9. Collaborations and License Agreements

The following tables provide amounts by year and by line item included in the Company's consolidated statements of comprehensive loss attributable to transactions arising from its significant collaborative arrangements and all other arrangements, as defined in the Financial Accounting Standards Board's Accounting Standards Codification Topic 808, Collaborative Arrangements.

	For the Year Ended December 31, 2015 (in thousands)
	2003 Sandoz Collaboration Agreement		2006 Sandoz Collaboration Agreement		Baxalta Collaboration Agreement		Total Collaborations
Collaboration revenues:
Product revenue	$	5,063	$	43,440	$	—	$	48,503

Research and development revenue:
Milestone payments		—		20,000		—		20,000
Amortization of upfront payments and license payments		—		—		9,014		9,014
Research and development services and external costs		789		2,861		8,483		12,133

Total research and development revenue	$	789	$	22,861	$	17,497	$	41,147

Total collaboration revenues	$	5,852	$	66,301	$	17,497	$	89,650


Operating expenses:
Research and development expense(1)	$	324	$	856	$	1,851	$	3,031
General and administrative expense(1)	$	344	$	206	$	963	$	1,513

Total operating expenses	$	668	$	1,062	$	2,814	$	4,544

	For the Year Ended December 31, 2014 (in thousands)
	2003 Sandoz Collaboration Agreement		2006 Sandoz Collaboration Agreement		Baxalta Collaboration Agreement		Total Collaborations
Collaboration revenues:
Product revenue	$	19,963	$	—	$	—	$	19,963

Research and development revenue:
Milestone payments		—		—		12,000		12,000
Amortization of upfront payments and license payments		—		480		3,239		3,719
Research and development services and external costs		1,043		2,452		13,073		16,568

Total research and development revenue	$	1,043	$	2,932	$	28,312	$	32,287

Total collaboration revenues	$	21,006	$	2,932	$	28,312	$	52,250


Operating expenses:
Research and development expense(1)	$	341	$	920	$	16,637	$	17,898
General and administrative expense(1)	$	125	$	299	$	527	$	951

Total operating expenses	$	466	$	1,219	$	17,164	$	18,849

	For the Year Ended December 31, 2013 (in thousands)
	2003 Sandoz Collaboration Agreement		2006 Sandoz Collaboration Agreement		Baxalta Collaboration Agreement		Total Collaborations
Collaboration revenues:
Product revenue	$	16,701	$	—	$	—	$	16,701

Research and development revenue:
Amortization of upfront payments		—		1,128		2,851		3,979
Research and development services and external costs		3,040		715		11,030		14,785

Total research and development revenue	$	3,040	$	1,843	$	13,881	$	18,764

Total collaboration revenues	$	19,741	$	1,843	$	13,881	$	35,465


Operating expenses:
Research and development expense(1)	$	802	$	2,525	$	22,707	$	26,034
General and administrative expense(1)	$	—	$	511	$	493	$	1,004

Total operating expenses	$	802	$	3,036	$	23,200	$	27,038


(1)	The amounts represent external expenditures, including amortization of an intangible asset, and exclude salaries and benefits, share-based compensation, facilities, depreciation and laboratory supplies, as these costs are not directly charged to programs.

2003 Sandoz Collaboration Agreement

In 2003, the Company entered into a collaboration and license agreement, or the 2003 Sandoz Collaboration Agreement, with Sandoz AG (formerly Sandoz N.V. and Biochemie West Indies, N.V.) and Sandoz Inc. (formerly Geneva Pharmaceuticals, Inc.) to jointly develop, manufacture and commercialize Enoxaparin Sodium Injection, a generic version of LOVENOX®, in the United States. Sandoz N.V. later assigned its rights in the 2003 Sandoz Collaboration Agreement to Sandoz AG, an affiliate of Novartis Pharma AG. The Company refers to Sandoz AG and Sandoz Inc. together as Sandoz.

