7.  Collaboration Agreement



On February 25, 2019, The Company entered into a collaboration and license agreement (the “Collaboration and License Agreement”) with BioSense Global LLC (“BioSense”) to advance the development and commercialization of RX-3117 for pancreatic and other cancers in the Republic of Singapore, China, Hong Kong, Macau and Taiwan (the “Territory”). Under the terms of the Collaboration and License Agreement, the Company will grant BioSense an exclusive license to develop and commercialize pharmaceutical products containing RX-3117 as a single agent for the prevention or treatment of metastatic pancreatic cancer and other forms of cancer in the Territory that is effective upon payment in full of an upfront payment. The upfront payment consists of an aggregate of $3,000,000,  $150,000 of which had been paid by March 31, 2019.  The remaining $2,850,000 is due in two installments with the final installment due on August 24, 2019. Under the Collaboration and License Agreement, the Company is also eligible to receive milestone payments in an aggregate of up to $226,000,000 upon the achievement of development, regulatory and commercial goals. The Company will also be eligible to receive tiered royalties in the low double digits to mid-teens on annual net sales in the Territory.

The Company has evaluated the Collaboration and License Agreement under ASC 606, “Revenue from Contracts with Customers”, to determine the appropriate amount of revenue to be recognized as the Company fulfills its obligations under the Collaboration and License Agreement.  In performing its evaluation, the Company identified the promised goods or services in the contract and determined whether the promised goods or services are performance obligations, including whether they are distinct in the context of the contract.

The Company determined the transaction price is equal to the upfront fee of $3,000,000 and the future milestone and royalty payments are constrained variable consideration that will be incorporated as part of the periodic update of the transaction price.  The transaction price will be allocated to the performance obligations on the basis of the relative stand-alone selling price estimated for each performance obligation.  The Company identified the granting of the exclusive license to develop RX-3117 and the promise to supply RX-3117 for clinical trials as the performance obligations associated with this agreement. 

As neither performance obligation has been satisfied, the Company recognized no revenue for the three months ended March 31, 2019,  and recorded the $150,000 received as deferred revenue on the Company’s balance sheet.