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Form 10-Q MOMENTA PHARMACEUTICALS For: Sep 30

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November 4, 2016 4:00 PM EDT

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
 
FORM 10-Q
 
(MARK ONE)
 
x         QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended September 30, 2016
 
or
 
o         TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the Transition Period from              to             
 
Commission File Number 000-50797
 
Momenta Pharmaceuticals, Inc.
(Exact Name of Registrant as Specified in Its Charter)
 
Delaware
 
04-3561634
(State or Other Jurisdiction of
Incorporation or Organization)
 
(I.R.S. Employer Identification No.)
 
675 West Kendall Street, Cambridge, MA
 
02142
(Address of Principal Executive Offices)
 
(Zip Code)
 
(617) 491-9700
(Registrant’s Telephone Number, Including Area Code)
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes x  No ¨
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes x   No ¨
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
 
Large accelerated filer x
 
Accelerated filer ¨
 
 
 
Non-accelerated filer ¨
 
Smaller reporting company ¨
(Do not check if a smaller reporting company)
 
 
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes ¨  No x
 
As of October 31, 2016, there were 71,021,528 shares of the registrant’s common stock, par value $0.0001 per share, outstanding.
 


MOMENTA PHARMACEUTICALS, INC.

 
 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Our logo, trademarks and service marks are the property of Momenta Pharmaceuticals, Inc. Other trademarks or service marks appearing in this Quarterly Report on Form 10-Q are the property of their respective holders.


2

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 
Statements contained in this Quarterly Report on Form 10-Q that are about future events or future results, or are otherwise not statements of historical fact, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements are based on current expectations, estimates, forecasts, projections, intentions, goals, strategies, plans, prospects and the beliefs and assumptions of our management. In some cases, these statements can be identified by words such as “anticipate,” “approach,” “believe,” “can,” “contemplate,” “continue,” “could,” “ensure,” “estimate,” “expect,” “intend,” “likely,” “may,” “might,” “objective,” “opportunity,” “plan,” “potential”, “predict,” “project,” “pursue,” “seek,” “schedule,” “should,” “strategy,” “target,” “typically,” “will,” “would,” and other similar words or expressions, or the negative of these words or similar words or expressions. These statements include, but are not limited to, statements regarding our expectations regarding the development and utility of our products and product candidates; development, manufacture and commercialization of our products and product candidates; efforts to seek and manage relationships with collaboration partners, including without limitation for our biosimilar programs; the timing of clinical trials and the availability of results; the timing of launch of products and product candidates; GLATOPA®  (glatiramer acetate injection) market share, market potential and product revenues; M356 launch timing and market potential; the timing, merits, strategy, impact and outcome of litigation and legal proceedings; collaboration revenues and research and development revenues; manufacturing, including but not limited to our intent to rely on contract manufacturers; regulatory filings, reviews and approvals; the sufficiency of our current capital resources and projected milestone payments and product revenues for future operations; our future financial position, including but not limited to our future operating losses, our potential future profitability, our future expenses, the composition and mix of our cash, cash equivalents and marketable securities, our future revenues and our future liabilities; our funding transactions and our intended uses of proceeds thereof; Enoxaparin Sodium Injection product revenues and market potential; product candidate development costs; receipt of contingent milestone payments; accounting policies, estimates and judgments; our estimates regarding the fair value of our investment portfolio; the market risk of our cash equivalents, marketable securities, and derivative, foreign currency and other financial instruments; rights, obligations, terms, conditions and allocation of responsibilities and decision making under our collaboration agreements; the regulatory pathway for biosimilars; our strategy, including but not limited to our regulatory strategy, and scientific approach; the importance of key customer distribution arrangements; market potential and acceptance of our products and product candidates; future capital requirements; reliance on our collaboration partners and other third parties; the competitive landscape; changes in, impact of and compliance with laws, rules and regulations; product reimbursement policies and trends; pricing of pharmaceutical products, including our products and product candidates; our stock price; our intellectual property strategy and position; sufficiency of insurance; attracting and retaining qualified personnel; our internal controls and procedures; acquisitions or investments in companies, products and technologies; entering into license arrangements; marketing plans; financing our planned operating and capital expenditure; leasing additional facilities; materials used in our research and development; transfer of regulatory, development, manufacturing and commercialization activities and related records for M923; the assignment of third party agreements relating to M923; the grant of licenses and the payment of a royalty on net sales relating to M923; Baxalta’s continuing to perform development and manufacturing activities for M923; dilution; royalty rates; and vesting of equity awards.
 
Any forward-looking statements in this Quarterly Report on Form 10-Q involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. Important factors that may cause actual results to differ materially from current expectations include, among other things, those listed under Part II, Item 1A. “Risk Factors” and discussed elsewhere in this Quarterly Report on Form 10-Q. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future.


3

PART I. FINANCIAL INFORMATION
 
Item 1.    FINANCIAL STATEMENTS

MOMENTA PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
(unaudited)
 
September 30, 2016
 
December 31, 2015
Assets
 

 
 

Current assets:
 

 
 

Cash and cash equivalents
$
106,279

 
$
61,461

Marketable securities
202,679

 
288,583

Collaboration receivable
45,752

 
21,185

Prepaid expenses and other current assets
4,816

 
3,479

Total current assets
359,526

 
374,708

Property and equipment, net
20,976

 
21,896

Restricted cash
21,761

 
20,660

Intangible assets, net
5,478

 
3,528

Other long-term assets
1,369

 
248

 
 
 
 
Total assets
$
409,110

 
$
421,040

 
 
 
 
Liabilities and Stockholders’ Equity
 

 
 

Current liabilities:
 

 
 

Accounts payable
$
9,801

 
$
4,053

Accrued expenses
16,539

 
24,499

Deferred revenue
21,740

 
9,770

Other current liabilities
83

 
460

Total current liabilities
48,163

 
38,782

Deferred revenue, net of current portion
33,310

 
12,213

Other long-term liabilities
1,858

 
69

 
 
 
 
Total liabilities
83,331

 
51,064

Commitments and contingencies (Note 8)


 


Stockholders’ Equity:
 

 
 

Preferred stock, $0.01 par value per share; 5,000 shares authorized, 100 shares of Series A Junior Participating Preferred Stock, $0.01 par value per share designated and no shares issued and outstanding
—

 
—

Common stock, $0.0001 par value per share; 100,000 shares authorized, 71,246 shares issued and 71,017 shares outstanding at September 30, 2016 and 69,077 shares issued and 68,958 outstanding at December 31, 2015
7

 
7

Additional paid-in capital
843,549

 
824,385

Accumulated other comprehensive income
250

 
4

Accumulated deficit
(514,914
)
 
(452,372
)
Treasury stock, at cost, 229 shares at September 30, 2016 and 119 shares at December 31, 2015
(3,113
)
 
(2,048
)
 
 
 
 
Total stockholders’ equity
325,779

 
369,976

 
 
 
 
Total liabilities and stockholders’ equity
$
409,110

 
$
421,040

The accompanying notes are an integral part of these unaudited, condensed consolidated financial statements.

