Collaboration and License Agreements

At December 31, 2017, the Company had collaboration and license agreements with Sandoz AG (formerly Sandoz N.V. and Biochemie West Indies, N.V.), an affiliate of Novartis Pharma AG, and Sandoz Inc. (formerly Geneva Pharmaceuticals, Inc.), collectively referred to as Sandoz; Mylan Ireland Limited, a wholly-owned, indirect subsidiary of Mylan N.V., or Mylan; and CSL Behring Recombinant Facility AG, or CSL, a wholly-owned indirect subsidiary of CSL Limited. M923, the Company's biosimilar HUMIRA® (adalimumab) candidate, was previously developed in collaboration with Baxalta under the Baxalta Collaboration Agreement, as defined below. The Baxalta Collaboration Agreement was terminated effective December 31, 2016.

The following tables provide amounts by year indicated and by line item included in the Company's accompanying consolidated statements of operations and comprehensive loss attributable to transactions arising from its significant collaborative arrangements, as defined in the FASB's ASC Topic 808, Collaborative Arrangements, and all other arrangements. The amounts in operating expenses generally represent external expenditures, including amortization of an intangible asset, and exclude salaries and benefits, share-based compensation, facilities, depreciation and laboratory supplies, as the majority of such costs are not directly charged to programs. The dollar amounts in the tables below are in thousands.



	For the Year Ended December 31, 2017
	2003 Sandoz Collaboration Agreement		2006 Sandoz Collaboration Agreement		Mylan Collaboration Agreement			CSL License Agreement			Total Collaborations
Collaboration revenues:
Product revenue	$	313	$	66,490	$	—		$	—		$	66,803
Research and development revenue:
Commercial milestone (2)	—		10,000		—			—			10,000
Recognition of upfront payments	—		—		5,015			50,000			55,015
Research and development services and external costs	2,856		2,142		—			2,066			7,064
Total research and development revenue	$	2,856	$	12,142	$	5,015		$	52,066		$	72,079
Total collaboration revenues	$	3,169	$	78,632	$	5,015		$	52,066		$	138,882
Operating expenses:
Research and development expense	$	1,958	$	1,766	$	62,049		$	8,179		$	73,952
General and administrative expense	15,426		494		3,617			124			19,661
Less: net amount recovered from collaborators	—		—		(25,835		)	(3,320		)	(29,155		)
Total operating expenses	$	17,384	$	2,260	$	39,831		$	4,983		$	64,458



	For the Year Ended December 31, 2016
	2003 Sandoz Collaboration Agreement		2006 Sandoz Collaboration Agreement		Mylan Collaboration Agreement			Baxalta Collaboration Agreement (1)		Total Collaborations
Collaboration revenues:
Product revenue	$	—	$	74,648	$	—		$	—	$	74,648
Research and development revenue:
Recognition of upfront payments and license fee	—		—		6,368			21,983		28,351
Research and development services and external costs	345		2,545		—			3,730		6,620
Total research and development revenue	$	345	$	2,545	$	6,368		$	25,713	$	34,971
Total collaboration revenues	$	345	$	77,193	$	6,368		$	25,713	$	109,619
Operating expenses:
Research and development expense	$	692	$	1,911	$	55,147		$	1,196	$	58,946
General and administrative expense	7		470		3,009			187		3,673
Less: net amount recovered from collaborator	—		—		(27,770		)	—		(27,770		)
Total operating expenses	$	699	$	2,381	$	30,386		$	1,383	$	34,849



	For the Year Ended December 31, 2015
	2003 Sandoz Collaboration Agreement		2006 Sandoz Collaboration Agreement		Baxalta Collaboration Agreement (1)		Total Collaborations
Collaboration revenues:
Product revenue	$	5,063	$	43,440	$	—	$	48,503
Research and development revenue:
Milestones	—		20,000		—		20,000
Recognition of upfront payment and license fee	—		—		9,014		9,014
Research and development services and external costs	789		2,861		8,483		12,133
Total research and development revenue	$	789	$	22,861	$	17,497	$	41,147
Total collaboration revenues	$	5,852	$	66,301	$	17,497	$	89,650
Operating expenses:
Research and development expense	$	324	$	856	$	1,851	$	3,031
General and administrative expense	344		206		963		1,513
Total operating expenses	$	668	$	1,062	$	2,814	$	4,544

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(1)	The Baxalta Collaboration Agreement was terminated effective December 31, 2016.


