| Collaborations | Collaborations Lorcaserin collaborations Eisai. In November 2013, Arena GmbH and Eisai entered into the Second Amended and Restated Marketing and Supply Agreement, or Eisai Agreement. The Eisai Agreement expanded Eisai’s exclusive commercialization rights for lorcaserin to all of the countries in the world, except for South Korea, Taiwan, Australia, New Zealand and Israel. Lorcaserin is approved in the United States and marketed as BELVIQ for chronic weight management in adults who are overweight with a comorbidity or obese, and was made available to patients by prescription in the United States by Eisai in June 2013. In addition to providing commercialization rights, which are subject to applicable regulatory approval, we manufacture and sell lorcaserin to Eisai and provide Eisai with services related to development and regulatory activities. Under the Eisai Agreement, we have received an upfront payment and payments from sales of lorcaserin, and are entitled to receive payments from future sales of lorcaserin, milestone payments based on the achievement of regulatory filings and approvals, one-time purchase price adjustment payments and other payments. Prior to entering into the Eisai Agreement, Arena GmbH and Eisai Inc. entered into the original marketing and supply agreement in July 2010, under which we granted Eisai Inc. exclusive commercialization rights for lorcaserin solely in the United States and its territories and possessions. In May 2012, Arena GmbH and Eisai Inc. amended and restated such agreement by entering into the first amended agreement, which expanded Eisai Inc.’s exclusive commercialization rights to include most of North and South America. The following table summarizes the revenues we recognized under our collaboration with Eisai for the periods presented, in thousands: Years ended December 31, From Inception Through December 31, 2015 2015 2014 2013 Net product sales $ 14,236 $ 15,983 $ 5,702 $ 35,921 Amortization of upfront payments 7,541 7,630 4,035 28,067 Reimbursement of development expenses 1,538 10,037 2,020 16,958 Milestone payments 0 500 66,000 86,500 Reimbursement of patent and trademark expenses 426 444 361 1,318 Subtotal other Eisai collaborative revenue 9,505 18,611 72,416 132,843 Total $ 23,741 $ 34,594 $ 78,118 $ 168,764 The following table summarizes the deferred revenues under our collaboration with Eisai, in thousands: December 31, 2015 2014 Upfront payments $ 86,933 $ 94,474 Net product sales 10,754 7,081 Total deferred revenues attributable to Eisai 97,687 101,555 Less current portion (18,295 ) (14,622 ) Deferred revenues attributable to Eisai, less current portion $ 79,392 $ 86,933 Upfront and milestone payments. In connection with entering into the Eisai Agreement, we received from Eisai an upfront payment of $60.0 million . This payment is in addition to the $50.0 million and $5.0 million in upfront payments we received from Eisai in connection with entering into the original agreement and the first amended agreement, respectively. Revenues from these upfront payments were deferred, as we determined that the exclusive rights did not have standalone value without our ongoing development and regulatory activities. Accordingly, these payments are recognized ratably as revenue over the periods in which we expect the services to be rendered, which are approximately 15 years for the Eisai Agreement and first amended agreement and 16 years for the original agreement. In addition to the upfront payments, we have received from Eisai a total of $86.5 million in milestones payments, and we are eligible to receive up to an aggregate of $176.0 million in additional regulatory and development milestone payments. Product purchase price and purchase price adjustment payments. We manufacture lorcaserin at our facility in Switzerland, and sell lorcaserin to Eisai for Eisai’s commercialization in the United States and, subject to applicable regulatory approval, in the other territories under the Eisai Agreement (other than Europe, China and Japan) for a purchase price starting at 31.5% and 30.75% , respectively (and starting at 27.5% in Europe, China and Japan), of Eisai’s aggregate annual net product sales (which are the gross invoiced sales less certain deductions described in the Eisai Agreement), or the Product Purchase Price, in the respective territory. The Product Purchase Price will increase on a tiered basis in the United States and the other territories (other than Europe, China and Japan) to as high as 36.5% and 35.75% , respectively, on the portion of Eisai’s annual aggregate net product sales exceeding $750.0 million in all territories other than Europe, China and Japan. The Product Purchase Price will increase to 35% in Europe, China and Japan on the portion of Eisai’s annual aggregate net product sales exceeding $500.0 million in such territories. The Product Purchase Price is subject to reduction (for sales in a particular country), including in the event of generic competition in the applicable country. The revenue we recognize for BELVIQ product revenue related to redemption of vouchers and product samples is based on our cost of goods sold. In addition to payments for purchases of lorcaserin, we are eligible to receive up to an aggregate of $1.56 billion in one-time purchase price adjustment payments and other payments. These payments include up to an aggregate of $1.19 billion that are based on Eisai’s