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Collaboration, License and Purchase Agreements
12 Months Ended
Dec. 31, 2016
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Collaboration, License and Purchase Agreements
genix International Limited Sales and Purchase Agreement
On October 24, 2014, the Company acquired Zogenix International Limited, pursuant to a sale and purchase agreement with Brabant Pharma Limited (Brabant). Under the terms of the Sale and Purchase Agreement, the Company agreed to make future milestone payments to the former principals of Brabant of up to $95.0 million in the event the Company achieves certain milestones with respect to ZX008, consisting of $50.0 million in regulatory milestones and $45.0 million in sales milestones.
In September 2012, Zogenix International Limited entered into a collaboration and license agreement with the Universities of Antwerp and Leuven in Belgium (the Universities), which was amended and restated in October 2014. Under the terms of the agreement, the Universities granted Zogenix International Limited an exclusive worldwide license to use the data obtained from the study, as well as certain intellectual property related to fenfluramine for the treatment of Dravet syndrome. Zogenix International Limited is required to pay a mid-single-digit percentage royalty on net sales of fenfluramine for the treatment of Dravet syndrome or, in the case of a sublicense of fenfluramine for the treatment of Dravet syndrome, a percentage in the mid-twenties of the sub-licensing revenues. The agreement terminates in September 2020; however, upon the commencement of Phase 3 clinical trials of fenfluramine or marketing approval by a regulatory authority, the agreement will be extended until September 2045. The agreement may be terminated by the Universities if Zogenix International Limited: (a) does not use commercially reasonable efforts to (i) develop and commercialize fenfluramine for the treatment of Dravet syndrome or related conditions stemming from infantile epilepsy, or (ii) seek approval of fenfluramine for the treatment of Dravet syndrome in the United States; or (b) if Zogenix International Limited becomes insolvent, shall make an assignment for the benefit of creditors, or shall have a petition in bankruptcy filed for or against it or if a petition for any similar relief has been filed against it. The Company can terminate the agreement upon specified prior written notice to the Universities.
Endo Ventures Limited Asset Purchase Agreement
In May 2014, the Company completed the sale of its Sumavel DosePro business to Endo Ventures Bermuda Limited and Endo Ventures Limited (collectively, Endo) and concurrently entered into a long-term supply agreement with Endo for the exclusive right, and contractual obligation, to manufacture and supply Sumavel DosePro to Endo. The agreement provides for an initial term of eight years.
The Company and Endo have recently entered into a letter agreement acknowledging Endo’s decision to have the Company discontinue the manufacturing and supply of the Sumavel DosePro product under the supply agreement while the parties finalize termination of the supply agreement. The Company expects to fulfill current open orders during the first half of 2017 and not to supply Endo with additional Sumavel DosePro following such time. The Company is currently working with its suppliers to wind down activities and may incur additional costs associated with the discontinuance of Sumavel DosePro. See Note 6 for additional information.
Valeant Pharmaceuticals North America LLC Co-Promotion Agreement Termination
On June 27, 2013, the Company entered into a co-promotion agreement (the Co-Promotion Agreement) with Valeant Pharmaceuticals North America LLC (Valeant) to promote Migranal® Nasal Spray (Migranal) to a prescriber audience of physicians and other health care practitioners in the United States. The Company’s sales team began promoting Migranal to prescribers in August 2013, and Valeant paid the Company a co-promotion fee on a quarterly basis that represented specified percentages of net sales generated by the Company over defined baseline amounts of net sales. The original term of the agreement was through December 31, 2015. In 2016, 2015 and 2014, the Company recognized co-promotion service revenue of zero, $0.3 million and $3.4 million, respectively, under the Valeant Agreement.
In June 2015, the Company and Valeant entered into a Termination and Mutual Release Agreement, whereby the Co-Promotion Agreement terminated on June 12, 2015. In connection with the termination, Valeant made a one-time payment to the Company totaling $0.5 million, which was recorded as service and other product revenue in the consolidated statements of operations for the year ended December 31, 2015.
Durect Development and License Agreement
On July 11, 2011, the Company entered into a development and license agreement with Durect Corporation under which the Company is responsible for the clinical development and commercialization of Relday. Durect is responsible for pre-clinical, formulation and chemistry, manufacturing and controls development. Durect will be reimbursed by the Company for its research and development efforts on the product. Total research and development expense reimbursed under this agreement for 2016, 2015 and 2014 was $0.3 million, $4.6 million, and $4.3 million, respectively.