4

MOMENTA PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(in thousands, except per share amounts)
(unaudited)
 
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2016
 
2015
 
2016
 
2015
Collaboration revenues:
 

 
 

 
 
 
 
Product revenue
$
23,339

 
$
8,666

 
$
58,831

 
$
30,693

Research and development revenue
5,805

 
5,129

 
16,593

 
36,565

Total collaboration revenue
29,144

 
13,795

 
75,424

 
67,258

 
 
 
 
 
 
 
 
Operating expenses:
 

 
 

 
 
 
 
Research and development*
31,568

 
31,733

 
93,498

 
88,466

General and administrative*
15,758

 
12,459

 
46,301

 
33,678

Total operating expenses
47,326

 
44,192

 
139,799

 
122,144

 
 
 
 
 
 
 
 
Operating loss
(18,182
)
 
(30,397
)
 
(64,375
)
 
(54,886
)
 
 
 
 
 
 
 
 
Other income
638

 
347

 
1,833

 
737

 
 
 
 
 
 
 
 
Net loss
$
(17,544
)
 
$
(30,050
)
 
$
(62,542
)
 
$
(54,149
)
 
 
 
 
 
 
 
 
Basic and diluted net loss per share
$
(0.26
)
 
$
(0.44
)
 
$
(0.91
)
 
$
(0.88
)
 
 
 
 
 
 
 
 
Weighted average shares used in computing basic and diluted net loss per share
68,799

 
68,004

 
68,540

 
61,442

 
 
 
 
 
 
 
 
Comprehensive loss:
 

 
 

 
 
 
 
Net loss
$
(17,544
)
 
$
(30,050
)
 
$
(62,542
)
 
$
(54,149
)
Net unrealized holding (losses) gains on available-for-sale marketable securities
(36
)
 
(4
)
 
246

 
32

Comprehensive loss
$
(17,580
)
 
$
(30,054
)
 
$
(62,296
)
 
$
(54,117
)

* Non-cash share-based compensation expense included in operating expenses is as follows:
 
Research and development
$
2,042

 
$
2,122

 
$
6,426

 
$
3,031

General and administrative
$
2,897

 
$
2,435

 
$
8,330

 
$
3,756

 
The accompanying notes are an integral part of these unaudited, condensed consolidated financial statements.


5

MOMENTA PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
 
 
Nine Months Ended September 30,
 
2016
 
2015
Cash Flows from Operating Activities:
 

 
 

Net loss
$
(62,542
)
 
$
(54,149
)
Adjustments to reconcile net loss to net cash used in operating activities:
 

 
 

Depreciation and amortization
5,726

 
5,799

Share-based compensation expense
14,756

 
6,787

Amortization of premium on investments
524

 
987

Amortization of intangibles
1,240

 
796

Changes in operating assets and liabilities:
 

 
 

Collaboration receivable
(24,567
)
 
(2,693
)
Prepaid expenses and other current assets
(1,337
)
 
136

Restricted cash
(1,101
)
 
59

Other long-term assets
(1,121
)
 
—

Accounts payable
5,748

 
(1,714
)
Accrued expenses
(7,960
)
 
3,779

Deferred revenue
33,067

 
(6,572
)
Other current liabilities
(377
)
 
25

Other long-term liabilities
1,789

 
(422
)
 
 
 
 
Net cash used in operating activities
(36,155
)
 
(47,182
)
 
 
 
 
Cash Flows from Investing Activities:
 

 
 

Purchases of property and equipment
(4,806
)
 
(2,747
)
Purchases of marketable securities
(264,905
)
 
(281,500
)
Proceeds from maturities of marketable securities
350,531

 
105,844

 
 
 
 
Net cash provided by (used in) investing activities
80,820

 
(178,403
)
 
 
 
 
Cash Flows from Financing Activities:
 

 
 

Proceeds from public offering of common stock, net of issuance costs
—

 
148,439

Net proceeds from issuance of common stock under ATM facilities
—

 
64,503

Proceeds from issuance of common stock under stock plans
1,218

 
23,329

Repurchase of common stock pursuant to share surrender
(1,065
)
 
(2,048
)
 
 
 
 
Net cash provided by financing activities
153

 
234,223

 
 
 
 
Increase in cash and cash equivalents
44,818

 
8,638

Cash and cash equivalents, beginning of period
61,461

 
61,349

Cash and cash equivalents, end of period
$
106,279

 
$
69,987

 
 
 
 
Non-Cash Investing Activity:
 
 
 
Common shares issued to Parivid to settle milestone payment
$
3,190

 
$
—

 
The accompanying notes are an integral part of these unaudited, condensed consolidated financial statements.


6

MOMENTA PHARMACEUTICALS, INC.
NOTES TO UNAUDITED, CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
1. The Company
 
Business
 
Momenta Pharmaceuticals, Inc., or the Company or Momenta, was incorporated in the state of Delaware in May 2001 and began operations in early 2002. Its facilities are located in Cambridge, Massachusetts. Momenta is a biotechnology company focused on developing generic versions of complex drugs, biosimilars and novel therapeutics for autoimmune diseases. The Company presently derives all of its revenue from its collaborations.
 
2. Summary of Significant Accounting Policies
 
Basis of Presentation and Principles of Consolidation
 
The Company’s accompanying condensed consolidated financial statements are unaudited and have been prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP, applicable to interim periods and, in the opinion of management, include all normal and recurring adjustments that are necessary to state fairly the results of operations for the reported periods. The Company’s condensed consolidated financial statements have also been prepared on a basis substantially consistent with, and should be read in conjunction with, the Company’s audited consolidated financial statements for the year ended December 31, 2015, which were included in the Company’s Annual Report on Form 10-K that was filed with the Securities and Exchange Commission, or SEC, on February 26, 2016. The year-end condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP. The results of the Company’s operations for any interim period are not necessarily indicative of the results of the Company’s operations for any other interim period or for a full fiscal year.
 
The accompanying condensed consolidated financial statements reflect the operations of the Company and the Company’s wholly-owned subsidiary, Momenta Pharmaceuticals Securities Corporation. All significant intercompany accounts and transactions have been eliminated.
 
Use of Estimates
 
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, the Company evaluates its estimates and judgments, including those related to revenue recognition, accrued expenses, and share-based payments. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results could differ from those estimates.
 
Revenue Recognition
 
The Company recognizes revenue when persuasive evidence of an arrangement exists; services have been performed or products have been delivered; the fee is fixed or determinable; and collection is reasonably assured.
 
The Company has entered into collaboration and license agreements with pharmaceutical companies for the development and commercialization of certain of its product candidates. The Company’s performance obligations under the terms of these agreements may include (i) transfer of intellectual property rights (licenses), (ii) providing research and development services, and (iii) participation on joint steering committees with the collaborators. Non-refundable payments to the Company under these agreements may include up-front license fees, payments for research and development activities, payments based upon the achievement of defined collaboration objectives and profit share or royalties on product sales.
 
At September 30, 2016, the Company had collaboration and license agreements with Sandoz AG (formerly Sandoz N.V. and Biochemie West Indies, N.V.), an affiliate of Novartis Pharma AG, and Sandoz Inc. (formerly Geneva Pharmaceuticals, Inc.), collectively referred to as Sandoz; Sandoz AG; Baxalta U.S. Inc., Baxalta GmbH and Baxalta Incorporated, collectively referred to as Baxalta; and Mylan Ireland Limited, a wholly-owned, indirect subsidiary of Mylan N.V., or Mylan.
 

7

The Company evaluates multiple element agreements under the Financial Accounting Standards Board’s, or FASB, Accounting Standards Update, or ASU, No. 2009-13, Multiple-Deliverable Revenue Arrangements, or ASU 2009-13. When evaluating multiple element arrangements under ASU 2009-13, the Company identifies the deliverables included within the agreement and determines whether the deliverables under the arrangement represent separate units of accounting. Deliverables under the arrangement are a separate unit of accounting if (i) the delivered item has value to the customer on a standalone basis and (ii) if the arrangement includes a general right of return relative to the delivered item and delivery or performance of the undelivered items are considered probable and substantially within the Company’s control. This evaluation requires subjective determinations and requires management to make judgments about the individual deliverables and whether such deliverables are separable from the other aspects of the contractual relationship. In determining the units of accounting, management evaluates certain criteria, including whether the deliverables have standalone value, based on the consideration of the relevant facts and circumstances for each arrangement. The Company considers whether the collaborator can use the license or other deliverables for their intended purpose without the receipt of the remaining elements, and whether the value of the deliverable is dependent on the undelivered items and whether there are other vendors that can provide the undelivered items.
 
