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Collaborative Arrangements and Licensing Agreements
12 Months Ended
Dec. 31, 2015
Collaborative Arrangements and Licensing Agreements [Abstract]  
Collaborative Arrangements and Licensing Agreements
6. Collaborative Arrangements and Licensing Agreements

Strategic Partnerships

AstraZeneca

Cardiometabolic and Renal Diseases Collaboration

In July 2015, we and AstraZeneca formed a strategic collaboration to discover and develop antisense therapies for treating cardiovascular and metabolic diseases primarily focused on targets in the kidney, and renal diseases. As part of the agreement, we granted AstraZeneca an exclusive license to a preclinical program and the option to license a drug for each target advanced under this research collaboration. Upon acceptance of a drug development candidate, AstraZeneca will be responsible for all further global development, regulatory and commercialization activities for such drug. Under the terms of the agreement, we received a $65 million upfront payment. Since this agreement has multiple elements, we evaluated the deliverables in this arrangement and determined that none of the deliverables have stand-alone value because of the early stage of research for this collaboration. Therefore, we concluded there is one unit of accounting and we are amortizing the $65 million upfront payment through August 2021. We are eligible to receive license fees and substantive milestone payments of up to more than $4 billion, including up to $1.1 billion for the achievement of development milestones and up to $2.9 billion for regulatory milestones. We will earn the next milestone payment of $25 million under this collaboration upon identification of the first drug candidate to move into development. In addition, we are eligible to receive tiered royalties up to the low teens on sales from any product that AstraZeneca successfully commercializes under this collaboration agreement.

Oncology Collaboration

In December 2012, we entered into a collaboration agreement with AstraZeneca to discover and develop antisense drugs for cancer. As part of the agreement, we granted AstraZeneca an exclusive license to develop and commercialize IONIS-STAT3-2.5Rx for the treatment of cancer and an option to license up to three anti-cancer drugs under a separate research program. AstraZeneca is responsible for all global development, regulatory and commercialization activities for IONIS-STAT3-2.5Rx. We and AstraZeneca have evaluated IONIS-STAT3-2.5Rx in patients with advanced metastatic hepatocellular carcinoma and advanced lymphoma. AstraZeneca is evaluating IONIS-STAT3-2.5Rx in combination with MEDI4736, AstraZeneca's investigational anti-PD-L1 drug, in patients with head and neck cancer. For the research program, we are responsible for identifying a development candidate for each of the three anti-cancer research programs. AstraZeneca has the option to license drugs resulting from each of the three anti-cancer research programs, and if AstraZeneca exercises its option for a drug, it will be responsible for all further global development, regulatory and commercialization activities for such drug.

Under the terms of the agreement, we received $31 million in upfront payments. We recorded revenue of $11.5 million upon receipt of these payments and we have amortized $11.9 million into revenue as we have performed development activities under this collaboration. We are recognizing the remaining $7.6 million related to the option to license three drugs under the research program through December 2016. In January 2016, we and AstraZeneca amended the agreement for the research program. Under the amended terms of the agreement, we can earn an additional $5 million in milestone payments for advancing a drug under our research program.

We are eligible to receive milestone payments and license fees from AstraZeneca as programs advance in development. In addition, we are eligible to receive tiered royalties up to the low to mid-teens on sales from any drugs resulting from these programs. If AstraZeneca successfully develops IONIS-STAT3-2.5Rx and the three drugs under the research program, we could receive license fees and substantive milestone payments of nearly $750 million, including up to $226 million for the achievement of development milestones and up to $485 million for the achievement of regulatory milestones. From inception through December 2015, we have received $63.5 million in milestone payments and upfront fees under this oncology collaboration. We will earn the next milestone payment of $15 million if we further advance a cancer drug under our research program with AstraZeneca.

Each of our agreements with AstraZeneca will continue until the expiration of all payment obligations under the applicable agreement. In addition, the agreement, or any program under the applicable agreement, may terminate early under the following situations:

AstraZeneca may terminate the agreement or any program at any time by providing written notice to us;
AstraZeneca may terminate the agreement or any program by providing written notice if we undergo a change of control with a third party; and
Either we or AstraZeneca may terminate the agreement or any program by providing written notice to the other party upon the other party's uncured failure to perform a material obligation under the agreement, or the entire agreement if the other party becomes insolvent.

During 2015, 2014 and 2013 we earned revenue of $6.4 million, $27.7 million and $29.1 million, respectively, from our relationship with AstraZeneca, which represented two percent, 13 percent and 20 percent, respectively, of our total revenue for those periods. Our balance sheets at December 31, 2015 and 2014 included deferred revenue of $63.3 million and $4.4 million, respectively, related to our relationship with AstraZeneca.

Biogen

We have established four strategic collaborations with Biogen focused on using antisense technology to advance the treatment of neurological and neuromuscular disorders. These collaborations combine our expertise in creating antisense drugs with Biogen's expertise in developing therapies for neurological disorders. We and Biogen are currently developing six drugs to treat neurological diseases under these collaborations, including nusinersen, IONIS-DMPK-2.5Rx, IONIS-SOD1Rx, formerly ISIS-BIIB3Rx, and three drugs to treat undisclosed neurodegenerative diseases, IONIS-BIIB4Rx, IONIS-BIIB5Rx, and IONIS-BIIB6Rx. In addition to these six drugs, we and Biogen are evaluating numerous additional targets for the development of drugs to treat neurological diseases.