Under the terms of the 2003 Sandoz Collaboration Agreement, the Company and Sandoz agreed to exclusively work with each other to develop and commercialize Enoxaparin Sodium Injection for any and all medical indications within the United States. In addition, the Company granted Sandoz an exclusive license under our intellectual property rights to develop and commercialize injectable enoxaparin for all medical indications within the United States. The Company identified two significant deliverables in this arrangement consisting of: (i) the license and (ii) development and related services. The Company determined that the license did not meet the criteria for separation as it did not have stand-alone value apart from the development services, which are proprietary to the Company. Therefore, the Company determined that a single unit of accounting exists with respect to the 2003 Sandoz Collaboration Agreement.

Sandoz began selling Enoxaparin Sodium Injection in July 2010. Under the original payment terms of the 2003 Sandoz Collaboration Agreement, Sandoz was obligated to pay the Company either a contractually-defined profit-share or royalty on net sales depending on the kind and number of other marketed generic versions of LOVENOX. The Company received 45% of profits from July 2010 through September 2011, a royalty on net sales from October 2011 through December 2011 and a share of profits in January 2012. From February 2012 to March 2015, the Company received a 10% royalty on net sales (12% on net sales above a certain threshold). In June 2015, the Company and Sandoz amended the 2003 Sandoz Collaboration Agreement, effective April 1, 2015, to provide that Sandoz would pay the Company 50% of contractually-defined profits on sales. See "Product revenue" in the tables above for product revenue earned by the Company in the years ended December 31, 2015, 2014 and 2013 on Sandoz' sales of Enoxaparin Sodium Injection.

The Company is no longer eligible to receive milestones under the 2003 Sandoz Collaboration Agreement because the remaining milestones were contingent upon there being no third-party competitors marketing an interchangeable generic version of LOVENOX.

The collaboration is governed by a joint steering committee and a joint project team, each consisting of an equal number of Sandoz and Company representatives. Most decisions must be made unanimously, with Sandoz collectively having one vote and the Company having one vote. Sandoz has the sole authority to determine the price at which it sells Enoxaparin Sodium Injection.

A portion of Enoxaparin Sodium Injection development expenses and certain legal expenses, which in the aggregate have exceeded a specified amount, are offset against profit-sharing amounts, royalties and milestone payments. The Company's contractual share of such development and legal expenses is subject to an annual claw-back adjustment at the end of each of the first five product years, with the product year beginning on July 1 and ending on June 30. The annual adjustment can only reduce the Company's profits, royalties and milestones by up to 50% in a given calendar quarter and any excess amount due will be carried forward into future quarters and reduce any profits in those future periods until it is paid in full. Annual adjustments, including amounts carried forward into future periods, are recorded as a reduction in product revenue. The annual adjustment was approximately $1.8 million for the product year ended June 30, 2015 and was paid in full as of December 31, 2015. The annual adjustment of $2.2 million for the product year ended June 30, 2014 was decreased by $2.1 million to reflect an adjustment to royalties earned in the 2012 product year. The annual adjustment was $3.8 million for the product year ended June 30, 2013.

The Company is reimbursed at a contractual FTE rate for any full-time equivalent employee expenses as well as any external costs incurred for commercial and related activities. The Company recognizes research and development revenue from FTE services and external costs upon completion of the performance requirements (i.e., as the services are performed and the reimbursable costs are incurred). Revenues are recorded on a gross basis as the Company contracts directly with, manages the work of and is responsible for payments to third-party vendors for such commercial and related services. See "Research and development revenue" in the tables above for research and development revenue earned by the Company under the 2003 Sandoz Collaboration Agreement.

2006 Sandoz Collaboration Agreement

In 2006 and 2007, the Company entered into a series of agreements, including a collaboration and license agreement, as amended, or the 2006 Sandoz Collaboration Agreement, with Sandoz AG, or Sandoz; and a stock purchase agreement and an investor rights agreement, with Novartis Pharma AG, or Novartis. Under the 2006 Sandoz Collaboration Agreement, the Company and Sandoz agreed to exclusively collaborate on the development and commercialization of COPAXONE and M356, among other products. Costs, including development costs and the costs of clinical studies, will be borne by the parties in varying proportions depending on the type of expense. For GLATOPA and M356, the Company is generally responsible for all of the development costs in the United States. For GLATOPA and M356 outside of the United States, the Company shares development costs in proportion to its profit sharing interest. The Company is reimbursed at a contractual FTE rate for any full-time equivalent employee expenses as well as any external costs incurred in the development of products to the extent development costs are born by Sandoz. All commercialization costs are borne by Sandoz.

