| COLLABORATION AGREEMENTS | 2. COLLABORATION AGREEMENTS
The following table summarizes our total consolidated net revenues
from collaborators, for the periods indicated, in thousands:
Three Months Ended September 30,
Nine Months Ended September 30,
Description 2016 2015 2016 2015
Sanofi Genzyme $ 7,387 $ 3,008 $ 17,189 $ 7,435
The Medicines Company 2,690 2,752 8,615 7,383
Takeda
—
—
— 8,867
Monsanto
—
—
— 5,621
Other 3,574 564 3,901 4,240
Total net revenues from collaborators $ 13,651 $ 6,324 $ 29,705 $ 33,546
Product Alliances
Sanofi Genzyme Collaboration
In January 2014, we entered into a global, strategic collaboration
with Sanofi Genzyme to discover, develop and commercialize RNAi
therapeutics as Genetic Medicines to treat orphan diseases. The
2014 Sanofi Genzyme collaboration superseded and replaced the
previous collaboration between us and Sanofi Genzyme entered into
in October 2012 to develop and commercialize RNAi therapeutics
targeting transthyretin, or TTR, for the treatment of hereditary
ATTR amyloidosis, including patisiran and revusiran, in Japan and
the Asia-Pacific region.
2012 Sanofi Genzyme Agreement
Under the 2012 Sanofi Genzyme agreement, Sanofi Genzyme paid us an
upfront cash payment of $22.5 million. We were also entitled to
receive certain milestone payments under the 2012 Sanofi 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 Sanofi Genzyme agreement, the parties agreed to
collaborate in the development and commercialization of licensed
products, with Sanofi Genzyme assuming primary responsibility in
the Sanofi 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 Sanofi 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
Sanofi Genzyme had the ability to grant sublicenses, it could not
sublicense all or substantially all of its rights under the 2012
Sanofi 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 Sanofi
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
Sanofi Genzyme agreement.
2014 Sanofi Genzyme Collaboration
In January 2014, we entered into the 2014 Sanofi Genzyme
collaboration. As noted above, the 2014 Sanofi Genzyme
collaboration superseded and replaced the 2012 Sanofi Genzyme
agreement.
The 2014 Sanofi 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 Sanofi
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 Sanofi Genzyme will
obtain exclusive rights to develop and commercialize collaboration
products in the rest of the world, referred to as the Sanofi
Genzyme Territory, together with certain broader
co-development/co-promote or worldwide rights for certain products.
Sanofi 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
Sanofi Genzyme’s opt-in and maintain development and
commercialization control after Sanofi 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 Sanofi Genzyme
Territory, Sanofi Genzyme has the right to either
(i) co-develop and co-promote fitusiran 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. Sanofi Genzyme may exercise this
selection right upon the completion of Human POP for both the
fitusiran and ALN-AS1 programs. Finally, Sanofi 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 Sanofi 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 Sanofi Genzyme collaboration, Sanofi Genzyme’s
specific license rights and the programs into which Sanofi Genzyme
has opted include the following:
•
Regional license terms and programs — Upon
opt-in, we will retain product rights in the Alnylam Territory,
while Sanofi Genzyme will obtain exclusive rights to develop and
commercialize the product in the Sanofi Genzyme Territory. Sanofi
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 Sanofi Genzyme exercises an option will be shared between
Sanofi Genzyme and us, with Sanofi Genzyme responsible for twenty
percent of the global development costs. Upon the effective date of
the 2014 Sanofi Genzyme collaboration, Sanofi 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
Sanofi Genzyme agreement. In September 2015, Sanofi Genzyme elected
to opt into our fitusiran clinical development program for the
treatment of hemophilia and other rare bleeding disorders under the
regional license terms. Cost-sharing for the fitusiran program
began in January 2016 under the regional license terms. As
described above, Sanofi Genzyme retains its future opt-in
• Co-development/co-promote license
terms and programs — Upon opt-in, we will retain product
rights in the Alnylam Territory, while Sanofi Genzyme will obtain
exclusive rights to develop and commercialize the product in the
Sanofi Genzyme Territory, and will co-promote the product in the
Alnylam Territory. Upon the effective date of the 2014 Sanofi
Genzyme collaboration, Sanofi Genzyme expanded its regional rights
for revusiran, an investigational RNAi therapeutic that was
previously being advanced in a Phase 3 clinical trial, which were
originally granted under the 2012 Sanofi Genzyme agreement, to
include a co-development/co-promote license and collaboration. In
October 2016, upon the recommendation of the revusiran Phase 3
study DMC to suspend dosing, we decided to discontinue development
of revusiran. As noted above, Sanofi Genzyme also has the right to
elect a co-development/co-promote license and collaboration for
fitusiran if it does not elect a global license and collaboration
for ALN-AS1. Development costs for co-development/co-promote
