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InSeptember 2013, we entered into a fourth and separate collaboration agreementwithBiogen Idec to leverage antisense
technology to advance the treatment of neurological diseases. We grantedBiogen Idec exclusive rights to the use of our
antisense technology todevelop therapies for neurological diseases as part of this broad collaboration.We received a $100
million upfront payment andwe are responsible for discovery and earlydevelopment through the completion of aPhase 2
clinical trial for each antisense drug identifiedduring the sixyear termof this collaboration, whileBiogen Idec is responsible
for the creation anddevelopment of smallmolecule treatments andbiologics.
All four of these collaboration agreements giveBiogen Idec the optionor options to license one ormore drugs resulting from
the specific collaboration. IfBiogen Idec exercises anoption, itwill payus a license fee andwill assume future development,
regulatory and commercialization responsibilities for the licenseddrug.We are also eligible to receivemilestone payments associated
with the research and/or development of the drugs prior to licensing,milestone payments if Biogen Idec achieves pre-specified
regulatorymilestones, and royalties on anyproduct sales of drugs resulting from these collaborations.
We evaluated all four of theBiogen Idec agreements to determinewhetherwe should account for them as separate
agreements. We determined that we should account for the agreements separatelybecausewe conducted the negotiations
independently of one another, each agreement focuses ondifferent drugs, there are no interrelated or interdependent deliverables, there
are no provisions in any of these agreements that are essential to the other agreement, and the payment terms and fees under each
agreement are independent of eachother. We also evaluated the deliverables in eachof these agreements todeterminewhether they
met the criteria tobe accounted for as separate units of accountingorwhether they shouldbe combinedwithother deliverables and
accounted for as a single unit of accounting. For all four of these agreements, we determined that the options did not have stand-alone
value becauseBiogen Idec cannot pursue the development or commercializationof the drugs resulting from these collaborations until
it exercises the respective option or options. As such, for each agreement we considered the deliverables tobe a single unit of
accounting andwe are recognizing the upfront payment for eachof the agreements over the respective estimated periodof our
performance.
Our collaborations often include contractualmilestones, which typically relate to the achievement of pre-specified
development, regulatory and commercialization events. These three categories ofmilestone events reflect the three stages of the life-
cycle of our drugs, whichwe describe inmore detail in the followingparagraph.
Prior to the first stage in the life-cycle of our drugs, we perform a significant amount ofworkusingour proprietary antisense
technology todesign chemical compounds that interactwith specific genes that are good targets for drugdiscovery. From these
research efforts, we hope to identify a development candidate. The designationof a development candidate is the first stage in the
life-cycle of our drugs. Adevelopment candidate is a chemical compound that has demonstrated the necessary safety and efficacy in
preclinical animal studies towarrant further study inhumans. During the first stepof the development stage, we or our partners study
our drugs in IND-enabling studies, which are animal studies intended to support an InvestigationalNewDrug, or IND, application
and/or the foreign equivalent. An approved IND allows us or our partners to studyour development candidate inhumans. If the
regulatory agency approves the IND, we or our partners initiatePhase 1 clinical trials inwhichwe typically enroll a small number of
healthyvolunteers to ensure the development candidate is safe for use inpatients. Ifwe or our partners determine that a development
candidate is safe based on the Phase 1data, we or our partners initiate Phase 2 studies that are generally larger scale studies inpatients
with the primary intent of determining the efficacy of the development candidate. The final step in the development stage is Phase 3
studies togather the necessary safety and efficacy data to requestmarketing approval from the Food andDrugAdministration, or
FDA, and/or foreign equivalents. ThePhase 3 studies typically involve large numbers of patients and can take up to several years to
complete. If the data gathered during the trials demonstrates acceptable safety and efficacy results, we or our partnerwill submit an
application to theFDA and/or its foreign equivalents formarketing approval. This stage of the drug’s life-cycle is the regulatory
stage. If a drug achievesmarketing approval, itmoves into the commercialization stage, duringwhichour partnerwillmarket and sell
the drug topatients. Althoughour partnerwill ultimatelybe responsible formarketing and selling the partnereddrug, our efforts to
discover anddevelop a drug that is safe, effective and reliable contributes significantly toour partner’s ability to successfully sell the
drug. TheFDA and its foreign equivalents have the authority to impose significant restrictions on an approveddrug through the
product label andon advertising, promotional anddistribution activities. Therefore, our efforts designing and executing the necessary
animal and human studies are critical to obtaining claims in the product label from the regulatory agencies that would allowour
partner to successfully commercialize our drug. Further, the patent protection affordedour drugs as a result of our initial patent
applications and relatedprosecution activities in theUnitedStates and foreign jurisdictions are critical to our partner’s ability to sell
our drugswithout competition fromgeneric drugs. The potential sales volume of an approveddrug is dependent on several factors
including the size of the patient population,market penetrationof the drug, and the price charged for the drug.
