|
Related Party License Agreements
|
9 Months Ended | 12 Months Ended | ||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Sep. 30, 2012
|
Dec. 31, 2011
|
|||||||||||||||||||||
| Related Party Transactions Disclosure [Text Block] |
5.
Related
Party License Agreements
License
and development agreements have been entered into with
affiliates of BSC. Because an affiliate of BSC is a
stockholder of the Company and such affiliate of BSC has
a representative that has been elected to serve on the
Company’s board of directors, management has deemed
all transactions with BSC and its affiliates to be of a
related party nature.
BSC
Neuro Agreement
On
December 30, 2005, the Company entered into definitive
license and development agreements (collectively, as
amended, the “BSC Neuro Agreement”) with
Advanced Bionics Corporation, an affiliate of BSC.
Advanced Bionics Corporation subsequently changed its
name to Boston Scientific Neuromodulation Corporation
(“BSC Neuro”). Under the BSC Neuro Agreement,
the Company granted BSC Neuro an exclusive commercial
license with respect to certain of the Company’s
owned and licensed intellectual property, in the
neuromodulation field, to make, use, import, lease and
sell neuro-related leads, neuro-related lead extensions,
and neuro-related lead-type devices, such as implantable
pulse generators.
In
connection with the February 2012 modification of the BSC
Notes (see Note 6), the Company and BSC Neuro also
amended the terms of the BSC Neuro
Agreement. The amended terms included a
reduction in the amount BSC Neuro could be required to
pay the Company in future milestone-based payments
associated with successful development and regulatory
approval of the leads, from an original maximum amount of
$1,600,000 to an amended maximum amount of $800,000.
Under the BSC Neuro Agreement, BSC Neuro is obligated to
pay royalties to the Company based on BSC Neuro’s
net sales of licensed products, as defined by the
agreement. In addition to the reduction in potential
milestone-based payments, the amendment to the BSC Neuro
Agreement also reduced by half the royalty rates used in
calculating such royalty payments due to the
Company. Furthermore, the amended BSC Neuro
Agreement requires the Company to meet certain net
working capital targets, be current on its payroll
obligations, and not suffer an event of default under any
indebtedness for borrowed money, in each case while the
BSC Notes remain outstanding (see Note 6). If
the Company does not meet those requirements while the
BSC Notes are outstanding, the Company will be required
to assign certain patents and patent applications to BSC
Neuro. However, upon any such assignment to
BSC Neuro, BSC Neuro will grant to the Company an
exclusive, royalty-free, perpetual worldwide license to
the same patents and patent applications in all fields of
use other than neuromodulation and implantable medical
leads for cardiac applications.
The
Company did not receive any up-front license payments
pursuant to the BSC Neuro Agreement. In addition to other
potential payments under the agreement as described
above, the Company could receive over $500,000 in
incentive payments for incremental development work, but
only if and to the extent BSC Neuro requests the Company
to perform such work. The BSC Neuro Agreement requires
specified milestones in the development of an MRI-safe
implantable lead to be achieved by December 31, 2012. If
the milestones are not achieved by that date and this
failure is not the result of BSC Neuro’s failure to
reasonably cooperate with the Company in pursuing the
milestones, the Company will be required to repay BSC
Neuro certain amounts, including any development expenses
and milestone payments previously made to the Company
under this agreement and any patent prosecution costs
incurred by BSC Neuro with respect to the intellectual
property licensed under this agreement. As of September
30, 2012, the Company has received approximately $750,000
of payments from BSC Neuro which would be subject to the
repayment obligation described above. In addition, the
Company would be responsible to reimburse BSC Neuro for
out-of-pocket costs incurred by BSC Neuro in prosecuting
patent applications and maintaining issued patents for
the licensed technologies. As discussed in Note 2,
Revenue Recognition, all amounts received have been
recorded as deferred revenue.
