Bayer Relationship	6 Months Ended
Jun. 30, 2011
Bayer Relationship [Abstract]
Bayer Relationship	4. Bayer Relationship In April 2009, the Company entered into a Development and Commercialization License Agreement (the “License Agreement”) with Bayer HealthCare AG (“Bayer”). Under the terms of the License Agreement, the Company granted to Bayer a worldwide, exclusive license to develop and commercialize the Company’s mitogen-activated ERK kinase (“MEK”) inhibitors for all indications. In partial consideration for the license, Bayer paid the Company an upfront cash fee of $35 million. The Company is eligible to receive additional cash payments totaling up to $372 million upon achievement of certain development-, regulatory- and sales-based milestones, as well as low double-digit royalties on worldwide sales of products covered under the License Agreement. The Company is responsible for the completion of the Phase 1 and Phase 1/2 studies of BAY 86-9766 (RDEA119) that were underway at the time the license agreement was entered into. Bayer is responsible for reimbursing the Company for third-party development costs associated with the studies, up to a specified amount. During the fourth quarter of 2010, Bayer agreed to reimburse a portion of the personnel costs of employees involved in the development of BAY 86-9766 (RDEA119). The reimbursements will be recognized as the services are performed. The upfront fee, reimbursement of third-party development costs, reimbursement of personnel costs, payments associated with achieving specific milestones and royalties based on product sales, if any, will be accounted for as separate units of accounting. The $35 million upfront payment was originally being recognized on a straight-line basis over a period of approximately 13 months, which was the original period that the Company expected to complete all of its obligations under the License Agreement. In December 2009 and again in September 2010, the Company revised its estimate of this period as a result of design modifications to its ongoing BAY 86-9766 (RDEA119) clinical trials, extending it to a 38-month period ending in June 2012. The deferred balance of the license fee as of the date of the latest change in estimate of approximately $7,738,000 is being recognized over the revised timeline. For the three and six months ended June 30, 2011, the Company recognized revenue of approximately $1,077,000 and $2,153,000, respectively, and $2,426,000 and $4,853,000 for the same periods in 2010, as license fees in the condensed consolidated statement of operations. Participants in a collaborative arrangement are required to report costs incurred and revenues generated from transactions with third parties in each entity’s respective income statement based on whether the participant is considered a principal or an agent. Under the terms of the License Agreement and as it pertains to the completion of the Phase 1 and Phase 1/2 studies, the Company would be considered the principal as the Company is the primary obligor with respect to the third parties, has latitude in establishing price, has discretion in supplier selection and is involved in the determination of product or service specifications. As such, the Company records the gross amount of the reimbursement of third-party development costs for the ongoing clinical trials as revenue and the costs associated with these reimbursements are reflected as a component of research and development expense in the Company’s consolidated statement of operations. In July 2010 and again in May 2011, the ongoing clinical trial cost reimbursement amount was increased to include the effect of study design changes previously agreed to by both parties. For the three and six months ended June 30, 2011, the Company recognized revenue of approximately $967,000 and $1,571,000, respectively, and $1,095,000 and $1,942,000 for the same periods in 2010, as reimbursable research and development costs in the condensed consolidated statement of operations. For the three and six months ended June 30, 2011, the Company recognized $132,000 and $222,000, respectively, in reimbursed personnel costs, as sponsored research in its condensed consolidated statements of operations. The Company did not recognize any revenue for sponsored research for the three and six months ended June 30, 2010. Revenue from milestone payments, will be recognized upon achievement of the milestone only if (1) the milestone payment is non-refundable, (2) substantive effort is involved in achieving the milestone, (3) the amount of the milestone is reasonable in relation to the effort expended or the risk associated with achievement of the milestone, and (4) the milestone is at risk for both parties. If any of these conditions are not met, the Company will defer recognition of the milestone payment and recognize it as revenue over the estimated period of performance under the License Agreement as the related performance obligations are completed. During the fourth quarter of 2010, the Company received confirmation from Bayer that the first milestone for dosing of the first patient in the first Phase 2 study of BAY 86-9766 (RDEA119), had been achieved. The $15,000,000 milestone was recorded as revenue in the fourth quarter of 2010 in accordance with ASU 2010-17 and the milestone payment was received in January 2011. Revenue recognized for royalty payments, if any, will be based upon actual net sales of licensed products in the period the sales occur. Any amounts received by the Company pursuant to the License Agreement prior to satisfying the Company’s revenue recognition criteria are recorded as deferred revenue in the consolidated balance sheet.

