Overview
We are a clinical-stage biotechnology company focused on developing the next generation of ADCs to improve outcomes for cancer patients. By generating targeted therapies with enhanced anti-tumor activity and favorable tolerability profiles, we aim to disrupt the progression of cancer and offer patients more good days. We call this our commitment to ''target a better now.'' An ADC with our proprietary technology comprises an antibody that binds to a target found on tumor cells and is conjugated to one of our potent anti-cancer agents as a ''payload'' to kill the tumor cell once the ADC has bound to its target. ADCs are an expanding approach to the treatment of cancer, with seven approved products and the number of agents in development growing significantly in recent years.
We have established a leadership position in ADCs with a portfolio of differentiated product candidates to address both solid tumors and hematological malignancies.
Our lead program is mirvetuximab soravtansine, a first-in-class investigational ADC targeting FR?, a cell-surface protein overexpressed in a number of epithelial tumors, including ovarian, endometrial, and non-small-cell lung cancers. In March of 2019, we announced that FORWARD I, our Phase 3 clinical trial evaluating mirvetuximab compared to chemotherapy in women with FR?-positive PROC, did not meet the primary endpoint in either the entire treatment population or the pre-specified high FR? expression population. Data from FORWARD I did, however, show promising efficacy signals across a range of parameters in the pre-specified subset of patients with high FR? expression. In post hoc exploratory analyses using a PS2+ scoring method, in the FR?-high population scored by the PS2+ method, mirvetuximab was associated with longer PFS, by BIRC, higher overall response rate, or ORR, and longer overall survival, or OS. Following consultation with the FDA, we will concurrently enroll two new trials of mirvetuximab: SORAYA, a single-arm clinical trial that, if successful, could lead to accelerated approval of mirvetuximab; and MIRASOL, a randomized Phase 3 clinical trial that, if successful, could lead to full approval of mirvetuximab. We anticipate enrolling our first patient in SORAYA during the first quarter of 2020, and expect to report top-line data from this trial in mid-2021. We opened enrollment in MIRASOL inDecember 2019 and expect to report top-line data from this trial in the first half of 2022. If SORAYA is successful, we expect to submit an application for accelerated approval of mirvetuximab in the applicable patient population to the FDA during the second half of 2021 and to thereafter seek full approval on the basis of a confirmatory Phase 3 trial, MIRASOL. We undertook a review of our operations during the second quarter of 2019 with the goals of prioritizing our portfolio and reducing our cost base to ensure that our cash resources will be sufficient to advance certain of our programs through the next stages of development. Based on the outcome of this operational review and subsequent consultation with FDA, we have established three strategic priorities for the business: (i) execute SORAYA and MIRASOL and pursue the development of additional indications for mirvetuximab in ovarian cancer; (ii) advance a select portfolio of three earlier-stage product candidates; and (iii) further strengthen our balance sheet and expand our capabilities through partnering. Consistent with these priorities, we have focused our operations on the following activities:
? open SORAYA and enroll patients in MIRASOL to support the potential for
accelerated approval in 2022 and conversion to full approval in 2023;
continue follow up in the ongoing Phase 1b FORWARD II companion trial of
? mirvetuximab in combination regimens and initiate additional combination trials
to support expanded indications;
? continue IMGN632 development in patients with AML, BPDCN, and other
CD123-positive hematologic malignancies in collaboration with Jazz;
advance two additional assets that demonstrate our continued innovation in
ADCs: IMGC936, which is an investigational ADC directed to the novel solid
? tumor target, ADAM9, which we are co-developing with MacroGenics; and our next
generation investigational anti-FR? ADC, IMGN151, which is expected to enter
preclinical development in 2020; and
? monetize our remaining portfolio and platform technologies through
out-licensing transactions or asset sales.
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Corresponding to the prioritization of our portfolio, we have reduced ongoing expenses through the discontinuation of our IMGN779 development program, suspension of all other research activities, and a reduction in our workforce.
We have also developed a new class of cytotoxic payloads that we refer to as IGNs. Our IGNs are designed to alkylate DNA without cross-linking, which has provided a broad therapeutic index in preclinical models. Specifically, IGN ADCs have retained the anti-tumor potency of crosslinking drugs with less toxicity to normal cells in in vitro and animal models. These properties have allowed for repeat administration of ADCs with IGN payloads in clinical studies and as supported by preclinical data, suggest that IGNs may be able to be combined with other agents. IMGN632 is an investigational ADC comprised of a high affinity antibody designed to target CD123 with site specific conjugation to our most potent IGN payload. We are advancing IMGN632 in clinical trials for patients with AML and BPDCN. We recently presented data from our Phase 1 clinical trial of IMGN632 in patients with relapsed or refractory adult AML and BPDCN. We have also determined a Phase 2 dose and schedule for IMGN632 and have initiated a clinical trial with combinations in AML as well as monotherapy in front-line patients with minimal residual disease following induction therapy. In addition, we continue to enroll BPDCN patients under our initial protocol. We continue to advance select preclinical programs, led by IMGC936. IMGC936 is an investigational ADC in co-development with MacroGenics designed to target ADAM9, an enzyme overexpressed in a range of solid tumors and implicated in tumor progression and metastasis. This ADC incorporates a number of innovations, including antibody engineering to extend half-life, site-specific conjugation with a fixed drug-antibody ratio to enable higher dosing, and a next-generation linker and payload for improved stability and bystander activity. We reported encouraging preclinical safety and activity data from this program at the AACR meeting in 2019 and expect an IND for IMGC936 will be submitted to the FDA in the first half of 2020. Finally, we expect our next generation anti-folate receptor alpha candidate, IMGN151, to move into preclinical development in 2020. Collaborating on ADC development with other companies allows us to generate revenue, mitigate expenses, enhance our capabilities, and extend the reach of our proprietary platform. The most advanced partner program is Roche's marketed product, Kadcyla®. Our ADC technology is also used in candidates in clinical development with a number of partners. We have evolved our partnering approach to pursue relationships where we can gain access to technology and complementary capabilities, such as our technology swap with CytomX, as well as co-development and co-commercialization opportunities, such as our relationships with Jazz and MacroGenics. In addition, following our restructuring in 2019, we seek to monetize our remaining portfolio and platform technologies through out-licensing transactions or asset sales. To this end, inDecember 2019 , we granted an exclusive development and commercialization license to CytomX to our cytotoxic payload technology for use with antibodies (and Probodies™ developed therefrom) directed to EpCAM, including certain of our proprietary anti-EpCAM antibodies developed into Probodies utilizing CytomX's Probody technology, in return for which we will receive an upfront payment from CytomX with the potential for additional payments following CytomX's successful achievement of pre-defined clinical development, approval, and commercialization milestones, as well as royalties on net sales. In addition, the new license terminated the previous exclusive development and commercialization license CytomX granted us in 2017 to its proprietary antibody-masking technology for use with Probodies. We expect that substantially all of our revenue for the foreseeable future will result from payments under our collaborative arrangements. For more information concerning these relationships, including their ongoing financial and accounting impact on our business, please read Note C, "Significant Collaborative Agreements," to our consolidated financial statements included in this report.
