| SIGNIFICANT AGREEMENTS | 2. SIGNIFICANT AGREEMENTS
The following table summarizes our total consolidated net revenues
from collaborators, for the periods indicated, in thousands:
Three Months Ended June 30,
Six Months Ended June 30,
2015 2014 2015 2014
Takeda $ 3,374 $ 5,494 $ 8,867 $ 10,987
The Medicines Company 2,648 1,259 4,631 2,525
Genzyme 2,610 (897 ) 4,427 (897 )
Monsanto
— 1,410 5,621 2,820
Other 53 29 3,676 135
Total net revenues from collaborators $ 8,685 $ 7,295 $ 27,222 $ 15,570
Product Alliances
Genzyme Collaboration
In January 2014, we entered into a global, strategic collaboration
with Genzyme Corporation, a Sanofi company, or Genzyme, to
discover, develop and commercialize RNAi therapeutics as Genetic
Medicines to treat orphan diseases. The 2014 Genzyme collaboration
superseded and replaced the previous collaboration between us and
Genzyme entered into in October 2012 to develop and commercialize
RNAi therapeutics targeting transthyretin, or TTR, for the
treatment of TTR-mediated amyloidosis, or ATTR amyloidosis,
including patisiran and revusiran, in Japan and the Asia-Pacific
region.
2012 Genzyme Agreement
Under the 2012 Genzyme agreement, Genzyme paid us an upfront cash
payment of $22.5 million. We were also entitled to receive certain
milestone payments under the 2012 Genzyme agreement. In the fourth
quarter of 2013, we earned a milestone of $7.0 million based upon
the completion of a successful patisiran Phase 2 clinical trial and
a milestone of $4.0 million based upon the initiation of the Phase
3 clinical trial for patisiran.
Under the 2012 Genzyme agreement, the parties agreed to collaborate
in the development and commercialization of licensed products, with
Genzyme assuming primary responsibility in the Genzyme territory,
which included Japan and the Asia-Pacific region, and us retaining
primary responsibility in the rest of the world.
We determined that the deliverables under the 2012 Genzyme
agreement included the license, a joint steering committee and any
additional TTR-specific RNAi therapeutic compounds that comprised
the ALN-TTR program. We also determined that, pursuant to the
accounting guidance governing revenue recognition on multiple
element arrangements, the license and undelivered joint steering
committee and any additional TTR-specific RNAi therapeutic
compounds did not have standalone value due to the specialized
nature of the services to be provided by us. In addition, while
Genzyme had the ability to grant sublicenses, it could not
sublicense all or substantially all of its rights under the 2012
Genzyme agreement. The uniqueness of our services and the limited
sublicense right were indicators that standalone value was not
present in the arrangement. Therefore the deliverables were not
separable and, accordingly, the license and undelivered services
were treated as a single unit of accounting. We were unable to
reasonably estimate the period of performance under the 2012
Genzyme agreement, as we were unable to estimate the timeline of
our deliverables related to the deliverable for any additional
TTR-specific RNAi therapeutic compounds. Through December 31,
2013, we had deferred all revenue, or $33.5 million, under the 2012
Genzyme agreement.
2014 Genzyme Collaboration
In January 2014, we entered into the 2014 Genzyme collaboration. As
noted above, the 2014 Genzyme collaboration superseded and replaced
the 2012 Genzyme agreement.
The 2014 Genzyme collaboration is structured as an exclusive
relationship for the worldwide development and commercialization of
RNAi therapeutics in the field of Genetic Medicines, which includes
our current and future Genetic Medicine programs that reach Human
Proof-of-Principle Study Completion (as defined in the Genzyme
master agreement), or Human POP, by the end of 2019, subject to
extension to the end of 2021 in various circumstances. We will
retain product rights in North America and Western Europe, referred
to as the Alnylam Territory, while Genzyme will obtain exclusive
rights to develop and commercialize collaboration products in the
rest of the world, referred to as the Genzyme Territory, together
with certain broader co-development/co-promote or worldwide rights
for certain products. Genzyme’s rights, described in detail
below, are structured as an opt-in that is triggered upon
achievement of Human POP. We maintain development control for all
programs prior to Genzyme’s opt-in and maintain development
and commercialization control after Genzyme’s opt-in for all
programs in the Alnylam Territory.
