4 Collaboration arrangements and concentration of credit risk

In the three months ended March 31, 2018, the Company generated all collaboration and license revenues from its Collaboration and License Agreement with BMS.

The Company and Chiesi Farmaceutici S.p.A. (“Chiesi”) terminated their collaboration in 2017.

Services to BMS are rendered through the Dutch operating entity. Total collaboration and license revenue generated from these partners are as follows:


	Three months ended March 31,
	2018		2017

Bristol Myers Squibb	$	3,478	$	1,507
Chiesi Farmaceutici S.p.A (terminated in 2017)		—		1,814
Total	$	3,478	$	3,321

Amounts owed by BMS in relation to the collaboration services are as follows:

BMS collaboration

In May 2015, the Company closed a Collaboration and License Agreement with BMS (the “BMS Collaboration Agreement”) that provides exclusive access to the Company’s gene therapy technology platform for multiple targets in cardiovascular (and other target specific) diseases. The collaboration included the Company’s proprietary gene therapy program for congestive heart failure which aims to restore the heart's ability to synthesize AMT-126, a calcium sensor and master regulator of heart function, and thereby improve clinical outcomes for patients with reduced ejection fraction. Beyond cardiovascular diseases, the agreement also included the potential for a target exclusive collaboration in other disease areas. In total, the companies may collaborate on ten targets, including AMT-126.

The Company is conducting the discovery, non-clinical, analytical and process development activities and is responsible for manufacturing of clinical and commercial supplies using the Company’s vector technologies and industrial, proprietary insect-cell based manufacturing platform. BMS reimburses the Company for all its research and development efforts in support of the Collaboration, and will lead the clinical development and regulatory activities across all programs. BMS will also be solely responsible for commercialization of all products from the collaboration.

The Company evaluated the BMS Collaboration Agreement and determined that its performance obligations according with its new revenue recognition adopted on January 1, 2018, are as follows:

(i)

Providing access to its technology and know-how in the field of gene therapy as well as actively contributing to the target selection, the collaboration as a whole, the development during the target selection, the pre-clinical and the clinical phase through participating in joint steering committee and other governing bodies (“License Revenue”);

(ii)

Providing pre-clinical research activities (“Collaboration Revenue”); and

(iii)

Providing clinical and commercial manufacturing services for products (“Manufacturing Revenue”).

License revenue – BMS

The Company recognized $2.5 million of license revenue for the three months ended March 31, 2018 compared to $0.9 million during the same period in 2017 in relation to a $60.1 million upfront payment recorded on May 21, 2015, as well as $15.0 million received in relation to the designation of the second, third and fourth collaboration target in August 2015 (together “Consideration”).

The Company also is entitled to an aggregate $16.5 million in target designation payments upon the selection of the fifth to tenth collaboration target. The Company will also be eligible to receive research, development and regulatory milestone payments of up to $254.0 million for AMT-126 and up to $217.0 million for each of the other selected targets, if milestones are achieved. The Company will include the variable consideration related to the selection of the fifth to tenth collaboration target or any of the milestones in the transaction price if it no longer considers it probable that including these payments in the transaction price would not result in the reversal of cumulative revenue recognized. Due to the significant uncertainty surrounding the development of gene-therapy product candidates and the dependence on BMS’s performance and decisions the Company so far did not consider this probable. The Company might recognize significant amounts of License Revenue for services performed in prior periods if and when the Company determines that the uncertainty regarding the above variable consideration has been resolved and the Company would include these payments in the transaction price.

Additionally, the Company is eligible to receive net sales-based milestone payments and tiered high single to low double-digit royalties on product sales. The royalty term is determined on a licensed-product-by-licensed-product and country-by-country basis and begins on the first commercial sale of a licensed product in a country and ends on the expiration of the last to expire of specified patents or regulatory exclusivity covering such licensed product in such country or, with a customary royalty reduction, ten years after the first commercial sale if there is no such exclusivity. These revenues will be recognized when earned.

Under the previous revenue standard, the Company recognized License Revenue over the expected performance period on a straight-line basis commencing on May 21, 2015. In accordance with the new revenue recognition standards, the Company recognizes License Revenue over the expected performance period based on its measure of progress towards the completion of certain activities related to its services. The Company determines such progress by comparing activities performed at the end of each reporting period with total activities expected to be performed. The Company estimates total expected activities using a number of unobservable inputs, such as the probability of BMS designating additional targets, the probability of successfully completing each phase and estimated time required to provide services during the various development stages. If available, the Company uses product candidate specific research and development plans. Alternatively, the Company assumes that completion of the pre-clinical phase requires an average of four years and that clinical development and commercial launch on average require 8.5 years to complete.

The estimation of total services at the end of each reporting period involves considerable judgement. The estimated number of product candidates that BMS will pursue, significantly impacts the amount of License Revenue the Company recognizes. For example, if the Company would increase the probability of all additional targets being designated by 10% than the revenue for the three months ended March 31, 2018, would have decreased by approximately $0.7 million to $1.8 million as the Company would be required to render more services in relation to the Consideration received.

Collaboration Revenue – BMS

The Company provides research and development services to BMS. Collaboration revenue related to these contracted services is recognized when earned.

The Company generated $1.0 million of collaboration revenue during the three months ended March 31, 2018, compared to $0.6 million during the same period in 2017.

Manufacturing Revenue – BMS

BMS and the Company also entered into Master Clinical Supply Agreement in April 2017 for the Company to supply gene therapy products during the clinical as well as into a binding term sheet to supply gene therapy products during the commercial phase to BMS. Revenues from product sales will be recognized when earned. To date the Company has not supplied any clinical and commercial gene therapy product to BMS.

December 31,

in thousands

Bristol Myers Squibb