To date, we have not generated revenues from commercial sales of internal
products and we expect to incur significant operating losses for the foreseeable
future. As of
InJanuary 2020 , we announced the closing of a public offering of 24,523,750 shares of common stock at a price of$4.25 per share. We received net proceeds from the offering of$97.7 million after deducting underwriting discounts and offering expenses. We intend to use the net proceeds of the offering, together with its existing capital, to fund our operations, including, but not limited to, clinical trial activities, supply of drug substance and drug product, pre-commercialization activities, capital expenditures, and working capital.
Critical Accounting Policies
We prepare our consolidated financial statements in accordance with accounting principles generally accepted in theU.S. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to our collaborative agreements, clinical trial 44 Table of Contents
accruals, inventory, and stock-based compensation. We base our estimates on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ from these estimates.
We adopted ASC 842 using the transition method provided by ASC Update No. 2018-11, Leases (Topic 842): Targeted Improvements. Under this method, we initially applied the new leasing rules onJanuary 1, 2019 , rather than at the earliest comparative period presented in the financial statements. Prior periods presented are in accordance with previous guidance issued under ASC 840. The adoption of ASC 842 represents a change in accounting principle that will recognize lease assets and liabilities on the balance sheet, including those previously classified as operating leases under ASC 840, and disclose key information about leasing arrangements. Refer to Note B to the consolidated financial statements for further discussion on this change. We adopted ASC 606 onJanuary 1, 2018 , using the modified retrospective method for all contracts not completed as of the date of adoption. The reported results for 2018 reflect the application of ASC 606 guidance, while the reported results prior to 2018 were prepared under the guidance of ASC 605, "Revenue Recognition", which is also referred to herein as "legacy GAAP" or the "previous guidance." Refer to Note B to the consolidated financial statements for further discussion on this change. We believe the following critical accounting policies reflect our more significant judgments and estimates used in the preparation of our consolidated financial statements.
Revenue Recognition
We enter into licensing and development agreements with collaborators for the development of
ADCs. The terms of these agreements contain multiple deliverables/performance obligations which may include (i) licenses, or options to obtain licenses, to our ADC technology, (ii) rights to future technological improvements, (iii) research activities to be performed on behalf of the collaborative partner, (iv) delivery of cytotoxic agents, and (v) prior to the decommission of ourNorwood facility in 2018, the manufacture of preclinical or clinical materials for the collaborative partner. Payments to us under these agreements may include upfront fees, option fees, exercise fees, payments for research activities, payments for the manufacture of preclinical or clinical materials, payments based upon the achievement of certain milestones, and royalties on product sales. We follow the provisions of Accounting Standards Codification Topic 606 - Revenue from Contracts with Customers (ASC 606) in accounting for these agreements. Revenue is recognized when a customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. In determining the appropriate amount of revenue to be recognized as we fulfill our obligations under the agreements, we perform the following five steps: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations, including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when or as we satisfy each performance obligation. We only apply the five-step model to contracts when it is probable that we will collect the consideration to which we are entitled in exchange for the goods or services we transfer to the customer. At contract inception, once the contract is determined to be within the scope of ASC 606, we assess the goods or services promised within each contract and determine those that are performance obligations, and assess whether each promised good or service is distinct. We then recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when or as the performance obligation is satisfied. As part of the accounting for the arrangement, we must develop assumptions that require judgment to determine the selling price for each performance obligation that was identified in the contract, which is discussed in further detail below.
At
Development and commercialization licenses, which provide the party with the
? right to use our ADC technology and/or certain other intellectual property to
develop and commercialize anticancer compounds to a specified antigen target:
Bayer (one exclusive single-target license)
Biotest (one exclusive single-target license)
CytomX (two exclusive single-target licenses)
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Novartis (five exclusive single-target licenses)
Roche, through its
Sanofi (five fully-paid, exclusive single-target licenses)
Collaboration and option agreement for a defined period of time to secure a
? license to develop and commercialize a specified anticancer compound on
established terms: Jazz Pharmaceuticals
? Collaboration and license agreement to co-develop and co-commercialize a
specified anticancer compound on established terms:
MacroGenics
There are no performance, cancellation, termination, or refund provisions in any of the arrangements that contain material financial consequences to us.
