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AGREEMENTS WITH PFIZER | 12 Months Ended
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Dec. 31, 2016
AGREEMENTS WITH PFIZER [Abstract] |
AGREEMENTS WITH PFIZER | NOTE 2 - AGREEMENTS WITH PFIZER
| 1. | On November 30, 2009, Protalix Ltd. and Pfizer entered into the Pfizer Agreement pursuant to which Pfizer was granted an exclusive, worldwide license to develop and commercialize taliglucerase alfa, except in Israel. Under the terms and conditions of the Pfizer Agreement, Protalix Ltd. retained the right to commercialize taliglucerase alfa in Israel. In June 2013, Pfizer returned the commercialization rights in Brazil to Protalix Ltd.
Under the Pfizer Agreement and prior to its amendment in October 2015, Pfizer made an upfront payment to Protalix Ltd. of $60.0 million in connection with the execution of the agreement and shortly thereafter paid Protalix Ltd. an additional $5.0 million upon the Company’s achievement of a certain milestone. Protalix Ltd. received a $25.0 million milestone payment in connection with the approval of taliglucerase alfa by the FDA in May 2012. Protalix Ltd. was entitled to 40% of the results (profits or losses) earned on Pfizer’s sales of taliglucerase alfa. Such result (profit or loss) were to be calculated while, in addition to other adjustments, taking into account Protalix Ltd.’s cost of goods sold and Pfizer’s commercial expenses, with certain expenses capped or borne solely by one party (“Collaboration Operation”). As of October 12, 2015 (day of signing the Amended Pfizer Agreement), the Company accrued a liability in respect of its share in the accumulated losses of the collaboration operation equal to approximately $4.3 million. After deducting the losses, the Company is entitled to receive in cash its share in the profits of the collaboration operation. Upon execution of the Amended Pfizer Agreement, the Company no longer shares Pfizer’s profits or losses with respect to Pfizer’s sales of taliglucerase alfa. The Company recognized revenue from milestone payments received pursuant to the Pfizer Agreement in accordance with guidance regarding arrangements with multiple deliverables. As the first Pfizer Agreement required the Company’s continued involvement with respect to the proposed commercialization of taliglucerase alfa, the non-refundable, up-front license payment the Company received from Pfizer was deferred and was recognized over the related performance period. The Company estimated the performance period of 14 years based on the date the last relevant patent expires. As to the final release of the deferred revenue, see 2 below. Each milestone payment that was considered to be substantive for purposes of revenue recognition was recorded as revenue during the period in which the milestone was achieved. The Company first determined that the initial, non-refundable upfront license fee payment of $60.0 million together with the first $5.0 million payment were to be recognized on a straight line basis as revenue over the estimated relationship period (approximately $4.6 million per year). The $25.0 million milestone payment received during 2012 in connection with the FDA’s approval of taliglucerase alfa in the United States was considered to be a substantive milestone for purposes of revenue recognition and, accordingly, was recorded as revenue during the period in which the milestone was achieved.
| 2. | In October 2015 the Company entered into the following agreements:
Amended Pfizer Agreement - Pursuant to the amendment, the Company granted Pfizer an exclusive license in the entire world, including Israel but excluding Brazil. Pfizer acquired all the information, knowledge and permission to manufacture and sell Elelyso. Protalix also agreed to provide Pfizer with:
| a. | Manufacturing and supply of the drug substance for its incorporation into the licensed product in consideration of an agreed price per unit.
| b. | Assistance in arranging for the manufacture of the drug substance by Pfizer or by alternative supplier chosen by Pfizer in consideration of an agreed hourly rate plus reimbursement of expenses.
Stock Purchase Agreement - the Company issued 5,649,079 shares of Common Stock to Pfizer. Promissory note – as of the date of the amendment, the Company owed Pfizer $4.3 million as a result of the accumulated losses incurred by the collaboration operation. Following the new agreements, the Company committed to pay Pfizer the principal sum of the debt at the earlier of (a) November 12, 2020 and (b) the date upon which it becomes due pursuant to any event of default, as defined. The three contracts presented above are considered a single arrangement with multiple deliverables. The Company allocated the total consideration of $46.0 million between the license and Common Stock according to each fair value, as follows: $6.1 million was allocated to the issuance of shares and $39.9 million to the license. The Company considered the relevant circumstances in order to determine the appropriate timing of revenue recognition and determined that revenues related to the Amended Pfizer Agreement should be recognized immediately. The Amended Pfizer Agreement terminated the Company’s continued involvement according to the original Pfizer Agreement and therefore the pre-existing balance of deferred revenue was recognized in the Statement of Operations. The Amended Pfizer Agreement resulted in a discontinued operation as defined under ASU 2014-08 because it represented a strategic shift for the Company that has a major effect on the entity’s operations and financial results. Revenues from the Pfizer Agreements as well as revenues from sales of Elelyso in Israel are presented as discontinued operations, see note 12. In connection with the payments received under the Pfizer Agreement and the Amended Pfizer Agreement, Protalix Ltd. paid to other third parties certain royalties. See note 6a.

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