Alnylam Pharmaceuticals (ALNY)

 

In July 2006, the Company executed an Amended and Restated Research Collaboration and License Agreement (the “Amended License Agreement”) with Merck, which amended and restated the Research Collaboration and License Agreement, dated September 8, 2003, between the Company and Merck, as amended. In September 2007, the Company and Merck terminated the Amended License Agreement (the “Termination Agreement”). Pursuant to the Termination Agreement, all license grants of intellectual property to develop, manufacture and/or commercialize RNAi therapeutic products under the Amended License Agreement ceased as of the date of the Termination Agreement, subject to certain specified exceptions. The Termination Agreement further provides that, subject to certain conditions, the Company and Merck will each retain sole ownership and rights in their own intellectual property. The Company has no remaining deliverables under the Amended License Agreement. The Company was recognizing the remaining deferred revenue of $3.5 million under the Amended License Agreement, related to upfront cash payments and additional license fee payments received from Merck, on a straight-line basis over the remaining period of expected performance of four years. As a result of the Termination Agreement, the Company recognized this remaining deferred revenue of $3.5 million.

 

 

In July 2006, the Company executed an Amended and Restated
Research Collaboration and License Agreement (the “Amended
License Agreement”) with Merck, which amended and restated
the Research Collaboration and License Agreement, dated
September 8, 2003, between the Company and Merck, as
amended. In September 2007, the Company and Merck terminated the
Amended License Agreement (the “Termination
Agreement”). Pursuant to the Termination Agreement, all
license grants of intellectual property to develop, manufacture
and/or
commercialize RNAi therapeutic products under the Amended
License Agreement ceased as of the date of the Termination
Agreement, subject to certain specified exceptions. The
Termination Agreement further provides that, subject to certain
conditions, the Company and Merck will each retain sole
ownership and rights in their own intellectual property. The
Company has no remaining deliverables under the Amended License
Agreement. The Company was recognizing the remaining deferred
revenue of $3.5 million under the Amended License Agreement,
related to upfront cash payments and additional license fee
payments received from Merck, on a straight-line basis over the
remaining period of expected performance of four years. As a
result of the Termination Agreement, the Company recognized this
remaining deferred revenue of $3.5 million.

 

 

In July 2006, the Company executed an Amended and Restated Research Collaboration and License Agreement (the “Amended License Agreement”) with Merck, which amends and restates the Research Collaboration and License Agreement, dated September 8, 2003, between the Company and Merck, as amended (the “Original License Agreement”). The collaboration between the Company and Merck is focused on developing RNAi therapeutics for targets associated with human diseases and, under the terms of the Amended License Agreement, will focus on the nine targets that then remained to be nominated by Merck under the terms of the Original License Agreement. These nine programs will be in addition to the existing program directed to the NOGO pathway on which the Company and Merck are already collaborating. The Company may select three of the nine additional programs as joint development programs, which Merck will co-fund and participate in from the outset. In October 2006, the Company selected a co-development program from the first three targets presented by Merck under the Amended License Agreement. Under the Original License Agreement, the collaboration was structured such that co-funding by Merck would not begin until after the completion of defined pre-clinical work. The Amended License Agreement provides funding from Merck immediately for programs selected by the Company for co-development, and provides that, in the United States, the Company will have the right to co-promote RNAi therapeutic products developed in these three co-development programs. Merck will assume primary responsibility for the remaining six programs and the Company is eligible to receive milestone payments and royalties on any RNAi therapeutic products developed and commercialized by Merck in these six programs. The initial term of the collaboration under the Amended License Agreement is five years from the date of the Original License Agreement and, unless earlier terminated, will continue until the date on which no product is being developed or commercialized under the agreement. Unless earlier terminated, the Amended License Agreement shall continue in effect until the expiration of all royalty obligations and profit-sharing obligations under the agreement.

 

Also in July 2006, the Company and Merck agreed to terminate their Collaboration and License Agreement, effective as of June 29, 2004 (the “Ocular Collaboration Agreement”), pursuant to which the Company and Merck were collaborating in the research, development and commercialization of RNAi products directed to certain targets, including but not limited to, vascular endothelial growth factor (“VEGF”). In connection with the termination of the Ocular Collaboration Agreement, and subject to certain royalty and other obligations, the Company has retained its rights to develop, manufacture and commercialize ophthalmic products directed to VEGF and Merck has granted the Company a license under certain of its technology solely to develop, manufacture and commercialize RNAi products directed to VEGF.

 

At December 31, 2006, the Company has deferred revenue on its balance sheet of $3.9 million related to upfront cash payments and additional license fee payments received from the Original License Agreement and the Ocular Collaboration Agreement. The Company is recognizing the remaining deferred revenue on a straight-line basis over the period of expected performance or five years.

 

 

In September 2003, the Company entered into a five-year strategic alliance with Merck to develop RNAi-based technology and therapeutics. For technology development, Merck and the Company each committed to devote resources, including full-time equivalents and expertise, to the collaborative development of advanced RNAi technology. Merck will have rights to use this technology solely for the identification and validation of drug targets; the Company will have rights to use it for these purposes and also for therapeutic purposes. For therapeutics development, Merck agreed to provide the Company with twelve proprietary drug targets as potential targets for siRNA therapeutics. The Company has the right, but not the obligation, to develop siRNA drug candidates against each target provided by Merck. If the Company advances a candidate to a defined point in pre-clinical development, the Company and Merck will then decide whether the Company, Merck or the two companies together will proceed with the further development and commercialization of that candidate. For each drug candidate in whose development Merck decides to participate, it will make a cash payment to the Company at the time of its decision, and will also reimburse the Company for a portion of the costs the Company has so far incurred on that candidate.

 

In connection with this alliance, Merck made an upfront cash payment of $2.0 million and a $5.0 million equity investment in the Company during 2003. In addition, in connection with this agreement, the Company received $1.0 million in additional license fee payments from Merck in September 2004 and September 2005 and $7.0 million in December 2004 upon the attainment of a pre-specified technology milestone. Of the $7.0 million received in December 2004, $5.0 million was from the sale of 710,273 shares of the Company’s common stock and $2.0 million represented a cash milestone. The Company is recognizing the revenue related to the up-front and license payments ratably over the estimated period of performance under the agreement, which the Company has determined to be six years, and recognized the cash milestone as revenue upon receipt. The amortization of these payments resulted in revenues of $0.9 million, $0.6 million and $0.1 million in 2005, 2004 and 2003, respectively. Of the $7.0 million payment received in December 2004, the Company recorded $5.3 million in stockholders’ equity for the sale of common stock, which represents the fair value of the stock on the date of issuance, and recognized the residual of $1.7 million of revenue in connection with the cash milestone payment. As of December 31, 2005, the Company has deferred revenue on its balance sheet of $2.4 million.