annual net product sales of lorcaserin in all of the territories under the Eisai Agreement on an aggregate basis, with the first and last amounts payable with annual net product sales of $250.0 million and $2.5 billion , respectively. Of these payments, Eisai will pay us a total of $330.0 million for annual net product sales of up to $1.0 billion . The $1.56 billion also includes $370.0 million in one-time purchase price adjustment payments we are eligible to receive based on annual net product sales in the non-US territories, comprised of $185.0 million based on Eisai’s annual net product sales in the non-US territories in North and South America and $185.0 million based on Eisai’s annual net product sales in the territories outside of North and South America. The first and last amounts are payable upon first achievement of annual net product sales of $100.0 million and $1.0 billion , respectively, with respect to each of the following areas: (i) the non-US territories in North and South America and (ii) the territories outside of North and South America. In addition, we are also eligible to receive certain payments by Eisai if certain annual minimum sales requirements in Mexico, Canada and Brazil are not met during the first ten years after initial commercial sale in such territories. The amount that Eisai pays us for lorcaserin product supply is based on Eisai’s estimated price at the time the order is shipped, which is Eisai’s estimate of the Eisai Product Purchase Price, and is subject to change on April 1 and October 1 of each year. At the end of Eisai’s fiscal year (March 31), the estimated price paid to us for product that Eisai sold to their distributors is compared to the Eisai Product Purchase Price of such product, and the difference is either refunded back to Eisai (for overpayments) or paid to us (for underpayments). On a monthly basis, Eisai provides us the total amount of net product sales for the month, details of the total deductions from gross to net product sales and the sales in units. We recognize our revenues monthly based on our percentage of Eisai’s monthly net product sales figures. When the revenues we recognize differ from the estimated price that Eisai paid us for such product, the difference is reclassified from deferred revenues to a receivable or payable account, as appropriate. We also adjust the deferred revenues balance for the product supply held at Eisai based on the most current net product sales figures provided to us, with the difference reclassified from deferred revenues to a receivable or payable account. The Eisai Product Purchase Price for the product Eisai has sold has been lower than the estimated price that Eisai paid us for such product, primarily due to an increase in deductions from savings cards and returns, partially offset by a decrease in vouchers. In January 2015, Eisai announced the launch of a new savings card which enables eligible patients without commercial coverage for BELVIQ to pay no more than $75 for each monthly prescription while those patients with commercial coverage for BELVIQ are able to use the card to obtain additional savings if their copay is greater than $50 per monthly prescription. Subsequent to the end of Eisai’s fiscal year, we refund the portion of these excess payments, which total the $12.1 million classified as Payable to Eisai on our consolidated balance sheet at December 31, 2015 , related to product sold by Eisai to their distributors through March 31. Development payments. In connection with the US approval of BELVIQ, the US Food and Drug Administration, or FDA, is requiring (i) an evaluation as part of the cardiovascular outcomes trial, or CVOT, of the effect of long-term treatment with BELVIQ on the incidence of major adverse cardiovascular events, or MACE, in overweight and obese patients with cardiovascular disease or multiple cardiovascular risk factors and (ii) the conduct of postmarketing studies to assess the safety and efficacy of BELVIQ for weight management in obese pediatric patients. In addition to the FDA-required studies, we and Eisai are prioritizing the development and approval of a once-daily formulation of lorcaserin, as well as potentially exploring, including as part of the CVOT, BELVIQ’s effect on conversion to type 2 diabetes and improvements in cardiovascular outcomes. The chart below summarizes the general agreement regarding cost sharing between Eisai and us for significant development activities under the Eisai Agreement. In addition, Eisai or we may from time to time conduct approved development of lorcaserin at such party’s own expense. For the years ended December 31, 2015 , 2014 , and 2013 , we recognized expenses of $16.2 million , $35.3 million and $11.7 million , respectively, for external clinical study fees related to lorcaserin and internal non-commercial manufacturing costs primarily related to lorcaserin. Cost Sharing for Development with Eisai United States Rest of North and South America Remaining Territories BELVIQ - Pre-approval* Not Applicable General Eisai: 90%; Arena: 10% Certain stability work Eisai: 50%; Arena: 50% Up to total of $100.0 million** Eisai: 50%; Arena: 50% Thereafter, Eisai: 100% BELVIQ - Post-approval* General Eisai: 90%; Arena 10% Non-FDA required portion of CVOT Up to $80.0 million - Eisai: 50%; Arena: 50% Thereafter, Eisai: 100% Certain pediatric studies Eisai: 50%; Arena: 50% General Eisai: 90%; Arena: 10% Certain