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Collaboration and License Agreements | 12 Months Ended
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Sep. 30, 2018
Collaboration And License Agreements [Abstract] |
Collaboration and License Agreements | NOTE 2. COLLABORATION AND LICENSE AGREEMENTS Amgen Inc. On September 28, 2016, the Company entered into two Collaboration and License agreements, and a Common Stock Purchase Agreement with Amgen Inc., a Delaware corporation (“Amgen”). Under one of the license agreements (the “Second Collaboration and License Agreement” or “AMG 890 (ARO-LPA) Agreement”), Amgen has received a worldwide, exclusive license to Arrowhead’s novel, RNAi ARO-LPA program. These RNAi molecules are designed to reduce elevated lipoprotein(a), which is a genetically validated, independent risk factor for atherosclerotic cardiovascular disease. Under the other license agreement (the “First Collaboration and License Agreement” or “ARO-AMG1 Agreement”), Amgen received an option to a worldwide, exclusive license for ARO-AMG1, an RNAi therapy for an undisclosed genetically validated cardiovascular target. In both agreements, Amgen is wholly responsible for clinical development and commercialization. Under the Common Stock Purchase Agreement, the Company has sold 3,002,793 shares of Common Stock to Amgen at a price of $7.16 per share. Subject to Amgen’s exercise of the Option, as defined in the ARO-AMG1 Agreement, Amgen has agreed to purchase, and the Company has agreed to sell, an additional $5 million worth of shares of Common Stock based on a 30 trading day formula surrounding the date of the Option exercise. Under the terms of the agreements taken together, the Company has received $35 million in upfront payments, $21.5 million in the form of an equity investment by Amgen in the Company’s Common Stock and could receive up to $617 million in option payments, and development, regulatory and sales milestone payments. The Company is further eligible to receive single-digit royalties for sales of products under the ARO-AMG1 Agreement and up to low double-digit royalties for sales of products under the AMG 890 (ARO-LPA) Agreement. Under the terms of the AMG 890 (ARO-LPA) Agreement, the Company has granted a worldwide, exclusive license to AMG 890 (ARO-LPA). The Company is also responsible for assisting Amgen in the oversight of certain development and manufacturing activities (the “AMG 890 (ARO-LPA) R&D Services”), most of which are to be covered at Amgen’s cost. The Company has determined that the significant deliverables under the AMG 890 (ARO-LPA) Agreement include the license and the AMG 890 (ARO-LPA) R&D Services. The Company also determined that, pursuant to the accounting guidance governing revenue recognition on multiple element arrangements, the license and the AMG 890 (ARO-LPA) R&D Services do not have standalone value due to the specialized nature of the activities and services to be provided by the Company. Therefore, the deliverables are not separable and, accordingly, the license and the AMG 890 (ARO-LPA) R&D Services are being treated as a single unit of accounting. The Company recognized revenue on a straight-line basis from November 18, 2016 (the Hart-Scott-Rodino clearance date), through October 31, 2017, which was the date where the AMG 890 (ARO-LPA) R&D Services were substantially completed. The Company received the upfront payment of $30 million due under the AMG 890 (ARO-LPA) Agreement in November 2016. The upfront $30 million payment was initially recorded as Deferred Revenue. During the years ended September 30, 2018 and 2017, $2.7 million and $27.3 million of this upfront payment were recognized into Revenue, respectively. This upfront payment has been recognized as Revenue in its entirety as of September 30, 2018. On August 1, 2018, the Company announced that it had earned a $10 million milestone payment from Amgen following the administration of the first dose of AMG 890 (ARO-LPA) in a phase 1 clinical study. The Company has recognized this payment as Revenue in its entirety during the year ended September 30, 2018 as the performance obligations had already been substantially completed. Under the new revenue recognition guidance there would be no change to our historical accounting for the AMG 890 (ARO-LPA) Agreement as the performance obligations have been substantially completed as of September 30, 2018. Additionally, any future milestone or royalty payments due under the AMG-890 (ARO-LPA) Agreement will be recognized in the period the milestone is achieved under the sales-based royalty exception allowed under accounting rules. Finally, the costs to obtain this agreement were immaterial. Under the terms of the ARO-AMG1 Agreement, the Company has granted an option to a worldwide, exclusive license to ARO-AMG1, an undisclosed genetically validated cardiovascular target. The Company is also responsible for developing, optimizing and manufacturing the candidate through certain preclinical efficacy and toxicology studies to determine whether the candidate the Company has developed meets the required criteria as defined in the agreement (the “Arrowhead Deliverable”). The Company delivered the candidate in August 2018 and Amgen currently has the option to an exclusive license for the intellectual property generated through the Company’s development efforts. If Amgen exercises its option, it would likely assume all development, regulatory and commercialization efforts for the candidate. The Company determined that the significant deliverables under the ARO-AMG1 Agreement include the option to license and the development and manufacturing activities toward achieving the Arrowhead Deliverable (the “ARO-AMG1 R&D Services”). The Company also determined that, pursuant to the accounting guidance governing revenue recognition on multiple element arrangements, the option to license and ARO-AMG1 R&D Services do not have standalone value due to the specialized nature of the activities and services to be provided by the Company. Therefore, the deliverables are not separable and, accordingly, the option to license and ARO-AMG1 R&D Services are being treated as a single unit of accounting. The Company has recognized revenue on a straight-line basis from October 1, 2016, through September 30, 2018, as the Company completed the Arrowhead Deliverable during the three months ended September 30, 2018. The Company