Sandoz commenced sales of GLATOPA in the United States on June 18, 2015. Under the 2006 Sandoz Collaboration Agreement, the Company earns 50% of contractually-defined profits on Sandoz' worldwide net sales of GLATOPA. The Company is entitled to earn 50% of contractually-defined profits on Sandoz' worldwide net sales of M356, if and when M356 is commercialized. Profits on net sales of GLATOPA and M356 are calculated by deducting from net sales the costs of goods sold and an allowance for selling, general and administrative costs, which is a contractual percentage of net sales. Sandoz is responsible for funding all of the legal expenses incurred under the 2006 Sandoz Collaboration Agreement; however a portion of certain legal expenses, including any patent infringement damages, can be offset against the profit-sharing amounts in proportion to the Company's 50% profit sharing interest.

For the year ended December 31, 2015, the Company recorded $43.4 million in product revenues from Sandoz' sales of GLATOPA, reflecting $52.5 million in profit share net of a deduction of $9.1 million for reimbursement to Sandoz of the Company's 50% share of pre-launch GLATOPA-related legal expenses. These expenses consist primarily of the costs incurred by Sandoz in connection with the patent infringement suit brought in 2008 by Teva Pharmaceuticals Industries Ltd. and related parties. See Note 14 "Commitments and Contingencies" for information on the suit. In the year ended December 31, 2015, the Company earned a $10.0 million regulatory milestone payment upon GLATOPA receiving sole FDA approval and an additional $10.0 million milestone payment upon the first commercial sale. The Company is eligible to receive in the aggregate up to $120.0 million in additional milestone payments upon the achievement of certain commercial and sales-based milestones for GLATOPA and M356 in the United States. None of these payments, once received, is refundable and there are no general rights of return in the arrangement. Sandoz has agreed to indemnify the Company for various claims, and a certain portion of such costs may be offset against certain future payments received by the Company.

The term of the 2006 Sandoz Collaboration Agreement extends throughout the development and commercialization of the products until the last sale of the products, unless earlier terminated by either party pursuant to the provisions of the 2006 Sandoz Collaboration Agreement. The 2006 Sandoz Collaboration Agreement may be terminated if either party breaches the 2006 Sandoz Collaboration Agreement or files for bankruptcy. In addition, either the Company or Sandoz may terminate the 2006 Sandoz Collaboration Agreement with respect to M356, if clinical trials are required for regulatory approval of M356.

Under the stock purchase agreement, the Company sold approximately 4.7 million shares of its common stock to Novartis for an aggregate purchase price of $75.0 million, representing a premium of $13.6 million based on the closing price of the Company's common stock on the NASDAQ Global Market on the on the date of purchase. The premium was recognized as revenue on a straight-line basis over the estimated development period. See "Amortization of upfront payments" in the tables above for research and development revenue earned by the Company relating to this paid premium. The equity premium has been earned as of December 31, 2014.

The Company recognizes research and development revenue from FTE services and research and development revenue from external development costs upon completion of the performance requirements (i.e., as the services are performed and the reimbursable costs are incurred). Revenue from external development costs is recorded on a gross basis as the Company contracts directly with, manages the work of and is responsible for payments to third-party vendors for such development and related services, except with respect to any amounts due Sandoz for shared development costs, which are recorded on a net basis. See "Research and development services and external costs" in the tables above for research and development revenue earned by the Company from FTE services and external development costs under the 2006 Sandoz Collaboration Agreement.

Baxalta Collaboration Agreement

The Company and Baxter International Inc., Baxter Healthcare Corporation and Baxter Healthcare SA (collectively, referred to as "Baxter") entered into a global collaboration and license agreement effective February 2012, or the Baxter Collaboration Agreement, to develop and commercialize biosimilars, including M923. In connection with Baxter's internal corporate restructuring in July 2015, Baxter assigned all of its rights and obligations under the Baxter Collaboration Agreement to Baxalta U.S. Inc., Baxalta GmbH and Baxalta Incorporated (collectively, "Baxalta"). In light of the assignment, all references to "Baxter" and the "Baxter Collaboration Agreement" have been replaced with references to "Baxalta" and the "Baxalta Collaboration Agreement," respectively.