Arrangement consideration generally includes up-front license fees and non-substantive options to purchase additional products or services. The Company determines how to allocate arrangement consideration to identified units of accounting based on the selling price hierarchy provided under the relevant guidance. The Company determines the estimated selling price for deliverables using vendor-specific objective evidence, or VSOE, of selling price, if available, third-party evidence, or TPE, of selling price if VSOE is not available, or best estimate of selling price, or BESP, if neither VSOE nor TPE is available. Determining the BESP for a deliverable requires significant judgment. The Company uses BESP to estimate the selling price for licenses to the Company’s proprietary technology, since the Company often does not have VSOE or TPE of selling price for these deliverables. In those circumstances where the Company utilizes BESP to determine the estimated selling price of a license to the Company’s proprietary technology, the Company considers entity specific factors, including those factors contemplated in negotiating the agreements as well as the license fees negotiated in similar license arrangements. Management may be required to exercise considerable judgment in estimating the selling prices of identified units of accounting under its agreements. In validating the Company’s BESP, the Company evaluates whether changes in the key assumptions used to determine the BESP will have a significant effect on the allocation of arrangement consideration between multiple deliverables.
 
Up-Front License Fees
 
Up-front payments received in connection with licenses of the Company’s technology rights are deferred if facts and circumstances dictate that the license does not have stand-alone value. When management believes the license to its intellectual property does not have stand-alone value from the other deliverables to be provided in the arrangement, it is combined with other deliverables and the revenue of the combined unit of accounting is recorded based on the method appropriate for the last delivered item. The Company recognizes revenue from non-refundable, up-front license fees on a straight-line basis over the contracted or estimated period of performance, which is typically the period over which the research and development services are expected to occur. Accordingly, the Company is required to make estimates regarding the development timelines for product candidates being developed pursuant to any applicable agreement. The determination of the length of the period over which to recognize the revenue is subject to judgment and estimation and can have an impact on the amount of revenue recognized in a given period. Quarterly, the Company reassesses its period of substantial involvement over which the Company amortizes its up-front license fees and makes adjustments as appropriate. The Company’s estimates regarding the period of performance under its collaborative research and development and licensing agreements have changed in the past and may change in the future. Any change in the Company’s estimates could result in changes to the Company’s results for the period over which the revenues from an up-front license fee are recognized.
 
Milestones
 
At the inception of each arrangement that includes milestone payments, the Company evaluates whether each milestone is substantive, in accordance with ASU No. 2010-17, Revenue Recognition—Milestone Method. A milestone is defined as an event that can only be achieved based on the Company’s performance, and there is substantive uncertainty about whether the event will be achieved at the inception of the arrangement. Events that are contingent only on the passage of time or only on counterparty performance are not considered milestones under accounting guidance. This evaluation includes an assessment of whether (a) the consideration is commensurate with either (1) the Company’s performance to achieve the milestone, or (2) the enhancement of the value of the delivered item(s) as a result of a specific outcome resulting from the Company’s performance to achieve the milestone, (b) the consideration relates solely to past performance (c) the consideration is reasonable relative to all of the deliverables and payment terms within the arrangement and (d) the milestone fee is refundable or adjusts based on future performance or non-performance. The Company evaluates factors such as the scientific, clinical, regulatory, commercial and other risks that must be overcome to achieve the respective milestone, the level of effort and investment required to achieve the respective milestone and whether the milestone consideration is reasonable relative to all deliverables and payment terms in

8

the arrangement in making this assessment. Payments that are contingent upon the achievement of a substantive milestone are recognized in their entirety in the period in which the milestone is achieved, assuming all other revenue recognition criteria are met.

Sales-based and commercial milestones are accounted for as royalties and are recorded as revenue upon achievement of the milestone, assuming all other revenue recognition criteria are met.
 
Profit Share and Royalties on Sandoz’ Sales of Enoxaparin Sodium Injection® and GLATOPA®
 
Profit share and royalty revenue is reported as product revenue and is recognized based upon net sales or contractual profit of licensed products in licensed territories in the period the sales occur as provided by the collaboration agreement. The amount of net sales or contractual profit is determined based on amounts provided by the collaborator and involve the use of estimates and judgments, such as product sales allowances and accruals related to prompt payment discounts, chargebacks, governmental and other rebates, distributor, wholesaler and group purchasing organizations fees, product returns, and co-payment assistance costs, which could be adjusted based on actual results in the future. The Company is highly dependent on its collaborators for timely and accurate information regarding any net revenues realized from sales of Enoxaparin Sodium Injection and GLATOPA in order to accurately report its results of operations.
 
Research and Development Revenue under Collaborations with Sandoz and Baxalta
 
Under its collaborations with Sandoz and Baxalta, the Company is reimbursed at a contractual full-time equivalent, or FTE, rate for any FTE employee expenses as well as any external costs incurred for commercial and related activities. The Company recognizes research and development revenue from FTE services and external costs upon completion of the performance requirements (i.e., as the services are performed and the reimbursable costs are incurred). Revenues are recorded on a gross basis as the Company contracts directly with, manages the work of and is responsible for payments to third-party vendors for such commercial and related services.
 
Collaboration Receivable
 
Collaboration receivable represents:
 
•
Amounts due to the Company for profit share on Sandoz’ sales of Enoxaparin Sodium Injection and GLATOPA;

•
Amounts due to the Company for reimbursement of research and development services and external costs under the collaborations with Sandoz and Baxalta; and

•
The net amount due from Mylan for its 50% share of collaboration expenses under the cost-sharing arrangement.
 
The Company has not recorded any allowance for uncollectible accounts or bad debt write-offs and it monitors its receivables to facilitate timely payment.
 
Deferred Revenue
 
Deferred revenue represents consideration received from collaborators in advance of achieving certain criteria that must be met for revenue to be recognized in conformity with GAAP.
 
Net Loss Per Common Share
 
The Company computes basic net loss per common share by dividing net loss by the weighted average number of common shares outstanding, which includes common stock issued and outstanding and excludes unvested shares of restricted common stock. The Company computes diluted net loss per common share by dividing net loss by the weighted average number of common shares and potential shares from outstanding stock options and unvested restricted stock determined by applying the treasury stock method.
 
The following table presents anti-dilutive shares for the three and nine months ended September 30, 2016 and 2015 (in thousands):
 

9

 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2016
 
2015
 
2016
 
2015
Weighted-average anti-dilutive shares related to:
 

 
 

 
 
 
 
Outstanding stock options
6,826

 
2,690

 
6,880

 
4,341

Restricted stock awards
1,500

 
457

 
1,052

 
547

 
Since the Company had a net loss for all periods presented, the effect of all potentially dilutive securities is anti-dilutive. Accordingly, basic and diluted net loss per share is the same for the three and nine months ended September 30, 2016 and 2015. Anti-dilutive shares comprise the impact of the number of shares that would have been dilutive had the Company had net income plus the number of common stock equivalents that would be anti-dilutive had the Company had net income. Furthermore, 1,439,985 performance-based restricted common stock awards that were granted between April and September 30, 2016 had not vested as of September 30, 2016, and were excluded from diluted shares outstanding as the vesting conditions for the awards, discussed further in Note 6 “Share-Based Payments - Restricted Stock Awards,” had not been met as of September 30, 2016.
 
