Significant Agreements	12 Months Ended
Dec. 31, 2011
Notes to Financial Statements
Significant Agreements	NOTE 13 SIGNIFICANT AGREEMENTS Merial Limited In September 2009, we entered into a world-wide license and development agreement with Merial Limited (Merial), a world leading animal health company, for a long acting pain management product for companion animals. Under the terms of the new agreement, we received a nonrefundable upfront license fee and would receive development funding and potential future milestone payments and 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. Any milestone payments would be recognized when receipt of the payments is probable. 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 $0.6 million, $1.3 million and $0.2 million in revenue related to development services to Merial for the years ended 2011, 2010 and 2009, 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, upon termination of the licensing agreement by Merial. 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 used primarily to fund the Phase 3 pivotal trial of APF530, our drug candidate for the prevention of both acute and delayed CINV. Subsequent $2.5 million payments were received in both 2007 and January 2010 upon the achievement of certain milestones. RHEI Pharmaceuticals, Inc. On October 1, 2006, we entered into an agreement with RHEI Pharmaceuticals, Inc. (RHEI) in which we granted them an exclusive license to develop and market APF530 in Greater China. We received a license fee upon the signing of the contract, which was recorded as deferred revenue on the balance sheet, and were due additional milestone payments upon the achievement of certain regulatory events. Following the announcement of acceptance for filing of an NDA for our APF530 product candidate by the FDA on July 20, 2009, RHEI became contractually obligated to pay us a milestone payment. RHEI did not make such milestone payment in the time required under the terms of our agreement, and we provided RHEI with notice of its cure period. RHEI remained in default of this payment and, as a result, we elected to terminate the agreement for cause on September 29, 2009. No material termination penalties applied to us for the termination of the agreement. Revenue of $1.0 million, previously deferred in conjunction with the RHEI agreement, was recognized in 2009 as a result of the termination and is included in contract revenue.

Significant Agreements

12 Months Ended

Dec. 31, 2011

NOTE 13 SIGNIFICANT AGREEMENTS

Merial Limited

In September 2009, we entered into a world-wide license and development agreement with Merial Limited (Merial), a world leading animal health company, for a long acting pain management product for companion animals. Under the terms of the new agreement, we received a nonrefundable upfront license fee and would receive development funding and potential future milestone payments and 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. Any milestone payments would be recognized when receipt of the payments is probable.

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 $0.6 million, $1.3 million and $0.2 million in revenue related to development services to Merial for the years ended 2011, 2010 and 2009, 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, upon termination of the licensing agreement by Merial.

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 used primarily to fund the Phase 3 pivotal trial of APF530, our drug candidate for the prevention of both acute and delayed CINV. Subsequent $2.5 million payments were received in both 2007 and January 2010 upon the achievement of certain milestones.

RHEI Pharmaceuticals, Inc.

On October 1, 2006, we entered into an agreement with RHEI Pharmaceuticals, Inc. (RHEI) in which we granted them an exclusive license to develop and market APF530 in Greater China. We received a license fee upon the signing of the contract, which was recorded as deferred revenue on the balance sheet, and were due additional milestone payments upon the achievement of certain regulatory events.

Following the announcement of acceptance for filing of an NDA for our APF530 product candidate by the FDA on July 20, 2009, RHEI became contractually obligated to pay us a milestone payment. RHEI did not make such milestone payment in the time required under the terms of our agreement, and we provided RHEI with notice of its cure period. RHEI remained in default of this payment and, as a result, we elected to terminate the agreement for cause on September 29, 2009. No material termination penalties applied to us for the termination of the agreement.

Revenue of $1.0 million, previously deferred in conjunction with the RHEI agreement, was recognized in 2009 as a result of the termination and is included in contract revenue.

- Definition

Tabular disclosure of significant agreements under research and development arrangements accounted for as a contract to perform research and development for others (including royalty arrangements, purchase provisions, license agreements, and commitments to provide additional funding), aggregated by similar arrangements or individually if necessary to understand the effects on the financial statements. Include also the amount of costs incurred under a research and development arrangement accounted for as a contract to perform research and development for others. Aggregation of similar arrangements by type may be appropriate. Include also the amount of compensation earned (contract income) under a research and development arrangement accounted for as a contract to perform research and development for others. Aggregation of similar arrangements by type may be appropriate.

+ References+ Details