ACHN 2017 Annual Report

our HCV product candidates that we licensed to Janssen under the Janssen Agreement. Following the termination, all licenses granted by either party to the other under the Janssen Agreement terminated, except to the extent necessary to allow either party to perform any obligations or exercise rights that survive the termination. As a result of the termination of the Janssen Agreement, we will not receive any future milestone-based or royalty payments under that agreement, and Janssen will not bear the future costs of developing and commercializing our HCV portfolio. We currently have no plans to advance the HCV program on our own. Financial Operations Overview Revenue To date, we have not generated any revenue from the commercial sale of any drugs. During the year ended December 31, 2017 we did not recognize any revenue. During the years ended December 31, 2016 and 2015, we recognized revenue of $15.0 million and $66.1 million, respectively, under the Janssen Agreement which was terminated effective November 8, 2017. Pursuant to the terms of the Janssen Agreement, we were required to provide technology transfer services related to the chemistry, manufacturing and know-how to Janssen for up to 180 days after the effective date of the Janssen Agreement. We completed this transfer in December 2015. We determined that the amount received in excess of the fair value of our common stock upon issuance to JJDC of $66.1 million of our common stock was attributed to the license and technology services and straight-line attribution of the license and technology services revenues would be used to recognize revenue. As such, revenue of $66.1 million was recorded during the year ended December 31, 2015 associated with this transaction. During the year ended December 31, 2016, we recognized revenue of $15.0 million under the Janssen Agreement due to the achievement of a clinical enrollment milestone. As a result of the termination of the Janssen Agreement, we will not receive any future milestone-based or royalty payments under that agreement, and Janssen will not bear the future costs of developing and commercializing our HCV portfolio. Research and Development Our research and development expenses reflect costs incurred for our proprietary research and development projects which consist primarily of salaries and benefits for our research and development personnel, costs of services by clinical research organizations, other outsourced research, materials used during research and development activities, facility-related costs such as rent and utilities associated with our laboratory and clinical development space and operating supplies. Our focus is on our complement inhibitor platform, directed at advancing small molecule compounds that have the potential to be used in the treatment of immune-related diseases associated with the alternative pathway of the complement system. The complement system is a part of the human innate immune system and is believed to comprise three pathways: the alternative pathway, the lectin pathway and the classical pathway. We are advancing novel small molecules from this platform which target complement factor D, an essential protein within the amplification loop of the alternative pathway. The alternative pathway is thought to play a critical role in a number of disease conditions including rare orphan conditions such as PNH, a blood disorder, C3G and IC-MPGN, both kidney diseases, as well as several more prevalent indications. In addition to ACH-4471, our lead drug candidate, we have also generated a platform of additional potent and specific orally-administered compounds that bind to factor D with high affinity, resulting in alternative 79