Nusinersen

In January 2012, we entered into a collaboration agreement with Biogen to develop and commercialize nusinersen for the treatment of SMA. We are currently conducting a Phase 3 study evaluating nusinersen in infants with SMA, which we expect to be fully enrolled in the second quarter of 2016. We are also conducting a Phase 3 study evaluating nusinersen in children with SMA, for which we have completed target enrollment. In addition, we are evaluating nusinersen in two Phase 2 open-label studies, one in children with SMA and one in infants with SMA. Patients from all of these studies continue to have access to nusinersen through open-label extension dosing. We are responsible for completing the studies we are currently conducting. Biogen has the option to license nusinersen. If Biogen exercises its option, it will pay us a license fee and will assume all other global development, regulatory and commercialization responsibilities. Biogen may exercise this option upon completion of and data review of the first successful Phase 2/3 trial or completion of both Phase 2/3 trials. An amendment in December 2014 provided for additional opt-in scenarios, based on the filing or the acceptance of a new drug application or marketing authorization application with the FDA or EMA. In June 2015, we and Biogen amended the development plan for nusinersen to include conducting the open-label extension study for the Phase 3 studies in infants and children. As a result of the change to the development plan, we earned an $11 million milestone payment when we initiated the Phase 3 open-label extension study and we are eligible to earn additional milestone and other payments.

Under the terms of the agreement, we received an upfront payment of $29 million, which we are amortizing through February 2017. We are also eligible to receive a license fee, milestone payments and tiered royalties up to the mid-teens on any sales of nusinersen. Over the term of the collaboration, we are eligible to receive up to $346 million in a license fee and payments, including up to $121 million in substantive milestone and other payments associated with the clinical development of nusinersen prior to licensing and up to $150 million in substantive milestone payments if Biogen achieves pre-specified regulatory milestones. From inception through December 2015, we have received more than $130 million in milestone payments and upfront fees for advancing nusinersen. In 2015, we earned $40 million for advancing the studies we are conducting in infants and children with SMA. In addition we earned a $2 million milestone payment in February 2016 for further advancing the Phase 3 study of nusinersen in infants. We will earn the next milestone payment of $2 million if we further advance the Phase 3 study of nusinersen in infants.

IONIS-DMPK-2.5Rx

In June 2012, we and Biogen entered into a second and separate collaboration agreement to develop and commercialize a novel antisense drug, IONIS-DMPK-2.5Rx, targeting DMPK for the treatment of myotonic dystrophy type 1, or DM1. We are responsible for global development of the drug through the completion of the first Phase 2 clinical trial. We are currently evaluating IONIS-DMPK-2.5Rx in a Phase 1/2 clinical study in patients with DM1. Biogen has the option to license the drug through the completion of the first Phase 2 trial. If Biogen exercises its option, it will assume all other global development, regulatory and commercialization responsibilities. Under the terms of the agreement, we received an upfront payment of $12 million, which we are amortizing through October 2018. In June 2015, we and Biogen amended the development plan for IONIS-DMPK-2.5Rx under which we are eligible to earn additional milestone payments of up to $4.2 million for further advancing the Phase 1/2 study of IONIS-DMPK-2.5Rx. Over the term of the collaboration, we are eligible to receive up to $263 million in a license fee and substantive milestone payments, including up to $63 million in development milestone payments and up to $130 million in milestone payments if Biogen achieves pre-specified regulatory milestones. In addition, we are eligible to receive tiered royalties up to the mid-teens on any sales of IONIS-DMPK-2.5Rx. From inception through December 2015, we have received nearly $39 million in milestone payments and upfront fees for advancing IONIS-DMPK-2.5Rx, including a $2.8 million milestone payment we earned in November 2015. We will earn the next milestone payment of $1.4 million if we further advance the Phase 1/2 study for IONIS-DMPK-2.5Rx and we will earn a $35 million milestone payment if we initiate a Phase 2 study for IONIS-DMPK-2.5Rx.

Neurology

In December 2012, we and Biogen entered into a third and separate collaboration agreement to develop and commercialize novel antisense drugs to up to three targets to treat neurological or neuromuscular diseases. We are responsible for the development of each of the drugs through the completion of the initial Phase 2 clinical study for such drug. Biogen has the option to license a drug from each of the three programs through the completion of the first Phase 2 study for each program. We are currently advancing IONIS-BIIB4Rx under this collaboration. If Biogen exercises its option for a drug, it will assume all further global development, regulatory and commercialization responsibilities for that drug. Under the terms of the agreement, we received an upfront payment of $30 million, which we are amortizing through December 2020. Over the term of the collaboration, we are eligible to receive up to $259 million in a license fee and substantive milestone payments per program. We are eligible to receive up to $59 million in development milestone payments to support research and development of each program, including amounts related to the cost of clinical trials. We are also eligible to receive up to $130 million in milestone payments per program if Biogen achieves pre-specified regulatory milestones. In addition, we are eligible to receive tiered royalties up to the mid-teens on sales from any drugs resulting from each of the three programs. In February 2015, we earned a $10 million milestone payment when we initiated an IND-enabling toxicology study of IONIS-BIIB4Rx, a drug for an undisclosed target designed to treat a neurodegenerative disease. From inception through December 2015, we have received $40 million in milestone payments and upfront fees under this collaboration, not including the $3 million milestone payment we earned in February 2016. We will earn the next milestone payment of up to $10 million for the continued development of IONIS-BIIB4Rx.

