The Company has not recorded revenues in the year ended December 31, 2019, and all revenues in the years ended December 31, 2018 and 2017, respectively, relate to an exclusive License and Collaboration Agreement (Collaboration Agreement) with Aventis Inc., a wholly-owned subsidiary of Sanofi. The Collaboration Agreement provided for the research, development and potential commercialization of pharmaceutical products for the treatment, prevention and diagnosis of hypertrophic and dilated cardiomyopathy, as well as potential additional indications. Revenues for the two years ended December 31, 2018 and 2017, respectively, relate to a $45.0 million payment received from Sanofi in January 2017 as a non-refundable continuation payment for such research and development. The $45.0 million was recognized pro-rata over the two-year period ending December 31, 2018 based on a cost-based input method and was recorded proportionally in relation to the Company’s research and development effort over those periods.

The Collaboration Agreement provided for a termination clause whereby on or before December 31, 2018, Sanofi was required to notify the Company of its intent to continue the collaboration and on December 31, 2018 Sanofi notified the Company it was not continuing the collaboration; however, certain royalty rights remained with Sanofi. In July 2019, the Company and Sanofi entered into a Termination Agreement and the Company reacquired these U.S. royalty rights for $80.0 million, of which $50.0 million was paid immediately and $30.0 million was deposited into escrow to be paid to Sanofi by June 30, 2020 without conditions. The Company also paid $4.3 million to Sanofi for certain of its assets related to the danicamtiv program. Neither the Company nor Sanofi have further obligations under the Collaboration Agreement that would prevent the payment of the escrowed amount. As a result of the Termination Agreement, there are no further rights or obligations between the parties.

The Company implemented ASC 606 using the full retrospective transition method effective January 1, 2018 and revised its revenue for the years ended December 31, 2016 and 2017 accordingly. The Company evaluated the Collaboration Agreement under ASC 606 and determined that it had the following performance obligations to Sanofi:

1. the licenses of intellectual property for each of the HCM-1, HCM-2 and DCM-1 compound development programs, and

2. the performance of research and development services, including regulatory support, for each of the three programs.

The Company considered whether the licenses had standalone functionality and were capable of being distinct; however, given the fact that the research and development services were of such a specialized nature that could only be performed by the Company and Sanofi could not benefit from the intellectual property licenses without the Company’s performance, the Company determined that the intellectual property licenses were not distinct from the research and development services and thus the license and research and development services for each program were combined into three separate performance obligations.

For revenue recognition purposes, the Company determined that the Collaboration Agreement was a period to period contract for which the Company had enforceable rights and obligations from inception through the initial term of December 31, 2016. Sanofi had the right to terminate the Collaboration Agreement prior to December 31, 2016 or to extend the contract term through December 31, 2018. If Sanofi had elected to terminate the agreement, the termination would have taken effect on December 31, 2016 and all licensed rights would have reverted to the Company. The Company did not have any obligation to reimburse Sanofi any portion of the payments received if Sanofi had terminated the agreement.

In December 2016, Sanofi elected to continue the Collaboration Agreement for an extended term ending December 31, 2018 and made a $45.0 million continuation payment to the Company in January 2017. The Company determined that the extended term was to be treated as a separate contract because such an extension was not probable at the inception of the contract, the extension represented additional goods and services, and such activities were priced commensurate to the effort required and did not involve any significant discount. It was also concluded that the extended term provided the Company with enforceable rights and obligations for the two-year period ended December 31, 2018. Because Sanofi retained the option in the Collaboration Agreement to extend the arrangement, neither party was committed to perform and the contract did not have enforceable rights and obligations beyond December 31, 2018.

The Company’s assessment of the transaction price included an analysis of amounts to which it was expected to be entitled for providing goods or services to the customer. The extended term (from January 1, 2017 to December 31, 2018) had a fixed fee of $45.0 million, paid by Sanofi contemporaneously with the notice of continuation of the contract. The Company therefore determined that the transaction price for this extended term was $45.0 million and this amount was recognized over the periods ending December 31, 2018 and 2017, respectively.

As noted above, the Collaboration Agreement included up to $45.0 million in funding from Sanofi of approved in-kind research and clinical activities. Sanofi was the decision maker on how to provide these services and such services were used in the development of joint program technology which is co-owned by both parties. As such the Company concluded that these in-kind contributions did not constitute consideration paid by Sanofi to the Company.

Any consideration related to sales-based royalties were to be recognized when the related sales occurred and therefore have also been excluded from the transaction price.

