Isis Pharmaceuticals, Inc. Form 10K - page 124

F-36
Upon terminationof the license and co-development agreement, the licensewe granted toGenzyme forKYNAMROwill
terminate andGenzymewill stop selling the product. In addition, ifGenzyme voluntarily terminates the agreement orwe terminate
the agreement in a countryor countries forGenzyme’s failure to develop and commercializeKYNAMRO, then the rights to
KYNAMROwill revert back tous andwemaydevelop and commercializeKYNAMRO in the countries that are the subject of the
termination, subject to a royaltypayable toGenzyme.
Ifwe are the subject of an acquisition, thenwithin180days following the acquisition, Genzymemay elect to purchase all of
our rights to receive payments under theKYNAMRO license and co-development agreement for a purchase price tobemutually
agreed tobyus andGenzyme, or, ifwe cannot agree, a fairmarket value price determinedby an independent investment banking firm.
During2013, 2012 and2011, we earned revenue of $32.5million, $67.6million, and$72.3million, respectively, fromour
relationshipwithGenzyme, which represented22percent, 66percent, and73percent, respectively, of our total revenue for those
years. Our balance sheet atDecember 31, 2012 includeddeferred revenue of $3.8million forKYNAMROdrug substance thatwe
shipped toGenzyme in 2013.
GlaxoSmithKline
InMarch2010, we entered into a strategic alliancewithGSK, for up to sixprograms, usingour antisense drugdiscovery
platform to seekout anddevelopnewdrugs against targets for rare and serious diseases, including infectious diseases and some
conditions causingblindness. This alliance allows us to control and facilitate development of drugswhile still being eligible to
receivemilestone payments aswe advance these drugs in clinical development. Under the terms of the agreement, we received a $35
million upfront payment and inMay2011we received a $3millionpayment whenGSK expanded the collaboration. We are
amortizing these payments through July2015.
InOctober 2012, we andGSK amended the original agreement to reflect an accelerated clinical development plan for ISIS-
TTRRx. Under the amended terms of the agreement, we received a $2.5million upfront payment inDecember 2012, whichwe are
amortizing through July2015. We also received a $7.5millionmilestone payment inFebruary2013whenwe initiated thePhase 2/3
clinical study for ISIS-TTRRx and a $2millionmilestone payment inDecember 2013 for advancing the ongoingPhase 2/3 studyof
ISIS-TTRRx. We have earned$24.0million primarily inmilestone payments fromGSK related to the development of ISIS-TTRRx and
we are eligible to earn an additional $46million inpre-licensingmilestone payments associatedwith the ISIS-TTRRx Phase 2/3 study.
In addition, under the amended agreement, GSK increased the regulatory and commercialmilestone paymentswe can earn should
ISIS-TTRRx receivemarketing approval andmeet pre-agreed sales targets.
Our strategic alliance currently includes five active programs including the ISIS-TTRRx program. We are eligible to receive
on average up to$20million inmilestone payments throughPhase 2proof-of-concept for each program, except the ISIS-TTRRx
program, whichwe describe above. GSKhas the option to license drugs from these programs at Phase 2proof-of-concept for a
license fee. IfGSK exercises its option to a program itwill be responsible for all further development and commercialization of the
program. InSeptember 2013, we designated ISIS-GSK3Rx as an additional development candidate under our collaborationwithGSK.
ISIS-GSK3Rx is an antisense drugdesigned to inhibit the productionof anundisclosed target to treat a common viral infection. To
date, we have earned$10million inmilestone payments associatedwith advancing the ISIS-GSK3Rx program including a $3million
milestone paymentwe earned inNovember 2013whenwe initiated aPhase 1 study for ISIS-GSK3Rx. InNovember 2013, we
designated ISIS-GSK4Rx as an additional development candidate under our collaborationwithGSK and earned a $5millionmilestone
payment. ISIS-GSK4Rx is an antisense drugwe designed to treat anundisclosed ocular disease. Under our agreement, ifGSK
successfully develops all five programs for one ormore indications and achieves pre-agreed sales targets, we could receive license
fees and substantivemilestone payments of nearly$1.2billion, includingup to$185.5million for the achievement of development
milestones, up to $526.5million for the achievement of regulatorymilestones andup to$445million for the achievement of
commercializationmilestones.Wewill earn the next $1millionmilestone payment ifwe initiate an open-label extension studyof
ISIS-TTRRx. In addition, we are eligible to receive up todouble-digit royalties on sales from any product that GSK successfully
commercializes under this alliance.
During2013, 2012 and2011, we earned revenue of $35.3million, $8.2million and$17.7million, respectively, fromour
relationshipwithGSK, which represented24percent, eight percent and18percent, respectively, of our total revenue for those years.
Our balance sheets at December 31, 2013 and2012 includeddeferred revenue of $11.5million and$19.9million, respectively, related
to our relationshipwithGSK.