| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF SECURITIES EXCHANGE ACT OF 1934 |
Delaware
|
33-0336973
|
|
(State or other jurisdiction of incorporation or organization)
|
(IRS Employer Identification No.)
|
Large accelerated filer
|
Accelerated filer
|
Non-accelerated filer
|
Smaller reporting company
|
(Do not check if a smaller reporting company)
|
PART I
|
FINANCIAL INFORMATION
|
|
ITEM 1:
|
Financial Statements:
|
|
Condensed Consolidated Balance Sheets as of March 31, 2015 (unaudited) and December 31, 2014
|
3
|
|
Condensed Consolidated Statements of Operations for the three months ended March 31, 2015 and 2014 (unaudited)
|
4
|
|
Condensed Consolidated Statements of Comprehensive Loss for the three months ended March 31, 2015 and 2014 (unaudited)
|
5
|
|
Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2015 and 2014 (unaudited)
|
6
|
|
Notes to Condensed Consolidated Financial Statements (unaudited)
|
7
|
|
ITEM 2:
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
20
|
Results of Operations
|
23
|
|
Liquidity and Capital Resources
|
28
|
|
Risk Factors
|
30
|
|
ITEM 3:
|
Quantitative and Qualitative Disclosures about Market Risk
|
36
|
ITEM 4:
|
Controls and Procedures
|
36
|
PART II
|
OTHER INFORMATION
|
37
|
ITEM 1:
|
Legal Proceedings
|
37
|
ITEM 2:
|
Unregistered Sales of Equity Securities and Use of Proceeds
|
37
|
ITEM 3:
|
Default upon Senior Securities
|
37
|
ITEM 4:
|
Mine Safety Disclosures
|
37
|
ITEM 5:
|
Other Information
|
37
|
ITEM 6:
|
Exhibits
|
38
|
SIGNATURES
|
39
|
March 31,
2015
|
December 31,
2014
|
|||||||
(Unaudited)
|
||||||||
ASSETS
|
||||||||
Current assets:
|
||||||||
Cash and cash equivalents
|
$
|
148,348
|
$
|
142,998
|
||||
Short-term investments
|
546,706
|
585,834
|
||||||
Contracts receivable
|
26,934
|
3,903
|
||||||
Inventories
|
6,839
|
6,290
|
||||||
Investment in Regulus Therapeutics Inc.
|
93,446
|
81,881
|
||||||
Other current assets
|
13,154
|
15,691
|
||||||
Total current assets
|
835,427
|
836,597
|
||||||
Property, plant and equipment, net
|
89,047
|
88,958
|
||||||
Licenses, net
|
2,221
|
2,690
|
||||||
Patents, net
|
17,915
|
17,186
|
||||||
Deposits and other assets
|
10,823
|
10,378
|
||||||
Total assets
|
$
|
955,433
|
$
|
955,809
|
||||
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
||||||||
Current liabilities:
|
||||||||
Accounts payable
|
$
|
16,487
|
$
|
17,984
|
||||
Accrued compensation
|
5,411
|
12,302
|
||||||
Accrued liabilities
|
23,746
|
30,451
|
||||||
Current portion of long-term obligations
|
2,058
|
2,882
|
||||||
Current portion of deferred contract revenue
|
52,586
|
51,713
|
||||||
Total current liabilities
|
100,288
|
115,332
|
||||||
Long-term deferred contract revenue
|
119,083
|
127,797
|
||||||
1 percent convertible senior notes
|
332,274
|
327,486
|
||||||
2¾ percent convertible senior notes
|
48,579
|
48,014
|
||||||
Long-term obligations, less current portion
|
7,510
|
7,669
|
||||||
Long-term financing liability for leased facility
|
71,848
|
71,731
|
||||||
Total liabilities
|
679,582
|
698,029
|
||||||
Stockholders’ equity:
|
||||||||
Common stock, $0.001 par value; 300,000,000 shares authorized, 119,602,322 and 118,442,726 shares issued and outstanding at March 31, 2015 and December 31, 2014, respectively
|
120
|
118
|
||||||
Additional paid-in capital
|
1,251,928
|
1,224,509
|
||||||
Accumulated other comprehensive income
|
47,114
|
39,747
|
||||||
Accumulated deficit
|
(1,023,311
|
)
|
(1,006,594
|
)
|
||||
Total stockholders’ equity
|
275,851
|
257,780
|
||||||
Total liabilities and stockholders’ equity
|
$
|
955,433
|
$
|
955,809
|
Three Months Ended
March 31,
|
||||||||
2015
|
2014
|
|||||||
Revenue:
|
||||||||
Research and development revenue under collaborative agreements
|
$
|
61,892
|
$
|
19,550
|
||||
Licensing and royalty revenue
|
691
|
8,611
|
||||||
Total revenue
|
62,583
|
28,161
|
||||||
Expenses:
|
||||||||
Research, development and patent expenses
|
64,447
|
53,448
|
||||||
General and administrative
|
7,466
|
4,380
|
||||||
Total operating expenses
|
71,913
|
57,828
|
||||||
Loss from operations
|
(9,330
|
)
|
(29,667
|
)
|
||||
Other income (expense):
|
||||||||
Investment income
|
845
|
657
|
||||||
Interest expense
|
(9,021
|
)
|
(4,943
|
)
|
||||
Gain on investments, net
|
—
|
397
|
||||||
Loss before income tax benefit
|
(17,506
|
)
|
(33,556
|
)
|
||||
Income tax benefit
|
789
|
2,276
|
||||||
Net loss
|
$
|
(16,717
|
)
|
$
|
(31,280
|
)
|
||
Basic and diluted net loss per share
|
$
|
(0.14
|
)
|
$
|
(0.27
|
)
|
||
Shares used in computing basic and diluted net loss per share
|
118,948
|
117,128
|
Three Months Ended
March 31,
|
||||||||
2015
|
2014
|
|||||||
Net loss
|
$
|
(16,717
|
)
|
$
|
(31,280
|
)
|
||
Unrealized gains on securities, net of tax
|
7,367
|
8,261
|
||||||
Reclassification adjustment for realized gains included in net loss
|
—
|
(341
|
)
|
|||||
Comprehensive loss
|
$
|
(9,350
|
)
|
$
|
(23,360
|
)
|
Three Months Ended
March 31,
|
||||||||
2015
|
2014
|
|||||||
Operating activities:
|
||||||||
Net loss
|
$
|
(16,717
|
)
|
$
|
(31,280
|
)
|
||
Adjustments to reconcile net loss to net cash used in operating activities:
|
||||||||
Depreciation
|
1,571
|
1,561
|
||||||
Amortization of patents
|
312
|
263
|
||||||
Amortization of licenses
|
469
|
471
|
||||||
Amortization of premium on investments, net
|
1,749
|
1,376
|
||||||
Amortization of debt issuance costs
|
275
|
135
|
||||||
Amortization of 2¾ percent convertible senior notes discount
|
565
|
1,671
|
||||||
Amortization of 1 percent convertible senior notes discount
|
4,788
|
—
|
||||||
Amortization of long-term financing liability for leased facility
|
1,662
|
1,652
|
||||||
Stock-based compensation expense
|
13,305
|
7,069
|
||||||
Gain on investments, net
|
—
|
(397
|
)
|
|||||
Non-cash losses related to patents, licensing and property, plant and equipment
|
93
|
108
|
||||||
Tax benefit from other unrealized gains on securities
|
(798
|
)
|
(2,276
|
)
|
||||
Changes in operating assets and liabilities:
|
||||||||
Contracts receivable
|
(23,031
|
)
|
1,279
|
|||||
Inventories
|
(549
|
)
|
496
|
|||||
Other current and long-term assets
|
(2,451
|
)
|
(896
|
)
|
||||
Accounts payable
|
(2,695
|
)
|
(2,646
|
)
|
||||
Accrued compensation
|
(6,891
|
)
|
(7,840
|
)
|
||||
Deferred rent
|
62
|
25
|
||||||
Accrued liabilities
|
(6,704
|
)
|
2,643
|
|||||
Deferred contract revenue
|
(7,841
|
)
|
(5,742
|
)
|
||||
Net cash used in operating activities
|
(42,826
|
)
|
(32,328
|
)
|
||||
Investing activities:
|
||||||||
Purchases of short-term investments
|
(40,213
|
)
|
(69,185
|
)
|
||||
Proceeds from the sale of short-term investments
|
78,460
|
95,288
|
||||||
Purchases of property, plant and equipment
|
(878
|
)
|
(1,403
|
)
|
||||
Acquisition of licenses and other assets, net
|
(719
|
)
|
(333
|
)
|
||||
Proceeds from the sale of strategic investments
|
—
|
454
|
||||||
Net cash provided by investing activities
|
36,650
|
24,821
|
||||||
Financing activities:
|
||||||||
Proceeds from equity awards
|
14,116
|
12,003
|
||||||
Principal payments on debt and capital lease obligations
|
(2,590
|
)
|
(2,691
|
)
|
||||
Net cash provided by financing activities
|
11,526
|
9,312
|
||||||
Net increase in cash and cash equivalents
|
5,350
|
1,805
|
||||||
Cash and cash equivalents at beginning of period
|
142,998
|
159,973
|
||||||
Cash and cash equivalents at end of period
|
$
|
148,348
|
$
|
161,778
|
||||
Supplemental disclosures of cash flow information:
|
||||||||
Interest paid
|
$
|
37
|
$
|
83
|
||||
Supplemental disclosures of non-cash investing and financing activities:
|
||||||||
Amounts accrued for capital and patent expenditures
|
$
|
1,198
|
$
|
1,506
|
1. | Basis of Presentation |
2. | Significant Accounting Policies |
| The exclusive license we granted to AstraZeneca to develop and commercialize ISIS-STAT3-2.5 Rx for the treatment of cancer; |
| The development services we agreed to perform for ISIS-STAT3-2.5 Rx ; |
| The exclusive license we granted to AstraZeneca to develop and commercialize ISIS-AR-2.5 Rx and the research services we performed for ISIS-AR-2.5 Rx ; and |
| The option to license up to three drugs under a research program and the research services we are performing for this program. |
| Estimated future product sales; |
| Estimated royalties on future product sales; |
| Contractual milestone payments; |
| Expenses we expect to incur; |
| Income taxes; and |
| An appropriate discount rate. |
| The number of internal hours we will spend performing these services; |
| The estimated number and cost of studies we will perform; |
| The estimated number and cost of studies that we will contract with third parties to perform; and |
| The estimated cost of drug product we will use in the studies. |
| In January 2012, we entered into a collaboration agreement with Biogen to develop and commercialize ISIS-SMN Rx for spinal muscular atrophy, or SMA. As part of the collaboration, we received a $29 million upfront payment and we are responsible for global development of ISIS-SMN Rx through completion of Phase 2/3 clinical trials. |
| In June 2012, we entered into a second and separate collaboration agreement with Biogen to develop and commercialize a novel antisense drug targeting DMPK, or dystrophia myotonica-protein kinase. As part of the collaboration, we received a $12 million upfront payment and we are responsible for global development of the drug through the completion of a Phase 2 clinical trial. |
| In December 2012, we entered into a third and separate collaboration agreement with Biogen to discover and develop antisense drugs against three targets to treat neurological or neuromuscular disorders. As part of the collaboration, we received $30 million upfront payment and we are responsible for the discovery of a lead antisense drug for each of three targets. |
| In September 2013, we entered into a fourth and separate collaboration agreement with Biogen to leverage antisense technology to advance the treatment of neurological diseases. We granted Biogen exclusive rights to the use of our antisense technology to develop therapies for neurological diseases as part of this broad collaboration. We received a $100 million upfront payment and we are responsible for discovery and early development through the completion of a Phase 2 clinical trial for each antisense drug identified during the six year term of this collaboration, while Biogen is responsible for the creation and development of small molecule treatments and biologics. |
