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Collaboration Agreements | 12 Months Ended
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Dec. 28, 2018
Organization, Consolidation and Presentation of Financial Statements [Abstract] |
Collaboration Agreements | COLLABORATION AGREEMENTS We have established multiple collaborations with leading pharmaceutical companies for the commercialization and further development of cabozantinib, as well as with smaller, discovery-focused biotechnology companies to expand our product pipeline. Additionally, in line with our business strategy prior to the commercialization of our first product, COMETRIQ, we entered into other collaborations with leading pharmaceutical companies including Genentech, Daiichi Sankyo, Merck & Co., Inc. (Merck) and Bristol-Myers Squibb Company (BMS) for other compounds and programs in our portfolio. Under these collaborations, we are generally entitled to receive milestone and royalty payments, and for certain collaborations, payments for product supply services, development cost reimbursements, and/or profit sharing payments. See “Note 2. Revenues” for information on collaboration revenues recognized during the years ended December 31, 2018, 2017 and 2016. Cabozantinib Commercial Collaborations Ipsen Collaboration Description of the Collaboration In February 2016, we entered into a collaboration and license agreement with Ipsen for the commercialization and further development of cabozantinib. Pursuant to the terms of the collaboration agreement, Ipsen received exclusive commercialization rights for current and potential future cabozantinib indications outside of the U.S., Canada and Japan. The collaboration agreement was subsequently amended in December 2016 to include commercialization rights in Canada. We have also agreed to collaborate with Ipsen on the development of cabozantinib for current and potential future indications. Unless terminated earlier, the collaboration agreement has a term that continues, on a product-by-product and country-by-country basis, until the latter of (i) the expiration of patent claims related to cabozantinib, (ii) the expiration of regulatory exclusivity covering cabozantinib or (iii) ten years after the first commercial sale of cabozantinib, other than COMETRIQ. A related supply agreement will continue in effect until expiration or termination of the collaboration agreement. The collaboration agreement may be terminated for cause by either party based on uncured material breach of either the collaboration agreement or the supply agreement by the other party, bankruptcy of the other party or for safety reasons. Upon termination by either party, all licenses granted by us to Ipsen will automatically terminate, and, except in the event of a termination by Ipsen for our material breach, the licenses granted by Ipsen to us shall survive such termination and shall automatically become worldwide, or, if Ipsen were to terminate only for a particular region, then for the terminated region. Following termination by us for Ipsen’s material breach, or termination by Ipsen without cause or because we undergo a change of control by a party engaged in a competing program, Ipsen is prohibited from competing with us for a period of time. Consideration under the Collaboration In consideration for the exclusive license and other rights contained in the collaboration agreement, including commercialization rights in Canada, Ipsen paid us aggregate upfront payments of $210.0 million. As of December 31, 2018, we have also achieved aggregate milestones of $275.0 million related to development, regulatory and commercial progress by Ipsen since the inception of the collaboration agreement, including $140.0 million in milestones recognized during 2018. We are also eligible to receive future development and regulatory milestone payments from Ipsen, totaling an aggregate of $84.0 million upon additional approvals of cabozantinib in future indications and/or jurisdictions, as well as contingent payments of up to $519.5 million associated with sales-based milestones. We will further receive royalties on net sales of cabozantinib by Ipsen outside of the U.S. and Japan. We were initially entitled to receive a tiered royalty of 2% to 12% on the initial $150.0 million of net sales; this amount was reached in the second quarter of 2018. As of December 31, 2018 and going forward, we are entitled to receive a tiered royalty of 22% to 26% on annual net sales (with separate tiers for Canada); these 22% to 26% royalty tiers reset each calendar year. In Canada, we are entitled to receive a tiered royalty of 22% on the first CAD$30.0 million of annual net sales and a tiered royalty thereafter to 26% on annual net sales; these 22% to 26% royalty tiers for Canada will also reset each calendar year. Consistent with our historical agreement with GSK, we are required to pay a 3% royalty to GSK on all net sales of any product incorporating cabozantinib, including net sales by