BSC
Cardiac Agreement
Effective
March 19, 2008, the Company entered into definitive
license and development agreements (collectively, the
“BSC Cardiac Agreement”) with Cardiac
Pacemakers, Inc. (“BSC Cardiac”), an
affiliate of BSC. Under the BSC Cardiac Agreement, the
Company granted BSC Cardiac an exclusive commercial
license with respect to certain of the Company’s
owned and licensed intellectual property rights, in the
field of implantable medical leads for cardiac
applications, to make, have made, use, promote, market,
import, distribute, lease, sell, offer for sale and
commercialize products in the licensed field of use. The
Company is required to continue to investigate the
feasibility of its technology and, upon successful
completion of feasibility studies, to work with BSC
Cardiac to develop this technology for different types of
MRI-compatible and MRI-safe implantable cardiac
leads.
Pursuant
to the BSC Cardiac Agreement, in addition to prospective
royalty payments on net sales of licensed products, the
Company received non-refundable licensing fees totaling
$13,000,000 in 2008, and the Company could receive up to
$20,000,000 in future milestone-based payments associated
with the successful development and regulatory approval
of the implantable cardiac leads, subject to certain
patents being issued on patent applications licensed to
BSC Cardiac. The Company initially recorded the payment
of up-front licensing fees as deferred revenue and is
recognizing revenue over the five year estimated period
of continuing involvement (see Note 2, Revenue
Recognition). The Company determined the five-year
estimated period of continuing involvement based upon the
Company’s internal development plan and projected
timeline for the different implantable cardiac leads. The
Company reevaluates its estimated remaining period of
continuing involvement at each reporting period, and any
changes will be incorporated into the determination of
revenue recognition on a prospective basis.
Except
as set forth below, the licensing provisions of the BSC
Cardiac Agreement will terminate upon the expiration of
the last issued patent that is licensed under the
agreement, and the development provisions of the BSC
Cardiac Agreement will expire upon FDA approval of a
design for each of the different lead types described in
the agreement. BSC Cardiac has the one-time option,
within 60 days after successful completion of the first
cardiac lead feasibility study, to cease further
development work and to terminate the provisions of the
BSC Cardiac Agreement. If BSC Cardiac elects to exercise
its option under the BSC Cardiac Agreement to terminate
further development efforts, the license the Company
granted to BSC Cardiac will automatically become
non-exclusive with respect to certain of the intellectual
property, other intellectual property will be removed
from the scope of the license and revert to the
Company, and BSC Cardiac will not be obligated
to pay the Company any future royalties on net sales of
products containing intellectual property that remains
subject to the non-exclusive license. Likewise, any
unachieved future milestone-based payments will not be
due to the Company.
|
5.
Related Party License Agreements
License
and development agreements have been entered into with
affiliates of BSC. Because an affiliate of BSC is a
stockholder of the Company and such affiliate of BSC has a
representative that has been elected to serve on the
Company’s board of directors, management has deemed
all transactions with BSC and its affiliates to be of a
related party nature.
BSC
Neuro Agreement
On
December 30, 2005, the Company entered into definitive
license and development agreements (collectively, as
amended, the “BSC Neuro Agreement”) with
Advanced Bionics Corporation, an affiliate of BSC. Advanced
Bionics Corporation subsequently changed its name to Boston
Scientific Neuromodulation Corporation (“BSC
Neuro”). Under the BSC Neuro Agreement, the Company
granted BSC Neuro an exclusive commercial license with
respect to certain of the Company’s owned and
licensed intellectual property, in the neuromodulation
field, to make, use, import, lease and sell neuro-related
leads, neuro-related lead extensions, and neuro-related
lead-type devices, such as implantable pulse
generators.
Under
the BSC Neuro Agreement, in addition to prospective royalty
payments on net sales of licensed products, the Company
could receive up to $1,600,000 in future milestone-based
payments associated with successful development and
regulatory approval of the leads (see Note 13 for
modification of these terms). The Company did not receive
any up-front license payments pursuant to this agreement.
