4 Collaboration arrangements and concentration of credit risk

In the three and nine months ended September 30, 2017, the Company generated all collaboration and license revenues from its Collaboration and License Agreement with BMS, and its Co-Development Agreement for hemophilia B with Chiesi Farmaceutici S.p.A. (“Chiesi”).

On April 19, 2017, the Company and Chiesi entered into an agreement to terminate the Glybera Commercialization Agreement following the Company’s decision to not seek renewal with the European Medicines Agency of the marketing authorization for Glybera by October 2017 (“Glybera Termination Agreement”). In July 2017, the Company and Chiesi terminated their co-development agreement in respect of the hemophilia B program (“hemophilia B Termination Agreement”). As a result, the Company holds the global rights to the development of the hemophilia B program and is not required to provide any further services in relation to the co-development and active contribution to the collaboration by providing technology access in the field of gene therapy to Chiesi.

Since June 2015, BMS has been considered a related party given the significance of its equity investment in the Company.

Services to the Company’s collaboration partners are rendered by the Dutch operating entity. Total collaboration and license revenue generated from these partners are as follows:


	Three months ended September 30,				Nine months ended September 30,
	2017		2016		2017		2016
	in thousands
Bristol Myers Squibb	$	2,260	$	5,125	$	5,877	$	10,396
Chiesi Farmaceutici S.p.A		—		2,096		4,646		5,571
Total	$	2,260	$	7,221	$	10,523	$	15,967

Amounts owed by these partners in relation to the collaboration are as follows:


	September 30,		December 31,
	2017		2016
	in thousands
Bristol Myers Squibb	$	1,945	$	5,500
Chiesi Farmaceutici S.p.A		—		3,680
Total	$	1,945	$	9,180

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 S100A1, 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 S100A1.

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 it is a revenue arrangement with multiple elements. The Company’s substantive deliverables under the BMS Collaboration Agreement include an exclusive license to its technology in the field of cardiovascular disease, research and development services for specific targets chosen by BMS and general development of the Company’s proprietary vector technology, participation in the Joint Steering Committee, and clinical and commercial manufacturing. The Company concluded that the BMS Collaboration Agreement consists of three units of accounting, including (i) technology (license and target selections), know-how and manufacturing in the field of gene therapy and development and active contribution to the development through the Joint Steering Committee participations, (ii) provision of employees, goods and services for research activities for specific targets and (iii) clinical and commercial manufacturing. The Company determined that the license does not have stand-alone value to BMS without the Company’s know-how and manufacturing technology through the participation of the Joint Steering Committee and accordingly, they were combined into one unit of accounting.

License revenue – BMS

As of May 21, 2015, the effective date of the BMS Collaboration Agreement, the Company recorded deferred revenue of $60.1 million. On July 31, 2015, BMS selected the second, third and fourth collaboration targets, triggering a $15.0 million target designation payment to the Company. The Company is entitled to an aggregate of $16.5 million in target designation payments upon the selection of the fifth through tenth collaboration targets. The Company will also be eligible to receive research, development and regulatory milestone payments of up to $254.0 million for S100A1 and up to $217.0 million for each of the other selected targets, if milestones are achieved. The Company determined that the contingent payments under the BMS Collaboration Agreement relating to research, development and regulatory milestones do not constitute substantive milestones and will not be accounted for under the milestone method of revenue recognition. The events leading to these payments solely depend on BMS’ performance. Accordingly, any revenue from these contingent payments would be allocated to the first unit of accounting noted above and recognized over the expected performance period.

License revenue is recognized over an expected performance period of 19 years on a straight-line basis commencing on May 21, 2015. The expected performance period is reviewed quarterly and adjusted to account for changes, if any, in the Company´s estimated performance period. The estimated performance period did not change in the nine months ended September 30, 2017.

The Company recognized $1.1 million and $3.1 million of license revenue for the three and nine months ended September 30, 2017, respectively, and compared to $1.0 million and $3.0 million during the same periods in 2016.

Additionally, the Company is eligible to receive net sales-based milestone payments and tiered high single to low double-digit royalties on product sales. These revenues will be recognized when earned.

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 such first commercial sale if there is no such exclusivity.

Collaboration revenue – BMS

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

The Company generated $1.1 million and $2.8 million of collaboration revenue during the three and nine months ended September 30, 2017, respectively, compared to $4.1 million and $7.4 million during the same periods in 2016.

Manufacturing revenue – BMS

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

Chiesi collaboration

In 2013, the Company entered into two agreements with Chiesi, one for the co-development and commercialization of the hemophilia B program (the “Hemophilia Collaboration Agreement”) and one for the commercialization of Glybera (the “Glybera Agreement”, and together with the Collaboration Agreement, the “Chiesi Agreements”) in Europe and selected territories.

In April 2017, the parties agreed to terminate the Glybera Agreement. Accordingly, the Company will not be required to supply Glybera to Chiesi beyond October 2017. In July 2017, the parties terminated the Hemophilia Collaboration Agreement and the Company reacquired rights associated with its hemophilia B program in Europe and selected territories.

License revenue – Chiesi

Upon the closing of the Chiesi Agreements on September 30, 2013, the Company received €17.0 million ($22.1 million) in non-refundable up-front payments. The Company determined that the up-front payments constituted a single unit of accounting that should be amortized as license revenue on a straight-line basis over the performance period of July 2013 through September 2032. In July 2017, the Company fully released the outstanding deferred revenue and recorded $13.8 million other income during the three and nine months ended September 30, 2017.

The Company recognized $0.0 million and $0.0 million of license revenue during the three and nine months ended September 30, 2017, respectively, compared to $0.2 million and $0.7 million during the same periods in 2016. The Company recognized the license revenue for the nine months ended September 30, 2017, net of a $0.5 million reduction for amounts previously amortized and repaid by the Company in accordance with the Glybera Termination Agreement in 2017.

Collaboration revenue – Chiesi

Prior to the termination of the Hemophilia Collaboration Agreement up to June 30,2017, Chiesi reimbursed the Company for 50% of the agreed research and development efforts related to hemophilia B. These reimbursable amounts have been presented as collaboration revenue.

The Company generated $0.0 million and $4.6 million of collaboration revenue from the co-development of hemophilia B during the three and nine months ended September 30, 2017, respectively, compared to $1.9 million and $4.8 million during the same periods in 2016.