Ipsen. We are primarily responsible for funding cabozantinib-related development costs for those trials in existence at the time we entered into the collaboration agreement with Ipsen; global development costs for additional trials are shared between the parties, with Ipsen reimbursing us for 35% of such costs, provided Ipsen chooses to opt into such trials. We are responsible for the manufacture and supply of cabozantinib for all development and commercialization activities under the collaboration agreement. In connection with the collaboration agreement, we entered into a supply agreement with Ipsen to supply finished, labeled drug product to Ipsen for distribution in the territories outside of the U.S. and Japan for the term of the collaboration agreement. The product will be supplied at our cost, as defined in the agreement. Revenues from the Collaboration Collaboration revenues under the collaboration agreement with Ipsen were as follows (in thousands):
| Year Ended December 31,
| 2018 |  | 2017 |  | 2016
Ipsen collaboration revenues | $ | 182,879 |  |  | $ | 69,792 |  |  | $ | 33,252 |
As of December 31, 2018, $48.0 million of the transaction price allocated to our research and development services performance obligation had not been satisfied. As of December 31, 2018, the net contract liability for the collaboration agreement with Ipsen was $13.3 million, which was included in Long-term portion of deferred revenue in the accompanying Consolidated Balance Sheets. See “—Performance Obligations and Transaction Prices for our Ipsen and Takeda Collaborations”, below, for additional information related to the revenue recognition for this collaboration. Takeda Collaboration Description of the Collaboration In January 2017, we entered into a collaboration and license agreement with Takeda. Pursuant to this collaboration agreement, Takeda has exclusive commercialization rights for current and potential future cabozantinib indications in Japan, and the parties have agreed to collaborate on the clinical development of cabozantinib in Japan. Unless earlier terminated, the collaboration agreement has a term that continues, on a product-by-product basis, until the earlier of (i) two years after first generic entry with respect to such product in Japan or (ii) the later of (A) the expiration of patent claims related to cabozantinib and (B) the expiration of regulatory exclusivity covering cabozantinib in Japan. The collaboration agreement may be terminated for cause by either party based on uncured material breach by the other party, bankruptcy of the other party or for safety reasons. For clarity, Takeda’s failure to achieve specified levels of commercial performance, based upon sales volume and/or promotional effort, during the first six years of the collaboration shall constitute a material breach of the collaboration agreement. We may terminate the agreement if Takeda challenges or opposes any patent covered by the collaboration agreement. At any time prior to August 1, 2023, the parties may mutually agree to terminate the collaboration agreement if Japan’s Pharmaceuticals and Medical Devices Agency is unlikely to grant any approval of the marketing authorization application in any cancer indication in Japan. After the commercial launch of cabozantinib in Japan, Takeda may terminate the collaboration agreement upon twelve months’ prior written notice following the third anniversary of the first commercial sale of cabozantinib in Japan. Upon termination by either party, all licenses granted by us to Takeda will automatically terminate, and the licenses granted by Takeda to us shall survive such termination and shall automatically become worldwide. Consideration under the Collaboration In consideration for the exclusive license and other rights contained in the collaboration agreement, we received a $50.0 million upfront nonrefundable payment from Takeda. During the year ended December 31, 2018, we also achieved a $10.0 million development related milestone. As of December 31, 2018, we were eligible to receive development, regulatory and first-sale milestone payments of up to $90.0 million related to second-line RCC, first-line RCC and second-line HCC, as well as additional development, regulatory and first-sale milestone payments, without limit, for additional potential future indications. The collaboration agreement also provides that we are eligible to receive pre-specified payments of up to $83.0 million associated with sales volume milestones and receive royalties on net sales of cabozantinib in Japan. We are entitled to receive a tiered royalty of 15% to 24% on the initial $300.0 million of net sales, and following this initial $300.0 million of net sales, we are then entitled to receive a tiered royalty of 20% to 30% on annual net sales thereafter; these 20% to 30% royalty tiers will reset each calendar year. Consistent with our historical agreement with GSK, we are required to pay a 3% royalty to GSK on all net sales of any product incorporating cabozantinib, including net sales by Takeda. Takeda is responsible for 20% of the costs associated with the global cabozantinib development plan’s current and future trials, provided Takeda opts into such trials, and 100% of costs associated with the cabozantinib development activities that are exclusively for the benefit of Japan. We are responsible for the manufacture and supply of cabozantinib for all development and commercialization activities under the collaboration, and consequently, we entered into a clinical supply agreement covering the supply of cabozantinib to Takeda. Revenues from the Collaboration Collaboration revenues under the collaboration agreement with Takeda were as follows (in thousands):
