Collaboration and License Agreements | Collaboration and License Agreements Accounting analysis and revenue recognition Our collaboration and license agreements typically involve us granting licenses of our intellectual property and performing research and development services in exchange of upfront fees, milestone payments and royalty payments. Since December 31, 2019, there have been no material changes to the key terms of our collaboration or license agreements. For further information on the terms and conditions of our existing collaboration and license agreements, please see the notes to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2019. Collaboration revenue We recognize revenue when the customer obtains control of promised goods or services, in an amount that reflects the consideration that we expect to receive in exchange for those goods or services . In determining the appropriate amount of revenue to be recognized, we performed the following steps: (i) identified the promised goods or services in the contract; (ii) determined whether the promised goods or services are performance obligations including whether they are distinct in the context of the contract; (iii) measured the transaction price, including the constraint on variable consideration; (iv) allocated the transaction price to the performance obligations; and (v) recognized revenue when (or as) we satisfied each performance obligation. Royalty revenue For arrangements that include sales-based royalties and sales-based milestones and in which the license is deemed to be the predominant item to which the royalties relate, we recognize royalty revenue upon the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied). Milestone revenue At each reporting period we evaluate whether milestones are considered probable of being reached and, to the extent that a significant reversal would not occur in future periods, estimate the amount to be included in the transaction price using the most likely amount method. Milestone payments that are not within our control, such as regulatory approvals, are considered constrained and are excluded from the transaction price until those approvals are received. Celgene Corporation We have entered into the following collaboration agreements, or collectively, the Collaboration Agreements, with Celgene, a wholly owned subsidiary of BMS, which is a related party through ownership of our common stock: • In April 2010, we entered into a discovery and development collaboration and license agreement focused on cancer metabolism, or the 2010 Agreement, which was amended in October 2011 and July 2014. The discovery phase of the 2010 Agreement expired in April 2016. On August 15, 2016, we terminated the 2010 Agreement as to the program directed to the isocitrate dehydrogenase 1, or IDH1, target, for which ivosidenib was the lead development candidate. Accordingly, the sole program remaining under the 2010 Agreement is IDHIFA® (enasidenib), a co-commercialized licensed program for which Celgene leads and funds global development and commercialization activities. On June 11, 2020, we sold our tiered, sales-based royalty rights on worldwide net sales of IDHIFA® (enasidenib), as well as our rights to receive up to $55.0 million in outstanding regulatory milestone payments from BMS, to RPI for $255.0 million. Under the 2010 Agreement, we remain eligible to receive a $25.0 million potential milestone payment for the enasidenib program upon achievement of a specified ex-U.S. commercial milestone event, as well as reimbursement for costs incurred for our co-commercialization efforts and development activities. • In April 2015, we entered into a joint worldwide development and profit share collaboration and license agreement with Celgene, and our wholly owned subsidiary, Agios International Sarl, entered into a collaboration and license agreement with Celgene International II Sarl, or collectively, the AG-881 Agreements, to establish a worldwide collaboration focused on the development and commercialization of vorasidenib products. Under the AG-881 Agreements, we and Celgene split all worldwide development costs for vorasidenib, subject to specified exceptions. The AG-881 Agreements were terminated effective September 4, 2018, upon which we received sole global rights to vorasidenib. In connection with the termination of the AG-881 Agreements, Celgene will be eligible to receive royalties from us at a low single-digit percentage rate on worldwide net sales of products containing vorasidenib. • In May 2016, we entered into a master research and collaboration agreement with Celgene, or the 2016 Agreement, focused on metabolic immuno-oncology, or MIO, a developing field which aims to modulate the activity of relevant immune cells by targeting critical metabolic nodes, thereby enhancing the immune mediated anti-tumor response. The initial four-year research term of the 2016 Agreement ended May 2020. On March 25, 2020 Celgene declined the option to extend the research agreement for up to two, or in specified cases, up to four additional one-year terms which would have required the payment of a $40.0 million extension fee. Further, on April 10, 2020 Celgene notified us that they will be declining to elect any program as a continuation program under the 2016 agreement. Celgene had designated AG-270, our inhibitor of methionine adenosyltransferase 2a, or MAT2A, as a development candidate under the 2016 Agreement. On March 25, 2020, Celgene notified us of their decision to decline their option to enter into a Development & Commercialization Agreement with respect to the MAT2A program under the 2016 Agreement which would have required the payment of a $30.0 million fee. As a result of the decisions, the research services were fully satisfied as of May 17, 2020, no additional performance obligations remain under the 2016 Agreement and we are no longer eligible for any milestone payments for the 2016 Agreement. Collaboration revenue During the three and nine months ended September 30, 2020 and 2019, we recognized the following collaboration revenue: Three Months Ended September 30, Nine Months Ended September 30, (In thousands) 2020 2019 2020 2019 Services performed that were considered performance obligations as of the modification dates On-going research and development services $ 199 $ 4,695 $ 64,133 $ 29,915 Services performed that were not considered performance obligations as of the modification dates Commercialization activities 1,007 821 2,905 2,499 Total collaboration revenue - related party $ 1,206 $ 5,516 $ 67,038 $ 32,414 The following table presents changes in our contract assets and liabilities during the nine months ended September 30, 2020: (In thousands) December 