4. Bayer Relationship

In April 2009, the Company entered into a Development and Commercialization License Agreement (the “License Agreement”) with Bayer HealthCare AG (“Bayer”). Under the terms of the License Agreement, the Company granted to Bayer a worldwide, exclusive license to develop and commercialize the Company’s mitogen-activated ERK kinase (“MEK”) inhibitors for all indications. In partial consideration for the license, Bayer paid the Company an upfront cash fee of $35 million. The Company is eligible to receive additional cash payments totaling up to $372 million upon achievement of certain development-, regulatory- and sales-based milestones, as well as low double-digit royalties on worldwide sales of products covered under the License Agreement. The Company is responsible for the completion of the Phase 1 and Phase 1/2 studies of BAY 86-9766 (RDEA119) that were underway at the time the license agreement was entered into. Bayer is responsible for reimbursing the Company for third-party development costs associated with the studies, up to a specified amount. During the fourth quarter of 2010, Bayer agreed to reimburse a portion of the personnel costs of employees involved in the development of BAY 86-9766 (RDEA119). The reimbursements will be recognized as the services are performed. The upfront fee, reimbursement of third-party development costs, reimbursement of personnel costs, payments associated with achieving specific milestones and royalties based on product sales, if any, will be accounted for as separate units of accounting.

The $35 million upfront payment was originally being recognized on a straight-line basis over a period of approximately 13 months, which was the original period that the Company expected to complete all of its obligations under the License Agreement. In December 2009 and again in September 2010, the Company revised its estimate of this period as a result of design modifications to its ongoing BAY 86-9766 (RDEA119) clinical trials, extending it to a 38-month period ending in June 2012. The deferred balance of the license fee as of the date of the latest change in estimate of approximately $7,738,000 is being recognized over the revised timeline. For the three and six months ended June 30, 2011, the Company recognized revenue of approximately $1,077,000 and $2,153,000, respectively, and $2,426,000 and $4,853,000 for the same periods in 2010, as license fees in the condensed consolidated statement of operations.

Participants in a collaborative arrangement are required to report costs incurred and revenues generated from transactions with third parties in each entity’s respective income statement based on whether the participant is considered a principal or an agent. Under the terms of the License Agreement and as it pertains to the completion of the Phase 1 and Phase 1/2 studies, the Company would be considered the principal as the Company is the primary obligor with respect to the third parties, has latitude in establishing price, has discretion in supplier selection and is involved in the determination of product or service specifications. As such, the Company records the gross amount of the reimbursement of third-party development costs for the ongoing clinical trials as revenue and the costs associated with these reimbursements are reflected as a component of research and development expense in the Company’s consolidated statement of operations. In July 2010 and again in May 2011, the ongoing clinical trial cost reimbursement amount was increased to include the effect of study design changes previously agreed to by both parties. For the three and six months ended June 30, 2011, the Company recognized revenue of approximately $967,000 and $1,571,000, respectively, and $1,095,000 and $1,942,000 for the same periods in 2010, as reimbursable research and development costs in the condensed consolidated statement of operations.

For the three and six months ended June 30, 2011, the Company recognized $132,000 and $222,000, respectively, in reimbursed personnel costs, as sponsored research in its condensed consolidated statements of operations. The Company did not recognize any revenue for sponsored research for the three and six months ended June 30, 2010.

Revenue from milestone payments, will be recognized upon achievement of the milestone only if (1) the milestone payment is non-refundable, (2) substantive effort is involved in achieving the milestone, (3) the amount of the milestone is reasonable in relation to the effort expended or the risk associated with achievement of the milestone, and (4) the milestone is at risk for both parties. If any of these conditions are not met, the Company will defer recognition of the milestone payment and recognize it as revenue over the estimated period of performance under the License Agreement as the related performance obligations are completed. During the fourth quarter of 2010, the Company received confirmation from Bayer that the first milestone for dosing of the first patient in the first Phase 2 study of BAY 86-9766 (RDEA119), had been achieved. The $15,000,000 milestone was recorded as revenue in the fourth quarter of 2010 in accordance with ASU 2010-17 and the milestone payment was received in January 2011.

Revenue recognized for royalty payments, if any, will be based upon actual net sales of licensed products in the period the sales occur.

Any amounts received by the Company pursuant to the License Agreement prior to satisfying the Company’s revenue recognition criteria are recorded as deferred revenue in the consolidated balance sheet.