Collaboration Agreements
We have entered into a variety of alliances in the ordinary course of our business. Although we do not consider any individual alliance to be material, certain of the more notable alliances are described below. The summarized financial information related to our alliances is presented in tabular format after the description of alliances:
Novartis Pharma AG: We licensed the worldwide rights (excluding Canada) regarding certain chirally pure forms of methylphenidate for FOCALIN® and FOCALIN XR® to Novartis. We also licensed to Novartis the rights related to long-acting formulations of methylphenidate and dex-methylphenidate products which are used in FOCALIN XR® and RITALIN LA®. We sell FOCALIN® to Novartis and receive royalties of between 30% and 35% on Novartis' sales of FOCALIN XR® and RITALIN LA®. The arrangement with Novartis will continue until the later of (i) the tenth anniversary of the first commercial launch on a country-by-country basis or (ii) when the last applicable patent expires with respect to that country. At the expiration date, we will grant Novartis a perpetual, non-exclusive, royalty-free license to make, have made, use, import and sell products using the dex-methylphenidate and long-acting formulation technology. The agreement may be terminated by Novartis upon 12 months prior written notice or by either party upon, among other things, the breach of a material obligation by the other party or in the event of withdrawal of the dex-methylphenidate product or RITALIN® product from the market because of regulatory mandate.
If the agreement is terminated by us, then all licenses granted to Novartis under the agreement will terminate and Novartis will grant us a non-exclusive license to certain of their intellectual property related to the compounds and products. If the agreement is terminated by Novartis then all licenses granted to Novartis under the agreement will terminate.
When a generic version of dexmethylphenidate hydrochloride enters the market, we expect Novartis' sales of FOCALIN XR® to decrease and therefore our royalties will also decrease. A generic version of RITALIN LA® was introduced in January 2012 and resulted in a decrease in royalties we received from Novartis related to sales of RITALIN LA®.
Acceleron Pharma (Acceleron): We have worldwide strategic collaboration agreements with Acceleron for the joint development and commercialization of sotatercept (ACE-11) and ACE-536. ACE-11 is currently in phase II studies for treatment of renal anemia, diamond blackfan anemia, beta-thalassemia and MDS, and ACE-536 is currently in phase II studies for beta-thalassemia and MDS.
On January 1, 2013 we became responsible for the payment of all development costs related to ACE-11 and ACE-536 and have recognized development expenses as research and development expense as they were incurred.
With respect to the ACE-11 program, Acceleron is eligible to receive of up to $367.0 million in development, regulatory approval and sales-based milestones and up to an additional $348.0 million for each of three specific discovery stage programs. We also agreed to co-promote the developed products in North America. Acceleron will receive tiered royalties on worldwide net sales upon the commercialization of a development compound.
With respect to the ACE-536 program, we have an exclusive, worldwide, royalty-bearing license to ACE-536 and future Acceleron products for the treatment of anemia. We also agreed to co-promote the products in the United States, Canada and Mexico. Acceleron is eligible to receive development, regulatory approval and sales-based milestones of up to $217.5 million for ACE-536 and up to an additional $170.8 million for the first discovery stage program, $148.8 million for the second discovery stage program and $125.4 million for each additional discovery stage program thereafter. Acceleron will receive tiered royalties on worldwide net sales upon the commercialization of a development compound.
The ACE-11 agreement may be terminated by us, at our sole discretion, at any time or by either party, among other things, upon a material breach by the other party. The ACE-536 agreement may be terminated by us, at our sole discretion, after completion of the initial phase II clinical trial or by either party, among other things, upon a material breach by the other party.
Agios Pharmaceuticals, Inc. (Agios): During 2010, we entered into a discovery and development collaboration and license agreement with Agios that focuses on cancer metabolism targets and the discovery, development and commercialization of associated therapeutics. We have an exclusive option to license any potential products that result from the Agios cancer metabolism research platform through the end of phase I clinical trials.
With respect to each product that we choose to license, Agios could receive up to approximately $120.0 million upon achievement of certain milestones and other payments plus royalties on sales, and Agios may also participate in the development and commercialization of certain products in the United States. Our option to license a product will terminate on April 14, 2015.
We have determined that Agios is a variable interest entity; however, we are not the primary beneficiary of this arrangement. Although we would have the right to receive the benefits from the collaboration and license agreement, we do not have the power to direct the activities under the collaboration and license agreement as Agios has the decision-making authority for this collaboration until we exercise our option to license a product. Our interest in Agios is limited to our equity ownership and we do not have any obligations or rights to the future losses or returns of Agios beyond this ownership.
