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Note 3 - Collaborative and Other Research and Development Contracts | 9 Months Ended
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Sep. 30, 2018
Notes to Financial Statements |
Collaborative Arrangement Disclosure [Text Block] | Note 3 — Collaborative and Other Research and Development Contracts U.S. Department of Health and Human Services (“BARDA/HHS”). On March 31, 2015, the Company announced that BARDA/HHS had awarded the Company a contract for the continued development of galidesivir as a potential treatment for diseases caused by RNA pathogens, including filoviruses. This BARDA/HHS contract includes a base contract of $16,265 to support galidesivir drug manufacturing, as well as $22,855 in additional development options that can be exercised by the government, bringing the potential value of the contract to $39,120. As of September 30, 2018, a total of $20,574 has been awarded under exercised options within this contract. National Institute of Allergy and Infectious Diseases (“NIAID/HHS”). In September 2013, NIAID/HHS contracted with the Company for the development of galidesivir as a treatment for Marburg virus disease. NIAID/HHS, part of the National Institutes of Health, made an initial award of $5,000 to the Company. The goals of this contract, including amendments, are to file IND applications for intravenous and intramuscular galidesivir for the treatment of Marburg virus disease and other hemorrhagic fever virus diseases, including Ebola virus and yellow fever disease, and to conduct Phase 1 human clinical trials. As of September 30, 2018, the total NIAID/HHS contract amount to advance the program through the completion of the Phase 1 clinical program is $43,035. As of September 30, 2018, all options have been exercised under this contract. The contracts with NIAID/HHS and BARDA/HHS are cost-plus-fixed-fee contracts. That is, the Company is entitled to receive reimbursement for all costs incurred in accordance with the contract provisions that are related to the development of galidesivir plus a fixed fee, or profit. NIAID/HHS and BARDA/HHS will make periodic assessments of progress and the continuation of the contract is based on the Company’s performance, the timeliness and quality of deliverables, and other factors. The government has rights under certain contract clauses to terminate these contracts. These contracts are terminable by the government at any time for breach or without cause. Centers for Disease Control and Prevention (“CDC”). On September 6, 2018, the Company announced that the CDC had awarded the Company a $34,660 contract for the procurement of up to 50,000 doses of RAPIVAB (peramivir injection) over a five -year period. The CDC’s purchase of RAPIVAB will supply the Strategic National Stockpile, the nation’s largest supply of potentially life-saving pharmaceuticals and medical supplies for use in a public health emergency. Seqirus UK Limited (“SUL”). On June 16, 2015, the Company and SUL, a limited company organized under the laws of the United Kingdom and a subsidiary of CSL Limited, a company organized under the laws of Australia, entered into a License Agreement (the "SUL Agreement") granting SUL and its affiliates worldwide rights to develop, manufacture and commercialize RAPIVAB and ALPIVAB (peramivir injection) for the treatment of influenza except for the rights to conduct such activities in Israel, Japan, Korea and Taiwan (the permitted geographies together constituting the "Territory"). Peramivir is an intravenous treatment for acute uncomplicated influenza and is currently approved for use in the United States, European Union, Canada, Australia, Japan, Taiwan and Korea. Peramivir is the first and only intravenous influenza treatment in the world and was approved by the U.S. Food and Drug Administration in December 2014 for the treatment of acute uncomplicated influenza in patients 18 years and older who have been symptomatic for no more than two days. The Company retains all rights and associated economics to procure pandemic stockpiling orders for RAPIVAB from the U.S. Government, while SUL has the right to pursue government stockpiling outside the U.S. Pursuant to the SUL Agreement, RAPIVAB and ALPIVAB are licensed to and expected to be commercialized by CSL's subsidiary, SUL, which specializes in influenza prevention through the supply of seasonal and pandemic vaccine to global markets. SUL will manufacture, commercialize and exercise decision-making authority with respect to the development and commercialization of RAPIVAB and ALPIVAB within the Territory and be responsible for all related costs, including sales and promotion. Under the terms of the SUL Agreement, the Company is responsible for fulfilling all post-marketing approval commitments in connection with the FDA's approval of the new drug application (“NDA”), and upon fulfillment will transfer ownership of and financial responsibility for the NDA to SUL. Under the terms of the SUL Agreement, the Company received an upfront payment of $33,740, has received $7,000 of milestone payments and should receive an additional $5,000 milestone payment related to the successful marketing approval by the EMA for an adult indication in the EU that was received in April 2018. $7,000 of the upfront payment was determined to be