ALNY » Topics » Revenue Recognition

This excerpt taken from the ALNY 10-K filed Feb 26, 2010.
Revenue Recognition
 
The Company has entered into collaboration agreements with biotechnology and pharmaceutical companies, including Novartis, Biogen Idec Inc. (“Biogen Idec”), Roche, Takeda, Kyowa Hakko Kirin Co., Ltd. (“Kyowa Hakko Kirin”), Cubist and Merck & Co., Inc. (“Merck”). The terms of the Company’s collaboration agreements typically include non-refundable license fees, funding of research and development, payments based upon achievement of clinical and pre-clinical development milestones, manufacturing services and royalties on product sales.
 
Non-refundable license fees are recognized as revenue upon delivery of the license only if the Company has a contractual right to receive such payment, the contract price is fixed or determinable, the collection of the resulting receivable is reasonably assured and the Company has no further performance obligations under the license agreement. Multiple element arrangements, such as license and development arrangements, are analyzed to determine whether the deliverables, which often include a license and performance obligations such as research and steering committee services, can be separated or whether they must be accounted for as a single unit of accounting.


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ALNYLAM PHARMACEUTICALS, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
The Company recognizes upfront license payments as revenue upon delivery of the license only if the license has stand-alone value and the fair value of the undelivered performance obligations, typically including research and/or steering committee services, can be determined. If the fair value of the undelivered performance obligations can be determined, such obligations are accounted for separately as such obligations are fulfilled. If the license is considered to either not have stand-alone value or have stand-alone value but the fair value of any of the undelivered performance obligations cannot be determined, the arrangement would then be accounted for as a single unit of accounting and the license payments and payments for performance obligations are recognized as revenue over the estimated period of when the performance obligations are performed.
 
Whenever the Company determines that an arrangement should be accounted for as a single unit of accounting, the Company determines the period over which the performance obligations will be performed and revenue will be recognized. Revenue will be recognized using either a proportional performance or straight-line method. The Company recognizes revenue using the proportional performance method when the level of effort required to complete its performance obligations under an arrangement can be reasonably estimated and such performance obligations are provided on a best-efforts basis. Direct labor hours or full-time equivalents are typically used as the measure of performance. Revenue recognized under the proportional performance method would be determined by multiplying the total payments under the contract, excluding royalties and payments contingent upon achievement of substantive milestones, by the ratio of level of effort incurred to date to estimated total level of effort required to complete the Company’s performance obligations under the arrangement. Revenue is limited to the lesser of the cumulative amount of payments received or the cumulative amount of revenue earned, as determined using the proportional performance method, as of the period ending date.
 
If the level of effort to complete its performance obligations under an arrangement cannot be reasonably estimated, then revenue under the arrangement would be recognized as revenue on a straight-line basis over the period the Company is expected to complete its performance obligations. Revenue is limited to the lesser of the cumulative amount of payments received or the cumulative amount of revenue earned, as determined using the straight-line method, as of the period ending date.
 
Many of the Company’s collaboration agreements entitle it to additional payments upon the achievement of performance-based milestones. If the achievement of a milestone is considered probable at the inception of the collaboration, the related milestone payment is included with other collaboration consideration, such as upfront fees and research funding, in the Company’s revenue model. Milestones that involve substantial effort on the Company’s part and the achievement of which are not considered probable at the inception of the collaboration are considered “substantive milestones.” Substantive milestones are included in the Company’s revenue model when achievement of the milestone is considered probable. As future substantive milestones are achieved, a portion of the milestone payment, equal to the percentage of the performance period completed when the milestone is achieved, multiplied by the amount of the milestone payment, will be recognized as revenue upon achievement of such milestone. The remaining portion of the milestone will be recognized over the remaining performance period using the proportional performance or straight-line method. Milestones that are tied to regulatory approval are not considered probable of being achieved until such approval is received. Milestones tied to counter-party performance are not included in the Company’s revenue model until the performance conditions are met.
 