| Year Ended December 31,
| 2018 |  | 2017
Takeda collaboration revenues | $ | 18,020 |  |  | $ | 14,779 |
As of December 31, 2018, $25.6 million of the transaction price allocated to our research and development services performance obligation had not been satisfied. As of December 31, 2018, the net contract liability for the collaboration agreement with Takeda was $2.6 million, which was included in Long-term portion of deferred revenue in the accompanying Consolidated Balance Sheets. Performance Obligations and Transaction Prices for our Ipsen and Takeda Collaborations We identified two performance obligations for both the Ipsen and Takeda collaboration agreements: (1) the transfer of an exclusive license for the commercialization and further development of cabozantinib; and (2) research and development services, which includes certain committed studies for the development of cabozantinib, pharmacovigilance services and participation on various joint committees (as defined in the specific collaboration agreements). We have allocated the transaction price for each of these collaborations, which are described below, to the identified performance obligations based on our best estimate of their relative standalone selling price. For the licenses, the estimate of the relative standalone selling price was determined using a discounted cash flow valuation utilizing forecasted revenues and costs, and a discount rate. For research and development services the estimate of the relative standalone selling price was determined using an adjusted market assessment approach that relies on internal and external costs and market factors. The portion of the transaction price allocated to our license performance obligation are recorded immediately as our license represents functional intellectual property that was transferred at a point in time. The portion of the transaction price allocated to our research and development services performance obligation is being recognized as revenue using the inputs method based on our internal development projected cost estimates through the current estimated patent expiration of cabozantinib in the European Union (EU) for the Ipsen Collaboration and Japan for the Takeda Collaboration, both of which are early 2030. Based on our evaluation of the collaboration agreements as of January 1, 2018, the date adoption of Topic 606, we determined that for both agreements, the up-front, nonrefundable payments, the milestones and royalties achieved as of December 31, 2017, and our estimate for the reimbursements of our research and development services performance obligation over the term of each agreement constituted the amount of the consideration to be included in the transaction price as of December 31, 2017. In addition, the transaction price for the Ipsen collaboration agreement included a $10.0 million milestone we expected to achieve during the three months ended March 31, 2018. Other than that $10.0 million milestone, variable consideration for both agreements related to regulatory and development milestones not previously recognized was constrained due to the fact that it was not probable that a significant reversal of cumulative revenue would not occur, given the inherent uncertainty of success with these milestones. Any variable consideration related to sales-based milestones and royalties will be recognized when the related sales occur as these amounts have been determined to relate to the relevant transferred license and therefore are recognized as the related sales occur. We re-evaluate the transaction price for the collaboration agreements in each reporting period as uncertain events are resolved or other changes in circumstances occur and we allocate those changes in the transaction price between our performance obligations. During the year ended December 31, 2018, the transaction price increased as a result of the achievement of various milestones described above. We further updated the transaction price based upon the impact of research and development services performed during the period and changes in our estimated reimbursements for our future research and development services. The portion of the increase in transaction price that was allocated to the previously satisfied performance