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Fiscal 2011 compared to Fiscal 2010 Collaboration Revenue decreased by $2.9 million, or 13.6%, in
fiscal 2011. The decrease was primarily due to fewer scientists engaged on our collaboration with
Genentech during the second half of fiscal 2011, which resulted in $5.0 million less revenue compared to
fiscal 2010. This decrease was partially offset by increased revenue of $1.7 million and $700 thousand
from funded research under our collaborations with Amgen and Novartis, respectively.
Cost of Revenue
Cost of Revenue represents costs attributable to discovery and development including preclinical and
clinical trials we may conduct for our collaborators and the cost of chemical compounds sold from our
inventory. These costs consist mainly of compensation, associated fringe benefits, share-based
compensation, preclinical and clinical outsourcing costs and other collaboration-related costs, including
supplies, small tools, travel and meals, facilities, depreciation, recruiting and relocation costs and other
direct and indirect chemical handling and laboratory support costs.
Below is a summary of our Cost of Revenue (dollars in thousands):
Years Ended June 30,
Change 2012 vs. 2011
Change 2011 vs. 2010
2012
2011
2010
$
%
$
%
Cost of revenue
$ 24,261
$ 28,916
$ 28,322
$ (4,655)
(16.1%)
$
594
2.1%
Cost of revenue as a percentage of
total revenue
28.5%
40.2%
52.6%
Fiscal 2012 compared to Fiscal 2011 Cost of Revenue decreased $4.7 million, or 16.1%, during fiscal
2012 compared to fiscal 2011. The decrease was primarily the result of fewer scientists engaged on our
collaborations with Genentech and Amgen during the second half of fiscal 2012. Cost of Revenue
decreased as a percentage of total revenue due to the increased License and Milestone Revenue
recognized in fiscal 2012 as discussed above.
Fiscal 2011 compared to Fiscal 2010 During fiscal 2011, Cost of Revenue increased $594 thousand, or
2.1%, but decreased as a percentage of total revenue. The increase in absolute dollars was related to the
restructuring charges incurred during the fourth quarter as discussed under
Note 9 Restructuring
Charges Fiscal 2011 Restructuring to the financial statements contained elsewhere in this Annual
Report. We recorded $1.3 million to Cost of Revenue from the reduction in force. In addition, related to the
restructuring, we vacated a portion of one of our significant laboratory facilities at our Longmont facility
and recorded $339 thousand to Cost of Revenue in accelerated depreciation on leasehold
improvements. This increase was partially offset by reduced outsourcing costs to advance our partnered
programs with Amgen and Novartis through clinical trials, as our partners now bear all or an increased
share of the development costs compared to the prior year. The decrease as a percentage of revenue is
the result of increased License and Milestone Revenue recognized during the year which did not have a
direct impact on our expenses.
Research and Development Expenses for Proprietary Drug Discovery
Our Research and Development Expenses for Proprietary Drug Discovery include costs associated with
our proprietary drug programs for scientific and clinical personnel, supplies, inventory, equipment, small
tools, travel and meals, depreciation, consultants, sponsored research, allocated facility costs, costs
related to preclinical and clinical trials and share-based compensation. We manage our proprietary
programs based on scientific data and achievement of research plan goals. Our scientists record their
time to specific projects when possible; however, many activities simultaneously benefit multiple projects
and cannot be readily attributed to a specific project. Accordingly, the accurate assignment of time and
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costs to a specific project is difficult and may not give a true indication of the actual costs of a particular
project. As a result, we do not report costs on a program basis.
Below is a summary of our research and development expenses by categories of costs for the periods
presented (dollars in thousands):
Years Ended June 30,
Change 2012 vs. 2011
Change 2011 vs. 2010
2012
2011
2010
$
%
$
%
Salaries, benefits and share-based
compensation
$ 22,832 $ 29,082 $ 31,358
$
(6,250)
(21.5%)
$
(2,276)
(7.3%)
Outsourced services and consulting
17,680
13,843
19,131
3,837
27.7%
(5,288)
(27.6%)
Laboratory supplies
6,652
9,328
10,734
(2,676)
(28.7%)
(1,406)
(13.1%)
Facilities and depreciation
8,066
9,702
9,697
(1,636)
(16.9%)
5
0.1%
Other
1,489
1,543
1,568
(54)
(3.5%)
(25)
(1.6%)
Total research and development for
proprietary drug discovery
$ 56,719 $ 63,498 $ 72,488
$
(6,779)
(10.7%)
$
(8,990)
(12.4%)
Fiscal 2012 compared to Fiscal 2011 Research and Development Expenses for Proprietary Drug
Discovery decreased $6.8 million, or 10.7%, during fiscal 2012 compared to the prior year. The decrease
was the result of our new license agreement with Genentech and our new collaboration and license
agreement with ASLAN Pharmaceuticals which resulted in the corresponding program costs shifting to
the collaboration partner.
Fiscal 2011 compared to Fiscal 2010 Research and Development Expenses for Proprietary Drug
Discovery for fiscal 2011 decreased by $9.0 million because our development costs for AMG 151 and
MEK162 both shifted out of Research and Development Expenses for Proprietary Drug Discovery to Cost
of Revenue as a result of partnering those programs with Amgen and Novartis during the third and fourth
quarters of fiscal 2010, respectively. Those decreases were partially offset by the increased development
costs from continuing to progress our most advanced wholly-owned drug programs through the clinic.
Also included in fiscal 2011 Research and Development Expenses for Proprietary Drug Discovery were
restructuring charges incurred during the fourth quarter as discussed in
Note 9 Restructuring Charges
Fiscal 2011 Restructuring within the notes to the financial statements contained elsewhere in this Annual
Report. We recorded $2.1 million and $1.5 million to Research and Development Expenses for
Proprietary Drug Discovery from the reduction in force and accelerated depreciation on leasehold
improvements, respectively.
General and Administrative Expenses
General and Administrative Expenses consist mainly of compensation and associated fringe benefits not
included in Cost of Revenue or Research and Development Expenses for Proprietary Drug Discovery and
include other management, business development, accounting, information technology and
administration costs, including patent filing and prosecution, recruiting and relocation, consulting and
professional services, travel and meals, sales commissions, facilities, depreciation and other office
expenses.
Below is a summary of our General and Administrative Expenses (dollars in thousands):
Years Ended June 30,
Change 2012 vs. 2011
Change 2011 vs. 2010
2012
2011
2010
$
%
$
%
General and administrative
$ 15,202
$ 16,261
$ 17,121
$ (1,059)
(6.5%)
$
(860)
(5.0%)
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