Collaborative Agreements

6 Months Ended

Dec. 31, 2011

Collaborative Agreements

Collaborative Agreements

B. Collaborative Agreements

Amgen

In September 2000, the Company entered into a ten-year right-to-test agreement with Abgenix, Inc. which was later acquired by Amgen. Under this agreement, in September 2009 and November 2009, the Company entered into two development and license agreements with Amgen granting Amgen the exclusive right to use the Company’s maytansinoid TAP technology to develop anticancer therapeutics to specific antigen targets. Under the terms of the licenses, the Company received a $1 million upfront payment with each license taken. The Company has deferred the $1 million upfront payments and is recognizing these amounts as revenue ratably over the estimated period of its substantial involvement. In addition to the $1 million upfront payment under each license, the Company is entitled to earn milestone payments potentially totaling $34 million per target for each compound developed under the right-to-test agreement, as well as royalties on the commercial sales of any resulting products.  To date, Amgen has advanced two compounds under its current license agreements to having Investigational New Drug (IND) applications. In November 2011, the INDs for these two compounds became active, which triggered two $1 million milestone payments to the Company. These payments are included in license and milestone fees for the three and six months ended December 31, 2011. At the time of execution of this agreement, there was significant uncertainty as to whether these milestones would be achieved.  In consideration of this, as well as the Company’s past involvement in the research and manufacturing of this product candidate, these milestones were deemed substantive.

Sanofi

In July 2003, the Company entered into a broad collaboration agreement with Sanofi (formerly Aventis) to discover, develop and commercialize antibody-based anticancer therapeutics.  The collaboration agreement provides for certain payments based on the achievement of product candidate milestones and royalties on sales of any resulting products, if and when such sales commence. For the targets included in the collaboration at this time, the Company is entitled to milestone payments potentially totaling $21.5 million for each product candidate developed under this agreement. Through December 31, 2011, the Company has earned and received an aggregate of $17 million in milestone payments under this agreement for compounds covered under this agreement now or in the past, including a $3 million milestone payment earned related to the initiation of Phase II clinical testing of SAR3419 which is included in license and milestone fee revenue for the three and six months ended December 31, 2011, as well as a $1 million milestone payment earned in September 2010 related to the initiation of Phase I clinical testing of SAR566658 which is included in license and milestone fee revenue for the six months ended December 31, 2010.  At the time of execution of this agreement, there was significant uncertainty as to whether these milestones would be achieved.  In consideration of this, as well as the Company’s past involvement in the research and manufacturing of this product candidate, these milestones were deemed substantive.

In August 2008, Sanofi exercised its option under a separate 2006 agreement for expanded access to ImmunoGen’s TAP technology. The exercise of this option enables Sanofi to evaluate, with certain restrictions, the Company’s maytansinoid TAP technology with antibodies to targets that were not included in the existing research collaboration between the companies and to license the exclusive right to use the technology to develop products to specific targets on the terms in the 2006 agreement. ImmunoGen is entitled to earn upfront and milestone payments potentially totaling $32 million per target for each compound developed under the 2006 agreement, as well as royalties on the commercial sales of any resulting products. ImmunoGen also is entitled to manufacturing payments for any materials made on behalf of Sanofi. The Company received $3.5 million with the exercise of this option in August 2008, in addition to the $500,000 ImmunoGen received in December 2006 with the signing of the option agreement. The agreement had a three-year original term from the date of the exercise of the option and was renewed by Sanofi in August 2011for its final three-year term by payment of a $2 million fee. The Company has deferred the $2 million extension fee and is recognizing this amount as revenue over the three year period during which Sanofi can elect to exercise an option for a development and commercialization license.

Bayer HealthCare

In October 2008, the Company entered into a development and license agreement with Bayer HealthCare. The agreement grants Bayer HealthCare exclusive rights to use the Company’s maytansinoid TAP technology to develop and commercialize therapeutic compounds to the mesothelin target found on solid tumors. Bayer HealthCare is responsible for the research, development, manufacturing and marketing of any products resulting from the license. The Company received a $4 million upfront payment upon execution of the agreement, and—for each compound developed and marketed by Bayer HealthCare under this collaboration—the Company could potentially receive up to $170.5 million in milestone payments; additionally, the Company is entitled to receive royalties on the sales of any resulting products. Through December 31, 2011, the Company has earned and received an aggregate of $3 million in milestone payments under this agreement. At the time of execution of this agreement, there was significant uncertainty as to whether these milestones would be achieved.  In consideration of this, as well as the Company’s past involvement in the research and manufacturing of this product candidate, these milestones were deemed substantive.

The Company had previously deferred the $4 million upfront payment received and was recognizing this amount as revenue ratably over the estimated period of substantial involvement. The Company had previously estimated this development period would conclude at the end of non-pivotal Phase II testing.  During the first quarter of fiscal 2012, Bayer HealthCare initiated Phase I clinical testing of its product candidate.  In reaching this stage of clinical testing, Bayer HealthCare developed its own processes for manufacturing required clinical material and produced clinical material in its own manufacturing facility.  Considering that Bayer was able to accomplish this without significant reliance on the Company, and considering that the Company’s expected future involvement will be primarily supplying Bayer HealthCare with small quantities of cytotoxic agents for a limited period of time, the Company believes its period of substantial involvement will end prior to the completion of non-pivotal Phase II testing. As a result of this determination, beginning in September 2011, the Company is recognizing the balance of the upfront payment as revenue ratably through September 2012.  This change in estimate results in an increase to license and milestone fees of approximately $489,000 for the six months ending December 31, 2011 and $1.2 million for the fiscal year ended June 30, 2012 compared to amounts that would have been recognized pursuant to the Company’s previous estimate.

Lilly

In December 2011, the Company entered into an agreement with Lilly. The agreement initially provides Lilly with a research license to test the Company’s TAP technology with Lilly’s antibodies and an option to take exclusive development and commercialization licenses to use ImmunoGen’s TAP technology to develop therapeutic products for a specified number of individual antigen targets. The term of the research license is for three years.  The terms of the agreement require Lilly to exercise its option for the development and commercialization licenses by the end of the research term. The terms of each development and commercialization license will be governed by a separate agreement executed at the time each option is exercised. The Company is entitled to a $20 million upfront payment in connection with the execution of the agreement, and for each development and commercialization license for an antigen target, the Company is entitled to receive milestone payments potentially totaling approximately $200 million plus royalties on product sales, if any. The Company also is entitled to receive payments for research and development activities performed on behalf of Lilly. Lilly is responsible for the development, manufacturing and marketing of any products resulting from this agreement.

No license revenue has been recognized related to this agreement for the three-month period ended December 31, 2011 because none of the delivered elements, primarily the research license, had standalone value. The Company expects to begin to record revenue upon delivery of exclusive development and commercialization licenses to Lilly upon Lilly’s exercise of its options to such licenses. The Company does not control when, or if, Lilly will exercise its options for development and commercialization licenses. As a result, the Company cannot predict when it will recognize revenue.  Accordingly, the entire $20 million upfront payment is included in long-term deferred revenue at December 31, 2011.

Additional information on the agreements the Company has with these companies, as well as other companies, is described elsewhere in this Quarterly Report and in the Company’s 2011 Annual Report on Form 10-K.