Fair Value Measurements
 
The tables below present information about the Company’s assets that are regularly measured and carried at fair value as of September 30, 2016 and December 31, 2015, and indicate the level within the fair value hierarchy of the valuation techniques utilized to determine such fair value (in thousands):
Description
 
Balance as of
September 30, 2016
 
Quoted
Prices in
Active
Markets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Other
Unobservable
Inputs
(Level 3)
Assets:
 
 

 
 

 
 

 
 

Cash equivalents:
 
 

 
 

 
 

 
 

Money market funds and overnight repurchase agreements
 
$
103,808

 
$
80,808

 
$
23,000

 
$
—

Marketable securities:
 
 

 
 

 
 

 
 

Corporate debt securities
 
14,170

 
—

 
14,170

 
—

Commercial paper obligations
 
88,010

 
—

 
88,010

 
—

Asset-backed securities
 
100,499

 
—

 
100,499

 
—

 
 
 
 
 
 
 
 
 
Total
 
$
306,487

 
$
80,808

 
$
225,679

 
$
—

 
Description
 
Balance as of
December 31, 2015
 
Quoted
Prices in
Active
Markets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Other
Unobservable
Inputs
(Level 3)
Assets:
 
 

 
 

 
 

 
 

Cash equivalents:
 
 

 
 

 
 

 
 

Money market funds and overnight repurchase agreements
 
$
54,077

 
$
30,077

 
$
24,000

 
$
—

Marketable securities:
 
 

 
 

 
 

 
 

U.S. government-sponsored enterprise securities
 
24,290

 
—

 
24,290

 
—

Corporate debt securities
 
73,651

 
—

 
73,651

 
—

Commercial paper obligations
 
125,805

 
—

 
125,805

 
—

Asset-backed securities
 
64,837

 
—

 
64,837

 
—

 
 
 
 
 
 
 
 
 
Total
 
$
342,660

 
$
30,077

 
$
312,583

 
$
—

 

10

There have been no impairments of the Company’s assets measured and carried at fair value during the three and nine months ended September 30, 2016 and 2015. In addition, there were no changes in valuation techniques or transfers between the fair value measurement levels during the three and nine months ended September 30, 2016. The fair value of Level 2 instruments classified as marketable securities were determined through third party pricing services. For a description of the Company’s validation procedures related to prices provided by third party pricing services, refer to Note 2 “Summary of Significant Accounting Policies: Fair Value Measurements” to the Company’s consolidated financial statements in its Annual Report on Form 10-K for the year ended December 31, 2015. The carrying amounts reflected in the Company’s accompanying condensed consolidated balance sheets for cash, accounts receivable, unbilled receivables, other current assets, accounts payable and accrued expenses approximate fair value due to their short-term maturities.

Cash, Cash Equivalents and Marketable Securities
 
The Company’s cash equivalents are primarily composed of money market funds carried at fair value, which approximate cost at September 30, 2016 and December 31, 2015. The Company classifies corporate debt securities, commercial paper, asset-backed securities and U.S. government-sponsored enterprise securities as short-term and long-term marketable securities in its consolidated financial statements. See Note 2 “Summary of Significant Accounting Policies: Cash, Cash Equivalents and Marketable Securities” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015 for a discussion of the Company’s accounting policies.
 
The following tables summarize the Company’s cash, cash equivalents and marketable securities as of September 30, 2016 and December 31, 2015 (in thousands):
 
As of September 30, 2016
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
Cash, money market funds and overnight repurchase agreements
 
$
106,279

 
$
—

 
$
—

 
$
106,279

Corporate debt securities due in one year or less
 
14,172

 
2

 
(4
)
 
14,170

Commercial paper obligations due in one year or less
 
87,773

 
237

 
—

 
88,010

Asset-backed securities due in one year or less
 
100,484

 
16

 
(1
)
 
100,499

 
 
 
 
 
 
 
 
 
Total
 
$
308,708

 
$
255

 
$
(5
)
 
$
308,958

 
 
 
 
 
 
 
 
 
Reported as:
 
 

 
 

 
 

 
 

Cash and cash equivalents
 
$
106,279

 
$
—

 
$
—

 
$
106,279

Marketable securities
 
202,429

 
255

 
(5
)
 
202,679

 
 
 
 
 
 
 
 
 
Total
 
$
308,708

 
$
255

 
$
(5
)
 
$
308,958

 

11

As of December 31, 2015
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
Cash, money market funds and overnight repurchase agreements
 
$
61,461

 
$
—

 
$
—

 
$
61,461

U.S. government-sponsored enterprise securities due in one year or less
 
24,285

 
5

 
—

 
24,290

Corporate debt securities due in one year or less
 
73,735

 
1

 
(84
)
 
73,652

Commercial paper obligations due in one year or less
 
125,693

 
120

 
(8
)
 
125,805

Asset-backed securities due in one year or less
 
64,866

 
—

 
(30
)
 
64,836

 
 
 
 
 
 
 
 
 
Total
 
$
350,040

 
$
126

 
$
(122
)
 
$
350,044

 
 
 
 
 
 
 
 
 
Reported as:
 
 

 
 

 
 

 
 

Cash and cash equivalents
 
$
61,461

 
$
—

 
$
—

 
$
61,461

Marketable securities
 
288,579

 
126

 
(122
)
 
288,583

 
 
 
 
 
 
 
 
 
Total
 
$
350,040

 
$
126

 
$
(122
)
 
$
350,044


At September 30, 2016 and December 31, 2015, the Company held 11 and 66 marketable securities, respectively, that were in a continuous unrealized loss position for less than one year. At September 30, 2016 and December 31, 2015, there were no securities in a continuous unrealized loss position for greater than one year.  The Company believes the unrealized losses were caused by fluctuations in interest rates.
 
The following table summarizes the aggregate fair value of these securities as of September 30, 2016 and December 31, 2015 (in thousands):
 
 
 
As of September 30, 2016
 
As of December 31, 2015
 
 
Aggregate
Fair Value
 
Unrealized
Losses
 
Aggregate
Fair Value
 
Unrealized
Losses
Corporate debt securities due in one year or less
 
$
7,167

 
$
(4
)
 
$
70,657

 
$
(84
)
Commercial paper obligations due in one year or less
 
$
—

 
$
—

 
$
33,734

 
$
(8
)
Asset-backed securities due in one year or less
 
$
21,684

 
$
(1
)
 
$
61,337

 
$
(30
)
 
Treasury Stock
 
Treasury stock represents common stock currently owned by the Company as a result of shares withheld from the vesting of performance-based restricted common stock to satisfy minimum tax withholding requirements.
 
Comprehensive Income (Loss)
 
Comprehensive income (loss) is the change in equity of a company during a period from transactions and other events and circumstances, excluding transactions resulting from investments by owners and distributions to owners. Comprehensive income (loss) includes net (loss) income and the change in accumulated other comprehensive income (loss) for the period. Accumulated other comprehensive income (loss) consists entirely of unrealized gains and losses on available-for-sale marketable securities for all periods presented.
 