| Designation of a development candidate. Following the designation of a development candidate, IND-enabling animal studies for a new development candidate generally take 12 to 18 months to complete; |
| Initiation of a Phase 1 clinical trial. Generally, Phase 1 clinical trials take one to two years to complete; |
| Initiation or completion of a Phase 2 clinical trial. Generally, Phase 2 clinical trials take one to three years to complete; |
| Initiation or completion of a Phase 3 clinical trial. Generally, Phase 3 clinical trials take two to four years to complete. |
| Filing of regulatory applications for marketing approval such as a New Drug Application, or NDA, in the United States or a Marketing Authorization Application, or MAA, in Europe. Generally, it takes six to twelve months to prepare and submit regulatory filings. |
| Marketing approval in a major market, such as the United States, Europe or Japan. Generally it takes one to two years after an application is submitted to obtain approval from the applicable regulatory agency. |
| First commercial sale in a particular market, such as in the United States or Europe. |
| Product sales in excess of a pre-specified threshold, such as annual sales exceeding $1 billion. The amount of time to achieve this type of milestone depends on several factors including but not limited to the dollar amount of the threshold, the pricing of the product and the pace at which customers begin using the product. |
| Substantive uncertainty exists as to the achievement of the milestone event at the inception of the arrangement; |
| The achievement of the milestone involves substantive effort and can only be achieved based in whole or in part on our performance or the occurrence of a specific outcome resulting from our performance; |
| The amount of the milestone payment appears reasonable either in relation to the effort expended or to the enhancement of the value of the delivered items; |
| There is no future performance required to earn the milestone; and |
| The consideration is reasonable relative to all deliverables and payment terms in the arrangement. |
| 1 percent convertible senior notes; |
| 2¾ percent convertible senior notes; |
| Dilutive stock options; |
| Unvested restricted stock units; and |
| Employee Stock Purchase Plan, or ESPP. |
Three Months Ended
March 31,
|
||||||||
2015
|
2014
|
|||||||
Beginning balance accumulated other comprehensive income
|
$
|
39,747
|
$
|
21,080
|
||||
Other comprehensive income before reclassifications, net of tax (1)
|
7,367
|
8,261
|
||||||
Amounts reclassified from accumulated other comprehensive income (2)
|
—
|
(341
|
)
|
|||||
Net current period other comprehensive income
|
7,367
|
7,920
|
||||||
Ending balance accumulated other comprehensive income
|
$
|
47,114
|
$
|
29,000
|
(1) | Other comprehensive income from the three months ended March 31, 2015 includes income tax expense of $5.1 million, compared to $5.4 million for the three months ended March 31, 2014. |
(2) | Included in gain on investments, net on our condensed consolidated statement of operations. |
Three Months Ended
March 31,
|
|||||
2015
|
2014
|
||||
Risk-free interest rate
|
1.5%
|
1.6%
|
|||
Dividend yield
|
0.0%
|
0.0%
|
|||
Volatility
|
53.5%
|
50.5%
|
|||
Expected life
|
4.5 years
|
4.6 years
|
Three Months Ended
March 31,
|
|||||
2015
|
2014
|
||||
Risk-free interest rate
|
0.1%
|
0.1%
|
|||
Dividend yield
|
0.0%
|
0.0%
|
|||
Volatility
|
56.2%
|
59.0%
|
|||
Expected life
|
6 months
|
6 months
|
Three Months Ended
March 31, 2014
|
||||
Risk-free interest rate
|
2.3
|
%
|
||
Dividend yield
|
0.0
|
%
|
||
Volatility
|
53.3
|
%
|
||
Expected life
|
7.1 years
|
Three Months Ended
March 31,
|
||||||||
2015
|
2014
|
|||||||
Research, development and patent expenses
|
$
|
10,486
|
$
|
5,873
|
||||
General and administrative
|
2,819
|
1,196
|
||||||
Total
|
$
|
13,305
|
$
|
7,069
|
3. | Investments |
One year or less
|
58%
|
After one year but within two years
|
29%
|
After two years but within three years
|
13%
|
Total
|
100%
|
Amortized
|
Gross Unrealized
|
Other-
Than-
Temporary
Impairment
|
Estimated
|
|||||||||||||||||
March 31, 2015
|
Cost
|
Gains
|
Losses
|
Loss
|
Fair Value
|
|||||||||||||||
Available-for-sale securities:
|
||||||||||||||||||||
Corporate debt securities
|
$
|
190,437
|
$
|
87
|
$
|
(31
|
)
|
$
|
—
|
$
|
190,493
|
|||||||||
Debt securities issued by U.S. government agencies
|
53,006
|
5
|
(13
|
)
|
—
|
52,998
|
||||||||||||||
Debt securities issued by the U.S. Treasury
|
5,999
|
4
|
—
|
—
|
6,003
|
|||||||||||||||
Debt securities issued by states of the United States and political subdivisions of the states (1)
|
46,571
|
25
|
(50
|
)
|
—
|
46,546
|
||||||||||||||
Total securities with a maturity of one year or less
|
296,014
|
121
|
(94
|
)
|
—
|
296,040
|
||||||||||||||
Corporate debt securities
|
137,653
|
124
|
(162
|
)
|
—
|
137,615
|
||||||||||||||
Debt securities issued by U.S. government agencies
|
62,529
|
29
|
(14
|
)
|
—
|
62,544
|
||||||||||||||
Debt securities issued by states of the United States and political subdivisions of the states
|
59,667
|
48
|
(165
|
)
|
—
|
59,550
|
||||||||||||||
Total securities with a maturity of more than one year
|
259,849
|
201
|
(341
|
)
|
—
|
259,709
|
||||||||||||||
Total available-for-sale securities
|
$
|
555,862
|
$
|
322
|
$
|
(435
|
)
|
$
|
—
|
$
|
555,749
|
Cost
|
Gross Unrealized
|
Other-
Than-
Temporary
Impairment
|
Estimated
|
|||||||||||||||||
March 31, 2015
|
Basis
|
Gains
|
Losses
|
Loss
|
Fair Value
|
|||||||||||||||
Equity securities:
|
||||||||||||||||||||
Regulus Therapeutics Inc.
|
$
|
12,477
|
$
|
80,969
|
$
|
—
|
$
|
—
|
$
|
93,446
|
||||||||||
Securities included in other current assets
|
880
|
—
|
—
|
(880
|
)
|
—
|
||||||||||||||
Total equity securities
|
$
|
13,357
|
$
|
80,969
|
$
|
—
|
$
|
(880
|
)
|
$
|
93,446
|
|||||||||
Total available-for-sale and equity securities
|
$
|
569,220
|
$
|
81,291
|
$
|
(435
|
)
|
$
|
(880
|
)
|
$
|
649,195
|
Amortized
|
Gross Unrealized
|
Other-
Than-
Temporary
Impairment
|
Estimated
|
|||||||||||||||||
December 31, 2014
|
Cost
|
Gains
|
Losses
|
Loss
|
Fair Value
|
|||||||||||||||
Available-for-sale securities:
|
||||||||||||||||||||
Corporate debt securities(1)
|
$
|
219,856
|
$
|
89
|
$
|
(89
|
)
|
$
|
—
|
$
|
219,856
|
|||||||||
Debt securities issued by U.S. government agencies
|
47,496
|
7
|
(27
|
)
|
—
|
47,476
|
||||||||||||||
Debt securities issued by the U.S. Treasury (1)
|
19,008
|
9
|
—
|
—
|
19,017
|
|||||||||||||||
Debt securities issued by states of the United States and political subdivisions of the states (1)
|
45,196
|
19
|
(53
|
)
|
—
|
45,162
|
||||||||||||||
Total securities with a maturity of one year or less
|
331,556
|
124
|
(169
|
)
|
—
|
331,511
|
||||||||||||||
Corporate debt securities
|
152,730
|
16
|
(600
|
)
|
—
|
152,146
|
||||||||||||||
Debt securities issued by U.S. government agencies
|
62,530
|
—
|
(151
|
)
|
—
|
62,379
|
||||||||||||||
Debt securities issued by states of the United States and political subdivisions of the states
|
60,073
|
32
|
(234
|
)
|
—
|
59,871
|
||||||||||||||
Total securities with a maturity of more than one year
|
275,333
|
48
|
(985
|
)
|
—
|
274,396
|
||||||||||||||
Total available-for-sale securities
|
$
|
606,889
|
$
|
172
|
$
|
(1,154
|
)
|
$
|
—
|
$
|
605,907
|
Cost
|
Gross Unrealized
|
Other-
Than-
Temporary
Impairment
|
Estimated
|
|||||||||||||||||
December 31, 2014
|
Basis
|
Gains
|
Losses
|
Loss
|
Fair Value
|
|||||||||||||||
Equity securities:
|
||||||||||||||||||||
Regulus Therapeutics Inc.
|
$
|
12,477
|
$
|
69,404
|
$
|
—
|
$
|
—
|
$
|
81,881
|
||||||||||
Securities included in other current assets
|
880
|
—
|
—
|
(880
|
)
|
—
|
||||||||||||||
Total equity securities
|
$
|
13,357
|
$
|
69,404
|
$
|
—
|
$
|
(880
|
)
|
$
|
81,881
|
|||||||||
Total available-for-sale and equity securities
|
$
|
620,246
|
$
|
69,576
|
$
|
(1,154
|
)
|
$
|
(880
|
)
|
$
|
687,788
|
(1) | Includes investments classified as cash equivalents on our condensed consolidated balance sheet. |
Less than 12 months of
temporary impairment
|
More than 12 months of
temporary impairment
|
Total temporary
impairment
|
||||||||||||||||||||||||||
Number of
Investments
|
Estimated
Fair Value
|
Unrealized
Losses
|
Estimated
Fair Value
|
Unrealized
Losses
|
Estimated
Fair Value
|
Unrealized
Losses
|
||||||||||||||||||||||
Corporate debt securities
|
132
|
$
|
136,603
|
$
|
(193
|
)
|
$
|
—
|
$
|
—
|
$
|
136,603
|
$
|
(193
|
)
|
|||||||||||||
Debt securities issued by U.S. government agencies
|
11
|
74,094
|
(27
|
)
|
—
|
—
|
74,094
|
(27
|
)
|
|||||||||||||||||||
Debt securities issued by states of the United States and political subdivisions of the states
|
24
|
42,943
|
(144
|
)
|
6,231
|
(71
|
)
|
49,174
|
(215
|
)
|
||||||||||||||||||
Total temporarily impaired securities
|
167
|
$
|
253,640
|
$
|
(364
|
)
|
$
|
6,231
|
$
|
(71
|
)
|
$
|
259,871
|
$
|
(435
|
)
|
4. | Fair Value Measurements |
At
March 31,
2015
|
Quoted Prices in
Active Markets
(Level 1)
|
Significant Other
Observable
Inputs
(Level 2)
|
Significant
Unobservable
Inputs
(Level 3)
|
|||||||||||||
Cash equivalents (1)
|
$
|
112,777
|
$
|
112,777
|
$
|
—
|
$
|
—
|
||||||||
Corporate debt securities (2)
|
328,108
|
—
|
328,108
|
—
|
||||||||||||
Debt securities issued by U.S. government agencies (2)
|
115,542
|
—
|
115,542
|
—
|
||||||||||||
Debt securities issued by the U.S. Treasury (2)
|
6,003
|
6,003
|
—
|
—
|
||||||||||||
Debt securities issued by states of the United States and political subdivisions of the states (3)
|
106,096
|
—
|
106,096
|
—
|
||||||||||||
Investment in Regulus Therapeutics Inc.
|
93,446
|
93,446
|
—
|
—
|
||||||||||||
Total
|
$
|
761,972
|
$
|
212,226
|
$
|
549,746
|
$
|
—
|
At
December 31,
2014
|
Quoted Prices in
Active Markets
(Level 1)
|
Significant Other
Observable
Inputs
(Level 2)
|
Significant
Unobservable
Inputs
(Level 3)
|
|||||||||||||
Cash equivalents (1)
|
$
|
104,680
|
$
|
104,680
|
$
|
—
|
$
|
—
|
||||||||
Corporate debt securities (4)
|
372,002
|
—
|
372,002
|
—
|
||||||||||||
Debt securities issued by U.S. government agencies (2)
|
109,855
|
—
|
109,855
|
—
|
||||||||||||
Debt securities issued by the U.S. Treasury (5)
|
19,017
|
19,017
|
—
|
—
|
||||||||||||
Debt securities issued by states of the United States and political subdivisions of the states (6)
|
105,033
|
—
|
105,033
|
—
|
||||||||||||
Investment in Regulus Therapeutics Inc.
