License and Collaboration Agreements |
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License and Collaboration Agreements [Abstract] | ||||||||||||||||||||||||||||
License and Collaboration Agreements |
Nyxol License Agreement
On November 6, 2022, the Company entered into the Nyxol License Agreement, pursuant to which it granted Famy an
exclusive, perpetual, sub-licensable license to develop, manufacture, import, export and commercialize (i) Nyxol for treating (a) reversal of mydriasis, (b) night vision disturbances or dim light vision, and (c) presbyopia, and (ii) Nyxol and
low dose pilocarpine for treating presbyopia (together, the “Nyxol Products”) worldwide except for certain countries and jurisdictions in Asia (the “Viatris Territory”). The Company retains the exclusive right to develop, manufacture, have
manufactured, import, export and commercialize the Nyxol Products outside of the Viatris Territory. In January 2023, Famy was acquired by Viatris Inc., and Viatris has assumed all of Famy’s obligations under the Nyxol License Agreement.
Under the terms
of the Nyxol License Agreement, the Company in partnership with Viatris, will develop the Nyxol Products in the United States. Viatris will reimburse the Company for budgeted costs related to the development of the Nyxol Products through FDA
approval. Viatris will be responsible for developing the Nyxol Products in countries and jurisdictions in the Viatris Territory outside of the United States. The parties established a joint steering committee, which oversees and makes
decisions regarding the development of the Nyxol Products. The committee is composed of an equal number of representatives of Viatris and Ocuphire. Viatris will commercialize the Nyxol Products in the Viatris Territory for each indication
that receives regulatory approval.
Pursuant to the
Nyxol License Agreement, the Company received a one-time non-refundable cash payment of $35 million in November 2022 for the
exclusive, perpetual, sub-licensable license to develop, manufacture, import, export and commercialize the Nyxol Products in the Viatris Territory. In addition, with respect to each Nyxol Product, the Company will be eligible to receive
potential additional payments of up to $130 million in the aggregate upon achieving certain specified regulatory or net sales
milestones, with the first potential payment of $10 million to be made following approval by the FDA of Nyxol for reversal of
mydriasis. The Company will also receive tiered royalties, starting at low double-digit royalties up to low twenty percent
royalties, based on the aggregate annual net sales of all Nyxol Products in the United States, and will receive low double-digit royalties based on all annual net sales in the Viatris Territory outside of the United States. The royalty
payments will continue on a country-by-country basis from the date of the first commercial sale of the first Nyxol Product in a country of the Viatris Territory until December 31, 2040.
Either party may
terminate the Nyxol License Agreement upon written notice in the case of the other party’s material breach (subject to applicable cure periods) or if the other party becomes subject to an insolvency event. In addition, the Company may
terminate the agreement in its entirety if Viatris or its affiliates commences an action challenging the validity, enforceability or scope of any of Ocuphire’s patents that are exclusively licensed under the Nyxol License Agreement.
Additionally, if Viatris determines not to pursue development or commercialization of a Nyxol Product in a country or jurisdiction in the Viatris Territory, Viatris may terminate the license with respect to such Nyxol Product in such country
or jurisdiction.
Both Ocuphire and
Viatris have agreed to indemnify the other party against certain losses and expenses relating to any breach of the indemnifying party’s obligations, representations, warranties or covenants under the Nyxol License Agreement.
The Nyxol License
Agreement was accounted for under the provisions of ASC 606. In accordance with the provisions under ASC 606, the Company identified two
distinct performance obligations at the effective date: (1) the license to its intellectual property (“license transfer”) and (2) research and development services.
The aggregate
transaction price associated with the Nyxol License Agreement, as adjusted for variable consideration subsequent to December 31, 2022, was $40.0
million which comprised the initial license transfer fee of $35.0 million and the $5.0 million payment anticipated under the research and development services that were not subject to cancellation. The transaction price was allocated between performance
obligations based on their relative standalone selling price (“SSP”). The performance obligations for research and development services through the non-cancellation period were fully met by the Company as of the first quarter of 2023.
The SSP for the
license transfer and for the research and development services was determined to be $287.8 million and $5.0 million, respectively. The SSP for the license transfer was determined based on a discounted royalty cash flow approach, taking into
consideration assumptions, including projected worldwide net profit for each of the respective programs based on probability assessments, projections based on internal forecasts, industry data, and information from other guideline companies
within the same industry and other relevant factors. The SSP for the research and development services was determined using a cost-plus margin approach, based on anticipated expenditure outlays within the first 120-day non-cancellation window. On a relative SSP basis, $39.3 million and $0.7 million of the transaction price was allocated to the license transfer and
to the research and development services obligations, respectively.
Recognition of Revenue
The Company
determined that the licenses transferred represented functional intellectual property. As such, the revenue related to the licenses was recognized at the point in time in which the license/know-how was delivered to Viatris (as successor to
Famy) which occurred during the fourth quarter of 2022. The Company determined that revenue related to the research and development services constrained to the 120-day non-cancellation period was to be recognized over time as the services are rendered based on an estimated percentage of completion input model.