New Accounting Pronouncements
 
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes all existing revenue recognition requirements, including most industry-specific guidance. The new standard requires a company to recognize revenue when it transfers goods or services to customers in an amount that reflects the consideration that the company expects to receive for those goods or services. In August 2015, the FASB issued ASU No. 2015-14, Revenue

12

from Contracts with Customers (Topic 606): Deferral of the Effective Date, which delayed the effective date of the new standard from January 1, 2017 to January 1, 2018. The FASB also agreed to allow entities to choose to adopt the standard as of the original effective date. In March 2016, the FASB issued ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations, which clarifies the implementation guidance on principal versus agent considerations. In April 2016, the FASB issued ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, which clarifies certain aspects of identifying performance obligations and licensing implementation guidance. In May 2016, the FASB issued ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients related to disclosures of remaining performance obligations, as well as other amendments to guidance on collectibility, non-cash consideration and the presentation of sales and other similar taxes collected from customers. These standards have the same effective date and transition date of January 1, 2018. The Company is currently evaluating the method of adoption and the potential impact that these standards may have on its financial position and results of operations.
 
In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements—Going Concern (Subtopic 205-40). The ASU requires all entities to evaluate for the existence of conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the issuance date of its financial statements. The accounting standard is effective for interim and annual periods after December 15, 2016, and will not have a material impact on the consolidated financial statements, but may impact the Company’s footnote disclosures regarding liquidity.
 
In November 2015, the FASB issued ASU No. 2015-17, Income Taxes, Balance Sheet Classification of Deferred Taxes (Topic 740). The new standard requires that deferred tax assets and liabilities be classified as noncurrent in a classified statement of financial position. The adoption of this standard in the first quarter of 2016 did not have a material impact on the Company’s financial position or results of operations as its net deferred tax assets have been fully offset by a valuation allowance.

 In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The new standard requires that all lessees recognize the assets and liabilities that arise from leases on the balance sheet and disclose qualitative and quantitative information about its leasing arrangements. The new standard will be effective for the Company on January 1, 2019. The Company is currently evaluating the impact of adopting this new accounting standard on its financial position and results of operations.
 
In March 2016, the FASB issued ASU No. 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. Under the new standard all excess tax benefits and tax deficiencies should be recognized as income tax expense or benefit in the income statement. The tax effects of exercised or vested awards should be treated as discrete items in the reporting period in which they occur. An entity also should recognize excess tax benefits regardless of whether the benefit reduces taxes payable in the current period. The new standard also provides for companies to make an entity-wide accounting policy election on how to account for award forfeitures. Entities can either estimate the number of awards that are expected to vest (current GAAP) or account for forfeitures when they occur. The accounting standard is effective for interim and annual periods after December 15, 2016. Early adoption is permitted for any entity in any interim or annual period. The Company is currently evaluating the impact of adopting this new accounting standard on its financial position and results of operations.

 
3. Intangible Assets

In April 2007, the Company entered into an asset purchase agreement with Parivid, LLC, or Parivid, a provider of data integration and analysis services, and S. Raguram, the principal owner of Parivid. Pursuant to the asset purchase agreement, the Company acquired certain of the assets and assumed certain of the liabilities of Parivid related to the acquired assets in exchange for $2.5 million in cash paid at closing and certain contingent milestone payments in a combination of cash and/or stock in the manner and on the terms and conditions set forth in the asset purchase agreement if certain milestones were achieved within fifteen years of the date of the asset purchase agreement. The asset purchase agreement was amended in August 2009 and in July 2011. Between 2009 and 2011, the Company made cash payments to Parivid of $7.3 million and issued 91,576 shares of its common stock valued at $10.92 per share to Parivid in satisfaction of certain Enoxaparin Sodium Injection-related milestones under the amended asset purchase agreement. As of June 18, 2016, the one-year anniversary of the commercial launch of GLATOPA, GLATOPA remained the sole generic COPAXONE 20 mg/mL product on the U.S. market, triggering the final milestone payment under the amended asset purchase agreement. In connection with the final milestone, in June 2016, the Company recorded an intangible asset and a non-current liability of $2.9 million. On August 10, 2016, the Company issued 265,605 shares of its common stock to Parivid to satisfy the GLATOPA-related milestone. The Company

13

recorded $3.2 million as an intangible asset based on the number of shares issued and the closing price of the Company’s common stock on the date the shares were issued to Parivid.

Intangible assets consist solely of the core developed technology assets acquired from Parivid. The intangible assets are being amortized using the straight-line method over the estimated useful life of GLATOPA of approximately six years through June 2021. As of September 30, 2016 and December 31, 2015, intangible assets, net of accumulated amortization, were as follows (in thousands):
 
 
 
September 30, 2016
 
December 31, 2015
 
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
Carrying
Value
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
Carrying
Value
Total intangible assets for core and developed technology and non-compete agreement
 
$
13,617

 
$
(8,139
)
 
$
5,478

 
$
10,427

 
$
(6,899
)
 
$
3,528

 
The weighted-average amortization period for the Company’s intangible assets is six years. Amortization expense was approximately $0.3 million for each of the three months ended September 30, 2016 and 2015. Amortization expense was approximately $1.2 million and $0.8 million for the nine months ended September 30, 2016 and 2015, respectively.
 
The Company expects to incur amortization expense of approximately $1.2 million per year for each of the next four years and approximately $0.9 million in the fifth year.
 
4. Restricted Cash
 
The Company designated $17.5 million as collateral for a security bond posted in the litigation against Amphastar, International Medical Systems, Ltd., a wholly owned subsidiary of Amphastar Pharmaceuticals, Inc. and Actavis, Inc. (formerly Watson Pharmaceuticals, Inc.), or Actavis, as discussed within Note 8, “Commitments and Contingencies”. Amphastar, International Medical Systems, Ltd. and Amphastar Pharmaceuticals, Inc. are collectively referred to as Amphastar. The $17.5 million is held in an escrow account by Hanover Insurance. The Company classified this restricted cash as long-term as the timing of a final decision in the Enoxaparin Sodium Injection patent litigation is not known.
 
The Company designated $2.4 million as collateral for a letter of credit related to the lease of office and laboratory space located at 675 West Kendall Street in Cambridge, Massachusetts. This balance will remain restricted through April 2018 and therefore is classified as non-current in the Company’s consolidated balance sheet. The Company will earn interest on the balance.

The Company designated $0.7 million as collateral for a letter of credit related to the lease of office and laboratory space located at 320 Bent Street in Cambridge, Massachusetts. This balance will remain restricted through February 2027 and during any lease term extensions and therefore is classified as non-current in the Company’s consolidated balance sheet. The Company will earn interest on the balance.

Simultaneous with the execution of the lease of office and laboratory space located at 301 Binney Street in Cambridge, Massachusetts in September 2016, the Company is obligated to deliver to the lessor a security deposit in the form of an irrevocable standby letter of credit in the amount of approximately two months of the monthly base rent, or $1.1 million. Although the letter of credit was issued in October 2016, the Company considers this amount restricted as of September 30, 2016. This balance will remain restricted through June 2025 and during any lease term extensions and therefore is classified as non-current in the Company’s consolidated balance sheet. The Company will earn interest on the balance.

 
5. Collaboration and License Agreements
 
At September 30, 2016, the Company had collaboration and license agreements with Sandoz, Sandoz AG, Baxalta and Mylan.
 
The Company records product revenue based on Sandoz’ sales of Enoxaparin Sodium Injection and GLATOPA.
 

14

Research and development revenue generally consists of amounts earned by us under our collaborations for technical development, regulatory and commercial milestones; reimbursement of research and development services and reimbursement of development costs under our collaborative arrangements with Sandoz and Baxalta; and recognition of the arrangement consideration under the collaborations with Baxalta and Mylan.
 
The collaboration with Mylan is a cost-sharing arrangement pursuant to which reimbursement for Mylan’s 50% share of collaboration expenses is recorded as a reduction to research and development expense and general and administrative expense depending on the nature of the activities.
 
