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License Agreements
9 Months Ended
Sep. 30, 2013
License Agreements

Note 12. License Agreements

The Company has certain agreements with Fresenius under which the Company pays royalties on future INTERCEPT Blood System product sales which utilize certain intellectual property rights held by Fresenius at royalty rates that vary by product: 10% of product sales for the platelet system, 3% of product sales for the plasma system, 5% of product sales for the red blood cell system, and 6.5% on sales of illuminators. During each the three months ended September 30, 2013, and 2012, the Company made separate royalty payments to Fresenius of $0.8 million and $0.7 million, respectively, and payments of $2.3 million and $2.1 million during the nine months ended September 30, 2013 and 2012, respectively. At both September 30, 2013, and December 31, 2012, the Company accrued royalties of $0.7 million and $0.8 million, respectively.

In December 2008, the Company extended its agreement with Fresenius to manufacture finished INTERCEPT disposable kits for the platelet and plasma systems through December 31, 2013. Under the amended manufacturing and supply agreement, the Company pays Fresenius a set price per kit, which is established annually, plus a fixed surcharge per kit. In addition, volume driven manufacturing overhead is to be paid or refunded if actual manufacturing volumes are lower or higher than the estimated production volumes. The Company made payments to Fresenius of $4.2 million and $1.4 million relating to the manufacturing of the Company products during the three months ended September 30, 2013, and 2012, respectively, and $11.8 million and $8.9 million, during the nine months ended September 30, 2013 and 2012, respectively. At September 30, 2013, and December 31, 2012, the Company owed Fresenius $4.3 million and $6.2 million, respectively, for INTERCEPT disposable kits manufactured. In connection with the warranty claims incurred by the Company and remediation of those claims during the year ended December 31, 2012 (see Note 1 in the Notes to Condensed Consolidated Financial Statements under “Guarantee and Indemnification Arrangements” for more detail), the Company filed a warranty claim against Fresenius. Fresenius accepted the warranty claim and has supplied the Company with replacement product or credit notes. As a result, the Company recorded a current asset of $1.8 million on its consolidated balance sheets as of December 31, 2012 representing the full amount of the warranty claim against Fresenius. As of September 30, 2013 the Company no longer has a warranty claim against Fresenius and all unsalable inventory has been returned to Fresenius.