(2)	On July 1, 2017, the Company earned a $10.0 million commercial milestone for which Sandoz was entitled to reduce contractual net profit in a corresponding amount under the terms of the 2006 Sandoz Collaboration Agreement.

2003 Sandoz Collaboration Agreement

In 2003, the Company entered into a collaboration and license agreement, or the 2003 Sandoz Collaboration Agreement, with Sandoz to jointly develop, manufacture and commercialize Enoxaparin Sodium Injection, a generic version of LOVENOX® (enoxaparin), in the United States. Under the terms of the 2003 Sandoz Collaboration Agreement, the Company and Sandoz agreed to exclusively work with each other to develop and commercialize Enoxaparin Sodium Injection for any and all medical indications within the United States. In addition, the Company granted Sandoz an exclusive license under its intellectual property rights to develop and commercialize injectable enoxaparin for all medical indications within the United States. A portion of Enoxaparin Sodium Injection development expenses and certain legal expenses, which in the aggregate have exceeded a specified amount, are offset against profit-sharing amounts, royalties and milestone payments. The Company's contractual share of such development and legal expenses was subject to an annual claw-back adjustment at the end of each of the first five product years, with the product year beginning on July 1 and ending on June 30, and the final adjustment occurred in June 2015. Annual adjustments were recorded as a reduction in product revenue.

Sandoz began selling Enoxaparin Sodium Injection in July 2010. Under the original payment terms of the 2003 Sandoz Collaboration Agreement, Sandoz was obligated to pay the Company either contractually defined profit share or royalty on net sales depending on the kind and number of other marketed generic versions of LOVENOX. In June 2015, the Company and Sandoz amended the 2003 Sandoz Collaboration Agreement, effective April 1, 2015, to provide that Sandoz would pay the Company 50% of contractually defined profits on sales, if any. For the year ended December 31, 2015, the Company earned $5.1 million in product revenue consisting of $6.9 million in a combination of profit share and royalties, net of an annual claw-back adjustment of $1.8 million for the product year ended June 30, 2015, on Sandoz' sales of Enoxaparin Sodium Injection. Sandoz did not record any profit on sales of Enoxaparin Sodium Injection for the year ended December 31, 2016, and therefore the Company did not record product revenue for Enoxaparin Sodium Injection in the period. For the year ended December 31, 2017, the Company earned $0.3 million in product revenue on Sandoz' sales of Enoxaparin Sodium Injection.

Under the Company’s collaboration with Sandoz, since the Company contracts directly with, manages the work of and is responsible for payments to third-party vendors for services the Company is obligated to provide to Sandoz, the reimbursements for such services are recorded as revenues on a gross basis. Revenues are recognized upon completion of the services. The Company recognized research and development revenue from FTE services and external costs of $2.9 million, $0.3 million, and $0.8 million in the years ended December 31, 2017, 2016, and 2015, respectively.

2006 Sandoz Collaboration Agreement

In 2006 and 2007, the Company entered into a series of agreements, including a collaboration and license agreement, as amended, or the 2006 Sandoz Collaboration Agreement, with Sandoz. Under the 2006 Sandoz Collaboration Agreement, the Company and Sandoz agreed to exclusively collaborate on the development and commercialization of GLATOPA 20 mg/mL and 40 mg/mL, collectively GLATOPA, a generic version of COPAXONE, among other products. Costs, including development costs and the costs of clinical studies, will be borne by the parties in varying proportions depending on the type of expense. For GLATOPA, the Company is generally responsible for all of the development costs in the United States. For GLATOPA outside of the United States, the Company shares development costs in proportion to its profit sharing interest. The Company is reimbursed at a contractual FTE rate for any FTE employee expenses as well as any external costs incurred in the development of products to the extent development costs are borne by Sandoz. All Commercialization Costs, as that term is defined in the 2006 Sandoz Collaboration Agreement, are borne by Sandoz. With respect to GLATOPA, Sandoz is responsible for funding Legal Expenses, as that term is defined in the 2006 Sandoz Collaboration Agreement, except for FTE costs with respect to certain legal activities for GLATOPA; however 50% of Legal Expenses, including any patent infringement damages, can be offset against the profit-sharing amounts.

