Collaboration and License Agreements | Collaboration and License Agreements Celgene Celgene Collaboration Agreement In June 2015, the Company entered into a Master Research and Collaboration Agreement ("Celgene Collaboration Agreement") with Celgene pursuant to which the Company and Celgene agreed to collaborate on researching, developing, and commercializing novel cellular therapy product candidates and other immuno-oncology and immunology therapeutics, including, in particular, CAR and TCR product candidates. The Celgene Collaboration Agreement became effective in July 2015 and was amended and restated in August 2015. Pursuant to the collaboration, prior to the exercise of an option for a program, each of the Company and Celgene will conduct independent programs to research, develop, and commercialize such product candidates (including, in the case of the Company, its CD19 and CD22 programs). Each party has certain options to obtain either an exclusive license to develop and commercialize specified product candidates arising from specified types of programs conducted by the other party within the scope of the collaboration, or the right to participate in the co-development and co-commercialization of specified product candidates arising from such programs, in each case in specified territories. Further, following the exercise by Celgene of an option to license product candidates from certain Company developed programs, excluding the CD19 program and the CD22 program, Celgene has the right to exercise an option for a specified number of such programs to co-develop and co-commercialize products arising out of such programs in certain countries, and each of Celgene and Company has the right to elect to participate in certain commercialization activities for products in such programs in territories where it is not leading commercialization of such product. The parties may exercise their options with respect to specified product candidates arising under programs within the scope of the collaboration until the tenth anniversary of the effective date of the Celgene Collaboration Agreement (the "Research Collaboration Term") , subject to a tail period applicable to certain programs, for which options have not yet been exercised as of the expiration of the Research Collaboration Term. BCMA-directed product candidates are excluded from the collaboration. For Company-originated programs (which includes the CD19 program and may include the CD22 program) under the collaboration for which Celgene exercises its option to obtain an exclusive license: • The Company would be responsible for research and development in the United States, Canada, and Mexico, and, for cellular therapy product candidates, China, and would retain commercialization rights and would lead commercialization activities and book sales of products in those countries (the "Juno Territory"), subject to Celgene’s option, for a specified number of programs (excluding the CD19 program and the CD22 program), to elect to co-develop and co-commercialize product candidates arising from such programs, or for other programs, to elect to participate in certain commercialization activities in the Juno Territory, as further described below. Under all such license agreements, the Company has the right to participate in specified commercialization activities arising from such programs in certain major European markets; • On a program-by-program basis, Celgene would receive an exclusive license, and pursuant to such license would be responsible for, development and commercialization outside of the Juno Territory (the "Celgene Territory"), including by leading commercialization activities and booking sales of products in the Celgene Territory. Celgene would be required to pay the Company a royalty on sales of products arising from such program in the Celgene Territory as further described below; and • For Company-originated programs, excluding CD19 and CD22, Celgene would have the right to exercise an option for a specified number of such programs, to obtain the right to co-develop and co-commercialize products arising from such program worldwide, except for China. For each such program, following Celgene’s exercise of such option, the parties would enter into an agreed form of co-development and co-commercialization agreement, pursuant to which: • Celgene would have the right to co-develop and co-commercialize product candidates arising from such programs, with the parties each entitled to bear and receive an equal share of the profits and losses arising from development and commercialization activities in such programs worldwide (other than China); and • The Company would remain the lead party for development and commercialization activities for such product candidates in the Juno Territory, and Celgene would remain the lead party for development and commercialization activities for such product candidates in the Celgene Territory, subject to the Company’s right to participate in certain commercialization activities in certain major European countries, and Celgene’s right to elect to participate in a specified percentage of commercialization activities in the Juno Territory. For other Company originated programs for which Celgene does not exercise such a co-development and co-commercialization right, Celgene would also have the right to elect to participate in up to a specified percentage of certain