Under the Baxalta Collaboration Agreement, the Company and Baxalta agreed to collaborate, on a world-wide basis, on the development and commercialization of M923, the Company's biosimilar HUMIRA® (adalimumab) candidate, and M834, the Company's biosimilar ORENCIA® (abatacept) candidate, and Baxalta had the right to select four additional reference products to target for biosimilar development under the collaboration. In July 2012, Baxalta selected an additional product: M511, the Company's biosimilar AVASTIN® (bevacizumab) candidate. In December 2013, Baxalta terminated its option to license M511 under the Baxalta Collaboration Agreement following an internal portfolio review. In February 2015, Baxalta's right to select additional programs expired without being exercised. Also in February 2015, Baxalta terminated in part the Baxalta Collaboration Agreement as it relates specifically to M834 and all worldwide development and commercialization rights for M834 reverted to the Company. The Baxalta Collaboration Agreement remains in effect and unchanged with respect to M923.

Under the Baxalta Collaboration Agreement, each party has granted the other an exclusive license under its intellectual property rights to develop and commercialize M923 for all therapeutic indications. The Company has agreed to provide development and related services on a commercially reasonable basis through the filing of an Investigational New Drug application, or IND, or equivalent application in the European Union for M923. Development and related services include high-resolution analytics, characterization, and product and process development. Baxalta is responsible for clinical development, manufacturing and commercialization activities and will exclusively distribute and market M923. The Company has the right to participate in a joint steering committee, consisting of an equal number of members from the Company and Baxalta, to oversee and manage the development and commercialization of M923 under the collaboration. Costs, including development costs, payments to third parties for intellectual property licenses, and expenses for legal proceedings, including the patent exchange process pursuant to the Biologics Price Competition and Innovation Act of 2009, will be borne by the parties in varying proportions, depending on the type of expense and the stage of development. The Company is reimbursed at a contractual FTE rate for any full-time equivalent employee expenses and external development costs for reimbursable activities related to M923.

Baxalta has a right of first negotiation with respect to collaborating with the Company on the development of any biosimilar product candidate that could compete with M923 based on the same mechanism of action. This right is effective until December 2017, subject to certain restrictions as outlined in the Baxalta Collaboration Agreement. Under the terms of the Baxter Agreement, the Company received an initial cash payment of $33.0 million, a $7.0 million license payment for achieving pre-defined "minimum development criteria" for M834, and $12.0 million in technical and development milestone payments in connection with the UK Medicines and Healthcare Products Regulatory Agency's acceptance of Baxalta's clinical trial application to initiate a pharmacokinetic clinical trial for M923. The Company is eligible to receive from Baxalta, in aggregate, up to $50.0 million in regulatory milestone payments for M923, on a sliding scale, where, based on the product's regulatory application, there is a significant reduction in the scope of the clinical trial program required for regulatory approval.

In addition, if M923 is successfully developed and launched, Baxalta will be required to pay to the Company royalties on net sales of licensed products worldwide, with a base royalty rate in the high single digits with the potential for significant tiered increases based on the number of competitors, the interchangeability of the product, and the sales tier for the product. The maximum royalty with all potential increases would be slightly more than double the base royalty.

The term of the collaboration shall continue throughout the development and commercialization of M923 on a country-by-country basis until there is no remaining payment obligation with respect to the product in the relevant territory, unless earlier terminated by either party pursuant to the terms of the Baxalta Collaboration Agreement.

The Baxalta Collaboration Agreement may be terminated by:

	•	either party for breach by or bankruptcy of the other party;
	•	Baxalta for its convenience; or
	•	the Company in the event Baxalta does not exercise commercially reasonable efforts to commercialize M923 in the United States or other specified countries, provided that the Company also has certain rights to directly commercialize M923, as opposed to terminating the Baxalta Collaboration Agreement, in event of such a breach by Baxalta.