The following tables provide amounts by period indicated and by line item included in the Company’s accompanying condensed consolidated statements of operations and comprehensive loss attributable to transactions arising from its significant collaborative arrangements and all other arrangements, as defined in the Financial Accounting Standards Board’s Accounting Standards Codification Topic 808, Collaborative Arrangements. The dollar amounts in the tables below are in thousands.
 
 
 
For the Three Months Ended September 30, 2016
 
 
2003 Sandoz
Collaboration
Agreement
 
2006 Sandoz
Collaboration
Agreement
 
Baxalta
Collaboration
Agreement
 
Mylan 
Collaboration
 Agreement (1)
 
Total
Collaborations
Collaboration revenues:
 
 

 
 

 
 

 
 

 
 

Product revenue
 
$
—

 
$
23,339

 
$
—

 
$
—

 
$
23,339

Research and development revenue:
 
 

 
 

 
 

 
 

 
 

Recognition of upfront payments and license payments
 
—

 
—

 
2,498

 
1,785

 
4,283

Research and development services and external costs
 
128

 
494

 
900

 
—

 
1,522

Total research and development revenue
 
$
128

 
$
494

 
$
3,398

 
$
1,785

 
$
5,805

Total collaboration revenues
 
$
128

 
$
23,833

 
$
3,398

 
$
1,785

 
$
29,144

Operating expenses:
 
 

 
 

 
 

 
 

 
 

Research and development expense(2)(3)
 
$
1

 
$
349

 
$
402

 
$
8,809

 
$
9,561

General and administrative expense(2)(3)
 
$
332

 
$
66

 
$
—

 
$
847

 
$
1,245

Total operating expenses
 
$
333

 
$
415

 
$
402

 
$
9,656

 
$
10,806

 
 
For the Three Months Ended September 30, 2015
 
 
2003 Sandoz
Collaboration
Agreement
 
2006 Sandoz
Collaboration
Agreement
 
Baxalta
Collaboration
Agreement
 
Total
Collaborations
Collaboration revenues:
 
 

 
 

 
 

 
 

Product revenue
 
$
—

 
$
8,666

 
$
—

 
$
8,666

Research and development revenue:
 
 

 
 

 
 

 
 

Milestone payments
 
—

 
—

 
—

 
—

Recognition of upfront payments and license payments
 
—

 
—

 
2,442

 
2,442

Research and development services and external costs
 
69

 
742

 
1,876

 
2,687

Total research and development revenue
 
$
69

 
$
742

 
$
4,318

 
$
5,129

Total collaboration revenues
 
$
69

 
$
9,408

 
$
4,318

 
$
13,795

Operating expenses:
 
 

 
 

 
 

 
 

Research and development expense(2)
 
$
—

 
$
274

 
$
251

 
$
525

General and administrative expense(2)
 
$
104

 
$
38

 
$
166

 
$
308

Total operating expenses
 
$
104

 
$
312

 
$
417

 
$
833

 
(1)
The Mylan Collaboration Agreement, as defined below, became effective on February 9, 2016.
 

15

(2)
The amounts generally represent external expenditures, including amortization of an intangible asset, and exclude salaries and benefits, share-based compensation, facilities, depreciation and laboratory supplies, as the majority of such costs are not directly charged to programs.
 
(3)
As a result of the cost-sharing provisions of the Mylan Collaboration Agreement, the Company offset approximately $7.7 million against research and development costs and $0.4 million against general and administrative costs during the three months ended September 30, 2016.

 
 
For the Nine Months Ended September 30, 2016
 
 
2003 Sandoz
Collaboration
Agreement
 
2006 Sandoz
Collaboration
Agreement
 
Baxalta
Collaboration
Agreement
 
Mylan 
Collaboration
 Agreement (1)
 
Total
Collaborations
Collaboration revenues:
 
 

 
 

 
 

 
 

 
 

Product revenue
 
$
—

 
$
58,831

 
$
—

 
$
—

 
$
58,831

Research and development revenue:
 
 

 
 

 
 

 
 

 
 

Recognition of upfront payments and license payments
 
—

 
—

 
7,382

 
4,550

 
11,932

Research and development services and external costs
 
266

 
1,878

 
2,517

 
—

 
4,661

Total research and development revenue
 
$
266

 
$
1,878

 
$
9,899

 
$
4,550

 
$
16,593

Total collaboration revenues
 
$
266

 
$
60,709

 
$
9,899

 
$
4,550

 
$
75,424

Operating expenses:
 
 

 
 

 
 

 
 

 
 

Research and development expense(2)(3)
 
$
1

 
$
1,643

 
$
880

 
$
20,897

 
$
23,421

General and administrative expense(2)(3)
 
$
1,865

 
$
341

 
$
316

 
$
1,411

 
$
3,933

Total operating expenses
 
$
1,866

 
$
1,984

 
$
1,196

 
$
22,308

 
$
27,354

 
 
For the Nine Months Ended September 30, 2015
 
 
2003 Sandoz
Collaboration
Agreement
 
2006 Sandoz
Collaboration
Agreement
 
Baxalta
Collaboration
Agreement
 
Total
Collaborations
Collaboration revenues:
 
 

 
 

 
 

 
 

Product revenue
 
$
2,843

 
$
27,850

 
$
—

 
$
30,693

Research and development revenue:
 
 

 
 

 
 

 
 

Milestone payments
 
—

 
20,000

 
—

 
20,000

Recognition of upfront payments and license payments
 
—

 
—

 
6,572

 
6,572

Research and development services and external costs
 
450

 
2,220

 
7,323

 
9,993

Total research and development revenue
 
$
450

 
$
22,220

 
$
13,895

 
$
36,565

Total collaboration revenues
 
$
3,293

 
$
50,070

 
$
13,895

 
$
67,258

Operating expenses:
 
 

 
 

 
 

 
 

Research and development expense(2)
 
$
208

 
$
703

 
$
1,376

 
$
2,287

General and administrative expense(2)
 
$
326

 
$
149

 
$
798

 
$
1,273

Total operating expenses
 
$
534

 
$
852

 
$
2,174

 
$
3,560


 
(1)
The Mylan Collaboration Agreement, as defined below, became effective on February 9, 2016.
 
(2)
The amounts generally represent external expenditures, including amortization of an intangible asset, and exclude salaries and benefits, share-based compensation, facilities, depreciation and laboratory supplies, as the majority of such costs are not directly charged to programs.
 

16

(3)
As a result of the cost-sharing provisions of the Mylan Collaboration Agreement, the Company offset approximately $19.8 million against research and development costs and $1.0 million against general and administrative costs during the nine months ended September 30, 2016.

2003 Sandoz Collaboration Agreement
 
In 2003, the Company entered into a collaboration and license agreement, or the 2003 Sandoz Collaboration Agreement, with Sandoz to jointly develop, manufacture and commercialize Enoxaparin Sodium Injection, a generic version of LOVENOX®, in the United States. Under the terms of the 2003 Sandoz Collaboration Agreement, the Company and Sandoz agreed to exclusively work with each other to develop and commercialize Enoxaparin Sodium Injection for any and all medical indications within the United States. In addition, the Company granted Sandoz an exclusive license under its intellectual property rights to develop and commercialize injectable enoxaparin for all medical indications within the United States.
 