Strategic Neurology

In September 2013, we and Biogen entered into a fourth and separate collaboration agreement, which is a long-term strategic relationship focused on applying antisense technology to advance the treatment of neurological diseases. As part of the collaboration, Biogen gained exclusive rights to the use of our antisense technology to develop therapies for neurological diseases and has the option to license drugs resulting from this collaboration. The exclusivity for neurological diseases will last through September 2019, and may be extended for any drug development programs being pursued under the collaboration. We will usually be responsible for drug discovery and early development of antisense drugs and Biogen will have the option to license antisense drugs after Phase 2 proof of concept. We are currently advancing three drugs, IONIS-SOD1Rx, IONIS-BIIB5Rx, and IONIS-BIIB6Rx under this collaboration. If Biogen exercises its option for a drug, it will assume all further global development, regulatory and commercialization responsibilities for that drug. Biogen will be responsible for all of the drug discovery and development activities for drugs using other modalities.

Under the terms of the agreement, we received an upfront payment of $100 million and are eligible to receive milestone payments, license fees and royalty payments for all drugs developed through this collaboration, with the specific amounts dependent upon the modality of the molecule advanced by Biogen. If we have a change of control during the first six years of the collaboration, we may be required to refund Biogen a portion of the $100 million upfront payment, with the amount of the potential refund decreasing ratably as we progress through the initial six-year term of the collaboration. We are amortizing the $100 million upfront payment through September 2019. Because the amortization period for the upfront payment will never be less than the initial six-year term of the collaboration, the amount of revenue we recognize from the upfront payment will never exceed the amount that Biogen could potentially require us to refund.

For each antisense molecule that is chosen for drug discovery and development under this collaboration, we are eligible to receive up to approximately $260 million in a license fee and substantive milestone payments. We are eligible to receive up to approximately $60 million for the achievement of research and development milestones, including amounts related to the cost of clinical trials, and up to $130 million for the achievement of regulatory milestones. In addition, we are eligible to receive tiered royalties up to the mid-teens on sales from any antisense drugs developed under this collaboration. If other modalities are chosen, such as small molecules or monoclonal antibodies, we are eligible to receive up to $90 million in substantive milestone payments, including up to $35 million for the achievement of research and development milestones and up to $55 million for the achievement of regulatory milestones. In addition, we are eligible to receive tiered single-digit royalties on sales from any drugs using non-antisense modalities developed under this collaboration. From inception through December 2015, we have received $135 million in milestone payments and upfront fees under this collaboration. In December 2015, we earned a $5 million milestone payment for validating a fifth target under this collaboration. We will earn the next milestone payment of up to $10 million if we choose another target to advance under this collaboration.

Each of our agreements with Biogen will continue until the earlier of the date all of Biogen's options to obtain the exclusive licenses under the applicable agreement expire unexercised or, if Biogen exercises its option, until the expiration of all payment obligations under the applicable agreement. In addition, each agreement, or any program under an agreement, may terminate early under the following situations:

Biogen may terminate the agreement or any program at any time by providing written notice to us;
Under specific circumstances, if we are acquired by a third party with a product that directly competes with a compound being developed under the agreement, Biogen may terminate the affected program by providing written notice to us;
If, within a specified period of time, any required clearance of a transaction contemplated by an agreement under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, is not received, then either we or Biogen may terminate the affected program by providing written notice to the other party; and
Either we or Biogen may terminate any program by providing written notice to the other party upon the other party's uncured failure to perform a material obligation under the agreement with respect to the affected program, or the entire agreement if the other party becomes insolvent.

During 2015, 2014 and 2013, we earned revenue of $106.2 million, $123.2 million and $37.0 million, respectively, from our relationship with Biogen, which represented 37 percent, 58 percent and 25 percent, respectively, of our total revenue for those periods. Our balance sheets at December 31, 2015 and 2014 included deferred revenue of $91.6 million and $118.1 million, respectively, related to our relationship with Biogen.

Research, Development and Commercialization Partners

Bayer

In May 2015, we entered into an exclusive license agreement with Bayer to develop and commercialize IONIS-FXIRx for the prevention of thrombosis. We are responsible for completing our ongoing Phase 2 study of IONIS-FXIRx in patients with end-stage renal disease on hemodialysis. Bayer is responsible for all other development and commercialization activities for IONIS-FXIRx.

