Related Party Transactions

Overview of Related Parties

The Company and Intrexon are parties to two distinct exclusive channel collaboration agreements, as more fully described below. Pursuant to these agreements, the Company engages Intrexon for support services for the research and development of product candidates covered under the respective agreements and reimburses Intrexon for its cost for time and materials for such work. Additionally, the Company's future commitments pursuant to the agreements include cash royalties and various developmental and commercial milestone payments as more fully described in Note 14.

Randal J. Kirk is the chairman of the board and chief executive officer of Intrexon and, together with his affiliates, owns more than 50% of Intrexon's common stock. Randal J. Kirk, together with his affiliates (including Intrexon) own approximately 38% of our common stock. Additionally, two of our directors, Julian Kirk (who is the son of Randal J. Kirk) and Marcus Smith, are employees of Third Security, LLC, which is an affiliate of Randal J. Kirk.

For the years ended December 31, 2015, 2014 and 2013, the Company incurred expenses of $15.9 million, $9.4 million and $10.1 million, respectively, for payments to Intrexon. Of the expenses incurred during the 2015 period, $10.0 million related to an up-front technology access fee pursuant to the 2015 ECC, $3.1 million related to direct expenses for work performed by Intrexon and $2.8 million related to pass-through costs. Of the costs incurred during the 2014 period, $5.2 million related to non-cash supplemental stock issuance costs pursuant to the second amendment to the 2012 ECC, $2.3 million related to direct expenses for work performed by Intrexon and $1.9 million related to pass-through costs. Of the costs incurred during the 2013 period, $6.4 million related to non-cash supplemental stock issuance costs pursuant to the first amendment to the 2012 ECC, $2.9 million related to direct expenses for work performed by Intrexon and $0.8 million related to pass-through costs. As of December 31, 2015 and 2014, the Company had outstanding payables with Intrexon of $10.7 million and $1.0 million, respectively.

Intrexon Collaboration - 2012 ECC

In October 2012, the Company entered into an Exclusive Channel Collaboration Agreement with Intrexon which was amended in June 2013 and January 2014 (as amended, the “2012 ECC”) pursuant to which the Company is Intrexon's exclusive channel collaborator in the research, development and commercialization of products in the following fields (the "2012 Fields"):


•	the enhanced production and purification of autologous fibroblasts, without gene therapy, for all aesthetic and therapeutic indications;


•	the enhanced production and purification of autologous dermal cells, without gene therapy, for aesthetic and therapeutic treatment of dermal, vocal cord, and periodontal indications;


•	the development of our gene therapies applied to autologous fibroblasts for all aesthetic and therapeutic indications;


•	the development of our gene therapies applied to autologous dermal cells for aesthetic and therapeutic treatment of dermal, vocal cord, and periodontal indications;


•	autologous human fibroblasts with gene therapy to express a therapeutic protein and/or bioactive ribonucleic acid for the treatment of autoimmune and non-infectious inflammatory disorders that manifest in cutaneous tissues, fascia and/or muscle; and


•	autologous human fibroblasts with gene therapy to express bioactive Tenascin-X locally to correct connective tissue disorders associated with Ehlers-Danlos Syndrome (hypermobility type).

Pursuant to the terms of the 2012 ECC, Intrexon has granted the Company a license to use its proprietary technologies and other intellectual property to research, develop and commercialize products in the 2012 Fields within the United States. The Company is responsible for all costs incurred in connection with the research, development and commercialization of products under the 2012 ECC and will own all clinical data, regulatory filings and regulatory approvals relating to such products. The Company engages Intrexon for support services for the research and development of products under the 2012 ECC and reimburses Intrexon for its cost for time and materials for such services.

In September 2015, the Company and Intrexon entered into a letter of agreement pursuant to which the parties mutually agreed to terminate their collaboration with respect to the development of potential therapies to treat Ehlers-Danlos

Syndrome (hypermobility type) due to technical hurdles. As a result, the Company no longer has any rights or obligations under the 2012 ECC with respect to the development of “autologous human fibroblasts genetically modified to express bioactive Tenascin-X locally to correct connective tissue disorders”.

In connection with the execution of the 2012 ECC, including certain amendments, the Company entered into stock issuance agreements with Intrexon. See Note 8 for details.

The Company is required to pay Intrexon quarterly cash royalties on all products developed under the 2012 ECC in an amount equal to 7% on aggregate annualized net sales up to $100 million, plus 14% on aggregate annualized net sales greater than $100 million. The Company is also required to pay Intrexon half of any sublicensing revenues that it receives from third parties in consideration for sublicenses granted by the Company with respect to products developed under the 2012 ECC, but only to the extent such sublicensing revenues are not included in net sales subject to royalties. Sales from LAVIV (azficel-T), including new indications, or other products that the Company develops and commercializes outside of the 2012 ECC are not subject to royalty payments unless the Company is able to reduce the product's cost of goods sold through the 2012 ECC, in which case, the Company is required to pay quarterly cash royalties on such products equal to one third of such cost of goods sold savings.

Intrexon Collaboration - 2015 ECC

In December 2015, the Company entered into an additional Exclusive Channel Collaboration Agreement with Intrexon (the “2015 ECC”) pursuant to which the Company is Intrexon’s exclusive channel collaborator in the research, development and commercialization of products for the treatment of chronic inflammatory and degenerative diseases of human joints through intra-articular or other local administration of genetically modified fibroblasts (the “2015 Field”).

Pursuant to the terms of the 2015 ECC, Intrexon has granted the Company a license to use its proprietary technologies and other intellectual property to develop and commercialize collaboration products in the 2015 Field throughout the world. The Company is responsible for all costs incurred in connection with the development and commercialization of collaboration products and will own all clinical data, regulatory filings and regulatory approvals relating to such products. The Company engages Intrexon for support services in connection with the research and development of products under the 2015 ECC and reimburses Intrexon for its cost for time and materials for such services.

In consideration for the license and the other rights that the Company receives under the 2015 ECC, the Company paid Intrexon an up-front technology access fee of $10 million in cash in January 2016. For each collaboration product the Company develops under the 2015 ECC, the Company is required to pay Intrexon development milestones of up to $30 million and commercialization milestones of up to $22.5 million, a low double-digit royalty on its net sales of such products and half of any sublicensing revenues received from third parties for such products.