VICAL INC, 10-Q filed on 5/2/2012
Quarterly Report
Document And Entity Information
3 Months Ended
Mar. 31, 2012
Apr. 24, 2012
Document And Entity Information [Abstract]
 
 
Document Type
10-Q 
 
Amendment Flag
false 
 
Document Period End Date
Mar. 31, 2012 
 
Document Fiscal Year Focus
2012 
 
Document Fiscal Period Focus
Q1 
 
Entity Registrant Name
VICAL INC 
 
Entity Central Index Key
0000819050 
 
Current Fiscal Year End Date
--12-31 
 
Entity Filer Category
Accelerated Filer 
 
Entity Common Stock, Shares Outstanding
 
85,922,276 
Balance Sheets (USD $)
In Thousands, unless otherwise specified
Mar. 31, 2012
Dec. 31, 2011
ASSETS
 
 
Cash and cash equivalents
$ 70,475 
$ 38,696 
Marketable securities, available-for-sale
20,787 
8,733 
Restricted cash
2,999 
2,998 
Receivables and other assets
13,541 
3,130 
Total current assets
107,802 
53,557 
Long-term investments
2,128 
5,928 
Property and equipment, net
5,968 
6,226 
Intangible assets, net
2,848 
2,871 
Other assets
191 
191 
Total assets
118,937 
68,773 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
Accounts payable and accrued expenses
7,266 
6,362 
Deferred revenue
 
99 
Total current liabilities
7,266 
6,461 
Long-term liabilities:
 
 
Deferred rent
1,892 
1,964 
Commitments and contingencies
   
   
Stockholders' equity:
 
 
Preferred stock, $0.01 par value, 5,000 shares authorized, none issued and outstanding
   
   
Common stock, $0.01 par value, 160,000 shares authorized, 85,894 and 71,913 shares issued and outstanding at March 31, 2012 and December 31, 2011, respectively
859 
719 
Additional paid-in capital
433,528 
384,087 
Accumulated deficit
(324,794)
(325,038)
Accumulated other comprehensive income
186 
580 
Total stockholders' equity
109,779 
60,348 
Total liabilities and stockholders' equity
$ 118,937 
$ 68,773 
Balance Sheets (Parenthetical) (USD $)
Mar. 31, 2012
Dec. 31, 2011
Balance Sheets [Abstract]
 
 
Preferred stock, par value
$ 0.01 
$ 0.01 
Preferred stock, shares authorized
5,000,000 
5,000,000 
Preferred stock, shares issued
Preferred stock, shares outstanding
Common stock, par value
$ 0.01 
$ 0.01 
Common stock, shares authorized
160,000,000 
160,000,000 
Common stock, shares issued
85,894,000 
71,913,000 
Common stock, shares outstanding
85,894,000 
71,913,000 
Statements Of Comprehensive Loss (USD $)
In Thousands, except Per Share data, unless otherwise specified
3 Months Ended
Mar. 31, 2012
Mar. 31, 2011
Revenues:
 
 
Contract and grant revenue
$ 1,221 
$ 530 
License and royalty revenue
10,239 
119 
Total revenues
11,460 
649 
Operating expenses:
 
 
Research and development
6,428 
4,290 
Manufacturing and production
2,472 
2,748 
General and administrative
2,700 
2,328 
Total operating expenses
11,600 
9,366 
Loss from operations
(140)
(8,717)
Other income (expense):
 
 
Investment and other income, net
384 
23 
Net income (loss)
244 
(8,694)
Basic net income (loss) per share
$ 0.00 
$ (0.12)
Diluted net income (loss) per share
$ 0.00 
$ (0.12)
Weighted average shares used in computing basic net income (loss) per share
84,519 
71,893 
Weighted average shares used in computing diluted net income (loss) per share
86,124 
71,893 
Comprehensive loss
$ (150)
$ (8,736)
Statements Of Cash Flows (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Mar. 31, 2012
Mar. 31, 2011
Cash flows from operating activities:
 
 
Net income (loss)
$ 244 
$ (8,694)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
 