Revenue
recognized under the Nyxol License Agreement during the three and six months ended June 30, 2023 was $3.7 million and $5.4 million, respectively.
Regulatory Milestones under the Nyxol License Agreement
The Company has
evaluated the regulatory milestones that may be received in connection with the Nyxol License Agreement. There is uncertainty that the events to obtain the regulatory milestones will be achieved given the nature of clinical development and
the stage of the development of the Nyxol Products. The remaining regulatory milestones will be constrained until it is probable that a significant revenue reversal will not occur.
Sales Milestone and Royalty Payments
Sales milestones
and royalties relate predominantly to a license of intellectual property granted to Viatris and are determined by sales or usage-based thresholds. The sales milestones and royalties are accounted for under the royalty recognition constraint
and will be accounted for as constrained variable consideration. The Company applies the royalty recognition constraint for each commercial milestone and will not recognize revenue for each until the subsequent sale of a licensed product
(achievement of each) occurs.
Each of the
remaining regulatory and sales milestone performance obligations and royalty payments were fully constrained as of June 30, 2023 and no
revenue was recognized.
A reconciliation of the closing balance of the contract assets and unbilled receivables
associated with the Nyxol License Agreement is as follows as of June 30, 2023 (in thousands):
The remaining
amounts in contract assets and unbilled receivables as of June 30, 2023 attributed to the research and development services are expected to be settled during the third quarter of 2023.
BioSense License and Assignment Agreement
On March 10, 2020, pre-Merger, Rexahn entered into an amendment to its collaboration and license agreement, (as amended, the “BioSense
License and Assignment Agreement”) with BioSense to advance the development and commercialization of RX-3117 for all human uses in the Republic of Singapore, China, Hong Kong, Macau, and Taiwan (the “BioSense Territory”). Under the terms of
the BioSense License and Assignment Agreement, the Company (i) granted BioSense an exclusive license to develop and commercialize pharmaceutical products containing RX-3117 as a single agent for all human uses in the BioSense Territory and
(ii) assigned and transferred all of the former Rexahn patents and patent applications related to RX-3117 in the BioSense Territory. The upfront payment consisted of an aggregate of $1,650,000, of which $1,550,000 was paid to Rexahn prior to the Merger and
the remaining $100,000 during calendar year 2021.
Under the BioSense License and Assignment Agreement, the
Company is eligible to receive additional milestone payments in an aggregate of up to $84,500,000 upon the achievement of development, regulatory and commercial goals and will also be eligible to receive tiered royalties at low double-digit rates on annual
net sales in the BioSense Territory. The Company determined that none of the milestone payments under the BioSense License and Assignment Agreement were probable of payment as of June 30, 2023, and as a result, no revenue related to the milestones was recognized as the achievement of events entitling the Company to any milestone payments were highly
susceptible to factors outside of the Company’s control. Future sales-based royalties related to the exclusive license to develop RX-3117 will be recognized in the period the underlying sales transaction occurs.
Payments received under the BioSense License and Assignment Agreement are subject to the
CVR Agreement described in Note 2 – Merger.
Processa License Agreement
On June 16, 2021, the
Company entered into a license agreement (the “Processa License Agreement”) with Processa Pharmaceuticals, Inc. (“Processa”), pursuant to which the Company has agreed to grant Processa an exclusive license to develop, manufacture and commercialize RX-3117 globally, excluding the BioSense Territory.
Processa will make future payments to the Company upon the achievement of certain
development and regulatory milestones, which primarily consist of dosing a patient in pivotal trials or having a drug indication approved by a regulatory authority in the United States or another country. In addition, Processa will pay the
Company mid-single-digit royalties based on annual sales under the license and will make one-time sales milestone payments based on
the achievement during a calendar year of certain thresholds for annual sales. Processa is also required to give the Company 32% of
any milestone payments received based on any sub-license agreement Processa may enter into with respect to the Processa License Agreement. The Company determined that none of the milestone payments under the Processa License Agreement were
probable of payment as of June 30, 2023, and as a result, no revenue related to the milestones was recognized, as the achievement of
events entitling the Company to any milestone payments were highly susceptible to factors outside of the Company’s control.
Processa is required to use commercially reasonable efforts, at its sole cost and expense, to conduct development
activities in one or more countries, including meeting specific diligence milestones that consist
of: (i) first patient administered drug in a clinical trial of a licensed product prior to the three (3) year anniversary of the
effective date; and (ii) first patient administered drug in a pivotal clinical trial of a licensed product or first patient administered drug in a clinical trial for a second indication of a licensed product prior to the five (5) year anniversary of the effective date. Either party may terminate the agreement in the event of a material breach of the agreement that has not
been cured following written notice and a 120-day opportunity to cure such breach, and Processa may terminate the agreement for any
reason upon 120 days prior written notice to Ocuphire.
Future payments received under the Processa License Agreement will be subject to the CVR Agreement described in Note 2–
Merger.
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