commercialization activities for product candidates in such program in the Juno Territory, and the Company would have the right to elect to participate in up to a specified percentage of certain commercialization activities for such product candidates in certain major European markets. For Celgene-originated programs under the collaboration for which the Company exercises its option to obtain an exclusive license, the parties will enter into a co-development and co-commercialization agreement and: • The parties will share global profits and losses from development and commercialization activities with 70% allocated to Celgene and 30% allocated to the Company; and • Celgene will lead global development and commercialization activities, subject to the Company’s right to elect to participate in up to a specified percentage of certain commercialization activities in the Juno Territory under certain circumstances and in certain major European countries. Furthermore, each of Celgene and the Company will have the exclusive right to exercise options to co-develop and co-commercialize product candidates arising out of programs for which the other party in-licenses or acquires rights that are within the scope of their collaboration, where such rights are available to be granted, with the parties each bearing an equal share of the profits and losses arising out of such programs following the exercise of such option. In general, for such programs where the rights are in-licensed or acquired by the Company and for which Celgene exercises its options, the Company will be the lead party for development and commercialization of product candidates arising from such programs in the Juno Territory, subject to Celgene’s right to elect to participate in certain commercialization activities for such product candidates in the Juno Territory, and Celgene will be the lead party for development and commercialization of product candidates arising in such programs in the Celgene Territory, subject to the Company’s right to elect to participate in certain commercialization activities for such product candidates in certain major European markets. Conversely, for such programs where the rights are in-licensed or acquired by Celgene and for which the Company exercises its options, Celgene will be the lead party for development and commercialization activities for product candidates arising from such programs on a worldwide basis, subject to the Company’s right to elect to participate in certain commercialization activities for such product candidates in the Juno Territory and in certain major European markets. The party exercising an option for these in-licensed or acquired programs is generally required to pay to the other party an upfront payment equal to one half of the costs incurred by other party in connection with the acquisition of rights to such programs. Under the terms of the Celgene Collaboration Agreement, the Company received an upfront cash payment of $150.2 million . In addition to the upfront payment, Celgene is required to pay to the Company an additional fee if it exercises its option for each of the CD19 program and the CD22 program, totaling, if the options are exercised for both programs during the initial opt-in window, $100.0 million . As described below, in April 2016, Celgene exercised its option for the CD19 program and paid the Company $50.0 million as an option exercise fee. Upon a party’s exercise of the option for any other program (other than certain in-licensed or acquired programs where a party exercises its option at the time such program is acquired), the party exercising the option is required to pay to the other party a payment at the time of exercise of its option, calculated as a multiple of the costs incurred by the other party in relation to the development activities for such program prior to the exercise of the option, with such multiple based on the point in development of such product at which such party exercises such option. For programs for which the parties have entered into a license agreement, the Company will also receive royalties from Celgene, for product candidates arising from the CD19 and CD22 programs, at a percentage in the mid-teens of net sales of such product candidates in the Celgene Territory, and for product candidates arising from other Company programs that are subject to a license agreement, tiered royalties on net sales of such product candidates in the Celgene Territory, at percentages ranging from the high single digits to the mid-teens, calculated based on the stage of development at which Celgene exercises its option for such program. Celgene CD19 License In April 2016, Celgene exercised its opt-in right to develop and commercialize product candidates from the Company’s CD19 program in the Celgene Territory. As a result, the Company and Celgene entered into a license agreement (the "Celgene CD19 License") pursuant to which Celgene received an exclusive, royalty-bearing license to develop and commercialize therapeutic CAR product candidates from the Company’s CD19 program in the Celgene Territory. The Company retains all rights to develop further and commercialize such product candidates in the Juno Territory. The Company and Celgene will generally share worldwide research and development costs for certain CD19 product candidates, although either party may opt out of funding specific studies led by the other. The