Agreements	6 Months Ended
Dec. 31, 2011
Notes to Financial Statements
Agreements	Note 6 – Agreements Collaboration and License Agreement with Janssen Biotech, Inc (Janssen). In December 2011, we entered into a worldwide collaboration with Janssen, one of the Janssen Pharmaceutical Companies of Johnson & Johnson to develop and commercialize PCI-32765, a novel, oral, Bruton’s Tyrosine Kinase (BTK) inhibitor for oncology and other indications, excluding inflammation and immune mediated conditions, in the US and outside the US (the License Territory). The collaboration provides Janssen with a co-exclusive license of the underlying technology, which has no fixed expiration, a $150,000,000 non-refundable upfront payment upon execution as well as milestone payments of up to $825,000,000 based upon continued development progress ($250,000,000), regulatory progress ($225,000,000) and approval of the product in both the US and the License Territory ($350,000,000). The agreement also includes a cost sharing arrangement for associated development activities, whereby Janssen is responsible for approximately 60% of development costs and we are responsible for the remaining 40% of associated costs. The agreement also includes a 50/50 net profit sharing arrangement for the commercialization of any resulting products from the collaboration. Both parties are responsible for the development, manufacturing and marketing of any products resulting from this agreement, with Janssen being the responsible party for commercialization in the License Territory and the parties co-commercializing with us leading the efforts in the US. In accordance with ASU No. 2009-13 (and as incorporated into ASC Topic 605-25), we identified all of the deliverables at the inception of the agreement. The significant deliverables were determined to be the license, committee services, development services and commercialization services. The commercialization services represent a contingent deliverable for which there is not a significant incremental discount. We have determined that the license represents one unit of accounting as the license has standalone value separate from the committee and development services based on the terms and rights of the license as indicated in the agreement, which include rights to the underlying technologies for PCI-32765 and the right to sublicense. We have also determined that the committee and development services each represent individual units of accounting as they have standalone value from each other. We determined our best estimate of selling prices for the license unit of accounting, which was based on market conditions, similar arrangements entered into by third parties and entity-specific factors such as the terms of our previous collaborative agreement, our pricing practices and pricing objectives, the likelihood that clinical trials will be successful, the likelihood that regulatory approval will be received and that the products will become commercialized. We also determined our best estimate of selling prices for the committee and development services, based on the nature of the services to be performed and estimates of the associated effort as well as estimated market rates for similar services. The arrangement consideration of $150,000,000 was allocated to the units of accounting based on the relative selling price method, under which discounts offered under the arrangement have been allocated evenly amongst each unit of accounting on a relative basis. The clinical, regulatory and approval milestones represent non-refundable amounts that would be paid by Janssen to us if certain milestones are achieved in the future. We have elected to apply the guidance in ASC 605-28 to the milestones. These milestones, if achieved, are substantive as they relate solely to past performance, are commensurate with estimated enhancement of value associated with the achievement of each milestone as a result of our performance, which are reasonable relative to the other deliverables and terms of the arrangement, and are unrelated to the delivery of any further elements under the arrangement. Of the $150,000,000 upfront payment received, $70,605,000 has been allocated to the licenses, $14,982,000 to the committee services and $64,413,000 to the development services. We have recognized license revenue upon execution of the arrangement as the associated unit of accounting had been delivered pursuant to the terms of the agreement. At inception, the $14,982,000 and $64,413,000 allocated to committee and development services, respectively, will be recognized as revenue as the related services are provided over the estimated service periods of 17 year and 9 years, which are equivalent to the estimated remaining life of the underlying technology and the estimated remaining development period, respectively. We have recognized development costs as a component of research and development expense and reimbursements for development services under the cost-sharing arrangement as an offset to research and development expense. As of December 31, 2011, approximately $79,215,000 is included in deferred revenue related to the committee and development services, of which $71,174,000 is included in deferred revenue-non-current. Collaboration and License Agreement with Les Laboratoires Servier. In April 2009, we entered into a collaboration and license agreement with Les Laboratoires Servier ("Servier") to research, develop and commercialize abexinostat (PCI-24781), an orally active, novel, small molecule inhibitor of pan-HDAC enzymes. Under the terms of the agreement, Servier acquired the exclusive right to develop and commercialize the pan-HDAC inhibitor product worldwide except for the United States and will pay development and regulatory milestones and a royalty to us on sales outside of the United States. Servier is solely responsible for conducting and paying for all development activities outside the United States. We will continue to own all rights within the United States. In May 2009, we received an upfront payment from Servier of $11,000,000 ($10,450,000 net of withholding taxes) and we received an additional $4,000,000 for research collaboration paid over a twenty-four month period through April 2011. The revenue related to these payments was recognized over the two-year research period, which ended in April 2011. Total revenue recognized in the three months ended December 31, 2010 was $2,824,000. We also received a $7,000,000 advance development milestone payment in April 2011 and we could receive additional payments up to approximately $17,500,000 upon the achievement of certain future development and regulatory milestones, as well as royalty payments. The $7,000,000 advance development milestone payment was recorded as deferred revenue at June 30, 2011. In October 2011, the related milestone was reached and we recognized the $7,000,000 as revenue in the three months ended December 31, 2011. Celera Corporation. In April 2006, we acquired multiple small molecule drug candidates for the treatment of cancer and other diseases from Celera Genomics, an Applera Corporation (now Celera Corporation – a subsidiary of Quest Diagnostics Incorporated). Future milestone payments under the agreement, as amended, could total as much as $97,000,000, although we currently cannot predict if or when any of the milestones will be achieved. Approximately two-thirds of the milestone payments relate to our HDAC Inhibitor program and approximately one-third relates to our Factor VIIa program. Approximately 90% of the potential future milestone payments would be paid to Celera after obtaining regulatory approvals in various countries. There are no milestone payments related to our BTK program. In addition to the milestone payments, Celera will be entitled to royalty payments based on annual sales of drugs commercialized from our HDAC Inhibitor, Factor VIIa and certain BTK Inhibitor programs.