Epizyme Inc. (Epizyme): In April 2012, we entered into a collaboration and license agreement with Epizyme to discover, develop and commercialize novel therapeutic compounds by inhibiting histone methyltransferases (HMT), an important epigenetic target class. Under the terms of the agreement, we made an upfront payment to Epizyme and also made an equity investment in Epizyme and received an exclusive option to license rights outside the United States to HMT inhibitors targeting the DOT1L HMT, including the Company’s product candidate EPZ-5676 and each Epizyme compound associated with such licensed compounds during the option term. If the option is exercised, Epizyme could receive up to $165.0 million in milestone payments associated with each Epizyme compound developed to inhibit each distinct HMT target under the collaboration plus royalties on sales. Epizyme will have the sole responsibility to develop and commercialize compounds in the United States.
The option term expires on either July 9, 2015 (or July 9, 2016 if we extend the option term for a fourth year and pay an option extension fee). Further, if an HMT target or targets are selected, the collaboration agreement will expire upon the expiration of all applicable royalty terms with respect to all licensed Epizyme compounds. Upon the expiration of the collaboration agreement, we will have a fully paid-up, royalty-free license to use Epizyme intellectual property to manufacture, market, use and sell such licensed Epizyme compounds outside the United States.
bluebird bio, Inc. (bluebird): In March 2013, we entered into a collaboration agreement with bluebird to discover, develop and commercialize novel disease-altering gene therapies in oncology. The collaboration focuses on applying gene therapy technology to modify a patient’s own T-cells, known as chimeric antigen receptor (CAR) T-cells, to target and destroy cancer cells. The collaboration has the potential to lead to the development of multiple CAR T-cell products. We have an option to license any products resulting from the collaboration after the completion of a phase I clinical study by bluebird for each product.
We made an upfront payment and may be obligated to pay up to $225.0 million per licensed product in aggregate potential option fees and clinical and regulatory milestone payments. bluebird also has the option to participate in the development and commercialization of any licensed products resulting from the collaboration through a 50/50 co-development and profit share in the United States in exchange for a reduction of milestone payments. Royalties would also be paid to bluebird in regions where there is no profit share, including in the United States, if bluebird declines to exercise their co-development and profit sharing rights.
The agreement has a termination date of March 19, 2016 and we have the option to extend the agreement until March 19, 2019 with the payment of extension fees. Further, we have the ability to terminate the collaboration at our discretion upon 90 days written notice to bluebird. If a product is optioned, the parties will enter into a pre-negotiated license agreement and potentially a co-development agreement should bluebird exercise its option to participate in the development and commercialization in the United States. The license agreement, if not terminated sooner, would expire upon the expiration of all applicable royalty terms under the agreement with respect to the particular product, and the co-development agreement, if not terminated sooner, would expire when the product is no longer being developed or commercialized in the United States. Upon the expiration of a particular license agreement, we will have a fully paid-up, royalty-free license to use bluebird intellectual property to manufacture, market, use and sell such licensed product.
FORMA Therapeutics Holdings, LLC (FORMA): In April 2013, we entered into a collaboration arrangement with FORMA under which the parties will discover, develop and commercialize drug candidates to regulate protein homeostasis targets. Protein homeostasis, which is important in oncology, neurodegenerative and other disorders, involves a tightly regulated network of pathways controlling the biogenesis, folding, transport and degradation of proteins.
The collaboration was launched with an upfront payment that enables us to evaluate selected targets and lead assets in protein homeostasis pathways during the pre-clinical phase. We will have the right to obtain exclusive licenses with respect to the development and commercialization of multiple drug candidates outside of the United States, in exchange for research and early development payments of up to approximately $200.0 million. FORMA is incentivized to advance the full complement of drug candidates through Phase I, and we will be responsible for all further global clinical development for each licensed candidate. FORMA is eligible to receive up to an additional $315.0 million in potential payments based upon development, regulatory and sales objectives for the first ex-U.S. license. FORMA is also eligible to receive potential payments for successive licenses, which escalate for productivity, increasing up to a maximum of an additional $430.0 million per program. In addition, FORMA will receive royalties on ex-U.S. sales and additional payments if multiple drug candidates reach defined cumulative sales objectives. The collaboration arrangement includes provisions for us to obtain rights with respect to development and commercialization of drug candidates in the United States in exchange for additional payments.
Under the collaboration arrangement, the parties will perform initial research and development for a term of four years. If, during such research term, a drug candidate meets certain criteria, then the parties will enter into a pre-negotiated license agreement and the collaboration will continue until all license agreements and all applicable royalty terms have expired. Each license agreement, if not terminated sooner would expire upon the expiration of all applicable royalty terms under such agreement. Upon the expiration of each license agreement, we will have an exclusive, fully-paid, royalty-free license to use the applicable FORMA intellectual property to manufacture, market, use and sell the product developed under such agreement outside of the United States. On October 7, 2013, we entered into the first ex-US license with FORMA and paid the applicable upfront payment under such license.
