7. Licenses Acquired

In accordance with ASC 730-10-25-1, Research and Development, costs incurred in obtaining technology licenses are charged to research and development expense if the technology licensed has not reached technological feasibility and has no alternative future use. The licenses purchased by Fortress and its partner companies require substantial completion of research and development, and regulatory and marketing approval efforts in order to reach technological feasibility. As such, for the three and nine months ended September 30, 2021 and 2020, the purchase price of licenses acquired were classified as research and development-licenses acquired in the unaudited condensed consolidated statement of operations as reflected in the following table:

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Journey

On June 29, 2021, Journey entered into the DFD Agreement to obtain the global rights for the development and commercialization of  DFD-29 with DRL. Pursuant to the terms and conditions of the DFD-29 Agreement, Journey agreed to pay $10.0 million, of which $2.0 million (the “First Installment”) was paid upon execution and $8.0 million (the “Second Installment”) which was paid on September 29, 2021. Additional contingent regulatory and commercial milestone payments totaling up to $163.0 million are also payable. Royalties ranging from approximately 10% to approximately 15% are payable on net sales of the DFD-29 product.

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Additionally, Journey is required to fund and oversee the Phase III clinical trials at a cost approximating $24.0 million, based upon the current development plan and budget.

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The DFD Agreement also includes contingent payments to be made to DRL in the event of a Journey IPO or the sale of Journey, See Note 6.  The fair value of the contingent payment as of September 30, 2021 was deemed to be $3.8 million, and was recorded in research and development, licenses acquired expense for the nine months ended September 30, 2021.

Mustang

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City of Hope National Medical Center

CD123 License (MB-102)

In February 2017, Mustang entered into an Amended and Restated Exclusive License Agreement with the City of Hope National Medical Center (“COH”) to acquire intellectual property rights pertaining to CD123-specific chimeric antigen receptor (“CAR”) engineered T cell (“CAR T”) technology. Pursuant to this agreement, payments are due for the achievement of eight development milestones totaling $14.5 million; additional payments are due upon the occurrence of certain one-time events, and royalty payments as a percentage of revenue in the mid-single digits are due on net sales of licensed products.  

For the nine months ended September 30, 2021, Mustang expensed a non-refundable milestone payment of $0.3 million for the 24th patient treated in the Phase 1 clinical study for MB-102 at COH. For the nine months ended September 30, 2020, Mustang expensed a non-refundable payment of $0.3 million in connection with Mustang’s public underwritten offerings.

IL13Rα2 License (MB-101)

In February 2017, Mustang entered into an Amended and Restated Exclusive License Agreement with COH to acquire intellectual property rights pertaining to IL13Rα2-specific CAR T technology. Pursuant to this agreement, payments are due for the achievement of eight development milestones totaling $14.5 million; additional payments are due upon the occurrence of certain one-time events, and royalty payments as a percentage of revenue in the mid-single digits are due on net sales of licensed products.  

For the nine months ended, September 30, 2020, Mustang expensed a non-refundable payment of $0.3 million in connection with Mustang’s public underwritten offerings.

Spacer License

In February 2017, Mustang entered into an Amended and Restated Exclusive License Agreement with COH to acquire intellectual property rights pertaining to Spacer patent rights. Pursuant to this agreement, payments are due upon the occurrence of certain one-time events, and royalty payments as a percentage of revenue in the low single digits are due on net sales of licensed products.  

For the nine months ended, September 30, 2020, Mustang expensed a non-refundable payment of $0.3 million in connection with Mustang’s public underwritten offerings.

PSCA License (MB-105)

In May 2017, Mustang entered into an exclusive license agreement with COH for the use of prostate stem cell antigen (“PSCA”) CAR T technology to be used in the treatment of prostate cancer, pancreatic cancer and other solid tumors. Pursuant to this agreement, Mustang paid an upfront fee of $0.3 million and pays an annual maintenance fee of $50,000. Additional payments are due for the achievement of ten development milestones totaling $14.9 million, and royalty payments in the mid-single digits are due on net sales of licensed products.

For the three and nine months ended, September 30, 2021, Mustang expensed a non-refundable milestone payment of $0.3 million for the twelfth patient treated in the Phase 1 clinical study of MB-105 at COH.

HER2 License (MB-103)

On May 31, 2017, Mustang entered into an exclusive license agreement with COH for the use of human epidermal growth factor receptor 2 (“HER2”) CAR T technology, which will initially be applied in the treatment of glioblastoma multiforme and brain metastases from HER2+ malignancies. Pursuant to this agreement, Mustang paid an upfront fee of $0.6 million and pays an annual maintenance fee of $50,000 (which began in 2019). Additional payments are due for the achievement of ten development milestones totaling $14.9 million, and royalty payments as a percentage of revenue in the mid-single digits are due on net sales of licensed products.

