| Celgene Collaboration Agreements | 5. Celgene Collaboration Agreements
To date, our revenue has primarily been generated from our
collaboration agreements with Celgene, or collectively, the
Collaboration Agreements. Celgene is a related party through
ownership of our common stock. In April 2010, we entered into a
collaboration agreement focused on cancer metabolism. The agreement
was amended in October 2011 and July 2014, or collectively the
agreement together with the amendments, the 2010 Agreement. On
April 27, 2015, we entered into a joint worldwide development
and profit share collaboration and license agreement with Celgene,
and our wholly owned subsidiary, Agios International Sarl, entered
into a collaboration and license agreement with Celgene
International II Sarl, or collectively, the AG-881 Agreements, to
establish a worldwide collaboration focused on the development and
commercialization of AG-881 products. On May 17, 2016, we
entered into a master research and collaboration agreement, or the
2016 Agreement.
2016 Agreement
In May 2016, we entered into the 2016 Agreement focused on MIO. In
addition to new programs identified under the 2016 Agreement, both
parties have also agreed that all future development and
commercialization of two remaining cancer metabolism programs
discovered under the 2010 Agreement, including AG-270,
During the research term of the 2016 Agreement, we plan to conduct
research programs focused on discovering compounds that are active
against metabolic targets in the immuno-oncology, or IO, field. The
initial four-year research term will expire on May 17, 2020,
and may be extended for up to two, or in specified cases, up to
four additional one-year terms.
For each program under the 2016 Agreement, we may nominate
compounds that meet specified criteria as development candidates
and, in limited circumstances, Celgene may also nominate compounds
as development candidates for each such program. Celgene may
designate the applicable program for further development following
any such nomination, after which we may conduct, at our expense,
additional pre-clinical and clinical development for such program
through the completion of an initial phase 1 dose escalation
study.
At the end of the research term, Celgene may designate for
continued development up to three research programs for which
development candidates have yet to be nominated, which are referred
to as continuation programs. We may conduct further research and
pre-clinical and clinical development activities on any
continuation program, at our expense, through the completion of an
initial phase 1 dose escalation study.
We granted Celgene the right to obtain exclusive options for
development and commercialization rights for each program that
Celgene has designated for further development, and for each
continuation program. Celgene may exercise each such option
beginning on the designation of a development candidate for such
program (or on the designation of such program as a continuation
program) and ending on the earlier of: (i) the end of a
specified period after we have furnished Celgene with specified
information about the initial phase 1 dose escalation study for
such program, or (ii) January 1, 2030. Research programs
that have applications in the inflammation or autoimmune, or
I&I, field that may result from the 2016 Agreement will also be
subject to the exclusive options described above.
We will retain rights to any program that Celgene does not
designate for further development or as to which it does not
exercise its option.
Under the terms of the 2016 Agreement, following Celgene’s
exercise of its option with respect to a program, the parties will
enter into either a co-development and co-commercialization
agreement if such program is in the IO field, or a license
agreement if such program is in the I&I field. Under each
co-development and co-commercialization agreement, the two parties
will co-develop and co-commercialize licensed products worldwide.
Either we or Celgene will lead development and commercialization of
licensed products for the United States, and Celgene will lead
development and commercialization of licensed products outside of
the United States. Depending on the country, the parties will each
have the right to provide a portion of field-based marketing
activities. Under each license agreement, Celgene will have the
sole right to develop and commercialize licensed products
worldwide.
Co-development and co-commercialization agreements
Under each co-development and co-commercialization agreement
entered into under the 2016 Agreement, the parties will split all
post-option exercise worldwide development costs, subject to
specified exceptions, as well as any profits from any net sales of,
or commercialization losses related to, licensed products in the IO
field. Celgene has the option to designate one program in the IO
field as the 65/35 program, for which Celgene will be the lead
party for the United States and will have a 65% profit or loss
share. For programs in the IO field other than the 65/35 program,
we and Celgene will alternate, on a program-by-program basis, being
the lead party for the United States, with us having the right to
be the lead party for the first such program, and each party will
have a 50% profit or loss share. The lead party for the United
States will book commercial sales of licensed products, if any, in
the United States, and Celgene will book commercial sales of
licensed products, if any, outside of the United States.
