Other License Agreements And Acquired Product Rights

9 Months Ended

Sep. 30, 2011

Other License Agreements And Acquired Product Rights: [Abstract]

Other License Agreements And Acquired Product Rights:

4. Other License Agreements and Acquired Product Rights:

Kunwha License Agreement

In May 2010, the Company entered into a License and Supply Agreement (the "Kunwha License Agreement") with Kunwha Pharmaceutical Co., Ltd., ("Kunwha") a corporation organized under the laws of the Republic of Korea, to develop, manufacture, sell and distribute the Company's BEMA^® Fentanyl product in the Republic of Korea. The Kunwha License Agreement is for a term beginning on May 26, 2010 until the later of the date of expiration of PCT/US07/16634 (WO 2008/011194) filed in South Korea as 10-2009-7003532 or July 23, 2027. Either the Company or Kunwha may terminate the Kunwha License Agreement prior to the expiration of the term: (i) upon or after the cessation of operations of the other party or the bankruptcy, insolvency, dissolution or winding up of the other party (other than dissolution or winding up for the purposes or reconstruction or amalgamation); or (ii) upon or after the breach of any material provision of Kunwha License Agreement by the other party if the breaching party has not cured such breach within a period of time after written notice thereof by the non-breaching party. In addition, both the Company and Kunwha have the right to terminate the Kunwha License Agreement on advanced written notice upon the occurrence of certain specified events such as failure to pay required royalties or the loss, revocation, suspension, termination or expiration of approvals to engage in the activities covered by the Kunwha License Agreement.

Under the terms of the Kunwha License Agreement, Kunwha was granted exclusive licensing rights for BEMA^® Fentanyl in the Republic of Korea, while the Company will retain all other licensing rights to BEMA^® Fentanyl not previously granted to third parties. Kunwha paid to the Company an upfront payment of $0.3 million in May 2010 (net of taxes the company received approximately $0.25 million) and will be responsible to make certain milestone payments which could aggregate up to $1.3 million (net of taxes the company receives approximately $1.1 million). In addition, Kunwha will pay royalties to the Company based on Net Sales (as defined in the Kunwha License Agreement) and will purchase all supplies of BEMA^® Fentanyl from the Company.

Kunwha will be responsible for payment of all costs associated with BEMA^® Fentanyl in the Republic of Korea. Kunwha and the Company will own any Improvements (as defined in the Kunwha License Agreement) made exclusively by such party with respect to the Licensed Product and will jointly own any Improvements that are the product of collaboration.

The upfront payment from Kunwha $0.3 million (net of taxes, approximately $0.25 million) received in June 2010 was recorded as contract revenue upon receipt.

TTY License and Supply Agreement

On October 7, 2010, the Company announced a license and supply agreement (the "TTY Agreement") with TTY Biopharm Ltd. ("TTY") for the exclusive rights to develop and commercialize BEMA^® Fentanyl (marketed as ONSOLIS^® in the U.S.) in the Republic of China, Taiwan. The TTY Agreement results in potential milestone payments to the Company of up to $1.3 million, which includes an already received upfront payment of $0.3 million that was recorded as contract revenue upon receipt. In addition, the Company will receive an ongoing royalty based on net sales. TTY will be responsible for the regulatory filing of BEMA^® Fentanyl in Taiwan as well as future commercialization in that territory. The term of the TTY Agreement is for the period from October 4, 2010 until the date fifteen (15) years after first commercial sale unless the agreement is extended in writing or earlier terminated as provided for in the agreement. Either the Company or TTY may terminate the TTY Agreement prior to the expiration of the term: (i) upon or after the cessation of operations of the other party or the bankruptcy, insolvency, dissolution or winding up of the other party (other than dissolution or winding up for the purposes or reconstruction or amalgamation); or (ii) upon or after the breach of any material provision of TTY Agreement by the other party if the breaching party has not cured such breach within a period of time after written notice thereof by the non-breaching party. In addition, TTY may terminate the TTY Agreement on advanced written notice to the Company, and both the Company and TTY have the right to terminate the TTY Agreement on advanced written notice upon the occurrence of certain specified events such as failure to pay required royalties or the loss, revocation, suspension, termination or expiration of approvals to engage in the activities covered by the TTY Agreement.

Agreement with QLT to Purchase Non-US BEMA^® Rights

The Company's August 2006 agreement with QLT USA, Inc. ("QLT") to purchase the non-US rights to the BEMA^® delivery technology required a payment by the Company of $1.0 million to QLT upon the approval in the first BEMA-related product in a non-US country. This payment, included in acquired product rights in the accompanying condensed consolidated balance sheet, was triggered by the Company's announcement on May 10, 2010 of the approval of a New Drug Submission by Health Canada, the regulatory authority in Canada, for ONSOLIS^®. The Company made a payment to QLT of $0.75 million in June 2010 with the remaining $0.25 million expected to be paid in 2011 upon the complete transfer of all required patent documentation.

License Amendment with CDC

On May 12, 2011, the Company entered into an Amendment to Clinical Development and License Agreement (the "CDLA Amendment") by and among CDC V, LLC ("CDC"), NB Athyrium LLC ("Athyrium"). The Company is a party to a Clinical Development and License Agreement, dated as of July 14, 2005 (as amended, the "CDLA"), with a predecessor to CDC pursuant to which CDC provided funding for the development of the Company's ONSOLIS^® product. Athyrium holds certain rights, acquired from CDC, to receive royalties on sales of ONSOLIS^®.

Under the terms of the CDLA Amendment, among other matters, the parties agreed to increase the royalty rate to be received by CDC/Athyrium retroactively to the initial launch date of ONSOLIS^® and, accordingly, the Company has recorded $0.3 million as additional cost of product royalties for the nine months ended September 30, 2011. In addition, certain terms of the CLDA were amended and restated to clarify that royalty payments by the Company under the CDLA will be calculated based on Meda's sales of ONSOLIS^®, whereas previous Company royalty payments to CDC were calculated based on Company sales of ONSOLIS^® to Meda.

The difference between these two calculations resulted in a $1.1 million overpayment by the Company which was recorded as a prepayment. As a result, the Company did not pay any of the 2011 quarterly royalty payments due to CDC/Athyrium and will not be required to pay another royalty payment until the December 31, 2011 royalty calculation, which is due during the first quarter of 2012.