Steering committee services that are not inconsequential or perfunctory and that are determined to be performance obligations are combined with other research services or performance obligations required under an arrangement, if any, in determining the level of effort required in an arrangement and the period over which the Company expects to complete its aggregate performance obligations.
 
For revenue generating arrangements where the Company, as a vendor, provides consideration to a licensor or collaborator, as a customer, the Company applies the accounting standard that governs such transactions. This standard addresses the accounting for revenue arrangements where both the vendor and the customer make cash payments to each other for services and/or products. A payment to a customer is presumed to be a reduction of the selling price unless the Company receives an identifiable benefit for the payment and it can reasonably estimate the


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ALNYLAM PHARMACEUTICALS, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
fair value of the benefit received. Payments to a customer that are deemed a reduction of selling price are recorded first as a reduction of revenue, to the extent of both cumulative revenue recorded to date and probable future revenues, which include any unamortized deferred revenue balances, under all arrangements with such customer, and then as an expense. Payments that are not deemed to be a reduction of selling price would be recorded as an expense.
 
The Company evaluates its collaborative agreements for proper classification in its consolidated statements of operations based on the nature of the underlying activity. Transactions between collaborators recorded in the Company’s consolidated statements of operations are recorded on either a gross or net basis, depending on the characteristics of the collaborative relationship. The Company generally reflects amounts due under its collaborative agreements related to cost-sharing of development activities as a reduction of research and development expense.
 
Revenue under government cost reimbursement contracts is recognized as the Company performs the underlying research and development activities.
 
Amounts received prior to satisfying the above revenue recognition criteria are recorded as deferred revenue in the accompanying consolidated balance sheets. Amounts not expected to be recognized within the next 12 months are classified as long-term deferred revenue. As of December 31, 2009, the Company had short-term and long-term deferred revenue of $81.9 million and $189.9 million, respectively, related to its collaborations.
 
These excerpts taken from the ALNY 10-K filed Mar 2, 2009.
Revenue Recognition
 
The Company has entered into collaboration agreements with biotechnology and pharmaceutical companies, including Roche, Takeda, Novartis, Kyowa Hakko Kirin Co., Ltd. (“Kyowa Hakko”), Biogen Idec Inc. (“Biogen Idec”) and Merck & Co., Inc. (“Merck”). The terms of the Company’s collaboration agreements typically include non-refundable license fees, funding of research and development, payments based upon achievement of clinical and pre-clinical development milestones and royalties on product sales. The Company follows the provisions of the Securities and Exchange Commission’s (“SEC”) Staff Accounting Bulletin (“SAB”) No. 104, “Revenue Recognition in Financial Statements,” Emerging Issues Task Force (“EITF”) Issue No. 00-21, “Revenue Arrangements with Multiple Deliverables” (“EITF 00-21”), EITF Issue No. 99-19, “Reporting Revenue Gross as a Principal Versus Net as an Agent,” and EITF Issue No. 01-9, “Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendor’s Products)” (“EITF 01-9”).
 
Non-refundable license fees are recognized as revenue upon delivery of the license only if the Company has a contractual right to receive such payment, the contract price is fixed or determinable, the collection of the resulting receivable is reasonably assured and the Company has no further performance obligations under the license agreement. Multiple element arrangements, such as license and development arrangements, are analyzed to determine whether the deliverables, which often include a license and performance obligations such as research and steering committee services, can be separated or whether they must be accounted for as a single unit of accounting in accordance with EITF 00-21. The Company recognizes up-front license payments as revenue upon delivery of the license only if the license has stand-alone value and the fair value of the undelivered performance obligations, typically including research and/or steering committee services, can be determined. If the fair value of the undelivered performance obligations can be determined, such obligations are accounted for separately as such obligations are fulfilled. If the license is considered to either not have stand-alone value or have stand-alone value but the fair value of any of the undelivered performance obligations cannot be determined, the arrangement would then be accounted for as a single unit of accounting and the license payments and payments for performance obligations are recognized as revenue over the estimated period of when the performance obligations are performed.
 
