Licensing and Research and Development Agreements | 6 Months Ended |
Jun. 30, 2014 |
Disclosure - Licensing and Research and Development Agreements [Abstract] | ' |
Licensing and Research and Development Agreements | ' |
Licensing and Research and Development Agreements |
Vitaros® |
Abbott Laboratories Limited |
In January 2012, the Company entered into an exclusive license agreement with Abbott Laboratories Limited (“Abbott”), granting Abbott the exclusive rights to commercialize Vitaros® for erectile dysfunction (“ED”) in Canada. The product was approved by Health Canada in late 2010. Under the license agreement, the Company received $2.5 million in October 2012 as an up-front payment. The Company determined that the only deliverable was the license element and given no additional obligation was associated with the license, the up-front license fee of $2.5 million from Abbott was recorded as revenue in the third quarter of 2012. |
Over the term of the agreement, the Company is eligible to receive an additional $13.2 million in aggregate milestone payments if all the regulatory and sales thresholds specified in the agreement are achieved, plus tiered royalty payments based on Abbott’s sales of the product in Canada. |
Bracco SpA |
On December 22, 2010, the Company entered into an exclusive license agreement with Bracco SpA (“Bracco”), granting Bracco the exclusive rights to commercialize Vitaros® product for ED in Italy. The product was granted national phase approval in Italy for the treatment of patients with ED in November 2013. Under the license agreement, the Company received $1.0 million as an up-front payment during the year ended December 31, 2011, and is eligible to receive up to €4.75 million ($6.5 million as of June 30, 2014), net of withholding taxes, in regulatory and sales milestone payments. Further, over the life of the agreement, the Company is eligible to receive tiered double-digit royalties based on Bracco’s sales of the product. |
The Company concluded that the only deliverable was the license element, and $0.3 million of the $1.0 million up-front payment was contingent upon the Company receiving regulatory marketing approval for the product in Europe. Therefore, $0.7 million, net of withholding taxes, was recognized as license revenue during the year ended December 31, 2011, as there was no additional obligation associated with the license. The remaining $0.3 million was deferred until the Company received regulatory marketing approval for the product in Europe, which occurred during the second quarter of 2013. Under the license agreement, an additional regulatory milestone of approximately $0.3 million was earned upon European regulatory approval in the second quarter of 2013 and as a result, approximately $0.3 million was billed and recognized as revenue for this substantive milestone during the second quarter of 2013, for a total of approximately $0.6 million of revenue recognized during the second quarter of 2013. |
Hexal AG, an affiliate within the Sandoz Division of the Novartis Group of Companies |
In February 2012, the Company entered into an exclusive license agreement with Hexal AG, an affiliate within the Sandoz Division of the Novartis Group of Companies (“Sandoz”) for Sandoz to market Vitaros® for the treatment of ED in Germany. Under the license agreement, the Company received $0.7 million as an up-front payment and is eligible to receive up to an additional €0.4 million ($0.5 million as of June 30, 2014) in regulatory milestones and €20.875 million ($28.5 million as of June 30, 2014) in aggregate sales milestones if all the regulatory and sales thresholds specified in the agreement are achieved, as well as tiered double-digit royalties on net sales by Sandoz in Germany. The Company concluded that the only deliverable was the license element and given no additional obligation was associated with the license, the up-front license fee of $0.7 million, net of withholding taxes, from Sandoz for the German territory was recorded as revenue in the first quarter of 2012. |
In December 2013, the Company amended and restated its license agreement with Sandoz to include the following countries as part of the exclusive license agreement: Austria, Belgium, Denmark, Finland, Iceland, Luxemburg, the Netherlands, Norway, Sweden and Switzerland (the “Expanded Territory”). Under the revised agreement, the Company received in January 2014 an additional up-front payment of $2.0 million for the Expanded Territory, and is eligible to receive up to an additional $2.5 million in marketing launch milestones as well as €20.875 million ($28.5 million as of June 30, 2014) in sales milestones plus tiered double-digit royalties on net sales by Sandoz in the Expanded Territory as well as those milestones and royalties related to Germany specified above. Under the terms of the agreement, Sandoz is entitled to a refund of the up-front payment under certain regulatory and manufacturing conditions and, in accordance with the accounting guidance, the $2.0 million up-front payment has been deferred and will be recognized as revenue once the conditions related to the refund rights have been met or lapse. The results of the manufacturing and regulatory conditions are expected to be determined no later than December 2014 and December 2016, respectively. |
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In 2013, Germany's Federal Institute for Drugs and Medical Devices, the Netherlands’ Medicines Evaluations Board and Sweden’s National Board of Health and Welfare each granted national phase approval to Vitaros® indicated for the treatment of patients with ED. Then, in January and April 2014, respectively, Belgium’s Ministry of Social Affairs, Public Health and Environment and the Ministry of Health of Luxembourg each granted national phase approval to Vitaros® indicated for the treatment of patients with ED. In August 2014, Sandoz launched Vitaros in Sweden, which triggered a launch milestone payment from Sandoz to the Company of $0.5 million. |
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In July 2011, the Company filed a marketing application in Switzerland with Swissmedic, the Swiss Agency for Therapeutic Products, for Vitaros® as a treatment for patients with ED. The Swiss regulatory comments for the marketing approval of Vitaros® are expected in the second half of 2014, following a non-approval decision, appeal by the Company and a subsequent notice of re-review received in early 2014. |
