Collaborative Research And Development Agreements
|9 Months Ended|
Sep. 30, 2011
|Collaborative Research And Development Agreements [Abstract]|
|Collaborative Research And Development Agreements||
3. Collaborative Research and Development Agreements
In November 2006, we entered into a collaborative research agreement and a license agreement with Shell to develop biocatalysts and associated processes that use such biocatalysts.
In November 2007, we entered into a new and expanded five-year collaborative research agreement and a license agreement with Shell. In connection with the new and expanded collaborative research agreement and license agreement, Shell paid us a $20.0 million up-front exclusivity fee, purchased Series E redeemable convertible preferred stock for gross proceeds of $30.5 million, and agreed to pay us (1) research funding at specified rates per FTE working on the project during the research term, (2) milestone payments upon the achievement of milestones and (3) royalties on future product sales.
In March 2009, we amended our collaborative research agreement and license agreement with Shell. In connection with these amendments Shell purchased Series F redeemable convertible preferred stock for gross proceeds of $30.0 million and agreed to pay us (1) additional research funding at specified rates per FTE working on the project during the research term and (2) additional milestone payments upon the achievement of milestones. Shell has the right to reduce the number of funded FTEs, subject to certain limitations, with a required advance notice period ranging from 30 to 270 days and a subsequent period ranging from 90 to 360 days during which notices of further FTE reductions cannot be made by Shell. The length of these periods varies dependent on the number of funded FTEs reduced. Effective August 2011, Shell reduced the number of funded FTEs engaged in our research and development collaboration by 12 from 128 to 116 FTEs.
In accordance with our revenue recognition policy, the $20.0 million up-front exclusivity fee and the research funding fees to be received for FTE services are recognized in proportion to the actual research efforts incurred relative to the amount of total expected effort to be incurred by us over the five-year research period commencing November 2007. Milestones payments to be earned under this agreement have been determined to be at risk at the inception of the arrangement and substantive and are expected to be recognized upon achievement of the applicable milestone and when collectability of such payment is reasonably assured. We recorded $3.1 million and $1.5 million of milestone revenues during the three months ended September 30, 2011 and 2010, respectively. We recorded milestone revenues of $3.1 million and $2.9 million during the nine months ended September 30, 2011 and 2010, respectively.
For the three months ended September 30, 2011 and 2010, our collaborative research and development revenue from Shell was $17.3 million and $16.2 million, respectively. For the nine months September 30, 2011 and 2010, our collaborative research and development revenues from Shell was $47.0 million and $46.9 million, respectively.
Under the agreements with Shell, we have the right to license technology from third parties that will assist us in meeting objectives under the collaboration. If third-party technology to be licensed is identified and mutually agreed upon by both parties, Shell is obligated to reimburse us for the licensing costs of the technology. Payments made by us to the third-party providers were recorded as research and development expenses related to our collaborative research agreement with Shell. None of the acquired licenses are expected to be used in products that will be sold within the next year and the phase of the project has not reached technological feasibility. Shell reimbursed us for $51,000 and $1.1 million of licensing costs during the three months ended September 30, 2011 and 2010, respectively. Shell reimbursed us for licensing costs of $116,000 and $1.3 million for the nine months ended September 30, 2011 and 2010, respectively. We record these reimbursements against the costs incurred.
In June 2011, Shell completed the transfer of all of its equity interests in us, together with the associated right to appoint one member to our board of directors, to Raízen Energia Participações S.A., ("Raízen ") Shell's joint venture with Cosan S.A. in Brazil. At the time of transfer, Raízen became our largest stockholder by owning approximately 5.6 million shares. Notwithstanding the above, Shell did not transfer our collaborative research agreement to Raízen and we continue to collaborate with Shell. Additionally in September 2011, we entered into a joint development agreement directly with Raízen. Under the agreement, we will deploy our CodeEvolver directed evolution technology platform to develop an improved first generation ethanol process for producing ethanol made from sugar.
Since October 2005, we have partnered with Arch Pharmalabs, Ltd. ("Arch"), a company based in India engaged in the manufacturing and sale of active pharmaceutical ingredients ("APIs"), and intermediaries to pharmaceutical companies worldwide.
In February 2010, we consolidated certain of the contractual terms in our agreements with Arch by simultaneously terminating all of our existing agreements with Arch, other than the Master Services Agreement with Arch entered into as of August 1, 2006, and entering into new agreements with Arch. The new agreements, among other things, provide for biocatalyst supply from us to Arch and intermediate supply from Arch to us. We sell the biocatalysts to Arch at an agreed upon price, and Arch manufactures the intermediates on our behalf. Arch sells the intermediates to us at a formula-based or agreed upon price. We then directly market and sell the intermediates to a specified group of customers in the generic pharmaceutical industry. Under the new agreements, Arch may also sell intermediates directly to other customers, and a license royalty is owed by Arch to us based on the volume of product they sell to us and their other customers. Royalties earned from Arch under this arrangement were $230,000 and $124,000 for the three months ended September 30, 2011 and 2010, respectively and $550,000 and $286,000 for the nine months ended September 30, 2011 and 2010, respectively.
The entire disclosure for collaborative arrangements in which the entity is a participant, including a) information about the nature and purpose of such arrangements; b) its rights and obligations thereunder; c) the accounting policy for collaborative arrangements; and d) the income statement classification and amounts attributable to transactions arising from the collaborative arrangement between participants.
Reference 1: http://www.xbrl.org/2003/role/presentationRef