Collaboration and Commercial Technology Licensing Agreements

9 Months Ended

Sep. 30, 2011

Collaboration and Commercial Technology Licensing Agreements

Collaboration and Commercial Technology Licensing Agreements

Note 5.  Collaboration and Commercial Technology Licensing Agreements

The Company has entered into a variety of collaboration and specimen transfer agreements relating to its development efforts. The Company recorded collaboration expense of $451,000 and $2.2 million for the three and nine months ended September 30, 2011, respectively, and $351,000 and $1.5 million for the three and nine months ended September 30, 2010, respectively, relating to services provided in connection with these agreements. In addition to these expenses, some of the agreements contain provisions for royalties from inventions resulting from these collaborations. The Company has specified options and rights relating to joint inventions arising out of the collaborations.

The Company is a party to various agreements under which it licenses technology on a non-exclusive basis in the field of human diagnostics. Access to these licenses enables the Company to process its Oncotype DX tests. While certain agreements contain provisions for fixed annual payments, license fees are generally calculated as a percentage of product revenues, with rates that vary by agreement and may be tiered, and payments that may be capped at annual minimum or maximum amounts. The Company recognized costs recorded under these agreements totaling $2.9 million and $7.8 million for the three and nine months ended September 30, 2011, respectively, and $2.7 million and $7.8 million for the three and nine months ended September 30, 2010, respectively, which were included in cost of product revenues. License fees for the nine months ended September 30, 2011 were reduced by an $800,000 payment under a legal settlement related to the abandonment of a patent.

At September 30, 2011, future fixed annual payments, exclusive of royalty payments, relating to the launch and commercialization of the Oncotype DX colon cancer test totaled $1.7 million and are payable as follows:

	Fixed FutureAnnual Payments
	(In thousands)
Payment Due:
January 2012	$	300
January 2013	450
January 2014	450
January 2015	450
Total	$	1,650

These payments are recorded in cost of product revenues as license fees. Expense for payments included in the table above is recorded ratably over the year before the relevant payment is due. If at any time the Company discontinues the sale of the products covered by the agreement, no future annual payments will be payable and the Company will have no further obligation under the applicable agreements.