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Significant Agreements
9 Months Ended
Sep. 30, 2011
Significant Agreements 
Significant Agreements

(9) SIGNIFICANT AGREEMENTS

Merial Limited

In September 2009, we entered into a world-wide license and development agreement with Merial Limited (Merial), a leading animal health company, for a long-acting pain management product for cats and dogs. Under the terms of the agreement, we received a nonrefundable upfront license fee and would receive development funding and potential future milestones that were in addition to royalties following commercialization. Under the license and development agreement, we were obligated to perform reimbursable development services and provide any improvements related to the licensed technology during the six-year development period. We recognized the upfront license fee ratably over the development period, and recognized revenue from the development services when the services were rendered.

In May 2011, we received notice of termination from Merial due to their concerns about the commercial potential of the product under development in the animal health market. We recognized $0 and $0.5 million of revenue related to development services to Merial in the three and nine months ended September 30, 2011, respectively, and $0.3 million and $1.0 million of revenue for the three and nine months ended September 30, 2010, respectively. The remaining balance of deferred revenue related to the upfront license fee of $0.1 million was recognized as revenue in the quarter ended June 30, 2011 when the earnings process was completed.

Paul Royalty Fund

On January 18, 2006, we sold our rights to royalties on sales of Retin-A Micro® and Carac®, effective October 1, 2005, to an affiliate of the Paul Royalty Fund for $30.0 million. Proceeds of $25.0 million were received upon the closing of the transaction and subsequent $2.5 million payments were received in both 2007 and January 2010 upon the achievement of certain milestones.