License and Collaboration Agreements

6 Months Ended

Jun. 30, 2011

License and Collaboration Agreements [Abstract]

Note 6—License and Collaboration Agreements

We have entered into various license and manufacturing agreements and collaborative research, development and commercialization agreements with pharmaceutical and biotechnology companies. Under these arrangements, we are entitled to receive license fees, upfront payments, milestone payments when and if certain development or regulatory milestones are achieved, royalties, sales milestones, payment for the manufacture and supply of certain drug materials, and/or reimbursement for research and development activities. All of our research, development and commercialization agreements are generally cancelable by our partners without significant financial penalty to the partner. Our costs of performing these services are included in research and development expense in the accompanying Condensed Consolidated Statements of Operations.

In accordance with these agreements, we recorded license, collaboration and other revenue as follows (in thousands):


		Three months ended				Six months ended
		June 30,				June 30,
Partner	Drug or Drug Candidate	2011		2010		2011		2010
F. Hoffmann- LaRoche	PEGASYS^®	$	1,283	$	1,283	$	2,566	$	2,566
Amgen, Inc.	Neulasta^®		1,250		—		2,500		—
Bayer Healthcare LLC	BAY41-6551 (Amikacin Inhale)		750		818		1,500		1,705
AstraZeneca AB	NKTR-118 and NKTR-119		845		27,579		1,086		53,306
Other			2,195		1,729		5,177		3,485


License, collaboration, and other revenue		$	6,323	$	31,409	$	12,829	$	61,062

F. Hoffmann-LaRoche Ltd and Hoffmann-LaRoche Inc.

PEGASYS^®

In February 1997, we entered into a license, manufacturing and supply agreement with F. Hoffmann-La Roche Ltd and Hoffmann-La Roche Inc. (Roche), under which we granted Roche a worldwide, exclusive license to use certain PEGylation materials in the manufacture of PEGASYS. As a result of Roche exercising a license extension option in December 2009, Roche has the right to manufacture all of its requirements for our proprietary PEGylation materials for PEGASYS and we will perform additional manufacturing, if any, only on an as-requested basis. In connection with Roche’s exercise of the license option extension in December 2009, we received a payment of $31.0 million. As of June 30, 2011, we have deferred revenue of approximately $23.1 million, which we expect to amortize through December 2015, which is the period through which we are required to provide back-up manufacturing and supply services on an as-requested basis.

Amgen, Inc.

Neulasta^®

On October 29, 2010, we amended and restated an existing supply and license agreement by entering into a supply, dedicated suite and manufacturing guarantee agreement (the amended and restated agreement) and a license agreement with Amgen Inc. and Amgen Manufacturing, Limited (together referred to as Amgen). Under the terms of the amended and restated agreement, we guarantee the manufacture and supply of our proprietary PEGylation materials (Polymer Materials) to Amgen in an existing manufacturing suite to be used exclusively for the manufacture of Polymer Materials for Amgen (the Manufacturing Suite) in our manufacturing facility in Huntsville, Alabama (Facility). This supply arrangement is on a non-exclusive basis (other than the use of the Manufacturing Suite and certain equipment) whereby Nektar is free to manufacture and supply the Polymer Materials to any other third party and Amgen is free to procure the Polymer Materials from any other third party. Under the terms of the amended and restated agreement, we received a $50.0 million payment in the fourth quarter of 2010 in return for our guaranteeing the supply of certain quantities of Polymer Materials to Amgen including without limitation the Additional Rights described below and manufacturing fees that are calculated based on fixed and variable components applicable to the Polymer Materials ordered by Amgen and delivered by us. Amgen has no minimum purchase commitments. If quantities of the Polymer Materials ordered by Amgen exceed specified quantities, significant additional payments become payable to us in return for our guaranteeing the supply of additional quantities of the Polymer Materials.

The term of the amended and restated agreement ends on October 29, 2020. In the event we become subject to a bankruptcy or insolvency proceeding, we cease to own or control the Facility, we fail to manufacture and supply or certain other events, Amgen or its designated third party will have the right to elect, among certain other options, to take title to the dedicated equipment and access the Facility to operate the Manufacturing Suite solely for the purpose of manufacturing the Polymer Materials (the Additional Rights). Amgen may terminate the amended and restated agreement for convenience or due to an uncured material default by us.

As of June 30, 2011, we have deferred revenue of approximately $46.7 million, which we expect to amortize through October 2020, the estimated end of our obligations under the amended and restated agreement.

Bayer Healthcare LLC

BAY41-6551 (Amikacin Inhale)

On August 1, 2007, we entered into a co-development, license and co-promotion agreement with Bayer Healthcare LLC (Bayer) to develop a specially-formulated inhaled Amikacin. We are responsible for development and manufacturing and supply of the nebulizer device included in the Amikacin product. Bayer is responsible for most future clinical development and commercialization costs, all activities to support worldwide regulatory filings, approvals and related activities, further development of Amikacin Inhale and final product packaging and distribution. We received an upfront payment of $40.0 million in 2007 and performance milestone payments of $20.0 million, of which $10.0 million will be used to reimburse Bayer for Phase 3 clinical trial costs. We are entitled to $60.0 million of development milestones upon achievement of certain development objectives, sales milestones upon achievement of annual sales targets, and royalties based on annual worldwide net sales of Amikacin Inhale. As of June 30, 2011, we have deferred revenue of approximately $29.0 million, which we expect to amortize through July 2021, the estimated end of our obligations under this agreement.

AstraZeneca AB

NKTR-118 and NKTR-119

On September 20, 2009, we entered into a License Agreement with AstraZeneca AB, a Swedish corporation (AstraZeneca), under which we granted AstraZeneca a worldwide, exclusive, perpetual, royalty-bearing, and sublicensable license under our patents and other intellectual property to develop, sell and otherwise commercially exploit NKTR-118 and NKTR-119. AstraZeneca is responsible for all costs associated with research, development and commercialization and will control drug development and commercialization decisions for NKTR-118 and NKTR-119. Under the terms of the agreement, AstraZeneca paid us an upfront payment of $125.0 million, which we received in the fourth quarter of 2009. As of December 31, 2010, we completed our obligations under the license agreement and related manufacturing technology transfer agreement. The upfront payment was amortized over approximately 15 months beginning in October 2009 in accordance with our performance obligation period and was fully recognized as of December 31, 2010. We are also entitled to $235.0 million and $75.0 million of contingent payments related to NKTR-118 and NKTR-119, respectively, based on development events to be pursued and completed solely by AstraZeneca, sales milestones, and royalties based on annual worldwide net sales of NTKR-118 and NKTR-119 products.