Company will be responsible for commercialization costs in the Juno Territory and Celgene will be responsible for commercialization costs in the Celgene Territory. The Company has the right to participate in specified commercialization activities for licensed products arising from the CD19 program in certain major European markets. Celgene has the right to participate in specified commercialization activities in North America for licensed products for certain indications under the CD19 program. The Company received a $50.0 million option exercise fee from Celgene upon the exercise of Celgene’s option for the CD19 program. The Company will also receive royalties from Celgene for CAR product candidates arising from the CD19 program at a percentage in the mid-teens of net sales of such product candidates in the Celgene Territory. 2015 Celgene Share Purchase Agreement In June 2015, the Company also entered into a Share Purchase Agreement (the "2015 Celgene SPA") with Celgene. Pursuant to the 2015 Celgene SPA, the Company sold 9,137,672 shares of the Company’s common stock to Celgene at an aggregate cash price of approximately $849.8 million , or $93.00 per share of common stock, on August 4, 2015. The 2015 Celgene SPA also provides for additional sales of shares by the Company to Celgene as follows: • First Period Top-Up Rights. Until June 29, 2020, Celgene has the annual right, following the filing of each Annual Report on Form 10-K filed by the Company, to purchase additional shares from the Company at a market average price, allowing it to "top up" to an ownership interest equal to 10% of the then-outstanding shares (after giving effect to such purchase), subject to adjustment downward in certain circumstances. If Celgene does not exercise its top-up right in full in any given year, then the percentage of ownership targeted for a top-up stock purchase for the next year will be reduced to Celgene’s percentage ownership at the time of such non-exercise or partial exercise (after giving effect to the issuance of shares in any partial exercise). • First Acquisition Right. During the period beginning on June 29, 2019 and ending on June 28, 2020, subject to Celgene opting in to a certain number of Company programs under the Celgene Collaboration Agreement, Celgene will have the right (the "First Acquisition Right") to purchase up to such number of shares that will allow Celgene to have ownership of 19.99% of the then-outstanding shares of the Company’s common stock (after giving effect to such purchase) at the closing price of the common stock on the principal trading market (currently The Nasdaq Global Select Market) on the date of exercise (the "FAR Base Price"), plus a premium on all shares in excess of the number of shares for which Celgene would then be able to purchase if it then had a top-up right as described in the preceding paragraph. • Second Period Top-Up Rights. After the closing of the purchase of shares upon the exercise of the First Acquisition Right until the SAR Termination Date (as defined below), in the event that Celgene has been diluted after exercising the First Acquisition Right, the Company may elect annually, upon the filing of each Annual Report on Form 10-K filed by the Company, to offer Celgene the right to purchase additional shares from the Company at 105% of market average price, allowing Celgene to "top up" to an ownership interest (after giving effect to such purchase) equal to the percentage ownership of shares that Celgene obtained upon exercise of the First Acquisition Right, subject to adjustment downward in certain circumstances. If Celgene does not exercise its top-up right in full in any year in which it is offered such right by the Company, then the percentage of ownership targeted for a top-up stock purchase for the next year it is offered such top-up right will be reduced to Celgene’s percentage ownership at the time of such non-exercise or partial exercise (after giving effect to the issuance of shares in any partial exercise). The "SAR Termination Date" is the later of (a) June 29, 2025, and (b) the earlier of (x) the date that is 6 months following the date that the conditions to the exercise of the Second Acquisition Right (as defined herein) are satisfied and (y) December 29, 2025. • Second Acquisition Right. During the period beginning on June 29, 2024 and ending on the SAR Termination Date, subject to each of Celgene and the Company opting into a certain number of programs under the Celgene Collaboration Agreement, and provided that Celgene exercised the First Acquisition Right so as to obtain an aggregate percentage ownership of at least 17% of the Company, Celgene will have the right (the "Second Acquisition Right") to purchase up to such number of shares that will allow Celgene to have ownership of 30% of the then-outstanding shares of the Company’s common stock (after giving effect to such purchase) at the closing price of the common stock on the principal trading market on the date of exercise (the "SAR Base Price"), plus a premium on all shares in excess of the number of shares for which Celgene would then be able to purchase if it then had a top-up right as described in the preceding paragraph. • Final Top-Up Rights. Following the closing of the purchase of shares upon the exercise of the Second Acquisition Right and until the Celgene Collaboration Agreement expires or is terminated, Celgene would