3 Collaboration arrangements and concentration of credit risk

BMS collaboration

In May 2015, the Company entered into a collaboration and license agreement with Bristol-Myers Squibb (“BMS”) that provides BMS with exclusive access to the Company’s gene therapy technology platform for the research, development and commercialization of therapeutics aimed at multiple targets in cardiovascular and other diseases (“Collaboration Targets”). During the initial research term of the agreement, the Company is supporting BMS in discovery, non‑clinical, analytical and process development efforts in respect of the Collaboration Targets. For any Collaboration Targets that may be advanced, the Company will be 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 costs in support of the collaboration during the research term, and will lead development, regulatory and commercial activities for any Collaboration Targets that may be advanced. The companies may collaborate on up to ten Collaboration Targets in total. The Company has agreed to certain restrictions on its ability to work independently of the collaboration, either directly or indirectly through any affiliate or third party, on certain programs that would be competitive with the collaboration programs.

BMS initially designated four Collaboration Targets, including S100A1 for congestive heart failure (“AMT-126”). In October 2018, the Company and BMS completed a heart function proof-of-concept study of AMT-126 in a pre-clinical animal model of heart failure. The study demonstrated deoxyribonucleic acid (“DNA”) delivery and expression of S100A1 in the myocardium, thereby validating its vector delivery platform in the animal model. The data did not show a benefit on heart function at six months and, consequently, the Joint Steering Committee for the collaboration decided to discontinue work on S100A1. In April 2019, BMS designated a new cardiovascular Collaboration Target to replace S100A1. BMS has not designated or reserved any additional Collaboration Targets as of March 31, 2019.

The initial four-year research term under the collaboration terminates on May 21, 2019. In February 2019, BMS requested a one-year extension of the research term. In April 2019, following an assessment of the progress of this collaboration and the Company’s expanding proprietary programs, the Company notified BMS that the Company did not intend to agree to an extension of the research term. Accordingly, the Company is currently in discussions with BMS potentially to amend the collaboration and license agreement and other related agreements following the expiration of the research term. It is currently uncertain whether an amendment to the collaboration and license agreement and related agreements will be agreed and, if agreed, what the specific terms of any such amendment may be. As a consequence, the Company has not taken into account the impact of such amendment, if any, on the timing of recognition of the prepaid license revenue. The Company will account for potential changes in the timing of recognition of the prepaid license revenue if and when the agreements have been amended.

The Company evaluated the BMS Collaboration Agreement and determined that its performance obligations 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 selection of Collaboration Targets, the collaboration as a whole, the development during the pre-clinical and the clinical phase through participating in joint steering committee and other governing bodies (“License Revenue”);

(ii)

Providing pre-clinical Collaboration Target specific, non‑clinical, analytical and process development services (“Collaboration Revenue”); and

(iii)

Providing clinical and commercial manufacturing services for Collaboration Targets (“Manufacturing Revenue”). To date the Company has not generated any Manufacturing Revenues.

Amounts owed by BMS in relation to Collaboration Revenue are as follows:


	March 31,		December 31,
	2019		2018
	(in thousands)
Bristol Myers Squibb	$	461	$	233
Total	$	461	$	233

License Revenue

The Company recognized $0.6 million of License Revenue for the three months ended March 31, 2019, respectively, compared to $2.5 million during the same period in 2018 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.

The Company would also be entitled to an aggregate $16.5 million in target designation payments upon the selection of the fifth to tenth Collaboration Target. The Company would also be eligible to receive research, development and regulatory milestone payments of up to $254.0 million for a lead Collaboration Target and up to $217.0 million for each of the other selected Collaboration Targets, if milestones are achieved. The Company would include the variable consideration related to the selection of the fifth to tenth Collaboration Target, or any of the milestones, in the transaction price once it is considered probable that including these payments in the transaction price would not result in the reversal of cumulative revenue recognized. The Company would recognize significant amounts of License Revenue for services performed in prior periods if and when the Company considers this probable. Due to the significant uncertainty surrounding the development of gene-therapy product candidates and the dependence on BMS’s performance and decisions, the Company does not currently consider this probable.

Additionally, the Company is eligible to receive net sales-based milestone payments and tiered mid-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 performance obligations are satisfied.

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.

The estimation of total services at the end of each reporting period involves considerable judgement. The estimated number of Collaboration Targets 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 Collaboration Targets being designated by 10% then the revenue for the three months ended March 31, 2019 would have decreased by approximately $1.8 million, as the Company would be required to render more services in relation to the consideration received.