Under the terms of the agreement, we are eligible to receive $155 million in near-term payments, including a $100 million upfront payment we received in the second quarter of 2015 and a $55 million milestone payment that we are eligible to receive upon advancement of the program following the Phase 2 study in patients with end-stage renal disease on hemodialysis. We recorded revenue of $91.2 million related to the license for IONIS-FXIRx in June 2015 and we are recognizing the remaining $8.8 million related to the ongoing development activities for IONIS-FXIRx through July 2016.

Over the term of the agreement, we are eligible to receive up to $375 million in license fees, substantive milestone payments and other payments, including up to $120 million for the achievement of development milestones and up to $110 million for the achievement of commercialization milestones. In addition, we are eligible to receive tiered royalties in the low-to-high 20 percent range on gross margins of IONIS-FXIRx. We will earn the next milestone payment of $55 million upon the advancement of the program following the ongoing Phase 2 study of IONIS-FXIRx in patients with end-stage renal disease on hemodialysis.

Our agreement with Bayer will continue until the expiration of all payment obligations under the agreement. In addition, the agreement, or any program under the agreement, may terminate early under the following situations:

Bayer may terminate the agreement or any program at any time by providing written notice to us;
Either we or Bayer may terminate the agreement or any program by providing written notice to the other party upon the other party’s uncured failure to perform a material obligation under the agreement, or the entire agreement if the other party becomes insolvent.

During 2015 we earned revenue of $93.4 million, from our relationship with Bayer, which represented 33 percent of our total revenue for the period. Our consolidated balance sheet at December 31, 2015 included deferred revenue of $6.7 million related to our relationship with Bayer.

Genzyme Corporation, a Sanofi company

In January 2008, we entered into an alliance with Genzyme focused on the licensing and co-development of Kynamro. The license and co-development agreement provided Genzyme with exclusive worldwide rights for all therapeutic purposes to our patents and know-how related to Kynamro. The transaction included a $175 million licensing fee and a $150 million equity investment by Genzyme in our stock. From inception through December 2015, we have received $375 million in a license fee, milestone payments and an equity investment for advancing Kynamro in development. In January 2016, we terminated our license agreement with Genzyme.

During 2015 and 2014, we did not earn any revenue from our relationship with Genzyme. During 2013, we earned revenue of $32.5 million from our relationship with Genzyme, which represented 22 percent of our total revenue for that year.

GSK

In March 2010, we entered into an alliance with GSK using our antisense drug discovery platform to discover and develop new drugs against targets for rare and serious diseases, including infectious diseases and some conditions causing blindness. Our alliance currently comprises five drugs in development, including our Phase 3 drug IONIS-TTRRx. GSK has the exclusive option to license drugs resulting from this alliance at Phase 2 proof-of-concept for a license fee. If GSK exercises its exclusive option for any drugs resulting from this alliance, it will be responsible for all further global development, regulatory and commercialization activities for such drug. Under the terms of the agreement, we received $38 million in upfront and expansion payments, which we are amortizing through March 2017.

In October 2012, we and GSK amended the original agreement to reflect an accelerated clinical development plan for IONIS-TTRRx. We are currently evaluating IONIS-TTRRx in a broad Phase 3 development program. We have completed target enrollment in the Phase 3 study in patients with FAP. From inception through December 2015, we have earned $60 million from GSK related to the development of IONIS-TTRRx, primarily in milestone payments. We are also eligible to earn an additional $10 million pre-licensing milestone payment associated with our ongoing study of IONIS-TTRRx. In addition, under the amended agreement, we and GSK increased the regulatory and commercial milestone payments we can earn should IONIS-TTRRx receive marketing authorization and meet pre-agreed sales targets. In September 2015, we and GSK amended the development plan for IONIS-TTRRx to support the Phase 3 cardiomyopathy study, which GSK plans to conduct.

In addition to IONIS-TTRRx, we have four drugs in development with GSK. We are developing two antisense drugs we designed to reduce the production of viral proteins associated with hepatitis B virus, or HBV, infection; IONIS-HBVRx and IONIS-HBV-LRx, a follow-on drug using our LICA technology. We are also developing IONIS-GSK4-LRx and IONIS-RHO-2.5Rx, which are antisense drugs we designed to treat ocular diseases.

Under our agreement, if GSK successfully develops all five drugs for one or more indications and achieves pre-agreed sales targets, we could receive license fees and substantive milestone payments of more than $1.0 billion, including up to $183.5 million for the achievement of development milestones, up to $363.5 million for the achievement of regulatory milestones and up to $348 million for the achievement of commercialization milestones. Through December 2015, we have received $135 million in milestone payments and upfront fees under this alliance with GSK, not including a $1.5 million payment we earned in January 2016 when GSK further advanced IONIS-HBV-LRx. We will earn the next milestone payment of up to $5 million if we further advance a program under this collaboration. In addition, we are eligible to receive tiered royalties up to the mid-teens on sales from any product that GSK successfully commercializes under this alliance.

Our alliance with GSK will continue until the earlier of the date that all of GSK's options to obtain the exclusive licenses under the agreement expire unexercised or, if GSK exercises its option, until the expiration of all payment obligations under the agreement. In addition, the agreement, or any program under the agreement, may terminate early under the following situations:

GSK may terminate any program, other than the IONIS-TTRRx program, at any time by providing written notice to us;
GSK may terminate the IONIS-TTRRx program by providing written notice to us after reviewing specific data from the Phase 3 study for the program; and
Either we or GSK may terminate any program by providing written notice to the other party upon the other party's uncured failure to perform a material obligation under the agreement with respect to the affected program, or the entire agreement if the other party becomes insolvent.

