3. License and Collaboration Agreements

Otsuka Pharmaceutical Co. Ltd

On December 22, 2014, the Company entered into a collaboration agreement (the “Collaboration Agreement”) with Otsuka Pharmaceutical Co., Ltd. (“Otsuka”) pursuant to which Otsuka will commercialize and further develop Iclusig in Japan, China, South Korea, Indonesia, Malaysia, the Philippines, Singapore, Taiwan, Thailand and Vietnam (the “Territory”).

Key provisions of the Collaboration Agreement include the following:

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The Company has granted an exclusive, non-assignable (except to affiliates) license to Otsuka to commercialize and distribute Iclusig in the Territory.

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The Company has granted a co-exclusive license to Otsuka to conduct research and development in the Territory.

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The Company will complete its ongoing pivotal trial of Iclusig in Japan and lead the preparation of the Japanese new drug application (the “JNDA”) on behalf of Otsuka and the Company.

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Otsuka is responsible for filing of the JNDA on behalf of Otsuka and the Company, which is expected to occur in 2015.

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The Company and Otsuka will form and participate on a joint development and commercialization committee (the “JDCC”) to oversee activities related to Iclusig in the Territory.

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The Company is responsible for manufacture and supply of Iclusig to Otsuka in either bulk form or in final packaged form, as requested by Otsuka.

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Otsuka is responsible for completion of final manufacturing, consisting of packaging and labeling of Iclusig for distribution in the Territory, as well as pricing and all other commercial activities by Otsuka within the Territory.

Following approvals in each country, Otsuka will market and sell Iclusig and record sales. Otsuka is not allowed to manufacture bulk product, but must purchase its supply from the Company. Otsuka will be responsible for medical affairs activities, determining pricing and reimbursement and all commercial activities in the Territory. With respect to the JDCC, each party has ultimate decision making authority with respect to a specified limited set of issues, and for all other issues, the matter must be resolved by consensus or by an expedited arbitration process.

In consideration for the licenses and other rights contained in the Collaboration Agreement, Otsuka paid the Company a non-refundable upfront payment of $77.5 million, less a refundable withholding tax in Japan of $15.8 million, and has agreed to pay the Company future milestone payments upon obtaining further regulatory approvals in the Territory. Otsuka will pay royalties based on a percentage of net sales in each country until the later of (i) the expiry date of the composition patent in each country, (ii) the expiration of any orphan drug exclusivity period or other statutory designation that provides similar exclusivity, or (iii) 10 years after the date of first commercial sale in such country. Otsuka will also pay for the supply of Iclusig purchased from the Company at a price based on a percentage of net sales in each country.

The Collaboration Agreement continues until the later of (x) the expiration of all royalty obligations in the Territory, or (y) the last sale by Otsuka in the Territory, or the last to expire patent in the Territory which is currently expected to be 2029. Under certain conditions, the Collaboration Agreement may be terminated by either party, in which case the Company would receive all rights to the regulatory filings related to Iclusig at our request, and the licenses granted to Otsuka would be terminated.

For accounting purposes, because Otsuka’s ability to access the value of the distribution rights in the license absent the delivery of the other elements of the arrangement, in particular the manufacturing deliverables which remain within the Company’s control, the Company has concluded that the licenses and other deliverables do not have standalone value, and have combined all deliverables into a single unit of accounting. The nonrefundable upfront cash payment has been recorded as deferred revenue on our balance sheet and will be recognized as revenue on a straight-line basis over the estimated term (currently estimated to extend through 2029), anticipated to begin in the second quarter of 2015, the point at which the Company has commenced providing all elements included in the Collaboration Agreement.

The upfront payment was subject to a Japan withholding tax of $15.8 million which was remitted by Otsuka to the Japanese tax authorities. The Company has determined that the release of those funds to the Company is probable and therefore has recorded a receivable for such amounts with an offsetting amount included in deferred revenue as of March 31, 2015. The Company received the $15.8 million from the Japanese tax authorities in April of 2015.

Medinol Ltd.

The Company entered into an agreement with Medinol Ltd. (“Medinol”) in 2005 pursuant to which the Company granted to Medinol a non-exclusive, world-wide, royalty-bearing license, under its patents and technology, to develop, manufacture and sell stents and other medical devices to deliver the Company’s mTOR inhibitor, ridaforolimus, to prevent reblockage of injured vessels following stent-assisted angioplasty. The term of the license agreement extends to the later to occur of the expiration of the Company’s patents relating to the rights granted to Medinol under the license agreement or fifteen years after the first commercial sale of a product developed under the agreement.

Medinol is required under the license agreement to use commercially reasonable efforts to develop products. The Company is required under a related supply agreement to use commercially reasonable efforts to supply agreed-upon quantities of ridaforolimus to Medinol, and Medinol shall purchase such supply of ridaforolimus from the Company, for the development, manufacture and sale of products. The supply agreement is coterminous with the license agreement. These agreements may be terminated by either party for breach after a 90-day cure period. In addition, Medinol may terminate the agreements upon 30-day notice to the Company upon certain events, including if it determines, in its reasonable business judgment, that it is not in its business interest to continue the development of any product, and the Company may terminate the agreements upon 30-day notice to Medinol, if it determines that it is not in its business interest to continue development and regulatory approval efforts with respect to ridaforolimus.

The license agreement provides for the payment by Medinol to the Company of an upfront license fee, payments based on achievement of development, regulatory and commercial milestones and royalties based on commercial sale of products developed under the agreement. In January 2014, Medinol initiated two registration trials of its NIRsupreme^™ Ridaforolimus-Eluting Coronary Stent System. The commencement of enrollment in these clinical trials along with the submission of an investigational device exemption with the FDA triggered milestone payments to the Company of $3.75 million, which are recorded as license revenue in the accompanying consolidated statement of operations for the three month period ended March 31, 2014. The Company is eligible to receive additional, regulatory, clinical and commercial milestone payments of up to $34.75 million under the agreement if two products are successfully developed and commercialized.

ICON Medical Corp.

In 2007, the Company entered into an agreement with ICON Medical Corp. (“ICON”), similar to the Medinol agreement, pursuant to which the Company granted to ICON a non-exclusive, world-wide, royalty-bearing license to develop, manufacture and sell stents and other medical devices to deliver ridaforolimus to prevent reblockage of injured vessels following stent-assisted angioplasty. In March 2015, the Company terminated this agreement. As of March 31, 2015, no products had been approved for sale resulting from this agreement and the Company had not received any milestone or other payments from ICON pursuant to this agreement.