Acquisition-Related Contingent Consideration

6 Months Ended

Jun. 30, 2012

Acquisition-Related Contingent Consideration [Abstract]

Acquisition-Related Contingent Consideration

Note 3. Acquisition-Related Contingent Consideration

On April 1, 2009, Mymetics and Norwood Immunology Limited ("NIL") closed the acquisition of Bestewil Holding B.V. ("Bestewil") from its parent, NIL, under a Share Purchase Agreement pursuant to which Mymetics agreed to purchase all issued and outstanding shares of capital stock (the "Bestewil Shares") of Bestewil from its parent, NIL, and all issued and outstanding shares of capital stock of Virosome Biologicals B.V. which were held by Bestewil.

The contingent consideration to be paid under the Share Purchase Agreement includes:

· A payment of up to E3,000 in cash should a third party commence a Phase III clinical trial by April 1, 2013 for Mymetics' Intranasal Influenza Vaccine licensed from Bestewil;

· A payment of 50% of Mymetics' net royalties received from a Respiratory  Syncytial Virus license (RSV license), payable in cash, maximum amount unlimited; and

· A payment in cash, maximum amount unlimited, of 25% of any net amounts received by Mymetics from a third party Herpes Simplex Virus license (HSV license) based upon Bestewil intellectual property.

The fair value of the contractual obligations to pay the contingent consideration is determined based on a risk-adjusted, discounted cash flow approach. This fair value measurement is based on significant inputs not observable in the market and thus represents a Level 3 measurement within the fair value hierarchy. The resultant cash flows are discounted using a discount rate of 13.9%, which the Company believes is appropriate and is representative of a market participant assumption.

The fair value of the contingent consideration due to NIL according to the achievement of certain milestones and royalties on the vaccines RSV, HSV and Influenza is estimated at E6,291 as of June 30, 2012. Due to the termination of the license contract with Abbott for the influenza patent in October 2011, the portion of the contingent consideration liability related to influenza is nil as of June 30, 2012.

The following table presents changes to the Company's acquisition-related contingent consideration for the period ending June 30, 2012:

	Fair Value Measurements Using Significant
	Unobservable Inputs(Level 3)
	Acquisition-related Contingent Consideration
	As recorded on		Measurement Adjustment		As adjusted
	December 31, 2011				on June 30, 2012
Royalties for RSV	E	3,216	E	349	E	3,565
Royalties for HSV	E	2,537	E	189	E	2,726
Royalties for Influenza Vaccines	E	--	E	--	E	--
Total Contingent Consideration	E	5,753	E	538	E	6,291

During the six month period ending June 30, 2012, the fair value of the acquisition-related contingent consideration increased by E538 compared to the period ending December 31, 2011. The increase is due to a decrease in time as the milestones become closer.

The fair value recorded as of June 30, 2012 was determined based on a projection period ending in 2030 which corresponds to the lifetime of the underlying patents and management's assessment of the Company's ability to generate new patents from its research. The RSV vaccine is planned to be out-licensed after a Phase II. The contingent consideration related to the intra-nasal influenza vaccine has been reduced to zero, as it is very unlikely that the Phase III clinical trial will start before April 1, 2013, now that the Company has regained the rights to the influenza vaccine technology.