obligations for the transfer of an intellectual property license was recognized during the period and the portion allocated to research and development services will be recognized in future periods as those services are delivered through early 2030. As of December 31, 2018, variable consideration related to the remaining unearned regulatory and development milestones for both agreements remained constrained due to the fact that it was not probable that a significant reversal of cumulative revenue would not occur. Cabozantinib Development Collaborations BMS In February 2017, we entered into a clinical trial collaboration agreement with BMS for the purpose of exploring the therapeutic potential of cabozantinib in combination with BMS’s immune checkpoint inhibitors (ICIs), nivolumab and/or ipilimumab, to treat a variety of types of cancer. As part of the collaboration, we are evaluating these combinations as treatment options for RCC and HCC in the CheckMate 9ER and CheckMate 040 trials, respectively. Pursuant to the terms of the collaboration agreement with BMS, each party granted to the other a non-exclusive, worldwide (within the collaboration territory as defined in the collaboration agreement and its supplemental agreements), non-transferable, royalty-free license to use the other party’s compounds in the conduct of each clinical trial. Each party will be responsible for supplying finished drug product for the applicable clinical trial and unless otherwise agreed between the parties, costs for each such trial will be shared equally between the parties, unless two BMS compounds will be utilized in such trial, in which case BMS will bear two-thirds of the costs for such study treatment arms and we will bear one-third of the costs. Unless earlier terminated, the collaboration agreement will remain in effect until the completion of all clinical trials under the collaboration, all related trial data has been delivered to both parties and the completion of any then agreed upon analysis. The collaboration agreement may be terminated for cause by either party based on uncured material breach by the other party, bankruptcy of the other party or for safety reasons. Upon termination by either party, the licenses granted to each party to conduct a combined therapy trial will terminate. The Roche Group (Roche) Collaboration In February 2017, we entered into a master clinical supply agreement with Roche for the purpose of evaluating cabozantinib in combination with Roche’s ICI, atezolizumab, in locally advanced or metastatic solid tumors. As part of this agreement with Roche, in June 2017, we initiated COSMIC-021, a phase 1b trial evaluating the safety and tolerability of the combination in patients with locally advanced or metastatic tumors, and in December 2018, we initiated COSMIC-312, a phase 3 pivotal trial evaluating the combination versus sorafenib in previously untreated advanced HCC, with an exploratory arm also evaluating cabozantinib monotherapy in previously untreated advanced HCC. We are the trial sponsor, and Roche is providing atezolizumab free of charge. GSK In October 2002, we established a product development and commercialization collaboration agreement with GSK. Under the terms of the collaboration agreement, GSK had the right to choose cabozantinib for further development and commercialization, but notified us in October 2008 that it had waived its right to select the compound for such activities. Although the collaboration agreement was terminated during 2014, GSK continues to be entitled to a 3% royalty we are required to pay on all net sales of any product incorporating cabozantinib by us and our collaboration partners. Royalties accruing to GSK in connection with the sales of cabozantinib are included in Cost of goods sold for sales by us and as a reduction of Collaboration revenues for sales by Ipsen. Such royalties were as follows (in thousands):
| Year Ended December 31,
| 2018 |  | 2017 |  | 2016
Royalties accruing to GSK | $ | 23,950 |  |  | $ | 12,413 |  |  | $ | 4,334 |
StemSynergy Therapeutics, Inc. (StemSynergy) Collaboration In January 2018, we entered into an exclusive collaboration and license agreement with StemSynergy for the discovery and development of novel oncology compounds targeting Casein Kinase 1 alpha (CK1 α), a component of the Wnt signaling pathway implicated in key oncogenic processes. Under the terms of the a greement, we will partner with StemSynergy to conduct preclinical and clinical studies with compounds targeting CK1 α. During the year ended December 31, 2018, we paid StemSynergy an upfront payment of $3.0 million in initial research and development funding and provided $1.2 million in additional research and development funding. StemSynergy is eligible for up to $2.3 million in additional such funding on an as needed basis. The research and development funding costs incurred to date were included in Research and development expenses in the accompanying Consolidated Statements of