have the annual right, in the event that Celgene has been diluted after exercising the Second Acquisition Right, following the filing of each Annual Report on Form 10-K filed by the Company, to purchase additional shares from the Company at a price equal to 105% of market average price, allowing it to "top up" to the percentage ownership it had attained upon exercising the Second Acquisition Right, less 250 basis points, subject to adjustment downward in certain circumstances. If Celgene does not exercise its top-up right in full in any given year, then the percentage of ownership targeted for a top-up stock purchase for the next year will be reduced to Celgene’s percentage ownership at the time of such non-exercise or partial exercise (after giving effect to the issuance of shares in any partial exercise). These rights and the other described top-up rights, as well as the First Acquisition Right and Second Acquisition Right, may be limited or eliminated in certain circumstances when and if Celgene disposes of any of its shares. The First Period Top-Up Rights, Second Period Top-Up Rights and Third Period Top-Up Rights are collectively referred to herein as the "Top-Up Rights". The First Acquisition Right and Second Acquisition Right are collectively referred to herein as the "Acquisition Rights." Each closing of the sale of shares to Celgene is subject to customary closing conditions, including termination or expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. The First Period Top-Up Right that was triggered by the filing of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015 permitted Celgene to top-up its ownership stake in the Company to 10% . Celgene exercised its right in part and purchased 1,137,593 shares at a price of $41.32 per share, for an aggregate cash purchase price of $47.0 million , to bring its ownership stake in the Company to 9.76% . As Celgene did not exercise this First Period Top-Up Right in full to reach 10% ownership, future First Period Top-Up Rights have been limited to permit Celgene to top-up its ownership stake in the Company to only 9.76% . In March 2017, Celgene exercised its First Period Top-Up Right triggered by the filing of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016 and purchased 75,568 shares at a price of $22.39 per share, for an aggregate cash purchase price of $1.7 million , to top-up its ownership stake of the Company's common stock to the permitted amount of 9.76% . The First Period Top-Up Right that will be triggered by the filing of the Company’s Annual Report on Form 10-K for the fiscal year ending December 31, 2017 will again permit Celgene to top-up its ownership stake of the Company’s common stock to 9.76% . In September 2017, concurrent with the closing of the September 2017 follow-on public offering, the Company closed a private placement of 758,327 shares of its common stock, at a price of $41.00 per share, with Celgene for an aggregate purchase price of $31.1 million . Accounting Analysis The Celgene Collaboration Agreement contains the following deliverables: (1) access to certain of the Company’s technology through a non-exclusive, worldwide, royalty-free right and license to conduct certain activities under the collaboration, and (2) participation on various collaboration committees. The Company considered the provisions of the multiple-element arrangement guidance in determining how to recognize the revenue associated with the two deliverables. The Company has accounted for access to certain of the Company’s technology and participation on various collaboration committees as a single unit of accounting because the two deliverables do not have standalone value and both obligations will be delivered throughout the estimated period of performance. The Company has identified the initial consideration for the Celgene Collaboration Agreement, which is the best estimated selling price, as the $150.2 million upfront payment. The Company determined that each of the identified deliverables have the same period of performance (the ten years research collaboration term) and have the same pattern of revenue recognition, ratably over the period of performance. As a result, the $150.2 million in arrangement consideration was recorded in deferred revenue and is being recognized over the ten year research collaboration term. The Company also evaluated its own options pertaining to Celgene’s programs. If the Company exercises any of its options, it is required to make a payment equal to a percentage of the costs incurred by Celgene prior to the exercise of the option in connection with the research and development activities and regulatory activities for such development candidate. The percentage of costs to be paid varies based on the point in development of such product at the time the Company exercises its option. The Company will account for the payments as research and development expense upon the exercise of the related option. The Company determined that payments related to licenses that will be used in future research and development activities with no proven alternative future use at the time of acquisition by the Company should be expensed when incurred in accordance with the Company’s accounting policy. In addition, Celgene purchased 9,137,672 shares of the Company’s common stock at a price of $93.00 per share, resulting in gross proceeds of $849.8 million . The Company determined