The term of the 2006 Sandoz Collaboration Agreement extends throughout the development and commercialization of the products until the last sale of the products, unless earlier terminated by either party pursuant to the provisions of the 2006 Sandoz Collaboration Agreement. The 2006 Sandoz Collaboration Agreement may be terminated if either party breaches the 2006 Sandoz Collaboration Agreement or files for bankruptcy. Sandoz AG has agreed to indemnify the Company for various claims, and a certain portion of such costs may be offset against certain future payments received by the Company.

Sandoz commenced sales of GLATOPA 20 mg/mL in the United States in June 2015 and of GLATOPA 40 mg/mL in the United States in February 2018. Under the 2006 Sandoz Collaboration Agreement, the Company earns 50% of contractually defined profits on Sandoz' worldwide net sales of GLATOPA 20 mg/mL and GLATOPA 40 mg/mL. Profits on net sales of GLATOPA are calculated by deducting from net sales the costs of goods sold and an allowance for selling, general and administrative costs, which is a contractual percentage of GLATOPA net sales and post-launch commercial milestones achieved.

On July 1, 2017, the Company earned a $10 million commercial milestone payment in connection with GLATOPA 20 mg/mL's being the sole FDA-approved generic of COPAXONE when earned and achieving a certain level of contractually defined profits in the United States, for which Sandoz was entitled to reduce contractual net profit under the terms of the 2006 Sandoz Collaboration Agreement. Following FDA approval of Mylan N.V.'s generic equivalents of COPAXONE 20 mg/mL and 40 mg/mL, which Mylan N.V. announced in October 2017, the Company is no longer eligible to earn $80 million in future post-launch commercial milestones; however, the Company is still eligible to receive up to $30 million in sales-based milestones for GLATOPA in the United States. None of these payments, once received, is refundable and there are no general rights of return in the arrangement.

On October 4, 2017, the Company and Sandoz entered into a letter agreement, pursuant to which the Company agreed to reduce its 50% share of contractually defined profits on worldwide net sales of GLATOPA by up to an aggregate of approximately $9.8 million, commencing in the first quarter of 2018, representing 50% of potential GLATOPA 40 mg/mL pre-launch inventory costs, which could decrease the Company's contractual profit share revenue on sales of GLATOPA 40 mg/mL. The letter agreement did not have an impact on the Company's consolidated financial statements for the year ended December 31, 2017 as it represents an expected loss on an executory contract that would not be recognized until the loss occurs.

Product revenue on Sandoz' sales of GLATOPA 20 mg/mL was $66.5 million, $74.6 million and $43.4 million in the years ended December 31, 2017, December 31, 2016 and December 31, 2015, respectively.

Under the Company’s collaboration with Sandoz, since the Company contracts directly with, manages the work of and is responsible for payments to third-party vendors for services the Company is obligated to provide to Sandoz, the reimbursements for such services are recorded as revenues on a gross basis. Revenues are recognized upon completion of the services. The Company recognized research and development revenue from FTE services and external costs of $2.1 million, $2.5 million, and $2.9 million in the years ended December 31, 2017, 2016, and 2015, respectively.

Baxalta Collaboration Agreement

The Company and Baxter International, Inc., Baxter Healthcare Corporation and Baxter Healthcare SA (or collectively referred to as Baxter) entered into a global collaboration and license agreement, or the Baxter Collaboration Agreement, effective February 2012, to develop and commercialize biosimilars, including M923, the Company's biosimilar HUMIRA^® (adalimumab) candidate. In connection with Baxter's internal corporate restructuring in July 2015, Baxter assigned the Baxter Collaboration Agreement to Baxalta U.S. Inc., Baxalta GmbH and Baxalta Incorporated, collectively referred to as Baxalta. Subsequent to the assignment, the Company refers to "Baxter" as "Baxalta" and the "Baxter Collaboration Agreement" as the "Baxalta Collaboration Agreement." On September 27, 2016, Baxalta gave the Company twelve months’ prior written notice of the exercise of its right to terminate for its convenience the Baxalta Collaboration Agreement. On December 31, 2016, the Company and Baxalta entered into an asset return and termination agreement, or the Baxalta Termination Agreement, which made the termination of the Baxalta Collaboration Agreement effective as of December 31, 2016.