stability work Eisai: 50%; Arena: 50% Up to total of $50.0 million - Eisai: 50%; Arena: 50% Thereafter, Eisai: 90%; Arena: 10% Lorcaserin products other than BELVIQ - Pre-approval Up to a total of $250.0 million (as reduced by up to $80.0 million for non-FDA required portion of CVOT)** - Eisai: 50%; Arena: 50% Lorcaserin products other than BELVIQ - Post-approval Up to a total of $100.0 million in the aggregate across all additional products - Eisai: 50%; Arena: 50% Thereafter, Eisai: 90%; Arena: 10% ______________________ * Development required by a regulatory authority, with the exception of the non-FDA required portion of the CVOT. ** Under the collaborative agreement, the amount for BELVIQ pre-approval in the Remaining Territories was decreased and the amount for lorcaserin products other than BELVIQ pre-approval was increased by such amount. Certain other terms. Eisai and we have agreed to limitations on the ability to commercialize outside of the Eisai Agreement any weight management product or addiction disorder product in the territories under the agreement. The agreement includes a stand-still provision limiting Eisai’s ability to acquire our securities and assets. Eisai will indemnify us for losses resulting from certain third-party claims, including for (a) Eisai’s negligence, willful misconduct or violation of law, but excluding product liability claims, (b) Eisai’s breach of the Eisai Agreement or related agreements, but excluding product liability claims, (c) certain uses or misuses of a lorcaserin product, (d) certain governmental investigations of Eisai related to a lorcaserin product, and (e) infringement relating to Eisai’s use of certain trademarks, tag lines and logos related to a lorcaserin product. Arena GmbH will indemnify Eisai for losses resulting from certain third-party claims, including for (i) Arena GmbH’s negligence, willful misconduct, failure to comply with law, breach of any agreement with a third party with respect to product development prior to the effective date of the original agreement with Eisai, but excluding product liability claims, (ii) Arena GmbH’s negligence or willful misconduct with respect to certain uses or misuses of a lorcaserin product outside of the agreement, (iii) certain uses or misuses of a lorcaserin product after the term of the agreement, in any territory no longer under the agreement or with respect to any product after the termination of the agreement with respect to such product, (iv) Arena GmbH’s negligence, willful misconduct or violation of law, but excluding product liability claims, (v) Arena GmbH’s breach of the Eisai Agreement or related agreements, but excluding product liability claims, (vi) certain infringement of intellectual rights of a third party, and (vii) infringement relating to Eisai’s use of certain trademarks related to a lorcaserin product. We are unable to predict the maximum potential amount of any indemnification claims. At December 31, 2015, we have not incurred any losses under these indemnification provisions. In addition, Arena GmbH and Eisai will, in general, share equally in losses resulting from third-party product liability claims, except where one party’s acts or omissions did not contribute to the events or circumstances leading to such product liability claim and the other party’s actual willful misconduct, violation of law or breach of its obligations under the Eisai Agreement or certain other agreements between Arena GmbH and Eisai were the sole and direct cause of the product liability claim. We are unable to predict the range of loss from future product liability claims. Eisai may terminate the Eisai Agreement with respect to any country in the territory following the later of the expiration of all issued lorcaserin patents in such country and 12 years after the first commercial sale of the first lorcaserin product in such country. Arena GmbH and Eisai each has the right to terminate the agreement early in certain circumstances in its entirety or with respect to the applicable country or product, including (a) if the other party is in material breach, (b) for commercialization concerns, and (c) for certain intellectual property infringement. Eisai also has the right to terminate the agreement early in its entirety or with respect to each country in certain circumstances, including (i) termination in a country if sales of generic equivalents of a lorcaserin product in such country exceed sales of the lorcaserin product in that country (based on volume), and (ii) if Eisai is acquired by a company that has a product that competes with a lorcaserin product. In addition, Arena GmbH can terminate the agreement early in its entirety or with respect to each country in the non-US territories in North and South America in certain circumstances, including termination in each country if Eisai does not satisfy certain regulatory filing and commercialization diligence requirements in such country. Ildong Pharmaceutical Co., Ltd. In November 2012, Arena GmbH and Ildong entered into the Marketing and Supply Agreement, or Ildong BELVIQ Agreement. Under this agreement, we granted Ildong exclusive rights to commercialize BELVIQ in South Korea for weight loss or weight management in obese and overweight patients. We also provide certain services and manufacture and sell BELVIQ to Ildong. Ildong has agreed not to conduct activities outside of our agreement related to the approval or