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Major Customers, Partnerships and Strategic Alliances | 9 Months Ended
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Sep. 30, 2014
Organization Consolidation And Presentation Of Financial Statements [Abstract] |
Major Customers, Partnerships and Strategic Alliances | NOTE 5—MAJOR CUSTOMERS, PARTNERSHIPS AND STRATEGIC ALLIANCES Collaboration Agreements Collaboration and License Agreement with Biogen Idec, Inc. in Human Therapeutics On January 8, 2014, Sangamo entered into a Global Research, Development and Commercialization Collaboration and License Agreement (the “Agreement”) with Biogen, pursuant to which Sangamo and Biogen will collaborate to discover, develop, seek regulatory approval for and commercialize therapeutics based on Sangamo’s zinc finger DNA-binding protein (“ZFP”) technology for hemoglobinopathies, including beta-thalassemia and sickle cell disease (“SCD”). Under the Agreement, Sangamo and Biogen jointly conduct two research programs: the beta-thalassemia program and the SCD program. For the beta-thalassemia program, Sangamo is responsible for all discovery, research and development activities through the first human clinical trial for the first ZFP Therapeutic developed under the Agreement for the treatment of beta-thalassemia. For the SCD program, both parties are responsible for research and development activities through the submission of an Investigational New Drug (“IND”) application for ZFP Therapeutics intended to treat SCD. For both programs, Biogen is responsible for subsequent world-wide clinical development, manufacturing and commercialization of licensed products developed under the Agreement. At the end of specified research terms for each program or under certain specified circumstances, Biogen retains the right to step in and take over any remaining activities of Sangamo. Furthermore, Sangamo has an option to co-promote in the United States any licensed product to treat beta-thalassemia and SCD developed under the Agreement, and Biogen agrees to compensate Sangamo for such co-promotion activities. Sangamo received an upfront license fee of $20.0 million upon entering into the Agreement. Biogen will also reimburse Sangamo for agreed upon costs incurred in connection with research and development activities conducted by Sangamo. In addition, Sangamo is eligible to receive contingent payments upon the achievement of specified regulatory, clinical development, commercialization and sales milestones. The total amount of potential regulatory, clinical development, commercialization and sales contingent payments, assuming the achievement of all specified milestone events in the Agreement, is $293.8 million, including Phase 1 contingent payments of $7.5 million for each of the beta-thalassemia and SCD programs. In addition, if products are commercialized under this Agreement, Biogen will pay Sangamo incremental royalties for each licensed product that are a tiered double-digit percentage of annual net sales of such product. There have been no licensed products approved under the Agreement as of September 30, 2014. All contingent payments under the Agreement, when earned, will be non-refundable and non-creditable. The Company has evaluated the contingent payments under the Agreement with Biogen based on the authoritative guidance for research and development milestones and determined that certain of these payments meet the definition of a milestone and that all such milestones are evaluated to determine if they are considered substantive milestones. Milestones are considered substantive if they are related to events (i) that can be achieved based in whole or in part on either the Company’s performance or on the occurrence of a specific outcome resulting from the Company’s performance, (ii) for which there was substantive uncertainty at the date the agreement was entered into that the event would be achieved and (iii) that would result in additional payments being due to the Company. Accordingly, consideration received for the achievement of milestones that are determined to be substantive will be recognized as revenue in their entirety in the period when the milestones are achieved and collectability is reasonably assured. Revenue for the achievement of milestones that are not substantive will be recognized over the remaining period of the Agreement, assuming all other applicable revenue recognition criteria have been met. Subject to the terms of the Agreement, Sangamo grants Biogen an exclusive, royalty-bearing license, with the right to grant sublicenses, to use certain ZFP and other technology controlled by Sangamo for the purpose of researching, developing, manufacturing and commercializing licensed products developed under the Agreement. Sangamo also grants Biogen a non-exclusive, world-wide, royalty free, fully paid license, with the right to grant sublicenses, of Sangamo’s interest in certain other intellectual property developed pursuant to the Agreement. The Company has identified the deliverables within the arrangement as a license to the technology and on-going research services activities. The Company has concluded that the license is not a separate unit of accounting as it does not have stand-alone value to Biogen apart from the research services to be performed pursuant to the Agreement. As a result, the Company will recognize revenue from the upfront payment on a straight-line basis over a forty-month estimated initial research term during which the Company will perform research services. As of September 30, 2014, the Company has deferred revenue of $16.4 million related to this Agreement. Revenues recognized under the agreement with Biogen for the three and nine months ended September 30, 2014 are as follows (in thousands):