|
81,881
|
—
|
—
|
81,881
|
||||||||||||
Total
|
$
|
792,468
|
$
|
123,697
|
$
|
586,890
|
$
|
81,881
|
(1) | Included in cash and cash equivalents on our condensed consolidated balance sheet. |
(2) | Included in short-term investments on our condensed consolidated balance sheet. |
(3) | $9.0 million included in cash and cash equivalents on our condensed consolidated balance sheet, with the difference included in short-term investments on our condensed consolidated balance sheet. |
(4) | $0.8 million included in cash and cash equivalents on our condensed consolidated balance sheet, with the difference included in short-term investments on our condensed consolidated balance sheet. |
(5) | $10 million included in cash and cash equivalents on our condensed consolidated balance sheet, with the difference included in short-term investments on our condensed consolidated balance sheet. |
(6) | $9.3 million included in cash and cash equivalents on our condensed consolidated balance sheet, with the difference included in short-term investments on our condensed consolidated balance sheet. |
Beginning balance of Level 3 investments
|
$
|
81,881
|
||
Total gain included in accumulated other comprehensive income (loss)
|
22,377
|
|||
Transfers out of Level 3 investments
|
(104,258
|
)
|
||
Ending balance of Level 3 investments
|
$
|
—
|
5. | Income Taxes |
6. | Collaborative Arrangements and Licensing Agreements |
| Bayer HealthCare may terminate the agreement or any program at any time by providing written notice to us; |
| Either we or Bayer HealthCare may terminate the agreement or any program by providing written notice to the other party upon the other party’s uncured failure to perform a material obligation under the agreement, or the entire agreement if the other party becomes insolvent; and |
| If Hart-Scott Rodino clearance is not received by December 31, 2015. |
| Biogen may terminate the agreement or any program at any time by providing written notice to us; |
| Under specific circumstances, if we are acquired by a third party with a product that directly competes with a compound being developed under the agreement, Biogen may terminate the affected program by providing written notice to us; |
| If, within a specified period of time, any required clearance of a transaction contemplated by an agreement under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, is not received, then either we or Biogen may terminate the affected program by providing written notice to the other party; and |
| Either we or Biogen may terminate any program by providing written notice to the other party upon the other party's uncured failure to perform a material obligation under the agreement with respect to the affected program, or the entire agreement if the other party becomes insolvent. |
| GSK may terminate any program, other than the ISIS-TTR Rx program, at any time by providing written notice to us; |
| GSK may terminate the ISIS-TTR Rx program by providing written notice to us after reviewing specific data from the Phase 3 study for the program; and |
| Either we or GSK may terminate any program by providing written notice to the other party upon the other party's uncured failure to perform a material obligation under the agreement with respect to the affected program, or the entire agreement if the other party becomes insolvent. |
7. | Segment Information and Concentration of Business Risk |
|
Isis Core
|
Akcea Therapeutics
|
Total
|
|||||||||
Revenue:
|
||||||||||||
Research and development
|
$
|
61,892
|
$
|
—
|
$
|
61,892
|
||||||
Licensing and royalty
|
691
|
—
|
691
|
|||||||||
Total segment revenue
|
$
|
62,583
|
$
|
—
|
$
|
62,583
|
||||||
Loss from operations
|
$
|
(2,232
|
)
|
$
|
(7,098
|
)
|
$
|
(9,330
|
)
|
Three Months Ended
March 31,
|
|||||
2015
|
2014
|
||||
Partner A
|
63%
|
36%
|
|||
Partner B
|
26%
|
12%
|
|||
Partner C
|
1%
|
12%
|
|||
Partner D
|
0%
|
27%
|
ITEM 2 | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
| We and our partners reported positive data on six drugs in our pipeline, including: |
o | We reported positive results from an ongoing open-label extension study of ISIS-TTR Rx in patients with FAP. In the open-label study after thirteen weeks of treatment with ISIS-TTR Rx , TTR protein was reduced up to 92 percent with a median reduction of 78 percent in patients with FAP compared to their baseline TTR levels at entry into the Phase 3 study. |
o | AstraZeneca reported clinical and preclinical data on ISIS-STAT3-2.5 Rx demonstrating evidence of antitumor activity in patients with cancer including advanced/metastatic hepatocellular carcinoma and diffuse large B cell lymphoma. Additionally, AstraZeneca reported that, in preclinical studies, co-treatment of ISIS-STAT3-2.5 Rx and MEDI4736, an immune checkpoint inhibitor, showed significantly greater antitumor activity than when either drug was administered alone. AstraZeneca plans to initiate two clinical studies evaluating ISIS-STAT3-2.5 Rx in combination with MEDI4736 this year. |
o | We reported top-line Phase 2 data on ISIS-PTP1B Rx demonstrating that patients with type 2 diabetes experienced statistically significant mean reductions in body weight and HbA1c (0.7 percentage point) at 36 weeks. |
o | Regulus reported clinical data on RG-101 showing that patients with hepatitis C virus achieved sustained viral suppression after only a single dose of RG-101, and that some patients remained below the level of detection for hepatitis C virus 20 weeks after a single dose. |
o | We reported Phase 1 results showing that ISIS-ANGPTL3 Rx produced significant reductions of up to 93 percent in ANGPTL3, up to 63 percent in triglycerides and up to 46 percent in total cholesterol in healthy volunteers. |
o | We reported Phase 1 results showing that ISIS-PKK Rx produced significant, dose-dependent reductions of PKK of up to 95 percent in healthy volunteers. |
| We licensed ISIS-FXI Rx to Bayer HealthCare to develop and commercialize ISIS-FXI Rx for the prevention of thrombosis. |
o | We are eligible to receive up to $375 million in payments, including a $100 million upfront payment and a $55 million milestone payment upon advancement of the program following completion of the planned Phase 2 study. |
o | We are eligible to receive tiered royalties in the low to high 20 percent range on gross margins of ISIS-FXI Rx . |
o | This transaction is subject to clearances under the Hart-Scott Rodino Antitrust Improvements Act. |
| We formed an alliance with Janssen to discover and develop antisense drugs to treat autoimmune disorders of the GI tract. |
o | We received $35 million in upfront payments and are eligible to receive nearly $800 million in development, regulatory and sales milestone payments and license fees for the programs under this alliance. |
o | We will also receive tiered royalties in the near teens on sales of drugs successfully commercialized. |
| We formed a wholly owned subsidiary, Akcea Therapeutics, to develop and commercialize our lipid drugs, ISIS-APOCIII Rx , ISIS-APO(a) Rx , ISIS-ANGPTL3 Rx and the follow on drugs for these programs. |
| We and Alnylam formed a new agreement that includes a cross-license of intellectual property, providing each company rights to certain of each other’s technology advances. |
o | The new agreement also provides each company with exclusive RNA therapeutic license rights for two programs. |
| We generated more than $195 million in payments from partners, including the following: |
o | $100 million from Bayer |
o | $42 million from Biogen |
o | $35 million from Janssen |
o | $17 million from GSK |
| Assessing the propriety of revenue recognition and associated deferred revenue; |
| Determining the proper valuation of investments in marketable securities and other equity investments; |
| Assessing the recoverability of long-lived assets, including property and equipment, intellectual property and licensed technology; |
| Determining the appropriate cost estimates for unbilled preclinical studies and clinical development activities; |
| Estimating our net deferred income tax asset valuation allowance; and |
| Determining the fair value of convertible debt without the conversion feature |
| $31 million from Biogen including the following: |
o | $10 million for initiating investigational new drug supporting studies for ISIS-BIIB4 Rx ; |
o | $9 million for advancing CHERISH, a Phase 3 study for ISIS-SMN Rx in infants with SMA; |
o | $7 million for advancing the open-label extension study for ISIS-SMN Rx in children with SMA; and |
o | $5 million for validating an undisclosed target to treat a neurological disorder. |
| $15 million from GSK related to advancing the Phase 2/3 study of ISIS-TTR Rx . |
Three Months Ended
March 31,
|
||||||||
2015
|
2014
|
|||||||
Isis Core
|
$
|
52,068
|
$
|
50,759
|
||||
Akcea Therapeutics
|
6,540
|
—
|
||||||
Non-cash compensation expense related to equity awards
|
13,305
|
7,069
|
||||||
Total operating expenses
|
$
|
71,913
|
$
|
57,828
|
Three Months Ended
March 31,
|
||||||||
2015
|
2014
|
|||||||
Research, development and patent expenses
|
$
|
53,961
|
$
|
47,575
|
||||
Non-cash compensation expense related to equity awards
|
10,486
|
5,873
|
||||||
Total research, development and patent expenses
|
$
|
64,447
|
$
|
53,448
|
Three Months Ended
March 31,
|
||||||||
2015
|
2014
|
|||||||
Isis Core
|
$
|
48,220
|
$
|
47,575
|
||||
Akcea Therapeutics
|
5,741
|
—
|
||||||
Non-cash compensation expense related to equity awards
|
10,486
|
5,873
|
||||||
Total research, development and patent expenses
|
$
|
64,447
|
$
|
53,448
|
Three Months Ended
March 31,
|
||||||||
2015
|
2014
|
|||||||
Antisense drug discovery expenses
|
$
|
10,661
|
$
|
9,097
|
||||
Non-cash compensation expense related to equity awards
|
2,918
|
1,685
|
||||||
Total antisense drug discovery
|
$
|
13,579
|
$
|
10,782
|
Three Months Ended
March 31,
|
||||||||
2015
|
2014
|
|||||||
KYNAMRO
|
$
|
1,254
|
$
|
1,797
|
||||
ISIS-TTR
Rx
|
3,231
|
2,381
|
||||||
ISIS-SMN
Rx
|
6,120
|
1,963
|
||||||
ISIS-APOCIII
Rx
|
2,371
|
1,054
|
||||||
Other antisense development products
|
9,135
|
10,779
|
||||||
Development overhead costs
|
8,673
|
8,424
|
||||||
Total antisense drug development, excluding non-cash compensation expense related to equity awards
|
30,784
|
26,398
|
||||||
Non-cash compensation expense related to equity awards
|
3,714
|
2,078
|
||||||
Total antisense drug development
|
$
|
34,498
|
$
|
28,476
|
Three Months Ended
March 31,
|
||||||||
2015
|
2014
|
|||||||
Isis Core
|
$
|
25,613
|
$
|
26,398
|
||||
Akcea Therapeutics
|
5,171
|
—
|
||||||
Non-cash compensation expense related to equity awards
|
3,714
|
2,078
|
||||||
Total antisense drug development
|
$
|
34,498
|
$
|
28,476
|
Three Months Ended
March 31,
|
||||||||
2015
|
2014
|
|||||||
Manufacturing and operations
|
$
|
5,633
|
$
|
5,766
|
||||
Non-cash compensation expense related to equity awards
|
1,171
|
699
|
||||||
