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Collaborative Arrangements
9 Months Ended
Sep. 30, 2014
Research and Development [Abstract]  
Collaborative Arrangements
Collaborative Arrangements
GSK Platform Technology Transfer, Collaboration and License Agreement
In July 2014, Codexis entered into a platform technology license agreement (the "License Agreement") with GlaxoSmithKline ("GSK"). Under the terms of the License Agreement, Codexis granted GSK a license to use its proprietary CodeEvolver® protein engineering platform technology.
We received a $6.0 million up-front licensing fee and we are eligible to receive contingent payments up to $19.0 million, of which $11.5 million are considered milestone payments, over the next three years subject to satisfactory completion of technology transfer milestones. We also have the potential to receive numerous additional contingent payments that range from $5.75 million to $38.5 million per project based on GSK's successful application of the licensed technology. The contingent payments are not deemed substantive milestones due to the fact that the achievement of the event underlying the payment predominantly relates to GSK's performance of future development and commercialization activities.
For up to three years following the end of the three-year period during which we will transfer our CodeEvolver® Platform Technology to GSK, GSK can exercise an option, upon payment of certain option fees, that would extend GSK’s license to include certain improvements to the CodeEvolver® Platform Technology that arise during such period. In addition, we are eligible to receive royalties based on net sales, if any, of a limited set of products developed by GSK using Codexis' CodeEvolver® protein engineering platform technology.
The term of the License Agreement continues, unless earlier terminated, until the expiration of all payment obligations under the License Agreement. At any time following the completion of the first technology transfer stage, GSK can terminate the License Agreement by providing 90 days written notice to us. If GSK exercises this termination right during the three-year technology transfer period, GSK will make a one-time termination payment to us.
Under the License Agreement, the significant deliverables were determined to be the license, platform technology transfer, and contingent obligation to supply GSK with enzymes manufactured by us at GSK's expense. We determined that the license and the platform technology transfer (together the "License") represent a unit of accounting. We determined that our participation in the joint steering committee in connection with the platform technology transfer does not represent a separate unit of accounting because GSK could not negotiate for and/or acquire these services from other third parties and our participation on the joint steering committee is coterminous with the technology transfer period.
The up-front License fee of $6.0 million is being recognized over the technology transfer period of three years. Amounts to be received under the development supply agreement described above will be recognized as revenue to the extent GSK purchases enzymes from us.
As of September 30, 2014, we have a deferred revenue balance of $5.5 million from GSK related to the up-front License fee. We recognized license fees of $0.5 million for the three and nine months ended September 30, 2014, as biocatalyst research and development revenue.
Merck Research and Development Collaboration
On February 1, 2012, Codexis entered into a five-year Sitagliptin Catalyst Supply Agreement ("Sitagliptin Catalyst Supply Agreement") whereby Merck Sharp and Dohme Corp. ("Merck") may obtain commercial scale substance for use in the manufacture of one of its products, Januvia®. Merck may extend the term of the Sitagliptin Catalyst Supply Agreement for an additional five years at its sole discretion.
The Sitagliptin Catalyst Supply 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 Catalyst Supply Agreement. The license fee is being recognized as collaborative research and development revenue ratably over the five year term of the Sitagliptin Catalyst Supply Agreement. As of September 30, 2014, we have a deferred revenue balance of $1.6 million from Merck related to the license fee. We recognized license fees of $0.5 million for three months ended September 30, 2014 and 2013, and $1.5 million for the nine months ended September 30, 2014, and $1.3 million for the nine months ended September 30, 2013, as biocatalyst research and development revenue. In addition, pursuant to the Sitagliptin Catalyst Supply Agreement, Merck may purchase supply from us for a fee based on contractually stated prices.
Arch Manufacturing Collaboration
From 2006 through November 2012, Arch of Mumbai, India manufactured substantially all of Codexis' commercialized intermediates and active pharmaceutical ingredients ("APIs") for sale to generic and innovative pharmaceutical manufacturers. Prior to November 2012, Arch produced atorva-family APIs and intermediates for us and it sold these directly to end customers primarily in India. In November 2012, Codexis entered into a new commercial arrangement with Arch (the "New Arch Enzyme Supply Agreement") whereby we agreed to supply Arch with enzymes for use in the manufacture of atorva family products and Arch agreed to market these products directly to end customers. We recognized product sales revenue for the sale of enzyme inventory to Arch and its affiliates pursuant to the New Arch Enzyme Supply Agreement of $0.2 million for the three months and $0.3 million for the nine months ended September 30, 2014, and nil for the three months and $2.1 million for the nine months ended September 30, 2013, as biocatalyst product sales revenue. During 2013, we recorded an allowance for bad debt of approximately $387,000 due to a write-off of an accounts receivable from Arch.