Development and Commercialization Licenses
The obligations under a development and commercialization license agreement generally include the license to our ADC technology with respect to a specified antigen target, and may also include obligations related to rights to future technological improvements, research activities to be performed on behalf of the collaborative partner and, previously, the manufacture of preclinical or clinical materials for the collaborative partner. Generally, development and commercialization licenses contain non-refundable terms for payments and, depending on the terms of the agreement, provide that we will earn payments upon the achievement of certain milestones and royalty payments, generally until the later of the last applicable patent expiration or 10 to 12 years after product launch. Royalty rates may vary over the royalty term depending on our intellectual property rights and/or the presence of comparable competing products. In the case of Sanofi, its licenses are fully-paid and no further milestones or royalties will be received. In the case ofDebiopharm , no royalties will be received. We previously made available research and manufacturing services under the development and commercialization licenses; following our restructuring inJune 2019 , these services have been discontinued. However, we may provide technology transfer services in connection with the out-licensing of product candidates initially developed by us at negotiated prices which are generally consistent with what other third parties would charge. We may also provide technical assistance and share any technology improvements with our collaborators during the term of the collaboration agreements. We do not directly control when or whether any collaborator will request research, achieve milestones, or become liable for royalty payments. In determining the performance obligations, management evaluates whether the license is distinct, and has significant standalone functionality, from the undelivered elements to the collaborative partner based on the consideration of the relevant facts and circumstances for each arrangement. Factors considered in this determination include the research capabilities of the partner and the availability of ADC technology research expertise in the general marketplace and whether technological improvements are required for the continued functionality of the license. If the license to our intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, we recognize revenues from non-refundable, up-front fees allocated to the license when the license is transferred to the customer and the customer is able to use and benefit from the license. We estimate the selling prices of the license and all other performance obligations based on market conditions, similar arrangements entered into by third parties, and entity-specific factors such as the terms of our previous collaborative agreements, recent preclinical and clinical testing results of therapeutic products that use our ADC technology, our pricing practices and pricing objectives, the likelihood that technological improvements will be made, and, if made, will be used by our collaborators, and the nature of the research services to be performed on behalf of our collaborators and market rates for similar services. We recognize revenue related to research services as the services are performed. We have also produced research material for potential collaborators under material transfer agreements. We are compensated at negotiated rates that are consistent with what other third parties would charge. We record amounts received for research materials 46
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produced or services performed as a component of research and development
support revenue. Following our restructuring in
Prior to 2019, we also provided cytotoxic agents to our collaborators and produced preclinical and clinical materials (drug substance) at negotiated prices generally consistent with what other third parties would charge. We recognized revenue on cytotoxic agents and on preclinical and clinical materials when the materials passed all quality testing required for collaborator acceptance and control had transferred to the collaborator. During the twelve months endedDecember 31, 2018 and 2017 the difference between our full cost to manufacture preclinical and clinical materials on behalf of our collaborators as compared to total amounts received from collaborators for the manufacture of preclinical and clinical materials was$1.4 and$3.1 million , respectively. We discontinued producing preclinical and clinical materials for our collaborators at the end of 2018.
We recognize revenue related to the rights to future technological improvements over the estimated term of the applicable license.
Our development and commercialization license agreements have milestone payments which for reporting purposes are aggregated into three categories: (i) development milestones, (ii) regulatory milestones, and (iii) sales milestones. Development milestones are typically payable when a product candidate initiates or advances into different clinical trial phases. Regulatory milestones are typically payable upon submission for marketing approval with the FDA or other countries' regulatory authorities or on receipt of actual marketing approvals for the compound or for additional indications. Sales milestones are typically payable when annual sales reach certain levels. At the inception of each arrangement that includes developmental and regulatory milestone payments, we evaluate whether the achievement of each milestone specifically relates to our efforts to satisfy a performance obligation or transfer a distinct good or service within a performance obligation. If the achievement of a milestone is considered a direct result of our efforts to satisfy a performance obligation or transfer a distinct good or service and the receipt of the payment is based upon the achievement of the milestone, the associated milestone value is allocated to that distinct good or service. If the milestone payment is not specifically related to our effort to satisfy a performance obligation or transfer a distinct good or service, the amount is allocated to all performance obligations using the relative standalone selling price method. In addition, we evaluate the milestone to determine whether the milestone is considered probable of being reached and estimate the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price to be allocated; otherwise, such amounts are considered constrained and excluded from the transaction price. At the end of each subsequent reporting period, we re-evaluate the probability of achievement of such development or regulatory milestones and any related constraint, and if necessary, adjust our estimate of the transaction price. Any such adjustments to the transaction price are allocated to the performance obligations on the same basis as at contract inception. Amounts allocated to a satisfied performance obligation shall be recognized as revenue, or as a reduction of revenue, in the period in which the transaction price changes. For development and commercialization license agreements that include sales-based royalties, including milestone payments based on the level of sales, and the license is deemed to be the predominant item to which the royalties relate, we recognize revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied) in accordance with the royalty recognition constraint. Under our development and commercialization license agreements, except for the Sanofi andDebiopharm licenses, we receive royalty payments based upon our licensees' net sales of covered products. Generally, under the development and commercialization agreements, we receive royalty reports and payments from our licensees approximately one quarter in arrears. We estimate the amount of royalty revenue to be recognized based on historical and forecasted sales and/or sales information from our licensees if available.
Collaboration and Option Agreements/Right-to-Test Agreements
Our right-to-test agreements provide collaborators the right to test our ADC technology for a defined period of time through a research, or right-to-test, license. Under both right-to-test agreements and collaboration and option agreements, collaborators may (a) take options, for a defined period of time, to specified targets and (b) upon exercise of those options, secure or "take" licenses to develop and commercialize products for the specified targets on established terms. Under these agreements, fees may be due to us (i) at the inception of the arrangement (referred to as "upfront" fees or payments), (ii) upon the opt-in to acquire a development and commercialization license(s) (referred to as exercise fees or payments earned, if any, when the development and commercialization license is "taken"), (iii) at the collaborator's request, after providing research services at negotiated prices, which are generally consistent with what other third parties would charge, or (iv) some combination of all of these fees. 47 Table of Contents The accounting for collaboration and option agreements and right-to-test agreements is dependent on the nature of the options granted to the collaborative partner. Options are considered distinct performance obligations if they provide a collaborator with a material right. Factors that are considered in evaluating whether options convey a material right include the overall objective of the arrangement, the benefit the collaborator might obtain from the agreement without exercising the options, the cost to exercise the options relative to the fair value of the licenses, and the additional financial commitments or economic penalties imposed on the collaborator as a result of exercising the options. As ofDecember 31, 2019 , all right-to-test agreements have expired. If we conclude that an option provides the customer a material right, and therefore is a separate performance obligation, we then determine the estimated selling prices of the option and all other units of accounting using the following inputs: a) estimated fair value of each program, b) the amount the partner would pay to exercise the option to obtain the license, and c) probability of exercise.
We do not control when or if any collaborator will exercise its options for development and commercialization licenses. As a result, we cannot predict when or if we will recognize revenues in connection with any of the foregoing.
Upfront payments on development and commercialization licenses may be recognized upon delivery of the license if facts and circumstances dictate that the license has stand-alone functionality and is distinct from the undelivered elements. In determining whether a collaboration and option agreement is within the scope of ASC 808, Collaborative Arrangements, management evaluates the level of involvement of both companies in the development and commercialization of the products to determine if both parties are active participants and if both parties are exposed to risks and rewards dependent on the commercial success of the licensed products. If the agreement is determined to be within the scope of ASC 808, we will segregate the research and development activities and the related cost sharing arrangement. Payments made by us for such activities will be recorded as research and development expense and reimbursements received from its partner will be recognized as an offset to research and development expense.