Total manufacturing and operations
|
$
|
6,804
|
$
|
6,465
|
Three Months Ended
March 31,
|
||||||||
2015
|
2014
|
|||||||
Isis Core
|
$
|
5,260
|
$
|
5,766
|
||||
Akcea Therapeutics
|
373
|
—
|
||||||
Non-cash compensation expense related to equity awards
|
1,171
|
699
|
||||||
Total antisense drug development
|
$
|
6,804
|
$
|
6,465
|
Three Months Ended
March 31,
|
||||||||
2015
|
2014
|
|||||||
Personnel costs
|
$
|
2,676
|
$
|
2,562
|
||||
Occupancy
|
1,833
|
1,735
|
||||||
Patent expenses
|
597
|
374
|
||||||
Depreciation and amortization
|
543
|
571
|
||||||
Insurance
|
312
|
294
|
||||||
Other
|
922
|
778
|
||||||
Total R&D support costs, excluding non-cash compensation expense related to equity awards
|
6,883
|
6,314
|
||||||
Non-cash compensation expense related to equity awards
|
2,683
|
1,411
|
||||||
Total R&D Support costs
|
$
|
9,566
|
$
|
7,725
|
Three Months Ended
March 31,
|
||||||||
2015
|
2014
|
|||||||
Isis Core
|
$
|
6,686
|
$
|
6,314
|
||||
Akcea Therapeutics
|
197
|
—
|
||||||
Non-cash compensation expense related to equity awards
|
2,683
|
1,411
|
||||||
Total R&D Support costs
|
$
|
9,566
|
$
|
7,725
|
Three Months Ended
March 31,
|
||||||||
2015
|
2014
|
|||||||
General and administrative expenses
|
$
|
4,647
|
$
|
3,184
|
||||
Non-cash compensation expense related to equity awards
|
2,819
|
1,196
|
||||||
Total general and administrative expenses
|
$
|
7,466
|
$
|
4,380
|
Three Months Ended
March 31,
|
||||||||
2015
|
2014
|
|||||||
Isis Core
|
$
|
3,848
|
$
|
3,184
|
||||
Akcea Therapeutics
|
799
|
—
|
||||||
Non-cash compensation expense related to equity awards
|
2,819
|
1,196
|
||||||
Total general and administrative expenses
|
$
|
7,466
|
$
|
4,380
|
Development expenses
|
$
|
5,741
|
||
General and administrative expenses
|
799
|
|||
Total operating expenses, excluding non-cash compensation expense related to equity awards
|
6,540
|
|||
Non-cash compensation expense related to equity awards
|
558
|
|||
Total Akcea Therapeutics operating expenses
|
$
|
7,098
|
|
Three Months Ended
March 31,
|
|||||||
|
2015
|
2014
|
||||||
2¾ percent convertible notes:
|
|
|
||||||
Non-cash amortization of the debt discount and debt issuance costs
|
$
|
612
|
$
|
1,806
|
||||
Interest expense payable in cash
|
421
|
1,384
|
||||||
1 percent convertible notes:
|
||||||||
Non-cash amortization of the debt discount and debt issuance costs
|
5,016
|
—
|
||||||
Interest expense payable in cash
|
1,250
|
—
|
||||||
Non-cash interest expense for long-term financing liability
|
1,662
|
1,652
|
||||||
Other
|
60
|
101
|
||||||
Total interest expense
|
$
|
9,021
|
$
|
4,943
|
Payments Due by Period (in millions)
|
||||||||||||||||||||
Contractual Obligations
(selected balances described below)
|
Total
|
Less than
1 year
|
1-3 years
|
3-5 years
|
After
5 years
|
|||||||||||||||
1 percent Convertible Senior Notes (principal and interest payable)
|
$
|
535.0
|
$
|
5.0
|
$
|
10.0
|
$
|
10.0
|
$
|
510.0
|
||||||||||
2¾ percent Convertible Senior Notes (principal and interest payable)
|
$
|
69.5
|
$
|
1.5
|
$
|
3.4
|
$
|
64.6
|
$
|
—
|
||||||||||
Facility Rent Payments
|
$
|
130.2
|
$
|
6.3
|
$
|
13.2
|
$
|
14.0
|
$
|
96.7
|
||||||||||
Equipment Financing Arrangements (principal and interest payable)
|
$
|
2.3
|
$
|
2.0
|
$
|
0.3
|
$
|
—
|
$
|
—
|
||||||||||
Other Obligations (principal and interest payable)
|
$
|
1.3
|
$
|
0.1
|
$
|
0.1
|
$
|
0.1
|
$
|
1.0
|
||||||||||
Capital Lease
|
$
|
0.1
|
$
|
0.1
|
$
|
—
|
$
|
—
|
$
|
—
|
||||||||||
Operating Leases
|
$
|
24.7
|
$
|
1.6
|
$
|
3.0
|
$
|
3.0
|
$
|
17.1
|
||||||||||
Total
|
$
|
763.1
|
$
|
16.6
|
$
|
30.0
|
$
|
91.7
|
$
|
624.8
|
|
1 Percent Convertible
Senior Notes
|
2¾ Percent Convertible
Senior Notes
|
||||||
Outstanding principal balance
|
$
|
500.0
|
$
|
61.2
|
||||
Issue date
|
November 2014
|
August 2012
|
||||||
Maturity date
|
November 2021
|
October 2019
|
||||||
Interest rate
|
1 percent
|
2¾ percent
|
||||||
Conversion price per share
|
$
|
66.81
|
$
|
16.63
|
||||
Total shares of common stock subject to conversion
|
7.5
|
3.7
|
| receipt and scope of regulatory approvals; |
| establishment and demonstration in the medical and patient community of the efficacy and safety of our drugs and their potential advantages over competing products |
| cost and effectiveness of our drugs compared to other available therapies |
| patient convenience of the dosing regimen for our drugs; and |
| reimbursement policies of government and third-party payors |
| priced lower than our drugs; |
| safer than our drugs; |
| more effective than our drugs; or |
| more convenient to use than our drugs. |
| KYNAMRO is approved in the United States as an adjunct to lipid-lowering medications and diet to reduce low density lipoprotein-cholesterol, apolipoprotein B, total cholesterol, and non-high density lipoprotein-cholesterol in patients with HoFH; |
| the KYNAMRO label contains a Boxed Warning citing a risk of hepatic toxicity; and |
| KYNAMRO is available only through a Risk Evaluation and Mitigation Strategy called the KYNAMRO REMS. |
| fund some of our development activities for KYNAMRO; |
| seek and obtain regulatory approvals for KYNAMRO; and |
| successfully commercialize KYNAMRO. |
| the clinical study may produce negative or inconclusive results; |
| regulators may require that we hold, suspend or terminate clinical research for noncompliance with regulatory requirements; |
| we, our partners, the FDA or foreign regulatory authorities could suspend or terminate a clinical study due to adverse side effects of a drug on subjects in the trial; |
| we may decide, or regulators may require us, to conduct additional preclinical testing or clinical studies; |
| enrollment in our clinical studies may be slower than we anticipate; |
| the cost of our clinical studies may be greater than we anticipate; and |
| the supply or quality of our drugs or other materials necessary to conduct our clinical studies may be insufficient, inadequate or delayed. |
| conduct clinical studies; |
| seek and obtain regulatory approvals; and |
| manufacture, market and sell our drugs. |
| pursue alternative technologies or develop alternative products that may be competitive with the drug that is part of the collaboration with us; |
| pursue higher-priority programs or change the focus of its own development programs; or |
| choose to devote fewer resources to our drugs than it does for its own drugs. |
| additional marketing approvals and successful commercial launch of KYNAMRO; |
| changes in existing collaborative relationships and our ability to establish and maintain additional collaborative arrangements; |
| continued scientific progress in our research, drug discovery and development programs; |
| the size of our programs and progress with preclinical and clinical studies; |
| the time and costs involved in obtaining regulatory approvals; |
| competing technological and market developments, including the introduction by others of new therapies that address our markets; and |
| the profile and launch timing of our drugs, including ISIS-APOCIII Rx , ISIS-SMN Rx and ISIS-TTR Rx . |
| interruption of our research, development and manufacturing efforts; |
| injury to our employees and others; |
| environmental damage resulting in costly clean up; and |
| liabilities under federal, state and local laws and regulations governing health and human safety, as well as the use, storage, handling and disposal of these materials and resultant waste products. |
ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
ITEM 4. | CONTROLS AND PROCEDURES |
ITEM 1. | LEGAL PROCEEDINGS |
ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
ITEM 3. | DEFAULT UPON SENIOR SECURITIES |
ITEM 4. | MINE SAFETY DISCLOSURES |
ITEM 5. | OTHER INFORMATION |
ITEM 6.
|
EXHIBITS
|
a. | Exhibits |
Exhibit
Number
|
Description of Document
|
|
10.1
|
Second Amended and Restated Strategic Collaboration and License Agreement between the Registrant and Alnylam Pharmaceuticals, Inc. dated January 8, 2015. Portions of this exhibit have been omitted and separately filed with the SEC.
|
|
10.2
|
Amendment #1 to HTT Research, Development, Option and License Agreement between the Registrant, F. Hoffmann-La Roche Ltd and Hoffmann-La Roche Inc. dated January 9, 2015. Portions of this exhibit have been omitted and separately filed with the SEC.
|
|
31.1
|
Certification by Chief Executive Officer Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
31.2
|
Certification by Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
32.1
|
Certification Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
101
|
The following financial statements from the Isis Pharmaceuticals, Inc. Quarterly Report on Form 10-Q for the quarter ended March 31, 2015, formatted in Extensive Business Reporting Language (XBRL): (i) condensed consolidated balance sheets, (ii) condensed consolidated statements of operations, (iii) condensed consolidated statements of comprehensive loss, (iv) condensed consolidated statements of cash flows and (v) notes to condensed consolidated financial statements (detail tagged).
|
Signatures
|
Title
|
Date
|
||
/s/ Stanley T. Crooke
|
Chairman of the Board, President, and Chief Executive Officer
|
|||
Stanley T. Crooke, M.D., Ph.D.
|
(Principal executive officer)
|
May 5, 2015
|
||
/s/ Elizabeth L. Hougen
|
Senior Vice President, Finance and Chief Financial Officer
|
|||
Elizabeth L. Hougen
|
(Principal financial and accounting officer)
|
May 5, 2015
|
§ | Enhance the leadership of Alnylam in RNAi therapeutics. |
§ | Enhance the potential of Alnylam to develop Double Stranded RNA drugs. |
§ | Enhance the patent positions of each Party with respect to certain Double Stranded RNA drugs. |
§ | Provide Isis with a means for participating in the success of RNAi therapeutics. |
§ | Enhance the potential of Isis to develop Single Stranded Compound drugs. |
§ | Provide Alnylam with exclusive rights to research, develop and commercialize oligomeric compounds for certain RNA Targets in the Field. |
§ | Provide Isis with exclusive rights to research, develop and commercialize oligomeric compounds for certain RNA Targets in the Field. |
Milestone Event
|
Milestone Payment
|
Initiation of Phase I Trial
|
US$375,000
|
Initiation of Phase III Trial
|
US$750,000
|
Filing NDA
|
US$[***]
|
Marketing Approval
|
US$[***]
|
Year
|
2004/2005
|
2006
|
2007
|
2008+
|
|||||||||
Applicable Percentage
|
[***]%
|
[***]%
|
[***]%
|
[***]%
|
Milestone Event
|
Milestone Payment
|
Initiation of Phase I Trial
|
US$[***]
|
Initiation of Phase III Trial
|
US$[***]
|
Filing NDA
|
US$[***]
|
Marketing Approval
|
US$[***]
|
if to Isis, to: | Isis Pharmaceuticals, Inc. |
with a copy to: | Attention: General Counsel |
if to Alnylam, to: | Alnylam Pharmaceuticals, Inc. |
with a copy to: | Faber Daeufer & Itrato PC |
For Isis: | Chief Operating Officer |
For Alnylam: | President and Chief Operating Officer |
Isis Pharmaceuticals, Inc.
|
Alnylam Pharmaceuticals, Inc.