MorphoSys AG (MorphoSys): In June 2013, we signed a collaboration, license and equity purchase agreement with MorphoSys to jointly develop MOR202 globally and to co-promote MOR202 in Europe. In August 2013, the transaction became effective. MOR202 is a fully human monoclonal antibody targeting CD38 to treat patients with multiple myeloma and certain leukemias. MOR202 is currently being evaluated in a phase I/IIa trial in patients with relapsed/refractory multiple myeloma.
MorphoSys could receive up to EUR 511.0 million (approximately $664.5 million) in development, regulatory and sales milestones and tiered royalties on net sales of MOR202 outside the co-promotion territory. In the co-promotion territory, MorphoSys retains a 50/50 profit sharing right on MOR202 in exchange for paying one third of the MOR202 development costs. Should MorphoSys choose to opt out of its co-promotion rights, MorphoSys would receive tiered royalties on net sales of MOR202 globally.
The agreement may be terminated at our discretion upon six months written notice to MorphoSys, or by either party upon material breach of the other party. Upon the expiration of the agreement, we will have a fully paid-up, irrevocable, perpetual, non-terminable license to use the intellectual property licensed from MorphoSys to research, develop, make, commercialize, use and sell MOR202.
Acetylon Pharmaceuticals, Inc. (Acetylon): In July 2013, we entered into a collaboration and option agreement with Acetylon. Under the agreement, the parties will support the development of Acetylon's portfolio of oral, selective HDAC inhibitors in oncology, hematology, immunology and neurologic disease indications. In addition, we have rights to receive certain research and development services from Acetylon and an exclusive right to acquire Acetylon at a later date at a purchase price based upon future independent company valuations.
The collaboration focuses on the continued clinical advancement of Acetylon's lead candidate, ACY-1215, an HDAC6 inhibitor being developed for hematological malignancies, ACY-738 for neurological diseases, an HDAC1/2 inhibitor and a yet unnamed project, spanning cancer and non-cancer disease indications. Under the agreement, we made an upfront payment to Acetylon, which included a fee for entering into the collaboration, fees for the exclusive right to acquire Acetylon and the rights to receive certain research and development services from Acetylon. During the term of the agreement, Acetylon will retain control of its drug development programs. If we exercise our right to acquire Acetylon, in addition to the purchase price based upon independent company valuations to be paid at the time of the acquisition, Acetylon shareholders will be eligible to receive potential future milestone payments for approvals, or additional indications, of drugs developed by Acetylon and for accomplishing defined sales targets. If all the milestones are achieved, the aggregate amount of the milestone payments would be $1.100 billion.
The agreement has an expiration date of December 31, 2015 and we have the right to extend the agreement until either June 30, 2016 or December 31, 2016 with the payment of an extension fee. Further, we have the ability to terminate the agreement at our discretion upon written notice to Acetylon.
OncoMed Pharmaceuticals, Inc. (OncoMed): On December 2, 2013, we entered into a collaboration agreement to jointly develop and commercialize up to six anti-cancer stem cell (CSC) product candidates from OncoMed’s biologics pipeline, including demcizumab (OMP-21M18, Anti-DLL4). OncoMed will control and conduct initial clinical studies. We will have an option to license worldwide rights to up to six novel anti-CSC therapeutic candidates commencing upon the completion of enrollment of patients in a phase I trial (and with respect to Demcizumab, a phase II trial) and ending 60 days after delivery by OncoMed of the applicable data package for each therapeutic candidate, subject to certain extensions. We will also have research, development and commercialization rights to small molecule compounds in another cancer stem cell pathway, with OncoMed eligible to receive milestones and royalties on any resulting products.
Demcizumab is currently in three phase Ib clinical studies in combination with standard-of-care therapeutics, including a trial in patients with first-line advanced pancreatic cancer. Subsequent to the exercise of our option rights, the parties will co-develop demcizumab and share global development costs on a one-third OncoMed and two-thirds Celgene split. Outside the United States, we would lead development and commercialization efforts, with OncoMed eligible to receive milestones and tiered royalties on sales outside the United States.
In addition to demcizumab, the collaboration includes up to five preclinical- or discovery-stage biologics programs: OncoMed’s anti-DLL4/VEGF bispecific antibody and up to four additional biologics programs targeting either the RSPO-LGR CSC pathway or another CSC pathway. We have exclusive options on these programs during or after completion of certain phase I clinical trials to be conducted by OncoMed, which if exercised, contain U.S. profit sharing and co-commercialization terms, plus one-third OncoMed and two-thirds Celgene global development cost-sharing and royalties outside the profit-sharing territory.
