Out-License of Zevalin in Certain Ex-U.S. Territories

12 Months Ended

Dec. 31, 2015

Out-License of Zevalin in Certain Ex-U.S. Territories

OUT-LICENSE OF MARQIBO, ZEVALIN, & EVOMELA IN CHINA TERRITORY

Overview of CASI Out-License

On September 17, 2014, we executed three product out-license agreements with a perpetual term (collectively, the “CASI Out-License”) with CASI Pharmaceuticals, Inc. (“CASI”), a publicly-traded biopharmaceutical company (NASDAQ: CASI) with a primary focus on the China market. Under the CASI Out-License, we granted CASI the exclusive rights to distribute two of our commercialized oncology drugs, ZEVALIN and MARQIBO, and our Phase 3 drug candidate, EVOMELA (“CASI Out-Licensed Products”) in greater China (which includes Taiwan, Hong Kong and Macau). In return, we received CASI equity for the rights related to ZEVALIN and EVOMELA and a secured promissory note for the rights related to MARQIBO. Additionally, under certain conditions which generally expire on September 17, 2019, we have a right to receive additional CASI common stock in order to maintain our post-investment ownership percentage if CASI issues additional securities.

CASI will be responsible for the development and commercialization of these three drugs, including the submission of import drug registration applications to regulatory authorities and conducting any confirmatory clinical studies in greater China. We will provide CASI with future commercial supply of the CASI Out-Licensed Products under typical market terms.

Proceeds Received

The proceeds we received, and its fair value on the CASI Out-License execution date, consisted of the following:



CASI common stock (5.4 million shares)	$	8,649	(a)
CASI secured promissory note due March 17, 2016 (since extended to March 17, 2017), net of fair value discount ($1.5 million face value and 0.5% annual coupon)	1,310		(b)
Total consideration received, net of fair value discount	$	9,959	(c)

(a)

Value determined based on the September 17, 2014 closing price of 5.4 million shares of CASI common stock on the NASDAQ Capital Market of $1.60 per share. Our current intention is to hold these securities on a long-term basis. Accordingly, we have presented its value of $5.2 million as of December 31, 2015 within “other assets” (rather than “marketable securities”) on our accompanying Consolidated Balance Sheets. The change in the value of these securities is reported within “unrealized (loss) gain on available-for-sale securities” on the accompanying Consolidated Statement of Comprehensive Loss.

(b)

Value estimated using the terms of the $1.5 million promissory note, and the application of a synthetic debt rating based on CASI’s publicly-available financial information, and the prevailing interest yields on similar public debt securities as of September 17, 2014. The face value of the promissory note as of December 31, 2015 is included within "other assets" on the accompanying Consolidated Balance Sheets.


(c)	Presented within “license fees and service revenue” in the accompanying Consolidated Statement of Operations as of December 31, 2015.

In addition, CASI will be responsible for paying any royalties or milestones that we are obligated to pay to our third-party licensors resulting from the achievement of certain milestones and/or sales of CASI Out-Licensed Products, but only to the extent of the greater China portion of such royalties or milestones.

Recognition of Proceeds – License Fee Revenue in 2015

The $9.7 million value (undiscounted, and net of certain foreign exchange adjustments) of the upfront proceeds that we received from CASI were recognized in the second quarter of 2015 within “license fees and service revenue” through our Consolidated Statements of Operations. The timing of this revenue recognition corresponds with the execution of supply agreements with CASI for ZEVALIN, MARQIBO, and EVOMELA. These agreements allow CASI to procure CASI Out-Licensed Products directly from approved third parties, and in such case, do not require our future involvement for their supply.

Mundipharma [Member]

Other Commitments [Line Items]

Out-License of Zevalin in Certain Ex-U.S. Territories

OUT-LICENSE OF ZEVALIN IN CERTAIN EX-U.S. TERRITORIES

Out-License of ZEVALIN to Mundipharma

On November 16, 2015, we entered into an out-license agreement with Mundipharma International Corporation Limited for their commercialization of ZEVALIN in Asia (excluding India and Greater China), Australia, New Zealand, Africa, the Middle East, and Latin America (including the Caribbean). In return, we received $18 million (comprised of $15 million received in December 2015 and $3 million received in January 2016), of which $15 million is included within "license fees and service revenue" on our accompanying Consolidated Statement of Operations. Revenue for the $3 million payment from January 2016 will be deferred and recognized within "license fees and service revenue" on a per unit basis with Mundipharma's future sales of ZEVALIN kits. We are also eligible to receive an additional $2 million upon Mundipharma's achievement of a specified sales milestone, that if/when achieved, will also be reported within "license fees and service revenue".

In connection with this out-license, on November 16, 2015, we concurrently sold to Mundipharma K.K., all common stock of Spectrum Pharmaceuticals GK (the legal entity through which we previously sold ZEVALIN in Japan) for $2.2 million (in the form of an unsecured note, payable no later than May 2016), representing its net asset value (excluding inventory) as of November 16, 2015.