License agreements
Under each license agreement under the 2016 Agreement, Celgene will
be responsible for all post-option exercise worldwide development
and associated costs, subject to specified exceptions, as well as
worldwide commercialization and associated costs, for licensed
products.
Financial terms
Under the terms of the 2016 Agreement, we received an initial
upfront payment in the amount of $200.0 million. The 2016
Agreement provides specified rights to extend the research term for
up to two, or in specified cases, up to four, additional years by
paying a $40.0 million per-year extension fee. Celgene will
pay an $8.0 million designation fee for each program that
Celgene designates for further development and for each
continuation program. For each program as to which Celgene
exercises its option to develop and commercialize, subject to
antitrust clearance, Celgene will pay an option exercise fee of at
least $30.0 million for any designated development program and
at least $35.0 million for any continuation programs. In
certain cases, Celgene may exercise its option to develop and
commercialize two early-stage I&I programs, prior to Celgene
designating the program for further development, by paying an
option exercise fee of $10.0 million.
We are eligible to receive the following milestone-based payments
associated with the 2016 Agreement:
Program
Milestone Amount
65/35 program in IO field Specified clinical development event $25.0 million
65/35 program in IO field Specified regulatory milestone events
Up to $183.8 million
50/50 program in IO field Specified clinical development event $20.0 million
50/50 program in IO field Specified regulatory milestone events Up to $148.8 million
I&I field Specified clinical development event $25.0 million
I&I field Specified regulatory milestone events Up to $236.3 million
I&I field Specified commercial milestone events Up to $125.0 million
Additionally, for each licensed program in the I&I field, we
are eligible to receive royalties at tiered, low double-digit
percentage rates on Celgene’s net sales, if any.
Opt-out right
Under the 2016 Agreement, we may elect to opt out of the cost and
profit share under any co-development and co-commercialization
agreement, subject to specified exceptions. Upon opting out,
Celgene will have the sole right to develop, manufacture and
commercialize the applicable licensed products throughout the
world, at its cost, and we will undertake transitional activities
reasonably necessary to transfer the development, manufacture and
commercialization of such licensed products to Celgene, at our
expense. Further, in lieu of the profit or loss sharing described
above, we would be eligible to receive royalties at tiered, low
double-digit percentage rates on Celgene’s net sales, if any,
of the applicable licensed products. However, we would continue to
be eligible to receive the developmental and regulatory
milestone-based payments described above.
Term
The term of the 2016 Agreement commenced on May 17, 2016 and,
if not terminated earlier, will expire upon the later of the
last-to-expire of the research term and all option exercise
periods, or, if an option is exercised by Celgene for one or more
programs in the collaboration, upon the termination or expiration
of the last-to-exist co-development and co-commercialization
agreement or license agreement, as applicable, for any such
program.
Termination
Subject to specified exceptions, Celgene may terminate the 2016
Agreement in its entirety for any reason by providing us with prior
written notice if there are no active co-development and
co-commercialization agreements or license agreements in place or
on a program-by-program basis if there are no active co-development
and co-commercialization agreements or license agreements in place
for the terminated program(s). Either party may terminate the 2016
Agreement for the insolvency of the other party. On a
program-by-program basis, prior to the exercise of an option,
either party may terminate the 2016 Agreement either in its
entirety or with respect to one or more programs on prior written
notice to the other party in the case of an uncured material breach
by the other party that frustrates the fundamental purpose of the
2016 Agreement. Following the exercise of an option for a program,
either party may terminate the 2016 Agreement with respect to such
program if such party terminates the co-development and
co-commercialization agreement or license agreement for such
program for an uncured material breach by the other party that
frustrates the fundamental purpose of such agreement. Either party
may terminate a co-development and co-commercialization agreement
or a license agreement upon the bankruptcy or insolvency of the
other party. Either party also has the right to terminate the
co-development and co-commercialization agreement or license
agreement if the other party or any of their affiliates challenges
the validity, scope or enforceability of or otherwise opposes, any
patent included within the intellectual property rights licensed to
the other party under such agreement.
