3 Fair value measurement

The following table sets forth the Company's assets and liabilities that are measured at fair value on a recurring basis as of December 31, 2016 and 2015:

	Quoted prices in active markets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)		Total		Classification in consolidated balance sheets
	in thousands
At December 31, 2015
Assets:
Cash and cash equivalents	$	221,626	$	—	$	—	$	221,626

Total assets		221,626		—		—		221,626


Liabilities:
Derivative financial instruments—long-term debt		—		—		259		259	Accrued expenses and other current liabilities
Derivative financial instruments—related party		—		—		578		578	Other non-current liabilities
Contingent consideration		—		—		2,926		2,926

Total liabilities	$	—	$	—	$	3,763	$	3,763


At December 31, 2016
Assets:
Cash and cash equivalents		132,496		—		—		132,496

Total assets		132,496		—		—		132,496


Liabilities:
Derivative financial instruments—long-term debt		—		—		11		11	Accrued expenses and other current liabilities
Derivative financial instruments—related party		—		—		51		51	Other non-current liabilities
Contingent consideration		—		—		1,838		1,838

Total liabilities	$	—	$	—	$	1,900	$	1,900

Changes in Level 3 items during the years ended December 31, 2016, 2015 and 2014 are as follows:

	Contingent consideration			Level 3 Derivative financial instruments			Total
	in thousands
Balance at December 31, 2013	$	—		$	299		$	299
Additions		1,743			—			1,743
(Gains) / losses recognized in profit or loss		195			(14	)		181
Currency translation effects		(171	)		(34	)		(205	)

Balance at December 31, 2014		1,767			251			2,018


Issuance of financial instruments		—			(10,060	)		(10,060	)
Allocation to shareholders' equity		—			3,614			3,614
(Gains) / losses recognized in profit or loss		1,339			7,162			8,501
Currency translation effects		(180	)		(130	)		(310	)

Balance at December 31, 2015		2,926			837			3,763


(Gains) / losses recognized in profit or loss		(1,080	)		(785	)		(1,865	)
Currency translation effects		(8	)		10			2

Balance at December 31, 2016	$	1,838		$	62		$	1,900

Contingent consideration

In connection with the acquisition of InoCard, the Company recorded contingent consideration related to amounts potentially payable to InoCard's former shareholders. The amounts payable are contingent upon realization of the following milestones:


	•	Successful completion of GLP toxicity and safety study;
	•	First patient dosed in a clinical study; and
	•	Full proof-of-concept of the product in human patients after finalization of a phase I/II study.

The valuation of the contingent liability is based on significant inputs not observable in the market such as the probability of success ("POS") of achieving the research milestones (estimated as probable for the first two milestones as of the balance sheet date), the time at which the research milestones are expected to be achieved (ranging from 2018 to 2021, as of the balance sheet date), as well as the 30% discount rate applied, which represents a Level 3 measurement. Varying, next to the passing of time, the unobservable inputs results in the following fair value changes:

	2016			2015
	in thousands
Change in fair value
Delay in milestones by 6 months	$	(209	)	$	(313	)
Increasing the POS for the first milestone by 20%		367			585
Decreasing the POS for the first milestone by 20%		(367	)		(585	)
Reducing the discount rate from 30% to 20%		638			1,228
Increasing the discount rate from 30% to 40%		(309	)		(560	)

Derivative financial instruments

The Company issued various derivative financial instruments related to the collaboration with Bristol-Meyers Squibb Company ("BMS") and in relation to the issuance of the Hercules Technology Growth Corp. ("Hercules") loan facility:

BMS collaboration

On April 6, 2015 ("Execution Date"), the Company entered into agreements with BMS. Pursuant to the terms of the agreements, BMS was required to purchase from the Company a certain number of shares such that:


	•	BMS would own 4.9% of the issued and outstanding ordinary shares of the Company immediately after the approval of the collaboration by the Company's shareholders ("First Closing"); and
	•	Prior to December 31, 2015 BMS would own 9.9% of the issued and outstanding ordinary shares of the Company immediately after such purchase ("Second Closing").

The purchase price per ordinary share related to the First Closing was agreed at $33.84 per share at the Execution Date.

The purchase price per ordinary share related to the Second Closing on August 7, 2015, was $29.67, which was equal to 110% of the Volume Weighted Average price ("VWAP") for the 20 trading days ending on the date that is 5 days prior to the Second Closing. The timing of the investment was at the sole discretion of BMS.