Whenever the Company determines that an arrangement should be accounted for as a single unit of accounting, the Company determines the period over which the performance obligations will be performed and revenue will be recognized. Revenue will be recognized using either a proportional performance or straight-line method. The Company recognizes revenue using the proportional performance method when the level of effort required to complete its performance obligations under an arrangement can be reasonably estimated and such performance obligations are provided on a best-efforts basis. Direct labor hours or full-time equivalents are typically used as the measure of performance. Revenue recognized under the proportional performance method would be determined by multiplying the total payments under the contract, excluding royalties and payments contingent upon achievement of substantive milestones, by the ratio of level of effort incurred to date to estimated total level of effort required to complete the Company’s performance obligations under the arrangement. Revenue is limited to the lesser of the cumulative amount of payments received or the cumulative amount of revenue earned, as determined using the proportional performance method, as of the period ending date.
 
If the level of effort to complete its performance obligations under an arrangement cannot be reasonably estimated, then revenue under the arrangement would be recognized as revenue on a straight-line basis over the period the Company is expected to complete its performance obligations. Revenue is limited to the lesser of the cumulative amount of payments received or the cumulative amount of revenue earned, as determined using the straight-line method, as of the period ending date.
 
Many of the Company’s collaboration agreements entitle it to additional payments upon the achievement of performance-based milestones. If the achievement of a milestone is considered probable at the inception of the collaboration, the related milestone payment is included with other collaboration consideration, such as up-front fees and research funding, in the Company’s revenue model. Milestones that involve substantial effort on the Company’s part and the achievement of which are not considered probable at the inception of the collaboration are


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ALNYLAM PHARMACEUTICALS, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
considered “substantive milestones.” Substantive milestones are included in the Company’s revenue model when achievement of the milestone is considered probable. As future substantive milestones are achieved, a portion of the milestone payment, equal to the percentage of the performance period completed when the milestone is achieved, multiplied by the amount of the milestone payment, will be recognized as revenue upon achievement of such milestone. The remaining portion of the milestone will be recognized over the remaining performance period using the proportional performance or straight-line method. Milestones that are tied to regulatory approval are not considered probable of being achieved until such approval is received. Milestones tied to counter-party performance are not included in the Company’s revenue model until the performance conditions are met.
 
Steering committee services that are not inconsequential or perfunctory and that are determined to be performance obligations are combined with other research services or performance obligations required under an arrangement, if any, in determining the level of effort required in an arrangement and the period over which the Company expects to complete its aggregate performance obligations.
 
For revenue generating arrangements where the Company, as a vendor, provides consideration to a licensor or collaborator, as a customer, the Company applies the provisions of EITF 01-9. EITF 01-9 addresses the accounting for revenue arrangements where both the vendor and the customer make cash payments to each other for services and/or products. A payment to a customer is presumed to be a reduction of the selling price unless the Company receives an identifiable benefit for the payment and it can reasonably estimate the fair value of the benefit received. Payments to a customer that are deemed a reduction of selling price are recorded first as a reduction of revenue, to the extent of both cumulative revenue recorded to date and probable future revenues, which include any unamortized deferred revenue balances, under all arrangements with such customer, and then as an expense. Payments that are not deemed to be a reduction of selling price would be recorded as an expense.
 
Amounts received prior to satisfying the above revenue recognition criteria are recorded as deferred revenue in the accompanying consolidated balance sheets. Amounts not expected to be recognized within the next 12 months are classified as long-term deferred revenue. As of December 31, 2008, the Company had short-term and long-term deferred revenue of $79.9 million and $250.1 million, respectively, related to its collaborations.
 
