10. Licenses and Collaborations

Merck Sharp & Dohme Corp.

On January 2, 2019, the Company entered into an Exclusive License and Research Collaboration Agreement (the “Collaboration Agreement”) with Merck Sharp & Dohme Corp. (“Merck”) to discover and develop certain proprietary influenza A/B antiviral agents. Under the terms of the Collaboration Agreement, Merck will fund research and development for the program, including clinical development, and will be responsible for worldwide commercialization of any products derived from the collaboration. Cocrystal received an upfront payment of $4,000,000 and is eligible to receive payments related to designated development, regulatory and sales milestones with the potential to earn up to $156,000,000, as well as royalties on product sales. Merck can terminate the Collaboration Agreement at any time prior to the first commercial sale of the first product developed under the Collaboration Agreement, in its sole discretion, without cause.

As a result of this agreement, the Company recognized revenue of $4,368,000 as consideration in exchange for conveyance of intellectual property rights at the time of the agreement signing in accordance with ASC Topic 606, Revenue from Contracts with Customers, which included the $4,000,000 milestone upfront payment, since received and recognized as collaboration revenues during the first quarter of 2019.

Research and development expenses related to our influenza A/B program which are reimbursable by Merck within 45 days of period-end under the terms of the Collaboration Agreement and recognized as collaboration revenue were $592,000 and $1,302,000 for the three and six months ended June 30, 2019, respectively. Total revenue of $5,670,000 included in the condensed consolidated statement of operations for the six months ended June 30, 2019 is related to this Collaboration Agreement. As of June 30, 2019, $914,000 is due from Merck under these agreements.

National Institute of Health

Cocrystal has two Public Health Biological Materials License Agreements with the National Institute of Health. The original License Agreements were dated August 31, 2010 and amended on November 6, 2013. The materials licensed are being used in Norovirus assays to screen potential antiviral agents in our library.