commercialization of any other pharmaceutical product for weight loss, weight management or obesity in South Korea, with the exception of phentermine. In connection with entering into the Ildong BELVIQ Agreement, we received from Ildong an upfront payment of $5.0 million , less withholding taxes. Revenues from this upfront payment were deferred, as we determined that the exclusive rights did not have standalone value without our ongoing development and regulatory activities. Accordingly, this payment is recognized ratably as revenue over the period in which we expect the services to be rendered, which is approximately 14 years . In addition to the upfront payment, we received a milestone payment of $3.0 million , less withholding taxes, in March 2015, which we earned upon the February 2015 approval of BELVIQ for marketing in South Korea for weight management. We manufacture BELVIQ at our facility in Switzerland, and sell BELVIQ to Ildong for a purchase price starting at the higher of the defined minimum amount or 35% of Ildong’s annual net product sales (which are the gross invoiced sales less certain deductions described in the Ildong Agreement), or the Ildong Product Purchase Price. The Ildong Product Purchase Price increases on a tiered basis up to the higher of the defined minimum amount or 45% on the portion of annual net product sales exceeding $15.0 million . However, in no event shall the Ildong Product Purchase Price be less than a defined minimum amount adjusted annually based upon a consumer price index. For the year ended December 31, 2015 , the Ildong Product Purchase Price equaled the defined minimum amount (which exceeded the amounts calculated using the applicable percentages for the applicable tiers of Ildong’s annual net product sales). If certain annual net product sales amounts are not met, we can convert Ildong’s right to commercialize BELVIQ in South Korea to be non-exclusive. At December 31, 2015 , our consolidated balance sheet included $0.4 million and $3.5 million for the current and non-current portion, respectively, of the deferred revenue attributable to the upfront payment. For the years ended December 31, 2015 , 2014 , and 2013 , we recognized revenues of $8.9 million (including $5.5 million from our portion of Ildong net product sales of BELVIQ and the $3.0 million milestone payment), $0.4 million and $0.5 million respectively, under this agreement. Ildong will indemnify us for losses resulting from certain third-party claims, including for (a) Ildong’s negligence, willful misconduct or violation of law, (b) Ildong’s breach of the marketing and supply agreement or related agreements, (c) certain uses or misuses of lorcaserin (including any product liability claim and other claims relating to sales or development of lorcaserin in South Korea), (d) certain governmental investigations of Ildong related to lorcaserin, and (e) infringement relating to Ildong’s use of trademarks related to lorcaserin. Arena GmbH will indemnify Ildong for losses resulting from certain third-party claims, including for (i) Arena GmbH’s negligence, willful misconduct or violation of law, and (ii) Arena GmbH’s breach of the marketing and supply agreement or related agreements. Unless terminated earlier, the agreement with Ildong will continue in effect until the later of the expiration of all issued patents relating to BELVIQ in South Korea and 12 years after the first commercial sale of lorcaserin in South Korea. Either party has the right to terminate the agreement early in certain circumstances, including (a) if the other party is in material breach, (b) for certain commercialization concerns, and (c) for certain intellectual property concerns. Ildong also has the right to terminate the agreement early if we notify Ildong that Ildong’s right to commercialize lorcaserin in South Korea will become non-exclusive. CY Biotech Company Limited In July 2013, Arena GmbH entered into the CYB Agreement. Under this agreement, we granted CYB exclusive rights to commercialize BELVIQ in Taiwan for weight loss or weight management in obese and overweight patients, subject to regulatory approval of BELVIQ by the Taiwan Food and Drug Administration, or TFDA. We also provide certain services and will manufacture and sell BELVIQ to CYB. CYB has agreed not to conduct outside of our agreement activities related to the approval or commercialization of any other pharmaceutical product for weight loss, weight management or obesity in Taiwan. We will receive payments from sales of BELVIQ under the CYB Agreement, and are eligible to receive purchase price adjustment payments based on CYB’s annual net product sales, as well as a milestone payment upon approval of the first additional indication for lorcaserin by the TFDA. We received from CYB an upfront payment of $2.0 million , less withholding taxes, which was recorded as deferred revenue and will be recognized as revenue ratably over approximately 14 years, which is the period in which we expect to provide services under the arrangement. For the years ended December 31, 2015 , 2014 , and 2013 , we recognized revenues of $0.2 million , $0.2 million and $0.1 million , respectively, under this agreement. Abic Marketing Limited (Teva) In July 2014, Arena GmbH entered into the Teva Agreement. Under this agreement, we granted Teva exclusive rights to commercialize BELVIQ in Israel for weight loss or weight management in obese and overweight