Agreements

6 Months Ended

Dec. 31, 2011

Note 6 – Agreements

Collaboration and License Agreement with Janssen Biotech, Inc (Janssen). In December 2011, we entered into a worldwide collaboration with Janssen, one of the Janssen Pharmaceutical Companies of Johnson & Johnson to develop and commercialize PCI-32765, a novel, oral, Bruton’s Tyrosine Kinase (BTK) inhibitor for oncology and other indications, excluding inflammation and immune mediated conditions, in the US and outside the US (the License Territory). The collaboration provides Janssen with a co-exclusive license of the underlying technology, which has no fixed expiration, a $150,000,000 non-refundable upfront payment upon execution as well as milestone payments of up to $825,000,000 based upon continued development progress ($250,000,000), regulatory progress ($225,000,000) and approval of the product in both the US and the License Territory ($350,000,000). The agreement also includes a cost sharing arrangement for associated development activities, whereby Janssen is responsible for approximately 60% of development costs and we are responsible for the remaining 40% of associated costs. The agreement also includes a 50/50 net profit sharing arrangement for the commercialization of any resulting products from the collaboration. Both parties are responsible for the development, manufacturing and marketing of any products resulting from this agreement, with Janssen being the responsible party for commercialization in the License Territory and the parties co-commercializing with us leading the efforts in the US.

In accordance with ASU No. 2009-13 (and as incorporated into ASC Topic 605-25), we identified all of the deliverables at the inception of the agreement. The significant deliverables were determined to be the license, committee services, development services and commercialization services. The commercialization services represent a contingent deliverable for which there is not a significant incremental discount.