Clinical Trial Accruals
Clinical trial expenses are a significant component of research and development expenses, and we outsource a significant portion of these costs to third parties. Third party clinical trial expenses include investigator fees, site costs (patient costs), clinical research organization costs, and costs for central laboratory testing and data management. The accrual for site and patient costs includes inputs such as estimates of patient enrollment, patient cycles incurred, clinical site activations, and other pass-through costs. These inputs are required to be estimated due to a lag in receiving the actual clinical information from third parties. Payments for these activities are based on the terms of the individual arrangements, which may differ from the pattern of costs incurred, and are reflected on the consolidated balance sheets as a prepaid asset or accrued clinical trial cost. These third party agreements are generally cancelable, and related costs are recorded as research and development expenses as incurred. Non-refundable advance clinical payments for goods or services that will be used or rendered for future R&D activities are recorded as a prepaid asset and recognized as expense as the related goods are delivered or the related services are performed. We also record accruals for estimated ongoing clinical research and development costs. When evaluating the adequacy of the accrued liabilities, we analyze progress of the studies, including the phase or completion of events, invoices received, and contracted costs. Significant judgments and estimates may be made in determining the accrued balances at the end of any reporting period. Actual results could differ from the estimates made by the Company. The historical clinical accrual estimates made by the Company have not been materially different from the actual costs.
Leases
EffectiveJanuary 1, 2019 , we adopted ASU 2016-2, Leases (Topic 842), the details of which are further discussed in Note B to the consolidated financial statements. We determine if an arrangement is a lease at inception. Operating leases include right-of-use ("ROU") assets and operating lease liabilities (current and non-current), which are recorded in our consolidated balance sheets. Single payment capital leases for equipment that are considered finance leases are included in property and equipment in our consolidated balance sheets. As these single payment obligations have all been made, there is no related liability recorded. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. We use the implicit rate when readily determinable. As a number of our leases do not provide an implicit rate, we use an incremental borrowing rate applicable to us based on the information available at the commencement date in determining the present value of lease payments. As we have no existing or proposed collateralized borrowing arrangements, to determine a reasonable 48
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incremental borrowing rate, we consider collateral assumptions, the lease term, our current credit risk profile and rates for existing borrowing arrangements for comparable peer companies. The operating lease ROU assets were netted against any lease incentive and straight-line lease liability balances atJanuary 1, 2019 . We account for the lease and fixed non-lease components as a single lease component. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for operating lease payments is recognized on a straight-line basis over the lease term.
Stock-based Compensation
As ofDecember 31, 2019 , we are authorized to grant future awards under three share-based compensation plans, which are theImmunoGen, Inc. 2018 Employee, Director and Consultant Equity Incentive Plan, the Employee Stock Purchase Plan, and the Inducement Equity Plan. The stock-based awards are accounted for under ASC Topic 718, "Compensation-Stock Compensation," pursuant to which the estimated grant date fair value of awards is charged to the statement of operations over the requisite service period, which is the vesting period. Such amounts have been reduced by our estimate of forfeitures for unvested awards. The fair value of each stock option is estimated on the date of grant using the Black-Scholes option-pricing model. Expected volatility is based exclusively on historical volatility of our stock. The expected term of stock options granted is based exclusively on historical data and represents the period of time that stock options granted are expected to be outstanding. The expected term is calculated for and applied to one group of stock options as we do not expect substantially different exercise or post-vesting termination behavior amongst our employee population. The risk-free rate of the stock options is based on theU.S. Treasury rate in effect at the time of grant for the expected term of the stock options. Estimated forfeitures are based on historical data as well as current trends. Stock compensation cost related to stock options and restricted stock incurred during the years endedDecember 31, 2019 , 2018, and 2017 was$13.8 ,$16.4 and$11.1 million , respectively. Stock compensation cost related to director deferred share units recorded during the years endedDecember 31, 2019 , 2018, and 2017 was$337,000 ,$361,000 and$206,000 respectively. Future stock-based compensation may significantly differ based on changes in the fair value of our common stock and our estimates of expected volatility and the other relevant assumptions.
Results of Operations
Revenues
Our total revenues increased$28.9 million to$82.3 million for the year endedDecember 31, 2019 compared to the prior year and decreased$62.0 million to$53.4 million for the year endedDecember 31, 2018 compared to the year endedDecember 31, 2017 . The increase in revenues in 2019 compared to 2018 is attributable to an increase in license and milestone and non-cash royalty revenue, partially offset by decreases in research and development support and clinical materials revenue. The decrease in revenues in 2018 compared to 2017 is attributable to a decrease in license and milestone fees and research and development support revenue, partially offset by an increase in non-cash royalty revenue and clinical materials revenue.
License and milestone fees
The amount of license and milestone fees we earn is directly related to the number of our collaborators, the collaborators' advancement of the product candidates, and the overall success in the clinical trials of the product candidates. As such, the amount of license and milestone fees may vary widely from quarter to quarter and year to year.