products, once Sanofi Genzyme exercises an option, will be shared
between Sanofi Genzyme and us, with Sanofi Genzyme responsible for
fifty percent of the global development costs. Sanofi Genzyme will
be required to make payments totaling up to $75.0 million in
development milestones for fitusiran, if selected, and, prior to
the discontinuation of the revusiran program, was required to make
certain milestone payments for revusiran. 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. Sanofi 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 Sanofi Genzyme Territory for such
co-development/co-promote product by Sanofi 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 and programs
— Upon opt-in, Sanofi Genzyme will obtain a worldwide license
to develop and commercialize the product. Sanofi Genzyme can elect
a global license for ALN-AS1, if it does not elect a
co-development/co-promote license for fitusiran, as described
above. Sanofi Genzyme also has 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 Sanofi Genzyme
collaboration. Sanofi Genzyme shall be responsible for one hundred
percent of global development costs. Sanofi 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. Sanofi 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 Sanofi 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 Sanofi Genzyme under the 2014 Sanofi
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 Sanofi Genzyme’s opt-in and also leading
development and commercialization for all programs in the Alnylam
Territory after Sanofi Genzyme’s opt-in. If Sanofi 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 Sanofi 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 Sanofi Genzyme intend to enter into
supply agreements to provide for supply of collaboration products
to Sanofi Genzyme for clinical studies, and, at Sanofi
Genzyme’s request, commercial sales. Sanofi Genzyme also has
certain rights to manufacture collaboration products. Additionally,
Sanofi 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 Sanofi Genzyme.
The master agreement (including the license terms appended thereto)
contains certain termination provisions, including for material
breach by the other party. Unless terminated earlier pursuant to
its terms, the master agreement will terminate upon the last to
expire of any of the option periods under the master agreement or
the license terms appended thereto.
Upon the closing of the equity transaction in February 2014, we
sold to Sanofi Genzyme 8,766,338 shares of our common stock and
Sanofi Genzyme paid $700.0 million in aggregate cash consideration
to us. As a condition to the closing of the equity transaction,
Sanofi 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 Sanofi Genzyme
collaboration and the date on which Sanofi Genzyme and its
affiliates cease to beneficially own at least 5% of our outstanding
common stock, Sanofi 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, Sanofi 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
Sanofi Genzyme owns less than 7.5% of our outstanding common stock,
subject to Sanofi 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
Sanofi Genzyme at the closing of the equity transaction, we will
offer Sanofi 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, Sanofi 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 Sanofi 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, Sanofi 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), Sanofi 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, Sanofi
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 Sanofi Genzyme immediately
after the closing of the stock purchase, subject to certain
conditions. In addition, following the lock-up period, subject to
certain conditions, Sanofi 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 Sanofi Genzyme owns
less than 7.5% of our outstanding common stock, subject to Sanofi
Genzyme’s limited right to maintain its ownership percentage
as described herein, in connection with new issuances of common
stock, subject to certain exceptions, Sanofi 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 Sanofi Genzyme is not entitled to a right of first offer with
respect to a new issuance, Sanofi 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 Sanofi Genzyme and its affiliates acquire at
least 20% or more of our outstanding common stock, Sanofi Genzyme
will be entitled to appoint one individual to our board of
directors. Sanofi Genzyme will also be entitled to certain
information rights, including with respect to financial information
in the event Sanofi 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 Sanofi 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 Sanofi 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 at September
30, 2016, prior to the discontinuation of the revusiran program,
was approximately six years, as described below, related to the
license to our patisiran and revusiran clinical programs under the
2014 Sanofi Genzyme collaboration. 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
Sanofi 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., in March 2014, Sanofi 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, Sanofi 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 Sanofi
Genzyme were not registered as part of the public offering, though
they were consummated simultaneously with the public offering.