 
Depreciation and amortization
493 
579 
Write-off of abandoned patents
20 
 
Gain on sale of property and equipment
(6)
 
Compensation expense related to stock options and awards
920 
798 
Changes in operating assets and liabilities:
 
 
Receivables and other assets
(10,412)
(437)
Accounts payable and accrued expenses
889 
(996)
Deferred revenue
(99)
76 
Deferred rent
(57)
(35)
Net cash used in operating activities
(8,008)
(8,709)
Cash flows from investing activities:
 
 
Proceeds from the sale of marketable securities
3,750 
 
Maturities of marketable securities
5,261 
4,767 
Purchases of marketable securities
(17,659)
(16,773)
Purchases of property and equipment
(135)
(78)
Proceeds from the sale of property and equipment
 
Patent expenditures
(97)
(102)
Net cash used in investing activities
(8,874)
(12,186)
Cash flows from financing activities:
 
 
Net proceeds from issuance of common stock
48,770 
Payment of withholding taxes for net settlement of restricted stock units
(109)
(64)
Net cash provided by (used in) financing activities
48,661 
(63)
Net increase (decrease) in cash and cash equivalents
31,779 
(20,958)
Cash and cash equivalents at beginning of period
38,696 
47,320 
Cash and cash equivalents at end of period
$ 70,475 
$ 26,362 
General
General
1. GENERAL

Vical Incorporated, or the Company, a Delaware corporation, was incorporated in April 1987 and has devoted substantially all of its resources since that time to its research and development programs. The Company researches and develops biopharmaceutical products based on its patented DNA delivery technologies for the prevention and treatment of serious or life-threatening diseases.

All of the Company's potential products are in research and development phases. No revenues have been generated from the sale of any such products, nor are any such revenues expected for at least the next several years. The Company earns revenue from research and development agreements with pharmaceutical collaborators and grant and contract arrangements with government entities. Most of the Company's product candidates will require significant additional research and development efforts, including extensive preclinical and clinical testing. All product candidates that advance to clinical testing will require regulatory approval prior to commercial use, and will require significant costs for commercialization. There can be no assurance that the Company's research and development efforts, or those of its collaborators, will be successful. The Company expects to continue to incur substantial losses and not generate positive cash flows from operations for at least the next several years. No assurance can be given that the Company can generate sufficient product revenue to become profitable or generate positive cash flows from operations.

The unaudited financial statements at March 31, 2012, and for the three months ended March 31, 2012 and 2011, have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission, or SEC, and with accounting principles generally accepted in the United States applicable to interim financial statements. These unaudited financial statements have been prepared on the same basis as the audited financial statements and include all adjustments, consisting of only normal recurring accruals, which in the opinion of management are necessary to present fairly the Company's financial position as of the interim date and results of operations for the interim periods presented. Interim results are not necessarily indicative of results for a full year or future periods. The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from those estimates. These unaudited financial statements should be read in conjunction with the Company's audited financial statements for the year ended December 31, 2011, included in its Annual Report on Form 10-K filed with the SEC.

Cash, Cash Equivalents and Marketable Securities

Cash and cash equivalents consist of cash and highly liquid securities with original maturities at the date of acquisition of ninety days or less. Investments with an original maturity of more than ninety days are considered marketable securities and have been classified by management as available-for-sale. These investments are classified as current assets, even though the stated maturity date may be one year or more beyond the current balance sheet date. Such investments are carried at fair value, with unrealized gains and losses included as a separate component of stockholders' equity. Realized gains and losses from the sale of available-for-sale securities or the amounts reclassified out of accumulated other comprehensive income, if any, are determined on a specific identification basis.

Restricted Cash

The Company is required to maintain a letter of credit securing an amount equal to twelve months of the current monthly installment of base rent for the term of its primary facilities lease, which ends in August 2017. Under certain circumstances the Company may be able to eliminate the need for the letter of credit. As of March 31, 2012, and December 31, 2011, restricted cash of $3.0 million was pledged as collateral for this letter of credit.