Operations. StemSynergy will also be eligible for up to $56.5 million in milestones for the first product to emerge from the collaboration, including preclinical and clinical development and regulatory milestone payments, sales-based milestones, as well as single-digit royalties on worldwide sales. We will be solely responsible for the commercialization of products that arise from the collaboration. Invenra, Inc. (Invenra) C ollaboration In May 2018, we entered into a collaboration and license agreement with Invenra, which is focused on developing next-generation biologics, to discover and develop multispecific antibodies for the treatment of cancer. Invenra is responsible for antibody lead discovery and generation while we will lead Investigational New Drug enabling studies, manufacturing, clinical development in single-agent and combination therapy regimens, and future regulatory and commercialization activities. The collaboration agreement also provides that we will receive an exclusive, worldwide license to one preclinical asset, and that we will pursue up to six additional discovery projects during the term of the collaboration, which in total are directed to three discovery programs. In consideration for the exclusive worldwide license and other rights contained in the collaboration agreement, we paid Invenra an upfront payment of $2.0 million and a project initiation fee of $2.0 million during the year ended December 31, 2018. The payments were included in Research and development expenses in the accompanying Consolidated Statements of Operations. As of December 31, 2018, we also have the right to initiate five additional discovery projects for development subject to an upfront payment of $2.0 million for each project as well as additional global milestone payments and royalties for any products that arise from these discovery efforts. Invenra is eligible to receive payments based on the achievement of specific development and regulatory milestones of up to $131.5 million for a product containing the lead preclinical asset in the first indication and up to $127.5 million for a product developed from each addition project we initiate. Upon successful commercialization of a product, Invenra is eligible to receive global milestone payments up to $325.0 million per product if certain sales thresholds are achieved as well as single digit tiered royalties on net sales of the approved product. Unless earlier terminated, the collaboration agreement has a term that continues, on a product-by-product and country-by-country basis, until the later of (i) ten years after the first commercial sale of such product in such country or (ii) expiration of patent claims covering the product in such country. We may terminate the collaboration agreement in its entirety or on a project-by-project, basis at any time prior to commercialization, for any or no reason, upon thirty days’ written notice to Invenra. The collaboration agreement also may be terminated by either party for a material breach by the other, subject to notice and cure provisions. Other Collaborations Genentech Profits and losses on U.S. commercialization and Royalty revenues on ex-U.S. sales under the collaboration agreement with Genentech were as follows (in thousands):
| Year Ended December 31,
| 2018 |  | 2017 |  | 2016
Profits and losses on U.S. commercialization | $ | 8,084 |  |  | $ | (2,140 | ) |  | $ | 8,771 |
Royalty revenues on ex-U.S. sales | $ | 5,564 |  |  | $ | 6,398 |  |  | $ | 2,827 |
Profits on the U.S. commercialization of COTELLIC for the year ended December 31, 2018 were included Collaboration revenues and profits and losses on for the years ended December 31, 2017 and 2016 were included in Selling, general and administrative expenses. The royalty revenues on ex-U.S. sales were included in Collaboration revenues for all periods presented. See “—Performance Obligations and Transaction Prices for our Other Collaborations”, below, for additional information related to revenue recognition for this collaboration. In December 2006, we out-licensed the development and commercialization of cobimetinib to Genentech pursuant to a worldwide collaboration agreement. Cobimetinib is a reversible inhibitor of MEK, a kinase that is a component of the RAS/RAF/MEK/ERK pathway. Under the terms of the collaboration agreement, we developed cobimetinib through the determination of the maximum tolerated dose in a phase 1 clinical trial, and Genentech had the option to co-develop cobimetinib, an option that Genentech exercised, and in March 2009, we granted to Genentech an exclusive worldwide revenue-bearing license to cobimetinib, at which point Genentech became responsible for completing the phase 1 clinical trial and the subsequent clinical development. In November 2015, the U.S. Food and Drug Administration (FDA) approved cobimetinib, under the brand name COTELLIC, in combination with Genentech’s Zelboraf (vemurafenib) as a treatment for patients with BRAF V600E or V600K mutation-positive