ORGANIZATION AND DESCRIPTION OF BUSINESS

3 Months Ended

Mar. 31, 2012

ORGANIZATION AND DESCRIPTION OF BUSINESS [Abstract]

ORGANIZATION AND DESCRIPTION OF BUSINESS

1. ORGANIZATION AND DESCRIPTION OF BUSINESS

We are a biopharmaceutical company involved in the development of an injectable collagenase for multiple indications. We are a party to a development and license agreement with Auxilium Pharmaceuticals, Inc. ("Auxilium") for injectable collagenase (which Auxilium has named XIAFLEX® (collagenase clostridium histolyticum)) for clinical indications in Dupuytren's contracture, Peyronie's disease and frozen shoulder (adhesive capsulitis). Auxilium has an option to acquire additional indications that we may pursue, including cellulite, for which we have granted Auxilium the right to initiate early development studies at its cost, and human and canine lipoma. Auxilium is currently selling XIAFLEX in the U.S. for the treatment of Dupuytren's contracture. Auxilium has an agreement with Pfizer, Inc. ("Pfizer") pursuant to which Pfizer has the right to market XIAFLEX for Dupuytren's contracture and Peyronie's disease in Europe and certain Eurasian countries, and will do so under the registered trademark XIAPEX® (collagenase clostridium histolyticum). Pfizer is currently selling XIAPEX in nine countries in Europe, including the United Kingdom, Germany and Spain. In addition, Auxilium has an agreement with Asahi Kasei Pharma Corporation ("Asahi") pursuant to which Asahi has the right to commercialize XIAFLEX for the treatment of Duputyren's contracture and Peyronie's disease in Japan. Auxilium also has an agreement with Actelion Pharmaceuticals Ltd. ("Actelion") pursuant to which Actelion has the right to commercialize XIAFLEX for the treatment of Duputyren's contracture and Peyronie's disease in Canada, Australia, Brazil and Mexico.

Pursuant to a March 2006 agreement (the "DFB Agreement") between the Company and DFB Biotech, Inc. ("DFB"), we continue to receive earn-out payments based on the sales of Santyl.  Our right to receive earn-out payments with respect to the marketed topical product sold to DFB expires in June 2013, but earn-out payments for second generation collagenase products, if any, continue indefinitely.

Operational Highlights

In a February 23, 2012 press release, Auxilium announced that it had entered into a Collaboration Agreement with Actelion pursuant to which Actelion has the right to develop and commercialize XIAFLEX for the treatment of Dupuytren's contracture and Peyronie's disease in Canada, Australia, Brazil and Mexico. According to the release, XIAFLEX for the treatment of Dupuytren's contracture has been accepted for review by Health Canada and regulatory action is expected in the second half of 2012. Additionally, Actelion expects to file for approval of XIAFLEX for the treatment of Dupuytren's contracture in Australia, Brazil and Mexico over the next 12 months. Under the terms of the agreement with Actelion, Auxilium is to receive a $10 million upfront payment from Actelion, as well as up to $16 million in potential regulatory, pricing, and reimbursement milestone payments and $42.5 million in potential sales milestone payments. Under the terms of our development and license agreement with Auxilium, we will receive a certain percentage from Auxilium in connection with the upfront payment by Actelion, and a specified percentage of any additional milestones received by Auxilium. We will also receive from Auxilium royalties from net sales and payments on costs of goods sold in Canada, Australia, Brazil and Mexico, which will be a specified percentage of what Auxilium is entitled to receive from Actelion without regard to any offset that Actelion may have with respect to Auxilium.

On March 31, 2012, we entered into an amendment to our existing agreement, dated August 27, 2008, related to our future royalty obligations for Peyronie's disease. The amendment enables us to buy down a portion of our future royalty obligations in exchange for an initial cash payment of $1.5 million and five additional cash payments payable upon the occurrence of a milestone event.

On May 7, 2012, we announced the initiation of a placebo controlled randomized Phase II clinical trial, Chien-804, to evaluate the efficacy of XIAFLEX for canines with benign subcutaneous lipomas. The single injection study will evaluate 32 dogs randomized 1:1 XIAFLEX to placebo. Auxilium has the option to license development and marketing rights to this canine lipoma indication.

In a May 9, 2012 press release, Auxilium announced that The Journal of Urology had published on its website, Auxilium's phase IIb clinical trial of XIAFLEX for the potential nonsurgical treatment of Peyronie's disease.  Top line data from this trial had been previously reported by Auxilium. The study will be included in the June 2012 print version of The Journal of Urology.