4. Collaboration Agreement

On May 28, 2013, the Company entered into the collaboration and license agreement with ThromboGenics. Under this agreement, the Company and ThromboGenics are collaborating to identify protein or peptide therapeutics that directly modulate any of a specified set of targets in a novel pathway in retinal disease. The Company and ThromboGenics jointly own any know-how made by or on behalf of either party in the course of the research and any patent rights claiming such know-how. The Company has granted ThromboGenics an exclusive, sublicenseable, royalty-bearing license under the Company’s rights in these patent rights and know-how, as well as under any other patent rights and know-how that the Company controls during the research term that are necessary for ThromboGenics to perform its obligations to research, develop, manufacture and commercialize collaboration products.

ThromboGenics will fund certain research and development services performed by the Company during the research term, which is initially thirty (30) months and automatically extends to the extent that the parties mutually agree in writing. The activities under the agreement are governed by a Joint Research Committee (“JRC”). The JRC is responsible for overseeing the research activities under the agreement. The JRC will disband at the end of the research term.

The Company received a $1.75 million upfront payment and will receive a set rate per annual full time equivalent personnel working on the collaboration, which will be paid quarterly in advance. The Company is also eligible to receive up to an aggregate of $25.0 million in milestone payments and may also receive low single-digit royalties on sales of any commercialized products resulting from the collaboration. There are no commercialization or sales-based milestones under the agreement.

The agreement expires when all of ThromboGenics’ payment obligations expire. The agreement provides that either party may terminate the agreement in the event of the other party’s insolvency, bankruptcy or comparable proceedings, or if the other party materially breaches the agreement and does not cure such breach during a specified cure period. The Company may terminate the agreement if ThromboGenics or any of its affiliates or licensees challenges the patent rights licensed to ThromboGenics. ThromboGenics may terminate the agreement for convenience by providing the Company with notice following the end of the research term. There are no refund provisions in this agreement.

The Company accounts for this agreement pursuant to ASC Topic 605-25, Revenue Recognition – Multiple Element Arrangements, or ASC 605-25. The Company identified the following deliverables in this agreement:

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an exclusive license to the Company’s intellectual property that is necessary for ThromboGenics to perform its obligations during the research term. (“Research License Deliverable”);

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the Company’s obligation to provide research services (“Research Services Deliverable”); and

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the Company’s participation on the JRC (“JRC Deliverable”).

The Company determined that the licenses to future collaboration product candidates are contingent upon the identification of future product candidates as a result of the Research Services, and as such, have not been identified as a separate deliverable at the inception of the arrangement.

The Company determined that the Research License Deliverable did not have standalone value from the Research Services Deliverable because the License is not sold separately and could not be resold on a standalone basis. While the intellectual property rights granted to ThromboGenics under this agreement are sublicensable, the Company determined that the Research License Deliverable does not have value without the Research Services Deliverable as the Company’s intellectual property could not be sold separately or utilized to develop product candidates without the expertise of the Company that is provided through the Research Services Deliverable. The Company concluded that ThromboGenics does not have the expertise to perform the specialized research activities and such expertise is not readily available in the marketplace. As such, the Company has accounted for the Research License Deliverable and the Research Services Deliverable as a combined unit of accounting. The Company determined that the JRC Deliverable has standalone value from the Research License Deliverable and the Research Services Deliverable (the combined unit of account). The Company has determined that the best estimate of selling price of the JRC Deliverable is de minimis, and thus the non-contingent arrangement consideration has been allocated to the combined unit of accounting.

The Company is recognizing the arrangement consideration using the proportional performance method, by which the amounts are recognized in proportion to the costs incurred based on full time equivalent personnel efforts. The Company recorded revenue of $244,000 for the three months ended March 31, 2015. The costs incurred by the Company related to the research activities are recorded as research and development expense in the statement of operations and comprehensive loss.

The potential milestone payments under this agreement are comprised of (i) up to an aggregate of $10.0 million of milestone payments due upon the achievement of specified preclinical and clinical development milestone events, and (ii) up to an aggregate of $15.0 million in milestone payments due upon the achievement of specified regulatory milestone events. The Company believes that certain of the preclinical and clinical development milestone payments are consistent with the definition of substantive milestones, and, accordingly, the Company will recognize these payments upon the achievement of such milestones, if any, in the period that such milestone is achieved. The remaining clinical development and regulatory milestone payments were not considered substantive and will be recognized upon achievement of the revenue recognition criteria of ASC 605. Factors considered in the evaluation of whether the milestones are substantive included the degree of risk associated with performance of the milestone, the level of effort and investment required, whether the milestone consideration was reasonable relative to the deliverables and whether the milestone was earned at least in part based on the Company’s performance.

As of March 31, 2015, the Company had not received any milestone or royalty payments.