7. Deferred Research and Development Arrangement
Rexgene Biotech Co., Ltd.
In 2003, the Company entered into a collaborative research agreement with Rexgene Biotech Co., Ltd. (“Rexgene”), a stockholder. Rexgene agreed to assist the Company with the research, development and clinical trials necessary for registration of the Company’s drug candidate RX-0201 (Archexin®) in Asia. In accordance with the agreement, Rexgene paid the Company a one-time fee of $1,500,000 in 2003. The agreement provided that it would expire upon the later of (i) 20 years after the date of the agreement or (ii) the expiration of the patents relating to RX-0201. The amortization reduced research and development expenses for the periods presented. The payment from Rexgene was used in the cooperative funding of the costs of development of RX-0201.
On February 5, 2018, the Company and NEXT BT Co. Ltd., (“Next BT”) the successor in interest to Rexgene, terminated the agreement. In exchange for Next BT terminating its rights to RX-0201 in Asia, the Company agreed to pay Next BT a royalty in the low single digits of any net sales of RX-0201 the Company makes in Asia and 50% of the Company’s licensing revenue related to the licensing of RX-0201 in Asia, up to an aggregate of $5,000,000. Upon termination of the agreement, the unamortized deferred research and development arrangement liability of $368,750 was eliminated and recognized as other income.
The Company historically used 20 years as its basis for recognition and accordingly, for the nine months ended September 30, 2018, research and development expenses were reduced by $6,250 for the period beginning January 1, 2018 up to the agreement’s termination. For the three and nine months ended September 30, 2017, $18,750 and $56,250, respectively was reduced from research and development expenses.