advanced melanoma. COTELLIC in combination with Zelboraf has also been approved in Switzerland, the EU, Canada, Australia, Brazil and multiple additional countries for use in the same indication. Prior to the FDA’s approval of COTELLIC, in November 2013, we exercised an option under the collaboration agreement to co-promote COTELLIC in the U.S., which allows for us to provide up to 25% of the total sales force for approved cobimetinib indications in the U.S. Between November 2015 and December 2017, we fielded 25% of the sales force promoting COTELLIC in combination with Zelboraf as a treatment for patients with BRAF mutation-positive advanced melanoma in the U.S. However, following a review of the commercial landscape, commencing in January 2018, we and Genentech scaled back the personal promotion of COTELLIC in this indication in the U.S. Cobimetinib Profit Sharing and Royalty Revenues Under the terms of our collaboration agreement, as amended in July 2017, we share in the profits and losses received or incurred in connection with COTELLIC’s commercialization in the U.S. This profit and loss share has multiple tiers: we receive 50% of profits and losses from the first $200.0 million of U.S. actual sales, decreasing to 30% of profits and losses from U.S. actual sales in excess of $400.0 million. These tiers will reset each calendar year. The revenue for each sale of COTELLIC applied to the profit and loss statement for the collaboration agreement (Genentech Collaboration P&L) is calculated using the average of the quarterly net selling prices of COTELLIC and any additional branded Genentech product(s) prescribed with COTELLIC in such sale. U.S. commercialization costs for COTELLIC are then applied to the Genentech Collaboration P&L, subject to reduction based on the number of Genentech products in any given combination including COTELLIC. In addition to our profit share in the U.S., under the terms of the collaboration agreement, we are entitled to low double-digit royalties on net sales of COTELLIC outside the U.S. We are not eligible for any additional milestone payments under the collaboration agreement with Genentech. Unless earlier terminated, the collaboration agreement has a term that continues until the expiration of the last payment obligation with respect to the licensed products under the collaboration. Genentech has the right to terminate the collaboration agreement without cause at any time. If Genentech terminates the collaboration agreement without cause, all licenses that were granted to Genentech under the agreement terminate and revert to us. Additionally, if Genentech terminates the collaboration agreement without cause, or we terminate the collaboration agreement for cause, we would receive, subject to certain conditions, licenses from Genentech to research, develop and commercialize reverted product candidates. The collaboration agreement may be terminated for cause by either party based on uncured material breach by the other party. Cobimetinib Clinical Development Program Cobimetinib is being evaluated by Genentech in a development program consisting of more than 50 clinical trials. These trials are being sponsored by Genentech or through Genentech’s investigator sponsored trial program. Daiichi Sankyo Collaboration revenues under the collaboration agreement with Daiichi Sankyo were as follows (in thousands):
| Year Ended December 31,
| 2018 |  | 2017 |  | 2016
Daiichi Sankyo collaboration revenues | $ | 20,000 |  |  | $ | — |  |  | $ | 15,000 |
See “—Performance Obligations and Transaction Prices for our Other Collaborations”, below, for additional information related to revenue recognition for this collaboration. In March 2006, we entered into a collaboration agreement with Daiichi Sankyo for the discovery, development and commercialization of novel therapies targeted against the MR, a nuclear hormone receptor implicated in a variety of cardiovascular and metabolic diseases. Under the terms of the agreement, we granted to Daiichi Sankyo an exclusive, worldwide license to certain intellectual property primarily relating to compounds that modulate MR, including esaxerenone, an oral, non-steroidal, selective MR antagonist. Daiichi Sankyo is responsible for all further preclinical and clinical development, regulatory, manufacturing and commercialization activities for the compounds. In January 2019, subsequent to our year-end, Daiichi Sankyo received approval from the Japanese Ministry of Health, Labour and Welfare for MINNEBRO as a treatment for patients with hypertension. We are eligible to receive additional development, regulatory and sales-based milestone payments of up to $110.0 million under this collaboration agreement, including a $20.0 million milestone payment upon the first arm’s-length sale of MINNEBRO in Japan. In addition, we are entitled to receive low double-digit royalties on sales of MINNEBRO. Daiichi Sankyo may terminate the agreement upon 90 days’ written notice, in which case Daiichi Sankyo’s payment obligations would cease, its license relating to compounds that modulate MR would terminate and revert to us and we would receive, subject to certain terms and conditions, licenses from Daiichi Sankyo to research, develop and commercialize compounds that were discovered under the collaboration. In addition, pursuant to a license agreement we entered into with Ligand Pharmaceuticals, Inc. (Ligand), we are required to pay a royalty of 0.5% to Ligand on net sales of MINNEBRO. Merck Collaboration revenues under the collaboration agreement with Merck were as follows (in thousands):