|
|||
By:
|
/s/
B. Lynne Parshall
|
By:
|
/s/
John Maraganore
|
|
Name:
|
B. Lynne Parshall
|
Name:
|
John Maraganore
|
|
Title:
|
Chief Operating Officer
|
Title:
|
Chief Executive Officer
|
1. | “Acquisition” means any of the following events: (a) the acquisition by any Person or group, other than a Person or group controlling such Party as of the Second Restatement Date, of “beneficial ownership” (as defined in Rule 13d-3 under the United States Securities Exchange Act of 1934, as amended), directly or indirectly, of fifty percent (50%) or more of the shares of such Party’s voting stock; (b) the approval by the shareholders of such Party of a merger, share exchange, reorganization, consolidation or similar transaction of such Party (a “Transaction”), other than a Transaction which would result in the voting stock of such Party outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than fifty percent (50%) of the voting stock of such Party or such surviving entity immediately after such Transaction; or (c) approval by the shareholders of such Party of a complete liquidation of such Party or a sale or disposition of all or substantially all of the assets of such Party. |
2. | “Active Program” means with respect to an RNA Target and a Party, any ongoing drug discovery, development, or commercialization of a compound directed to such RNA Target being conducted by such Party (whether on its own or through a sublicensee). |
3. | “Affiliate” with respect to a Person means any other Person controlling, controlled by, or under common control with such Person. For purposes of this definition, “control” refers to the possession, directly or indirectly, of the power to direct the management or policies of a Person, whether through the ownership of voting securities, by contract or otherwise, of a Person. Notwithstanding the foregoing, Regulus Therapeutics Inc. will not be considered an Affiliate of either Party. |
4. | “Agbio License Agreement” shall mean that certain License and Collaboration Agreement with Monsanto Company dated as of August 27, 2012, as amended through the Second Restatement Date, and from time to time after the Second Restatement Date; provided Isis has approved by prior written consent any such amendment after the Second Restatement Date that would diminish Isis’ rights under this Agreement or increase Isis’ obligations under this Agreement; and provided further in each case Alnylam has provided Isis a copy of such amendment before, or promptly after executing such amendment. |
5. | “Agricultural Field” shall mean applications in agriculture, horticulture, forestry, aquaculture and/or the residential markets relating to plants, fish, arthropods and/or pests and pathogens thereof (e.g., home, lawn, and/or garden). The Agricultural Field excludes, without limitation, (a) all human and animal (other than fish and arthropods) therapeutic, prophylactic or diagnostic applications; (b) the development, sale and use of research reagent products for any purpose; and (c) modification of any cells, tissues or organisms for the purpose of manufacturing heterologous proteins, peptides or viruses for any purpose other than the modification of plants, plant cells, or plant tissues for the purpose of manufacturing heterologous proteins, peptides or viruses for application to plants, fish, arthropods and/or pests or pathogens thereof. |
6. | “Agricultural Field Product” means a product that contains a Double Stranded RNA (including transgenic applications thereof) for application in the Agricultural Field that either (a) modulates the viability and/or biological processes (including expression of genes and/or proteins) of (i) plants, (ii) fish, (iii) arthropods, and/or (iv) pests or pathogens thereof; or (b) modifies plants, plant cells or plant tissues for the purpose of manufacturing heterologous proteins, peptides or viruses for application to (i) plants, (ii) fish, (iii) arthropods, and/or (iv) pests or pathogens thereof. |
7. | “Agricultural Field Product Net Sales” will mean (a) the gross invoice price of Agricultural Field Products sold by Alnylam, its Affiliates and sublicensees (but with respect to Alnylam does not include Naked Sublicensees) to a Third Party; provided, that such Third Party is an end-user of such Licensed Product or a Third Party which purchases Agricultural Field Product(s) (whether in packaged form or bulk form) from Alnylam, its Affiliate or sublicensee and resells such Agricultural Field Product(s) to third parties in a manner consistent with normal trade practices in the Agricultural Field; less (b) the following items: (i) deductions actually incurred, allowed, paid, accrued or specifically allocated in financial statements in accordance with generally accepted accounting principles, in preparing and utilizing distribution channels for an Agricultural Field Product (including product returns, customer rebates, dealer incentives, volume discounts, seed service fees, cash discounts (pre-pay discounts), (ii) local competitive response, transportation or cargo insurance, taxes, duties or other governmental tariffs (other than income taxes), (iii) government-mandated rebates, and (iv) a reasonable reserve for bad debts, (and some of which items, by way of example, are currently identified as “crop loss and replant” and “seed action pack”) in all cases allocated to such Agricultural Field Products in accordance with generally accepted accounting principles and methodologies established by Alnylam, its Affiliates or sublicensee, as the case may be, and that are consistently applied by such party across all of such party’s products in the Agricultural Field; provided, that such methodologies may be amended from time to time, upon notice to Isis to reflect general changes to such party’s methodologies, which changes are consistently applied by such selling party across such party’s products in the Agricultural Field and which changes are made in the ordinary course of such party’s business. |
8. | “Alnylam Current Chemistry Patents” means all Chemistry Patents (i) Controlled by Alnylam as of the First Restatement Date or any time thereafter until the Second Restatement Date and (ii) having an earliest priority date of no later than April 30, 2014, provided, however that (a) for any such Chemistry Patents that are acquired, licensed or invented after the First Restatement Date that include financial or other obligations to a Third Party, the provisions of Section 11.8 will govern whether such Patent will be included as an Alnylam Current Chemistry Patent; and (b) Alnylam Current Chemistry Patents do not include Patents that constitute Alnylam Excluded Technology. Without limitation the Patents listed on Schedule 1-8 attached hereto are Alnylam Current Chemistry Patents, except to the extent such Patents claim Alnylam Excluded Technology. |
9. | “Alnylam Current Motif and Mechanism Patents” means all Motif and Mechanism Patents (i) Controlled by Alnylam as of the First Restatement Date or any time thereafter until the Second Restatement Date and (ii) having an earliest priority date of no later than April 30, 2014, provided, however that (a) for any such Motif and Mechanism Patents that are acquired, licensed or invented after the First Restatement Date that include financial or other obligations to a Third Party, the provisions of Section 11.8 will govern whether such Patent will be included as an Alnylam Motif and Mechanism Patent; and (b) Alnylam Motif and Mechanism Patents do not include Patents that constitute Alnylam Excluded Technology. Without limitation the Patents listed on Schedule 1-9 attached hereto are Alnylam Current Motif and Mechanism Patents, except to the extent such Patents claim Alnylam Excluded Technology. |
10. | “Alnylam Double Stranded RNA Product” means a Double Stranded RNA Product discovered or developed by Alnylam, its Affiliates or sublicensees, the manufacture, sale or use of which is covered by a Valid Claim within the Isis Patent Rights. |
11. | “Alnylam Excluded Technology” means (a) inhibitors to specific genes or gene families, (b) Manufacturing Patents, (c) analytical technologies, kits and assays, including without limitation methods, systems and compositions of matter for amplifying, quantifying, detecting, characterizing or identifying nucleic acids or nonoligomeric ligands thereto, (d) formulation and delivery technologies and (e) the specific technology listed on Schedule 1-11 attached hereto. |
12. | “Alnylam Exclusive Target” means an RNA Target or protein product of (a) the antithrombin gene (AT, also known as AT3) or (b) the aminolevulinate synthase gene 1 (AS1), which genes are further identified and described on Exhibit B. |
13. | “Alnylam Exclusive Target Excluded Technology” means (a) Manufacturing Patents, (b) analytical technologies, kits and assays, including without limitation methods, systems and compositions of matter for amplifying, quantifying, detecting, characterizing or identifying nucleic acids or nonoligomeric ligands thereto, (c) formulation and delivery technologies, and (d) the specific technology listed on Schedule 1-13 attached hereto. |
14. | “Alnylam Exclusive Target Patents” means all Patents that are Controlled by Alnylam on or prior to the [***] anniversary of the Second Restatement Date that (a) claim (x) an oligomeric compound that hybridizes to and modulates an Isis Exclusive Target or (y) a method of using such oligomeric compound in the Field; or (b) are Chemistry Patents or Motif and Mechanism Patents other than those described in clause (a) above; provided, however that (A) for any such Patents that are acquired, licensed or invented after the First Restatement Date that include financial or other obligations to a Third Party, the provisions of Section 11.8 will govern whether such Patent will be included as an Alnylam Exclusive Target Patent; and (B) Alnylam Exclusive Target Patents do not include (I) Patents that constitute Alnylam Exclusive Target Excluded Technology, or (II) Patents Controlled by Alnylam that specifically claim an oligomeric compound that hybridizes to and modulates an Alnylam Exclusive Target (or method of using such oligomeric compound in the Field). Alnylam Exclusive Target Patents include, without limitation, the Patents listed on Schedule 1-14 attached hereto. |
15. | “Alnylam Exclusive Target Product” means an oligomeric compound (a) that hybridizes to and modulates an Alnylam Exclusive Target, and (b) the manufacture, sale or use of which is covered by a Valid Claim within the Isis Exclusive Target Patents. For purposes of determining whether a royalty is payable by Alnylam under Section 7.2(c), an oligomeric compound that hybridizes to and modulates an Alnylam Exclusive Target will continue to be considered an Alnylam Exclusive Target Product during the applicable Alnylam Exclusive Target Royalty Term for such compound in a country if the manufacture, sale or use of such compound in such country is covered by a Valid Claim within the Isis Exclusive Target Patents at the time of First Commercial Sale of such compound in such country. |
16. | “Alnylam Exclusive Target Royalty Term” means, on a Product-by-Product and country-by-country basis, the period commencing with the First Commercial Sale of an Alnylam Exclusive Target Product and ending on the later of the expiration of (i) the last-to-expire Valid Claim of an Isis Exclusive Target Patent that covers the manufacture, use, or sale of such Alnylam Exclusive Target Product in such country, and (ii) any period of regulatory data protection or market exclusivity or similar regulatory protection afforded by the Regulatory Authorities in such country, including any such periods listed in the FDA’s Orange Book, and all international equivalents. |
17. | “Alnylam Extended Field Patents” means all Chemistry Patents and Motif and Mechanism Patents Controlled by Alnylam on and after the Second Restatement Date and having any earliest priority date between May 1, 2014 and April 30, 2019, inclusive; provided, however that (a) for any such Chemistry Patents or Motif and Mechanism Patents that are acquired, licensed or invented that include financial or other obligations to a Third Party, the provisions of Section 11.8 will govern whether such Patent will be included as an Alnylam Extended Field Patent; and (b) Alnylam Extended Field Patents do not include Patents that constitute Alnylam Excluded Technology. Alnylam Extended Field Patents include, without limitation, the Patents listed on Schedule 1-17 attached hereto. |
18. | “Alnylam Extended Field Product” means a Double Stranded RNA Product the manufacture, sale or use of which is covered by a Valid Claim within the Isis Extended Field Patents. |
19. | “Alnylam Extended Field Royalty Term” means, on a Product-by-Product and country-by-country basis, the period commencing with the First Commercial Sale of an Alnylam Extended Field Product and ending on the expiration of the last-to-expire Valid Claim of an Isis Extended Field Patent that covers the manufacture, use or sale of such Alnylam Extended Field Product in such country. |
20. | “Alnylam Patent Rights” means Alnylam Current Motif and Mechanism Patents and Alnylam Current Chemistry Patents. For purposes of determining whether a royalty is payable by Isis under Section 8.2 in connection with the sale of an Isis Single Stranded RNAi Product, any Joint Patent, a Valid Claim of which covers the manufacture, use or sale of such Isis Single Stranded RNAi Product, will be considered an Alnylam Patent Right. |
21. | “Alnylam Product” means an Alnylam Double Stranded RNA Product or MicroRNA Product discovered or developed by Alnylam, its Affiliates or sublicensees, the manufacture, sale or use of which is covered by a Valid Claim within the Isis Patent Rights. |
22. | “Alnylam Special Target Patent” has the meaning set forth in Section 11.2(g). |
23. | “Alnylam Third Party Agreements” means the in-license and other agreements between Alnylam and a Third Party listed on Exhibit 6.5(c). |
24. | “Antisense Drug Discovery Program” means an antisense drug discovery program that investigates multiple different mechanisms of modulating an RNA Target to identify a drug candidate, with a predominant emphasis on potential drug candidates that are single-stranded. |
25. | “Applicable Laws” means all laws, statutes, rules, regulations, orders, judgments, or ordinances having the effect of law of any federal, national, multinational, state, provincial, county, city or other political subdivision. |