that this initial purchase of common stock combined with the embedded future stock purchase rights had a fair value of $849.8 million and this amount was recorded in equity. The Company evaluated and determined that the Top-Up Rights and Acquisition Rights granted to Celgene under the 2015 Celgene SPA are not freestanding instruments as these rights are not legally detachable and separately exercisable from the Company’s common stock. In addition, the Company has further assessed whether the Top-Up Rights and Acquisition Rights should be accounted for as derivative instruments and determined that derivative accounting does not apply. The Company determined that the Top-Up Rights and Acquisition Rights are embedded and inseparable from the initial stock purchase and no subsequent remeasurement is necessary. The Celgene CD19 License agreement contains the following deliverables: (1) an exclusive license with respect to intellectual property, (2) transfer of certain clinical and manufacturing knowledge and related support, and (3) participation on various collaboration committees during the technology transfer period. The Company has accounted for these deliverables as a single unit of accounting because they do not have standalone value and the obligations will be delivered throughout the estimated period of performance. The $50.0 million option exercise fee was recorded in deferred revenue and is being recognized ratably over the period in which the Company expects to fulfill these performance obligations, which was initially determined to be approximately two years . To the extent the Company’s research and development costs for certain CD19 product candidates exceed Celgene’s research and development costs for the CD19 program for a given quarter, Celgene is required to provide partial reimbursement to the Company for such costs. Either party may opt out from the cost sharing arrangement for specific studies being led by the other party, with the possibility to opt back in to the study in the future at a premium in exchange for the right to use data from that study in such party's territory. The Company recognizes the reimbursement by Celgene as revenue in the period the services are performed. To the extent Celgene’s research and development costs for the CD19 program exceed the Company’s research and development costs for certain CD19 product candidates for a given quarter, the Company is required to provide Celgene partial reimbursement for such costs. The Company recognizes the reimbursement to Celgene as additional research and development expense in the period the services are provided. For the year ended December 31, 2017, the Company recognized revenue of $86.1 million in connection with the Celgene Collaboration Agreement and the Celgene CD19 License, comprised of $41.4 million in upfront and opt-in fees recognized, and $44.7 million of cost-sharing revenue. For the year ended December 31, 2016, the Company recognized revenue of $64.6 million in connection with the Celgene Collaboration Agreement and the Celgene CD19 License, comprised of $34.1 million in upfront and opt-in fees recognized, and $30.5 million of cost-sharing revenue. The Company recognized revenue of $5.1 million in connection with the Celgene Collaboration Agreement for the year ended December 31, 2015 related to upfront fees recognized. As of December 31, 2017 and 2016 , there was $13.8 million and $11.2 million due from Celgene included in accounts receivable on the consolidated balance sheets. Fred Hutchinson Cancer Research Center In October 2013, the Company entered into a collaboration agreement with FHCRC, focused on research and development of cancer immunotherapy products. The agreement has a six year term and can be extended if mutually agreed upon. The research is conducted under project orders containing plans and budgets approved by the parties. In December 2015, the Company entered into an agreement with FHCRC to support the establishment of a clinical immunotherapy trial unit. Excluding the expense or gain related to success payment obligations, the Company recognized $15.8 million , $16.1 million , and $10.3 million of research and development expenses in connection with its collaboration and funding agreements with FHCRC for the years ended December 31, 2017, 2016, and 2015 , respectively. In October 2013, the Company granted FHCRC rights to certain share-based success payments. Under the terms of this arrangement, the Company may be required to make success payments to FHCRC based on increases in the estimated fair value of the Company’s common stock. The potential payments are based on multiples of increasing value based on a comparison of the fair value of the common stock relative to its original $4.00 issuance price. The payments are based on whether the value of the Company’s common stock meets or exceeds certain specified threshold values per share, in each case subject to adjustment for any stock dividend, stock split, combination of shares, or other similar events. The aggregate success payments to FHCRC are not to exceed $375.0 million which would only occur at a stock valuation of $160.00 per share. In June 2014, the Company entered into an agreement with FHCRC in which it can offset certain indirect costs related to the collaboration projects conducted by FHCRC against any success payments. The term of the success payment agreement ranges