Revenue
Recognition



 



The Company has entered into collaboration agreements with
biotechnology and pharmaceutical companies, including Roche,
Takeda, Novartis, Kyowa Hakko Kirin Co., Ltd. (“Kyowa
Hakko”), Biogen Idec Inc. (“Biogen Idec”) and
Merck & Co., Inc. (“Merck”). The terms of
the Company’s collaboration agreements typically include
non-refundable license fees, funding of research and
development, payments based upon achievement of clinical and
pre-clinical development milestones and royalties on product
sales. The Company follows the provisions of the Securities and
Exchange Commission’s (“SEC”) Staff Accounting
Bulletin (“SAB”) No. 104, “Revenue
Recognition in Financial Statements,”
Emerging Issues
Task Force (“EITF”) Issue
No. 00-21,
“Revenue Arrangements with Multiple Deliverables”
(“EITF 00-21”),
EITF Issue
No. 99-19,
“Reporting Revenue Gross as a Principal Versus Net as an
Agent,”
and EITF Issue
No. 01-9,
“Accounting for Consideration Given by a Vendor to a
Customer (Including a Reseller of the Vendor’s
Products)”
(“EITF 01-9”).


 



Non-refundable license fees are recognized as revenue upon
delivery of the license only if the Company has a contractual
right to receive such payment, the contract price is fixed or
determinable, the collection of the resulting receivable is
reasonably assured and the Company has no further performance
obligations under the license agreement. Multiple element
arrangements, such as license and development arrangements, are
analyzed to determine whether the deliverables, which often
include a license and performance obligations such as research
and steering committee services, can be separated or whether
they must be accounted for as a single unit of accounting in
accordance with
EITF 00-21.
The Company recognizes up-front license payments as revenue upon
delivery of the license only if the license has stand-alone
value and the fair value of the undelivered performance
obligations, typically including research
and/or
steering committee services, can be determined. If the fair
value of the undelivered performance obligations can be
determined, such obligations are accounted for separately as
such obligations are fulfilled. If the license is considered to
either not have stand-alone value or have stand-alone value but
the fair value of any of the undelivered performance obligations
cannot be determined, the arrangement would then be accounted
for as a single unit of accounting and the license payments and
payments for performance obligations are recognized as revenue
over the estimated period of when the performance obligations
are performed.


 



Whenever the Company determines that an arrangement should be
accounted for as a single unit of accounting, the Company
determines the period over which the performance obligations
will be performed and revenue will be recognized. Revenue will
be recognized using either a proportional performance or
straight-line method. The Company recognizes revenue using the
proportional performance method when the level of effort
required to complete its performance obligations under an
arrangement can be reasonably estimated and such performance
obligations are provided on a best-efforts basis. Direct labor
hours or full-time equivalents are typically used as the measure
of performance. Revenue recognized under the proportional
performance method would be determined by multiplying the total
payments under the contract, excluding royalties and payments
contingent upon achievement of substantive milestones, by the
ratio of level of effort incurred to date to estimated total
level of effort required to complete the Company’s
performance obligations under the arrangement. Revenue is
limited to the lesser of the cumulative amount of payments
received or the cumulative amount of revenue earned, as
determined using the proportional performance method, as of the
period ending date.


 



If the level of effort to complete its performance obligations
under an arrangement cannot be reasonably estimated, then
revenue under the arrangement would be recognized as revenue on
a straight-line basis over the period the Company is expected to
complete its performance obligations. Revenue is limited to the
lesser of the cumulative amount of payments received or the
cumulative amount of revenue earned, as determined using the
straight-line method, as of the period ending date.


 



Many of the Company’s collaboration agreements entitle it
to additional payments upon the achievement of performance-based
milestones. If the achievement of a milestone is considered
probable at the inception of the collaboration, the related
milestone payment is included with other collaboration
consideration, such as up-front fees and research funding, in
the Company’s revenue model. Milestones that involve
substantial effort on the Company’s part and the
achievement of which are not considered probable at the
inception of the collaboration are





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ALNYLAM
PHARMACEUTICALS, INC.