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Total revenue recognized from license and milestone fees from each of our
collaborators in the years ended
Years Ended December 31, License and Milestone Fees 2019 2018 2017 Collaborative Partner: Amgen/Oxford BioTherapeutics/Menarini$ 5 $ 1,066 $ 17 Bayer HealthCare 16 16 - CytomX 10,314 14 13,665 Debiopharm - 500 29,500 Fusion - 750 - Jazz 14,500 - - Lilly - 717 22 Novartis 4,865 1,189 180 Roche 5,046 46 - Sanofi - - 36,000 Takeda 42 10,982 85 Total$ 34,788 $ 15,280 $ 79,469 Revenue from license and milestone fees increased$19.5 million to$34.8 million for the year endedDecember 31, 2019 and decreased$64.2 million to$15.3 million for the year endedDecember 31, 2018 . Included in license and milestone fees for the year endedDecember 31, 2019 is a$5 million regulatory milestone achieved under our license agreement withGenentech , a member of the Roche Group, and$3.0 million and$4.7 million of development milestones that were determined to be probable of occurring under our license agreements with CytomX and Novartis, respectively, that were allocated to the previously delivered licenses. Also included in license and milestone fees for the year endedDecember 31, 2019 is$14.5 million of previously deferred license revenue earned upon the opt-out of the right to execute a license by Jazz. In addition,$7.3 million was recognized as revenue pursuant to a license agreement executed with CytomX inDecember 2019 . Included in license and milestone fees for the year endedDecember 31, 2018 is$10.9 million of previously deferred license revenue earned upon the expiration of the right to execute a license or extend the research term specified under the right-to-test agreement withTakeda , a$500,000 payment received inJanuary 2018 related to the delivery of IMGN529 clinical materials toDebiopharm , and$1 million and$500,000 of development milestones that were determined to be probable of occurring under our license agreements withOxford BioTherapeutics Ltd. and Fusion, respectively, that were allocated to the previously delivered licenses. InMay 2018 , Novartis terminated one of its six development and commercialization licenses, and inOctober 2018 , Lilly terminated its three development and commercialization licenses. As a result, we recorded the remaining$1.7 million balance of the upfront payments that had been allocated to future performance obligations under these licenses as revenue, which is included in license and milestone fees for 2018. Included in license and milestone fees for the year endedDecember 31, 2017 is$29.5 million of revenue related to the sale and transfer of our IMGN529 asset toDebiopharm , a$30 million paid-up license fee related to an amendment to our collaboration and license agreement with Sanofi,$6 million of development milestones achieved under the collaboration and license agreement with Sanofi prior to amendment,$12.7 million of non-cash license revenue earned upon the expiration of the right to replace the target specified under the development and commercialization license with CytomX and a$1 million development milestone achieved under said license agreement with CytomX. Deferred revenue of$127.4 million as ofDecember 31, 2019 includes$60.5 million remaining from an upfront payment related to the license options granted to Jazz inAugust 2017 and$65.2 million related to the sale of our residual rights to receive royalty payments on commercial sales of Kadcyla, with the remainder of the balance primarily representing consideration received from our collaborators pursuant to our license agreements which we have yet to earn pursuant to our revenue recognition policy.
Non-cash royalty revenue related to the sale of future royalties
InFebruary 2013 , theU.S. FDA granted marketing approval to Kadcyla, an ADC resulting from one of our development and commercialization licenses with Roche, through itsGenentech unit. We receive royalty reports and payments related to sales of Kadcyla from Roche one quarter in arrears. In accordance with our revenue recognition policy,$47.4 ,$32.2 , and$28.1 million of non-cash royalties on net sales of Kadcyla were recorded and included in royalty revenue for the years endedDecember 31, 2019 , 2018, and 2017, respectively. Kadcyla sales occurring afterJanuary 1, 2015 are covered by a royalty purchase agreement whereby the associated cash was remitted to Immunity 50
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Royalty Holdings, L.P. subject to a residual cap. InJanuary 2019 , we sold our residual rights to receive royalty payments on commercial sales of Kadcyla to OMERS, the defined benefit pension plan for municipal employees in the Province ofOntario, Canada , for$65.2 million , net of$1.5 million of fees. Simultaneously, OMERS purchased IRH's right to the royalties the Company previously sold as described above, thereby obtaining the rights to 100% of the royalties received from that date on. See further details regarding royalty obligation in Note F of the Consolidated Financial Statements.
Research and development support revenue
Research and development support revenue was$68,000 ,$1.4 million , and$3.5 million for the years endedDecember 31, 2019 , 2018 and 2017, respectively. The amount of research and development support revenue we earn is directly related to requests we receive from collaborators for research and development work under our agreements with them and, as such, the amount of these fees may vary widely from quarter to quarter and year to year. Additionally, as a result of the restructuring at the end of the second quarter of 2019, we have discontinued providing such services.
Clinical materials revenue
Clinical materials revenue was$4.6 million and$4.4 million , respectively, for the years endedDecember 31, 2018 and 2017. During these periods, we shipped clinical materials in support of a number of our collaborators' clinical trials, as well as preclinical materials in support of certain collaborators' development efforts and DMx shipments to certain collaborators in support of development and manufacturing efforts. We were compensated at negotiated prices which were generally consistent with what other third-parties would charge. We discontinued producing preclinical and clinical materials for our collaborators by the end of 2018.
Research and Development Expenses
Our research and development expenses relate to (i) research to evaluate new targets and to develop and evaluate new antibodies, linkers, and cytotoxic agents, (ii) preclinical testing of our own and, in certain instances, our collaborators' product candidates, and the cost of our own clinical trials, (iii) development related to clinical and commercial manufacturing processes, and (iv) external manufacturing operations, and prior to 2019, internal manufacturing operations, which also included raw materials. Research and development expense for the year endedDecember 31, 2019 decreased$60.0 million to$114.5 million from$174.5 million for the year endedDecember 31, 2018 . Research and development expense was$139.7 million for the year endedDecember 31, 2017 . The significant decrease in 2019 from the prior year was primarily due to: (i) lower expenses resulting from the restructuring of the business at the end of the second quarter of 2019 and the closing of our manufacturing facility at the end of 2018, including decreases in personnel, facility, and third-party research expenses; (ii) decreased clinical trial costs driven by lower activity in the FORWARD I Phase 3 study; and, (iii) lower antibody costs driven by activity to support commercial validation of mirvetuximab soravtansine in the prior year period. The significant increase in 2018 from 2017 was primarily due to higher clinical trial costs driven largely by completion of patient enrollment in FORWARD I, increased costs related to the FORWARD II and IMGN632 trials, and higher external manufacturing costs in support of commercial validation of mirvetuximab soravtansine. Contract service expense also increased due to increased clinical, regulatory, and commercial-readiness efforts to support advancement of mirvetuximab soravtansine. We are unable to accurately estimate which potential product candidates, if any, will eventually move into our internal preclinical research program. We are unable to reliably estimate the costs to develop these products as a result of the uncertainties related to discovery research efforts as well as preclinical and clinical testing. Our decision to move a product candidate into the clinical development phase is predicated upon the results of preclinical tests. We cannot accurately predict which, if any, of the discovery stage product candidates will advance from preclinical testing and move into our internal clinical development program. The clinical trial and regulatory approval processes for our product candidates that have advanced or that we intend to advance to clinical testing are lengthy, expensive, and uncertain in both timing and outcome. As a result, the pace and timing of the clinical development of our product candidates is highly uncertain and may not ever result in approved products. Completion dates and development costs will vary significantly for each product candidate and are difficult to predict. A variety of factors, many of which are outside our control, could cause or contribute to the prevention or delay of the successful completion of our clinical trials, or delay or prevent our obtaining necessary regulatory approvals. The costs to take a product through clinical trials are dependent upon, among other factors, the clinical indications, the timing, size, and design of each clinical trial, the number of patients enrolled in each trial, and the speed at which patients are enrolled and treated. Product candidates may be found to be ineffective or to cause unacceptable side effects during clinical trials, may take longer to progress through clinical trials
