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 agreed to 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 million and was 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.

On December 15, 2023, the Company received written notice from Merck of Merck’s election to terminate the Exclusive License and Collaboration Agreement. The termination of the Agreement is effective on March 14, 2024. According to Merck’s termination notice, Merck determined there were no existing conditions to continue the collaboration. The termination resulted from the inability to develop the compounds to meet a specific aspect of Merck’s program. The pending patent applications on compounds covered by the Agreement and previously filed by Merck on behalf of both companies remain in place.

Kansas State University Research Foundation

On February 18, 2020, the Company entered into a License Agreement (the “Agreement”) with Kansas State University Research Foundation (the “Foundation”) effective February 12, 2020.

Pursuant to the terms of the Agreement, the Foundation granted the Company an exclusive for human use a royalty bearing license to practice under certain patent rights, including a patent and a patent application covering antiviral compounds against coronaviruses and norovirus, and related know-how, to make and sell therapeutic, diagnostic and prophylactic products.

The Company agreed to pay the Foundation a one-time non-refundable license initiation fee in the amount of $80,000 and an annual license maintenance fee in the amount of $20,000 per year and agreed to reimburse the Foundation for third party expenses associated with the filing, prosecution, and maintenance of the patent rights in question. The Company also agreed to make certain future milestone payments up to $3.1 million, dependent upon the progress of clinical trials, regulatory approvals, and initiation of commercial sales in the United States and certain countries outside the United States.

On April 17, 2020, the Company entered into an Agreement with Foundation effective April 1, 2020. Pursuant to the terms of the Agreement, the Foundation granted the Company an exclusive for human use a royalty bearing license to practice under certain patent rights, including a patent and a patent application covering antiviral compounds against coronaviruses and norovirus, and related know-how, to make and sell therapeutic, diagnostic and prophylactic products.

The Company agreed to pay the Foundation a one-time non-refundable license initiation fee in the amount of $110,000 and an annual license maintenance fee in the amount of $20,000 per year for the first seven (7) years and $50,000 per year thereafter and agreed to reimburse the Foundation for third party expenses associated with the filing, prosecution and maintenance of the patent rights in question. The Company also agreed to make certain future milestone payments up to $4,150,000, dependent upon the progress of clinical trials, regulatory approvals, and initiation of commercial sales in the United States and certain countries outside the United States. As of December 31, 2023, no milestone payments to the Foundation were due under the agreement.

On February 28, 2024, the Company provided notice to the Foundation of the Company’s election to terminate both License Agreements. The terminations, which were made due to the Company’s determination that further development efforts under the License Agreements would be futile, are effective on March 29, 2024. The Company continues to clinically progress its fully owned compound CDI-988 for coronaviruses and norovirus.

Phase 2a Clinical Trial

In August, 2022, the Company engaged hVIVO, a subsidiary of London-based Open Orphan plc (AIM: ORPH), a rapidly growing specialist contract research organization (CRO), to conduct a Phase 2a clinical trial (the “Study”) with the Company’s novel, broad-spectrum, orally administered antiviral influenza candidate. The Company paid a reservation fee of $1.7 million upon execution of the Start-Up Agreement (the “Agreement”) for the Study. The Company recognized the reservation fee as prepaid asset on its balance sheet at December 31, 2022. In September 2023, the Clinical Trial Agreement (“CTA”) was executed by the Company and hVIVO, which supersedes the Agreement, including the terms attributable to the reservation fee. Under the terms of the CTA, total budget of the Study was approximately $6.8 million, which consisted of the reservation fee of $1.7 million and additional milestone payments totaling approximately $5.1 million. The reduction of the reservation fee and the milestone payments will become due during the length of the CTA as milestones are realized.

During the year ended December 31, 2023, upon achievement of certain milestones, the reservation fee was reduced by approximately $440,000, which was recognized as expense during the year then ended. As a result, the balance of the reservation fee was approximately $1.28 million which is included in prepaid expenses as of December 31, 2023. Pursuant to the CTA, additional milestones payments totaling approximately $2.61 million became due during the year ended December 31, 2023, resulting in the recognition during the year of aggregate expenses of $3.05 million incurred on the CTA. As of December 31, 2023, $1.9 million was due on the CTA which is included in accounts payable and accrued expenses in the accompanying consolidated balance sheet.