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In October 2007, we entered into a research and development collaboration, option and license agreement
with GSK for the discovery, development and worldwide commercialization of boron-based systemic anti-
infectives against four discovery targets, including the bacterial enzyme target leucyl-tRNA synthetase
(LeuRS). The collaborative research term of the agreement was six years, subject to an extension of up
to two years if agreed to by both parties. Pursuant to the agreement, GSK paid us a $12.0 million non-
refundable, non-creditable upfront fee in October 2007 and invested $30.0 million in a preferred stock
financing completed in December 2008. We are also eligible to receive potential milestone payments which
range from up to $252.8 million to $330.5 million in the aggregate per product candidate. GSK is further
obligated to pay us double-digit tiered royalties with the potential to reach the mid-teens on annual net sales
of resulting products.
In July 2010, GSK exercised its option to obtain an exclusive license to develop and commercialize
GSK '052 (formerly AN3365), our lead systemic antibiotic which targets the bacterial enzyme LeuRS for
the treatment of infections caused by Gram-negative bacteria. Upon exercise of the option, we received a
licensing fee of $15.0 million and are eligible to receive further development milestones up to $69.0 million,
commercial milestones up to $175.0 million and double-digit tiered royalties with the potential to reach the
high-teens on annual net sales. GSK has assumed responsibility for further development of the product
candidate and any resulting commercialization.
In addition to assuming sole responsibility for the costs of further development and commercialization of the
compounds for which it exercises an option to license, we have received $10.1 million for achievement of
performance milestones, including GSK '052 milestones for lead declaration, candidate selection and first
patient dosing in a Phase 1 clinical trial. We have also received milestone payments for lead declarations in
two other GSK programs.
In September 2011, we amended and expanded our research and development collaboration with GSK to
provide GSK the option to extend its rights around the bacterial enzyme target LeuRS, as well as to add new
programs for tuberculosis (TB) and malaria using our boron chemistry platform. All rights to the other three
original targets revert to Anacor. As a result of the amendment, we received a $5 million upfront payment as
well as the potential to receive additional milestones and research funding of up to $11.3 million by year end
2012, and additional milestones and royalties on future sales of resulting products.
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In August 2010, we entered into a research agreement with Lilly, under which we are collaborating to
discover products for a variety of animal health applications and Lilly will be responsible for worldwide
development and commercialization of compounds advancing from these efforts. The collaboration
combines our boron-based technology platform and drug research capabilities with Lilly's expertise in the
area of animal health. We received an upfront payment of $3.5 million and we will receive a minimum of
$6.0 million in research funding with the potential of up to $12.0 million in research funding, if successful.
In addition, we are eligible to receive payments contingent upon the achievement of development and
regulatory milestones, as well as tiered royalties escalating from high single digit to in the tens commercial
royalties on sales depending in part upon the mix of products sold.
In August 2011, Lilly selected its first development candidate arising from the collaboration for which
Anacor received a $1 million milestone payment. Lilly will be responsible for future development and
commercialization of this compound, and Anacor is eligible to receive additional development and regulatory
milestones as well as tiered royalties from the high single digits to low double digits on future sales.
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In February 2011, we entered into a research and development agreement with Medicis Pharmaceuticals to discover and develop boron-based small molecule compounds directed against a target for the potential treatment of acne. Under the terms of the agreement, Anacor received a $7 million upfront payment from Medicis and is primarily responsible for discovering and conducting early development of product candidates which utilize Anacor's proprietary boron chemistry platform. Medicis has an option to obtain an exclusive license for products covered by the agreement. Anacor is eligible for future research, development, regulatory and sales milestones of up to $153 million, as well as high single-digit to low double-digit royalties on sales by Medicis. Medicis will be responsible for further development and commercialization of the licensed products on a worldwide basis.
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