than 51 Table of Contents anticipated, may fail to receive necessary regulatory approvals or may prove impractical to manufacture in commercial quantities at reasonable cost or with acceptable quality. The lengthy process of securing FDA approvals for new drugs requires the expenditure of substantial resources. Any failure by us to obtain, or any delay in obtaining, regulatory approvals, would materially adversely affect our product development efforts and our business overall. Accordingly, we cannot currently estimate, with any degree of certainty, the amount of time or money that we will be required to expend in the future on our product candidates prior to their regulatory approval, if such approval is ever granted. As a result of these uncertainties surrounding the timing and outcome of our clinical trials, we are currently unable to estimate when, if ever, our product candidates that have advanced into clinical testing will generate revenues and cash flows. We do not track our research and development costs by project. Since we use our research and development resources across multiple research and development projects, we manage our research and development expenses within each of the categories listed in the following table and described in more detail below
(in thousands): Years EndedDecember 31 ,
Research and Development Expense Category 2019 2018 2017 Research
$ 12,272 $ 24,218 $
22,570
Preclinical and Clinical Testing 71,193 89,226
68,794
Process and Product Development 7,807 12,463
10,261
Manufacturing Operations 23,250 48,549
38,114
Research Research includes expenses associated with activities to evaluate new targets and to develop and evaluate new antibodies, linkers, and cytotoxic agents for our products and in support of our collaborators. Such expenses primarily include personnel, contract services, facility expenses, and lab supplies. Research expenses decreased$11.9 million to$12.3 million for the year endedDecember 31, 2019 and increased$1.6 million to$24.2 million for the prior year. The decrease in 2019 is principally due to a decrease in personnel expenses, lab supplies, and allocated facility expenses as a result of the restructuring of the business. The increase in 2018 was principally due to increases in allocated facility expenses, contract services, and lab supplies.
Preclinical and Clinical Testing
Preclinical and clinical testing includes expenses related to preclinical testing of our own and, in certain instances, our collaborators' product candidates, regulatory activities, and the cost of our own clinical trials. Such expenses include personnel, patient enrollment at our clinical testing sites, consultant fees, contract services, and facility expenses. Preclinical and clinical testing expenses decreased$18.0 million to$71.2 million for the year endedDecember 31, 2019 and increased$20.4 million to$89.2 million for the prior year. The decrease in 2019 was primarily the result of lower clinical trial costs principally driven by lower FORWARD I activity, lower personnel and lab expenses resulting from the restructuring of the business, and a higher credit recorded against IMGN779 and IMGN632 development costs pursuant to our cost-sharing agreement with Jazz due largely to an increased reimbursement cap for 2019 pursuant to the collaboration agreement executed inAugust 2017 . The increase in 2018 was primarily the result of an increase in clinical trial costs principally driven by advancement of the FORWARD I, FORWARD II, and IMGN632 studies, an increase in salaries and related expenses driven by increases in personnel and stock compensation expense, and an increase in contract services to support commercial advancement of mirvetuximab. Partially offsetting these increases, a higher credit was recorded against IMGN779 and IMGN632 development costs in 2018 resulting from a full-year of cost-sharing with Jazz.
Process and Product Development
Process and product development expenses include costs for development of clinical and commercial manufacturing processes for our own and collaborator compounds. Such expenses include the costs of personnel, contract services, lab supplies, and facility expenses. Process and product development expenses decreased$4.7 million to$7.8 million for the year endedDecember 31, 2019 and increased$2.2 million to$12.5 million for the prior year. The decrease in 2019 was principally due to a decrease in personnel expenses, lab supplies, and allocated facility expenses as a result of the restructuring of the business. The increase in 2018 was principally due to increases in allocated facility expenses, lab supplies, and salaries and related expenses driven by greater stock compensation expense, partially offset by a higher credit recorded against IMGN779 and IMGN632 development costs in 2018 resulting from a full-year of
cost-sharing with Jazz. 52 Table of Contents Manufacturing Operations
Manufacturing operations expense includes costs to manufacture preclinical and clinical materials for our own and our collaborators' product candidates, quality control and quality assurance activities, and costs to support the operation and maintenance of our conjugate manufacturing facility, which we ramped-down in 2018 and decommissioned inFebruary 2019 . Such expenses include personnel, raw materials for our and our collaborators' preclinical studies and clinical trials, non-pivotal and pivotal development costs with contract manufacturing organizations, manufacturing supplies, and facility expenses. Manufacturing operations expense decreased$25.2 million to$23.3 million for the year endedDecember 31, 2019 and increased$10.4 million to$48.5 million in the previous year. The decrease in 2019 was principally the result of lower antibody and small molecule costs driven by activity to support commercial validation of mirvetuximab soravtansine in the prior year, and lower personnel expenses, raw materials/manufacturing supplies, and facility-related expenses, including amortization of leasehold improvements, resulting from the shut-down of our manufacturing facility in late 2018, as well as related to the restructuring of the business in 2019. The increase in 2018 was principally the result of: (i) an increase in external manufacturing costs, including antibody development and supply expense; (ii) an increase in analytical service fees to transfer our products and certain of our collaborators' out of ourNorwood plant; and (iii) increased depreciation expense related to accelerated amortization ofNorwood leasehold improvements. Partially offsetting these increases, a higher credit was recorded against IMGN779 and IMGN632 development costs in 2018 resulting from a full-year of cost-sharing with Jazz. Antibody development and supply expense in support of commercial validation and in anticipation of potential future clinical trials, as well as our ongoing trials, was$8.3 ,$18.5 , and$12.5 million for the years endedDecember 31, 2019 , 2018, and 2017, respectively. Activity and supply in support of commercial validation of mirvetuximab drove the significant increase in 2018. The process of antibody production is lengthy due in part to the lead time to establish a satisfactory production process at a vendor. Accordingly, costs incurred related to antibody production and development have fluctuated from period to period and we expect these cost fluctuations to continue in the future.
