Our unrecognized gross tax benefits presented above would not reduce our annual effective tax rate if
recognized because we have recorded a full valuation allowance on our deferred tax assets. We do not foresee
any material changes to our gross unrecognized tax benefits within the next twelve months. We recognize interest
and/or penalties related to income tax matters in income tax expense. We did not recognize any accrued interest
and penalties related to gross unrecognized tax benefits during the year ended December 31, 2014.
TheAmerican Taxpayer Relief Act of 2012, which reinstated the United States federal research and
development tax credit retroactively from January 1, 2012 through December 31, 2013, was not enacted into law
until the first quarter of 2013. Therefore, the expected tax benefit resulting from such reinstatement for 2012 is
reflected in the Company’s estimated annual effective tax rate for 2013.
7. CollaborativeArrangements and LicensingAgreements
Pharmaceutical Alliances and Licensing
AstraZeneca
In December 2012, we entered into a collaboration agreement withAstraZeneca to discover and develop
antisense drugs against five cancer targets. As part of the agreement, we grantedAstraZeneca an exclusive
license to develop and commercialize ISIS-STAT3-2.5
Rx
, formerly ISIS-STAT3
Rx
, and ISIS-AR-2.5
Rx
, formerly
ISIS-AR
Rx
, for the treatment of cancer and an option to license up to three anti-cancer drugs under a separate
research program. Together withAstraZeneca, we are evaluating ISIS-STAT3-2.5
Rx
in patients with advanced
cancer. AstraZeneca is conducting a clinical study of ISIS-STAT3-2.5
Rx
in patients with advanced metastatic
hepatocellular carcinoma, or HCC. We are conducting a clinical study evaluating ISIS-STAT3-2.5
Rx
in patients
with advanced lymphomas, including patients with diffuse large b-cell lymphoma. We are responsible for
completing our clinical study in patients with advanced lymphomas andAstraZeneca is responsible for all other
global development, regulatory and commercialization activities for ISIS-STAT3-2.5
Rx
. In June 2013, we and
AstraZeneca added a second development candidate, ISIS-AR-2.5
Rx
, to our collaboration. ISIS-AR-2.5
Rx
is an
antisense drug we designed to treat patients with prostate cancer by inhibiting the production of the androgen
receptor, or AR. AstraZeneca is currently evaluating ISIS-AR-2.5
Rx
in a Phase 1/2 study in patients with
AR-related cancers. AstraZeneca is responsible for all other global development, regulatory and
commercialization activities for ISIS-AR-2.5
Rx
. In addition, we are responsible for identifying a development
candidate for each of the three anti-cancer research programs. AstraZeneca has the option to license drugs
resulting from each of the three anti-cancer research programs, and if AstraZeneca exercises its option for a drug,
it will be responsible for all further global development, regulatory and commercialization activities for such
drug.
Under the terms of the agreement, we received $31 million comprised of a $25 million upfront payment we
received in December 2012 and a $6 million payment we received in June 2013. We recorded revenue of
$11.5 million upon receipt of these payments. We are recognizing the remaining $19.5 million into revenue as
follows:
•
$11.2 million related to the ISIS-AR-2.5
Rx
program, which we amortized throughMarch 2014;
•
$7.6 million related to the option to license three drugs under a separate research program, which we
are amortizing through December 2016; and
•
$0.7 million related to the ISIS-STAT3-2.5
Rx
program, which we amortized through February 2015.
In June 2014, we earned a $15 million milestone payment whenAstraZeneca initiated a Phase 1 study of
ISIS-AR-2.5
Rx
. From inception through February 2015, we have earned $25 million in milestone payments
related to the development of ISIS-AR-2.5
Rx
.
In October 2014, we andAstraZeneca amended our agreement for ISIS-STAT3-2.5
Rx
. Under the amended
terms of the agreement, we received a $7.5 million milestone payment in November 2014 fromAstraZeneca for
advancing ISIS-STAT3-2.5
Rx
in patients with advanced cancers. We recognized into revenue $7.1 million of the
$7.5 million milestone payment when we received the payment in November 2014 and we amortized the
remaining balance through February 2015. UponAstraZeneca’s initiation of a Phase 2 study, we will earn a
$17.5 million milestone payment.
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