U.S. Government Contracts

12 Months Ended

Dec. 31, 2011

U.S. Government Contracts [Abstract]

U.S. Government Contracts

7. U.S. GOVERNMENT CONTRACTS

In the periods presented, nearly all of the revenue generated by the Company was derived from research contracts with and grants from the U.S. government. As of December 31, 2011, the Company had substantially completed all of its contracts with the U.S. government except for the July 2010 agreement for the development of therapeutics against Ebola and Marburg. Pursuant to this agreement, as of December 31, 2011, the Company is currently entitled to receive up to $126.5 million of which $52.7 million has been recognized as revenue. In addition, if the U.S. government elects to exercise all its options under the agreement, an additional $161.5 million in funding is available.

The following table sets forth the revenue from each of the Company's contracts with the U.S. government and other revenue for the years ended December 31, 2011, 2010 and 2009.

	Year Ended December 31,
	2011		2010		2009
	(in thousands)
January 2006 Agreements (Ebola and Marburg host factor, Dengue, Anthrax and Ricin)	$	9	$	519	$	2,288
November 2006 Agreement (Ebola, Marburg and Junín Viruses)		—		3,204		10,421
May 2009 Agreement (H1N1)		516		5,171		1,716
June 2010 Agreement (H1N1)		3,490		8,809		—
July 2010 Agreement (Ebola and Marburg)		42,875		9,822		—
Grants		—		1,622		725
Other Agreements		100		273		2,435
Total	$	46,990	$	29,420	$	17,585

The following is a description of contracts with the US government contracts and grants:

January 2006 Agreements (Ebola and Marburg Host Factors, Dengue, Anthrax and Ricin)

The 2006 defense appropriations included an allocation of $11.0 million to fund the Company's ongoing defense-related programs under four different contracts, all of which were executed in 2007, and the last of which expired in October 2010. As of December 31, 2011, the Company has recognized revenue of $9.7 million with respect to these contracts and the Company does not expect to receive any additional revenue under these contracts.

November 2006 Agreement (Ebola, Marburg and Junín Viruses)

In November 2006, the Company entered into a two-year research contract with the U.S. Defense Threat Reduction Agency ("DTRA"), which entitled the Company to $28.0 million to fund development of the Company's antisense therapeutic candidates against Ebola, Marburg and Junín hemorrhagic viruses. The contract was subsequently amended twice, which amendments extended the term of the contract to February 2011 and increased the award to an aggregate of $45.4 million. In November 2010, the Company and DTRA agreed that the key activities under this contract had been completed. As of December 31, 2011, the Company had recognized revenue of $38.4 million with respect to this contract and the Company does not expect any further revenue.

May 2009 Agreement (H1N1/Influenza)

In May 2009, the Company entered into a contract with DTRA to develop swine flu drugs. Under this contract, DTRA was to pay the Company up to $4.1 million for the work involving the application of the Company's proprietary PMO and PMOplus^® antisense chemistry. In March 2010, the contract was amended to include testing against additional influenza strains and funding increased to an aggregate of $8.1 million. As of December 31, 2011, the Company has recognized revenue of $7.4 million with respect to this contract and does not expect to receive additional revenue under this contract.

June 2010 Agreement (H1N1/Influenza)

On June 4, 2010, the Company entered into a contract with DTRA to advance the development of AVI-7100 as a medical countermeasure against the pandemic H1N1 influenza virus in cooperation with the Transformational Medical Technologies program ("TMT") of the U.S. Department of Defense ("DoD"). The contract originally provided for funding of up to $18.0 million, but, pursuant to a subsequent modification, was decreased to $13.1 million. The period of performance for this contract ended on June 3, 2011 and, as of December 31, 2011, the Company has recognized revenue of $12.3 million and does not expect to receive any additional revenue.

July 2010 Agreement (Ebola and Marburg)

On July 14, 2010, the Company was awarded a new contract with the DoD Chemical and Biological Defense Program through the U.S. Army Space and Missile Defense Command for the advanced development of the Company's hemorrhagic fever virus therapeutic candidates, AVI-6002 and AVI-6003, against the Ebola and Marburg viruses, respectively. The contract is structured into four segments for each therapeutic candidate and has an aggregate period of performance spanning approximately six years if DoD exercises its options for all segments. Activities under the first segment began in July 2010 and include Phase I studies in healthy volunteers as well as preclinical studies. In September 2011, the contract was amended to shift activities originally scheduled to occur during the second segment for each therapeutic candidate to the current funding period, which is scheduled to be completed in the second quarter of 2013. As a result of the amendment, the aggregate available funding for the current segments is approximately $126.5 million of which $52.7 million has been recognized to date.

After completion of the first segment, and each successive segment, DoD has the option to proceed to the next segment for either or both AVI-6002 and AVI-6003. If DoD exercises its options for all four segments for both AVI-6002 and AVI-6003, contract activities would include all clinical and licensure activities necessary to obtain FDA regulatory approval for each therapeutic candidate and would provide for a total funding award to the Company of up to $288.0 million over a period of six years, of which $161.5 million remains to be funded.

In February 2012, the Company announced that it received approval from the FDA to proceed with a single oligomer from AVI-6003, AVI-7288, as the lead product candidate against Marburg virus infection.

2010 Qualifying Therapeutic Discovery Project

In October 2010, the Company was awarded five cash grants for its DMD program and infectious disease programs totaling approximately $1.2 million under the U.S. government's Qualifying Therapeutic Discovery Project ("QTDP") and recognized the entire amount as revenue in 2010. The Company will not receive any further funding under the QTDP grants.