| Three months ended |  |  | Nine months ended |
| September 30 , |  |  | September 30 , |
| 2014 |  |  | 2014 |
Revenue related to Biogen Collaboration: |  |  |  |  |  |  |
Recognition of upfront fee | $ | 1,557 |  |  | $ | 3,756 |
Research services |  | 3,508 |  |  |  | 5,270 |
Total | $ | 5,065 |  |  | $ | 9,026 |
Related costs and expenses incurred under the Biogen agreement related to the beta-thalassemia project, which is co-funded with California Institute for Regenerative Medicine (“CIRM”), were $2.0 million and $4.5 million during the three and nine months ended September 30, 2014, respectively. Related costs and expenses for other projects including sickle cell disease under the Biogen agreement were $0.5 million and $0.8 million during the three and nine months ended September 30, 2014, respectively. Collaboration and License Agreement with Shire International GmbH in Human Therapeutics and Diagnostics In January 2012, the Company entered into a collaboration and license agreement (the “Agreement”) with Shire, pursuant to which the Company and Shire collaborate to research, develop and commercialize human therapeutics and diagnostics for monogenic diseases based on Sangamo’s novel ZFP technology. Under the Agreement, the Company and Shire may develop potential human therapeutic or diagnostic products for seven gene targets. The initial four gene targets selected were blood clotting Factors VII, VIII, IX and X, and products developed for such initial gene targets will be used for treating or diagnosing hemophilia. In June 2012, Shire selected a fifth gene target for the development of a ZFP Therapeutic for Huntington’s disease. Shire has the right, subject to certain limitations, to designate two additional gene targets. Pursuant to the Agreement, the Company granted Shire an exclusive, world-wide, royalty-bearing license, with the right to grant sublicenses, to use Sangamo’s ZFP technology for the purpose of developing and commercializing human therapeutic and diagnostic products for the gene targets. The initial research term of the Agreement is six years and is subject to extensions upon mutual agreement and under other specified circumstances. Under the terms of the Agreement, the Company is responsible for all research activities through the submission of an IND or European Clinical Trial Application (“CTA”), while Shire is responsible for clinical development and commercialization of products generated from the research program from and after the acceptance of an IND or CTA for the product. Shire reimburses Sangamo for agreed upon internal and external program-related research costs. The Company received an upfront license fee of $13.0 million upon entering into the Agreement. The Company will also be eligible to receive up to $213.5 million of contingent payments for each gene target if specified research, regulatory, clinical development, commercialization and sales milestone events occur, including payments for each gene target through the acceptance of an IND or CTA submission totaling $8.5 million. The Company will also be eligible to receive royalty payments that are a tiered double-digit percentage of net sales of licensed product sold by Shire or its sublicensees developed under the collaboration, if any. To date, no products have been approved and therefore no royalty fees have been earned under the Agreement with Shire. All contingent payments under the Agreement, when earned, will be non-refundable and non-creditable. The Company has evaluated the contingent payments under the Agreement with Shire based on the authoritative guidance for research and development milestones and determined that certain of these payments meet the definition of a milestone and that all such milestones are evaluated to determine if they are considered substantive milestones. Milestones are considered substantive if they are related to events (i) that can be achieved based in whole or in part on either the Company’s performance or on the occurrence of a specific outcome resulting from the Company’s performance, (ii) for which there was substantive uncertainty at the date the agreement was entered into that the event would be achieved and (iii) that would result in additional payments being due to the Company. Accordingly, revenue for the achievement of milestones that are determined to be substantive will be recognized in their entirety in the period the milestones are achieved and collectability is reasonably assured. Revenue for the achievement of milestones that are not substantive will be recognized over the remaining period of the Agreement, assuming all other applicable revenue recognition criteria have been met. During the three months ended September 30, 2014 Sangamo recognized a $1.0 million milestone payment related to our hemophilia program. The Company has identified the deliverables within the arrangement as a license to the technology and on-going research services activities. The Company has concluded that the license is not a separate unit of accounting as it does not have stand-alone value to Shire apart from the research services to be performed pursuant to the Agreement. As a result, the Company will recognize revenue from the upfront payment on a straight-line basis over a six-year initial research term during which the Company will perform research services. As of September 30, 2014, the Company has deferred revenue of $7.3 million related to this Agreement. Revenues recognized under the agreement with Shire for the three and nine months ended September 30, 2014 and 2013, were as follows (in thousands):