Sandoz began selling Enoxaparin Sodium Injection in July 2010. For the three months ended March 2015, the Company received a 10% royalty on net sales. In June 2015, the Company and Sandoz amended the 2003 Sandoz Collaboration Agreement, effective April 1, 2015, to provide that Sandoz would pay the Company 50% of contractually-defined profits on sales. For the nine months ended September 30, 2015, the Company earned $2.8 million in product revenue consisting of $0.1 million in profits from Sandoz' sales of Enoxaparin in the second quarter of 2015, net of a claw-back adjustment of $0.1 million, and $2.7 million in royalties from Sandoz' sales of Enoxparin in the first quarter of 2015. Sandoz did not record any profit on sales of Enoxaparin Sodium Injection in the three months ended September 30, 2016, three months ended September 30, 2015 or the nine months ended September 30, 2016, and therefore the Company did not record product revenue for Enoxaparin Sodium Injection in those periods.
 
A portion of Enoxaparin Sodium Injection development expenses and certain legal expenses, which in the aggregate have exceeded a specified amount, are offset against profit-sharing amounts, royalties and milestone payments. The Company’s contractual share of such development and legal expenses is subject to an annual claw-back adjustment at the end of each of the first five product years, with the product year beginning on July 1 and ending on June 30. The annual adjustment can only reduce the Company’s profits, royalties and milestones by up to 50% in a given calendar quarter and any excess amount due will be carried forward into future quarters and reduce any profits in those future periods until it is paid in full. Annual adjustments, including amounts carried forward into future periods, are recorded as a reduction in product revenue.

2006 Sandoz Collaboration Agreement
 
In 2006 and 2007, the Company entered into a series of agreements, including a collaboration and license agreement, as amended, or the 2006 Sandoz Collaboration Agreement, with Sandoz AG; and a stock purchase agreement and an investor rights agreement, with Novartis Pharma AG. Under the 2006 Sandoz Collaboration Agreement, the Company and Sandoz AG agreed to exclusively collaborate on the development and commercialization of GLATOPA and M356, among other products. Costs, including development costs and the costs of clinical studies, will be borne by the parties in varying proportions depending on the type of expense. For GLATOPA and M356, the Company is generally responsible for all of the development costs in the United States. For GLATOPA and M356 outside of the United States, the Company shares development costs in proportion to its profit sharing interest. The Company is reimbursed at a contractual FTE rate for any FTE employee expenses as well as any external costs incurred in the development of products to the extent development costs are born by Sandoz. All commercialization costs are borne by Sandoz.
 
Sandoz commenced sales of GLATOPA in the United States on June 18, 2015. Under the 2006 Sandoz Collaboration Agreement, the Company earns 50% of contractually-defined profits on Sandoz’ worldwide net sales of GLATOPA. The Company is entitled to earn 50% of contractually-defined profits on Sandoz’ worldwide net sales of M356, if M356 is commercialized. Profits on net sales of GLATOPA and M356 are calculated by deducting from net sales the costs of goods sold and an allowance for selling, general and administrative costs, which is a contractual percentage of net sales. Sandoz is responsible for funding all of the legal expenses incurred under the 2006 Sandoz Collaboration Agreement; however, a portion of certain legal expenses, including any patent infringement damages, can be offset against the profit-sharing amounts in proportion to the Company’s 50% profit sharing interest.
 
For the three months ended September 30, 2016, the Company recorded $23.3 million in product revenues from Sandoz’ sales of GLATOPA. For the nine months ended September 30, 2016, the Company recorded $58.8 million in product revenues from Sandoz’ sales of GLATOPA. The Company is eligible to receive in the aggregate up to $120 million in additional milestone payments upon the achievement of certain commercial and sales-based milestones for GLATOPA and M356 in the United States. None of these payments, once received, is refundable and there are no general rights of return in the

17

arrangement. Sandoz AG has agreed to indemnify the Company for various claims, and a certain portion of such costs may be offset against certain future payments received by the Company.
 
The term of the 2006 Sandoz Collaboration Agreement extends throughout the development and commercialization of the products until the last sale of the products, unless earlier terminated by either party pursuant to the provisions of the 2006 Sandoz Collaboration Agreement. The 2006 Sandoz Collaboration Agreement may be terminated if either party breaches the 2006 Sandoz Collaboration Agreement or files for bankruptcy. In addition, either the Company or Sandoz AG may terminate the 2006 Sandoz Collaboration Agreement with respect to M356, if clinical trials are required for regulatory approval of M356.
 
Baxalta Collaboration Agreement
 
The Company and Baxter International Inc., Baxter Healthcare Corporation and Baxter Healthcare SA, collectively referred to as Baxter, entered into a global collaboration and license agreement effective February 2012, or the Baxter Collaboration Agreement, to develop and commercialize biosimilars, including M923. In connection with Baxter’s internal corporate restructuring in July 2015, Baxter assigned all of its rights and obligations under the Baxter Collaboration Agreement to Baxalta. In light of the assignment, all references to Baxter and the Baxter Collaboration Agreement have been replaced with references to Baxalta and the Baxalta Collaboration Agreement, respectively. On June 3, 2016, Baxalta Incorporated and Shire plc, or Shire, announced the completion of the combination of Baxalta Incorporated and Shire. As a result of the combination, Baxalta Incorporated is a wholly-owned subsidiary of Shire. On September 27, 2016, Baxalta gave the Company twelve months’ prior written notice of the exercise of its right to terminate for its convenience the Baxalta Collaboration Agreement.
 
Under the Baxalta Collaboration Agreement, the Company and Baxalta agreed to collaborate, on a world-wide basis, on the development and commercialization of M923, the Company’s biosimilar HUMIRA® (adalimumab) candidate, and M834, the Company’s biosimilar ORENCIA® (abatacept) candidate, and Baxalta had the right to select four additional reference products to target for biosimilar development under the collaboration. In July 2012, Baxalta selected an additional product: M511, the Company’s biosimilar AVASTIN® (bevacizumab) candidate. In December 2013, Baxalta terminated its option to license M511 under the Baxalta Collaboration Agreement following an internal portfolio review. In February 2015, Baxalta’s right to select additional programs expired without being exercised. Also in February 2015, Baxalta terminated in part the Baxalta Collaboration Agreement as it relates specifically to M834 and all worldwide development and commercialization rights for M834 reverted to the Company.
 
Under the Baxalta Collaboration Agreement, each party granted the other an exclusive license under its intellectual property rights to develop and commercialize M923 for all therapeutic indications. The Company agreed to provide development and related services on a commercially reasonable basis through the filing of an Investigational New Drug application, or IND, or equivalent application in the European Union for M923. Development and related services include high-resolution analytics, characterization, and product and process development. Baxalta is responsible for clinical development, manufacturing and commercialization activities and will exclusively distribute and market M923. The Company has the right to participate in a joint steering committee, consisting of an equal number of members from the Company and Baxalta, to oversee and manage the development and commercialization of M923 under the collaboration. Costs, including development costs, payments to third parties for intellectual property licenses, and expenses for legal proceedings, including the patent exchange process pursuant to the Biologics Price Competition and Innovation Act of 2009, will be borne by the parties in varying proportions, depending on the type of expense and the stage of development. The Company is reimbursed at a contractual FTE rate for any FTE employee expenses and external development costs for reimbursable activities related to M923.

Under the terms of the Baxalta Collaboration Agreement, the Company received an initial cash payment of $33 million, a $7 million license payment for achieving pre-defined “minimum development criteria” for M834, and $12 million in technical and development milestone payments in connection with the UK Medicines and Healthcare Products Regulatory Agency’s acceptance of Baxalta’s clinical trial application to initiate a pharmacokinetic clinical trial for M923.