Revenue Recognition

Revenue is recognized when the four basic criteria of revenue recognition are met: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services rendered; (3) the fee is fixed or determinable; and (4) collectability is reasonably assured. Certain of the Company's revenue is generated through manufacturing contracts and stand-alone license agreements.

 

The Company has entered into multiple-element arrangements. In order to account for the multiple-element arrangements, the Company identifies the deliverables included within the agreement and evaluates which deliverables represent separate units of accounting. Analyzing the arrangement to identify deliverables requires the use of judgment, and each deliverable may be an obligation to deliver services, a right or license to use an asset, or another performance obligation.

Multiple-element arrangements prior to January 1, 2011

Prior to adopting the revised multiple element guidance on January 1, 2011, the Company analyzed its multiple element arrangements to determine whether the identified deliverables could be accounted for individually as separate units of accounting. The delivered item(s) were considered a separate unit of accounting if all of the following criteria were met: (1) the delivered item(s) has value to the customer on a standalone basis; (2) there is objective and reliable evidence of the fair value of the undelivered item(s); and (3) if the arrangement includes a general right of return relative to the delivered item, delivery or performance of the undelivered item(s) is considered probable and substantially in the Company's control. If these criteria were not met, the deliverable was combined with other deliverables in the arrangement and accounted for as a combined unit of accounting.

Multiple-element arrangements after January 1, 2011

Effective January 1, 2011, the Company follows the provisions of ASU No. 2009-13 for all multiple element agreements, including contract manufacturing, contract services and license agreements. Under the revised guidance, the delivered item(s) has value to the customer on a standalone basis and, if the arrangement includes a general right of return relative to the delivered item, delivery or performance of the undelivered item(s) is considered probable and substantially in the Company's control.

A delivered item is considered a separate unit of accounting when the delivered item has value to the partner on a standalone basis based on the consideration of the relevant facts and circumstances for each arrangement. Factors considered in this determination include the research capabilities of the partner and the availability of research expertise in this field in the general marketplace. Arrangement consideration is allocated at the inception of the agreement to all identified units of accounting based on their relative selling price. The relative selling price for each deliverable is determined using vendor specific objective evidence, or VSOE, of selling price or third-party evidence of selling price if VSOE does not exist. If neither VSOE nor third-party evidence of selling price exists, the Company uses its best estimate of the selling price for the deliverable. The amount of allocable arrangement consideration is limited to amounts that are fixed or determinable. The consideration received is allocated among the separate units of accounting, and the applicable revenue recognition criteria are applied to each of the separate units. Changes in the allocation of the sales price between delivered and undelivered elements can impact revenue recognition but do not change the total revenue recognized under any agreement. If facts and circumstances dictate that the license has standalone value from the undelivered items, which generally include research and development services and the manufacture of drug products, the license is identified as a separate unit of accounting and the amounts allocated to the license are recognized upon the delivery of the license, assuming the other revenue recognition criteria have been met. However, if the amounts allocated to the license through the relative selling price allocation exceed the upfront license fee, the amount recognized upon the delivery of the license is limited to the upfront fee received. If facts and circumstances dictate that the license does not have standalone value, the transaction price, including any upfront license fee payments received, are allocated to the identified separate units of accounting and recognized as those items are delivered.

The terms of the Company's partnership agreements provide for milestone payments upon achievement of certain regulatory and commercial events. Effective January 1, 2011, the Company adopted on a prospective basis the Milestone Method of accounting under ASU 2010-17. Under the Milestone Method, the Company recognizes consideration that is contingent upon the achievement of a milestone in its entirety as revenue in the period in which the milestone is achieved only if the milestone is substantive in its entirety. A milestone is considered substantive when it meets all of the following three criteria: 1) The consideration is commensurate with either the entity's performance to achieve the milestone or the enhancement of the value of the delivered item(s) as a result of a specific outcome resulting from the entity's performance to achieve the milestone, 2) The consideration relates solely to past performance, and 3) The consideration is reasonable relative to all of the deliverables and payment terms within the arrangement. A milestone is defined as an event (i) that can only be achieved based in whole or in part on either the entity's performance or on the occurrence of a specific outcome resulting from the entity's performance, (ii) for which there is substantive uncertainty at the date the arrangement is entered into that the event will be achieved and (iii) that would result in additional payments being due to the Company.

