•
Product sales in excess of a pre-specified threshold, such as annual sales exceeding $1 billion. The
amount of time to achieve this type of milestone depends on several factors including but not limited to
the dollar amount of the threshold, the pricing of the product and the pace at which customers begin
using the product.
We assess whether a substantive milestone exists at the inception of our agreements. When a substantive
milestone is achieved, we recognize revenue related to the milestone payment immediately. For our existing
licensing and collaboration agreements in which we are involved in the discovery and/or development of the
related drug or provide the partner with access to new technologies we discover, we have determined that the
majority of future development, regulatory and commercialization milestones are substantive. For example, we
consider most of the milestones associated with our strategic alliance with Biogen Idec substantive because we
are using our antisense drug discovery platform to discover and develop new drugs against targets for
neurological diseases. Alternatively, we considered milestones associated with our strategic alliance withAlnylam
Pharmaceuticals, Inc. substantive because we providedAlnylam ongoing access to our technology to develop and
commercialize RNA interference, or RNAi, therapeutics. In evaluating if a milestone is substantive we consider
whether:
•
Substantive uncertainty exists as to the achievement of the milestone event at the inception of the
arrangement;
•
The achievement of the milestone involves substantive effort and can only be achieved based in whole
or in part on our performance or the occurrence of a specific outcome resulting from our performance;
•
The amount of the milestone payment appears reasonable either in relation to the effort expended or to
the enhancement of the value of the delivered items;
•
There is no future performance required to earn the milestone; and
•
The consideration is reasonable relative to all deliverables and payment terms in the arrangement.
If any of these conditions are not met, we do not consider the milestone to be substantive and we defer
recognition of the milestone payment and recognize it as revenue over our estimated period of performance, if
any. We consider most milestone payments related to progression of a drug through the development and
regulatory stages of its life cycle to be substantive milestones because the level of effort and inherent risk
associated with these events is high. Further information about our collaborative arrangements can be found in
Note 7,
Collaborative Arrangements and Licensing Agreements
.
Licensing and royalty revenue
We often enter into agreements to license our proprietary patent rights on an exclusive or non-exclusive
basis in exchange for license fees and/or royalties. We generally recognize as revenue immediately those
licensing fees and royalties for which we have no significant future performance obligations and are reasonably
assured of collecting the resulting receivable. For example, during 2014, we recognized $9.5 million in revenue
fromAlnylam related to its license of our technology to one of its partners because we had no performance
obligations and collectability was reasonably assured.
Research, development and patent expenses
Our research and development expenses include wages, benefits, facilities, supplies, external services,
clinical trial and manufacturing costs and other expenses that are directly related to our research and
development operations. We expense research and development costs as we incur them. When we make
payments for research and development services prior to the services being rendered, we record those amounts as
prepaid assets on our consolidated balance sheet and we expense them as the services are provided. For the years
ended December 31, 2014, 2013 and 2012, research and development expenses were $238.9 million,
$173.7 million and $154.6 million, respectively. Aportion of the costs included in research and development
expenses are costs associated with our collaboration agreements. For the years ended December 31, 2014, 2013
and 2012, research and development costs of approximately $85.6 million, $51.0 million and $38.5 million,
respectively, were related to our collaborative agreements.
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