Research and License Agreements

9 Months Ended

Sep. 30, 2011

Research and License Agreements [Abstract]

Research and License Agreements

7. Research and License Agreements

Out-licensing Agreements

Pfizer. In August 2001, the Company entered into an exclusive worldwide license and development collaboration agreement with Wyeth Pharmaceuticals, Inc., (“Wyeth”), which has since been acquired by Pfizer for the development of active staphylococcal vaccines for humans. Under the terms of this agreement, the Company granted Pfizer an exclusive worldwide license to its MSCRAMM protein intellectual property with respect to human vaccines against staphylococcal organisms. The development, manufacture and sale of any products resulting from the collaboration are the responsibility of Pfizer. The Company is required to commit two full-time equivalent employees to the collaboration. The Company may terminate the agreement if Pfizer fails to use reasonable commercial efforts to bring related products to market. Pfizer may terminate the agreement, without cause, upon six months notice. Otherwise, this agreement will terminate upon the expiration of all of the current licensed patents in 2023.

Pursuant to this agreement, the Company is entitled to receive minimum research support payments of $1,000,000 per year until a target sales threshold of any product developed under this agreement is reached. The Company is also entitled to receive additional milestones upon the commencement of clinical trials, the filing of a Biologic License Application (“BLA”), and United States Food and Drug Administration (“FDA”) approval of a licensed product. If all such milestones are achieved relative to one licensed product, the Company would be entitled to receive a minimum of $10,000,000 in additional milestone payments from Pfizer. Finally, the Company is also entitled to royalties on net sales of licensed products manufactured, sold or distributed by Pfizer.

In July 2011, Pfizer initiated a Phase 1/ 2 clinical trial of a 4-antigen S. aureus vaccine (SA4Ag). The vaccine contains an antigen originating from the Company’s proprietary MSCRAMM protein platform. The Company earned a payment of $1,000,000 upon achievement of this substantive milestone. The Company amortized the upfront, non-refundable license fees on a straight-line basis over the term of such commitment as one unit of accounting. Revenue received for the ongoing research and development activities under the collaborative arrangement is recognized as these activities are performed or accomplished pursuant to the terms of the related agreement. Development milestone payments that the Company has determined are substantive are recognized as revenue when the Company has achieved the specific milestone and collectability is assured. Any amounts received in advance of the performance of the related activities are recorded as deferred revenue until earned.

Under this agreement, the Company reported revenue for the three months ended September 30, 2011 and 2010 of $1,262,500 and $287,500, respectively, and for the nine months ended September 30, 2011 and 2010 of $1,837,500 and $1,529,167, respectively. As of September 30, 2011 and December 31, 2010, the Company had deferred revenue in connection with this agreement of $41,667 and $129,667, respectively. The Company has received $9,000,000 in an upfront license fee and annual research support payments and $1,666,667 in milestone payments from Pfizer as of September 30, 2011.