 

Contract Services, Grant and Royalty Revenue

The Company recognizes revenues from contract services and federal government research grants during the period in which the related expenditures are incurred and related payments for those services are received or collection is reasonably assured. Royalties to be received based on sales of licensed products by the Company's partners incorporating the Company's licensed technology are recognized when received.

Net Income (Loss) Per Share

Basic and diluted net income (loss) per share has been computed using the weighted-average number of shares of common stock outstanding during the period. The weighted average number of shares used to compute diluted net income per share also includes any assumed exercise of stock options under the treasury stock method, and the assumed issuance of common stock under restricted stock units, or RSUs. Common stock equivalents totaling 1.6 million shares for the three months ended March 31, 2012 were included in the calculation of diluted net income per share. Common stock equivalents totaling 0.7 million shares for the three months ended March 31, 2011, were excluded from the calculation of diluted net income per share because of their antidilutive effect.

Recent Accounting Pronouncements

In June 2011, the Financial Accounting Standards Board, or FASB, issued authoritative guidance regarding comprehensive income. This newly issued accounting standard allows an entity to have the option to present the components of net income and comprehensive income in either one or two consecutive financial statements. The guidance eliminates the current option to report other comprehensive income and its components in the statement of changes in stockholders' equity. While the new guidance changes the presentation of comprehensive income, there are no changes to the components that are recognized in net income or other comprehensive income under current accounting guidance. The guidance was effective for fiscal years and interim periods beginning after December 15, 2011. The Company adopted these provisions as of January 1, 2012. The adoption did not have a material impact on the Company's financial position or results of operations.

In May 2011, the FASB issued authoritative guidance regarding common fair value measurements and disclosure requirements in U.S. Generally Accepted Accounting Principles and International Financial Reporting Standards. This newly issued accounting standard clarifies the application of certain existing fair value measurement guidance and expands the disclosures for fair value measurements that are estimated using significant unobservable inputs. This guidance was effective on a prospective basis for annual and interim reporting periods beginning on or after December 15, 2011. The Company adopted these provisions as of January 1, 2012. The adoption did not have a material impact on the Company's financial position or results of operations.

Stock-Based Compensation
Stock-Based Compensation
2. STOCK-BASED COMPENSATION

Total stock-based compensation expense was allocated to research and development, manufacturing and production and general and administrative expense as follows (in thousands):

 

     Three Months Ended
March 31,
 
         2012              2011      

Research and development

   $ 287       $ 258   

Manufacturing and production

     49         31   

General and administrative

     584         509   
  

 

 

    

 

 

 

Total stock-based compensation expense

   $ 920       $ 798   
  

 

 

    

 

 

 

During the three months ended March 31, 2012 and 2011, the Company granted stock-based awards with a total estimated value of $3.6 million and $2.9 million, respectively. At March 31, 2012, total unrecognized estimated compensation expense related to unvested stock-based awards granted prior to that date was $5.1 million, which is expected to be recognized over a weighted-average period of 1.7 years. Stock-based awards granted during the three months ended March 31, 2012 and 2011, were equal to 1.9% and 3.1%, respectively, of outstanding shares of common stock at the end of the applicable period.

Comprehensive Loss
Comprehensive Loss
3. COMPREHENSIVE LOSS

Comprehensive loss consists of net income (loss) and certain changes in equity that are excluded from net income (loss). For the three months ended March 31, 2012 and 2011, comprehensive loss was $0.2 million and $8.7 million, respectively.

