F-11
An appropriate discount rate.
We estimated the sellingprice of the research anddevelopment services byusingour internal estimates of the cost toperform
the specific services,markedup to include a reasonable profitmargin, and estimates of expected cashoutflows to thirdparties for
services and supplies over the expectedperiod thatwewill perform research anddevelopment. The significant inputswe used to
determine the selling price of the research anddevelopment services included:
The number of internal hourswewill spendperforming these services;
The estimated number and cost of studieswewill perform;
The estimated number and cost of studies that wewill contract with thirdparties to perform; and
The estimated cost of drugproductwewill use in the studies.
As a result of the allocation,we recognized$9.3million of the $25millionupfront payment for the ISIS-STAT3
Rx
license in
December 2012 andwe recognized$2.2millionof the $6million payment for the ISIS-STAT3
Rx
license in June 2013. We are
recognizing the remaining$19.5millionof the $31million over the estimated periodof our performance. Assuming a constant selling
price for the other elements in the arrangement, if therewas an assumed tenpercent increase or decrease in the estimated sellingprice
of the ISIS-STAT3
Rx
license, we determined that the revenuewewouldhave allocated to the ISIS-STAT3
Rx
licensewould change by
approximately sevenpercent, or $750,000, from the amountwe recorded.
Typically, wemust estimate our periodof performancewhen the agreementswe enter intodo not clearlydefine such
information. Our collaborative agreements typically include a research and/or development project planoutlining the activities the
agreement requires eachparty to performduring the collaboration.We estimate the periodof time overwhichwewill complete the
activities forwhichwe are responsible anduse that period of time as our periodof performance for purposes of revenue recognition
and amortize revenue over suchperiod. We havemade estimates of our continuingobligations under numerous agreements and in
certain instances the timing of satisfying these obligations is difficult to estimate. Accordingly, our estimatesmay change in the future.
If our estimates and judgments change over the course of these agreements, itmay affect the timing and amount of revenue thatwe
recognize in future periods. For example, in2013we adjusted the periodof performance onourGSK collaboration andour ISIS-
SMN
Rx
collaborationwithBiogen Idec. As a result of adding twonewdevelopment candidates, ISIS-GSK3
Rx
and ISIS-GSK4
Rx
, to
our collaborationwithGSK, our periodof performancewas extendedbeyondour initial estimate. Therefore, we extended the
amortizationperiod to correspond to the new extendedperiodof performance. Similarly, withour ISIS-SMN
Rx
collaboration, we
extended the amortizationperiod to correspond to the expansionof thePhase 3 study in infantswithSMA. Sincewe extended the
amortizationperiod for ourGSK collaboration andour ISIS-SMN
Rx
collaboration, the amortization from the upfront payments for
these collaborationswill be $2.6million less in2014 compared to2013.
From time to time, wemay enter into separate agreements at or near the same timewith the same customer. We evaluate
such agreements todeterminewhether they shouldbe accounted for individually as distinct arrangements orwhether the separate
agreements are, in substance, a singlemultiple element arrangement. We evaluatewhether the negotiations are conducted jointly as
part of a single negotiation, whether the deliverables are interrelatedor interdependent, whether fees inone arrangement are tied to
performance in another arrangement, andwhether elements in one arrangement are essential to another arrangement. Our evaluation
involves significant judgment todeterminewhether a groupof agreementsmight be so closely related that they are, in effect, part of a
single arrangement. For example, since early2012we have entered into four collaboration agreementswithBiogen Idec:
In January2012, we entered into a collaboration agreementwithBiogen Idec todevelop and commercialize ISIS-SMN
Rx
for
SpinalMuscularAtrophy, or SMA. As part of the collaboration, we received a $29million upfront payment andwe are
responsible for global development of ISIS-SMN
Rx
through completion of Phase 2/3 clinical trials.
In June 2012, we entered into a second and separate collaboration agreementwithBiogen Idec todevelop and commercialize
a novel antisense drug targetingDMPK, or dystrophiamyotonica-proteinkinase. As part of the collaboration, we received a
$12millionupfront payment andwe are responsible for global development of the drug through the completion of aPhase 2
clinical trial.
InDecember 2012, we entered into a third and separate collaboration agreement withBiogen Idec to discover anddevelop
antisense drugs against three targets to treat neurological or neuromuscular disorders. As part of the collaboration, we
received a $30million upfront payment andwe are responsible for the discoveryof a lead antisense drug for eachof three
targets.
