| Collaboration Agreement | 6. Collaboration Agreement In December 2022, the Company entered into the Kite Collaboration Agreement, the Gilead SPA and a standstill and stock restriction agreement with Gilead (the Standstill Agreement). Upon closing in January 2023, Kite made an upfront payment of $ 225.0 million and obtained a license to co-develop and co-commercialize anito-cel, and next-generation autologous and non-autologous CAR-T cell therapy products that use the same D-domain BCMA binder used in anito-cel, in each case for the treatment of multiple myeloma. The Company also granted Kite the ability to negotiate a development and commercialization license for the inclusion of a limited number of pre-specified additional autologous CAR-T-cell therapy products for the treatment of multiple myeloma, which can only be exercised by Kite after the Company provides to Kite a phase 1 clinical study report. Gilead made an equity investment of $ 100.0 million by purchasing 3,478,261 shares of Arcellx common stock at a fixed per share price of $ 28.75 pursuant to the Gilead SPA, which represented a $ 15.3 million discount on the sale of the Company’s common stock based on the share price on the date of closing. In November 2023, the Company entered into an amendment to its Kite Collaboration Agreement, the Second Gilead SPA and an amended and restated standstill and stock restriction agreement with Gilead (the “Amended Standstill Agreement”). Upon closing in December 2023, Kite commenced negotiation of a license for the Company’s ARC-SparX program, ACLX-001, in multiple myeloma. The Company and Kite have also expanded the scope of the collaboration for the Company’s anito-cel to include lymphomas, which is subject to further negotiation by both parties in order to be developed and is therefore not a performance obligation at contract inception and as of March 31, 2024 . In connection with the amendment to the Kite Collaboration Agreement, the Company received a $ 85.0 million upfront cash payment and are eligible for additional potential milestone payments, to offset prespecified development costs over a limited period of time. Gilead made an equity investment of $ 200.0 million by purchasing 3,242,542 shares of Arcellx common stock at a fixed per share price of $ 61.68 pursuant to the Second Gilead SPA, which represented a $ 15.6 million premium on the sale of the Company’s common stock based on the share price on the date of closing. Under the Kite Collaboration Agreement and its amendment, the Company will be eligible to receive clinical, regulatory, and commercial milestone payments of up to $ 598.3 million, $ 935.0 million and $ 507.5 million, for anito-cel, each next-generation autologous CAR-T cell therapy product, and each non-autologous CAR-T cell therapy product, respectively. In the United States, the Company and Kite will equally share profits and losses from the commercialization of anito-cel and any next-generation autologous CAR-T cell therapy product for which the Company has exercised its option to co-promote with Kite (collectively, the Co-Promote Products). The Company has the option to designate next-generation autologous CAR-T therapy product as a Co-Promote Product after Kite provides the first phase 1 clinical study report for such product with the proposed core development plan and budget. For Co-Promote Products outside of the United States and for any other products worldwide that are not a Co-Promote Product (Non-Co-Promote Products), including any next-generation autologous CAR-T cell therapy product for which the company has opted out of designating as a Co-Promote Product, the Company will be eligible for tiered royalties in the low to mid teen percentages. The Company and Kite will jointly develop the Co-Promote Products in accordance with mutually agreed development plans and development budgets. On a Co-Promote Product-by-Co-Promote Product basis, the Company may, upon advance written notice to Kite, opt out of sharing development costs and profits and losses from the commercialization of such Co-Promote Product (for example, anito-cel), in which case, it will become a Non-Co-Promote Product and eligible for tiered royalties in the low to mid teen percentages. Other than certain items expressly set forth in the Kite Collaboration Agreement and its amendment, the out-of-pocket development costs for activities conducted in the United States for Co-Promote Products will be shared equally by the Company and Kite. The out-of-pocket development costs for activities conducted outside the United States as part of a global clinical trial for Co-Promote Products will be borne 60 % by Kite and 40 % by the Company, however Kite will be solely responsible for its costs for country-specific clinical trials and chemistry, manufacturing and control (CMC) commercial readiness. Kite will be solely responsible for the conduct of development and commercialization of the Non-Co-Promote Products at its sole cost. In the United States, the Company and Kite will be jointly responsible for commercialization of the Co-Promote Products. Kite will manufacture the licensed products and bear the CMC commercial readiness costs and capital expenses, except that the Company is responsible for manufacturing anito-cel prior to transferring the manufacturing process to Kite and the parties share associated out-of-pocket costs. Reimbursement costs expected to be received from Kite or paid to Kite represent variable consideration and are included in the estimated transaction price. The Company’s promises under the Kite Collaboration Agreement include development, manufacture, and commercialization licenses, research and development activities, manufacturing activities, and the transfer of manufacturing know-how to Kite (collectively, the research and development services). These promises represent a single combined performance obligation as the promises are not distinct from each other. The Company determined that the license and research and development services are combined based on the specialized nature of the Company’s know-how and manufacturing process. The Company evaluated the amendment to the Kite Collaboration Agreement and determined that the contract modifications should be accounted for as changes to the original contract, as the services to be provided after the contract modification are not distinct from those services already provided. The Company uses a cost-based input method to measure proportional performance and to calculate the corresponding amount of revenue to recognize. In applying the cost-based input method of revenue recognition, the Company measures actual costs incurred relative to budgeted costs to fulfill the combined performance obligation. These costs consist primarily of third-party contract costs. Revenue is recognized based on actual costs incurred as a percentage of total budgeted costs as the Company completes its performance obligations. The Company uses the expected value method and most-likely-amount method to estimate variable consideration and will re-evaluate the transaction price in each reporting period, as uncertain events are resolved or other changes in circumstances occur. During the three months ended March 31, 2024, revenue recognized that was included in the contract liability balance at the beginning of the period was $ 39.3 million . During the three months ended March 31, 2024, revenue recognized from performance obligations satisfied in previous periods was $ 10.6 million , primarily due to the changes in scope of the amendment to the Kite Collaboration Agreement. As of March 31, 2024, the amount of the transaction price that has not been recognized as revenue was $ 120.7 million , which will be recognized as revenue over the period of time the Company is performing the research and development activities. |