Other Balance Sheet Accounts
Other Balance Sheet Accounts
4. OTHER BALANCE SHEET ACCOUNTS

Accounts payable and accrued expenses consisted of the following (in thousands):

 

     March 31,
2012
     December 31,
2011
 

Clinical trial accruals

   $ 1,624       $ 1,681   

Employee compensation

     2,189         3,653   

Accounts payable

     2,768         351   

Other accrued liabilities

     685         677   
  

 

 

    

 

 

 

Total accounts payable and accrued expenses

   $ 7,266       $ 6,362   
  

 

 

    

 

 

Short-Term Marketable Securities
Short-Term Marketable Securities
5. SHORT-TERM MARKETABLE SECURITIES

The following is a summary of short-term marketable securities classified as available-for-sale (in thousands):

 

March 31, 2012

   Amortized
Cost
     Unrealized
Gain
     Unrealized
Loss
     Market
Value
 

U.S. treasuries

   $ 6,017       $ —         $ —         $ 6,017   

Government-sponsored enterprise securities

     6,352         —           2         6,350   

Corporate bonds

     8,241         —           7         8,234   

Certificates of deposit

     186         —           —           186   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 20,796       $ —         $ 9       $ 20,787   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

December 31, 2011

   Amortized
Cost
     Unrealized
Gain
     Unrealized
Loss
     Market
Value
 

U.S. treasuries

   $ 1,008       $ 2       $ —         $ 1,010   

Government-sponsored enterprise securities

     7,200         —           2         7,198   

Certificates of deposit

     525         —           —           525   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 8,733       $ 2       $ 2       $ 8,733   
  

 

 

    

 

 

    

 

 

    

 

 

 

At March 31, 2012, $7.5 million of these securities were scheduled to mature outside of one year. The Company did not realize any gains or losses on sales of available-for-sale securities for the three months ended March 31, 2012. As of March 31, 2012, none of the securities had been in a continuous unrealized loss position longer than one year.

Long-Term Investments
Long-Term Investments
6. LONG-TERM INVESTMENTS

During the three months ended March 31, 2012, the Company sold two auction rate securities classified as long-term investments with a par value of $4.0 million. Included in interest and other income for the three months ended March 31, 2012 is a gain of $0.3 million related to the sale.

As of March 31, 2012, the Company held an auction rate security with a par value of $2.5 million. This auction rate security has not experienced a successful auction since the liquidity issues experienced in the global credit and capital markets in 2008. As a result the security is classified as a long-term investment as it is scheduled to mature in 2038. The security was rated BBB by Standard and Poor's as of March 31, 2012. The security continues to pay interest according to its stated terms.

 

The valuation of the Company's auction rate security is subject to uncertainties that are difficult to predict. The fair value of the security is estimated utilizing a discounted cash flow analysis. The key drivers of the valuation model include the expected term, collateralization underlying the security investment, the creditworthiness of the counterparty, the timing of expected future cash flows, discount rates, liquidity and the expected holding period. The security was also compared, when possible, to other observable market data for securities with similar characteristics. Based on the valuation of the security, the Company has recognized cumulative losses of $0.6 million as of March 31, 2012, none of which were realized during the three months ended March 31, 2012. The losses when incurred are included in investment and other income. The market value of the security has partially recovered. Included in other comprehensive income are unrealized losses of $6,000 and $8,000 for the three months ended March 31, 2012 and 2011, respectively. As of March 31, 2012, the Company had recorded cumulative unrealized gains of $0.3 million. The resulting carrying value of the auction rate security at March 31, 2012, was $2.1 million. Any future decline in market value may result in additional losses being recognized.

Fair Value Measurements
Fair Value Measurements
7. FAIR VALUE MEASUREMENTS

The Company measures fair value as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. Fair value measurements are based on a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

 

   

Level 1: Observable inputs such as quoted prices in active markets;

 

   

Level 2: Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and

 

   

Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

Cash equivalents, marketable securities and long-term investments measured at fair value are classified in the table below in one of the three categories described above (in thousands):

 

     Fair Value Measurements  
March 31, 2012    Level 1      Level 2      Level 3      Total  

Certificates of deposit

     186         —           —           186   

Money market funds

     49,958         —           —           49,958   

U.S. treasuries

     6,017         —           —           6,017   

Corporate bonds

     —           8,234         —           8,234   

Government-sponsored enterprise securities

     —           6,350         —           6,350   

Auction rate securities

     —           —           2,128         2,128   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 56,161       $ 14,584       $ 2,128       $ 72,873   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

     Fair Value Measurements  
December 31, 2011    Level 1      Level 2      Level 3      Total  

