Quarterly report pursuant to Section 13 or 15(d)

Deferred Revenue

 v2.3.0.11
Deferred Revenue
6 Months Ended
Jun. 30, 2011
Deferred Revenue  
Deferred Revenue
9.
Deferred Revenue
 
In 2003, the Company entered into a collaborative research agreement with Rexgene Biotech Co., Ltd. ("Rexgene"), a shareholder.  Rexgene is engaged in the development of pharmaceutical products in Asia and has agreed to assist the Company with the research, development and clinical trials necessary for registration of the Company's drug candidate, Archexin, in Asia.  This agreement provides Rexgene with exclusive rights to license, sublicense, make, have made, use, sell and import Archexin in Asia.  A one-time contribution to the joint development and research of Archexin of $1,500,000 was paid to the Company in 2003 in accordance with the agreement.  The amount of revenue from this contribution is being recognized as income over the term of the agreement which terminates at the later of 20 years or the term of the patent on the licensed product.
 
The Company is using 20 years as its basis for recognition and accordingly $18,750 and $37,500 were included in revenues for the three and six months ended June 30, 2011 and 2010, respectively.  The remaining $862,500 and $900,000 at June 30, 2011 and December 31, 2010, respectively, is reflected as deferred revenue on the balance sheet.  The contribution is being used in the cooperative funding of the costs of development of Archexin. Royalties of 3% of net sales of licensed products will become payable to the Company on a quarterly basis once commercial sales of Archexin begin in Asia.  The product is still under development and commercial sales in Asia are not expected to begin until at least 2013.  Under the terms of the agreement, Rexgene does not receive royalties on Company net sales outside of Asia.