 




NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS —
(Continued)


 



considered “substantive milestones.” Substantive
milestones are included in the Company’s revenue model when
achievement of the milestone is considered probable. As future
substantive milestones are achieved, a portion of the milestone
payment, equal to the percentage of the performance period
completed when the milestone is achieved, multiplied by the
amount of the milestone payment, will be recognized as revenue
upon achievement of such milestone. The remaining portion of the
milestone will be recognized over the remaining performance
period using the proportional performance or straight-line
method. Milestones that are tied to regulatory approval are not
considered probable of being achieved until such approval is
received. Milestones tied to counter-party performance are not
included in the Company’s revenue model until the
performance conditions are met.


 



Steering committee services that are not inconsequential or
perfunctory and that are determined to be performance
obligations are combined with other research services or
performance obligations required under an arrangement, if any,
in determining the level of effort required in an arrangement
and the period over which the Company expects to complete its
aggregate performance obligations.


 



For revenue generating arrangements where the Company, as a
vendor, provides consideration to a licensor or collaborator, as
a customer, the Company applies the provisions of
EITF 01-9.
EITF 01-9
addresses the accounting for revenue arrangements where both the
vendor and the customer make cash payments to each other for
services
and/or
products. A payment to a customer is presumed to be a reduction
of the selling price unless the Company receives an identifiable
benefit for the payment and it can reasonably estimate the fair
value of the benefit received. Payments to a customer that are
deemed a reduction of selling price are recorded first as a
reduction of revenue, to the extent of both cumulative revenue
recorded to date and probable future revenues, which include any
unamortized deferred revenue balances, under all arrangements
with such customer, and then as an expense. Payments that are
not deemed to be a reduction of selling price would be recorded
as an expense.


 



Amounts received prior to satisfying the above revenue
recognition criteria are recorded as deferred revenue in the
accompanying consolidated balance sheets. Amounts not expected
to be recognized within the next 12 months are classified
as long-term deferred revenue. As of December 31, 2008, the
Company had short-term and long-term deferred revenue of
$79.9 million and $250.1 million, respectively,
related to its collaborations.


 




These excerpts taken from the ALNY 10-K filed Mar 10, 2008.
Revenue Recognition
 
The Company has entered into collaboration agreements with biotechnology and pharmaceutical companies, including Roche, Novartis, Merck and Biogen Idec, Inc. (“Biogen Idec”). The terms of the Company’s collaboration agreements typically include non-refundable license fees, funding of research and development, payments based upon achievement of clinical and pre-clinical development milestones and royalties on product sales. The Company follows the provisions of the Securities and Exchange Commission’s (“SEC”) Staff Accounting Bulletin (“SAB”) No. 104, “Revenue Recognition in Financial Statements,” Emerging Issues Task Force (“EITF”) Issue No. 00-21, “Revenue Arrangements with Multiple Deliverables” (“EITF 00-21”), EITF No. 99-19, “Reporting Revenue Gross as a Principal Versus Net as an Agent,” and EITF No. 01-9, “Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendor’s Products)” (“EITF 01-9”).
 
Non-refundable license fees are recognized as revenue when the Company has a contractual right to receive such payment, the contract price is fixed or determinable, the collection of the resulting receivable is reasonably assured and the Company has no further performance obligations under the license agreement. Multiple element arrangements, such as license and development arrangements, are analyzed to determine whether the deliverables, which often include a license and performance obligations such as research and steering committee services, can be separated or whether they must be accounted for as a single unit of accounting in accordance with EITF 00-21. The Company recognizes up-front license payments as revenue upon delivery of the license only if the license has stand-alone value and the fair value of the undelivered performance obligations, typically including research and/or steering committee services, can be determined. If the fair value of the undelivered performance obligations can be determined, such obligations are accounted for separately as such obligations are fulfilled. If the license is considered to either not have stand-alone value or have standalone value but the fair value of any of the undelivered performance obligations cannot be determined, the arrangement would then be accounted for as a single unit of accounting and the license payments and payments for performance obligations are recognized as revenue over the estimated period of when the performance obligations are performed.
 