26. | “Bona Fide Discovery Collaboration” means (a) with respect to Double Stranded RNA Products that are not Agricultural Field Products, a collaboration involving the discovery and development of Double Stranded RNA Products, in which a Party plays an integral role in the experimentation and an important, though not necessarily dominant or co-equal, role in the decision-making, relating to the discovery and development of such Double Stranded RNA Products from the point in time at which the relevant RNA Target has been designated through the initiation [***]; and (b) with respect to Agricultural Field Products, a collaboration involving the discovery and/or development of Double Stranded RNA Products, in which a Party plays an integral role in the experimentation and an important, though not necessarily dominant or co-equal, role in the decision-making, relating to the discovery and/or development of such Double Stranded RNA Products. A Bona Fide Discovery Collaboration for Double Stranded RNA Products that are not Agricultural Field Products may continue beyond the initiation of such [***]. For Isis Products that are Double Stranded RNA Products, a Bona Fide Discovery Collaboration must be an Antisense Drug Discovery Program. For Alnylam, collaborations that do not include or involve Isis Patent Rights licensed from Isis under Section 5.1(a) (and do not include Isis Exclusive Target Patent Rights that are also Isis Patent Rights), shall not constitute Bona Fide Discovery Collaborations. For Isis, collaborations that do not include or involve Alnylam Patent Rights licensed from Alnylam pursuant to Section 6.2, shall not constitute Bona Fide Discovery Collaborations. A Party’s experimentation relating to the discovery and development of Double Stranded RNA Products that modulate a relevant RNA Target prior to the commencement of a collaboration shall be deemed to have been conducted in the course of the collaboration for purposes of determining whether the collaboration is a Bona Fide Discovery Collaboration. A series of related collaborations and/or license agreements involving the discovery and development of Double Stranded RNA Products with the same sublicensee or related sublicensees that includes a Bona Fide Discovery Collaboration agreement will be aggregated to constitute a single Bona Fide Discovery Collaboration. The Agbio License Agreement is deemed a Bona Fide Discovery Collaboration for purposes of this Agreement. |
27. | “Bona Fide Third Party Collaboration” means, with respect to a Party a collaboration between such Party and a Third Party involving the discovery, development and/or commercialization of, (a) in the case of Alnylam, an Alnylam Extended Field Product or an Alnylam Exclusive Target Product, as the case may be or (b) in the case of Isis, an Isis Extended Field Product or an Isis Exclusive Target Product, as the case may be. For Alnylam, such collaborations that do not include or involve Isis Extended Field Patents or Isis Exclusive Target Patents licensed from Isis hereunder shall not constitute Bona Fide Third Party Collaborations. For Isis, such collaborations that do not include or involve Alnylam Extended Field Patents or Alnylam Exclusive Target Patents licensed from Alnylam hereunder shall not constitute Bona Fide Third Party Collaborations. |
28. | “Business Day” means a weekday on which banking institutions in Boston, Massachusetts are open for business. For purposes of clarity, a Business Day shall not include any Saturday or Sunday or federal or Commonwealth of Massachusetts holiday. |
29. | “Calendar Quarter” means the respective periods of three (3) consecutive calendar months ending on March 31, June 30, September 30 and December 31. |
30. | “Chemistry Patent” means any Patent that covers (a) an oligomeric compound having a chemical composition that differs from a native oligonucleotide composition or (b) any modification to the base, sugar or internucleoside linkage of the oligomeric compound, and specifically, but without limitation, includes covalently linked conjugates and other such moieties |
31. | “Commercially Reasonable Efforts” means the diligent efforts, expertise and resources normally used by a Party to develop, manufacture and commercialize a product or compound owned by it or to which it has rights, which is of similar market potential at a similar stage in its development or product life, taking into account issues of safety, and efficacy, product profile, difficulty in developing the product or compound, competitiveness of the marketplace for the product, the proprietary position of the compound or product, the regulatory structure involved, the potential total profitability of the applicable product(s) marketed or to be marketed and other relevant factors affecting the cost, risk and timing of development and the total potential reward to be obtained if a product is commercialized, but not less than reasonably diligent efforts. In determining whether Commercially Reasonable Efforts have been satisfied, the fact that a Party is required to pay the other Party a royalty or milestones shall not be a factor weighed (i.e., a Party may not apply lesser resources or effort to a Product because it must pay a royalty or milestones to the other Party) . |
32. | “Control” or “Controlled” means, with respect to any Patent or other intellectual property right, possession of the right by a Party or its Affiliates (whether by ownership, license or otherwise, other than pursuant to a license granted under this Agreement), to assign, or grant a license, sublicense or other right to or under, such Patent or right as provided for herein without violating the terms of any agreement or other arrangement with any Third Party. |
33. | “Confidential Information” means information which is (a) of a confidential and proprietary nature; and (b) not readily available to that Party’s competitors and which, if known by a competitor of that Party, might lessen any competitive advantage of that Party or give such competitor a competitive advantage. |
(i)
|
was known by it prior to the receipt of Confidential Information from the disclosing Party;
|
(ii)
|
was disclosed to the receiving Party by a Third Party having the right to do so;
|
(iii) | was, or subsequently became, in the public domain through no fault of the receiving Party, its officers, directors, employees or agents; or |
(iv) | was concurrently or subsequently developed by personnel of the receiving Party without having had access to the disclosing Party’s Confidential Information. |
34. | “CRT” has the meaning set forth in Section 6.5(d)(ii). |
35. | “CRT Agreement” has the meaning set forth in Section 6.5(d)(ii). |
36. | “Designed for” means, when used in relation to a specified RNA Target, a Single Stranded RNAi Compound that is [***] to [***] of the specified [***] via [***]. |
37. | “Development Candidate” means a Single Stranded RNAi Product for which [***] have commenced. |
38. | “Development Collaboration” means a collaboration by either Party with a Third Party whose purpose is the further development and/or commercialization of a Double Stranded RNA Product or Single Stranded RNAi Product, as applicable, and that begins at or after the initiation of IND-Enabling Studies for such Product. For Alnylam, collaborations that do not include or involve Isis Patent Rights licensed from Isis under Sections 5.1(a) (and do not include Isis Exclusive Target Patent Rights that are also Isis Patent Rights), shall not constitute Development Collaborations. For Isis, collaborations that do not include or involve Alnylam Patent Rights licensed from Alnylam pursuant to Sections 6.1(a), (h), (i) or Section 6.2, shall not constitute Development Collaborations. |
39. | “Double Stranded RNA” means a composition designed to act primarily through an RNAi mechanism that is not a MicroRNA Construct and which consists of either (a) two separate oligomers of native or chemically modified RNA that are hybridized to one another along a substantial portion (greater than or equal to [***]%) of their lengths, or (b) a single oligomer of native or chemically modified RNA that is hybridized to itself by self-complementary base-pairing along a substantial portion (greater than or equal to [***]%) of its length to form a hairpin. |
40. | “Double Stranded RNA Product” means (a) a pharmaceutical composition that contains a Double Stranded RNA or (b) an Agricultural Field Product. |
41. | “Effective Date” means March 11, 2004. |
42. | “Enabled Target” has the meaning set forth in Section 4.3(a). |
43. | “Enabled Target Pool” has the meaning set forth in Section 4.3(a). |
44. | “Enabled Target Slot” has the meaning set forth in Section 4.3(a). |
45. | “Field” means the treatment and/or prevention of all human or animal diseases. |
46. | “First Commercial Sale” means, with respect to a country and a Product, the first sale for end use or consumption of such Product in such country after all required Marketing Approvals in such country have been obtained. |
47. | “Graduated Enabled Target” has the meaning set forth in Section 4.3(a). |
48. | “IND” means an Investigational New Drug Application or similar foreign application or submission for approval to conduct human clinical investigations. |
49. | “IND-Enabling Studies” means the pharmacokinetic and toxicology studies required to meet the regulations for filing an IND. |
50. | “Initiation of Phase I Trial” means the dosing of at least ten human subjects in the first human clinical trial conducted and designed to evaluate safety of a product. |
51. | “Initiation of Phase III Trial” means the dosing of the first patient in the first pivotal human clinical trial the results of which could be used to establish safety and efficacy of a Product as a basis for an application for marketing approval or that would otherwise satisfy the requirements of 21 CFR 3 12.21I or its foreign equivalent. |
52. | “Isis Current Chemistry Patents” means all Chemistry Patents (i) Controlled by Isis as of the First Restatement Date or any time thereafter until the Second Restatement Date and (ii) having an earliest priority date of no later than April 30, 2014; provided, however that (a) for any such Chemistry Patents that are acquired, licensed or invented after the First Restatement Date that include financial or other obligations to a Third Party, the provisions of Section 11.8 will govern whether such Patent will be included as an Isis Current Chemistry Patent; and (b) Isis Current Chemistry Patents do not include Patents that constitute Isis Excluded Technology. Without limitation the Patents listed on Schedule 1-52 attached hereto are Isis Current Chemistry Patents, except to the extent such Patents claim Isis Excluded Technology. |
53. | “Isis Current Motif and Mechanism Patents” means all Motif and Mechanism Patents (i) Controlled by Isis as of the First Restatement Date or any time thereafter until the Second Restatement Date and (ii) having an earliest priority date of no later than April 30, 2014; provided, however that (a) for any such Motif and Mechanism Patents that are acquired, licensed or invented after the First Restatement Date that include financial or other obligations to a Third Party, the provisions of Section 11.8 will govern whether such Patent will be included as an Isis Motif and Mechanism Patent; and (b) Isis Current Motif and Mechanism Patents do not include Patents that constitute Isis Excluded Technology. Without limitation the Patents listed on Schedule 1-53 attached hereto are Isis Current Motif and Mechanism Patents, except to the extent such Patents claim Isis Excluded Technology. |
54. | “Isis DS-Target Pool” has the meaning set forth in Section 6.4(a). |
55. | “Isis Enabled Target Pool” has the meaning set forth in Section 4.3(a). |
56. | “Isis Encumbered Target” means an RNA Target (a) to which Isis has a contractual obligation to a Third Party existing as of the Second Restatement Date that precludes Isis from granting a license under Section 5 with respect to such RNA Target and (b) that is identified and described on a [***] (as defined in the letter agreement dated March 9, 2004 between Alnylam and Isis). When and if such restrictions lapse an RNA Target will cease to be an Isis Encumbered Target. |
57. | “Isis Excluded Technology” means (a) RNase H mechanisms, RNase H motifs and RNase H oligonucleotides when utilized in an RNase H mechanism, assays and methods thereof; (b) modulators of specific genes, gene families or proteins; (c) Manufacturing Patents; (d) analytical technologies, kits and assays, including without limitation methods, systems and compositions of matter for amplifying, quantifying, detecting, characterizing or identifying nucleic acids or nonoligomeric ligands thereto; (e) formulation and delivery technologies; and (f) the specific technology listed on Schedule 1-57 attached hereto. |
58. | “Isis Exclusive Target” means an RNA Target or protein product of (a) the Factor X1 gene (FX1) or (b) the Apo(a) gene (Apoa1), which genes are further identified and described on Exhibit A. |
59. | “Isis Exclusive Target Excluded Technology” means (a) Manufacturing Patents, (b) analytical technologies, kits and assays, including without limitation methods, systems and compositions of matter for amplifying, quantifying, detecting, characterizing or identifying nucleic acids or non-oligomeric ligands thereto, (c) formulation and delivery technologies, and (d) the specific technology listed on Schedule 1-59 attached hereto. |
60. | “Isis Exclusive Target Patents” means all Patents Controlled by Isis on or prior to the [***] anniversary of the Second Restatement Date that (a) claim (x) an oligomeric compound that hybridizes to and modulates an Alnylam Exclusive Target or (y) a method of using such oligomeric compound in the Field; or (b) are Chemistry Patents or Motif and Mechanism Patents other than Patents described in clause (a) above; provided, however that (A) for any such Patents that are acquired, licensed or invented after the Restatement Date that include financial or other obligations to a Third Party, the provisions of Section 11.8 will govern whether such Patent will be included as an Isis Exclusive Target Patent; and (B) Isis Exclusive Target Patents do not include (I) Patents that constitute Isis Exclusive Target Excluded Technology, (II) Patents Controlled by Isis that specifically claim an oligomeric compound that hybridizes to and modulates an Isis Exclusive Target (or method of using such oligomeric compound in the Field). Isis Exclusive Target Patents include, without limitation, the Patents listed on Schedule 1-60 attached hereto, except to the extent such Patents claim Isis Exclusive Target Excluded Technology. |