31, Additions Deductions September 30, Contract assets Collaboration receivable – related party (1) $ 1,539 $ 4,228 $ (4,693) $ 1,074 Unbilled receivable - related party (2) — 1,606 (346) 1,260 Royalty receivable – related party (3) 2,900 5,015 (7,915) — Contract liabilities Deferred revenue – related party, current and net of current portions (4) 61,513 2,421 (63,934) — (1) Additions to collaboration receivables - related party relate to amounts billed to Celgene for reimbursable costs incurred by us during the reporting period. Deductions to receivables relate to collection of receivables during the reporting period. (2) Unbilled receivables - related party amounts relate to future reimbursable costs to Celgene. (3) Additions to royalty receivables - related party relate to amounts billed to Celgene during the reporting period. Deductions to receivables relate to collection of receivables during the reporting period. (4) Additions to deferred revenue - related party relate to consideration from Celgene during the reporting period. Deductions relate to deferred revenue recognized as revenue during the reporting period. The change in collaboration revenue from on-going research and development services during the three and nine months ended September 30, 2020 is primarily due to our updated estimate of the future costs that would be incurred from on-going research and development services to complete one of our performance obligations under the 2016 Agreement that is recognized over time using an input method, due to Celgene’s decision to decline extending the research term in the first quarter of 2020. During the three and nine months ended September 30, 2020 and 2019, we recognized the following as revenue due to changes in the contract liability balances: Three Months Ended September 30, Nine Months Ended September 30, (In thousands) 2020 2019 2020 2019 Amounts included in the contract liability at the beginning of the period $ — $ 4,404 $ 61,513 $ 28,823 Performance obligations satisfied in previous periods — — — — As of September 30, 2020, the aggregate amount of the transaction price allocated to performance obligations that are partially unsatisfied was $4.5 million. This amount is expected to be recognized as performance obligations are satisfied through September 2023. Royalty revenue As the underlying performance obligation, or delivery of the enasidenib license, had been satisfied as of June 2014, royalty revenue is recognized as the related sales occur. During the three and nine months ended September 30, 2020 and 2019, we recognized the following as royalty revenue: Three Months Ended September 30, Nine Months Ended September 30, (In thousands) 2020 2019 2020 2019 Royalty revenue – related party $ 683 $ 2,666 $ 7,356 $ 7,569 On June 11, 2020, we sold our tiered, sales-based royalty rights on worldwide net sales of IDHIFA® (enasidenib), as well as our rights to receive up to $55.0 million in outstanding regulatory milestone payments from BMS, to RPI for $255.0 million. For further discussion of the sale of future revenue, refer to Note 10, Sale of Future Revenue . Milestone revenue No milestones were achieved during the three and nine months ended September 30, 2020 or 2019. The next potential milestone expected to be achieved under the remaining terms of our Collaboration Agreements is the achievement of a specified ex-U.S. commercial milestone event, which would result in a milestone payment of $25.0 million under the 2010 Agreement. CStone Pharmaceuticals In June 2018, we and CStone Pharmaceuticals, or CStone, entered into an exclusive license agreement, or the CStone Agreement, to grant CStone specified intellectual property licenses to enable CStone to develop and commercialize certain products containing ivosidenib in mainland China, Hong Kong, Macau and Taiwan, or the CStone Territory. We retain development and commercialization rights for the rest of the world. On March 2, 2020, we amended the CStone Agreement to include Singapore as part of the CStone Territory. Pursuant to the CStone Agreement, CStone will initially be responsible for the development and commercialization of ivosidenib in acute myeloid leukemia, or AML, cholangiocarcinoma, and, at our discretion, brain cancer indications. CStone is responsible for all costs it incurs in developing, obtaining regulatory approval of, and commercializing ivosidenib in the CStone Territory, as well as certain costs incurred by us. Pursuant to the CStone Agreement, we received an initial upfront payment in the amount of $12.0 million and are entitled to receive up to an additional $407.0 million in milestone payments upon the achievement of certain development, regulatory and sales milestone events. We will also be entitled to receive tiered royalties, ranging from 15% to 19% percent, on annual net sales, if any, of ivosidenib in the CStone Territory. Collaboration revenue During the three and nine months ended September 30, 2020 and 2019, we recognized the following collaboration revenue -other: Three Months Ended September 30, Nine Months Ended September 30, (In thousands) 2020 2019 2020 2019 Services performed that were considered performance obligations as of the inception date License and other services $ — $ (103) $ 192 $ (103) Services performed that were not considered performance obligations as of the inception date Other services 1,101 523 2,594 2,305 Total collaboration revenue - other $ 1,101 $ 420 $ 2,786 $ 2,202 The following table presents changes in our contract assets during the nine months ended September 30, 2020: (In thousands) December 31, Additions Deductions September 30, Contract assets (1) Collaboration receivable - other $ 1,928 $ 2,786 $ (2,722) $ 1,992 (1) Additions to contract assets relate to amounts receivable from CStone. Deductions to contract assets relate to collection of receivables during the reporting period. As of September 30, 2020, the aggregate amount of the transaction price allocated to performance obligations that are partially unsatisfied was $0.5 million. Royalty revenue The license was determined to be the predominant item to which sales-based royalties and sales-based milestones relate. As the license was delivered in June 2018, we will recognize royalty revenue when the related sales occur. To date, no royalties have been received under the CStone Agreement. Milestone revenue No milestones were earned during the three and nine months ended September 30, 2020 and 2019. The next potential milestone expected to be achieved under the CStone Agreement is the dosing of the first patient in a local study in a solid tumor indication in mainland China. Achievement of this event will result in a milestone payment of $5.0 million. |