Whenever the Company determines that an arrangement should be accounted for as a single unit of accounting, the Company determines the period over which the performance obligations will be performed and revenue will be recognized. Revenue will be recognized using either a proportional performance or straight-line method. The Company recognizes revenue using the proportional performance method when the level of effort required to complete its performance obligations under an arrangement can be reasonably estimated and such performance obligations are provided on a best-efforts basis. Direct labor hours or full-time equivalents are typically used as the measure of performance. Revenue recognized under the proportional performance method would be determined by multiplying the total payments under the contract, excluding royalties and payments contingent upon achievement of substantive milestones, by the ratio of level of effort incurred to date to estimated total level of effort required to complete its performance obligations under the arrangement. Revenue is limited to the lesser of the cumulative amount of payments received or the cumulative amount of revenue earned, as determined using the proportional performance method, as of each reporting period.
 
If the level of effort to complete its performance obligations under an arrangement cannot be reasonably estimated, then revenue under the arrangement would be recognized as revenue on a straight-line basis over the

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ALNYLAM PHARMACEUTICALS, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
period the Company is expected to complete its performance obligations. Revenue is limited to the lesser of the cumulative amount of payments received or the cumulative amount of revenue earned, as determined using the straight-line basis, as of the period ending date.
 
Steering committee services that are not inconsequential or perfunctory and that are determined to be performance obligations are combined with other research services or performance obligations required under an arrangement, if any, in determining the level of effort required in an arrangement and the period over which the Company expects to complete its aggregate performance obligations.
 
For revenue generating arrangements where the Company, as a vendor, provides consideration to a licensor or collaborator, as a customer, the Company applies the provisions of EITF 01-9. EITF 01-9 addresses the accounting for revenue arrangements where both the vendor and the customer make cash payments to each other for services and/or products. A payment to a customer is presumed to be a reduction of the selling price unless the Company receives an identifiable benefit for the payment and it can reasonably estimate the fair value of the benefit received. Payments to a customer that are deemed a reduction of selling price are recorded first as a reduction of revenue, to the extent of both cumulative revenue recorded to date and of probable future revenues, which include any unamortized deferred revenue balances, under all arrangements with such customer and then as an expense. Payments that are not deemed to be a reduction of selling price would be recorded as an expense.
 
Amounts received prior to satisfying the above revenue recognition criteria are recorded as deferred revenue in the accompanying consolidated balance sheets. Amounts not expected to be recognized within the next twelve months are classified as long-term deferred revenue. As of December 31, 2007, the Company has short-term and long-term deferred revenue of $59.2 million and $204.1 million, respectively, related to its collaborations.
 
Revenue
Recognition



 



The Company has entered into collaboration agreements with
biotechnology and pharmaceutical companies, including Roche,
Novartis, Merck and Biogen Idec, Inc. (“Biogen Idec”).
The terms of the Company’s collaboration agreements
typically include non-refundable license fees, funding of
research and development, payments based upon achievement of
clinical and pre-clinical development milestones and royalties
on product sales. The Company follows the provisions of the
Securities and Exchange Commission’s (“SEC”)
Staff Accounting Bulletin (“SAB”) No. 104,
“Revenue Recognition in Financial Statements,”
Emerging Issues Task Force (“EITF”) Issue
No. 00-21,
“Revenue Arrangements with Multiple Deliverables”
(“EITF 00-21”),
EITF
No. 99-19,
“Reporting Revenue Gross as a Principal Versus Net as an
Agent,”
and EITF
No. 01-9,
“Accounting for Consideration Given by a Vendor to a
Customer (Including a Reseller of the Vendor’s
Products)”

(“EITF 01-9”).