We have determined that the license represents one unit of accounting as the license has standalone value separate from the committee and development services based on the terms and rights of the license as indicated in the agreement, which include rights to the underlying technologies for PCI-32765 and the right to sublicense. We have also determined that the committee and development services each represent individual units of accounting as they have standalone value from each other. We determined our best estimate of selling prices for the license unit of accounting, which was based on market conditions, similar arrangements entered into by third parties and entity-specific factors such as the terms of our previous collaborative agreement, our pricing practices and pricing objectives, the likelihood that clinical trials will be successful, the likelihood that regulatory approval will be received and that the products will become commercialized. We also determined our best estimate of selling prices for the committee and development services, based on the nature of the services to be performed and estimates of the associated effort as well as estimated market rates for similar services. The arrangement consideration of $150,000,000 was allocated to the units of accounting based on the relative selling price method, under which discounts offered under the arrangement have been allocated evenly amongst each unit of accounting on a relative basis.

The clinical, regulatory and approval milestones represent non-refundable amounts that would be paid by Janssen to us if certain milestones are achieved in the future. We have elected to apply the guidance in ASC 605-28 to the milestones. These milestones, if achieved, are substantive as they relate solely to past performance, are commensurate with estimated enhancement of value associated with the achievement of each milestone as a result of our performance, which are reasonable relative to the other deliverables and terms of the arrangement, and are unrelated to the delivery of any further elements under the arrangement.

Of the $150,000,000 upfront payment received, $70,605,000 has been allocated to the licenses, $14,982,000 to the committee services and $64,413,000 to the development services. We have recognized license revenue upon execution of the arrangement as the associated unit of accounting had been delivered pursuant to the terms of the agreement. At inception, the $14,982,000 and $64,413,000 allocated to committee and development services, respectively, will be recognized as revenue as the related services are provided over the estimated service periods of 17 year and 9 years, which are equivalent to the estimated remaining life of the underlying technology and the estimated remaining development period, respectively. We have recognized development costs as a component of research and development expense and reimbursements for development services under the cost-sharing arrangement as an offset to research and development expense.

As of December 31, 2011, approximately $79,215,000 is included in deferred revenue related to the committee and development services, of which $71,174,000 is included in deferred revenue-non-current.

Collaboration and License Agreement with Les Laboratoires Servier. In April 2009, we entered into a collaboration and license agreement with Les Laboratoires Servier ("Servier") to research, develop and commercialize abexinostat (PCI-24781), an orally active, novel, small molecule inhibitor of pan-HDAC enzymes. Under the terms of the agreement, Servier acquired the exclusive right to develop and commercialize the pan-HDAC inhibitor product worldwide except for the United States and will pay development and regulatory milestones and a royalty to us on sales outside of the United States. Servier is solely responsible for conducting and paying for all development activities outside the United States. We will continue to own all rights within the United States.

In May 2009, we received an upfront payment from Servier of $11,000,000 ($10,450,000 net of withholding taxes) and we received an additional $4,000,000 for research collaboration paid over a twenty-four month period through April 2011. The revenue related to these payments was recognized over the two-year research period, which ended in April 2011. Total revenue recognized in the three months ended December 31, 2010 was $2,824,000.

We also received a $7,000,000 advance development milestone payment in April 2011 and we could receive additional payments up to approximately $17,500,000 upon the achievement of certain future development and regulatory milestones, as well as royalty payments. The $7,000,000 advance development milestone payment was recorded as deferred revenue at June 30, 2011. In October 2011, the related milestone was reached and we recognized the $7,000,000 as revenue in the three months ended December 31, 2011.

Celera Corporation. In April 2006, we acquired multiple small molecule drug candidates for the treatment of cancer and other diseases from Celera Genomics, an Applera Corporation (now Celera Corporation – a subsidiary of Quest Diagnostics Incorporated). Future milestone payments under the agreement, as amended, could total as much as $97,000,000, although we currently cannot predict if or when any of the milestones will be achieved. Approximately two-thirds of the milestone payments relate to our HDAC Inhibitor program and approximately one-third relates to our Factor VIIa program. Approximately 90% of the potential future milestone payments would be paid to Celera after obtaining regulatory approvals in various countries. There are no milestone payments related to our BTK program. In addition to the milestone payments, Celera will be entitled to royalty payments based on annual sales of drugs commercialized from our HDAC Inhibitor, Factor VIIa and certain BTK Inhibitor programs.