||License and Collaboration Agreements |
Alimera Sciences, Inc.
Under a collaboration agreement with Alimera, as amended in March 2008 (the "Alimera Agreement"), the Company has licensed Alimera the rights to develop, market and sell certain products, including ILUVIEN.
Upon execution of the Alimera Agreement in March 2008, the Company received consideration of $12.0 million in cash and Alimera cancelled $5.7 million of accrued development cost liabilities, including related penalties and accrued interest, owed by the Company to Alimera as of March 14, 2008. In addition, the Company received a $15.0 million interest-bearing conditional note (subject to acceleration upon the occurrence of certain defined liquidity events), Alimera agreed to pay a $25.0 million milestone payment upon FDA approval of ILUVIEN for DME, and Alimera assumed all financial responsibility for the development of licensed products under the Alimera Agreement, which had previously been shared equally, including reimbursement of approved development costs incurred by the Company in support of the ongoing clinical studies of ILUVIEN for DME and anticipated regulatory submissions. In exchange, the Company decreased its share in any future profits, as defined, on sales of ILUVIEN for DME by Alimera from 50% to 20%, subject to an offset of 20% of pre-profitability commercialization costs, as defined, incurred by Alimera. In the event Alimera sublicenses commercialization, the Company is entitled to receive 20% of royalties and 33% of non-royalty consideration received by Alimera, less certain permitted deductions. On April 27, 2010, following consummation of its initial public offering, Alimera paid the $15.0 million conditional note in full together with $225,000 of accrued and unpaid interest.
Revenue related to the Alimera Agreement totaled approximately $31,000 and $54,000 during the three months ended September 30, 2011 and 2010, respectively.
In April 2007, the Company entered into a worldwide Collaborative Research and License Agreement with Pfizer (the "Original Pfizer Agreement") for the use of certain of its technologies in ophthalmic applications that were not licensed to others. Commencing in calendar year 2008, Pfizer paid the Company $500,000 quarterly in consideration of the Company's costs in performing the research program.
In June 2011, the Company and Pfizer entered into an Amended and Restated Collaborative Research and License Agreement (the "Restated Pfizer Agreement") to focus solely on the development of a sustained-release bioerodible implant designed to deliver latanoprost for human ophthalmic disease or conditions, other than uveitis (the "Latanoprost Product"). The Original Pfizer Agreement was effectively terminated, including the cessation of Pfizer's $500,000 quarterly funding of the research program. Upon execution of the Restated Pfizer Agreement, Pfizer made an upfront payment of $2.3 million and the Company agreed to use commercially reasonable efforts to fund development of the Latanoprost Product, with technical assistance from Pfizer, for at least one year and, thereafter, at the Company's option, through completion of Phase II clinical trials, designated as Proof-of-Concept ("POC"). An investigator-sponsored Phase I/II dose-escalation study has been initiated to assess the safety and efficacy of this insert for patients with ocular hypertension and glaucoma. Within 90 days following receipt of the Company's final report demonstrating POC, Pfizer may exercise its option for an exclusive, worldwide license to develop and commercialize the Latanoprost Product in return for a $20.0 million payment, double-digit sales-based royalties and additional development, regulatory and sales performance milestone payments of up to $146.5 million. If the Company elects to cease development of the Latanoprost Product after one year, but prior to completion of Phase II clinical trials, Pfizer would still have the right to exercise an option for an exclusive worldwide license to develop and commercialize the Latanoprost Product upon payment of a lesser option fee, with comparable reductions in future sales-based royalties and other designated milestones. If Pfizer does not exercise its option, the Restated Pfizer Agreement will automatically terminate provided, however, that the Company will retain the right to develop and commercialize the Latanoprost Product on its own or with a partner.
Based upon the significant changes to the terms of the Original Pfizer Agreement, which included (i) changes in the consideration payable by Pfizer; (ii) changes in the deliverables; and (iii) changes in the research program, which now is solely related to the Latanoprost Product, the Company considered the Restated Pfizer Agreement a material modification and applied the applicable accounting guidance to this arrangement.
