Collaboration Agreements

6 Months Ended

Jul. 03, 2020

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. Additionally, consistent with our business strategy prior to the commercialization of cabozantinib, we entered into other collaborations with leading pharmaceutical companies 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 receive payments for product supply services, development cost reimbursements, and/or profit-sharing payments. See “Note 2. Revenues” for additional information on revenues recognized under our collaboration agreements.

We have also established multiple collaborations with smaller, discovery-focused biotechnology companies to expand our product pipeline. Under these collaborations, we may be required to make milestone and royalty payments, and for certain collaborations make payments for development cost reimbursements and/or option exercise fees.

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, 2019 for a description of each of our collaboration agreements.

Cabozantinib Collaborations

Ipsen Collaboration

In February 2016, we entered into a collaboration agreement with Ipsen for the commercialization and further development of cabozantinib. Under the terms of the collaboration agreement, as amended, Ipsen received exclusive commercialization rights for current and potential future cabozantinib indications outside of the U.S. and Japan. We have also agreed to collaborate with Ipsen on the development of cabozantinib for current and potential future indications. The parties’ efforts are governed through a joint steering committee and appropriate subcommittees established to guide and oversee the collaboration’s operation and strategic direction; provided, however, that we retain final decision-making authority with respect to cabozantinib’s ongoing development. During the second quarter of 2020, Ipsen opted into and is now co-funding the development costs for CONTACT-01 and CONTACT-02, two phase 3 pivotal trials of cabozantinib in combination with atezolizumab in patients with previously treated, metastatic non-small cell lung cancer and metastatic castration-resistant prostate cancer, respectively, and the four remaining cohorts of COSMIC-021 it had not previously opted into.

Revenues under the collaboration agreement with Ipsen were as follows (in thousands):



	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
License revenues	$	33,597	$	14,946	$	51,546	$	28,909
Collaboration services revenues	19,320		7,303		30,407		15,208
Total	$	52,917	$	22,249	$	81,953	$	44,117

Revenues for both the three and six months ended June 30, 2020 included $18.8 million in revenues recognized in connection with a $20.0 million development milestone from Ipsen we determined was probable of achievement.

As of June 30, 2020, $46.2 million of the transaction price was allocated to our research and development services performance obligation that has not yet been satisfied.

Takeda Collaboration

In January 2017, we entered into a collaboration agreement with Takeda. Under this collaboration agreement, as amended, 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 operation and strategic direction of the parties’ collaboration is governed through a joint executive committee and appropriate subcommittees.

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



	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
License revenues	$	22,946	$	—	$	22,946	$	9,056
Collaboration services revenues	2,195		1,565		3,264		4,002
Total	$	25,141	$	1,565	$	26,210	$	13,058

Revenues for both the three and six months ended June 30, 2020 included $23.7 million in revenues recognized in connection with $31.0 million in milestones we achieved upon Takeda’s first commercial sale of CABOMETYX as a treatment for patients with curatively unresectable or metastatic renal cell carcinoma in Japan, as well as royalties earned related to sales of cabozantinib in Japan.

As of June 30, 2020, $25.1 million of the transaction price was allocated to our research and development services performance obligation that has not yet been satisfied.

GSK

In October 2002, we established a product development and commercialization collaboration agreement with GSK. We are required to pay a 3% royalty to GSK on the net sales of any product incorporating cabozantinib by us and our collaboration partners. Royalties earned by 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 services revenues for sales by our collaboration partners. Such royalties were $7.6 million and $15.7 million during the three and six months ended June 30, 2020, respectively, as compared to $7.8 million and $15.1 million during the comparable periods in 2019.

Genentech Collaboration

In December 2006, we out-licensed the development and commercialization of cobimetinib to Genentech under a worldwide collaboration agreement. 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 the European Union and multiple additional countries for use in the same indication. In July 2020, the FDA also approved COTELLIC for use in combination with Zelboraf and Tecentriq (atezolizumab) as a treatment for BRAF V600-mutation positive advanced melanoma in previously untreated patients. License revenues under the collaboration agreement with Genentech were as follows (in thousands):



	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
Profits on U.S. commercialization	$	1,376	$	1,349	$	2,783	$	2,404
Royalty revenues on ex-U.S. sales	$	1,125	$	1,323	$	2,434	$	2,813