patients, subject to regulatory approval of BELVIQ by the Israeli Ministry of Health, or MOH. We also provide certain services and will manufacture and sell BELVIQ to Teva. Teva has agreed not to conduct outside of our agreement activities related to the approval or commercialization of any other pharmaceutical product for weight loss, weight management or obesity in Israel. We will receive payments from sales of BELVIQ under the Teva Agreement. We received from Teva an upfront payment of $500,000 and a milestone payment of $250,000 earned upon its application for regulatory approval of BELVIQ in Israel. We recorded the upfront payment as deferred revenue and are recognizing it as revenue ratably over approximately nine years, which is the period in which we expect to provide services under the arrangement. For the years ended December 31, 2015 , and 2014 , we recognized revenues of $0.1 million and $0.3 million , respectively, under the Teva Agreement. Other collaborations Nelotanserin - Axovant Sciences Ltd. In May 2015, Arena GmbH entered into the Axovant Agreement. In October 2015, Roivant Sciences, Ltd., or Roivant, assigned the exclusive rights to develop and commercialize nelotanserin to its subsidiary, Axovant Sciences Ltd., or Axovant. Under this agreement, Axovant has exclusive worldwide rights to develop and commercialize nelotanserin, subject to regulatory approval. We also provide certain services and will manufacture and sell nelotanserin to Axovant. We received an upfront payment of $4.0 million , which was recorded as deferred revenue and is being recognized as revenue ratably over approximately five years, which is the period in which we expect to provide services under the arrangement. We will receive payments from sales of nelotanserin under the Axovant Agreement, and are eligible to receive purchase price adjustment payments based on Axovant’s annual net product sales, as well as $41.5 million in development and regulatory milestone payments. For the year ended December 31, 2015 , we recognized revenues of $1.1 million under this agreement. Temanogrel - Ildong Pharmaceutical Co., Ltd. In November 2012, we entered into the Ildong Temanogrel Agreement for temanogrel, our internally discovered inverse agonist of the serotonin 2A receptor. Under such agreement, we granted Ildong exclusive rights to commercialize temanogrel in South Korea for myocardial infarction, acute coronary syndrome, stroke, peripheral artery disease, and other cardiovascular diseases, subject to further development and regulatory approval of temanogrel. Initially, Ildong will be responsible for funding and conducting, under the direction of a joint steering committee, the ongoing Phase 1 clinical trial in healthy volunteers to investigate the safety of co-administration with clopidogrel and aspirin and a planned Phase 2a proof-of-concept trial in patients. We will maintain ownership of temanogrel outside of South Korea, and have the rights to use data generated by Ildong for the development and potential commercialization of temanogrel outside of South Korea by us or other Arena licensees. In addition, Ildong has agreed to pay us a $2.0 million development milestone if the planned additional Phase 1 and Phase 2a clinical trials conducted by Ildong support continued development and we or another Arena licensee initiates a Phase 2b clinical trial of temanogrel. We are also eligible to receive a royalty on net product sales of temanogrel in South Korea, and Ildong is eligible to receive a share of future payments received by us related to licensing transactions and sales of temanogrel in other territories. CNS Receptor - Boehringer Ingelheim International GmbH In December 2015, Arena GmbH and Boehringer Ingelheim entered into an exclusive agreement, or Boehringer Ingelheim Agreement, to conduct joint research to identify drug candidates targeting an undisclosed GPCR that belongs to the group of orphan central nervous system, or CNS, receptors. Under this agreement, we granted Boehringer Ingelheim exclusive rights to our internally discovered, novel compounds and intellectual property for an orphan CNS receptor. We will jointly conduct research with Boehringer Ingelheim to identify additional drug candidates that are suitable for continued research and development as therapeutic compounds for various disease indications, with the initial focus expected to be psychiatric diseases such as schizophrenia. The agreement grants Boehringer Ingelheim exclusive worldwide rights to develop, manufacture and commercialize products resulting from the collaboration. In part consideration of the rights to our intellectual property necessary or useful to conduct the joint research under the Boehringer Ingelheim Agreement, we received from Boehringer Ingelheim an upfront payment of $7.5 million in January 2016, less withholding taxes which are refundable to us. Revenues from this upfront payment will be deferred, as we determined that the exclusive rights did not have standalone value without our ongoing participation in the joint research. Accordingly, this payment will be recognized ratably as revenue over the period in which we expect the services to be rendered, which is approximately two years. In addition to the upfront payment, we are eligible to receive up to an aggregate of $254 million in research funding and success milestones in case of full commercial success of multiple drug products. |
