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10-Q - FORM 10-Q - ACHILLION PHARMACEUTICALS INCd230843d10q.htm
EX-31.1 - SECTION 302 CEO CERTIFICATION - ACHILLION PHARMACEUTICALS INCd230843dex311.htm
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EX-31.2 - SECTION 302 CFO CERTIFICATION - ACHILLION PHARMACEUTICALS INCd230843dex312.htm
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Collaboration Arrangements
9 Months Ended
Sep. 30, 2011
Collaboration Arrangements [Abstract] 
Collaboration Arrangements

6. Collaboration Arrangements

Gilead Sciences, Inc.

In November 2004, the Company entered into a research collaboration and license agreement with Gilead Sciences, Inc. pursuant to which the Company agreed to collaborate exclusively with Gilead throughout the world to develop and commercialize compounds for the treatment of HCV which inhibit HCV replication through a novel mechanism of action targeting the HCV NS4A protein. In September 2009, the Company and Gilead amended the collaboration arrangement so that the Company may continue to develop ACH-1095 independently during an "Interim Period," while Gilead may rejoin in the development of ACH-1095 at clinical proof-of-concept, as defined in the agreement. At this time, however, the Company has elected not to devote significant resources to clinical development of ACH-1095.

The Company continues to be responsible for preclinical assessment of a limited number of other NS4A antagonists until such time as proof-of-concept is achieved. Gilead will otherwise be responsible for all manufacturing, formulation and commercialization activities associated with such compounds, if nominated, including all regulatory filings and clinical trials after proof-of-concept. The Company received $10,000 from Gilead upon the execution of the license agreement, of which $2,000 was allocated to the fair value of the preferred stock purchased concurrent with entering into the license agreement. The remaining $8,000 of the non-refundable up-front license fee, as well as a $2,000 milestone achieved during the period prior to achievement of proof-of-concept, are being accounted for under the proportionate performance model.

Gilead has the right to terminate the agreement without cause upon 30 days written notice to the Company. Upon termination of the Gilead arrangement for any reason, all cost share amounts due and payable through the date of termination shall be paid by the appropriate party and no previously paid amounts will be refundable. In addition to Gilead's rights to unilaterally terminate this agreement, each party has the right to terminate for material breach; however, the Company may terminate for Gilead's breach only on a market-by-market basis, and, if applicable, a product-by-product basis.

Revenue under the proportionate performance model is recognized as the Company's effort under the collaboration is incurred. The proportion of actual performance to total expected performance is applied to these payments in determining periodic revenue. Payments made by the Company to Gilead in connection with this collaboration are recognized as a reduction of revenue. When the Company's performance obligation is complete, the Company will recognize milestone payments, if any, when the corresponding milestone is achieved. The Company will recognize royalty payments, if any, upon product sales. Under the proportionate performance method, revenue recognized will be limited by the aggregate cash received or receivable to date by the Company.

At this time, the Company cannot accurately estimate its future obligations under the collaboration as it has not identified a new lead compound that will be developed jointly. Therefore, during the three and nine months ended September 30, 2011 and 2010, the Company did not recognize revenue from upfront, milestone and full-time equivalent, or "FTE," fees previously received under the collaboration. The Company will determine its remaining obligations if and when a new lead compound is identified.

During the three months ended September 30, 2011 and 2010, the Company recognized revenue of $64 and $45, respectively, under the arrangement, all of which related to external costs billed by the Company to Gilead. During the nine months ended September 30, 2011 and 2010, the Company recognized revenue of $185 and $162, respectively, under the arrangement, all of which related to external costs billed by the Company to Gilead.

Included in the accompanying balance sheets as of September 30, 2011 and December 31, 2010 are $64 and $18, respectively, of accounts receivable resulting from this collaboration agreement and $2,489 and $2,489, respectively, of deferred revenue resulting from the up-front fee, a milestone payment, and FTE costs.

 

GCA Therapeutics, Ltd.

In February 2010, the Company entered into a license agreement (the "Agreement") with GCA Therapeutics, Ltd. ("GCAT") for elvucitabine, the Company's nucleoside reverse transcriptase inhibitor for the treatment of both hepatitis B virus ("HBV") infection and human immunodeficiency virus ("HIV") infection. The Agreement was amended and restated in March 2010. The exclusive license grants GCAT the right, through a Chinese joint venture with Tianjing Institute of Pharmaceutical Research, to clinically develop and commercialize elvucitabine in mainland China, Hong Kong and Taiwan.

Under the terms of the Agreement, GCAT, through a sublicense agreement with a Chinese joint venture, T&T Pharma Co., Ltd., will assume all development and regulatory responsibility and associated costs for elvucitabine. The Company will be eligible to receive development milestones and royalties on net sales in the territories covered by the agreement.

The Agreement may be terminated by either party based upon material breaches by the other party, effective 90 days after providing written notice to the breaching party, if the breaching party fails to cure its material breach.

The Company may terminate the Agreement upon 30 days written notice in the event GCAT fails to meet any of the development or commercialization diligence milestones by the deadlines specified in the Agreement, or may terminate upon 90 days written notice in the event of a change of corporate control. In the event of a change of control, as defined, the Company shall pay GCAT termination fees, in an amount determined based upon specified progress milestones.