 



Non-refundable license fees are recognized as revenue when the
Company has a contractual right to receive such payment, the
contract price is fixed or determinable, the collection of the
resulting receivable is reasonably assured and the Company has
no further performance obligations under the license agreement.
Multiple element arrangements, such as license and development
arrangements, are analyzed to determine whether the
deliverables, which often include a license and performance
obligations such as research and steering committee services,
can be separated or whether they must be accounted for as a
single unit of accounting in accordance with
EITF 00-21.
The Company recognizes up-front license payments as revenue upon
delivery of the license only if the license has stand-alone
value and the fair value of the undelivered performance
obligations, typically including research
and/or
steering committee services, can be determined. If the fair
value of the undelivered performance obligations can be
determined, such obligations are accounted for separately as
such obligations are fulfilled. If the license is considered to
either not have stand-alone value or have standalone value but
the fair value of any of the undelivered performance obligations
cannot be determined, the arrangement would then be accounted
for as a single unit of accounting and the license payments and
payments for performance obligations are recognized as revenue
over the estimated period of when the performance obligations
are performed.


 



Whenever the Company determines that an arrangement should be
accounted for as a single unit of accounting, the Company
determines the period over which the performance obligations
will be performed and revenue will be recognized. Revenue will
be recognized using either a proportional performance or
straight-line method. The Company recognizes revenue using the
proportional performance method when the level of effort
required to complete its performance obligations under an
arrangement can be reasonably estimated and such performance
obligations are provided on a best-efforts basis. Direct labor
hours or full-time equivalents are typically used as the measure
of performance. Revenue recognized under the proportional
performance method would be determined by multiplying the total
payments under the contract, excluding royalties and payments
contingent upon achievement of substantive milestones, by the
ratio of level of effort incurred to date to estimated total
level of effort required to complete its performance obligations
under the arrangement. Revenue is limited to the lesser of the
cumulative amount of payments received or the cumulative amount
of revenue earned, as determined using the proportional
performance method, as of each reporting period.


 



If the level of effort to complete its performance obligations
under an arrangement cannot be reasonably estimated, then
revenue under the arrangement would be recognized as revenue on
a straight-line basis over the



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ALNYLAM
PHARMACEUTICALS, INC.




 




NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)


 



period the Company is expected to complete its performance
obligations. Revenue is limited to the lesser of the cumulative
amount of payments received or the cumulative amount of revenue
earned, as determined using the straight-line basis, as of the
period ending date.


 



Steering committee services that are not inconsequential or
perfunctory and that are determined to be performance
obligations are combined with other research services or
performance obligations required under an arrangement, if any,
in determining the level of effort required in an arrangement
and the period over which the Company expects to complete its
aggregate performance obligations.


 



For revenue generating arrangements where the Company, as a
vendor, provides consideration to a licensor or collaborator, as
a customer, the Company applies the provisions of
EITF 01-9.
EITF 01-9
addresses the accounting for revenue arrangements where both the
vendor and the customer make cash payments to each other for
services
and/or
products. A payment to a customer is presumed to be a reduction
of the selling price unless the Company receives an identifiable
benefit for the payment and it can reasonably estimate the fair
value of the benefit received. Payments to a customer that are
deemed a reduction of selling price are recorded first as a
reduction of revenue, to the extent of both cumulative revenue
recorded to date and of probable future revenues, which include
any unamortized deferred revenue balances, under all
arrangements with such customer and then as an expense. Payments
that are not deemed to be a reduction of selling price would be
recorded as an expense.


 



Amounts received prior to satisfying the above revenue
recognition criteria are recorded as deferred revenue in the
accompanying consolidated balance sheets. Amounts not expected
to be recognized within the next twelve months are classified as
long-term deferred revenue. As of December 31, 2007, the
Company has short-term and long-term deferred revenue of
$59.2 million and $204.1 million, respectively,
related to its collaborations.


