Company: CNTB
Filing Date: 2025-05-15
Form Type: 10-Q
Source: 0001835268-25-000035
Chunk: 20

Company: Connect Biopharma Holdings Ltd
Filing Date: 2025-05-15
Form: 10-Q
Item: Part I, Item 1
Chunk 20
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 the Licensor up to an aggregate amount of $123 million upon the achievement of certain development, regulatory and commercial milestones. The achievement of certain milestones is dependent upon the timing and success of future development activities to be completed by Simcere. Simcere is also required to make payments for cost reimbursements related to certain development activities, including supply of material for clinical development. The License Agreement additionally provides that Simcere is obligated to pay Licensor royalties at tiered percentage rates up to low double-digit percentages on net sales of the licensed product in the Territory.The term of the License Agreement is coterminous with the period up to which sales-based royalty payments shall be made, which is approximately 12 years after commercialization of the licensed compound. After this period, the license is considered fully paid and Simcere can continue to exploit the rights in the license in the Territory.Revenue RecognitionThe Company evaluated the License Agreement which provides Simcere with the right to use the Company’s intellectual property in the Territory. The Company concluded that the License Agreement was subject to Topic 606 as the Company viewed the License Agreement as a contract with a customer as the activities were central to its business operations. As such, the Company assessed the terms of the License Agreement and identified four performance obligations for the license to research, develop, manufacture and commercialize rademikibart in the Territory. The four performance obligations include: (i) transfer of the intellectual property and know-how; (ii) transfer of the current manufacturing process; (iii) development and transfer of a new manufacturing process; and (iv) completion of certain rademikibart development services.

13

At inception of each arrangement that includes milestone payments, the Company evaluates where the milestones are considered probable of being reached. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. At the Effective Date, the Company determined the transaction price to be $25 million, which is comprised of (i) a $21 million upfront payment for the grant of license to the Licensee and (ii) $4 million of cost reimbursement upon delivery of certain clinical trial reports. All other milestones are considered to be constrained at the Effective Date because these milestones are not within the control of the Company and therefore these milestones are not included in the transaction price.When an intellectual property license is determined to be a predominant promise in the arrangement, sales-based milestone payments and royalties are recognized at the later of when the associated performance obligation has