Specifically, in addition to its regional rights for our current
and future Genetic Medicine programs in the Genzyme Territory,
Genzyme has the right to either (i) co-develop and co-promote
ALN-AT3 for the treatment of hemophilia and other rare bleeding
disorders in the Alnylam Territory, with us maintaining development
and commercialization control, or (ii) obtain a global license
to ALN-AS1 for the treatment of hepatic porphyrias. Genzyme may
exercise this selection right upon the completion of Human POP for
both the ALN-AT3 and ALN-AS1 programs. Finally, Genzyme has the
right for a global license to a single, future Genetic Medicine
program that was not one of our defined Genetic Medicine programs
as of the effective date of the 2014 Genzyme collaboration. We will
retain global rights to any RNAi therapeutic Genetic Medicine
program that does not reach Human POP by the end of 2019, subject
to certain limited exceptions. We retain full rights to all current
and future RNAi therapeutic programs outside of the field of
Genetic Medicines, including the right to form new
collaborations.
Under the 2014 Genzyme collaboration, Genzyme’s specific
license rights include the following:
• Regional license terms – Upon
opt-in, we will retain product rights in the Alnylam Territory,
while Genzyme will obtain exclusive rights to develop and
commercialize the product in the Genzyme Territory. Genzyme can
elect this license for any of our current and future Genetic
Medicine programs that complete Human POP by the end of 2019,
subject to limited extension. Development costs for products once
Genzyme exercises an option will be shared between Genzyme and us,
with Genzyme responsible for twenty percent of the global
development costs. Upon the effective date of the 2014 Genzyme
collaboration, Genzyme expanded the scope of its regional license
and collaboration for patisiran, an investigational RNAi
therapeutic currently in a Phase 3 clinical trial, which was
originally established under the 2012 Genzyme agreement. Genzyme
will be required to make payments totaling up to $50.0 million upon
the achievement of certain patisiran development milestones. In
addition, Genzyme will be required to make payments totaling up to
$75.0 million per product other than patisiran, including up to
$55.0 million in development milestones and $20.0 million in
commercial milestones. We could potentially earn the next patisiran
milestone payment, ranging between $5.0 million and $20.0 million
based on the geographic region, upon the achievement of specified
events in connection with a regulatory filing or approval. Genzyme
will also be required to pay tiered double-digit royalties up to
twenty percent for each regional product based on annual net sales,
if any, of such regional product by Genzyme, its affiliates and
sublicensees.
• Co-development/co-promote license
terms – Upon opt-in, we will retain product rights in the
Alnylam Territory, while Genzyme will obtain exclusive rights to
develop and commercialize the product in the Genzyme Territory, and
will co-promote the product in the Alnylam Territory. Upon the
effective date of the 2014 Genzyme collaboration, Genzyme expanded
its regional rights for revusiran, an investigational RNAi
therapeutic currently in a Phase 3 clinical trial, which were
originally granted under the 2012 Genzyme agreement, to include a
co-development/co-promote license and collaboration. Genzyme also
has the right to elect a co-development/co-promote license and
collaboration for ALN-AT3, if it does not elect a global license
and collaboration for ALN-AS1. Development costs for
co-development/co-promote products, once Genzyme exercises an
option, will be shared between Genzyme and us, with Genzyme
responsible for fifty percent of the global development costs.
Genzyme will be required to make payments totaling up to $75.0
million in development milestones for each of revusiran and
ALN-AT3, if selected. In December 2014, we earned a development
milestone payment of $25.0 million based upon the initiation of the
first global Phase 3 clinical trial for revusiran. We could
potentially earn the next revusiran milestone payment, ranging
between $5.0 million and $25.0 million based on the geographic
region, upon the achievement of specified events in connection with
regulatory approval. Genzyme will also be required to pay tiered
double-digit royalties up to twenty percent for each
co-development/co-promote product based on annual net sales, if
any, in the Genzyme Territory for such co-development/co-promote
product by Genzyme, its affiliates and sublicensees. The parties
will share profits equally and we expect to book product sales in
the Alnylam Territory.
•
Global license terms – Upon opt-in, Genzyme will
obtain a worldwide license to develop and commercialize the
product. Genzyme can elect a global license for ALN-AS1, if it does
not elect a co-development/co-promote license for ALN-AT3. Genzyme
will also have one right to a global license through 2019, subject
to limited extension, for a future Genetic Medicine program that
was not one of our defined Genetic Medicine programs as of the
effective date of the 2014 Genzyme collaboration. Genzyme shall be
responsible for one hundred percent of global development costs.
Genzyme will be required to make payments totaling up to $200.0
million per global product, including up to $60.0 million in
development milestones and $140.0 million in commercial milestones.
Genzyme will also be required to pay tiered double-digit royalties
up to twenty percent for each global product based on annual net
sales, if any, of each global product by Genzyme, its affiliates
and sublicensees.
Due to the uncertainty of pharmaceutical development and the high
historical failure rates generally associated with drug
development, we may not receive any additional milestone payments
or any royalty payments from Genzyme under the 2014 Genzyme
collaboration.