61. | “Isis Exclusive Target Product” means an oligomeric compound that (a) hybridizes to and modulates an Isis Exclusive Target, and (b) the manufacture sale or use of which is covered by a Valid Claim within the Alnylam Exclusive Target Patents. For purposes of determining whether a royalty is payable by Isis under Section 8.2(d), an oligomeric compound that hybridizes to and modulates an Isis Exclusive Target will continue to be considered an Isis Exclusive Target Product during the applicable Isis Exclusive Target Royalty Term for such compound in a country if the manufacture, sale or use of such compound in such country is covered by a Valid Claim within the Alnylam Exclusive Target Patents at the time of First Commercial Sale of such compound in such country. |
62. | “Isis Exclusive Target Royalty Term” means, on a Product-by-Product and country-by-country basis, the period commencing with the First Commercial Sale of an Isis Exclusive Target Product and ending on the later of the expiration of (i) the last-to-expire Valid Claim of an Alnylam Exclusive Target Patent that covers the manufacture, use or sale of such Isis Exclusive Target Product in such country, and (ii) any period of regulatory data protection or market exclusivity or similar regulatory protection afforded by the Regulatory Authorities in such country, including any such periods listed in the FDA’s Orange Book, and all international equivalents. |
63. | “Isis Extended Field Patents” means all Chemistry Patents and Motif and Mechanism Patents Controlled by Isis on and after the Second Restatement Date and having any earliest priority date between May 1, 2014 and April 30, 2019, inclusive; provided, however that (a) for any such Chemistry Patents or Motif and Mechanism Patents that are acquired, licensed or invented that include financial or other obligations to a Third Party, the provisions of Section 11.8 will govern whether such Patent will be included as an Isis Extended Field Patent; and (b) Isis Extended Field Patents do not include Patents that constitute Isis Excluded Technology. Isis Extended Field Patents include, without limitation, the Patents listed on Schedule 1-63 attached hereto, except to the extent such Patents claim Isis Excluded Technology. |
64. | “Isis Extended Field Product” means any Single Stranded Product the manufacture sale or use of which is covered by a Valid Claim within the Alnylam Extended Field Patents. |
65. | “Isis Extended Field Royalty Term” means, on a Product-by-Product and country-by-country basis, the period commencing with the First Commercial Sale of an Isis Extended Field Product and ending on the expiration of the last-to-expire Valid Claim of an Alnylam Extended Field Patent that covers the manufacture, use or sale of such Isis Extended Field Product in such country. |
66. | “Isis Manufacturing Patents” means the Patents specifically listed on Schedule 1-66 attached hereto. The Parties may agree in writing from time to time to add additional Patents to Schedule 1-66 attached hereto. |
67. | “Isis Patent Rights” means Isis Current Motif and Mechanism Patents, and Isis Current Chemistry Patents. |
68. | “Isis Product” means any Isis Single Stranded Product, MicroRNA Product, Double Stranded RNA Product or Isis Single Stranded RNAi Product, discovered or developed by Isis, its Affiliates or sublicensees, the manufacture, sale or use of which is covered by a Valid Claim within the Alnylam Patent Rights. |
69. | “Isis Retained Target” means each RNA Target that is subject to certain Third Party obligations of Isis and described on Schedule 1-69 attached hereto, as such schedule is updated from time to time pursuant to Section 5.3(f). |
70. | “Isis Retained Special Target” means each RNA Target designated as such on Schedule 1-69 attached hereto. |
71. | “Isis Single Stranded Product” means any single stranded oligomeric compound (a) that hybridizes in whole or in part to, and modulates the amount or activity of, an RNA Target, (b) is not a Double Stranded RNA or Double Stranded RNA Product, (c) is not a Single Stranded RNAi Compound, Single Stranded RNAi Product or Isis Single Stranded RNAi Product, and (d) the manufacture, sale or use of which is covered by a Valid Claim within the Alnylam Patent Rights. |
72. | “Isis Single Stranded RNAi Product” means any Single Stranded RNAi Product Designed for an Isis Enabled Target, the manufacture, sale or use of which is covered by a Valid Claim within the Alnylam Patent Rights. |
73. | “Isis Special Patents” means the Patents specifically listed on Schedule 1-73 attached hereto. The Parties may mutually agree in writing from time to time to add additional Patents to Schedule 1-73 attached hereto. |
74. | “Isis Special Target Patent” has the meaning set forth in Section 11.2(f). |
75. | “Isis Third Party Agreements” means the agreements between Isis and a Third Party listed on Exhibit 5.3(d). |
76. | “Joint Invention” has the meaning set forth in Section 11.1(b). |
77. | “Joint Patent” has the meaning set forth in Section 11.1(b). |
78. | “Know-How” means all tangible or intangible know-how, discoveries, processes, formulas, data, clinical and preclinical results, non-Patented Inventions, Inventions for which Patents are in preparation, trade secrets, and any physical, chemical, or biological material or any replication of any such material in whole or in part that are not otherwise covered by the Isis Patent Rights or the Alnylam Patent Rights |
79. | “License Term” means the period from the Second Restatement Date until the date of expiry of the last to expire of the Patents licensed hereunder. |
80. | “Major Pharmaceutical Company” means a Person that, together with all of its affiliated Persons, had annual pharmaceutical product sales during the most recently completed calendar year in excess of $[***]. |
81. | “Manufacturing Patents” means Patent claims claiming (1) a method of joining together component pieces of an oligomeric compound; (2) an improved method of making a component piece where such component piece is disclosed prior to the first filing of the Patent claiming such improved method; (3) in the case of concurrently-filed Patents claiming a new component piece and disclosing multiple methods of making the new component piece in a separate concurrently-filed Patent, the method(s) most suitable for making the new component piece at large scale (provided at least one method must be treated under this Agreement as claimed under a Chemistry Patent and not under a Manufacturing Patent); or (4) compounds used in such methods of joining together component pieces, other than the component pieces themselves and precursors of such component pieces. Thus, for example, Manufacturing Patents include claims to methods such as deprotection, capping, loading onto a solid support, and cleaving from a solid support, all of which are methods used in the process of assembling oligomeric compounds from component pieces; and reagents, such as solid supports themselves, useful in such methods. |
82. | “Marketing Approval” means the act of a Regulatory Authority necessary for the marketing and sale of the Product in a country or regulatory jurisdiction, including, without limitation, the approval of the NDA by the FDA. |
83. | “MicroRNA Construct” is a construct having the chemical and physical description of a Double Stranded RNA that is either (a) designed to target a precursor microRNA or a microRNA, thereby to inhibit the production or function of the microRNA, or (b) designed to function by mimicking the translational repressor function of a naturally occurring microRNA, and which, in relation to its target RNA, has been demonstrated in vitro and, to the extent reasonably feasible, in vivo, to function solely as a translational repressor and not via cleavage of such target RNA. |
84. | “MicroRNA Product” means a pharmaceutical product that contains a MicroRNA Construct. |
85. | “Motif and Mechanism Patents” means any Patent that covers an oligomeric structure or composition of matter, or any method of using or incorporating such oligomeric structure or composition of matter in vitro or in vivo, including without limitation for therapeutic use, in which target RNA levels are modulated by any mechanism other than RNase H. |
86. | “Naked Sublicense” means a license for Double Stranded RNA that includes rights to the Isis Patent Rights that is not a license in connection with (a) a Development Collaboration or (b) a Bona Fide Discovery Collaboration or (c) a Bona Fide Third Party Collaboration. A series of Naked Sublicenses to the same sublicensee or related sublicensees will be aggregated to constitute a single Naked Sublicense. For the avoidance of doubt, where this Agreement grants Alnylam exclusive rights to grant Naked Sublicenses, such exclusive rights preclude Isis from granting licenses to the Isis Patent Rights to Third Parties for Double Stranded RNA that are not Isis Products for which Isis has exercised its option under Section 6.2 even though such license grants by Isis would technically be license grants and not sublicense grants. Licenses that do not include or involve rights to Isis Patent Rights shall not constitute Naked Sublicenses. |
87. | “Naked Sublicensee” means a Third Party that obtains a Naked Sublicense from Alnylam in accordance with the terms of this Agreement. |
88. | “NDA” means New Drug Application or similar application or submission for approval to market and sell a new pharmaceutical product filed with or submitted to a Regulatory Authority. |
89. | “Net Sales” will mean the gross invoice price of Products sold by Alnylam or Isis (as applicable), their respective Affiliates and sublicensees (but with respect to Alnylam does not include Naked Sublicensees) to a Third Party less the following items: (i) trade discounts, credits or allowances, (ii) credits or allowances additionally granted upon returns, rejections or recalls, (iii) freight, shipping and insurance charges, (iv) taxes, duties or other governmental tariffs (other than income taxes) and (v) government-mandated rebates and (vi) a reasonable reserve for bad debts. Except in the cases of Products used to conduct clinical trials, reasonable amounts of Products used as marketing samples and Product provided without charge for compassionate or similar uses, a Party, its Affiliates or sublicensees will be treated as having sold Products for an amount equal to the fair market value of Products if: (a) Products are used by such Party, its Affiliates or sublicensees without charge or provision of invoice, or (b) Products are provided to a Third Party by such Party, its Affiliates or sublicensees without charge or provision of invoice and used by such third party. |
90. | “Other Isis Sublicense” has the meaning set forth in Section 8.4(b). |
91. | “Patent” or “Patents” means (a) patent applications (including provisional applications and applications for certificates of invention); (b) any patents issuing from such patent applications (including certificates of invention); (c) all patents and patent applications based on, corresponding to, or claiming the priority date(s) of any of the foregoing; (d) any substitutions, extensions (including supplemental protection certificates), registrations, confirmations, reissues, divisionals, continuations, continuations-in-part, re-examinations, renewals and foreign counterparts thereof; and (e) all patents claiming overlapping priority therefrom. |
92. | “Permitted Licenses” means (1) licenses granted by Isis or Alnylam (as the case may be) before or after the Second Restatement Date to any Third Party under the Alnylam Exclusive Target Patents (where Alnylam is the granting Party) or the Isis Exclusive Target Patents (where Isis is the granting Party) to (a) use oligonucleotides (or supply oligonucleotides to end users) solely to conduct pre-clinical research, or (b) enable such Third Party to manufacture or formulate oligonucleotides, where (i) such Third Party is primarily engaged in providing contract manufacturing or services and is not primarily engaged in drug discovery, development or commercialization of therapeutics; and (ii) the granting Party does not assist such Third Party to identify, discover or make an Alnylam Exclusive Target Product (where Isis is the granting Party) or an Isis Exclusive Target Product (where Alnylam is the granting Party); and (2) material transfer, collaboration, sponsored research or similar agreements with academic collaborators or non-profit institutions solely to conduct noncommercial Research. |
93. | “Person” means any person, organization, corporation or other business entity. |
94. | “Product” means an Alnylam Product, an Isis Product, an Alnylam Extended Field Product, an Isis Extended Field Product, an Alnylam Exclusive Target Product, or an Isis Exclusive Target Product, as the case may be. |
95. | “Regulatory Authority” means any applicable government regulatory authority involved in granting approvals for the marketing and/or pricing of a Product worldwide including, without limitation, the United States Food and Drug Administration (“FDA”) and any successor government authority having substantially the same function, and foreign equivalents thereof. |
96. | “Research Program” means the Parties’ research collaboration focused on Single Stranded RNAi Compounds and conducted pursuant to the First Restated Agreement. |
97. | “Research Program Patent” means any Patents that claim Inventions that were discovered by the employees of either Party in the performance of the Research Program. The Research Program Patents are listed on Schedule 1-97 attached hereto. |
98. | “Research Use” means discovering, developing and optimizing an Alnylam Product or an Isis Product, as applicable, up to, but not including, [***], and/or conducting pilot manufacturing studies of an Alnylam Product or an Isis Product, as applicable . Research Use may include small pilot toxicology studies. With respect to Isis, Research Use does not include studies [***] for potential drug targets, but does include studies [***] for development of Double Stranded RNA Products or Single Stranded RNAi Products, as applicable, from among potential targets for which a reasonable scientific basis exists for believing that such potential targets are associated with a particular disease or condition. |
99. | “Reserved DS-Target” has the meaning set forth in Section 6.4(a). |
100. | “RNA Target” means a ribonucleic acid transcript with a defined sequence and/or function, including all splice variants and mutant forms of such transcript. |
101. | “Single Stranded Compound” means a single stranded oligomeric compound (a) that hybridizes in whole or in part to, and modulates the amount or activity of, an RNA Target, and (b) is not a Double Stranded RNA, a Double Stranded RNA Product, a Single Stranded RNAi Compound, or a Single Stranded RNAi Product. |
102. | “Single Stranded Product” means a pharmaceutical composition that contains a Single Stranded Compound and is not a Double Stranded RNA, a Double Stranded RNA Product, a Single Stranded RNAi Compound, or a Single Stranded RNAi Product. |