Under the Baxalta Collaboration Agreement, the Company and Baxalta agreed to collaborate, on a world-wide basis, on the development and commercialization of M923 and M834, the Company's biosimilar ORENCIA® (abatacept) candidate, and Baxalta had the right to select four additional reference products to target for biosimilar development under the collaboration. In July 2012, Baxalta selected an additional product candidate and in December 2013, following an internal portfolio review, terminated its option to license the product candidate. In February 2015, Baxalta's right to select additional programs expired without further exercise. Also, in February 2015, Baxalta terminated in part the Baxalta Collaboration Agreement as it related to M834 and all worldwide development and commercialization rights for M834 reverted to the Company.

Under the Baxalta Collaboration Agreement, each party granted the other an exclusive license under its intellectual property rights to develop and commercialize M923 for all therapeutic indications. The Company agreed to provide development and related services on a commercially reasonable basis through the filing of an Investigational New Drug application, or IND, or equivalent application in the European Union for M923. Development and related services included high-resolution analytics, characterization, and product and process development. Baxalta was responsible for clinical development, manufacturing and commercialization activities for M923. The Company had the right to participate in a joint steering committee, consisting of an equal number of members from the Company and Baxalta, to oversee and manage the development and commercialization of M923 under the collaboration. Costs, including development costs, payments to third parties for intellectual property licenses, and expenses for legal proceedings, including the patent exchange process pursuant to the Biologics Price Competition and Innovation Act of 2009, was to be borne by the parties in varying proportions, depending on the type of expense and the stage of development. The Company was generally responsible for research and process development costs prior to filing an IND or equivalent application in the European Union, and the cost of in-human clinical trials, manufacturing in accordance with current good manufacturing practices and commercialization was borne by Baxalta.

Under the terms of the Baxalta Collaboration Agreement, the Company received an upfront payment of $33 million, a $7 million license payment for achieving pre-defined "minimum development criteria" for M834, and $12 million in technical and development milestone payments in connection with the UK Medicines and Healthcare Products Regulatory Agency's acceptance of Baxalta's clinical trial application to initiate a pharmacokinetic clinical trial for M923. The Company was reimbursed at a contractual FTE rate for any FTE employee expenses and external development costs for reimbursable activities related to M923. Had M923 been successfully developed and launched under the Baxalta Collaboration Agreement, Baxalta would have been required to pay the Company royalties on net sales of licensed products worldwide, with a base royalty rate in the high single digits with the potential for significant tiered increases based on the number of competitors, the interchangeability of the product, and the sales tier for the product. The maximum royalty with all potential increases would have been slightly more than double the base royalty.

On June 3, 2016, Baxalta Incorporated and Shire plc, or Shire, announced the completion of the combination of Baxalta Incorporated and Shire. As a result of the combination, Baxalta Incorporated, of which Baxalta US Inc. and Baxalta GmbH are wholly-owned subsidiaries, is a wholly-owned subsidiary of Shire. On September 27, 2016, Baxalta gave the Company twelve months’ prior written notice of the exercise of its right to terminate for its convenience the Baxalta Collaboration Agreement. Under the terms of the Baxalta Collaboration Agreement, the effective date of the termination was twelve months following the date Baxalta gave the termination notice, as more particularly set forth in the Baxalta Collaboration Agreement. As of the termination effective date, (i) Baxalta was obligated to transfer to the Company all ongoing regulatory, development, manufacturing and commercialization activities and related records for M923 and, at the Company's request, assign to the Company any third party agreements reasonably necessary for and primarily related to the development, manufacture, and commercialization of M923 to the extent permitted by the agreements' terms, (ii) the licenses granted pursuant to the Baxalta Collaboration Agreement by the Company to Baxalta under the Company's intellectual property rights relating to M923 would terminate, the licenses granted pursuant to the Baxalta Collaboration Agreement by Baxalta to the Company under Baxalta’s intellectual property rights relating to M923 would survive, and Baxalta was obligated to grant to the Company additional licenses under Baxalta’s intellectual property rights relating to M923 existing as of the termination effective date, and (iii) the Company was obligated to pay to Baxalta a royalty of 5% of net sales, as such term is defined in the Baxalta Collaboration Agreement, until Baxalta’s development expenses and commercialization costs, as such terms are defined in the Baxalta Collaboration Agreement, occurring through the termination effective date were reimbursed. Following receipt of the termination notice, the Company is no longer eligible to receive any regulatory milestone payments under the Baxalta Collaboration Agreement. Prior to the termination effective date, Baxalta was obligated to continue to perform development and manufacturing activities for M923.