The Company paid an upfront fee to Durect and is obligated to pay Durect up to $103.0 million in total future milestone payments with respect to the product subject to and upon the achievement of various development, regulatory and sales milestones. The Company is also required to pay a mid-single-digit to low double-digit percentage patent royalty on annual net sales of the product determined on a jurisdiction-by-jurisdiction basis. Further, until an NDA for Relday has been filed in the United States, the Company is obligated to spend no less than $1.0 million in external expenses on the development of Relday in any trailing 12 month period beginning in July 2012. The patent royalty term is equal to the later of the expiration of all Durect technology patents or joint patent rights in a particular jurisdiction, the expiration of marketing exclusivity rights in such jurisdiction, or 15 years from first commercial sale in such jurisdiction. After the patent royalty term, the Company will continue to pay royalties on annual net sales of the product at a reduced rate for so long as the Company continues to sell the product in the jurisdiction. The Company is also required to pay to Durect a tiered percentage of fees received in connection with any sublicense of the licensed rights.
Durect granted the Company an exclusive worldwide license, with sub-license rights, to Durect intellectual property rights related to Durect’s proprietary polymeric and non-polymeric controlled-release formulation technology to make and have made, use, offer for sale, sell and import risperidone products, where risperidone is the sole active agent, for administration by injection in the treatment of schizophrenia, bipolar disorder or other psychiatric related disorders in humans. Durect retains the right to supply the Company’s Phase 3 clinical trial and commercial product requirements on the terms set forth in the License Agreement.
Durect retains the right to terminate the License Agreement with respect to specific countries if the Company fails to advance the development of the product in such country within a specified period, either directly or through a sublicensee. In addition, either party may terminate the License Agreement upon insolvency or bankruptcy of the other party, upon written notice of a material uncured breach or if the other party takes any act impairing such other party’s relevant intellectual property rights. The Company may terminate the License Agreement upon written notice if during the development or commercialization of the product, the product becomes subject to one or more serious adverse drug experiences or if either party receives notice from a regulatory authority, independent review committee, data safety monitoring board or other similar body alleging significant concern regarding a patient safety issue and, as a result, the Company believes the long-term viability of the product would be seriously impacted. The Company may also terminate the License Agreement with or without cause, at any time upon prior written notice.
Aradigm Corporation Asset Purchase Agreement
In 2006, the Company entered into an asset purchase agreement with Aradigm Corporation (Aradigm). Under the terms of the agreement, Aradigm transferred all of its tangible assets and intellectual property related to the DosePro needle-free drug delivery system to the Company. Aradigm also granted the Company a non-exclusive license under all of its other intellectual property related to the DosePro delivery system prior to the closing of the asset purchase. Aradigm retained a non-exclusive license, with a right to sublicense, under all transferred intellectual property rights solely for purposes of the pulmonary field, and the Company granted Aradigm a license under other intellectual property rights solely for use in the pulmonary field. Endo Ventures pays royalties to Aradigm Corporation on sales of Sumavel DosePro subsequent to the sale of the business to Endo in May 2014. The Company pays royalties for any additional revenue generated from differences between actual and estimated returns of Sumavel DosePro prior to the sale of the business.
The Company made an initial payment to Aradigm at the closing of the asset purchase and made an additional milestone payment upon the U.S. commercialization of Sumavel DosePro in 2010. The Company is also required to pay a 3% royalty on global net sales of Sumavel DosePro, by the Company or one of the Company’s future licensees, if any, until the later of January 2020 or the expiration of the last valid claim of the transferred patents covering the manufacture, use, or sale of the product. The Company recorded the second milestone payment in other assets in the consolidated balance sheet and was amortizing the prepaid royalties over the estimated useful life of the technology to royalty expense. As a result of Endo’s intention to discontinue Sumavel DosePro (see Note 6), the Company recorded an impairment charge of $2.0 million to write off the remaining carrying amount of the prepaid royalties.
Other Asset Acquisitions
In October 2016, the Company paid $1.5 million to acquire the global rights to a preclinical development program for orphan CNS disorders in an asset acquisition. At the date of acquisition, the project had not yet reached technological feasibility, was deemed to have no alternative use, and was immediately charged to operating expense. The asset purchase agreement provides for potential additional payments if certain development and sales milestones are achieved. Due to the preclinical stage of development and the nature of this arrangement, any future potential payments related to the attainment of the specified milestones over a period of several years are inherently uncertain.