15.	RELATED PARTIES

Intrexon Corporation

In September 2014, the Company entered into a collaboration agreement with Intrexon for the development and commercialization of allogeneic cell therapeutics for the treatment or repair of damaged articular hyaline cartilage in humans, utilizing Intrexon’s proprietary technology. The term of the Collaboration Agreement commences upon the effective date, September 30, 2014, and continues until either written notice of termination is given by the Company within ninety days, or if either party creates a material breach that cannot be remedied within sixty days.

Under the terms of the Collaboration Agreement, the Company is solely responsible for the costs of development and commercialization with the following exceptions: (i) the establishment of certain manufacturing capabilities and facilities; (ii) the cost of basic research related to Intrexon’s proprietary technology outside of costs related to the collaboration products; (iii) payments related to supplemental in-licensed third party IP; (iv) costs of filing, prosecution and maintenance of Intrexon patents; and (v) any other costs mutually agreed upon as being the responsibility of Intrexon. As consideration, the Company paid Intrexon an up-front fee of $10,000 in the form of a convertible promissory note as an access fee for commercial license rights to the Intrexon IP granted in the Collaboration Agreement, and will pay commercialization milestones and sales milestones as achieved. Refer to Note 8, Related Party Convertible Promissory Notes for further details on the $10,000 promissory note the Company issued to Intrexon. The commercialization milestone payments are payable in cash or shares of the Company’s common stock at the option of the Company, and in the event the Company is sold prior to making any of these milestone payments and the Collaboration Agreement is transferred in the sale, the milestone payments would be payable in cash upon the first instance of each milestone. Finally, the Company is required to make royalty payments in the low double digits of the aggregated gross profit arising from the sale of collaboration products.

The amounts payable upon milestone events are as follows:

 

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$500 within 30 days of the first instance of the achievement of the Investigational New Drug (“IND”) Filing Milestone Event;

 

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$2,500 within 30 days of the first instance of the achievement of the IND Acceptance Milestone Event;

 

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$3,000 within 30 days of the first instance of the achievement of the Phase III Milestone Event;

 

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$5,000 within 30 days of the first instance of the achievement of the Approval Milestone Event; and

 

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$1,000 within 30 days of each instance of the achievement of the Approval Amendment Milestone Event.

The cumulative sales milestones from the sale of products developed under the ECC are as follows:

 

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$5,000 within 30 days of the first instance that cumulative net sales reach $300,000;

 

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$7,500 within 30 days of the first instance that cumulative net sales reach $650,000; and

 

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$10,000 within 30 days of the first instance that cumulative net sales reach $1,000,000.

As part of the Collaboration Agreement, Intrexon made an equity purchase commitment to participate in a qualified financing, as defined therein, and will purchase $15,000 worth of the Company’s common stock as part of, or in connection with the qualified financing.

 

On December 3, 2014, the Company completed its IPO and the $10,000 promissory note to Intrexon and accrued interest were converted into 918,206 shares of the Company’s common stock. In addition, Intrexon participated in the IPO purchasing $19,496 worth of the Company’s common stock, or 1,772,364 shares.

In 2014, the Company also initiated research and development activities with Intrexon and incurred expenses of $3,100 and $14 in 2015 and 2014 respectively. At December 31, 2015, the Company owes Intrexon $1,546, which is in accrued expenses. See Note 6, Accrued Expenses. These expenses were included in research and development in the consolidated statement of operations. See Note 8, Related Party Convertible Promissory Notes.

Purpose, Co.

In June 2012, the Company entered into an agreement with Purpose, Co. to amend its previous agreements. In the previous agreements, Purpose, Co. granted the Company a perpetual license to its patents related to its exogenous tissue processor which is used in the development of the Company’s products. In exchange, the Company granted Purpose, Co. a perpetual license to all of the Company’s biotechnology and biomaterial for use in Japan. The agreement provides for Purpose, Co. to manufacture and sell machinery to the Company for cost until the Company’s products become commercially viable. The Company has also agreed to pay royalties on any third-party revenue generated using Purpose, Co.’s licensed technology.

Under the June 2012 amendment, the Company received exclusive rights to all of Purpose, Co.’s technology related to the exogenous tissue processor, continued supply of exogenous tissue processors during the Company’s clinical trials, and rights to manufacture the exogenous tissue processors at any location the Company chooses. In exchange for such consideration, the Company named Purpose, Co. the sole manufacturer of equipment and also clarified the geographic territories of the exclusive license that Purpose Co. was granted for use of the Company’s technology. Also, the Company agreed to reimburse Purpose, Co. for $250 of development costs on a next generation tissue processer. Refer to the discussion under Note 7, Tissue Processor Sub-License.

The amounts that have been paid to Purpose, Co. under this agreement were $187 and $173 for the years ended December 31, 2015 and 2014, respectively.