5. License Agreements

License and Compound Library and Option Agreement

In February 2016, the Company entered into a license agreement with a privately held clinical-stage biopharmaceutical company to research, develop, and seek and obtain marketing approval for a licensed compound. In February 2016, in conjunction with this license agreement, the Company also entered into a compound library and option agreement with the same biopharmaceutical company to identify compounds with potential utility in the treatment of age-related conditions other than indications in oncology. This license agreement included contingent consideration of up to 666,670 shares of additional common stock to be issued, up to $70.3 million of milestone payments based on achievement of certain specified clinical development and sales milestone events and tiered royalties in the low-single digits based on sales of licensed products. As of March 31, 2018 and 2017, none of the milestones had been achieved and no royalties were due from the sales of licensed products.

In connection with the compound library and option agreement, the Company received an equity interest for 275,766 ordinary shares of an affiliate of the biopharmaceutical company at an aggregate purchase price of $0.5 million, which represents an insignificant level of ownership in the entity and approximates the fair value of the shares received and has been recorded as a cost method investments in the Company’s financial statements. The Company had a commitment to invest an additional $0.5 million in this entity in the future which was exercised in May 2018.  

The Company also agreed to provide funding to the biopharmaceutical company for research and development work performed at a cost of up to $2.0 million through February 2020. The research and development expense under the research services agreement was not material for the three months ended March 31, 2018 or 2017.

Under the consolidation guidance, the Company determined that the biopharmaceutical company is a VIE. The Company does not have the power to direct the activities that most significantly affect the economic performance of this entity and as such the Company is not the primary beneficiary and consolidation is not required. As of March 31, 2018 and December 31, 2017, the Company has not provided financial, or other, support to the biopharmaceutical company that was not contractually required.

Other License Agreements with Research Institutions

The Company has entered into license agreements with various research institutions which have provided the Company with rights to patents, and in certain cases, research “know-how” and proprietary research tools to research, develop and commercialize drug candidates. In addition to upfront consideration paid to these various research institutions in either cash or shares of the Company’s common stock, the Company may be obligated to pay milestone payments in cash or the issuance of the Company’s common stock specific to each agreement on achievement of certain specified clinical development and/or sales events. To date, none of these events had occurred and no milestone or royalty payments have been recognized.