arrangement, and whether elements in one arrangement are essential to another arrangement. Our evaluation
involves significant judgment to determine whether a group of agreements might be so closely related that they
are, in effect, part of a single arrangement. For example, since early 2012 we have entered into four collaboration
agreements with Biogen Idec:
•
In January 2012, we entered into a collaboration agreement with Biogen Idec to develop and
commercialize ISIS-SMN
Rx
for spinal muscular atrophy, or SMA. As part of the collaboration, we
received a $29 million upfront payment and we 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 agreement with Biogen Idec to
develop and commercialize a novel antisense drug targeting DMPK, or dystrophia myotonica-protein
kinase. As part of the collaboration, we received a $12 million upfront payment and we are responsible
for global development of the drug through the completion of a Phase 2 clinical trial.
•
In December 2012, we entered into a third and separate collaboration agreement with Biogen Idec to
discover and develop antisense drugs against three targets to treat neurological or neuromuscular
disorders. As part of the collaboration, we received a $30 million upfront payment and we are
responsible for the discovery of a lead antisense drug for each of three targets.
•
In September 2013, we entered into a fourth and separate collaboration agreement with Biogen Idec to
leverage antisense technology to advance the treatment of neurological diseases. We granted Biogen
Idec exclusive rights to the use of our antisense technology to develop therapies for neurological
diseases as part of this broad collaboration. We received a $100 million upfront payment and we are
responsible for discovery and early development through the completion of a Phase 2 clinical trial for
each antisense drug identified during the six year term of this collaboration, while Biogen Idec is
responsible for the creation and development of small molecule treatments and biologics.
All four of these collaboration agreements give Biogen Idec the option to license one or more drugs
resulting from the specific collaboration. If Biogen Idec exercises an option, it will pay us a license fee and will
assume future development, regulatory and commercialization responsibilities for the licensed drug. We are also
eligible to receive milestone payments associated with the research and/or development of the drugs prior to
licensing, milestone payments if Biogen Idec achieves pre-specified regulatory milestones, and royalties on any
product sales of drugs resulting from these collaborations.
We evaluated all four of the Biogen Idec agreements to determine whether we should account for them as
separate agreements. We determined that we should account for the agreements separately because we conducted
the negotiations independently of one another, each agreement focuses on different 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 each other. We
also evaluated the deliverables in each of these agreements to determine whether they met the criteria to be
accounted for as separate units of accounting or whether they should be combined with other 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 because Biogen Idec cannot pursue the development or commercialization of the
drugs resulting from these collaborations until it exercises the respective option or options. As such, for each
agreement we considered the deliverables to be a single unit of accounting and we are recognizing the upfront
payment for each of the agreements over the respective estimated period of our performance.
Our collaborations often include contractual milestones, which typically relate to the achievement of
pre-specified development, regulatory and commercialization events. These three categories of milestone events
reflect the three stages of the life-cycle of our drugs, which we describe in more detail in the following
paragraph.
Prior to the first stage in the life-cycle of our drugs, we perform a significant amount of work using our
proprietary antisense technology to design chemical compounds that interact with specific genes that are good
targets for drug discovery. From these research efforts, we hope to identify a development candidate. The
designation of 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 to
warrant further study in humans.
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