|ARRAY BIOPHARMA INC filed this Form 10-K on 08/11/2017|
Array and Celgene Corporation and Celgene Alpine Investment Co., LLC (collectively "Celgene") entered into a Drug Discovery and Development Option and License Agreement in July 2013 to collaborate on development of an Array-invented preclinical development program targeting a novel inflammation pathway. The agreement provides Celgene an option to select multiple clinical development candidates that Celgene may further develop on an exclusive basis under the agreement. Celgene also had the option to obtain exclusive worldwide rights to commercialize one or more of the development compounds it could select upon payment of an option exercise fee to Array. Array was responsible for funding and conducting preclinical discovery research on compounds directed at the target, and Celgene was responsible for all clinical development and commercialization of any compounds it could select. During July 2016, Celgene notified Array that it would not exercise the option to obtain exclusive worldwide rights to commercialize any of the development compounds. As a result, Array retains all rights to the program.
Array received a non-refundable up-front payment of $11.0 million from Celgene during the first quarter of fiscal 2014. The majority of the up-front payment received was for the performance of research services, which we recognized as collaboration revenue over the estimated option term which originally was estimated to be three years. During the three months ended December 31, 2014, we revised this estimate to just over two years and prospectively adjusted recognition of the unrecognized portion of the up-front payment at the time of the change in estimate over the revised remaining option period. Due to additional information obtained during the three months ended March 31, 2015, we revised our estimate back to the original estimate of three years. There were no associated deferred revenue balances as of June 30, 2017 and 2016.
Array entered into a Drug Discovery Collaboration Agreement with Biogen Idec MA Inc. ("Biogen") in May 2014 for the discovery and development of Array-discovered inhibitors targeting a novel kinase for the treatment of autoimmune disorders. Under the terms of the agreement, Biogen and Array collaborated on the discovery of the novel kinase inhibitors. Biogen was responsible for all aspects of clinical development and commercialization. Pursuant to advance quarterly funding from Biogen, Array provided staffing to support the discovery program during the anticipated three-year discovery program term, which could have been extended for an additional 12-month period upon consent from both parties. The agreement included research funding for three years, various milestone payments payable upon achievement of certain development and commercial milestones, and royalties to Array. The collaboration terminated in November 2015.
Pursuant to the accounting guidance for revenue recognition for multiple-element arrangements, Array identified two non-contingent deliverables that met the separation criteria, the first being conduct of discovery and pre-IND manufacturing activities under the discovery program (the “discovery program deliverable”), and participation on the joint research committee ("JRC") as the second. The discovery program deliverable and the JRC deliverable were both expected to be delivered throughout the duration of the discovery program term. Revenue recognized under the Biogen agreement during the periods presented was based upon the level of staffing provided during those periods and our established FTE rate for research services. There were no associated deferred revenue balances as of June 30, 2017 and 2016.
Asahi Kasei Pharma
On March 31, 2016, the Company announced a strategic collaboration with Asahi Kasei Pharma Corporation ("AKP") to develop and commercialize select Tropomyosin receptor kinase A (TRKA) inhibitors, including Array-invented ARRY-954, for pain, inflammation and other non-cancer indications.
The Company received a $12.0 million up-front payment in April 2016 and may receive cost sharing payments, up to $63.5 million in additional development and commercialization milestone payments, and up to double-digit royalties on future sales. Array will retain full commercialization rights for all compounds in all indications in territories outside of Asia and within Asia retain full rights to cancer indications for all compounds excluding those being developed by AKP.
In accordance with the revenue recognition criteria under ASC Topic 605, the Company determined that the AKP agreement is a multi-deliverable arrangement with the following deliverables: (1) the license rights, and (2) clinical development and other services. The Company determined that the license granted to AKP does not have stand-alone value apart from the services Array will provide. Accordingly, non-refundable upfront amounts received under