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Collaborative Arrangements
12 Months Ended
Dec. 31, 2017
Research and Development [Abstract]  
Collaborative Arrangements
Collaborative Arrangements
GSK Platform Technology Transfer, Collaboration and License Agreement
In July 2014, we entered into a CodeEvolver® platform technology transfer collaboration and license agreement (the “GSK CodeEvolver® Agreement”) with GlaxoSmithKline (“GSK”). Pursuant to the terms of the agreement, we granted GSK a non-exclusive license to use the CodeEvolver® protein engineering technology platform to develop novel enzymes for use in the manufacture of GSK's pharmaceutical and health care products.
We received a $6.0 million up-front licensing fee upon signing the GSK CodeEvolver® Agreement and subsequently a $5.0 million non-creditable, non-refundable milestone payment upon achievement of the first milestone in 2014. In September 2015, we achieved the second milestone of the agreement and earned milestone revenue of $6.5 million. In April 2016, we completed the full transfer of the CodeEvolver® protein engineering platform technology and earned milestone revenue of $7.5 million, for which payment was received in June 2016. In the third quarter of 2016, we earned the first contingent payment under the agreement related to the development of an enzyme for an already-commercialized GSK product. We also have the potential to receive additional cumulative contingent back end milestone 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 back end milestone 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.
In addition, we are eligible to receive royalties based on net sales, if any, of a limited set of products developed by GSK using the CodeEvolver® protein engineering technology platform.
The up-front license fee of $6.0 million was being recognized ratably over the technology transfer period of three years since July 2014. We recognized all deferred revenues from the up-front license fees from GSK upon completion of the technology transfer in April 2016 and there were no remaining up-front license fees recognized in 2017. We recognized $3.0 million and $2.0 million, respectively, in 2016 and 2015 as research and development revenue.
Merck Platform Technology Transfer and License Agreement
In August 2015, we entered into a CodeEvolver® platform technology transfer and license agreement (the "Merck CodeEvolver® Agreement") with Merck Sharp & Dohme Corp., a subsidiary of Merck & Co., Inc. (collectively, "Merck"). The Merck CodeEvolver® Agreement allows Merck to use the CodeEvolver® protein engineering technology platform in the field of human and animal healthcare.
We received a $5.0 million up-front license fee upon execution of the Merck CodeEvolver® Agreement, which was being recognized ratably over the estimated platform technology transfer period of two years. The technology transfer was completed in September 2016. We have the potential to receive payments of up to a maximum of $15.0 million for each commercial active pharmaceutical ingredient ("API") that is manufactured by Merck using one or more novel enzymes developed by Merck using the CodeEvolver® protein engineering technology platform.

The deferred revenues relating to the up-front license fees were fully recognized as of December 31, 2016, and there were no remaining up-front license fees recorded in 2017. We recognized license fees of none, $4.0 million, and $1.0 million in 2017, 2016 and 2015, respectively, as research and development revenue. Additionally, we recognized research and development revenues of $3.6 million, $3.0 million, and $1.9 million in 2017, 2016, and 2015, respectively, for various research projects under our collaborative arrangement.
Merck Sitagliptin Catalyst Supply Agreement
In February 2012, we entered into a five-year Sitagliptin Catalyst Supply Agreement (“Sitagliptin Catalyst Supply Agreement”) with Merck whereby Merck may obtain commercial scale enzyme for use in the manufacture of Januvia®, its product based on the active ingredient Sitagliptin. In December 2015, Merck exercised its option under the terms of the Sitagliptin Catalyst Supply Agreement to extend the agreement for an additional five years through February 2022.
Effective as of January 2016, we and Merck amended the Sitagliptin Catalyst Supply Agreement to prospectively provide for variable pricing based on the cumulative volume of enzyme purchased by Merck under the Sitagliptin Catalyst Supply Agreement and to specify the third-party supplier from whom Merck would be allowed to purchase a percentage of its requirements for such enzyme. Merck has the right to terminate the Sitagliptin Catalyst Supply Agreement at any time after January 1, 2018 by giving us 24 months’ advance written notice. In June 2017, we completed a contractual milestone by qualifying the specified third-party enzyme supplier and recognized $0.3 million as research and development revenues.
The Sitagliptin Catalyst Supply Agreement requires Merck to pay an annual license fee for the rights to the Sitagliptin technology each year for the term of the agreement. Amounts of annual license fees are based on contractually agreed prices and are on a declining scale. Prior to December 2015, the aggregate license fee for the initial five year period was being recognized ratably over the initial five year term of the Sitagliptin Catalyst Supply Agreement as collaborative research and development revenues. Due to the amendment entered in December 2015 as noted above, we revised our performance period in December 2015 and began recognizing the remaining unamortized portion of the license fee and the aggregate license fees for the second five year period over the revised period on a straight line basis.
