Research And Development

9 Months Ended

Sep. 30, 2011

Research And Development [Abstract]

Research And Development

Note 8—Research and Development

The Company's research and development includes costs associated with the research and development of the Company's KRYSTEXXA product prior to U.S. Food and Drug Administration ("FDA") approval and FDA-related post-marketing commitments for approved products (KRYSTEXXA post-approval). These costs primarily include pre-clinical and clinical studies and trials, personnel costs, including compensation, consultants and contract research organizations, quality control and assurance costs, regulatory costs and costs related to the development of commercial scale manufacturing capabilities for KRYSTEXXA. These manufacturing capabilities also include the costs of preparing Fujifilm Diosynth Biotechnologies USA LLC ("Fujifilm") to serve as the Company's secondary source supplier of pegloticase drug substance for KRYSTEXXA in the United States. Costs associated with the Company's Medical Affairs function are also currently classified as research and development. Currently, the focus of the Company's Medical Affairs function is to support the Company's post-approval clinical trials. Additionally, the Company includes the legal costs associated with new patents and existing patent maintenance for products (KRYSTEXXA) that have not yet been approved in countries outside the United States as research and development. Research and development costs are expensed as incurred.

Prior to the FDA approval of KRYSTEXXA, manufacturing costs associated with third-party contractors for validation and commercial batch production, process technology transfer, quality control and stability testing, raw material purchases, overhead expenses and facilities costs were recorded as research and development and expensed as incurred as future use could not be determined, and there was uncertainty surrounding FDA approval of KRYSTEXXA for marketing in the United States. Following regulatory approval of KRYSTEXXA by the FDA, the Company capitalizes certain manufacturing costs as inventory in cases where the manufacturing costs meet the definition of an inventoriable asset.

Clinical trial costs have been another significant component of research and development expenses and all of the Company's clinical studies are performed by third-party contract research organizations ("CROs"). The Company accrues costs for clinical studies performed by CROs that are milestone or event driven in nature and based on reports and invoices submitted by the CRO. These expenses are based on patient enrollment as well as costs consisting primarily of payments made to the CRO, clinical sites, investigators, testing facilities and patients for participating in the Company's clinical trials.

Non-refundable advance payments for future research and development activities are deferred and capitalized. Such amounts are recognized as an expense as the goods are delivered or the related services are performed. The Company has not deferred any research and development costs as of September 30, 2011 and December 31, 2010 and therefore had no amortization expense for the nine-month periods ended September 30, 2011 and 2010, respectively, based on services performed.