The Company evaluated the Xencor
Agreement under the provisions of ASC 606 and ASU 2018-18,
Collaborative Arrangements (Topic
808) Clarifying the Interaction between Topic 808 and Topic 606.
The Company concluded that Xencor, Inc. is not a customer as there
are no distinct units of account that are reflective of a
vendor-customer relationship or exchange of consideration for the
research activities. The Company’s share of any collaboration
expense is recognized as an research and development expense on the
Company’s condensed statement of operations.
For the cost-sharing related to the research program, the Company
will follow the presentation and disclosure guidance of ASC 808,
Collaboration Agreements. The
Company had a payable of $18,000 and a receivable of $25,000 under
the research cost-sharing provision recorded in accrued expenses
and prepaid and other current assets, respectively, on the
accompanying condensed balance sheets as of September 30, 2022 and
December 31, 2021, respectively.
In-Licensing Arrangements – Development
2022, the Company entered into an Option and License
Agreement (the “Option and License Agreement”), by and between the
Company and Zymeworks Inc (“Zymeworks”). The Company received a
license under certain of Zymeworks’ proprietary drug conjugate
patents and know-how to perform preclinical research and
development of antibody drug conjugates (“ADCs”). The aggregate
consideration for the research license is $5.0 million. The Company also received an
option to obtain an exclusive license to research, develop,
manufacture, and commercialize certain ADCs for additional license
fees and royalties. Unless earlier terminated or extended, the term
of the research license and the commercial option is two
years from the effective date.
The Company will be required to use commercially reasonable efforts
to develop and commercialize at least one licensed product and the
Company will pay to Zymeworks an option exercise fee, and lump sum
payments upon the achievement of certain development and regulatory
milestones and commercial milestones. In addition, with respect to
each licensed product, the Company will pay tiered royalties on net
sales of licensed products at single-digit royalty rates.
The research license fee of $5.0 million was expensed to research
and development expense in April 2022 in accordance with the
Company's research and development expense policy.
Employee Retention Credit
The Coronavirus Aid, Relief and Economic Security (“CARES”) Act, as
amended by the further legislation, provides an employee retention
credit (“ERC”) to eligible employers, which is a refundable tax
credit against certain employment taxes. In calendar 2021, the ERC
was equal to 70% of qualified wages paid to employees up to $10,000
of qualified wages per employee for each of the first, second and
third calendar quarters of 2021. The Company has determined that
its aggregate eligible refundable credit for 2021 is $2.9 million.
In May 2022, the Company filed the requisite claims for the
eligible 2021 ERC.
The Company classified the ERC amounts as a reduction to payroll
expense. During the nine months ended September 30, 2022, the
Company recorded $2.4 million and $0.5 million related to the ERC
within research and development expense and general and
administrative expense, respectively, on the Company’s condensed
statement of operations. As of September 30, 2022, the Company has
a $2.9 million receivable balance from the United States government
related to the CARES Act, which is recorded as other receivables in
“Prepaid expenses and other current assets” on the Company’s
condensed balance sheet.
Cash, Cash Equivalents and Restricted Cash
Cash and cash equivalents include all cash balances and highly
liquid investments purchased with an original maturity of
three months or less.
The Company maintained restricted
cash of $1.1
million and $1.5 million as of September 30, 2022 and December
31, 2021, respectively. These amounts as of September 30, 2022 and
December 31, 2021 are included in