On December 31, 2016, the Company and Baxalta entered into the Baxalta Termination Agreement, amending certain termination provisions of the Baxalta Collaboration Agreement. Under the terms of the Baxalta Termination Agreement, the termination of the Baxalta Collaboration Agreement was made effective December 31, 2016. Baxalta was relieved of its obligations to continue to perform activities for M923 after December 31, 2016, except for certain on-going clinical and regulatory activities that were completed in 2017, and in January 2017, Baxalta paid the Company a one-time cash payment of $51.2 million representing the costs Baxalta would have incurred in performing the activities it would have performed under Baxalta Collaboration Agreement through the original termination date.

In accordance with FASB's ASU No. 2009-13: Multiple-Deliverable Revenue Arrangements (Topic 615), the Company identified all of the deliverables at the inception of the Baxalta Collaboration Agreement. The deliverables were determined to include (i) six development and product licenses for each of M923, M834 and the four additional collaboration products, (ii) research and development services related to each of M923, M834 and the four additional collaboration products and (iii) the Company's participation in a joint steering committee. The Company determined that each of the license deliverables do not have stand-alone value apart from the related research and development services deliverables because (1) there are no other vendors selling similar, competing products on a stand-alone basis, (2) Baxalta does not have the contractual right to resell the license, and (3) Baxalta is unable to use the license for its intended purpose without the Company's performance of research and development services. As such, the Company determined that with respect to this arrangement separate units of accounting did exist for each of the six licenses together with the related research and development services, as well as the one unit of accounting for the joint steering committee. The estimated selling price for these units of accounting was determined based on similar license arrangements and the nature of the research and development services to be performed for Baxalta and market rates for similar services. At the inception of the Baxalta Collaboration Agreement, arrangement consideration of $61.0 million, which included the $33.0 million upfront payment and aggregate option payments for the four additional collaboration products of $28.0 million, was allocated to the units of accounting based on the relative selling price method. Of the $61.0 million, $10.3 million was allocated to the M923 product license together with the related research and development services, $10.3 million to each of the four additional collaboration product licenses with the related research and development services, $9.4 million was allocated to the M834 product license together with the related research and development services due to that product's stage of development at the time the license was delivered, and $114,000 was allocated to the joint steering committee unit of accounting.

At the inception of the Baxalta Collaboration Agreement, the Company delivered development and product licenses for M923 and M834 and commenced revenue recognition of the arrangement consideration allocated to those products. In addition, the Company began revenue recognition for the arrangement consideration allocated to the joint steering committee unit of accounting. Following Baxalta's termination of M834 and the lapse of its right to select additional products the number of deliverables were reduced from seven to two and the total consideration consideration decreased from $61 million to $40 million. The Company recognized the resulting change in revenue as a result of the decrease in deliverables and expected consideration on a prospective basis through the expected FDA approval of the remaining products.

As a result of termination of the Baxalta Collaboration Agreement, the Company's performance period for M923 and the joint steering committee ended on December 31, 2016; therefore, the Company recognized the remaining balance of deferred revenue of $22.0 million as research and development revenue in the year ended December 31, 2016. The total impact of the change in performance period was $11.0 million, or $0.16 per share. In addition, the Company recorded the $51.2 million asset return payment in other income in the fourth quarter of 2016 as a result of Baxalta's accelerated termination and funding of anticipated development costs pursuant to the Baxalta Collaboration Agreement.

Mylan Collaboration Agreement

The Company and Mylan entered into a collaboration agreement, or the Mylan Collaboration Agreement, effective February 9, 2016, pursuant to which the Company and Mylan agreed to collaborate exclusively, on a worldwide basis, to develop, manufacture and commercialize six of the Company’s biosimilar candidates, including M834.

Under the terms of the Mylan Collaboration Agreement, Mylan paid the Company a non-refundable upfront payment of $45 million. In addition, the Company and Mylan equally share costs (including development, manufacturing, commercialization and certain legal expenses) and profits (losses) with respect to such product candidates, with Mylan funding its share of collaboration expenses incurred by the Company, in part, through up to six contingent milestone payments, totaling up to $200 million across the six product candidates, two of which, totaling $60 million, the Company received in 2016.

