XML 98 R10.htm IDEA: XBRL DOCUMENT v2.4.0.8
Collaborative Research and Development Agreements
12 Months Ended
Dec. 31, 2013
Collaborative Research and Development Agreements [Abstract]  
Collaborative Research and Development Agreements
Collaborative Research and Development Agreements
Shell and Raízen
In November 2006, the Company entered into a collaborative research agreement and a license agreement with Shell to develop biocatalysts and associated processes that use such biocatalysts. In November 2007, the Company entered into a new and expanded five-year collaborative research agreement (“Shell Research Agreement”) and a license agreement (the “Shell License Agreement”) with Shell.
In September 2012, the Company entered into an agreement with Shell (the “New Shell Agreement”) which among other things, terminated the Shell Research Agreement effective as of August 31, 2012, except for certain provisions of the Shell Research Agreement which will survive such termination, including provisions regarding intellectual property rights, patent prosecution and maintenance, confidentiality and indemnification. The New Shell Agreement required Shell to pay the Company approximately $7,500,000 as full, complete and final satisfaction of amounts that Shell may have owed the Company under the Shell Research Agreement with respect to (i) FTEs assigned to the Shell Research Agreement and (ii) milestones achieved or achievable by us under the Shell Research Agreement. The $7,500,000 was recognized as revenue during the third quarter of 2012 when all of the Company's obligations were fulfilled under the New Shell Agreement and was collected during the fourth quarter of 2012.
Beginning September 1, 2012, the Company has no further obligations to Shell under the Shell Research Agreement to provide any FTEs to perform work under or after the collaboration and Shell has no future obligations to us under the Shell Research Agreement to provide funding for FTEs to perform work under or after the collaboration. The Company remains eligible to receive a one-time $3,000,000 payment from Shell under the Shell Research Agreement upon the first sale by Shell of a product in the field of converting cellulosic biomass into fermentable sugars in Brazil, or in the fields of converting fermentable sugars derived from biomass into liquid fuel or liquid fuel additives or into lubricants.
Under the New Shell Agreement, Shell granted the Company royalty-bearing, non-exclusive rights and licenses to develop, manufacture, use and sell enzymes and microbes in the field of converting cellulosic biomass into fermentable sugars on a worldwide basis, except for Brazil, where such sugars are converted into liquid fuels, fuel additives or lubricants (the “Field of Use”). Raízen holds the exclusive rights to use the Company's enzymes and microbes for converting cellulosic biomass into fermentable sugars in Brazil, where such sugars are converted into ethanol. Following the date on which the Company's biocatalysts are used to produce sugars used in the Field of Use sufficient to produce 30.0 million gallons of liquid fuel, the Company will be required to pay Shell a royalty on the Company's sales to third parties of the Company's enzymes and microbes in the Field of Use, equal to a low single-digit percentage of net sales and the Company will also be required to pay Shell a royalty on the Company's use of biocatalysts in the Field of Use, equal to a low single-digit percentage of its applicable net sales of such enzymes or microbes. Shell is also entitled to discounted pricing under the New Shell Agreement for biocatalysts purchased from the Company by Shell for use in the Field of Use, but the Company is under no obligation to sell such biocatalysts to Shell.
Under the New Shell Agreement, the Company also granted to Shell a non-exclusive, royalty-free license to manufacture, use and import, solely for the use of Shell and its affiliates, (i) enzymes developed by the Company during the ten year period following August 31, 2012 outside of the Shell Research Agreement for use in the Field of Use and (ii) improvements to any microbe developed by the Company during the ten year period following August 31, 2012 outside of the Shell Research Agreement that is derivative of an identified microbe for use in the Field of Use. Shell remains subject to existing royalty obligations to us for future sales of products covered by the intellectual property and technology that remain exclusively licensed to Shell under the License Agreement.
Additionally, with respect to each invention relating to technology or materials regarding novel liquid fuel compounds, liquid fuel additives or lubricants, Shell will continue to be required to work exclusively with the Company, for a period of three years after the first nonprovisional patent application filing for such invention, to identify biological methods of synthesis of the compound(s) that are claimed, or whose use as a liquid fuel compound, additive or lubricant, is claimed, in such patent filing.
The New Shell Agreement has a term that commences on August 31, 2012 and continues until the later of August 31, 2032 or the date of the last to expire patent rights included in the Company's collaboration that claim a biocatalyst or a microbe for use in the Field of Use.
In June 2011, Shell completed the transfer of all of its equity interests in us to Raízen, Shell’s joint venture with Cosan S.A. Indústria e Comércio, (“Cosan”) in Brazil. As a result, Shell is no longer considered a related party. Notwithstanding the above, Shell did not transfer the Shell Research Agreement to Raízen. Additionally, in September 2011, the Company entered into a joint development agreement directly with Raízen. Work under this joint development agreement was completed in 2012 and the Company does not expect this project to continue.
Merck Research and Development Collaboration
On February 1, 2012, the Company entered into a 5 year Sitagliptin Catalyst Supply Agreement ("Sitagliptin Agreement") whereby Merck Sharp and Dohme Corp. ("Merck") may obtain commercial scale substance for their use in the manufacture of one of its products, Januvia®. Merck may extend the term of the Sitagliptin Agreement for an additional five years at its sole discretion.
The Sitagliptin Agreement calls for Merck to pay an annual license fee for the rights to the Sitagliptin technology each year for the term of the Sitagliptin Agreement. As of December 31, 2013, the Company has a deferred revenue balance of $696,000 from Merck related to the license fee. The license fee is being recognized as collaborative research and development revenue ratably over the five year term of the Sitagliptin Agreement. During the twelve months ended December 31, 2013, the Company recognized $1,804,000 of the license fee as collaborative research and development revenue and $1,004,000 in product revenue. Pursuant to the Sitagliptin Agreement, Merck may purchase substance from the Company for a fee based on contractually stated prices. No revenue was recognized under the Sitagliptin Agreement during the twelve months ended December 31, 2012.
Arch Manufacturing Collaboration
From 2006 through November 2012, Arch of Mumbai, India manufactured substantially all of the Company's commercialized intermediates and APIs for sale to generic and innovator pharmaceutical manufacturers. Prior to November 2012, Arch produced atorva-family API's and intermediates for the Company and it sold these directly to end customers primarily in India. In November 2012, the Company entered into a new commercial arrangement with Arch (the "New Arch Enzyme Supply Agreement") whereby it will supply Arch with enzymes for use in the manufacture of atorva family products and Arch will market these products directly to end customers. During 2013, Arch was unable to competitively supply these products to end customers, resulting in a significant decrease in revenues. For the twelve months ended December 31, 2013, the Company recognized $2,134,000 in product revenue for the sale of enzyme inventory to Arch pursuant to the New Arch Enzyme Supply Agreement. During 2013, the Company recorded an allowance for bad debt of approximately $387,000 due to a write-off of an accounts receivable from Arch.