Collaboration Agreements

6 Months Ended

Jun. 28, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

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 and Bristol-Myers Squibb Company for other compounds and programs in our portfolio. See “Note 3. Collaboration Agreements” to our Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2018 for a description of each of our collaboration agreements.

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 three and six months ended June 30, 2019 and 2018.

Cabozantinib Commercial Collaborations

Ipsen 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 on three occasions, including 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. Collaboration revenues under the collaboration agreement with Ipsen were as follows (in thousands):



	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Ipsen collaboration revenues	$	22,249	$	34,043	$	44,117	$	87,852

As of June 30, 2019, $47.5 million of the transaction price allocated to our research and development services performance obligation had not been satisfied. As of June 30, 2019, the net contract liability for the collaboration agreement with Ipsen was $8.4 million, of which $0.3 million was included in the Current portion of deferred revenue and $8.1 million was included in the Long-term portion of deferred revenue in the accompanying Condensed Consolidated Balance Sheets.

Takeda 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. The collaboration agreement was subsequently amended in March 2018 and April 2019.

The second amendment to the collaboration agreement with Takeda, which was executed on April 29, 2019 and became effective on May 7, 2019 (the Amendment), among other things, reduced the amount of reimbursements we will receive from Takeda for costs associated with our required global pharmacovigilance activities and limits those reimbursements to $1.0 million per year. It also increased the total potential development, regulatory and first-sale milestone payments to be paid to us by Takeda for second-line RCC, first-line RCC and second-line HCC by $12.0 million to $102.0 million, including an increase from $10.0 million to $16.0 million for the milestone we received for the April 2019 submission of a regulatory application for cabozantinib as a treatment for patients with advanced RCC to the Japanese Ministry of Health, Labour and Welfare (MHLW). We continue to be eligible to receive additional development, regulatory and first-sale milestone payments for other potential future indications. The Amendment also increased the amount of Takeda’s total potential commercial milestones by $6.0 million to $89.0 million. We continue to be eligible to receive royalties on net sales of cabozantinib in Japan.

Collaboration revenues under the collaboration agreement with Takeda were as follows (in thousands):



	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Takeda collaboration revenues	$	1,565	$	1,986	$	13,058	$	4,903

As of June 30, 2019, $19.2 million of the transaction price allocated to our research and development services performance obligation had not been satisfied. As of June 30, 2019, the net contract liability for the collaboration agreement with Takeda was $8.5 million which was included in the Long-term portion of deferred revenue in the accompanying Condensed Consolidated Balance Sheets.

Genentech Collaboration

In December 2006, we out-licensed the development and commercialization of cobimetinib to Genentech pursuant to a worldwide collaboration agreement. 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 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 the European Union and multiple additional countries for use in the same indication. Profits on U.S. commercialization and Royalty revenues on ex-U.S. sales were as follows (in thousands):



	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Profits on U.S. commercialization	$	1,349	$	2,696	$	2,404	$	4,069
Royalty revenues on ex-U.S. sales	$	1,323	$	1,546	$	2,813	$	2,895

Daiichi Sankyo

In March 2006, we entered into a collaboration agreement with Daiichi Sankyo pursuant to which 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, the Japanese MHLW approved esaxerenone, under the brand name MINNEBRO, as a treatment for patients with hypertension and in May 2019, Daiichi Sankyo had its first commercial sale of MINNEBRO. As a result of the launch, we received a $20.0 million milestone payment from Daiichi Sankyo in June 2019. We are eligible for low double-digit royalties on sales of MINNEBRO. 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.

Collaboration revenues under the collaboration agreement with Daiichi Sankyo were as follows (in thousands):



	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Daiichi Sankyo collaboration revenues	$	20,114	$	—	$	20,114	$	20,000

Iconic Therapeutics, Inc. (Iconic) Collaboration

In May 2019, we entered into an exclusive option and license agreement with Iconic. Under the terms of the agreement, we gained an exclusive option to license ICON-2, Iconic’s lead oncology antibody-drug conjugate program, in exchange for an upfront payment to Iconic of $7.5 million and a commitment for preclinical development funding. As of June 30, 2019, we accrued $5.1 million for the preclinical development funding commitment. Both the upfront payment and the accrual for the preclinical development funding commitment were included in Research and development expenses for the three and six months ended June 30, 2019 in the accompanying Condensed Consolidated Statements of Income.

If we exercise the option, we would be required make an option exercise fee payment of $20.0 million to Iconic, we would assume responsibilities for all subsequent clinical development and commercialization activities, and Iconic would become eligible for up to $190.6 million in potential development, regulatory and first-sale milestone payments, $262.5 million in potential commercial milestone payments, as well as royalties on potential sales.

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 in December 2014, we continue to be required to pay a 3% royalty to GSK on the 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 accruing to GSK were as follows (in thousands):



	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Royalties accruing to GSK	$	7,833	$	5,628	$	15,115	$	10,753