During 2015, 2014 and 2013, we earned revenue of $33.3 million, $37.3 million and $35.3 million, respectively, from our relationship with GSK, which represented 12 percent, 17 percent and 24 percent, respectively, of our total revenue for those years. Our balance sheets at December 31, 2015 and 2014 included deferred revenue of $4.9 million and $10.0 million, respectively, related to our relationship with GSK.

Janssen Biotech, Inc., a pharmaceutical company of Johnson & Johnson

In December 2014, we entered into a collaboration agreement with Janssen Biotech, Inc. to discover and develop antisense drugs that can be locally administered, including oral delivery, to treat autoimmune disorders of the gastrointestinal tract. Janssen has the option to license drugs from us through the designation of a development candidate for up to three programs. Prior to option exercise we are responsible for the discovery activities to identify a development candidate. If Janssen exercises an option for one of the programs, it will be responsible for the global development, regulatory and commercial activities under that program. Under the terms of the agreement, we received $35 million in upfront payments, which we are amortizing through December 2018. We are eligible to receive nearly $800 million in license fees and substantive milestone payments for these programs, including up to $175 million for the achievement of development milestones, up to $420 million for the achievement of regulatory milestones and up to $180 million for the achievement of commercialization milestones. In addition, we are eligible to receive tiered royalties up to the near teens on sales from any drugs resulting from this collaboration. We will earn the next milestone payment of $5 million if Janssen chooses another target to advance under this collaboration.

Our agreement with Janssen will continue until the earlier of the date that all of Janssen’s options to obtain the exclusive licenses under the agreement expire unexercised or, if Janssen exercises its option, until the expiration of all payment obligations under the agreement. In addition, the agreement, or any program under the agreement, may terminate early under the following situations:

Janssen may terminate the agreement or any program at any time by providing written notice to us; and
Either we or Janssen may terminate any program by providing written notice to the other party upon the other party’s uncured failure to perform a material obligation under the agreement, or the entire agreement if the other party becomes insolvent.

During 2015 we earned revenue of $8.9 million from our relationship with Janssen. During 2014 and 2013 we did not earn any revenue from our relationship with Janssen. Our balance sheet at December 31, 2015 included deferred revenue of $26.3 million related to our relationship with Janssen.

Roche

In April 2013, we formed an alliance with Hoffman-La Roche Inc. and F. Hoffmann-La Roche Ltd., collectively Roche, to develop treatments for Huntington's disease, or HD, based on our antisense technology. Roche has the option to license the drugs from us through the completion of the first Phase 1 trial. Under the agreement, we are responsible for the discovery and development of an antisense drug targeting huntingtin, or HTT, protein. We are currently evaluating a drug targeting HTT, IONIS-HTTRx, in a Phase 1/2 clinical study in patients with early stage HD. If Roche exercises its option, it will be responsible for global development, regulatory and commercialization activities for any drug arising out of the collaboration. We are also working collaboratively with Roche on the discovery of an antisense drug utilizing Roche's "brain shuttle" program. Under the terms of the agreement, we received an upfront payment of $30 million in April 2013, which we are amortizing through January 2017. We are eligible to receive up to $362 million in a license fee and substantive milestone payments including up to $67 million for the achievement of development milestones, up to $170 million for the achievement of regulatory milestones and up to $80 million for the achievement of commercialization milestones. In addition, we are eligible to receive up to $136.5 million in milestone payments for each additional drug successfully developed and up to $50 million in commercial milestone payments if a drug using Roche's proprietary brain shuttle technology is successfully commercialized. We are also eligible to receive tiered royalties up to the mid-teens on any product sales of drugs resulting from this alliance. Through December 2015, we have received $52 million in milestone payments and upfront fees under this alliance with Roche. We will earn the next milestone payment of $10 million if Roche initiates a Phase 2 trial for IONIS-HTTRx.

Our alliance with Roche will continue until the earlier of the date Roche's option to obtain the exclusive license under the agreement expires unexercised or, if Roche exercises its option, until the expiration of all payment obligations under the agreement. In addition, the agreement may terminate early under the following situations:

Roche may terminate the agreement at any time by providing written notice to us;
Either we or Roche may terminate the agreement by providing written notice to the other party upon the other party's uncured failure to perform a material obligation under the agreement or if the other party becomes insolvent; and
Either we or Roche may terminate the brain shuttle program if at least one development candidate is not designated under such program by a mutually agreed deadline.

During 2015, 2014 and 2013, we earned revenue of $31.2 million, $8.7 million and $5.1 million, respectively from our relationship with Roche, which represented 11 percent, four percent and three percent, respectively, of our total revenue for those years. Our balance sheet at December 31, 2015 and 2014 included deferred revenue of $8.8 million and $17.0 million, respectively related to our relationship with Roche.

Satellite Company Collaborations

Achaogen, Inc.