The collaboration agreement also includes option exercise payments and payments for achievement of development, regulatory and commercial milestones, paid on a per-program basis. For the demcizumab program, these contingent payments could total up to approximately $790.0 million, and include a payment for achievement of predetermined safety criteria in phase II clinical trials. For the anti-DLL4/VEGF bispecific antibody program, contingent payments could total up to $505.0 million. For the other four programs, each program is eligible for up to approximately $440.0 million of contingent payments. OncoMed could also receive more than $100.0 million in contingent payments for the small molecule program.
The collaboration agreement may be terminated by us on a program-by-program basis upon one hundred twenty (120) days prior written notice before exercise of that program option, and after such program option exercise, by either party for material breach by the other party. With certain exceptions, the collaboration agreement expires upon the later of (a) the last-to-expire option term and (b) if one or more options are exercised, the termination or expiration of the last to expire agreement with respect to such exercised option.
Other Collaboration Arrangements in 2013: In addition to the collaboration arrangements described above, we entered into a number of collaborative arrangements during 2013 that resulted in $52.1 million of assets for investments in equity or other assets and research and development expenses of $149.0 million. These additional arrangements entered into during 2013 include the potential for future milestone payments of up to an aggregate $373.0 million related to the attainment of specified development and regulatory approval milestones over a period of several years. Our obligation to fund these efforts is contingent upon continued involvement in the programs and/or the lack of any adverse events which could cause the discontinuance of the programs. We do not consider these collaboration arrangements to be individually significant at this time.
Summarized financial information related to our collaboration agreements is presented below:
|
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Year ended December 31, | | As of December 31,1 |
| | Research and Development Expense | | | | | | |
| | Upfront Fees | Milestones | Extension of Agreements | Amortization of Prepaid Research and Development | | Additional Equity Investments Made | | Intangible Asset Balance | Equity Investment Balance | Percentage of Outstanding Equity |
Acceleron | 2013 | $ | — |
| $ | 17.0 |
| $ | — |
| $ | — |
| | $ | 10.0 |
| | $ | — |
| $ | 127.2 |
| 11 | % |
| 2012 | — |
| — |
| — |
| — |
| | — |
| | — |
| 30.5 |
| 12 | % |
| 2011 | 25.0 |
| 14.5 |
| — |
| — |
| | 25.0 |
| | | | |
| 2010 and prior | 45.0 |
| 13.0 |
| — |
| — |
| | 5.5 |
| | | | |
Agios | 2013 | — |
| — |
| 20.0 |
| — |
| | 12.8 |
| | — |
| 113.0 |
| 15 | % |
| 2012 | — |
| — |
| — |
| — |
| | — |
| | — |
| 37.5 |
| 17 | % |
| 2011 | — |
| — |
| 20.0 |
| — |
| | 28.7 |
| | | | |
| 2010 and prior | 121.2 |
| — |
| — |
| — |
| | 8.8 |
| | | | |
Epizyme | 2013 | — |
| 25.0 |
| — |
| — |
| | 1.0 |
| | — |
| 69.4 |
| 12 | % |
| 2012 | 65.0 |
| — |
| — |
| — |
| | 25.0 |
| | — |
| 25.0 |
| 15 | % |
bluebird | 2013 | 74.7 |
| — |
| — |
| — |
| | — |
| | 0.2 |
| — |
| — | % |
FORMA | 2013 | 52.8 |
| — |
| — |
| — |
| | — |
| | 0.2 |
| — |
| — | % |
MorphoSys | 2013 | 94.3 |
| — |
| — |
| — |
| | 61.3 |
| | — |
| 61.4 |
| 3 | % |
Acetylon | 2013 | 50.0 |
| — |
| — |
| 4.3 |
| | 10.0 |
| | 35.7 |
| 25.0 |
| 10 | % |
| 2012 | — |
| — |
| — |
| — |
| | 5.0 |
| | — |
| 15.0 |
| 10 | % |
| 2011 | — |
| — |
| — |
| — |
| | 10.0 |
| | | | |
Oncomed | 2013 | 155.0 |
| — |
| — |
| — |
| | 22.2 |
| | — |
| 43.4 |
| 5 | % |
Other Collaboration Arrangements | 2013 | 149.0 |
| — |
| — |
| 3.0 |
| | 13.6 |
| | 25.6 |
| 30.0 |
| N/A |
|
2012 | 113.5 |
| 5.4 |
| — |
| 0.2 |
| | 13.6 |
| | 27.3 |
| 29.9 |
| N/A |
|
2011 | 103.5 |
| 1.0 |
| 2.4 |
| — |
| | 1.1 |
| | | | |
1 Year-end balance and percentage of outstanding equity are presented for the current and prior year.
