HUMAN GENOME SCIENCES INC - FORM 10-Q - XML - IDEA: XBRL DOCUMENT - April 25, 2012

Note 3. Collaborations and Other Agreements

GlaxoSmithKline Agreement

During 2006, the Company entered into a license agreement with GlaxoSmithKline ("GSK") for the co-development and co-commercialization of BENLYSTA arising from an option GSK exercised in 2005, relating to an earlier collaboration agreement. The agreement grants GSK a co-development and co-commercialization license, under which both companies are jointly conducting activities related to the development and sale of products in the United States and abroad. The Company and GSK share Phase 3 and 4 development costs, and share sales and marketing expenses and profits of any product commercialized under the agreement. The Company has primary responsibility for bulk manufacturing and for commercial manufacturing of the finished drug product. In March 2011, the U.S. Food and Drug Administration ("FDA") approved BENLYSTA and in July 2011 the European Commission granted marketing authorization for BENLYSTA.

GSK's share of the collaboration profit with respect to BENLYSTA sales in the U.S. and HGS' share of the rest of world ("ROW") collaboration expense incurred by GSK are included in the Commercial collaboration expenses line in the consolidated statements of operations and comprehensive loss for the three months ended March 31, 2012 and 2011.

Research and development expenses for the three months ended March 31, 2012 and 2011 are net of $6,111 and $5,178, respectively, of costs reimbursed by GSK. The Company shares certain research and development costs including personnel costs, outside services, clinical manufacturing and overhead with GSK under cost sharing provisions in the GSK collaboration agreement.

U.S. Government Agreement

In July 2009, the U.S. Government ("USG") agreed to purchase 45,000 additional doses of raxibacumab for the Strategic National Stockpile ("SNS"), to be delivered over a three-year period beginning in 2009. The

Company expects to receive a total of approximately $142,000 from this order as deliveries are completed. The Company recognized $6,138 and $14,031 in product revenue related to raxibacumab during the three months ended March 31, 2012 and 2011, respectively. The Company recognized $377 and $920 in manufacturing and development services revenue related to the work to conduct animal studies and other raxibacumab activities during the three months ended March 31, 2012 and 2011, respectively. The Company is entitled to receive approximately $20,000 under the contract with the USG if raxibacumab is licensed by the FDA.

MedImmune LLC Agreement

In 1999, the Company entered into a collaborative agreement with Cambridge Antibody Technology Ltd. ("CAT") (assumed by MedImmune LLC ("MedImmune") through acquisition) to jointly pursue the development of fully human monoclonal antibody therapeutics. The Company will pay MedImmune milestone payments in connection with the development of any such antibodies as well as royalty payments on the Company's net sales of such licensed product following regulatory approval. In the event of the achievement of certain other milestones or successful product launch of other products, the Company would be obligated to pay MedImmune additional compensation. Since 1999, the Company has exercised one option and made certain payments. During the three months ended March 31, 2012, the Company did not incur any milestones obligations. During the three months ended March 31, 2011, the Company made a $3,000 milestone payment in connection with the FDA approval of BENLYSTA, which is included in research and development expenses on the consolidated statement of operations and comprehensive loss.

In 2000, the Company entered into a second agreement with CAT. The 2000 agreement provides the Company with rights to use MedImmune technology to develop and sell an unlimited number of fully human antibodies for therapeutic and diagnostic purposes. The Company will pay MedImmune clinical development milestones and royalties based on product sales. Since 2000, the Company has exercised several options and made certain payments. During the three months ended March 31, 2012 and 2011, the Company did not incur any milestone obligations.

During the three months ended March 31, 2012 and 2011, the Company incurred aggregate royalty expenses under these agreements of approximately $2,596 and $764, respectively, associated with U.S. sales of BENLYSTA and raxibacumab. These royalty expenses are included in cost of product sales on the consolidated statements of operations and comprehensive loss. Royalty expenses to MedImmune related to ROW sales of BENLYSTA are included in Commercial collaboration expense on the consolidated statement of operations and comprehensive loss for the three months ended March 31, 2012.

FivePrime Therapeutics Agreement

During 2011, the Company entered into an agreement with FivePrime Therapeutics, Inc. ("FivePrime") to develop and commercialize FivePrime's FP-1039 product candidate for multiple cancers. The Company paid FivePrime an upfront license fee of $50,000, which is reflected in research and development expenses on the consolidated statement of operations and comprehensive loss for the three months ended March 31, 2011. The Company may be required to pay up to $445,000 in future development, regulatory and commercial milestone payments, as well as royalty payments on net sales if the product is commercialized. HGS has exclusive rights to develop and commercialize FP-1039, now known as HGS1036, for all indications in the United States, Canada and the European Union ("EU"). FivePrime has an option to co-promote HGS1036 and any next-generation products in the United States, and retains full development and commercialization rights in all other regions of the world outside the U.S., Canada and the EU. The Company incurred research and development expenses of $865 under cost sharing provisions in the FivePrime agreement during the three months ended March 31, 2012. The Company did not incur any research and development expenses, other than the upfront license fee paid, during the three months ended March 31, 2011.