Additionally, BMS was granted two warrants:


	•	A warrant allowing BMS to purchase a specific number of uniQure ordinary shares such that its ownership will equal 14.9% immediately after such purchase. The warrant can be exercised on the later of (i) the date on which the Company receives from BMS the Target Designation Fees (as defined in the collaboration agreements) associated with the first six New Targets (as defined in the collaboration agreements); and (ii) the date on which BMS designates the sixth New Target.
	•	A warrant allowing BMS to purchase a specific number of uniQure ordinary shares such that its ownership will equal 19.9% immediately after such purchase. The warrant can be exercised on the later of (i) the date on which uniQure receives from BMS the Target Designation Fees associated with the first nine New Targets; and (ii) the date on which BMS designates the ninth New Target.

The exercise price, in respect of each warrant, will be equal to the greater of (i) the product of (A) $33.84, multiplied by (B) a compounded annual growth rate of 10% and (ii) the product of (A) 1.10 multiplied by (B) the VWAP for the 20 trading days ending on the date that is five trading days prior to the date of a notice of exercise delivered by BMS.

On the Execution Date, the Company recorded derivative financial instruments related to the First Closing, Second Closing and the two warrants at a combined fair value of $10.1 million (recorded as an asset). The Company evaluated the Share Subscription Agreement and the Collaboration Agreement (see note 4, "Collaboration arrangements and concentration of credit risk") as one agreement.

The Company recorded other losses of $7.3 million related to the changes in fair value of the derivative financial asset related to the First Closing between the Execution Date and June 12, 2015. On June 12, 2015, the Company issued 1.1 million of its ordinary shares to BMS for aggregate cash proceeds of $37.6 million, thereby extinguishing the derivative financial asset at its fair value of $5.0 million at this date and raising $32.6 million equity. After the extinguishment the equity raised from the sale of ordinary shares in excess of the market price of $29.37 per share was recorded in additional paid-in capital as these amounts result from an investment decision made by BMS.

The Company recorded other losses of $0.3 million related to changes in fair value of the derivative financial liability related to the Second Closing between the Execution Date and August 7, 2015. On August 7, 2015, the Company issued 1.3 million of its ordinary shares to BMS at $29.67 per ordinary share for aggregate cash proceeds of $37.9 million, thereby extinguishing the derivative financial liability at its fair value of $1.4 million at this date and raising $39.3 million equity. After the extinguishment the equity raised from the sale of ordinary shares in excess of the market price of $23.64 per share was recorded in additional paid-in capital as these amounts result from an investment decision made by BMS.

The fair value of the warrants as of December 31, 2016 is $0.1 million (December 31, 2015: $0.6 million). During the year ended December 31, 2016, the Company recognized $0.5 million in other non-operating income (expense) (December 31, 2015: $0.5 million gain) related to fair value changes of the BMS warrants.

The Company used Monte-Carlo simulations to determine the fair market value of the BMS warrants. The valuation model incorporated several inputs, including the underlying share price at both the Execution Date and on May 21, 2015, the effective date of the collaboration agreement ("Effective Date") as well as at the balance sheet date, the risk-free rate adjusted for the period affected, an expected volatility based on a peer group analysis, the expected yield on any dividends and management's expectations on the timelines of reaching certain defined trigger events for the exercising of the warrants, as well as management's expectations regarding the number of ordinary shares that would be issued upon exercise of the warrants. All of these represent Level 3 inputs. Additionally, the model assumes BMS will exercise the warrants only if it is financially rational to do so. Varying the unobservable inputs results in the following fair value changes as of December 31, 2016:

	7th warrant		10th warrant		Total
	in thousands
Base case	$	21	$	30	$	51
Increase volatility by 10% to 85%		41		49		90
Extend exercise dates by one year		42		38		80

Exercise of the warrants are expected to occur within 3 and 5 years after the balance sheet date. The Company classified the derivative financial liabilities as non-current at the balance sheet date.

Hercules loan facility

On June 14, 2013, the Company entered into a venture debt loan facility with Hercules ("Original Facility"). The Original Facility entered into with Hercules (see note 9, "Long-term debt") included a warrant. The warrant was not closely related to the host contract and was accounted for separately as a derivative financial liability measured at fair value though profit or loss. The warrant included in the Original Loan Agreement remained in place following the 2014 and 2016 amendments of the loan. The fair value of this derivative as of December 31, 2016 is $0.0 million (December 31, 2015: $0.3 million). During the year ended December 31, 2016, uniQure recognized a $0.3 million gain in other non-operating income / (expense) (December 31, 2015: $0.0 million) related to fair value changes of the Hercules warrants.

The fair value of the warrant is based on the Black-Scholes model. Assumptions are made on inputs such as risk-free rate, the share price, time to maturity and unobservable inputs such as volatility and foreign exchange to translate to euro, the functional currency of the issuer, in order to determine the fair value per warrant. Varying the unobservable inputs results in the following fair value changes as of December 31, 2016:

	Share price		Volatility		Time to maturity
	in thousands
–10%	$	8	$	8	$	9
Base Case		11		11		11
+10%		15		15		13