AKAO 2017 Annual Report

19 contractor, we are responsible for all technical and regulatory activities under a research plan proposed by us and accepted by BARDA. Our program to develop C-Scape, a product candidate to treat serious bacterial infections due to ESBL producing Enterobacteriaceae, is also partially funded under a contract with BARDA. In September 2017, we were awarded the C-Scape Contract (“BARDA C-Scape Contract”) which includes a base period with obligated funding of $12.0 million and subsequent option periods that, if exercised, would bring the total value of the award to $18.0 million. Through December 31, 2017, we have recorded $1.0 million to revenue, with $11.0 million remaining available from the funding currently committed under the C-Scape Contract. Payments under the BARDA-plazo and BARDA C-Scape Contracts, collectively (“the BARDA contracts,”) are made in installments as activities are conducted in accordance with the research plan. Payments to us are based on direct costs incurred and allowances for overhead, plus a fee, where applicable. From time to time, we may propose a change to the research plan to BARDA, and BARDA may or may not choose to accept the change to the research plan, along with any associated additional costs, subject to the availability of funding, as well as other factors. We are also obligated under the contract to satisfy various federal reporting requirements, including technical reporting with respect to our plazomicin and C-Scape development activities, reporting with respect to intellectual property and financial reporting. In addition, technical documents and regulatory filings may be reviewed by BARDA prior to their finalization and/or submission. Under standard government contracting terms, the government receives only limited rights for government use of certain of our pre-existing data and certain data produced with non-federal funding, to the extent such data are required for delivery to BARDA under the project. The U.S. government receives unlimited rights to use and disclose new data first produced under the project with BARDA funding. The U.S. government is entitled to a nonexclusive, worldwide, royalty-free license to practice or have practiced any patent on an invention that is conceived or first reduced to practice under the project, and may obtain additional rights if we do not elect to retain ownership of a subject invention or if we do not satisfy certain disclosure and patent prosecution obligations with respect to a subject invention. The government’s rights do not include the composition of matter patents related to plazomicin or C-Scape, as these were developed and prosecuted prior to our entry into the BARDA contracts and without government funding. The BARDA contracts do not entitle the government to any sales royalties or other post-commercialization financial rights. BARDA is entitled to terminate either contract for convenience at any time provided reasonable closeout costs are paid and is not obligated to provide funding beyond currently obligated amounts allotted from Congressionally appropriated funds. For more information regarding the government contracts referred to above see “Risk Factors--Risks Related to Our U.S. Government Contracts and to Certain Grant Agreements” and “Risk Factors--Risks Related to Intellectual Property.” Provisions in our U.S. government contracts, including our contract with BARDA, and certain grant agreements, including our collaboration with the Gates Foundation, may affect our intellectual property rights. As is customary under many government-funded research grants and contracts with foundations, including our collaboration with the Gates Foundation, we may not have sole rights to certain intellectual property and, in specific situations, could share or lose the rights we do have. Commercial Agreements License Agreement with Ionis Pharmaceuticals, Inc. (formerly Isis Pharmaceuticals, Inc.) On January 25, 2006, we entered into a license agreement with Ionis Pharmaceuticals, Inc. (“Ionis”), pursuant to which Ionis granted us an exclusive license under certain patents relating to aminoglycoside antibacterial compounds and related know-how to develop and commercialize certain novel aminoglycoside antibacterial compounds. We are required to use commercially reasonable efforts to develop and commercialize certain compounds under the agreement. In consideration for the rights granted to us by Ionis under the license agreement, we issued $1.5 million of our Series A convertible preferred stock to Ionis in 2006. In addition, we are required to make payments to Ionis upon the achievement of specified development and regulatory milestones totaling up to $19.5 million for the first aminoglycoside product developed under certain terms of the agreement. We paid $4.0 million to Ionis in the fourth quarter of 2014 following dosing the first patient in our Phase 3 CARE trial of plazomicin in September 2014 and could owe up to $9.75 million for a second aminoglycoside product, if any,