ACHN 2017 Annual Report

Janssen Agreement due to the achievement of a clinical enrollment milestone. During the year ended December 31, 2015, we recognized $66.1 million of revenue under the Janssen Agreement related to the upfront payment received by us in exchange for the license and technology transfer services and the issuance of our common stock to an affiliate of Janssen’s. Research and Development Expenses: Our research and development expenses 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 laboratories and clinical development space, operating supplies and other costs associated with our research and development activities. Research and development expenses consisted of the following: For the Years Ended Change 2017 2016 2015 2017 vs. 2016 2016 vs. 2015 (in thousands) Personnel costs . . . . . . . . . . . . . . . . . . . . . . . . . . $15,256 $14,824 $13,130 $ 432 3% $ 1,694 13% Stock based compensation . . . . . . . . . . . . . . . . . 4,490 4,695 4,500 (205) (4)% 195 4% Outsourced research and supplies . . . . . . . . . . . . 34,262 30,062 31,214 4,200 14% (1,152) (4)% Professional and consulting fees . . . . . . . . . . . . . 5,847 5,501 5,287 346 6% 214 4% Facilities costs . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,261 3,320 2,505 (59) (2)% 815 33% Travel and other costs . . . . . . . . . . . . . . . . . . . . . 1,801 1,171 557 630 54% 614 110% Research and development tax credit . . . . . . . . . 135 (411) (640) 546 133% 229 (36)% Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $65,052 $59,162 $56,553 $5,890 10% $ 2,609 5% Comparison of the Years Ended December 31, 2017 and 2016 The increase for year ended December 31, 2017 was primarily due to increased clinical trial costs related to ACH-4471 combined with increased preclinical and manufacturing costs for ACH-5228. Discovery research costs related to our next generation factor D inhibitors also increased. These amounts were partially offset by decreased preclinical and manufacturing costs related to ACH-4471. We expect research and development expenses over the next year will decrease somewhat as compared to 2017 as we focus primarily on the development of our existing clinical candidates and late preclinical compounds and implement our restructuring plan. Comparison of the Years Ended December 31, 2016 and 2015 The increase in research and development costs from 2015 to 2016 was primarily due to increased manufacturing, clinical trial and consulting costs related to the advancement of ACH-4471, partially offset by decreased manufacturing, clinical trial and consulting costs related to our HCV compounds, which were licensed to Janssen in 2015. Personnel costs also increased in 2016 due to the addition of personnel in our discovery and development groups. 85