F-13
Generally, themilestone events contained inour partnership agreements coincidewith the progressionof our drugs from
development, to regulatory approval and then to commercialization. The process of successfullydiscovering a newdevelopment
candidate, having it approved andultimately sold for a profit is highlyuncertain. As such, themilestone paymentswemay earn from
our partners involve a significant degree of risk to achieve. Therefore, as a drugprogresses through the stages of its life-cycle, the
value of the druggenerally increases.
Developmentmilestones inour partnershipsmay include the following types of events:
Designationof a development candidate. Following the designationof a development candidate, IND-enabling animal
studies for a newdevelopment candidate generally take 12 to18months to complete;
Initiationof aPhase 1 clinical trial. Generally, Phase 1 clinical trials take one to two years to complete;
Initiationor completion of aPhase 2 clinical trial. Generally, Phase 2 clinical trials take one to three years to complete;
Initiationor completion of aPhase 3 clinical trial. Generally, Phase 3 clinical trials take two to four years to complete.
Regulatorymilestones inour partnershipsmay include the following types of events:
Filingof regulatory applications formarketing approval such as aNewDrugApplication, orNDA, in theUnitedStates
or aMarketingAuthorizationApplication, orMAA, inEurope. Generally, it takes six to twelvemonths toprepare and
submit regulatory filings.
Marketing approval in amajormarket, such as theUnitedStates, Europe or Japan. Generally it takes one to two years
after an application is submitted toobtain approval from the applicable regulatory agency.
Commercializationmilestones inour partnershipsmay include the following types of events:
First commercial sale in a particularmarket, such as in theUnitedStates or Europe.
Product sales in excess of a pre-specified threshold, such as annual sales exceeding $1billion. The amount of time to
achieve this type ofmilestone depends on several factors includingbut not limited to the dollar amount of the threshold,
the pricingof the product and the pace atwhich customers beginusing the product.
We assesswhether a substantivemilestone exists at the inception of our agreements. When a substantivemilestone is
achieved, we recognize revenue related to themilestone payment. For our existing licensing and collaboration agreements inwhich
we are involved in the discovery and/or development of the relateddrugor provide the partnerwith access tonew technologieswe
discover, we have determined that all future development, regulatory and commercializationmilestones are substantive. For example,
for our strategic alliancewithBiogen Idec, we are usingour antisense drugdiscovery platform to discover and developnew drugs
against targets for neurological diseases. Alternatively, we provide access toour technology toAlnylamPharmaceuticals, Inc. to
develop and commercializeRNA interference, or RNAi, therapeutics. We considermilestones for bothof these collaborations tobe
substantive. In evaluating if amilestone is substantivewe considerwhether:
Substantive uncertainty exists as to the achievement of themilestone event at the inception of the arrangement;
The achievement of themilestone involves substantive effort and canonlybe achievedbased inwhole or inpart onour
performance or the occurrence of a specific outcome resulting fromour performance;
The amount of themilestone payment appears reasonable either in relation to the effort expendedor to the enhancement
of the value of the delivered items;
There is no future performance required to earn themilestone; and
The consideration is reasonable relative to all deliverables andpayment terms in the arrangement.
If anyof these conditions are notmet, we donot consider themilestone to be substantive andwe defer recognitionof the
milestone payment and recognize it as revenue over the estimated periodof performance, if any. We considermilestone payments
related toprogressionof a drug through the development and regulatory stages of its life cycle to be substantivemilestones because
the level of effort and inherent risk associatedwith these events is high. All of themilestone paymentswe earned in2013were
substantive. Therefore, we recognized the entire amount of thosemilestone payments in 2013, including a $25millionmilestone
payment fromGenzymewe recognized in the first quarter of 2013when theFDA approved theKYNAMRONDA. Further
information about our collaborative arrangements canbe found inNote 7,
CollaborativeArrangements andLicensingAgreements
.