The Company's deliverables under the Restated Pfizer Agreement include conducting the research and development program for the Latanoprost Product through completion of Phase II (the "R&D program") and participation on a Joint Steering Committee ("JSC"). The Company concluded that the Pfizer exercise option for the worldwide exclusive license was not a deliverable of the arrangement, due to it being a substantive option and not being priced at a significant and incremental discount. The Company determined that the JSC did not have standalone value from the R&D program and therefore the Company combined these deliverables into a single unit of accounting. The performance period is the expected period over which the services of the combined unit are performed, which the Company has estimated to be 3 years.
The total arrangement consideration of the Restated Pfizer Agreement totaled $10.05 million, which consisted of $7.75 million of deferred revenue on the Company's balance sheet at the effective date plus the $2.3 million upfront payment. The difference between the total arrangement consideration and the estimated selling price of the combined deliverables, or $3.3 million, was recognized as collaborative research and development revenue in the quarter ended June 30, 2011, the period of the modification. The estimated selling price of $6.7 million is being recognized as collaborative research and development revenue over the expected 3-year performance period using the proportional performance method. The Company recorded revenue of $288,000 for the three months ended September 30, 2011 and $0 for the three months ended September 30, 2010. At September 30, 2011 and June 30, 2011, the Company recorded deferred revenue of $6.4 million and $6.7 million, respectively, classified between current and non-current deferred revenue. The costs associated with conducting the research program for the Latanoprost Product are reflected in operating expenses in the period in which they are incurred.
To the extent that any subsequent payment is received from Pfizer, including option exercise, milestone and sales-based royalty consideration, which would occur after completion of the Company's performance period under the Restated Pfizer Agreement, such amount would be recognized as revenue when all the revenue criteria are met.
In January 2008, the Company and Intrinsiq Materials Cayman Limited ("Intrinsiq") entered into an agreement pursuant to which Intrinsiq acquired an exclusive field-of-use license to develop and commercialize nutraceutical and food science applications of BioSilicon, and certain related assets, for $1.2 million. Provided the license agreement remained in effect, Intrinsiq was obligated to pay the Company aggregate minimum royalties of $3.55 million through April 2014, of which the first $450,000 was paid in July 2009.
The Company determined the performance period of the license arrangement to be 17 years, coinciding with the last to expire of the patents licensed to Intrinsiq, and recognized collaborative research and development revenue using the cumulative catch-up method.
On July 22, 2011, the Company consummated an asset purchase agreement, in which it acquired porous BioSilicon-related capital equipment assets of Intrinsiq for $223,000, and employed four former Intrinsiq employees. The fair value of the tangible assets acquired approximated the total acquisition consideration. Coincident with the transaction, Intrinsiq terminated the agreements underlying its original 2008 exclusive field-of-use license to develop and commercialize nutraceutical and food science applications of BioSilicon. The license termination resulted in the recognition of collaborative research and development revenue of $1.1 million in the three months ended September 30, 2011, representing the total Intrinsiq deferred revenue balance at June 30, 2011, which was classified as a current liability. During the three months ended September 30, 2010, the Company recognized Intrinsiq collaborative research and development revenue of $20,000.
Bausch & Lomb
The Company's Retisert and Vitrasert products were developed and commercialized under a licensing and development agreement with Bausch & Lomb. Pursuant to the collaboration agreement, Bausch & Lomb has a worldwide exclusive license to make and sell Vitrasert and our first-generation products (as defined in the agreement, including the Retisert device) in return for royalties based on sales.
Royalty income totaled $198,000 and $402,000 for the three months ended September 30, 2011 and 2010, respectively. Accounts receivable from Bausch & Lomb totaled $198,000 and $321,000 at September 30, 2011 and June 30, 2011, respectively.