In 2006, we exclusively licensed to Achaogen, Inc. specific know-how, patents and patent applications relating to aminoglycosides. In exchange, Achaogen agreed to certain payment obligations related to aminoglycosides Achaogen developed. Achaogen is developing plazomicin, an aminoglycoside Achaogen discovered based on the technology we licensed to Achaogen. In connection with the license, Achaogen issued to us $1.5 million of Achaogen Series A Preferred Stock. If Achaogen successfully develops and commercializes two drugs under our agreement, we will receive payments totaling up to $49.3 million for the achievement of key clinical, regulatory and sales events. Through December 2015, we have earned $7 million in milestone payments from Achaogen, including a $4 million milestone payment we earned in September 2014 when Achaogen initiated a Phase 3 study of plazomicin in patients with serious multi-drug resistant, gram-negative bacterial infections. We will earn the next milestone payment of $7.5 million if Achaogen obtains regulatory approval for plazomicin in a major market. We are also eligible to receive royalties on sales of drugs resulting from the program. Achaogen is solely responsible for the continued development of plazomicin.

During 2015 and 2013, we did not earn any revenue from our relationship with Achaogen. During 2014 we earned revenue of $4 million from our relationship with Achaogen and we sold all of the Achaogen stock we owned resulting in net proceeds of $1.3 million.

Alnylam Pharmaceuticals, Inc.

In March 2004, we entered into an alliance with Alnylam to develop and commercialize RNAi therapeutics. Under the terms of the agreement, we exclusively licensed to Alnylam our patent estate relating to antisense motifs and mechanisms and oligonucleotide chemistry for double-stranded RNAi therapeutics in exchange for a $5 million technology access fee, participation in fees from Alnylam’s partnering programs, as well as future milestone and royalty payments from Alnylam. For each drug Alnylam develops under this alliance, we may receive up to $3.4 million in milestone payments, including up to $1.1 million for the achievement of development milestones and $2.3 million for regulatory milestones. We will earn the next milestone payment of $0.4 million if Alnylam initiates a Phase 1 study for a drug in Alnylam’s pipeline. We also have the potential to earn royalties on drug sales and a portion of payments that Alnylam receives from licenses of our technology it grants to its partners plus royalties. We retained rights to a limited number of double-stranded RNAi therapeutic targets and all rights to single-stranded RNAi, or ssRNAi, therapeutics.

In turn, Alnylam nonexclusively licensed to us its patent estate relating to antisense motifs and mechanisms and oligonucleotide chemistry to research, develop and commercialize single-stranded antisense therapeutics, ssRNAi therapeutics, and to research double-stranded RNAi compounds. We also received a license to develop and commercialize double-stranded RNAi drugs targeting a limited number of therapeutic targets on a nonexclusive basis. If we develop or commercialize an RNAi-based drug using Alnylam’s technology, we will pay Alnylam up to $3.4 million in milestone payments for specified development and regulatory events, plus royalties. To date, we do not have an RNAi-based drug in development.

In 2015, we and Alnylam entered into an alliance in which we formed an intellectual property cross-license under which we and Alnylam each obtained exclusive license rights to four therapeutic programs. Alnylam granted us an exclusive, royalty-bearing license to its chemistry, RNA targeting mechanism and target-specific intellectual property for oligonucleotides against four targets. In exchange, we granted Alnylam an exclusive, royalty-bearing license to our chemistry, RNA targeting mechanism and target-specific intellectual property for oligonucleotides against four targets. Alnylam also granted us a royalty-bearing, non-exclusive license to new platform technology arising from May 2014 through April 2019 for single-stranded antisense therapeutics. In turn, we granted Alnylam a royalty-bearing, non-exclusive license to new platform technology arising from May 2014 through April 2019 for double-stranded RNAi therapeutics. Through December 2015, we have received nearly $70 million from Alnylam.

During 2015, 2014 and 2013, we earned revenue from our relationship with Alnylam totaling $1.3 million, $9.9 million and $1.5 million, respectively.

Antisense Therapeutics Limited

In 2001 we licensed ATL1102 and ATL1103 to ATL, an Australian company publicly traded on the Australian Stock Exchange. ATL is currently undertaking a chronic toxicology study in primates to support a potential Phase 2b trial of ATL1102 in patients with multiple sclerosis, or MS. In addition, ATL is currently developing ATL1103 for growth and sight disorders. We are eligible to receive royalties on sales of ATL1102 and ATL1103. We may also receive a portion of the fees ATL receives if it licenses ATL1102 or ATL1103. At December 31, 2015 and 2014, we owned less than ten percent of ATL’s equity. During 2015, 2014 and 2013, we did not earn any revenue from our relationship with ATL. 

