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Roche
InApril 2013, we formed an alliancewithHoffman-LaRoche Inc. andF. Hoffmann-LaRocheLtd., collectivelyRoche, to
develop treatments forHuntington’s disease basedonour antisense technology. Roche has the option to license the drugs fromus
through the completion of the first Phase 1 trial. Prior tooption exercise, we are responsible for the discovery anddevelopment of an
antisense drug targetinghuntingtin, orHTT, protein.We are alsoworking collaborativelywithRoche on the discoveryof an antisense
drugutilizingRoche’s “brain shuttle” program. IfRoche exercises its option, itwill be responsible for global development, regulatory
and commercialization activities for anydrug arisingout of the collaboration. Under the terms of the agreement, we received an
upfront payment of $30million inApril 2013, whichwe are amortizing throughApril 2017. We are eligible to receive up to $362
million in a license fee and substantivemilestone payments includingup to$67million for the achievement of development
milestones, up to $170million for the achievement of regulatorymilestones andup to$80million for the achievement of
commercializationmilestones. In addition, we are eligible to receive up to $136.5million inmilestone payments for each additional
drug successfully developed and up to$50million in commercialmilestones if a drugusingRoche’s proprietarybrain shuttle
technology is successfully commercialized. We are also eligible to receive tiered royalties on anyproduct sales of drugs resulting
from this alliance.Wewill earn the nextmilestone payment of $22million ifwe initiate a Phase 1 trial for a drug targetingHTT
protein. During2013, we earned revenue of $5.1million fromour relationshipwithRoche. Our balance sheet atDecember 31, 2013
includeddeferred revenue of $25million related toour relationshipwithRoche.
SatelliteCompanyCollaborations
Achaogen, Inc.
In2006, we exclusivelyoutlicensed toAchaogen, Inc. specific know-how, patents andpatent applications relating to
aminoglycosides. In exchange, Achaogen agreed to certainpayment obligations related to aminoglycosidesAchaogendeveloped.
Aminoglycosides are a class of smallmolecule antibiotics that inhibit bacterial protein synthesis and that physicians use to treat
serious bacterial infections. Achaogen is developingplazomicin, an aminoglycosideAchaogendiscoveredbasedon the technologywe
licensed toAchaogen. Plazomicin has displayed broad-spectrum activity in animals againstmulti-drug resistant gram-negative
bacteria that cause systemic infections, includingE. coli. The compoundhas alsodemonstrated activity againstmethicillin-resistant
staphylococcus aureus, orMRSA.
In connectionwith the license, Achaogen issued tous $1.5millionofAchaogenSeriesAPreferredStock. Since early2009,
we have received$3million fromAchaogen, $500,000ofwhichwas inAchaogen securities, asAchaogenhas advanced plazomicin in
development. In addition, assumingAchaogen successfully develops and commercializes the first twodrugs under our agreement, we
may receive payments totalingup to$46.3million for the achievement of key clinical, regulatory and sales events. Wewill earn the
next payment of $4million ifAchaogen initiates a Phase 3 study for plazomicin.We are also eligible to receive royalties on sales of
drugs resulting from the program. Achaogen is solely responsible for the continueddevelopment of plazomicin.
During2013, 2012 and2011, we didnot earn any revenue fromour relationshipwithAchaogen. AtDecember 31, 2013 and
2012, we owned less than10percent ofAchaogen’s equity.
AlnylamPharmaceuticals, Inc.
InMarch2004, we entered into a strategic alliancewithAlnylam to develop and commercializeRNA interference
therapeutics. Under the terms of the agreement, we exclusively licensed toAlnylamour patent estate relating to antisensemotifs and
mechanisms andoligonucleotide chemistry for double-strandedRNAi therapeutics in exchange for a $5million technology access fee,
participation in fees fromAlnylam’s partneringprograms, aswell as futuremilestone and royalty payments fromAlnylam. In
August 2012, we expanded the license to include using the double-strandedRNAi technology for agricultural products. For each drug
Alnylamdevelops under this alliance, wemay receive up to$3.4million in substantivemilestone payments, including up to$1.1
million for the achievement of developmentmilestones and$2.3million for regulatorymilestones. In2013, we earned a $750,000
milestone paymentwhenAlnylam initiated aPhase 3 study for a drug targetingTTR. Wewill earn the nextmilestone payment of
$375,000 ifAlnylam initiates a Phase 1 study for a drug inAlnylam’s pipeline.We retained rights to a limited number of double-
strandedRNAi therapeutic targets and all rights to single-strandedRNAi, or ssRNAi, therapeutics.
In turn, Alnylamnonexclusively licensed tous its patent estate relating to antisensemotifs andmechanisms and
oligonucleotide chemistry to research, develop and commercialize ssRNAi therapeutics and to researchdouble-strandedRNAi
compounds.We also received a license todevelop and commercialize double-strandedRNAi drugs targeting a limited number of
therapeutic targets on a nonexclusive basis. Ifwe developor commercialize anRNAi-baseddrugusingAlnylam’s technology, wewill
payAlnylammilestone payments and royalties. For eachdrug, the potentialmilestone payments toAlnylam total $3.4million, which
wewill pay ifwe achieve specifieddevelopment and regulatory events. Todate, we donot have anRNAi-baseddrug in clinical
development. OurAlnylam alliance provides uswith an opportunity to realize substantial value fromour pioneeringwork in antisense
mechanisms andoligonucleotide chemistry and is an example of our strategy toparticipate in all areas ofRNA-targetingdrug
discovery.