In accordance with FASB's ASU No. 2009-13: Multiple-Deliverable Revenue Arrangements (Topic 615), the Company identified all of the deliverables at the inception of the Baxalta Collaboration Agreement. The deliverables were determined to include (i) the development and product licenses to M923, M834 and the four additional reference products, (ii) the research and development services related to M923, M834 and the four additional reference products and (iii) the Company's participation in a joint steering committee. The Company has determined that each of the license deliverables do not have stand-alone value apart from the related research and development services deliverables as there are no other vendors selling similar, competing products on a stand-alone basis, Baxalta does not have the contractual right to resell the license, and Baxalta is unable to use the license for its intended purpose without the Company's performance of research and development services. As such, the Company determined that separate units of accounting exist for each of the six licenses together with the related research and development services, as well as the joint steering committee with respect to this arrangement. The estimated selling prices for these units of accounting were determined based on similar license arrangements and the nature of the research and development services to be performed for Baxalta and market rates for similar services. At the inception of the Baxalta Collaboration Agreement, the arrangement consideration of $61.0 million, which included the $33.0 million upfront payment and aggregate option payments for the four additional reference products of $28.0 million, was allocated to the units of accounting based on the relative selling price method. Of the $61.0 million, $10.3 million was allocated to the M923 product license together with the related research and development services, $10.3 million to each of the four additional reference products product licenses with the related research and development services, $9.4 million was allocated to the M834 product license together with the related research and development services due to that product's stage of development at the time the license was delivered, and $114,000 was allocated to the joint steering committee unit of accounting.

At the inception of the Baxalta Collaboration Agreement, the Company delivered development and product licenses for M923 and M834 and commenced revenue recognition of the arrangement consideration allocated to those products. In addition, the Company began revenue recognition for the arrangement consideration allocated to the joint steering committee unit of accounting. Baxalta's termination of its option to license M511 in December 2013 as well as its termination of M834 and the lapsing of its right to select additional products in February 2015 reduced the number of deliverables from seven to two and decreased the total consideration from $61.0 million to $40.0 million. The Company determined that the change in total consideration received and total deliverables under the arrangement represented a change in estimate and, as a result, the Company reallocated the revised total consideration of $40.0 million to the remaining deliverables under the agreement using the original best estimate of selling price. The remaining deliverables are the combined unit of account for the M923 license and the related research and development services and the Company's participation on the joint steering committee. Of the $40.0 million, $39.6 million was allocated to the M923 product license together with the related research and development services and $0.4 million was allocated to the joint steering committee unit of accounting. The Company recognized the resulting change in revenue as a result of the decrease in deliverables and expected consideration on a prospective basis beginning in the first quarter of 2015. The Company records this revenue on a straight-line basis over the applicable performance period, which begins upon delivery of the development and product license and ends upon FDA approval of the product. The Company currently estimates that the performance period for M923 and for the joint steering committee is approximately six years. As of December 31, 2015, $22.0 million of revenue was deferred under this agreement, of which $9.8 million was included in current liabilities and $12.2 million was included in non-current liabilities in the consolidated balance sheet.

The Company recognizes research and development revenue from FTE services and research and development revenue from external development costs upon completion of the performance requirements (i.e., as the services are performed and the reimbursable costs are incurred). Revenue from external development costs is recorded on a gross basis as the Company contracts directly with, manages the work of and is responsible for payments to third-party vendors for such development and related services. Beginning in 2013, the Company commenced billing to Baxalta FTE services and external development costs for reimbursable activities related to M923. See tables above for research and development revenue earned by the Company under the Baxalta Collaboration Agreement.

The Company has concluded that the M923 technical development milestones and the IND milestones pursuant to the Baxalta Collaboration Agreement are substantive. The Company evaluated factors such as the scientific and regulatory risks that must be overcome to achieve these milestones, the level of effort and investment required and whether the milestone consideration is reasonable relative to all deliverables and payment terms in the arrangement in making this assessment. Revenues from the non-refundable, technical development and IND milestones were recognized upon successful accomplishment of the milestones as research and development revenue.

The regulatory milestones, along with any associated royalty or profit sharing payments, will be considered contingent fees that will be recorded as earned in future periods.