 




This excerpt taken from the ALNY 10-K filed Mar 12, 2007.
Revenue Recognition
 
The Company recognizes revenue in accordance with the Securities and Exchange Commission’s (“SEC”) Staff Accounting Bulletin No. 104, Revenue Recognition in Financial Statements. The Company has entered into collaboration agreements with Merck and Novartis Pharma and its affiliate, Novartis Institutes for BioMedical Research, Inc. (collectively “Novartis”) and Biogen Idec. Revenues from these collaboration agreements may include nonrefundable license fees, milestones, research and development funding, cost reimbursements and royalties. When evaluating multiple element arrangements, the Company considers whether the components of the arrangement represents separate units of accounting as defined in Emerging Issues Task Force (“EITF”) Issue No. 00-21, Revenue Arrangements with Multiple Deliverables (“EITF 00-21”). Application of these standards requires subjective determinations and requires management to make judgments about the value of the individual elements and whether it is separable from the other aspects of the contractual relationship. Nonrefundable license fees are recognized as revenue as the Company performs under the collaboration agreements. Where the Company’s level of effort is relatively constant over the performance period, the Company recognizes total fixed or determined contract revenues on a straight-line basis over the estimated period of performance under the contract unless evidence suggests that revenue is earned in a different pattern, in which case that pattern is followed.
 
The Company recognizes milestone payments as revenue upon achievement of the milestone only if (1) the milestone payments are nonrefundable; (2) substantive effort is involved in achieving the milestone; and (3) the amount of the milestone is reasonable in relation to the effort expended or the risk associated with achievement of the milestone. If any of these conditions are not met, the Company defers the milestone payments and recognizes them as revenue over the estimated period of performance under the contract as the Company completes its performance obligations.


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ALNYLAM PHARMACEUTICALS, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 
This excerpt taken from the ALNY 10-K filed Mar 16, 2006.
Revenue Recognition
 
The Company recognizes revenue in accordance with the Securities and Exchange Commission’s (“SEC”) Staff Accounting Bulletin No. 104, Revenue Recognition in Financial Statements. The Company has entered into collaboration agreements with Merck & Co. (“Merck”) and Novartis Pharma AG and its affiliate, Novartis Institutes for BioMedical Research, Inc. (collectively “Novartis”) (Note 12). Revenues from these collaboration agreements may include nonrefundable license fees, milestones, research and development funding, cost reimbursements and royalties. When evaluating multiple element arrangements, the Company considers whether the components of the arrangement represents separate units of accounting as defined in Emerging Issues Task Force (“EITF”) Issue No. 00-21, Revenue Arrangements with Multiple Deliverables (“EITF 00-21”). Application of these standards


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Table of Contents

 
ALNYLAM PHARMACEUTICALS, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

requires subjective determinations and requires management to make judgments about the value of the individual elements and whether it is separable from the other aspects of the contractual relationship. Nonrefundable license fees are recognized as revenue as the Company performs under the collaboration agreements. Where the Company’s level of effort is relatively constant over the performance period, the Company recognizes total fixed or determined contract revenues on a straight-line basis over the estimated period of performance under the contract.
 
The Company recognizes milestone payments as revenue upon achievement of the milestone only if (1) the milestone payments are nonrefundable; (2) substantive effort is involved in achieving the milestone; and (3) the amount of the milestone is reasonable in relation to the effort expended or the risk associated with achievement of the milestone. If any of these conditions are not met, the Company defers the milestone payments and recognizes them as revenue over the estimated period of performance under the contract as the Company completes its performance obligations. In December 2004, the Company recognized revenue related to the receipt of a $2.0 million technology milestone payment from Merck under the Company’s September 2003 collaboration agreement for the development of Systemic RNAitm therapeutics (the “Technology Milestone”).
 
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