For each product candidate other than M834, at a specified stage of early development, the Company and Mylan will each decide, based on the product candidate’s development progress and commercial considerations, whether to continue the development, manufacture and commercialization of such product candidate under the collaboration or to terminate the collaboration with respect to such product candidate.

Under the Mylan Collaboration Agreement, the Company granted Mylan an exclusive license under the Company’s intellectual property rights to develop, manufacture and commercialize the product candidates for all therapeutic indications, and Mylan granted the Company a co-exclusive license under Mylan’s intellectual property rights for the Company to perform its development and manufacturing activities under the product work plans agreed by the parties, and to perform certain commercialization activities to be agreed by the joint steering committee for such product candidates if the Company exercises its co-commercialization option described below. The Company and Mylan established a joint steering committee consisting of an equal number of members from the Company and Mylan to oversee and manage the development, manufacture and commercialization of product candidates under the collaboration. Unless otherwise determined by the joint steering committee, it is anticipated that, in collaboration with the other party, (a) the Company will be primarily responsible for nonclinical development activities and initial clinical development activities for product candidates; additional (pivotal or Phase 3 equivalent) clinical development activities for M834; and regulatory activities for product candidates in the United States through regulatory approval; and (b) Mylan will be primarily responsible for additional (pivotal or Phase 3 equivalent) clinical development activities for product candidates other than M834; regulatory activities for the product candidates outside the United States; and regulatory activities for products in the United States after regulatory approval, when all marketing authorizations for the products in the United States will be transferred to Mylan. Mylan will commercialize any approved products, with the Company having an option to co-commercialize, in a supporting commercial role, any approved products in the United States. The joint steering committee is responsible for allocating responsibilities for other activities under the collaboration.

The term of the collaboration will continue throughout the development and commercialization of the product candidates, on a product-by-product and country-by-country basis, until development and commercialization by or on behalf of the Company and Mylan pursuant to the Mylan Collaboration Agreement has ceased for a continuous period of two years for a given product candidate in a given country, unless earlier terminated by either party pursuant to the terms of the Mylan Collaboration Agreement.

The Mylan Collaboration Agreement may be terminated by either party for breach by, or bankruptcy of, the other party; for its convenience; or for certain activities involving competing products or the challenge of certain patents. Other than in the case of a termination for convenience, the terminating party will have the right to continue the development, manufacture and commercialization of the terminated products in the terminated countries. In the case of a termination for convenience, the other party will have the right to continue. If a termination occurs, the licenses granted to the non-continuing party for the applicable product will terminate for the terminated country. Subject to certain terms and conditions, the party that has the right to continue the development or commercialization of a given product candidate may retain royalty-bearing licenses to certain intellectual property rights, and rights to certain data, for the continued development and sale of the applicable product in the country or countries for which termination applies.

The Company accounts for the Mylan Collaboration Agreement as a collaboration pursuant to ASC 808. Consistent with its accounting policy, the Company has considered the provisions of ASC 605-25 by analogy to determine the appropriate recognition of the $45 million upfront payment from Mylan. In connection therewith, the deliverables in the arrangement were determined to include (i) six development and product licenses, for each of M834 and the five additional collaboration products, (ii) research and development services related to each of M834 and the five additional collaboration products and (iii) the Company’s participation in the joint steering committee. The Company has determined that each of the license deliverables does not have stand-alone value apart from the related research and development services deliverables because (1) there are no other vendors selling similar, competing products on a stand-alone basis, (2) Mylan does not have the contractual right to resell the license, and (3) Mylan is unable to use the license for its intended purpose without the Company’s performance of research and development services. As such, the Company determined that with respect to this arrangement, separate units of accounting exist for each of the six licenses together with the related research and development services, or the combined units of accounting, as well as a separate unit of accounting for participation in the joint steering committee. VSOE and TPE were not available for the combined units of accounting. As such, the Company determined BESP for the combined units of accounting based on an analysis of its existing license arrangements and other available data and the nature and extent of the research and development services to be performed. BESP for the joint steering committee unit of accounting was based on market rates for similar services. At the inception of the Mylan Collaboration Agreement, total arrangement consideration of $45 million was allocated to each of the units of accounting based on the relative selling price method by analogy to ASC 605-25. Of the $45 million, $8.2 million was allocated to the M834 combined unit of accounting, between $5.7 million and $9.0 million to the five additional combined units of accounting, considering the products’ stage of development at the time the licenses were delivered, and $51,000 was allocated to the joint steering committee unit of accounting. Changes in the key assumptions used to determine BESP for the units of accounting would not have a significant effect on the allocation of arrangement consideration.

