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Collaboration
9 Months Ended
Sep. 30, 2013
Text Block [Abstract]  
Collaboration

Note 4—Collaboration

On October 5, 2012, the Company entered into an Exclusive Channel Collaboration Agreement (the Channel Agreement) with Intrexon Corporation (Intrexon) that governs a “channel collaboration” arrangement. The Channel Agreement grants the Company an exclusive license to use proprietary technologies and other intellectual property of Intrexon to develop and commercialize certain products in the United States. Through the original collaboration with Intrexon, the Company is exploring the use of genetically modified fibroblast cells to treat patients with collagen deficient diseases. The Company is working to genetically modify fibroblasts with the gene to produce collagen VII to treat patients with recessive dystrophic epidermolysis bullosa (RDEB). This development concept utilizes genetically modified fibroblasts to up-regulate and produce collagen VII in a controlled manner for localized or systematic treatment of RDEB.

On June 28, 2013, the Company and Intrexon entered into a First Amendment (Amendment) to the parties’ Channel Agreement. The Amendment broadens the existing collaboration to include potential treatments based on engineered autologous fibroblast cells for the localized treatment of autoimmune and inflammatory disorders including morphea (localized scleroderma), cutaneous eosinophilias and moderate to severe psoriasis.

Pursuant to the Channel Agreement and Amendment, the Company engaged Intrexon for support services for the development of new products covered under the Channel Agreement and Amendment and will reimburse Intrexon for its fully-loaded cost for time and materials for transgenes, cell processing, or other work performed by Intrexon for such research and manufacturing. For the three and nine months ended September 30, 2013, the Company incurred expenses of $1.4 million and $2.4 million, respectively, for work performed. The Company will pay quarterly cash royalties on improved products equal to one-third of cost of goods sold savings less any such savings developed by the Company outside of the Channel Agreement or Amendment. On all other developed products, the Company will pay Intrexon quarterly cash royalties of 7% on aggregate annualized net sales up to $100 million, and 14% on aggregate annualized net sales greater than $100 million. Sales from the Company’s currently marketed products (including new indications) are not subject to royalty payments unless they are improved upon through the Channel Agreement.

As consideration for the Channel Agreement, the Company issued 1,317,520 shares of its common stock. This resulted in a non-cash expense of approximately $6.9 million that was included in research and development expense in the fourth quarter of 2012, due to the recording of the fair value of the issued shares of common stock valued at $5.25 per share, issued to Intrexon as consideration for the Channel Agreement.

In connection with the execution of the Amendment, on June 28, 2013, the Company entered into a Supplemental Stock Issuance Agreement with Intrexon – see Note 11.