| Year Ended December 31,
| 2018 |  | 2017 |  | 2016
Merck collaboration revenues | $ | — |  |  | $ | — |  |  | $ | 5,000 |
See “—Performance Obligations and Transaction Price for our Other Collaborations”, below, for additional information related to revenue recognition for this collaboration. In December 2011, we entered into an agreement with Merck pursuant to which we granted Merck an exclusive worldwide license to our phosphoinositide-3 kinase-delta (PI3K-δ) program, including XL499 and other related compounds. Pursuant to the terms of the agreement, Merck has sole responsibility to research, develop, and commercialize compounds from our PI3K-δ program. Subsequent to December 31, 2018, we have been notified by Merck that they will be terminating their PI3K-δ program, including their development activities under this collaboration agreement. Upon the termination of the collaboration agreement by Merck, the license granted to Merck will terminate. BMS - ROR Collaboration Collaboration revenues under the ROR collaboration agreement with BMS were as follows (in thousands):
| Year Ended December 31,
| 2018 |  | 2017 |  | 2016
BMS collaboration revenues | $ | — |  |  | $ | 12,500 |  |  | $ | — |
See “—Performance Obligations and Transaction Prices for our Other Collaborations”, below, for additional information related to revenue recognition for this collaboration. In October 2010, we entered into a worldwide collaboration with BMS pursuant to which each party granted to the other certain intellectual property licenses to enable the parties to discover, optimize and characterize ROR antagonists that may subsequently be developed and commercialized by BMS. Since July 2013, BMS has been solely responsible for any further research, development, manufacture and commercialization of products developed under the collaboration and will bear all costs and expenses associated with those activities. We are eligible for additional development and regulatory milestone payments of up to $240.0 million in the aggregate and sales-based milestones of up to $150.0 million in the aggregate, as well as royalties on commercial net sales, depending on the advancement of the product candidate and eventual product. BMS may, at any time, terminate the collaboration agreement upon certain prior notice to us on a product-by-product and country-by-country basis. In addition, either party may terminate the agreement for the other party’s uncured material breach. In the event of termination by BMS at will or by us for BMS’s uncured material breach, the license granted to BMS would terminate, the right to such product would revert to us and we would receive a royalty-bearing license for late-stage reverted compounds and a royalty-free license for early-stage reverted compounds from BMS to develop and commercialize such product in the related country. In the event of termination by BMS for our uncured material breach, BMS would retain the right to such product, subject to continued payment of milestones and royalties. Performance Obligations and Transaction Prices for our Other Collaborations We have evaluated our collaborations agreements with Genentech, Daiichi Sankyo, Merck and BMS and have determined that those collaboration agreements each have one performance obligation: the delivery of intellectual property licenses to the collaboration partner. We have further determined that the licenses we provided represent functional intellectual property that was transferred at a point in time, when the agreements were executed, prior to the adoption of Topic 606. Potential variable consideration for these collaborations related to regulatory and development milestones was constrained due to the fact that it was not probable that a significant reversal of cumulative revenue would not occur, given the inherent uncertainty of success with these milestones and therefore, any additional consideration earned and received from these collaborations will be fully recognized when the milestone is no longer constrained. Any variable consideration related to royalties and other sales-based milestones will be recognized when the related sales occur as these amounts have been determined to relate predominantly to the licenses transferred and therefore are recognized at the later of when the performance obligation is satisfied or the related sales occur.

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