Exclusivity
While any of Celgene’s options remain available under the
2016 Agreement, subject to specified exceptions, we may not
directly or indirectly develop, manufacture or commercialize,
outside of the 2016 Agreement, any therapeutic modality in the IO
or I&I field with specified activity against a metabolic
target.
During the term of each co-development and co-commercialization
agreement and license agreement, subject to specified exceptions,
neither we nor Celgene may directly or indirectly develop,
manufacture or commercialize outside of such agreement any
therapeutic modality in any field with specified activity against
the metabolic target that is the focus of the program licensed
under such agreement.
AG-120 Letter Agreement
On May 17, 2016, we entered into a letter agreement with
Celgene regarding ivosidenib, or the AG-120 Letter Agreement. Under
the AG-120 Letter Agreement, the parties agreed to terminate the
2010 Agreement, effective as of August 15, 2016, as to the
program directed to the isocitrate dehydrogenase 1, or IDH1,
target, for which ivosidenib is the lead development candidate.
Under the 2010 Agreement, Celgene had held development and
commercialization rights to the IDH1 program outside of the United
States, and we held such rights inside the United States. As a
result of the termination, we obtained global rights to ivosidenib
and the IDH1 program. Neither party will have any further financial
obligation, including royalties or milestone payments, to the other
concerning ivosidenib or the IDH1 program. Under the terms of the
termination, the parties have also agreed to conduct specified
transitional activities in connection with the termination. In
addition, pursuant to the AG-120 Letter Agreement, the parties are
released from their exclusivity obligations under the 2010
Agreement with respect to the IDH1 program. The termination does
not affect the AG-881 Agreements, which are directed to both the
IDH1 target and the isocitrate dehydrogenase 2, or IDH2,
target.
AG-881 Agreements
On April 27, 2015, we entered into the AG-881 Agreements. The
AG-881 Agreements establish a joint worldwide collaboration focused
on the development and commercialization of AG-881 products. Under
the terms of the AG-881 Agreements, we received an initial upfront
payment of $10.0 million in May 2015 and are eligible to
receive milestone-based payments described below. The parties will
split all worldwide development costs equally, subject to specified
exceptions, as well as any profits from any net sales of, or
commercialization losses related to, licensed AG-881 products.
We are eligible to receive up to $70.0 million in potential
milestone payments related to AG-881 under the AG-881 Agreements.
The potential milestone payments are comprised of: (i) a
$15.0 million milestone payment for filing of a first NDA in a
major market and (ii) up to $55.0 million in milestone
payments upon achievement of specified regulatory milestone events.
We may also receive royalties at tiered, low- to mid-teen
percentage rates on net sales if we elect not to participate in the
development and commercialization of AG-881.
2010 Agreement
In April 2010, we entered into the 2010 Agreement, which was
amended in October 2011 and July 2014. The goal of the
collaboration was to discover, develop and commercialize
disease-altering therapies in oncology based on our cancer
metabolism research platform. We initially led discovery,
preclinical and early clinical development for all cancer
metabolism programs under the collaboration. The discovery phase of
the 2010 Agreement expired in April 2016.
Upon agreement to terminate the 2010 Agreement, effective as of
August 15, 2016, as to the program directed to the IDH1
target, for which ivosidenib is the lead development candidate, the
sole program remaining under the 2010 Agreement is
IDHIFA ® ®
Under the remaining terms of the 2010 Agreement, we are eligible to
receive up to $95.0 million in potential milestone payments
for the IDHIFA ®
Under the 2010 Agreement, we may also receive royalties at tiered,
low-double digit to mid-teen percentage rates on net sales and have
the option to participate in the development and commercialization
of certain products in the United States. Assuming all other
revenue recognition criteria are met, royalty payments will be
recognized as revenue in the period in which they are earned. To
date, we have not earned any royalty payments under the 2010
Agreement.