Atlantic Pharmaceuticals Limited

In March 2007, we licensed alicaforsen to Atlantic Pharmaceuticals, a UK-based specialty pharmaceutical company founded in 2006. Atlantic Pharmaceuticals is developing alicaforsen for the treatment of ulcerative colitis, or UC, and other inflammatory diseases. Atlantic Pharmaceuticals is initially developing alicaforsen for pouchitis, a UC indication, followed by UC and other inflammatory diseases. In exchange for the exclusive, worldwide license to alicaforsen, we received a $2 million upfront payment from Atlantic Pharmaceuticals in the form of equity. Under the agreement, we could receive milestone payments totaling up to $1.4 million for the achievement of regulatory milestones for multiple indications. We will earn the next milestone payment of $0.6 million if Atlantic Pharmaceuticals submits an NDA for alicaforsen with the FDA. In 2010, Atlantic Pharmaceuticals began supplying alicaforsen under international named patient supply regulations for patients with inflammatory bowel disease, or IBD, for which we receive royalties.

In 2010 and 2013, we agreed to sell Atlantic Pharmaceuticals alicaforsen drug substance in return for shares of Atlantic Pharmaceuticals’ common stock. Additionally, in 2013 we received an advance payment in the form of equity for the initial royalties that we will earn from Atlantic Pharmaceuticals. We recorded a full valuation allowance for all of the equity we received from Atlantic Pharmaceuticals, including the upfront payment, because realization of value from the equity is uncertain. At December 31, 2015 and 2014, we owned approximately 11 percent and 12 percent, respectively, of Atlantic Pharmaceuticals’ equity. We earned $0.7 million related to royalties and sales of drug substance in 2013. Because the payments were made in equity, we did not record any revenue. During 2015 and 2014, our revenue was negligible from our relationship with Atlantic Pharmaceuticals.

OncoGenex Technologies Inc., a subsidiary of OncoGenex Pharmaceuticals Inc.

Custirsen

In November 2001, we established a drug development collaboration with OncoGenex, a biotechnology company committed to the development of cancer therapeutics for patients with drug resistant and metastatic cancers, to co-develop and commercialize custirsen, an anti-cancer antisense drug that targets clusterin. OncoGenex is currently evaluating custirsen in two Phase 3 studies. In July 2008, we and OncoGenex amended the co-development agreement pursuant to which OncoGenex became solely responsible for the costs, development and commercialization of custirsen. In exchange, OncoGenex agreed to pay us royalties on sales of custirsen and to share consideration it receives from licensing custirsen to a third party, except for consideration OncoGenex receives for the fair market value of equity and reimbursement of research and development expenses. Under the amended agreement, we assigned to OncoGenex our rights in the patents claiming the composition and therapeutic methods of using custirsen and granted OncoGenex a worldwide, nonexclusive license to our know-how and patents covering our core antisense technology and manufacturing technology solely for use with custirsen. In addition, we agreed that so long as OncoGenex or its commercialization partner is using commercially reasonable efforts to develop and commercialize custirsen, we will not research, develop or commercialize an antisense compound designed to modulate clusterin. The amended agreement will continue until OncoGenex or its commercialization partner is no longer developing or commercializing custirsen or until we terminate the agreement for OncoGenex’s uncured failure to make a payment required under the agreement.

OGX-225

In August 2003, we and OncoGenex entered into a second and separate agreement for the development of an antisense anti-cancer drug, OGX-225. OncoGenex is responsible for all development costs and activities. OncoGenex issued to us $0.8 million of OncoGenex securities as payment for an upfront fee. In addition, OncoGenex will pay us milestone payments totaling up to $3.5 million for the achievement of key development and regulatory milestones, including up to $1.5 million for the achievement of development milestones and up to $2 million for the achievement of regulatory milestones. In addition, we are eligible to receive royalties on future product sales of OGX-225. As of December 31, 2015, OncoGenex had not achieved any milestone events related to OGX-225. We will earn the next milestone payment of $0.5 million if OncoGenex initiates a Phase 2 study for OGX-225.

Apatorsen

In January 2005, we entered into a third and separate agreement with OncoGenex to allow for the development of an additional antisense anti-cancer drug, apatorsen. OncoGenex and collaborators are evaluating apatorsen in multiple Phase 2 studies in patients with cancer. OncoGenex is responsible for all development costs and activities. OncoGenex will pay us milestone payments totaling up to $5.8 million for the achievement of key development and regulatory milestones, including up to $1.3 million for the achievement of development milestones and up to $4.5 million for the achievement of regulatory milestones. In addition, we are eligible to receive royalties on future product sales of the drug. We will earn the next milestone payment of $1.3 million if OncoGenex initiates a Phase 3 study for apatorsen.

During 2015, 2014 and 2013, we did not earn any revenue from our relationship with OncoGenex.

Regulus Therapeutics Inc.

In September 2007, we and Alnylam established Regulus as a company focused on the discovery, development and commercialization of microRNA-targeting therapeutics. We and Alnylam retain rights to develop and commercialize, on pre-negotiated terms, microRNA therapeutic products that Regulus decides not to develop either by itself or with a partner. Regulus is addressing therapeutic opportunities that arise from alterations in microRNA expression. Since microRNAs may act as master regulators of the genome, affecting the expression of multiple genes in a disease pathway, microRNA therapeutics define a new platform for drug discovery and development. MicroRNAs may also prove to be an attractive new tool for characterizing diseases. Regulus focuses its drug discovery and development efforts in numerous therapeutic areas, including cancer, fibrosis, and viral infections. Regulus currently has three drugs in clinical development. Regulus is evaluating RG-101 in a Phase 2 study in patients with HCV and in a Phase 1 study in patients with severe renal insufficiency or end-stage renal disease. Regulus is also evaluating RG-012 in a Phase 1 study to treat patients with Alport syndrome. Regulus and AstraZeneca are also evaluating RG-125 in a Phase 1 study for the treatment of NASH in patients with type 2 diabetes or pre-diabetes. We are eligible to receive royalties on any future product sales of these drugs.