received an upfront payment of $5 million due under this agreement in September 2016. The upfront $5 million payment was initially recorded as Deferred Revenue. During the years ended September 30, 2018 and 2017, $2.5 million and $2.5 million of this upfront payment were recognized into Revenue, respectively. This upfront payment has been recognized as Revenue in its entirety as of September 30, 2018. Under the new revenue recognition guidance there would be no change to our historical accounting for the ARO-AMG1 Agreement as the Arrowhead Deliverable was completed during the three months ended September 30, 2018. Additionally, any future option, milestone or royalty payments due under the ARO-AMG1 Agreement will be recognized in the period the milestone is achieved under the sales-based royalty exception allowed under accounting rules. Finally, the costs to obtain this agreement were immaterial. The Company also entered into a separate services agreement and separate statements of work with Amgen to provide certain services related to process development, manufacturing, materials supply, discovery studies, and other consulting services related to AMG 890 (ARO-LPA) and ARO-AMG1. During the years ended September 30, 2018, 2017, 2016, these work orders generated approximately $1.0 million, $1.5 million and $0 of Revenue, respectively. Janssen Pharmaceuticals, Inc. On October 3, 2018, the Company entered into a License Agreement (“Janssen License Agreement”) and a Research Collaboration and Option Agreement (“Janssen Collaboration Agreement” with Janssen Pharmaceuticals, Inc. (“Janssen”) part of the Janssen Pharmaceutical Companies of Johnson & Johnson. The Company also entered into a Stock Purchase Agreement (“JJDC Stock Purchase Agreement”) with Johnson & Johnson Innovation-JJDC, Inc. (“JJDC”), a New Jersey corporation. Under the Janssen License Agreement, Janssen has received a worldwide, exclusive license to the Company’s ARO-HBV program, the Company’s third-generation subcutaneously administered RNAi therapeutic candidate being developed as a potentially curative therapy for patients with chronic hepatitis B virus infection. Beyond the Company’s ongoing Phase 1 / 2 study of ARO-HBV, Janssen will be wholly responsible for clinical development and commercialization. Under the Janssen Collaboration Agreement, Janssen will be able to select three new targets against which Arrowhead will develop clinical candidates. These candidates are subject to certain restrictions and will not include candidates in the Company’s current pipeline. The Company will perform discovery, optimization and preclinical development, entirely funded by Janssen, sufficient to allow the filing of a U.S. Investigational New Drug application or equivalent, at which time Janssen will have the option to take an exclusive license. If the option is exercised, Janssen will be wholly responsible for clinical development and commercialization. Under the JJDC Stock Purchase Agreement, in October 2018 the Company sold 3,260,869 shares of common stock to JJDC at a price of $23.00 per share. Under the terms of the agreements taken together, the Company has received $175 million as an upfront payment, $75 million in the form of an equity investment by JJDC in Arrowhead common stock, and may receive up to $1.6 billion in development and sales milestones payments for the Janssen License Agreement, and up to $1.9 billion in development and sales milestone payments for the three additional targets covered under the Janssen Collaboration Agreement. The Company is further eligible to receive tiered royalties up to mid teens under the license agreement and up to low teens under the collaboration and option agreement on product sales. The Company has evaluated these agreements in accordance with the new revenue recognition requirements that became effective for the Company on October 1, 2018. At the inception of these agreements, the Company has identified one distinct performance obligation. Regarding the Janssen License Agreement, the Company determined that the key deliverables included the license and certain R&D services including the Company’s responsibility to complete the ongoing Phase 1 / 2 study of ARO-HBV and the Company’s responsibility to ensure certain manufacturing of ARO-HBV drug product is completed and delivered to Janssen (the “Janssen R&D Services”). Due to the specialized and unique nature of these Janssen R&D services, and their direct relationship with the license, the Company determined that these deliverables represent one distinct bundle and thus, one performance obligation. The Company also determined that Janssen’s option to require the Company to develop up to three new targets is not a material right, and thus, not a performance obligation at the onset of the agreement. The consideration for this option will be accounted for if and when it is exercised. The Company determined the transaction price totaled approximately $197.8 million which includes the upfront payment, the premium paid by JJDC for its equity investment in the Company, and estimated payments for ARO-HBV drug materials on hand and additional material to be manufactured. The Company has allocated the total $197.8 million initial transaction price to its one distinct performance obligation for the ARO-HBV license and the associated Janssen R&D Services. This revenue will be recognized using a proportional performance method (based on actual labor hours versus estimated total labor hours) beginning in October 2018 and ending as the Company’s efforts in overseeing the ongoing phase 1 / 2 clinical trial are completed.

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- Definition Collaboration and license agreements. + References No definition available. + Details
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- Definition The entire disclosure for collaborative arrangements in which the entity is a participant, including a) information about the nature and purpose of such arrangements; b) its rights and obligations thereunder; c) the accounting policy for collaborative arrangements; and d) the income statement classification and amounts attributable to transactions arising from the collaborative arrangement between participants. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 808 -URI http://asc.fasb.org/topic&trid=5833765 + Details
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