Unless terminated earlier by either party, the term of the 2010
Agreement will continue until the expiration of all royalty terms
with respect to IDHIFA ®
Accounting analysis and revenue recognition –
collaboration revenue
April 2015 – May 2016
The AG-881 Agreements were determined to be a modification of the
2010 Agreement due to the AG-881 Agreements including a compound
originally identified within the 2010 Agreement. As a result of the
modification, under the provisions of ASC 605-25, Multiple
Element Arrangements,
• Licenses for the AG-881
program
• Four separate on-going development
services for which we determined we are acting as the principal of
all development activities (each of which is a separate unit of
accounting) Revenue Recognition –
Principal Agent Considerations
• Four separate on-going development
services for which we determined we are not acting as the principal
of all development activities (each of which is a separate unit of
accounting)
•
On-going research and development
• Committee participations under the
2010 Agreement and AG-881 Agreements
As a result of Celgene assuming the primary development
responsibilities for IDHIFA ®
Beginning in the third quarter of 2015, we initiated a phase 1b
frontline combination clinical trial of IDHIFA ® ® ®
During the three months ended March 31, 2016, we incurred an
additional $3.3 million in reimbursable development expenses
related to the ivosidenib and AG-881 programs that were not
contemplated as of the April 2015 modification. The amounts are
recorded as a reduction of research and development costs of each
respective program.
Post-May 2016
The 2016 Agreement was determined to be a modification of the 2010
Agreement and the AG-881 Agreements because it includes compounds
originally identified within the 2010 Agreement. As a result of the
modification, we identified the undelivered elements under the
Collaboration Agreements and determined the best estimate of
selling price for the undelivered elements as of the modification
date. We then allocated the total arrangement consideration, which
included the remaining deferred revenue balance at the modification
date, the upfront payment of $200.0 million under the 2016
Agreement and other consideration under the Collaboration
Agreements that were deemed to be determinable at the modification
date, to each unit of accounting relative to its best estimate of
selling price. During the three months ended March 31, 2017,
we received $8.0 million from Celgene upon the designation of
AG-270,
• Three separate development
services for which we determined we are acting as the principal for
all development activities (each of which is a separate unit of
accounting)
•
Three separate on-going development services for
which we determined we are not acting as the principal for all
development activities (each of which is a separate unit of
accounting)
• On-going research and
development
• Committee participations under the
2010 Agreement, AG-881 Agreements and 2016 Agreement
• Additional development activities
for which we determined we are acting as the principal of all
development activities
The total estimated arrangement consideration, as well as the
expected timing of revenue recognition, is adjusted based on
changes in estimated arrangement consideration as a result of
changes in estimates for on-going development services. The
allocable consideration will increase as we perform certain
services for which we are eligible to receive additional
consideration. These amounts will be recognized on a cumulative
catch-up basis for any in-process units of accounting or
immediately for any fully delivered units of accounting. The
estimated arrangement consideration may decrease if we receive less
reimbursement than initially estimated.
During the three months ended March 31, 2017 and 2016, we
recognized a total of $10.5 million and $31.3 million,
respectively, as collaboration revenue and recognized $2.8 million
and $8.8 million, respectively, as a reduction of research and
development expenses. As of March 31, 2017 and
December 31, 2016, we recorded a collaboration receivable of
$11.3 million and $4.9 million, respectively, related to
reimbursable development costs.
In determining the current and noncurrent classification of
deferred revenue, we consider the total consideration expected to
be earned in the next twelve months for services to be performed
under certain units of accounting, and the estimated proportional
performance and timing of delivery of certain deliverables to
determine the deferred revenue balance that will remain twelve
months from the balance sheet date.
Accounting analysis and revenue recognition – milestone
revenue
We concluded that certain milestone payments that may be received
under the Collaboration Agreements are substantive. Factors
considered in the evaluation of the milestones included an
assessment of whether: (i) the consideration is commensurate
with either our performance to achieve the milestone or the
enhancement of the value of the delivered item(s) as a result of a
specific outcome resulting from our performance to achieve the
milestone, (ii) the consideration relates solely to past
performance, and (iii) the consideration is reasonable
relative to all of the deliverables and payment terms within the
Collaboration Agreements. Revenue from substantive milestones is
recognized as revenue in its entirety upon successful
accomplishment of the milestones, assuming all other revenue
recognition criteria are met. Milestones not deemed substantive,
are allocated to each unit of accounting, discussed above, relative
to our best estimate of selling price for each unit of accounting
and recognized on a proportional performance basis or ratably over
the expected period of performance.
In January 2016, a substantive clinical development milestone
related to the IDHIFA ® AG-270, |