At the inception of the Mylan Collaboration Agreement, the Company delivered development and product licenses for all six collaboration products and commenced revenue recognition of the arrangement consideration that was allocated to the respective units of accounting. In addition, the Company began revenue recognition for the arrangement consideration allocated to the joint steering committee unit of accounting. The Company determined it would be appropriate to recognize the upfront payment on a straight-line basis over the applicable performance period during which the research and development services are expected to be delivered, which begins upon delivery of the development and product license and ends upon FDA approval of the product. The Company currently estimates that the performance periods for the units of accounting range from five years to eight years. The Company concluded that presenting the amount as revenue was appropriate based on the provisions of ASC 808 and the fact that the upfront payment was attributed to the issuance of the license. During the year ended December 31, 2017, the Company recognized $5.0 million of the $45.0 million upfront payment as revenue. As of December 31, 2017, $33.6 million was deferred under this agreement, of which $2.9 million was included in current liabilities and $30.7 million was included in non-current liabilities in the consolidated balance sheet.

The collaboration with Mylan is a cost-sharing arrangement. Collaboration costs incurred by the parties are subject to quarterly reconciliation such that the final amount of expense included in the Company's statement of operations is equal to its 50% share of the total collaboration costs. The Company classifies the payments received or made under the cost sharing provisions of the arrangement as a component of research and development or general and administrative expense, accordingly to reflect the joint risk sharing nature of the arrangement, Mylan funds its 50% share of development-related collaboration costs through contingent milestone payments of up to $200 million across the six product candidates, while other shared collaboration costs are reconciled by the parties with the owing party reimbursing the other party by making quarterly payments. In the year ended December 31, 2016, the Company received two milestone payments totaling $60 million, of which $27.1 million funded Mylan's 50% share of 2016 development-related collaboration costs and $24.7 million funded Mylan's 50% share of 2017 development-related collaboration costs, leaving $8.2 million to be applied towards Mylan 50% share of future development-related collaboration costs. During the year ended December 31, 2017, the Company recovered $1.2 million of other shared collaboration costs from Mylan.

CSL License and Option Agreement

The Company and CSL Behring Recombinant Facility AG, or CSL, a wholly-owned indirect subsidiary of CSL Limited, entered into a License and Option Agreement, or the CSL License Agreement, effective February 17, 2017, pursuant to which the Company granted CSL an exclusive worldwide license to research, develop, manufacture and commercialize the M230 pre-clinical product candidate, an Fc multimer protein that is a selective immunomodulator of the Fc receptor. The CSL License Agreement also provides, on an exclusive basis, for the Company and CSL to conduct research on other Fc multimer proteins, and provides CSL the right to develop, manufacture and commercialize these additional research products globally.

Pursuant to the terms of the CSL License Agreement, CSL paid the Company a non-refundable upfront payment of $50 million. For the development and commercialization of M230, the Company is eligible to receive up to $550 million in contingent clinical, regulatory and sales milestone payments, and additional negotiated milestone payments for a named research stage product should that enter development. The Company is also entitled to sales-based royalty payments in percentages ranging from a mid-single digit to low-double digits for M230 and a named research stage product should that enter development and be commercialized, and royalties and development milestone payments to be negotiated for any other products developed under the CSL License Agreement. Sales milestones are based on aggregated sales across M230 and any other products developed under the CSL License Agreement. The Company also has the option to participate in a cost-and-profit sharing arrangement, under which the Company would fund 50% of global research and development costs and 50% of U.S. commercialization costs for all products developed pursuant to the CSL License Agreement, or the Co-Funded Products, in exchange for either a 50% share of U.S. profits, or the 50% Co-funding Option, or 30% share of U.S. profits, determined by the stage of development at which the Company makes such election. On August 28, 2017, the Company exercised its 50% Co-funding Option. As a result, for Co-Funded Products, royalties remain payable for territories outside of the United States, and the milestone payments for which the Company is eligible are reduced from up to $550 million to up to $297.5 million. The Company also has the right to opt-out of such arrangement at its sole discretion, which would result in milestone payments and royalties reverting to their pre-arrangement amounts. The Company also has the option to participate in the promotion of Co-Funded Products in the United States, subject to a co-promotion agreement to be negotiated with CSL.