| Three months ended |  |  | Nine months ended |
| September 30, |  |  | September 30, |
| 2014 |  |  | 2013 |  |  | 2014 |  |  | 2013 |
Revenue related to Shire Collaboration: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Recognition of upfront fee | $ | 542 |  |  | $ | 542 |  |  | $ | 1,625 |  |  | $ | 1,625 |
Recognition of milestone |  | 1,000 |  |  |  | - |  |  |  | 1,000 |  |  |  | - |
Research services |  | 5,002 |  |  |  | 3,968 |  |  |  | 15,912 |  |  |  | 11,340 |
Total | $ | 6,544 |  |  | $ | 4,510 |  |  | $ | 18,537 |  |  | $ | 12,965 |
Related costs and expenses incurred under the Shire agreement were $5.1 million and $3.5 million during the three months ended September 30, 2014 and September 30, 2013, respectively, and $15.5 million and $10.3 million during the nine months ended September 30, 2014 and September 30, 2013, respectively. Agreement with Sigma-Aldrich Corporation in Laboratory Research Reagents, Transgenic Animal and Commercial Protein Production Cell-line Engineering In July 2007, Sangamo entered into a license agreement (the “Agreement”) with Sigma-Aldrich Corporation (“Sigma”). Under the Agreement, Sangamo agreed to provide Sigma with access to our proprietary ZFP technology and the exclusive right to use the technology to develop and commercialize research reagent products and services in the research field, excluding certain agricultural research uses that Sangamo previously licensed to Dow AgroSciences LLC (“DAS”). Under the Agreement, Sangamo and Sigma agreed to conduct a three-year research program to develop laboratory research reagents using Sangamo’s ZFP technology during which time Sangamo agreed to assist Sigma in connection with its efforts to market and sell services employing the Company’s ZFP technology in the research field. Sangamo has transferred its ZFP manufacturing technology to Sigma. In October 2009, Sangamo expanded its Agreement with Sigma. In addition to the original terms of the Agreement, Sigma received exclusive rights to develop and distribute ZFP-modified cell lines for commercial production of protein pharmaceuticals and certain ZFP-engineered transgenic animals for commercial applications. Under the terms of the Agreement, Sigma made an upfront cash payment of $20.0 million consisting of a $4.9 million purchase of 636,133 shares of Sangamo common stock and a $15.1 million upfront license fee. The upfront license fee was recognized on a straight-line basis from the effective date of the expanded license through July 2010, which represents the period over which Sangamo was obligated to perform research services for Sigma. Sangamo is also eligible to receive commercial license fees of $5.0 million based upon a percentage of net sales and sublicensing revenue and thereafter a reduced royalty rate of 10.5% of net sales and sublicensing revenue. In addition, upon the achievement of certain cumulative commercial milestones Sigma will make milestone payments to Sangamo up to an aggregate of $25.0 million. Revenues recognized under the agreement with Sigma for the three and nine months ended September 30, 2014 and 2013, were as follows (in thousands):
| Three months ended |  |  | Nine months ended |
| September 30, |  |  | September 30, |
| 2014 |  |  | 2013 |  |  | 2014 |  |  | 2013 |
Revenue related to Sigma Collaboration: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Royalty revenues | $ | 67 |  |  | $ | 201 |  |  | $ | 270 |  |  | $ | 711 |
License fee and milestone revenues |  | 269 |  |  |  | 101 |  |  |  | 447 |  |  |  | 1,351 |
Total | $ | 336 |  |  | $ | 302 |  |  | $ | 717 |  |  | $ | 2,062 |
Related costs and expenses incurred under the Sigma agreement were $0.0 million and $0.1 million during the three months ended September 30, 2014 and 2013, respectively. Related costs and expenses incurred under the Sigma agreement were both $0.1 million during the nine months ended September 30, 2014 and 2013, respectively. Agreement with Dow AgroSciences in Plant Agriculture In October 2005, Sangamo entered into an exclusive commercial license agreement (the “Agreement”) with DAS. Under the Agreement, Sangamo provides DAS with access to our proprietary ZFP technology and the exclusive right to use the technology to modify the genomes or alter the nucleic acid or protein expression of plant cells, plants, or plant cell cultures. Sangamo has retained rights to use plants or plant-derived products to deliver ZFP transcription factors (“ZFP TFs”) or ZFP nucleases (“ZFNs”) into humans or animals for