contingent upon EU marketing approval and was deferred until it was recognized in the second quarter of 2018. BioCryst and SUL are engaged in a formal dispute resolution process, which has now entered arbitration proceedings. The dispute involves many items under the contract including, but not limited to, the EMA approval milestone, which BioCryst maintains is now due under the SUL Agreement. The Company is also entitled under the SUL Agreement to receive tiered royalties at a percentage rate beginning in the mid-teens contingent upon meeting minimum thresholds of net sales, as well as a low-thirties percentage of the gross profit from government stockpiling purchases made outside the U.S. Specifically, the Company receives tiered royalties at a percentage rate in the mid-teens to low-forties on net sales in the U.S. during a Contract Year (defined as July 1 - June 30) and tiered royalties at a percentage rate in the mid-teens to mid-twenties on net sales in the Territory, other than in the U.S., during a Calendar Year, each subject to certain downward adjustments for circumstance or events impacting the overall market opportunity. SUL's royalty payment obligations commence on the date of the SUL Agreement and expire, on a country-by-country basis, upon the later of (i) the expiration of legal exclusivity in such country and (ii) ten years from the date of the SUL Agreement. The Company developed peramivir under a license from UAB and will owe sublicense payments to them on any future milestone payments and/or royalties received by the Company from SUL. Shionogi & Co., Ltd. (“Shionogi”). In February 2007, the Company entered into an exclusive license agreement with Shionogi to develop and commercialize peramivir in Japan for the treatment of seasonal and potentially life-threatening human influenza. Under the terms of the agreement, Shionogi obtained rights to injectable formulations of peramivir in Japan. The Company developed peramivir under a license from UAB and will owe sublicense payments to them on any future milestone payments and/or royalties received by the Company from Shionogi. In October 2008, the Company and Shionogi amended the license agreement to expand the territory covered by the agreement to include Taiwan. Shionogi has commercially launched peramivir under the commercial name RAPIACTA in Japan and Taiwan. In December 2017, the Company, on behalf of Royalty Sub, instituted arbitration proceedings against Shionogi in order to resolve a dispute with Shionogi under the Shionogi Agreement regarding the achievement of sales milestones and escalating royalties. In the event that the Company prevails in the arbitration, any amounts realized in the arbitration or in respect of the milestone payments and escalating royalties that are the subject of the arbitration would be for the benefit of Royalty Sub and be used by Royalty Sub to service its obligations under the non-recourse PhaRMA Notes (except for any amounts realized by the Company in respect of royalties relating to sales to Japanese governmental entities, which amounts would be retained by the Company). The costs associated with the arbitration proceedings are expected to be paid out of the assets of Royalty Sub in accordance with the terms of the indenture and servicing agreement relating to the PhaRMA Notes, except to the extent such costs are recovered in connection with any arbitration award in favor of the Company and Royalty Sub if they prevail in the arbitration proceedings. Arbitration proceedings, like other legal proceedings, are inherently uncertain. As a result, the Company cannot assure you that the Company will prevail in the arbitration. As any arbitration award in favor of the Company would accrue primarily to the benefit of Royalty Sub and the holders of the PhaRMA Notes, and because the costs associated with the arbitration proceedings are expected to come out of the assets of Royalty Sub if not recovered as part of any arbitration award in favor of the Company and Royalty Sub, the Company does not currently anticipate that these arbitration proceedings will have a material adverse impact on the Company. Green Cross Corporation (“Green Cross”). In June 2006, the Company entered into an agreement with Green Cross to develop and commercialize peramivir in Korea. Under the terms of the agreement, Green Cross will be responsible for all development, regulatory, and commercialization costs in Korea. The Company received a one -time license fee of $250. The license also provides that the Company will share in profits resulting from the sale of peramivir in Korea, including the sale of peramivir to the Korean government for stockpiling purposes. Furthermore, Green Cross will pay the Company a premium over its cost to supply peramivir for development and any future marketing of peramivir products in Korea. Green Cross has commercially launched peramivir under the commercial name PeramiFlu in Korea. Mundipharma International Holdings Limited (“Mundipharma”). In February 2006, the Company entered into an exclusive, royalty bearing right and license agreement with Mundipharma for the development and commercialization of forodesine, a Purine Nucleoside Phosphorylase (“PNP”) inhibitor, for use in oncology. Under the terms of the license agreement, as amended, Mundipharma obtained rights to forodesine in