Laboratoires Majorelle |
In November 2013, the Company entered into an exclusive license agreement with Majorelle, granting Majorelle the rights to commercialize Vitaros® for the treatment of ED in France, Monaco and certain countries in Africa. In December 2013, France's National Agency for Medicines and Health Products Safety granted national phase approval to Vitaros® indicated for the treatment of patients with ED. The Company received $1.8 million in November 2013 as an up-front payment, $0.2 million in January 2014 upon the receipt of marketing authorization in France, and is eligible to receive up to $2.0 million in additional regulatory milestone payments. Under the agreement, the Company is also entitled to €15.5 million ($21.2 million as of June 30, 2014) in sales milestones as well as tiered double-digit royalties based on Majorelle’s sales of the product. |
In December 2013, in a related negotiation, Majorelle agreed to make severance payments to certain former employees of Scomedica SAS for an aggregate amount of approximately $2.0 million on behalf of the Company. The Company concluded that the fair value of the Vitaros® license granted was equal to $4.0 million, or the sum of the $1.8 million upfront payment received, the $0.2 million payment received for National Phase approval in France, and the $2.0 million paid by Majorelle on behalf of the Company. |
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During the second quarter of 2014, upon withdrawal of the Works Council Claim in June 2014 (see note 3 for further details regarding the claim), the Company recognized $3.0 million of the $4.0 million Vitaros® license fair value in license fee revenue in its statement of operations. Under the terms of the license agreement, Majorelle is entitled to a refund of $1.0 million of the upfront payment under certain contractual conditions. The $1.0 million subject to refund has been deferred and will be recognized as revenue once the condition related to the refund right has been met, which is expected to occur in 2014. |
Recordati Ireland Ltd. |
In February 2014, the Company entered into an exclusive license agreement with Recordati to market Vitaros® for the treatment of ED in Spain, Ireland, Portugal, Greece, Cyprus, the CEE Countries (Central and Eastern Europe), Russia and the other CIS Countries (former Soviet republics), Ukraine, Georgia, Turkey and certain countries in Africa. The Company received $2.5 million as an up-front payment in February 2014 and is eligible to receive up to €1.0 million ($1.4 million as of June 30, 2014) in commercial launch payments and €34.5 million ($47.1 million as of June 30, 2014) in sales milestones. Further, over the life of the agreement, the Company is entitled to receive tiered double-digit royalties based on Recordati’s sales of the product. |
Under the terms of the license agreement, there were two deliverables: the granting of a license and the execution of a Manufacturing Supply Agreement (the “Supply Agreement”). In accordance with the accounting guidance, the $2.5 million up-front payment was deferred when received in February 2014 until both deliverables were met. Upon execution of the Supply Agreement in June 2014, the Company satisfied the deliverables requirement under the terms of the license agreement and therefore recognized the full upfront payment as revenue during the second quarter of 2014. |
Two of the primary territories licensed by Recordati have been granted national phase approval. In August 2013, the Irish Medicines Board granted national phase approval to Vitaros® indicated for the treatment of patients with ED. Then, in April 2014, the Spanish Agency for Medicines and Health Products (“AEMPS”) granted national phase approval to Vitaros® indicated for the treatment of patients with ED. |
Takeda Pharmaceuticals International GmbH |
In September 2012, the Company entered into an exclusive license agreement with Takeda Pharmaceuticals International GmbH (“Takeda”) to market the Company’s Vitaros® drug for the treatment of ED in the United Kingdom. In August 2013, the United Kingdom’s Medicines and Healthcare Products Regulatory Agency granted national phase approval to Vitaros® indicated for the treatment of patients with ED. Under the license agreement, the Company is eligible to receive up to €34.65 million ($47.3 million as of June 30, 2014) in up-front license fees and aggregate milestone payments if all the regulatory and sales thresholds specified in the agreement are achieved, plus tiered double-digit royalty payments. The agreement with Takeda includes two deliverables: the granting of a license and manufacturing, with related product supply. In accordance with the accounting guidance on revenue recognition for multiple-element agreements, the product supply element of the agreement meets the criteria for separation. Given there was no additional obligation associated with the license element, the up-front license fee of $1.0 million from Takeda was recognized as revenue in the third quarter of 2012. |
Actavis plc |
In 2012, the Company entered into a supply and testing agreement with Warner Chilcott UK Limited, a subsidiary of Actavis plc (Warner Chilcott UK and Warner Chilcott Company Inc. collectively referred to herein as “Actavis”), to supply and provide testing services related to Vitaros®. The Company determined that the agreement with Actavis included two deliverables: certain contract services and product supply. The product supply element and contract services element of the agreement were treated as separate units of accounting. No revenue was recognized associated with the product supply element. Revenue associated with the contract services element was fully recognized in 2013 using the proportional performance method over the period in which the contract services were performed. |
Actavis acquired the Vitaros® United States (“U.S.”) commercial rights in 2009. The Company believes that there is a significant commercial opportunity for Vitaros® in the U.S. and is in discussions with Actavis to explore the various options available to advance the Vitaros® clinical development program forward in the U.S. |