diagnostic, therapeutic or prophylactic purposes. The Agreement with DAS provided for an initial three-year research term. In June 2008, DAS exercised its option under the agreement to obtain a commercial license to sell products incorporating or derived from plant cells generated using the Company’s ZFP technology, including agricultural crops, industrial products and plant-derived biopharmaceuticals. The exercise of the option triggered a one-time commercial license fee of $6.0 million, payment of the remaining $2.3 million of the previously agreed $4.0 million in research milestones, development and commercialization milestone payments for each product, and royalties on sales of products. Furthermore, DAS has the right to sublicense Sangamo’s ZFP technology to third parties for use in plant cells, plants or plant cell cultures. Sangamo will be entitled to 25% of any cash consideration received by DAS under such sublicenses. In December 2010, the Company amended the Agreement with DAS to extend the period of reagent manufacturing services and research services through December 31, 2012. The Agreement also provides for minimum license fees each year due to Sangamo every October, provided the Agreement is not terminated by DAS. Annual fees range from $250,000 to $3.0 million and total $25.3 million over 11 years. The Company does not have any ongoing performance obligations under the agreement with DAS. DAS has the right to terminate the Agreement at any time; accordingly, the Company’s actual license fees over the term of the Agreement could be lower than $25.3 million. In addition, each party may terminate the Agreement upon an uncured material breach by the other party. In the event of any termination of the Agreement, all rights to use the Company’s ZFP technology will revert to Sangamo, and DAS will no longer be permitted access to Sangamo’s ZFP technology or to develop or, except in limited circumstances, commercialize any products derived from the Company’s ZFP technology. There were no revenues or related costs and expenses during the three and nine months ended September 30, 2014 and 2013, respectively. Funding from Research Foundations California Institute for Regenerative Medicine - HIV In October 2009, CIRM, a State of California entity, granted a $14.5 million Disease Team Research Award to develop an HIV/AIDS therapy based on the application of ZFN gene editing technology in hematopoietic stem cells (“HSCs”). The four-year grant supports an innovative research project conducted by a multidisciplinary team of investigators, including investigators from the University of Southern California, City of Hope National Medical Center and Sangamo BioSciences. Sangamo received funds totaling $5.2 million from the total amount awarded based on expenses incurred for research and development efforts by Sangamo as prescribed in the agreement, and subject to its terms and conditions. The award is intended to substantially fund Sangamo’s research and development efforts related to the agreement. The State of California has the right to receive, subject to the terms and conditions of the agreement between Sangamo and CIRM, payments from Sangamo resulting from sales of a commercial product resulting from research and development efforts supported by the grant. As of December 31, 2013, all revenues under the award have been recognized and all funds have been received. There were no revenues attributable to research and development performed under the CIRM grant agreement during the three and nine months ended September 30, 2014. Revenues attributable to research and development performed under the CIRM grant agreement were $0.5 million and $1.2 million during the three and nine months ended September 30, 2013, respectively. Related costs and expenses incurred under the CIRM agreement were both $0.5 million during the three months ended September 30, 2014 and 2013, respectively, and $1.5 million and $1.4 million during the nine months ended September 30, 2014 and 2013, respectively. California Institute for Regenerative Medicine - Beta-Thalassemia In May 2013, CIRM granted Sangamo a $6.4 million Strategic Partnership Award to develop a potentially curative ZFP Therapeutic for beta-thalassemia based on the application of its ZFN gene editing technology in HSCs. The four-year grant provides matching funds for preclinical work that will support an IND application and a Phase 1 clinical trial in transfusion-dependent beta-thalassemia patients. The State of California has the right to receive, subject to the terms and conditions of the agreement between Sangamo and CIRM, payments from Sangamo, or its collaborators, from sales of a commercial product resulting from research and development efforts supported by the grant, in accordance with Title 17, California Code of Regulations, Section 100600. Revenue attributable to research and development performed under the CIRM grant agreement for beta-thalassemia was $0.4 million during the three months ended September 30, 2014 and $1.1 million during the nine months ended September 30, 2014. Related costs and expenses incurred under the CIRM grant agreement were $0.4 million and $1.1 million during the three and nine months ended September 30, 2014, respectively.

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