Under the master agreement, the parties will collaborate in the
development of option products, with us leading development for all
programs prior to Genzyme’s opt-in and also leading
development and commercialization for all programs in the Alnylam
Territory after Genzyme’s opt-in. If Genzyme does not
exercise its option to license rights to a particular program, we
will retain the exclusive right to develop and commercialize such
program throughout the world, including the right to sublicense to
third parties.
The 2014 Genzyme collaboration is governed by an alliance joint
steering committee that is comprised of an equal number of
representatives from each party. There are additional committees to
manage various aspects of each regional, co-developed/co-promoted
and global program. We and Genzyme intend to enter into supply
agreements to provide for supply of collaboration products to
Genzyme for clinical studies, and, at Genzyme’s request,
commercial sales. Genzyme also has certain rights to manufacture
collaboration products. Additionally, Genzyme has certain limited
opt-out rights, as specified in the master agreement, upon which
products revert fully back to us with no further obligations to
Genzyme.
Upon the closing of the equity transaction in February 2014, we
sold to Genzyme 8,766,338 shares of our common stock and Genzyme
paid $700.0 million in aggregate cash consideration to us. As a
condition to the closing of the equity transaction, Genzyme entered
into an investor agreement with us. Under the investor agreement,
until the earlier of the fifth anniversary of the expiration or
earlier termination of the 2014 Genzyme collaboration and the date
on which Genzyme and its affiliates cease to beneficially own at
least 5% of our outstanding common stock, Genzyme and its
affiliates are bound by certain “standstill”
provisions. The standstill provisions include agreements not to
acquire more than 30% of our outstanding common stock, call
stockholder meetings, nominate directors other than those approved
by our board of directors, subject to certain limited exceptions,
or propose or support a proposal to acquire us. Further, Genzyme
has agreed to vote, and cause its affiliates to vote, all shares of
our voting securities they are entitled to vote, up to a maximum of
20% of our outstanding common stock, in a manner either as
recommended by our board of directors or proportionally with the
votes cast by our other stockholders, except with respect to
certain change of control transactions or our liquidation or
dissolution. Until Genzyme owns less than 7.5% of our outstanding
common stock, subject to Genzyme’s limited right to maintain
its ownership percentage as described below, if we issue common
stock or securities convertible into or exercisable for common
stock to a third party that holds at least 30% of our outstanding
common stock or, in connection with a collaboration or license
transaction, to a third party that will initially hold at least the
percentage of our outstanding common stock represented by the
shares purchased by Genzyme at the closing of the equity
transaction, we will offer Genzyme an opportunity to amend the
standstill and voting provisions in the investor agreement to be
consistent with the terms provided to such third party.
Under the investor agreement, Genzyme has also agreed not to
dispose of any shares of common stock beneficially owned by it
immediately after the closing of the stock purchase until the
earlier of (i) December 31, 2019 (subject to extension by
up to two years if Genzyme’s option to select additional
compounds under the master agreement is extended beyond
December 31, 2019) and (ii) six months after the
expiration or earlier valid termination of the collaboration, in
each case subject to earlier termination in the event certain
clinical activities under the collaboration fail to occur.
Following the expiration of this lock-up period, Genzyme will be
permitted to sell such shares of common stock subject to certain
limitations, including volume and manner of sale restrictions.
Notwithstanding the foregoing, following the two-year anniversary
of the closing of the stock purchase, in the event that the market
price per share of our common stock is at least 100% higher than
the market price per share of our common stock at closing of the
stock purchase (in each case based upon a ten-day trailing
average), Genzyme may sell up to 25% of its initial shares, subject
to certain restrictions on post-lock-up period dispositions as
described above.
Under the investor agreement, following the lock-up period, Genzyme
will have three demand rights to require us to conduct a registered
underwritten public offering with respect to the shares of common
stock beneficially owned by Genzyme immediately after the closing
of the stock purchase. In addition, following the lock-up period,
subject to certain conditions, Genzyme will be entitled to
participate in registered underwritten public offerings by us if
other selling stockholders are included in the registration.
The investor agreement provides that, until Genzyme owns less than
7.5% of our outstanding common stock, subject to Genzyme’s
limited right to maintain its ownership percentage as described
herein, in connection with new issuances of common stock, subject
to certain exceptions, Genzyme will be entitled to a right of first
offer to participate proportionally to maintain its then-current
ownership percentage of our common stock. If Genzyme is not
entitled to a right of first offer with respect to a new issuance,
Genzyme will have the opportunity, on a post-transaction basis, to
purchase additional shares sufficient to maintain its
pre-transaction ownership percentage of our common stock (subject
to the same 7.5% ownership threshold).
Finally, in the event Genzyme and its affiliates acquire at least
20% or more of our outstanding common stock, Genzyme will be
entitled to appoint one individual to our board of directors.
