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to low-double digit royalty percentages on net sales of ReGenX licensed products, subject to reduction in specified circumstances; and lower mid-double digit percentages of any sublicense
fees we receive from sublicensees for the licensed patent rights. As of September 30, 2015, we have paid $2.3 million under the ReGenX License, which includes $0.3 million in
aggregate milestone payments.
Asklepios Biopharmaceutical, Inc.
In May 2015, we entered into a non-exclusive, worldwide license agreement with Asklepios Biopharmaceutical, Inc., or AskBio,
under certain patents and patent applications, for the use of AskBio's self-complementary AAV genome technology for the treatment of SMA in humans, or the AskBio License. Under the AskBio License, we
paid AskBio a one-time upfront license fee of $1 million, payable across stipulated milestones. We are also required to pay, ongoing annual maintenance fees, up to a total of
$0.6 million in clinical development milestone payments and up to a total of $9 million in commercial milestone payments. Under the terms of the AskBio License, we are required to pay
AskBio annual tiered royalties on net sales of any products covered by the AskBio License, on a country-by-country basis, starting at percentages in the low-single digits and increasing to mid-single
digits. These royalty rates are subject to potential reduction in specified circumstances, including, in the event we exercise our option to make a specified one-time royalty option fee payment to
AskBio. We must also pay AskBio a low double digit percentage of all consideration we receive from any sublicense of the licensed technology. Through September 30, 2015, we have paid the
$1.0 million upfront license fee owed under the AskBio License.
Financial Operations Overview
To date, we have not generated any revenues from the commercial sale of gene therapy products, and we do not expect to generate
substantial revenue for at least the next few years. In the future, we will seek to generate revenue primarily from product sales and, potentially, collaborations with strategic partners.
We classify our operating expenses into two categories: research and development and general and administrative expenses. Personnel
costs including salaries, benefits, bonuses and stock-based compensation expense, comprise a significant component of each of these expense categories. We allocate expenses associated with personnel
costs based on the nature of work associated with these resources.
Research and Development Costs
Research and development expense consists of expenses incurred while performing research and development activities to discover and
develop potential gene therapy treatments. This includes conducting preclinical studies and clinical trials, manufacturing development efforts and activities related to regulatory filings for product
candidates. We recognize research and development expenses as they are incurred. Up-front fees incurred in obtaining technology licenses for research and development activities are expensed as
incurred if the technology licensed has no alternative future use. Our research and development expense primarily consists of:
- salaries and personnel-related costs, including benefits and any employee stock-based compensation, for our scientific personnel
performing research and development activities;