For the nine months ended, September 30, 2020, Mustang expensed a non-refundable milestone payment of $0.3 million for the twelfth patient treated in the Phase 1 clinical study of MB-103 at COH.

CSL Behring (Calimmune) License

On August 23, 2019, Mustang entered into a non-exclusive license agreement with CSL Behring (Calimmune, Inc.) (“Calimmune License”) for the rights to the Cytegrity^TM stable producer cell line for the production of viral vector for our lentiviral gene therapy program for the treatment of XSCID (MB-107 and MB-207). Mustang previously licensed the XSCID gene therapy program from St. Jude Children’s Research Hospital, Inc. (“St. Jude”) in August 2018. Pursuant to the terms of the Calimmune License, Mustang paid an upfront fee of $0.2 million. CSL Behring is eligible to receive additional payments totaling $1.2 million upon the achievement of three development and commercialization milestones. Royalty payments as a percentage of revenue in the low-single digits are due on net sales of licensed products.

For the three and nine months ended September 30, 2021 and 2020, Mustang expensed non-refundable milestone payments of $30,000 and $0.2 million, respectively, in connection with the Calimmune License.

Leiden University Medical Centre License

On September 8, 2021, Mustang entered into an exclusive, worldwide licensing agreement with Leiden University Medical Centre (“Leiden”) for the use of a gene therapy under development for the treatment of severe immunodeficiency caused by RAG1 deficiency (the “Leiden License”). Pursuant to the Leiden License, Mustang expensed an upfront fee of $0.4 million. Additional payments are due for the achievement of certain development milestones totaling up to $31 million and royalty payments in the low to mid-single digits are due on net sales of licensed products.

For the three and nine months ended September 30, 2021, Mustang expensed an upfront payment of $0.4 million in connection with the Leiden License.

Fred Hutchinson Cancer Research Center - CD20 License (MB-106)

On July 3, 2017, Mustang entered into an exclusive, worldwide licensing agreement with Fred Hutchinson Cancer Research Center (“Fred Hutch”) for the use of a CAR T therapy related to autologous T cells engineered to express a CD20-specific chimeric antigen receptor (“CD20 Technology License”). Pursuant to the CD20 Technology License, Mustang paid Fred Hutch an upfront fee of $0.3 million and will owe an annual maintenance fee of $50,000 on each anniversary of the license until the achievement by Mustang of regulatory approval of a licensed product using CD20 Technology. Additional payments are due for the achievement of eleven development milestones totaling $39.1 million, and royalty payments in the mid-single digits are due on net sales of licensed products.

For the nine months ended, September 30, 2020, Mustang expensed a non-refundable milestone payment of $0.3 million in connection with the Phase 1 clinical study of MB-106 at Fred Hutch.

Mayo Clinic – CAR T Technology License

On April 1, 2021, Mustang entered into an exclusive license agreement with the Mayo Foundation for Medical Education and Research (the “Mayo Clinic”) for a novel technology that may be able to transform the administration of CAR T therapies and has the potential to be used as an off-the-shelf therapy. Pursuant to this agreement, Mustang paid an upfront fee of $0.8 million and will pay an annual maintenance fee of $25,000. Additional payments are due for each of two licensed products for the achievement of eleven development and commercial milestones totaling up to $92.6 million per product, and royalty payments in the mid-single digits are due on net sales of licensed products.

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For the nine months ended September 30, 2021, Mustang expensed an upfront payment of $0.8 million pursuant to the terms of the license agreement.

SIRION Biotech GmbH - LentiBOOST^TM

In October 2020, Mustang entered into a licensing agreement with SIRION Biotech (“SIRION”) for the rights to SIRION’s LentiBOOST^TM technology for the development of MB-207, a lentiviral gene therapy for the treatment of previously transplanted XSCID patients (the “SIRION Technology License”). Pursuant to the SIRION Technology License, Mustang paid SIRION a one-time upfront fee of $0.1 million (€0.1 million). In addition, five future development milestone payments totaling up to approximately $5.6 million (€4.7 million) in the aggregate are due upon achievement of certain milestones. Additional milestone payments totaling up to $4.1 million (€3.5 million) in the aggregate are due in connection with the achievement of three commercial milestones and low- to mid-single digit royalties as a percentage of revenue are due on aggregate cumulative worldwide net sales of licensed products.

For the three and nine months ended September 30, 2020, Mustang expensed an upfront payment of $0.1 million pursuant to the terms of the SIRION Technology License.