Genzyme will also be entitled to certain information rights,
including with respect to financial information in the event
Genzyme or its affiliates require such information for its own
financial reporting purposes. The rights and restrictions under the
investor agreement are subject to termination upon the occurrence
of certain events.
We recorded the issuance of 8,766,338 shares of our common stock
under the stock purchase agreement using the price of our common
stock on the date the shares were issued to Genzyme. Based on the
common stock price of $85.72, the fair value of the shares issued
was $751.5 million, which was $51.5 million in excess of the
proceeds received from Genzyme for the issuance of our common
stock. This $51.5 million is being amortized on a straight-line
basis over the performance period, which is currently approximately
six years as described below. In addition, due to intraperiod tax
allocation rules, upon closing of the equity transaction we
recorded a benefit from income taxes of $15.2 million due to the
Genzyme equity purchase being recorded in additional paid-in
capital, net of tax.
In accordance with the investor agreement, as a result of our
issuance of shares in connection with our acquisition of Sirna
Therapeutics, Inc., or Sirna, in March 2014, Genzyme exercised its
right to purchase an additional 344,448 shares of our common stock
for $23.0 million. In addition, in January 2015, in connection with
our public offering, Genzyme exercised its right to purchase
directly from us, in concurrent private placements, 744,566 shares
of common stock at the public offering price resulting in $70.7
million in proceeds to us. The sales of common stock to Genzyme
were not registered as part of the public offering, though they
were consummated simultaneously with the public offering.
Under the terms of the investor agreement, Genzyme also has the
right each January to purchase a number of shares of our common
stock based on the number of shares we issued during the previous
year for compensation-related purposes. Genzyme exercised this
right to purchase directly from us 196,251 shares of our common
stock on January 22, 2015 for $18.3 million. The sale of these
shares to Genzyme was consummated as a private placement.
In each instance, the purchase by Genzyme described above allowed
Genzyme to maintain its ownership level of our common stock of
approximately 12%.
We determined that the deliverables for the programs Genzyme is
currently collaborating with us on include the licenses to our
patisiran and revusiran clinical programs, which licenses were
delivered to Genzyme upon the closing date of the transaction, and
the associated development activities, joint steering committee
participation and information exchange for these clinical programs.
We also determined that, pursuant to the accounting guidance
governing revenue recognition on multiple element arrangements, the
license and associated undelivered development activities, joint
steering committee participation and information exchange
activities did not have standalone value due to the specialized
nature of the services to be provided by us. In addition, while
Genzyme has the ability to grant sublicenses, it cannot sublicense
all or substantially all of its rights under the 2014 Genzyme
collaboration. The uniqueness of our services and the limited
sublicense rights are indicators that standalone value is not
present in the arrangement. Therefore the deliverables are not
separable and, accordingly, the license and undelivered services
were treated as a single unit of accounting. When multiple
deliverables are accounted for as a single unit of accounting, we
base our revenue recognition model on the final deliverable. Under
the 2014 Genzyme collaboration, the last deliverables for patisiran
and revusiran are expected to be completed within approximately six
years.
We determined that the total cash received from Genzyme under the
now superseded 2012 Genzyme agreement reflects consideration for
certain of the performance obligations for ALN-TTR programs
included in the 2014 Genzyme collaboration. Therefore we are
recognizing the $33.5 million of deferred revenue under the 2012
Genzyme agreement on a straight-line basis over the period of
performance of the ALN-TTR programs, which, as noted above, is
currently approximately six years. In addition, during the fourth
quarter of 2014, we recognized as revenue a portion of the $25.0
million milestone payment earned in December 2014 equal to the
percentage of the performance period completed when the milestone
was earned. During the three and six months ended June 30,
2015, we also recognized as revenue a portion of the expense
reimbursement of $9.3 million and $18.1 million, respectively, due
to us under the terms of the 2014 Genzyme collaboration equal to
the percentage of the performance period completed to date. As
future consideration is achieved, including any milestones or
reimbursement for development activities, we will recognize as
revenue a portion of these payments equal to the percentage of the
performance period completed when the milestone or activities have
been satisfied, multiplied by the amount of the payment. We will
recognize the remaining portion of consideration received over the
remaining performance period on a straight-line basis. At
June 30, 2015, deferred revenue under the 2014 Genzyme
collaboration was $20.4 million.
We determined that the opt-in rights that Genzyme has for future
Genetic Medicine programs represent separate and additional
deliverables that Genzyme may receive from us in future periods.
Upon each opt-in by Genzyme, we have determined that each program
and the related activities will represent a single unit of
accounting and, consistent with our accounting policies, we will
base our revenue recognition period on the final deliverable
associated with each future opt-in, if any. |