Sanofi Genzyme also has the right at the beginning of each year 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. Sanofi Genzyme exercised this right
to purchase directly from us 196,251 shares of our common stock on
January 22, 2015 for $18.3 million and 205,030 shares of our
common stock on February 1, 2016 for $14.3 million. The sales
of these shares to Sanofi Genzyme were consummated as private
placements.
In each instance, the purchase by Sanofi Genzyme described above
allowed Sanofi Genzyme to maintain its ownership level of our
common stock of approximately 12%.
We determined that the deliverables for the programs on which
Sanofi Genzyme was collaborating with us upon initiation of the
2014 collaboration included the licenses to our patisiran and
revusiran clinical programs, which licenses were delivered to
Sanofi 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
Sanofi Genzyme has the ability to grant sublicenses, it cannot
sublicense all or substantially all of its rights under the 2014
Sanofi 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 Sanofi Genzyme collaboration, the last deliverables for
patisiran and revusiran were expected, at September 30, 2016, prior
to the discontinuation of the revusiran program, to be completed
within approximately six years from the closing date of the
transaction and the last deliverables for fitusiran are expected to
be completed within approximately five years from the date Sanofi
Genzyme elected to opt into our fitusiran clinical development
program under the regional license terms. We determined that the
total cash received from Sanofi Genzyme under the now superseded
2012 Sanofi Genzyme agreement reflects consideration for certain of
the performance obligations for ALN-TTR programs included in the
2014 Sanofi Genzyme collaboration. Therefore we are recognizing the
$33.5 million of deferred revenue under the 2012 Sanofi Genzyme
agreement on a straight-line basis over the period of performance
of the ALN-TTR programs, which, as noted above, at September 30,
2016, prior to the discontinuation of the revusiran program, was
approximately six years. As consideration is achieved, including
any milestones or reimbursement for development activities, we
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 recognize the remaining portion of consideration
received over the remaining performance period on a straight-line
basis.
The following table presents information related to the 2014 Sanofi
Genzyme collaboration, in thousands:
Excess of fair value of our common stock issued to Sanofi Genzyme
in February 2014 $ (51,450 )
Deferred revenue remaining under the 2012 Sanofi Genzyme agreement
upon execution of the 2014 Sanofi Genzyme collaboration 33,500
Milestone payment received:
Year-ended December 31, 2014 25,000
Expense reimbursement from Sanofi Genzyme:
Year-ended December 31, 2015 33,949
Quarter-ended March 31, 2016 8,801
Quarter-ended June 30, 2016 9,943
Quarter-ended September 30, 2016 12,846
Total consideration at September 30, 2016 $ 72,589
Cumulative revenue recognized at September 30, 2016 $ 28,563
Deferred revenue at September 30, 2016 $ 44,026
We determined that the opt-in rights that Sanofi Genzyme has for
future Genetic Medicine programs represent separate and additional
deliverables that Sanofi Genzyme may receive from us in future
periods. Upon each opt-in by Sanofi 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.
Our estimate regarding the performance period under the 2014 Sanofi
Genzyme collaboration related to the license to our patisiran and
revusiran clinical programs was adjusted in October 2016 due to our
decision to discontinue development of revusiran. As a result, with
respect to these programs, we currently expect the last
deliverables to be completed within approximately five years from
the closing date of the transaction as compared to an expectation
at September 30, 2016 of approximately six years. Beginning in the
fourth quarter of 2016, we expect to recognize the remaining
deferred revenue over the remaining performance period on a
straight-line basis due to the adjustment to the performance period
made on a prospective basis in October 2016. |