103. | “Single Stranded RNAi Compound” means a single stranded chemically modified oligonucleotide and/or analog designed to cause target mRNA cleavage via the RISC or RNAi mechanism. For purposes of clarity, an ssRNAi compound does not include oligonucleotides (or chemically modified oligonucleotide analogs) designed to work via other mechanisms such as (i) RNase H 1 or 2 (including any oligonucleotide which has [***]); (ii) alteration of splicing; (iii) translation arrest (excluding RNAi-mediated repression of translation); (iv) alteration of processing; (v) polyadenylation; (vi) capping; (vii) modulation of pre-mRNA processing of the target mRNA; or (viii) oligonucleotides (or chemically modified oligonucleotide analogs) designed to mimic a known naturally occurring microRNA. |
104. | “Single Stranded RNAi Product” means a pharmaceutical composition that contains a Single Stranded RNAi Compound. |
105. | “Stanford University” has the meaning set forth in Section 6.5(d)(i). |
106. | “Stanford Agreement” has the meaning set forth in Section 6.5(d)(i). |
107. | “Sublicense Revenue” means any payments that (1) with respect to Alnylam, Alnylam receives from a sublicensee in consideration of a Naked Sublicense, or (2) with respect to Isis, Isis receives from a sublicensee in consideration of a sublicense to further the research, development or commercialization of an Isis Single Stranded RNAi Product (other than sublicenses of rights under Sections 6.1(k) or (l)), in each case including, but not limited to, license fees, royalties, milestone payments, and license maintenance fees, but excluding: (i) payments made in consideration of equity or debt securities of the applicable Party at fair market value and (ii) payments specifically committed to reimburse the applicable Party for the fully-burdened cost of research and development. If a Party receives any non-cash Sublicense Revenue, such Party will pay the other Party, at the election of the Party who is entitled to receive Sublicense Revenue payment, either (x) a cash payment equal to the fair market value of the appropriate percentage of the Sublicense Revenue or (y) the in-kind portion, if practicable, of the Sublicense Revenue. |
108. | “Technology Access Fee” means any payments that Alnylam receives from granting a Third Party access (through sublicense or otherwise) to the Isis Patent Rights (including to Isis Exclusive Target Patent Rights that are also Isis Patent Rights) as part of a Bona Fide Discovery Collaboration or Development Collaboration agreement, including, but not limited to, (1) license fees, (2) collaboration fees, (3) option fees, (4) payments made in consideration for the issuance of equity or debt securities above fair market value, (5) payments made for research and development support above Alnylam’s fully-burdened cost, but excluding the following payments: (i) payments made in consideration for equity or debt securities of Alnylam at fair market value, (ii) payments made in consideration for thirty-five percent (35%) or more of Alnylam’s equity securities at fair market value plus a reasonable control premium, (iii) payments specifically committed to reimburse Alnylam for the fully-burdened cost of research and development, including without limitation the fully-burdened cost of products transferred by Alnylam in connection with such research and development, and payments received by Alnylam pursuant to the Agbio License Agreement that are specifically committed to reimburse Alnylam for the cost of Patent prosecution, maintenance and/or defense of Patents covering or claiming Agricultural Field Products; provided, however , that any payments received by Alnylam but not applied to reimburse Alnylam for such expenses will be Technology Access Fees, (iv) [***] (v) payments that are not milestones and that are associated with the sale of commercial products, and (vi) payments that count as Sublicense Revenue under a Naked Sublicense subject to Alnylam’s payment obligations to Isis under Section 7.4. If Alnylam receives any non-cash Technology Access Fees, Alnylam will pay Isis, at Isis’ election, either (x) a cash payment equal to the fair market value of Isis’ appropriate portion of the Technology Access Fee or (y) the in-kind portion, if practicable, of the Technology Access Fee. |
109. | “Third Party” means any party other than Isis or Alnylam and their respective Affiliates. |
110. | “Valid Claim” means (i) an issued claim of an unexpired Patent that has not been withdrawn, canceled or disclaimed, or held invalid or unenforceable by a court of competent jurisdiction in an unappealed or unappealable decision, or (ii) a claim of a patent application which has been pending for less than [***] years from the earliest priority date for such application. |
1. | Government Rights - Inventions claimed in US Patent Applications: [***] were funded in part by a Small Business Innovation Research grant administered by the National Institutes of Health. Accordingly, the U.S. Federal Government retains certain rights to those inventions. |
1. | Co-Exclusive License Agreement between Max-Planck-Innovation GmbH (formerly Garching Innovation GmbH) and Alnylam Pharmaceuticals, Inc., dated December 20, 2002, as amended by Amendment dated July 2, 2003, the Requirements Amendment effective June 15, 2005, the Waiver Amendment effective August 9, 2007 and the Amendment to the Alnylam Co-Exclusive License Agreement dated as of March 14, 2011, by and between Alnylam Pharmaceuticals, Inc., on the one hand, and Whitehead Institute for Biomedical Research, Massachusetts Institute of Technology and Max-Planck-Innovation GmbH, on the other hand; and Co-Exclusive License Agreement between Max Planck Innovation GmbH (formerly Garching Innovation GmbH) and Alnylam Europe AG (formerly Ribopharma AG), dated July 30, 2003. |
1. | Amended and Restated License and Collaboration Agreement among Alnylam, Isis and Regulus Therapeutics Inc., dated January 1, 2009, as amended on June 7, 2010, October 25, 2011, and August 2, 2013. |
2. | License and Collaboration Agreement between Alnylam and Takeda Pharmaceutical Company Limited dated May 27, 2008, as amended by letter agreements dated March 16, 2011 and August 18, 2009. |
3. | License and Collaboration Agreement between Alnylam and F. Hoffmann-La Roche Ltd. and Hoffmann-La Roche Inc. dated July 8, 2007, as amended by that certain letter amendment dated May 29, 2008. This License and Collaboration Agreement has been assigned to Arrowhead Research Corporation. |
1. | All patent rights licensed to Alnylam under the license agreement between the [***] and Alnylam dated [***]. |
2. | All patent rights licensed to Alnylam under the license agreement between [***] dated [***]. |
1.
|
Intellectual property covering:
|
· | RNA processing, including modulation of [***]; |
· | PNA chemistry licensed or acquired from [***]; |
· | [***] chemistry licensed or acquired from [***]; |
· | [***] a Gene Target. |
2. | [***]/4’-Thio Chemistry. |
Isis Docket Number
|
Country
|
Status
|
Patent Number
|
Granted Date
|
Title
|
[***]
|
[***]
|
[***]
|
[***]
|
[***]
|
[***]
|
[***]
|
[***]
|
[***]
|
[***]
|
[***]
|
[***]
|
3.
|
McGill University (B)
|
Isis Docket
Number
|
Country
|
Status
|
Title
|
[***]
|
[***]
|
[***]
|
[***]
|
4.
|
Walder Patents (B)
|
5.
|
Merck Nucleoside
|
6.
|
Carnegie Institution of Washington.
|
7.
|
Garching Innovation GmbH.
|
8.
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Max-Planck-Innovation GmbH.
|
(A) | Isis cannot sublicense the technologies marked with this footnote. |
(B) | Although, Isis can sublicense the technologies marked with this footnote, such a sublicense carries additional financial and other obligations. Isis is willing to negotiate a separate sublicense agreement for these technologies. |
9.
|
Intellectual property covering:
|
· | RNA processing, including modulation of [***]; |
· | PNA chemistry licensed or acquired from [***]; |
· | [***] chemistry licensed or acquired from [***]; |
· | [***] a Gene Target. |
10. | [***]/4’-Thio Chemistry. |
Isis Docket Number
|
Country
|
Status
|
Patent Number
|
Granted Date
|
Title
|
[***]
|
[***]
|
[***]
|
[***]
|
[***]
|
[***]
|
[***]
|
[***]
|
[***]
|
[***]
|
[***]
|
[***]
|
11.
|
McGill University (B)
|
Isis Docket Number
|
Country
|
Status
|
Title
|
[***]
|
[***]
|
[***]
|
[***]
|
12.
|
Walder Patents (B)
|
13.
|
Merck Nucleoside
|
14.
|
Carnegie Institution of Washington.
|
15.
|
Garching Innovation GmbH.
|
16.
|
Max-Planck-Innovation GmbH.
|
(C) | Isis cannot sublicense the technologies marked with this footnote. |
(D) | Although, Isis can sublicense the technologies marked with this footnote, such a sublicense carries additional financial and other obligations. Isis is willing to negotiate a separate sublicense agreement for these technologies. |
1. | The human Factor XI gene (also known as coagulation factor XI, plasma thromboplastin antecedent, F11, FXI) and its protein product. As of the Second Restatement Date, the gene has NCBI Gene ID 2160, an example of an identifier for the Factor XI gene is NCBI RefSeq code NM_000128 and an example of an identifier for the Factor XI protein product is NCBI RefSeq code NP_000119. |
2. | The human Apo(a) gene (also known as apolipoprotein(a); LPA; Lipoprotein, Lp(a); Lp(a)) and its protein product. As of the Second Restatement Date, the gene has NCBI Gene ID 4018, an example of an identifier for the Apo(a) gene is NCBI RefSeq code NM_005577 and an example of an identifier for the Apo(a) protein product is NCBI RefSeq code NP_005568. |
Confidential
|
CONFIDENTIAL TREATMENT REQUESTED
|
UNDER 17 C.F.R §§ 200.80(B)4, AND 240.24B-2
|
7.12. | No Challenge . If, during the Agreement Term, solely with respect to rights to the [***] that are included (or, prior to Option exercise, are eligible to be included) in a license granted to Roche under Section 4.1.1 , Roche, its Affiliates or Sublicensees, in the United States or any other country, (a) commence or otherwise voluntarily determine to participate in (other than as may be necessary or reasonably required to assert a cross-claim or a counter-claim or to respond to a court request or order or administrative law request or order) any action or proceeding, challenging or denying the enforceability or validity of any claim within an issued patent or patent application within such [***], or (b) direct, support or actively assist any other Person (other than as may be necessary or reasonably required to assert a cross-claim or a counter-claim or to respond to a court request or order or administrative law request or order) in bringing or prosecuting any action or proceeding challenging or denying the validity of any claim within an issued patent or patent application within such [***], then unless, within thirty (30) days after written notice from Isis, Roche rescinds any actions brought by Roche, its Affiliates, or Sublicensees, Isis may, to the extent permitted under Applicable Law, terminate this Agreement and the provisions of Section 10.4.1 and Section 10.4.2 will apply; [***]. |
Isis Pharmaceuticals, Inc.
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By:
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/s/ B. Lynne Parshall
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Name:
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B. Lynne Parshall
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Title:
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Chief Operating Officer
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Date:
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||||
F. Hoffman-La Roche Ltd
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||||
By:
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/s/ Dr. Christoph Sarry
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By:
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/s/ Stefan Arnold
|
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Name:
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Dr. Christoph Sarry
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Name:
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Stefan Arnold
|
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Title:
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Global Alliance Director
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Title:
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Head Legal Pharma
|
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Date:
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12 January 2015
|
|||
Hoffman-La Roche Inc.
|
||||
By:
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/s/ John P Parise
|
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Name:
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John P Parise
|
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Title:
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Authorized Signatory
|
|||
Date:
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Jan 12, 2015
|
Dated: May 5, 2015
|
|
|
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/s/ Stanley T. Crooke
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|
|
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Stanley T. Crooke, M.D., Ph.D.
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Chief Executive Officer
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Dated: May 5, 2015
|
|
|
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/s/ Elizabeth L. Hougen
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|
|
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Elizabeth L. Hougen
|
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Chief Financial Officer
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1. | The Company’s Quarterly Report on Form 10-Q for the period ended March 31, 2015, to which this Certification is attached as Exhibit 32.1 (the “Periodic Report”), fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended; and |
2. | The information contained in the Periodic Report fairly presents, in all material respects, the financial condition of the Company at the end of the period covered by the Periodic Report and the results of operations of the Company for the period covered by the Periodic Report. |
Dated: May 5, 2015
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/s/ Stanley T. Crooke
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/s/ Elizabeth L. Hougen
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Stanley T. Crooke, M.D., Ph.D.
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Elizabeth L. Hougen
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Chief Executive Officer
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Chief Financial Officer
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