General and Administrative Expenses
General and administrative expenses increased$1.8 million to$38.5 million for the year endedDecember 31, 2019 and increased$2.8 million to$36.7 million for the prior year. The increase in 2019 was principally due to greater allocated facility expenses related to excess laboratory and office space, partially offset by a decrease in personnel expenses resulting from the restructuring. The increase in 2018 was principally due to an increase in third-party service fees and an increase in salaries and related expenses driven largely by greater
stock compensation expense. Restructuring Charges 2019 Corporate Restructuring
OnJune 26, 2019 , the Board of Directors approved a plan to restructure the business to focus resources on continued development of mirvetuximab soravtansine and a select portfolio of three earlier-stage product candidates, resulting in a significant reduction of our workforce, with a majority of these employees separating from the business bymid-July 2019 and most of the remaining affected employees transitioning over varying periods of time of up to 12 months. Communication of the plan to the affected employees was substantially completed onJune 27, 2019 . As a result of the workforce reduction, we recorded a charge of$16.0 million for severance related to a pre-existing plan inJune 2019 , which has been subsequently reduced to$15.4 million due to minor adjustments to the plan. The related cash payments will be substantially paid out byJune 30, 2020 . In addition, a charge of$4.0 million is expected to be recorded for incremental retention benefits in the same time period, of which approximately$2.1 million was recorded during the year endedDecember 31, 2019 .
In addition to the termination benefits and other related charges, we are
seeking to sub-lease the majority of the laboratory and office space at
2018 Manufacturing Restructuring
InFebruary 2018 , following an in-depth review of manufacturing and quality operations, the Board of Directors authorized management to implement a new operating model that will rely on external manufacturing and quality testing for drug substance and drug product for our development programs. The implementation of this new operating model led to the ramp-down of manufacturing and quality activities at theNorwood, Massachusetts facility by the end of 2018, with a full decommissioning of the facility inFebruary 2019 . Implementation of the new operating model resulted in the 53
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separation of 22 employees. Communication of the plan to the affected employees
was substantially completed on
In connection with the implementation of the new operating model, we recorded a charge of$1.2 million for severance related to a pre-existing plan in the first quarter of 2018. Additional expense was recorded for incremental retention benefits over the remaining service period of the related employees, as well as marginal adjustments to severance resulting from voluntary terminations, which totaled$2.3 million for the remainder of 2018. Cash payments related to retention benefits were paid in the fourth quarter of 2018 and those related to severance were substantially paid out by the end of the second quarter of 2019. Additionally, certain options held by the employees to be separated were modified to extend the exercise period, resulting in a stock compensation charge of$157,000 in the first quarter of 2018.
Charge Related to Unoccupied Office Space
We have sought to sub-lease 10,281 square feet of unoccupied office space inWaltham that was leased in 2016. During the year endedDecember 31, 2019 , we recorded a$559,000 impairment charge related to this lease, which represents the remaining balance of the right to use asset as the likelihood of finding a sub-lessor has diminished significantly as the lease approaches termination. During the year endedDecember 31, 2017 ,$779,000 of similar charges were also recorded. Investment Income, net
Investment income for the years endedDecember 31, 2019 , 2018, and 2017 was$4.4 ,$4.2 , and$1.1 million , respectively. The increase in 2019 and 2018 compared to 2017 is due to a greater average cash balance in each period driven largely by$65.2 million of net proceeds generated from the sale of the our residual rights to Kadcyla® (ado-trastuzumab emtansine) royalties inJanuary 2019 ,$162.5 million of net proceeds generated from a public offering of common stock inJune 2018 , and$101.7 million of net proceeds generated from a public offering of common stock inOctober 2017 .
Non-Cash Interest Expense on Liability Related to Sale of Future Royalty
In 2015, IRH purchased our right to receive 100% of the royalty payments on commercial sales of Kadcyla arising under our development and commercialization license withGenentech , until IRH has received aggregate royalties equal to$235 million or$260 million , depending on when the aggregate royalties received by IRH reach a specified milestone. InJanuary 2019 , OMERS purchased IRH's right to the royalties the Company previously sold as described above. As described in Note F to our Consolidated Financial Statements, this royalty sale transaction has been recorded as a liability that amortizes over the estimated royalty payment period as Kadcyla royalties are remitted directly to the purchaser. During the years endedDecember 31, 2019 , 2018, and 2017, we recorded$16.9 ,$10.6 and$13.2 , respectively, of non-cash interest expense. The increase in 2019 compared to 2018 and 2017 is a result of a greater effective interest rate driven by greater projected royalty payments than previously estimated due to market expansion of Kadcyla and approval for a second indication received in 2019. We impute interest on the transaction and record interest expense at the effective interest rate, which we currently estimate to be 15.5%. There are a number of factors that could materially affect the estimated interest rate, in particular, the amount and timing of royalty payments from future net sales of Kadcyla, and we assess this estimate on a periodic basis. As a result, future interest rates could differ significantly and any such change in interest rate will be adjusted prospectively.
Interest Expense on Convertible Senior Notes
InJune 2016 , the Company issued Convertible 4.5% Senior Notes with an aggregate principal amount of$100 million . The Convertible Notes are senior unsecured obligations and bear interest at a rate of 4.5% per year, payable semi-annually in arrears onJanuary 1 andJuly 1 of each year, commencing onJanuary 1, 2017 . During the second half of calendar 2017,$97.9 million of this debt was converted to common shares, which is discussed further below. For the years endedDecember 31, 2019 , 2018, and 2017, we recorded$95,000 ,$95,000 and$3.0 million , respectively, of interest expense.