We recognized license fees of $1.3 million, $1.3 million and $1.9 million in 2017, 2016 and 2015, respectively, as collaborative research and development revenue. As of December 31, 2017 and 2016, we had deferred revenue of $1.3 million and $1.0 million, respectively, from Merck related to the license fee. In addition, pursuant to the terms of the agreement, Merck may purchase supply from us for a fee based on contractually stated prices and we recognized $9.0 million, $6.0 million and $1.6 million, respectively, in 2017, 2016 and 2015 in product sales under this agreement.
Biopharmaceutical Collaborative Development Agreement
In May 2015, we entered into a collaborative development agreement with a leading global biopharmaceutical company. Under the terms of the agreement, we used our CodeEvolver® protein engineering platform technology to develop a novel enzyme for use in our partner’s therapeutic development program. We recognized revenues of none, $1.8 million, and $0.5 million in 2017 2016, and 2015, respectively, as collaborative research and development revenues. The collaborative development agreement was terminated by mutual consent in August 2017.
Enzyme Supply Agreement
In November 2016, we entered into a supply agreement whereby our customer may purchase quantities of one of our proprietary enzymes for use in its commercial manufacture of a product. Pursuant to the supply agreement, we received an upfront payment of $0.75 million in December 2016, which we accordingly recorded as deferred revenues. Such upfront payment will be recognized over the period of the supply agreement as the customer purchases our proprietary enzyme. As of December 31, 2017 and 2016, we had deferred revenue from the supply agreement of $0.7 million. Under the agreement, we recognize product revenues for quantities of enzyme sold to our customer when all revenue recognition criteria are met.
Research and Development Agreement
In March 2017, we entered into a multi-year research and development services agreement with a fine chemicals customer. Under the agreement, we have the potential to receive research and development revenues and milestone payments based on the customer's decision to continue the development process. We received an upfront payment of $3.0 million, which is being recognized ratably over the maximum term of the services period of 21 months, of which we recognized revenue of $1.3 million in 2017. We also recognized $1.9 million of revenue for research and development services on a net payment received under the agreement in 2017. Total revenue recognized under the research and development agreement in 2017 was $3.2 million. As of December 31, 2017, we had deferred revenue from the development services agreement of $3.1 million.
Global Development, Option and License Agreement and Strategic Collaboration Agreement
In October 2017, we entered into a Global Development, Option and License Agreement (the “Nestlé Agreement”) with Nestec Ltd. (“Nestlé Health Science”) and, solely for the purpose of the integration and the dispute resolution clauses of the Agreement, Nestlé Health Science S.A.
We received an upfront cash payment of $14.0 million upon the execution of the Agreement for the development of our enzyme CDX-6114. We recognized development fees of $7.2 million in 2017 as research and development revenues. The upfront payment is being recognized using a proportional performance model based on the ratio of level of effort incurred to date compared to the total estimated level of effort required to complete all performance obligations under the agreement. As of December 31, 2017, we had deferred revenue related to development fees of $6.8 million. We are eligible to receive a $4.0 million progress payment after the commencement of Phase 1a clinical trial. In addition, we are eligible to receive an additional $3.0 million in the event Nestlé Health Science exercises its option to obtain an exclusive, worldwide, royalty-bearing, sublicensable license to develop and commercialize CDX-6114 and other products for the treatment of HPA. Other potential payments from Nestlé Health Science to us under the Nestlé Agreement include (i) development and approval milestones of up to $86.0 million, (ii) sales-based milestones of up to $250.0 million in the aggregate, which aggregate amount is achievable if net sales exceed $1.0 billion in a single year, and (iii) tiered royalties, at percentages ranging from the middle single digits to low double-digits, of net sales of Product.
In addition to the Nestlé Agreement, we and Nestlé Health Science concurrently entered into a Strategic Collaboration Agreement (the “Strategic Collaboration Agreement”) pursuant to which we and Nestlé Health Science will collaborate to leverage the CodeEvolver® protein engineering technology platform to develop novel enzymes for Nestlé Health Science’s established Consumer Care and Medical Nutrition business areas. Under the Strategic Collaboration Agreement, we recognized research and development fees of $0.5 million in 2017. As of December 31, 2017, we had deferred revenue of $1.1 million.