from eight to eleven years depending upon when or if the company receives FDA approval of certain of its product candidates as specified in the agreement. The following table summarizes all possible remaining FHCRC success payments, payable in cash or publicly-traded equity at the Company’s discretion: Multiple of Initial Equity Value at issuance 15.0x 20.0x 25.0x 30.0x 35.0x 40.0x Per share common stock price required for payment $ 60.00 $ 80.00 $ 100.00 $ 120.00 $ 140.00 $ 160.00 Success payment(s) (in millions) $ 50 $ 50 $ 50 $ 50 $ 50 $ 50 The success payments will be owed if the value of the Company’s common stock on the contractually specified valuation measurement dates during the term of the success payment agreement equals or exceeds the above outlined multiples. The valuation measurement dates are triggered by events which include an initial public offering of the Company’s stock, a merger, an asset sale, or the sale of the majority of the shares held by certain of the Company’s stockholders or the last day of the term of the success payment agreement. If a higher success payment tier is first met at the same time a lower tier is first met, both tiers will be owed. Any previous success payments made to FHCRC are credited against the success payment owed as of any valuation measurement date, so that FHCRC does not receive multiple success payments in connection with the same threshold. A payment may be triggered on the first anniversary of the closing of the IPO (or the date that is 90 days following such anniversary, at the Company’s option, if the Company is contemplating a capital market transaction during such 90 day period). The value of any such success payment will be determined by the average trading price of a share of the Company’s common stock over the consecutive 90-day period preceding such determination date. The value of any success payment payable upon a merger or an asset sale will be equal to the cash or value of securities received for each share of the Company's common stock. In December 2015, success payments to FHCRC were triggered in the aggregate amount of $75.0 million , less indirect cost offsets of $3.3 million . The Company elected to make the payment in shares of its common stock, and thereby issued 1,601,085 shares of its common stock to FHCRC in December 2015. The estimated fair value of the total success payment obligation to FHCRC, after giving effect to the success payments achieved in December 2015, was approximately $70.3 million and $22.9 million as of December 31, 2017 and 2016 , respectively. With respect to the FHCRC success payment obligations, the Company recognized expense of $41.4 million for the year ended December 31, 2017 , a gain of $20.5 million for the year ended December 31, 2016 , and expense of $44.3 million for the year ended December 31, 2015 . The gain and expense are recorded within research and development expense in the consolidated statements of operations and represent the change in the FHCRC success payment liability during such periods and twelve months of accrued expense. The FHCRC success payment liability on the consolidated balance sheets as of December 31, 2017 and 2016 was $54.6 million and $13.3 million , respectively. The Company’s liability for share-based success payments under the FHCRC collaboration is carried at fair value and recognized as expense over the term of the six year collaboration agreement. To determine the estimated fair value of the success payment liability the Company uses a Monte Carlo simulation methodology which models the future movement of stock prices based on several key variables. The following variables were incorporated in the calculation of the estimated fair value of the success payment liability as of the following balance sheet dates: December 31, Assumptions 2017 2016 Fair value of common stock $ 45.71 $ 18.85 Risk free interest rate 2.07% - 2.32% 1.88% - 2.30% Expected volatility 75 % 75 % Expected term (years) 3.79 - 6.79 4.79 - 7.79 The computation of expected volatility was estimated using a combination of available information about the historical volatility of stocks of similar publicly-traded companies for a period matching the expected term assumption and our historical and implied future volatility. The risk free interest rate and expected term assumptions depend on the estimated timing of FDA approval. In addition, the Company incorporated the estimated number and timing of valuation measurement dates in the calculation of the success payment liability. In October 2013, the Company entered into a license agreement with FHCRC, pursuant to which the Company acquired an exclusive, worldwide, sublicensable license under certain patent rights, and a non-exclusive, worldwide, sublicensable license under certain technology, to research, develop, manufacture, improve, and commercialize products and processes covered by such patent rights or incorporating such technology for all therapeutic uses for the treatment of human cancer. The patents and patent applications covered by this agreement are directed, in part, to CAR constructs, including target specific constructs and customized spacer regions, TCR constructs, and their use for immunotherapy. The Company classifies on the consolidated statements of operations payments accrued or made under its licensing arrangements based on the underlying nature of the expense. Expenses related |