Under the CSL License Agreement, the Company granted CSL an exclusive license under the Company’s intellectual property to research, develop, manufacture and commercialize product candidates for all therapeutic indications. CSL has granted the Company a non-exclusive, royalty-free license under CSL’s intellectual property for the Company’s research and development activities pursuant to the CSL License Agreement and its commercialization activities under any co-promotion agreement with CSL.

The Company and CSL formed a joint steering committee consisting of an equal number of members from the Company and CSL, to facilitate the research, development, and commercialization of product candidates.

Unless earlier terminated, the term of the CSL License Agreement commences on the Effective Date and continues until the later of (i) the expiration of all payment obligations with respect to products under the CSL License Agreement, (ii) the Company is no longer co-funding development or commercialization of any products and (iii) the Company and CSL are not otherwise collaborating on the development and commercialization of products or product candidates. CSL may terminate the CSL License Agreement on a product-by-product basis subject to notice periods and certain circumstances related to clinical development. The Company may terminate the CSL License Agreement under certain circumstances related to the development of M230 and if no activities are being conducted under the CSL License Agreement. Either party may terminate the CSL License Agreement (i) on a product-by-product basis if certain patent challenges are made, (ii) on a product-by-product basis for material breaches, or (iii) due to the other party’s bankruptcy. Upon termination of the CSL License Agreement, subject to certain exceptions, the licenses granted under the CSL License Agreement terminate. In addition, dependent upon the circumstances under which the CSL License Agreement is terminated, the Company or CSL has the right to continue the research, development, and commercialization of terminated products, including rights to certain data, for the continued development and sale of terminated products and, subject to certain limitations, obligations to make sales-based royalty payments to the other party.

CSL's obligations under the CSL License Agreement are guaranteed by its parent company, CSL Limited.

The Company applied ASC 605-25 at the inception of the arrangement. The deliverables in the arrangement were determined to include (i) the M230 research, development, manufacturing and commercialization license, (ii) the research license for other Fc multimer proteins and (iii) the Company's responsibility to transfer the technology package relating to M230 to CSL. The best estimate of the selling price associated with the Company's participation on the joint steering committee was deemed to be de minimis, and therefore was not evaluated further. The Company determined that the M230 research, development, manufacturing and commercialization license does not have stand-alone value separate and apart from the Company's responsibility to transfer the M230 technology package to CSL because (1) there are no other vendors selling similar licenses on a stand-alone basis, (2) CSL does not have the contractual right to resell the license or the transferred technology, and (3) CSL is unable to use the license for its intended purpose without the technology transfer. In addition, the Company determined that the research license does not have stand-alone value. As such, the Company determined that there was one unit of accounting. The total arrangement consideration of $50 million was allocated to the single unit of accounting and the Company determined it would recognize the amount as revenue once the technology transfer is completed, which is the final item to be delivered in the unit of accounting. The technology transfer occurred in the fourth quarter of 2017, therefore the Company recognized $50 million as revenue in the year ended December 31, 2017.

As discussed above, on August 28, 2017 the Company exercised its 50% Co-funding Option. Prior to the Company's exercise of its 50% Co-funding Option, the Company was reimbursed for certain costs under the arrangement, and such amounts were recorded as revenue or reductions to research and development expense depending on the nature of the activities. When the Company contracted directly with, managed the work of and was responsible for payments to third-party vendors for services the Company was obligated to provide to CSL, reimbursement of such costs were recorded as revenues on a gross basis. Reimbursable material costs incurred on CSL's behalf were netted against research and development expense. After the Company's exercise of its 50% Co-funding Option, the Company determined the arrangement became a collaboration pursuant to ASC 808. Reimbursement by CSL for its share of the development effort is presented as a reduction of operating expenses, and reimbursement by the Company for its share of the development effort is recorded as an incremental operating expense, consistent with the Company’s accounting policy for collaboration arrangements.