In addition, the Company could receive over $500,000 in
incentive payments for incremental development work, but
only if and to the extent BSC Neuro requests the Company to
perform such work. This agreement requires specified
milestones in the development of an MRI-safe implantable
lead to be achieved by December 31, 2012. If the
milestones are not achieved by that date and this
failure is not the result of BSC Neuro’s failure to
reasonably cooperate with the Company in pursuing the
milestones, the Company will be required to repay BSC Neuro
certain amounts, including any development expenses and
milestone payments previously made to the Company under
this agreement and any patent prosecution costs incurred by
BSC Neuro with respect to the intellectual property
licensed under this agreement. As of December 31,
2011, the Company has received approximately $750,000 of
payments from BSC Neuro which would be subject to the
repayment obligation described above. In addition, the
Company would be responsible to reimburse BSC Neuro for out
of pocket costs incurred by BSC Neuro in prosecuting patent
applications and maintaining issued patents for the
licensed technologies. As discussed in Note 2, Revenue
Recognition, all amounts received have been recorded as
deferred revenue.
BSC
Cardiac Agreement
Effective
March 19, 2008, the Company entered into definitive
license and development agreements (collectively the
“BSC Cardiac Agreement”) with Cardiac
Pacemakers, Inc. (“BSC Cardiac”), an affiliate
of Boston Scientific Corporation. Under the BSC Cardiac
Agreement, the Company granted BSC Cardiac an exclusive
commercial license with respect to certain of the
Company’s owned and licensed intellectual property
rights, in the field of implantable medical leads for
cardiac applications, to make, have made, use, promote,
market, import, distribute, lease, sell, offer for sale and
commercialize products in the licensed field of use. The
Company is required to continue to investigate the
feasibility of its technology and, upon successful
completion of feasibility studies, to work with BSC Cardiac
to develop this technology for different types of
MRI-compatible and MRI-safe implantable cardiac
leads.
Pursuant
to the BSC Cardiac Agreement, in addition to prospective
royalty payments on net sales of licensed products, the
Company received non-refundable licensing fees totaling
$13,000,000 in 2008, and the Company could receive up to
$20,000,000 in future milestone-based payments associated
with the successful development and regulatory approval of
the implantable cardiac leads, subject to certain patents
being issued on patent applications licensed to BSC
Cardiac. The Company initially recorded the payment as
deferred revenue and is recognizing revenue over the five
year estimated period of continuing involvement (see Note
2, Revenue Recognition). The Company determined the five
year estimated period of continuing involvement based upon
the Company’s internal development plan and projected
timeline for the different implantable cardiac leads. The
Company reevaluates its estimated remaining period of
continuing involvement at each reporting period, and any
changes will be incorporated into the determination of
revenue recognition on a prospective basis.
Except
as set forth below, the licensing provisions of the BSC
Cardiac Agreement will terminate upon the expiration of the
last issued patent that is licensed under the agreement,
and the development provisions of the BSC Cardiac Agreement
will expire upon FDA approval of a design for each of the
different lead types described in the agreement. BSC
Cardiac has the one-time option, within 60 days after
successful completion of the first cardiac lead feasibility
study, to cease further development work and to terminate
the provisions of the BSC Cardiac Agreement. If BSC Cardiac
elects to exercise its option under the BSC Cardiac
Agreement to terminate further development efforts, the
license the Company granted to BSC Cardiac will
automatically become non-exclusive with respect to certain
of the intellectual property, other intellectual property
will be removed from the scope of the license and revert to
the Company, and BSC Cardiac will not be obligated to pay
the Company any future royalties on net sales of products
containing intellectual property that remains subject to
the non-exclusive license. Likewise, any unachieved future
milestone-based payments will not be due to the
Company.
Remaining
related party deferred revenue is presently expected to be
recognized as revenue as follows:
|
||||||||||||||||||||