During 2015, 2014 and 2013, we did not earn any revenue from our relationship with Regulus. During 2015 and 2014, we sold a portion of our Regulus stock, resulting in a gain of $20.2 million and $19.9 million, respectively, and proceeds of $25.5 million and $22.9 million, respectively. As of December 31, 2015, we owned approximately 2.8 million shares, approximately five percent of Regulus’ equity, with a net carrying value of $24.8 million.

External Project Funding

CHDI Foundation, Inc.

Starting in November 2007, CHDI provided financial and scientific support to our Huntington’s disease drug discovery program through our development collaboration. In April 2013, we formed an alliance with Roche to develop treatments for Huntington’s disease. Under the terms of our agreement with CHDI, we will reimburse CHDI for a portion of its support of our Huntington’s disease program out of the payments we receive from Roche. We made payments of $5 million and $3 million to CHDI in 2015 and 2013, respectively, associated with the progression of our Huntington’s disease program. If we achieve pre-specified milestones under our collaboration with Roche, we will make additional payments to CHDI up to $4 million, upon which our obligation to CHDI will be complete.

During 2015, our revenue earned from our relationship with CHDI was negligible and during 2014, we did not earn any revenue. During 2013, we earned revenue of $0.4 million from our relationship with CHDI.

The Ludwig Institute; Center for Neurological Studies

In October 2005, we entered into a collaboration agreement with the Ludwig Institute, the Center for Neurological Studies and researchers from these institutions to discover and develop antisense drugs for amyotrophic lateral sclerosis, or ALS, and other neurodegenerative diseases. Under this agreement, we agreed to pay the Ludwig Institute and Center for Neurological Studies modest milestone payments and royalties on any antisense drugs resulting from the collaboration.

Intellectual Property Sale and Licensing Agreements

Sales of Intellectual Property

Abbott Molecular Inc.

In January 2009, we sold our former subsidiary, Ibis Biosciences, to Abbott Molecular Inc., or AMI, pursuant to a stock purchase agreement for a total acquisition price of $215 million plus the earn out payments described below.

Under the stock purchase agreement, we are eligible to receive earn out payments from AMI equal to a percentage of Ibis’ revenue related to sales of Ibis systems, which AMI launched in 2014 as IRIDICA, including instruments, assay kits and successor products. Once cumulative net sales reach $140 million, and through December 31, 2025, we are eligible to earn out payments in any year that net sales exceed $50 million for the applicable year. The earn out payments will equal five percent of Ibis’ cumulative net sales over $140 million and up to $2.1 billion, and three percent of Ibis’ cumulative net sales over $2.1 billion. AMI may reduce these earn out payments from five percent to as low as 2.5 percent and from three percent to as low as 1.5 percent, respectively, upon the occurrence of certain events. During 2015, 2014 and 2013, we did not earn any revenue from our relationship with AMI.

In-Licensing Arrangements

University of Massachusetts

We have a license agreement with the University of Massachusetts under which we acquired an exclusive license to the University of Massachusetts’ patent rights related to nusinersen. If we successfully develop and commercialize a drug incorporating the technology we licensed from the University of Massachusetts, we will pay a milestone payment to the University of Massachusetts of $0.3 million for the achievement of a key regulatory milestone. In addition, we will pay the University of Massachusetts a portion of any sublicense revenue we receive in consideration for sublicensing its technology, and a royalty on sales of nusinersen in the United States if our product incorporates the technology we licensed from the University of Massachusetts.

Verva Pharmaceuticals Ltd.

We have a license agreement with Verva under which we acquired an exclusive license to Verva’s antisense patent rights related to IONIS-FGFR4Rx. If we successfully develop and commercialize a drug incorporating the technology Verva licensed to us, we will pay milestone payments to Verva totaling up to $6.1 million for the achievement of key patent, clinical, and regulatory milestones. If we convert our license from an exclusive license to a nonexclusive license we could significantly reduce the milestone payments due to Verva. In addition, we will also pay royalties to Verva on sales of IONIS-FGFR4Rx if our product incorporates the technology we licensed from Verva.

Cold Spring Harbor Laboratory

We have a collaboration and license agreement with the Cold Spring Harbor Laboratory under which we acquired an exclusive license to the Cold Spring Harbor Laboratory’s patent rights related to nusinersen. If we successfully develop and commercialize a drug incorporating the technology we licensed from the Cold Spring Harbor Laboratory, we will pay a portion of any sublicense revenue and post licensing milestone payments we receive in consideration for sublicensing the Cold Spring Harbor Laboratory’s technology up to $11.3 million and a royalty on sales of nusinersen if our product incorporates the technology we licensed from the Cold Spring Harbor Laboratory.

7. Segment Information and Concentration of Business Risk