Certificates of deposit

   $ 525       $ —         $ —         $ 525   

Money market funds

     12,778         —           —           12,778   

U.S. treasuries

     1,010         —           —           1,010   

Government-sponsored enterprise securities

     —           7,198         —           7,198   

Auction rate securities

     —           —           5,928         5,928   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 14,313       $ 7,198       $ 5,928       $ 27,439   
  

 

 

    

 

 

    

 

 

    

 

 

 

The Company's investments in U.S. treasury securities, certificates of deposit and money market funds are valued based on publicly available quoted market prices for identical securities as of March 31, 2012. The Company determines the fair value of corporate bonds and other government-sponsored enterprise related securities with the aid of valuations provided by third parties using proprietary valuation models and analytical tools. These valuation models and analytical tools use market pricing or similar instruments that are both objective and publicly available, including matrix pricing or reported trades, benchmark yields, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids and/or offers. The Company validates the valuations received from its primary pricing vendors for its level 2 securities by examining the inputs used in that vendor's pricing process and determines whether they are reasonable and observable. The Company also compares those valuations to recent reported trades for those securities. The Company did not adjust any of the valuations received from these third parties with respect to any of its level 2 securities at March 31, 2012. The Company did not reclassify any investments between level categories during the three months ended March 31, 2012. The valuation of the Company's investments in auction rate securities are more fully described in Note 6.

Activity for assets measured at fair value using significant unobservable inputs (Level 3) is presented in the table below (in thousands):

 

     Three Months
Ended

March  31, 2012
 

Balance at December 31, 2011

   $ 5,928   

Total net realized gains included in earnings

     (590

Total net unrealized losses included in other comprehensive income

     (50

Sales of Level 3 securities

     (3,160
  

 

 

 

Balance at March 31, 2012

   $ 2,128   
  

 

 

 

Total gains or losses for the period included in net income attributable to the change in unrealized gains or losses relating to assets still held at the reporting date

   $ —     
  

 

 

Commitments And Contingencies
Commitments And Contingencies
8. COMMITMENTS AND CONTINGENCIES

The Company prosecutes its intellectual property estate vigorously to obtain the broadest valid scope for its patents. Due to uncertainty of the ultimate outcome of patent enforcement actions, their impact on future operating results or the Company's financial condition is not subject to reasonable estimates.

In the ordinary course of business, the Company may become a party to lawsuits involving various matters. The Company is unaware of any such lawsuits presently pending against it which, individually or in the aggregate, are deemed to be material to the Company's financial condition or results of operations.

Stockholders' Equity
Stockholders' Equity
9. STOCKHOLDERS' EQUITY

During the three months ended March 31, 2012, the Company sold 13,909,692 shares of its common stock in a public offering at a price to the public of $3.75 per share. Net proceeds from the offering, after deducting underwriting discounts and commissions and other offering expenses payable by the Company, totaled $48.7 million. All of the shares of common stock were offered pursuant to two effective shelf registration statements.

Astellas Agreements
Astellas Agreements
10. ASTELLAS AGREEMENTS

In July 2011, the Company entered into license agreements with Astellas Pharma Inc., or Astellas, granting Astellas exclusive, worldwide, royalty-bearing licenses under certain of the Company's know-how and intellectual property to develop and commercialize certain products containing plasmids encoding certain forms of glycoprotein B and/or phosphoprotein 65, including TransVax™ but excluding CyMVectin™.

Under the terms of the license agreements, Astellas paid a nonrefundable upfront license fee of $25.0 million in 2011. The Company is also entitled to receive an additional $10.0 million upon finalization of the general trial design for a Phase 3 registration trial of TransVax™ in hematopoietic stem cell transplant recipients which occurred in March of 2012. The Company recognized $10.1 million in license revenue under the Astellas agreements during the three months ended March 31, 2012, which included the aforementioned $10.0 milestone.

Under the terms of the agreements the Company is also performing research and development services which are being paid for by Astellas. During the three months ended March 31, 2012, the Company recognized $1.0 million of revenue related to these contract services.