Non-Cash Debt Conversion Expense
During the second half of calendar 2017, we entered into privately negotiated exchange agreements with a number of holders of our outstanding Convertible Notes, pursuant to which we agreed to exchange, in a private placement,$97.9 million in aggregate principal amount of Convertible Notes held by the holders for 26.2 million newly issued shares of our common stock, equivalent to the number of shares based on the original conversion terms, plus an additional number of newly issued shares of common stock to be determined based on the volume-weighted average trading price of the common stock over certain trading days. As a result of the agreements, 2.8 million additional shares, were issued. In accordance with ASC, Topic 470-20, "Debt - Debt with Conversion and Other Options," we recorded a 54 Table of Contents non-cash debt conversion expense in the amount of$22.9 million in 2017, the accounting details of which are further discussed in Note E to our Consolidated Financial Statements. In addition, accrued interest on the bonds of$743,000 which the noteholders forfeited,$2.5 million of deferred financing costs, and$1.7 million of costs incurred to execute the conversions were charged to paid-in capital as a result of the issuance of common stock.
Other Income (Expense), net
Other income (expense), net for the years endedDecember 31, 2019 , 2018, and 2017, was$590,000 ,$(895,000) and$1.5 million , respectively. This includes$(240,000) ,$(780,000) and$1.6 million in foreign currency exchange (losses) gains related to obligations with non-U.S. dollar-based suppliers and Euro cash balances maintained to fulfill them during the same periods, respectively. In addition, we recorded$830,000 ,$(115,000) and$(93,000) of gain (loss) on the sale/disposal of fixed assets in 2019, 2018, and 2017, respectively. The gain on sale/disposal of fixed assets in 2019 was largely driven by the sale of excess lab equipment resulting from the restructuring.
Liquidity and Capital Resources
(amounts in tables in thousands)
As of December 31, 2019 2018 Cash and cash equivalents$ 176,225 $ 262,252 Working capital 131,488 208,121
Shareholders' (deficit) equity (76,121) 10,972
Years Ended December 31 2019 2018 2017
Cash (used) provided by operating activities
(533) (5,246)
(1,116)
Cash provided by financing activities 2,873 166,813
100,614 Cash Flows We require cash to fund our operating expenses, including the advancement of our own clinical programs, and to make capital expenditures. Historically, we have funded our cash requirements primarily through equity and convertible debt financings in public markets and payments from our collaborators, including license fees, milestones, research funding, and royalties. We have also monetized our rights to receive royalties on Kadcyla for up-front consideration. As ofDecember 31, 2019 , we had$176.2 million in cash and cash equivalents. Net cash (used) provided by operating activities was$(88.4) ,$(166.4) , and$7.6 million during the years endedDecember 31, 2019 , 2018, and 2017, respectively. The principal use of cash in operating activities for all periods presented was to fund our net loss, adjusted for non-cash items, with the current year benefiting from$65.2 million of net proceeds from the sale of our residual rights to royalty payments on net sales of Kadcyla, and with 2017 benefiting from payments by Jazz,Debiopharm , and Sanofi, totaling$137.8 million resulting in cash provided by operations. Net cash used for investing activities was$533,000 ,$5.2 million , and$1.1 million for the years endedDecember 31, 2019 , 2018, and 2017, respectively, and represent cash outflows from capital expenditures, net of proceeds generated from the sale of capital assets. Capital expenditures for all periods presented consisted primarily of leasehold improvements to the laboratory and office space at our corporate headquarters, laboratory equipment, computer software applications, and dedicated equipment at third-party manufacturing vendors. During 2019, as a result of the restructuring, we sold excess equipment generating proceeds of$2.3 million . Net cash provided by financing activities was$2.9 million ,$166.8 , and$100.6 million for the years endedDecember 31, 2019 , 2018, and 2017, respectively. InJune 2018 , pursuant to a public offering, we issued and sold 15.8 million shares of our common stock resulting in net proceeds of$162.5 million . InOctober 2017 , pursuant to a public offering, we issued and sold 16.7 million shares of our common stock resulting in net proceeds of$101.7 million .
Net cash provided by financing activities for the years ended
We anticipate that our current capital resources of$176.2 million and$97.7 million of net proceeds generated from a public offering inJanuary 2020 will enable us to meet our operational expenses and capital expenditures for more than twelve months after the date of this report. We may raise additional funds through equity and debt financings or generate revenues from collaborators through a combination of upfront license payments, milestone payments, royalty 55 Table of Contents
payments and research funding. We cannot provide assurance that such collaborative agreement funding will, in fact, be received. Should we or our partners not meet some or all of the terms and conditions of our various collaboration agreements or if we are not successful in securing future collaboration agreements, we may elect or be required to secure alternative financing arrangements, and/or defer or limit some or all of our research, development, and/or clinical projects.
As ofDecember 31, 2019 , pursuant to a Sales Agreement datedMarch 3, 2017 , withCowen and Company, LLC , or Cowen, as sales agent, we could offer and sell, from time to time, through Cowen, shares of our common stock having an aggregate offering price of up to$50.0 million . This agreement was terminated inJanuary 2020 , in conjunction with a public offering of our common stock.
Contractual Obligations
Below is a table that presents our contractual obligations and commercial
commitments as of
Payments Due by Period Less than 13 45 More than Total One Year Years Years 5 Years Waltham lease obligations(1)$ 33,785 $ 5,419 $ 10,580 $ 10,920 $ 6,866 Other operating lease obligations(1) 258 66 132 60 - Liability related to the sale of future royalties(2) 125,034 41,909 55,265 15,552 12,308 Convertible 4.5% senior notes(3) 2,100 - 2,100 - - Total$ 161,177 $ 47,394 $ 68,077 $ 26,532 $ 19,174
(1) See Note J to the Consolidated Financial Statements in Item 8 for discussion
of these leases.
(2) See Note F to the Consolidated Financial Statements in Item 8 for discussion
of this liability.
(3) See Note E to the Consolidated Financial Statements in Item 8 for discussion
of the convertible senior notes.
In addition to the above table, the Company is responsible for variable
operating costs and real estate taxes approximating
In 2018, the Company executed a commercial agreement with one of its manufacturers for future production of antibody through calendar 2025. InMay 2019 , the agreement was amended to reduce the number of committed antibody batches for an agreed-upon exit fee, which was recorded as research and development expense in the first quarter of 2019. After further negotiations, our noncancelable commitment for future production is approximately €5 million atDecember 31, 2019 .
Recent Accounting Pronouncements
The information set forth under Note B to the consolidated financial statements under the caption "Summary of Significant Accounting Policies" is incorporated herein by reference.
Off-Balance Sheet Arrangements
None. 56 Table of Contents
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