2. Collaborative Arrangements

Revenues from Collaborative Arrangements

We recognized revenue from our collaborative arrangements as follows:

	Year Ended December 31,
(In thousands)	2016		2015		2014
Mylan	$	15,102	$	19,175	$	—
Takeda Pharmaceuticals		15,075		—		—
Trek Therapeutics		—		8,216		—
Various VIBATIV collaborative partners		368		5,327		7,270
Other		500		—		—

Total revenue from collaborative arrangements	$	31,045	$	32,718	$	7,270

Mylan

Development and Commercialization Agreement

In January 2015, Mylan and we established a strategic collaboration for the development and, subject to regulatory approval, commercialization of revefenacin (TD-4208), our investigational LAMA in development for the treatment of COPD. We entered into this collaboration to expand the breadth of our revefenacin development program and extend our commercial reach beyond the acute care setting where we currently market VIBATIV.

Under the Mylan Agreement, Mylan paid us an initial payment of $15.0 million in cash in the second quarter of 2015. Also, pursuant to an ordinary share purchase agreement entered into on January 30, 2015, Mylan Inc., a subsidiary of Mylan N.V., made a $30.0 million equity investment in us, buying 1,585,790 ordinary shares from us in early February 2015 in a private placement transaction at a price of approximately $18.918 per share, which represented a 10% premium over the volume weighted average price per share of our ordinary shares for the five trading days ending on January 30, 2015.

Under the Mylan Agreement, the significant deliverables were determined to be the license, development responsibilities and committee participation. We determined that the license represents a separate unit of accounting as the license, which includes rights to our underlying technologies for revefenacin, has standalone value because the rights conveyed permit Mylan to perform all efforts necessary to use our technologies to bring the compounds through development and, upon regulatory approval, commercialization. We based the best estimate of selling price for the license using a discounted cash flow approach. We determined that development responsibilities and committee participation represent separate units of accounting as Mylan could negotiate for and/or acquire each of these services from other third parties and we based the best estimates of the respective selling prices on the nature and timing of the services to be performed.

As payments are received from Mylan, they are allocated to the three units of accounting based on the relative selling price method. Amounts allocated to the license are recognized as collaborative revenue when delivered. Amounts allocated to the development responsibilities under the Mylan Agreement are recognized proportionately with the performance of the underlying services and accounted for as reductions to R&D expense. Amounts allocated to committee participation are recognized ratably over the estimated performance periods as revenue from collaborative arrangements.

In the first quarter of 2015, upfront payments totaling $19.2 million from Mylan were allocated to the license and committee participation based on the relative selling price method. The $19.2 million consists of the initial payment of $15.0 million in cash and the $4.2 million premium related to the equity investment, which represents the difference between the closing price on January 30, 2015 and the issued price of $18.918 per share.

For the year ended December 31, 2015, we recognized $19.2 million in revenue from collaborative arrangements related primarily to the license and technological know-how delivered in the first quarter of 2015, and we recorded reductions to R&D expense of $52.6 million representing reimbursements for our development responsibilities.

For the year ended December 31, 2016, we recognized $15.1 million in revenue, primarily related to the $15.0 million milestone payment received from Mylan for the achievement of 50% enrollment in the Phase 3 twelve-month safety study, and we recorded reductions to R&D expense of $83.5 million representing reimbursements for our development responsibilities.

As of December 31, 2016, we are eligible to receive from Mylan additional potential development, regulatory and sales milestone payments totaling up to $205.0 million in the aggregate, with $160.0 million associated with revefenacin monotherapy and $45.0 million for future potential combination products. Of the $160.0 million associated with monotherapy, $150.0 million relates to commercialization and $10.0 million relates to regulatory actions in the EU. Development and regulatory milestones are deemed to be substantive milestones and will be recognized as revenue in the period upon achievement of each respective milestone. Sales milestones are considered contingent payments and are not deemed to be substantive milestones due to the fact that the achievement of the event underlying the payment predominantly relates to Mylan's performance of future commercial activities.

Takeda Pharmaceuticals

License and Collaboration Agreement

In June 2016, we entered into a License and Collaboration Agreement with Millennium Pharmaceuticals, Inc. ("Millennium") (the "Takeda Agreement"), in order to establish a collaboration for the development and commercialization of TD-8954, a selective 5-HT4 receptor agonist. Prior to the Takeda Agreement, we developed TD-8954 for potential use in the treatment of gastrointestinal motility disorders, including short-term intravenous use for enteral feeding intolerance ("EFI") to achieve early nutritional adequacy in critically ill patients at high nutritional risk, an indication for which the compound received FDA Fast Track designation. Millennium is an indirect wholly-owned subsidiary of Takeda Pharmaceutical Company Limited (TSE: 4502) (collectively with Millennium, "Takeda"). Under the terms of the Takeda Agreement, Takeda will be responsible for worldwide development and commercialization of TD-8954. We received an upfront cash payment of $15.0 million and will be eligible to receive success based development, regulatory and sales milestone payments by Takeda. The first $110.0 million of potential milestones are associated with the development, regulatory and commercial launch milestones for EFI or other intravenously dosed indications. We will also be eligible to receive a tiered royalty on worldwide net sales by Takeda at percentage royalty rates ranging from low double-digits to mid-teens.

The transactions contemplated by the Takeda Agreement closed in September 2016, following the expiration of the required waiting period under the Hart-Scott-Rodino Antitrust Improvements Act ("HSR Act"). Upon closing and the subsequent transfer of the license, technical know-how and related pharmaceutical materials, we recognized $15.1 million in revenue for the year ended December 31, 2016.

Alfa Wassermann

Development and Collaboration Agreement

In connection with the Spin-Off, we were assigned the October 2012 development and collaboration agreement between Innoviva and Alfa Wasserman for velusetrag under which the parties agreed to collaborate in the execution of a two-part Phase 2 program to test the efficacy, safety and tolerability of velusetrag in the treatment of patients with gastroparesis (a medical condition consisting of a paresis (partial paralysis) of the stomach, resulting in food remaining in the stomach for a longer time than normal). Alfa Wassermann has an exclusive option to develop and commercialize velusetrag in the European Union, Russia, China, Mexico and certain other countries, while we retain full rights to velusetrag in the United States, Canada, Japan and certain other countries. We are entitled to receive funding for the Phase 2a study and most of the Phase 2b study. If Alfa Wassermann exercises its license option at the completion of the Phase 2 program, then we are entitled to receive a $10.0 million option fee. If velusetrag is successfully developed and commercialized, we are entitled to receive potential future contingent payments totaling up to $53.5 million, and royalties on net sales by Alfa Wassermann ranging from the low teens to 20%.

Reimbursement of R&D Costs

Under certain collaborative arrangements, we are entitled to reimbursement of certain R&D costs. Our policy is to account for the reimbursement payments by our collaboration partners as reductions to R&D expense.

The following table summarizes the reductions to R&D expenses related to the reimbursement payments:

	Year Ended December 31,
(In thousands)	2016		2015		2014
Mylan	$	83,490	$	52,551	$	—
Alfa Wassermann		7,113		2,122		1,764
Other		134		483		120

Total reduction to R&D expense	$	90,737	$	55,156	$	1,884