markets across Europe, Asia, and Australasia in exchange for a $10,000 up-front payment. In April 2017, Mundipharma obtained regulatory approval of Mundesine ® (forodesine hydrochloride) for the treatment of relapsed/refractory PTCL (Peripheral T-Cell Lymphoma) by the Ministry of Health, Labor and Welfare in Japan and is responsible for all commercialization costs in Japan. With Mundesine’s approval, we began receiving royalties on product sales in Japan as per the amended license agreement. Albert Einstein College of Medicine of Yeshiva University and Industrial Research, Ltd. (“AECOM” and “IRL” respectively). In June 2000, the Company licensed a series of potent inhibitors of PNP from AECOM and IRL, (collectively, the “Licensors”). The lead product candidate from this collaboration is forodesine. The Company has obtained worldwide exclusive rights to develop and ultimately distribute these, or any other, product candidates that might arise from research on these inhibitors. The Company has the option to expand the agreement to include other inventions in the field made by the investigators or employees of the Licensors. The Company agreed to use commercially reasonable efforts to develop these drugs. In addition, the Company has agreed to pay certain milestone payments for each licensed product (which range in the aggregate from $1,400 to almost $4,000 per indication) for future development of these inhibitors, single digit royalties on net sales of any resulting product made by the Company, and to share approximately one quarter of future payments received from other third -party partners, if any. In addition, the Company has agreed to pay annual license fees, which can range from $150 to $500, that are creditable against actual royalties and other payments due to the Licensors. This agreement may be terminated by the Company at any time by giving 60 days advance notice or in the event of material uncured breach by the Licensors. In May 2010, the Company amended the licensee agreement through which the Company obtained worldwide exclusive rights to develop and ultimately distribute any product candidates that might arise from research on a series of PNP inhibitors, including forodesine and ulodesine. Under the terms of the amendment, the Licensors agreed to accept a reduction of one -half in the percentage of future payments received from third -party sub licensees of the licensed PNP inhibitors that must be paid to the Licensors. This reduction does not apply to (i) any milestone payments the Company may receive in the future under its license agreement dated February 1, 2006 with Mundipharma and (ii) royalties received from its sub licensees in connection with the sale of licensed products, for which the original payment rate will remain in effect. The rate of royalty payments to the Licensors based on net sales of any resulting product made by the Company remains unchanged. On June 19, 2012, the Company further amended its agreements with AECOM/IRL whereby the parties clarified the definition of the field with respect to PNP inhibition and AECOM/IRL agreed to exclusive worldwide license of galidesivir to BioCryst for any antiviral use. On January 6, 2014, the Carbohydrate Chemistry Research Team from Callaghan Innovation Research Limited, formerly Industrial Research Limited, transferred to Victoria University of Wellington (“VUW”) to establish the Ferrier Research Institute. The intellectual property rights relating to this research team, and the contracts relating to that intellectual property were transferred to a wholly owned subsidiary of VUW, including the contracts to which BioCryst is a party. The parties executed novation agreements in order to effectuate the transfer. Except for a substitution of parties, the terms and conditions of the contracts are substantially the same. The University of Alabama at Birmingham (“UAB”). The Company currently has agreements with UAB for influenza neuraminidase and complement inhibitors. Under the terms of these agreements, UAB performed specific research for the Company in return for research payments and license fees. UAB has granted the Company certain rights to any discoveries in these areas resulting from research developed by UAB or jointly developed with the Company. The Company has agreed to pay single digit royalties on sales of any resulting product and to share in future payments received from other third -party partners. The Company has completed the research under the UAB agreements. These two agreements have initial 25 -year terms, are automatically renewable for five -year terms throughout the life of the last patent and are terminable by the Company upon three months’ notice and by UAB under certain circumstances. Upon termination both parties shall cease using the other parties’ proprietary and confidential information and materials, the parties shall jointly own joint inventions and UAB shall resume full ownership of all UAB licensed products. There is currently no activity between the Company and UAB on these agreements, but when the Company licenses this technology, such as in the case of the Shionogi, Green Cross and SUL agreements, or commercializes products related to these programs, the Company will owe sublicense fees or royalties on amounts it receives.

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