Since the Company determined that the three performance obligations were satisfied over time, the Company selected a single revenue recognition method that it believed most faithfully depicts the Company’s performance in transferring control of the services. ASC 606 allows entities to choose between two methods to measure progress toward complete satisfaction of a performance obligation:

1. Output methods - recognize revenue on the basis of direct measurements of the value to the customer of the goods or services transferred to date relative to the remaining goods or services promised under the contract (e.g. surveys of performance completed to date, appraisals of results achieved, milestones reached, time elapsed, and units produced, or units delivered); or

2. Input methods - recognize revenue on the basis of the entity’s efforts or inputs to the satisfaction of a performance obligation (e.g., resources consumed, labor hours expended, costs incurred, or time elapsed) relative to the total expected inputs to the satisfaction of that performance obligation.

The Company utilized a cost-based input method to measure proportional performance and calculated the corresponding amount of revenue to recognize. The Company believed this was the best measure of progress because other measures did not reflect how the Company executed its performance obligations under the contract with Sanofi. In applying the cost-based input methods of revenue recognition, the Company used actual costs incurred relative to budgeted costs to fulfill the combined performance obligations. Revenue was recognized based on actual costs incurred as a percentage of total actual and budgeted costs as the Company completed its performance obligations, which were fulfilled on December 31, 2018. A cost-based input method of revenue recognition requires management to make estimates of costs to complete the Company’s performance obligations. In making such estimates, significant judgment is required to evaluate assumptions related to cost estimates. The cumulative effect of revisions to estimated costs to complete the Company’s performance obligations were recorded in the period in which changes were identified and amounts could be reasonably estimated.

For the years ended December 31, 2019, 2018 and 2017, the Company recognized zero, $33.6 million and, $11.4 million of collaboration and license revenue, respectively. The Company will not recognize any further revenue from the Collaboration Agreement.

There were no contract assets or liabilities during the year ended December 31, 2019. The following table presents changes in the Company’s contract assets and liabilities, which excludes research and development reimbursements under the cost sharing plan further discussed below, for the year ended December 31, 2018 (in thousands):

		Year Ended December 31, 2018
		Balance at Beginning of Period			Additions		Deductions				Balance at End of Period
Contract liabilities:
Deferred revenue	$		33,558	$	—	$		(33,558	)	$	—

During the years ended December 31, 2019, 2018 and 2017, the Company received research and development cost reimbursements from Sanofi under the terms of the Collaboration Agreement.

Since the inception of the Collaboration Agreement and up until December 31, 2018, Sanofi had been conditionally responsible for reimbursing the Company for:

Effective October 2017, and through June 30, 2019, Sanofi shared RPP costs for the mavacamten program pursuant to the Collaboration Agreement termination terms. Registration program costs approved by the Company and Sanofi included amounts incurred relating to clinical trials, development and manufacturing of, and obtaining regulatory approvals for mavacamten, and included direct employee costs and direct out-of-pocket costs incurred, by or on behalf of a party, specifically identifiable or reasonably and directly allocable to those activities.

Pursuant to the additional compounds provisions of the Collaboration Agreement, in August 2018 Sanofi agreed to reimburse the Company for eligible costs it incurred in the development of the MYK-224 compound, which had been identified as an additional compound under the HCM-1 program. Eligible costs were subject to review and approval under the same procedures as under the RPP program; reimbursable costs consisted of research and development activities agreed to by the Company and Sanofi that were negotiated and budgeted prior to the application for reimbursement. Reimbursements for this compound continued through March 31, 2019, in accordance to the Collaboration Agreement termination terms.

Estimated reimbursements were invoiced to Sanofi before each interim period based on budgeted amounts. For the RPP program, these estimates consisted of one half of the Company’s mavacamten development budget in excess of Sanofi’s mavacamten development budget each interim period and the entire MYK-224 budget which was reimbursable in full. Actual amounts received from Sanofi were applied to the applicable interim period to reduce the Company’s research and development expenses.

Due to the termination of the license agreement effective December 31, 2018, the Company has not received reimbursements for the MYK-224 compound for any periods subsequent to April 1, 2019 and for the mavacamten compound subsequent to July 1, 2019.

The Company recorded $18.5 million, $23.1 million and $7.3 million as reductions to research and development expenses for the years ended December 31, 2019, 2018 and 2017, respectively. The following table presents the Sanofi prepayments and reimbursed research and development expenses for the years ended December 31, 2019, 2018 and 2017 (in thousands):

	Year Ended December 31,
	2019			2018			2017
Balance at beginning of year	$	12,973		$	4,432		$	—
Additions for advance billings		—			—			1,013
Payments received from Sanofi		5,521			31,659			10,697
Actual expenses incurred		(18,494	)		(23,118	)		(7,278	)
Balance at end of year	$	—		$	12,973		$	4,432