Under the terms of the Baxalta Collaboration Agreement, the effective date of the termination is twelve months following the date Baxalta gave the termination notice, as more particularly set forth in the Baxalta Collaboration Agreement, or the Effective Date. As of the Effective Date, (i) Baxalta is obligated to transfer to the Company all ongoing regulatory, development, manufacturing and commercialization activities and related records for M923 and, at the Company’s request, assign to the Company any third party agreements reasonably necessary for and primarily related to the development, manufacture, and commercialization of M923 to the extent permitted by the agreements' terms, (ii) the licenses granted pursuant to the Baxalta Collaboration Agreement by the Company to Baxalta under the Company’s intellectual property rights relating to M923 will terminate, the licenses granted pursuant to the Baxalta Collaboration Agreement by Baxalta to the

18

Company under Baxalta’s intellectual property rights relating to M923 will survive, and Baxalta is obligated to grant to the Company additional licenses under Baxalta’s intellectual property rights relating to M923 existing as of the Effective Date, and (iii) the Company is obligated to pay to Baxalta a royalty of 5% of net sales, as such term is defined in the Baxalta Collaboration Agreement, until Baxalta’s development expenses and commercialization costs, as such terms are defined in the Baxalta Collaboration Agreement, occurring through the Effective Date are reimbursed. Following receipt of the termination notice, the Company is no longer eligible to receive any regulatory milestone payments under the Baxalta Collaboration Agreement. Prior to the Effective Date, Baxalta is obligated to continue to perform development and manufacturing activities for M923, which is currently in a pivotal clinical trial from which data is expected to be reported in 2016.
 
In accordance with FASB’s ASU No. 2009-13: Multiple-Deliverable Revenue Arrangements (Topic 615), the Company identified the deliverables at the inception of the Baxalta Collaboration Agreement. The deliverables were determined to include (i) six development and product licenses, for each of M923, M834 and the four additional collaboration products, (ii) research and development services related to each of M923, M834 and the four additional collaboration products and (iii) the Company’s participation in a joint steering committee. The Company determined that each of the license deliverables does not have stand-alone value apart from the related research and development services deliverables because (1) there are no other vendors selling similar, competing products on a stand-alone basis, (2) Baxalta does not have the contractual right to resell the license, and (3) Baxalta is unable to use the license for its intended purpose without the Company’s performance of research and development services. As such, the Company determined that with respect to this arrangement separate units of accounting exist for each of the six licenses together with the related research and development services, as well as the one unit of accounting for the joint steering committee. The estimated selling price for these units of accounting was determined based on similar license arrangements and the nature of the research and development services to be performed for Baxalta and market rates for similar services. At the inception of the Baxalta Collaboration Agreement, arrangement consideration of $61 million, which included the $33 million upfront payment and aggregate option payments for the four additional collaboration products of $28.0 million, was allocated to the units of accounting based on the relative selling price method. Of the $61 million, $10.3 million was allocated to the M923 product license together with the related research and development services, $10.3 million to each of the four additional collaboration product licenses with the related research and development services, $9.4 million was allocated to the M834 product license together with the related research and development services due to that product’s stage of development at the time the license was delivered, and $114,000 was allocated to the joint steering committee unit of accounting.
 
At the inception of the Baxalta Collaboration Agreement, the Company delivered development and product licenses for M923 and M834 and commenced revenue recognition of the arrangement consideration allocated to those products. In addition, the Company began revenue recognition for the arrangement consideration allocated to the joint steering committee unit of accounting. Baxalta’s termination of its option to license M511 in December 2013 as well as its termination of M834 and the lapsing of its right to select additional products in February 2015 reduced the number of deliverables from seven to two and decreased the total consideration from $61 million to $40 million. The Company determined that the change in total consideration received and total deliverables under the arrangement represented a change in estimate and, as a result, the Company reallocated the revised total consideration of $40 million to the remaining deliverables under the agreement using the original best estimate of selling price. The remaining deliverables are the combined unit of account for the M923 license and the related research and development services and the Company’s participation on the joint steering committee. Of the $40 million, $39.6 million was allocated to the M923 product license together with the related research and development services and $0.4 million was allocated to the joint steering committee unit of accounting. The Company recognized the resulting change in revenue as a result of the decrease in deliverables and expected consideration on a prospective basis. The Company recorded this revenue on a straight-line basis over the applicable performance period, which began with delivery of the development and product license and ends upon FDA approval of the product.

As a result of Baxalta's termination notice, the Company's performance period for M923 and the joint steering committee will end on the Effective Date, as defined above; therefore, the Company will recognize the remaining deferred revenue balance as of September 30, 2016 of $14.6 million ratably as revenue over the remaining performance period of twelve months, with quarterly amortization of $3.7 million for the next three quarters and $3.5 million in the third quarter of 2017. The impact of this change in estimate on the Company's net loss and net loss per share was immaterial for the three and nine months ended September 30, 2016. 

Mylan Collaboration Agreement
 
On January 8, 2016, the Company and Mylan entered into a collaboration agreement, or the Mylan Collaboration Agreement, which became effective on February 9, 2016, pursuant to which the Company and Mylan agreed to collaborate exclusively, on a world-wide basis, to develop, manufacture and commercialize six of the Company’s biosimilar candidates, including M834.

19

 
Under the terms of the Mylan Collaboration Agreement, Mylan agreed to pay the Company a non-refundable upfront payment of $45 million. In addition, the Company and Mylan share equally costs (including development, manufacturing, commercialization and certain legal expenses) and profits (losses) with respect to such product candidates, with Mylan funding its share of collaboration expenses incurred by the Company, in part, through up to six contingent milestone payments, totaling up to $200 million across the six product candidates.
 
For each product candidate other than M834, at a specified stage of early development, the Company and Mylan will each decide, based on the product candidate’s development progress and commercial considerations, whether to continue the development, manufacture and commercialization of such product candidate under the collaboration or to terminate the collaboration with respect to such product candidate.
 
Under the Mylan Collaboration Agreement, the Company granted Mylan an exclusive license under the Company’s intellectual property rights to develop, manufacture and commercialize the product candidates for all therapeutic indications, and Mylan granted the Company a co-exclusive license under Mylan’s intellectual property rights for the Company to perform its development and manufacturing activities under the product work plans agreed by the parties, and to perform certain commercialization activities to be agreed by the joint steering committee for such product candidates if the Company exercises its co-commercialization option described below. The Company and Mylan established a joint steering committee consisting of an equal number of members from the Company and Mylan to oversee and manage the development, manufacture and commercialization of product candidates under the collaboration. Unless otherwise determined by the joint steering committee, it is anticipated that, in collaboration with the other party, (a) the Company will be primarily responsible for nonclinical development activities and initial clinical development activities for product candidates; additional (pivotal or Phase 3 equivalent) clinical development activities for M834; and regulatory activities for product candidates in the United States through regulatory approval; and (b) Mylan will be primarily responsible for additional (pivotal or Phase 3 equivalent) clinical development activities for product candidates other than M834; regulatory activities for the product candidates outside the United States; and regulatory activities for products in the United States after regulatory approval, when all marketing authorizations for the products in the United States will be transferred to Mylan. Mylan will commercialize any approved products, with the Company having an option to co-commercialize, in a supporting commercial role, any approved products in the United States. The joint steering committee is responsible for allocating responsibilities for other activities under the collaboration.
 
The term of the collaboration will continue throughout the development and commercialization of the product candidates, on a product-by-product and country-by-country basis, until development and commercialization by or on behalf of the Company and Mylan pursuant to the Mylan Collaboration Agreement has ceased for a continuous period of two years for a given product candidate in a given country, unless earlier terminated by either party pursuant to the terms of the Mylan Collaboration Agreement.
 
The Mylan Collaboration Agreement may be terminated by either party for breach by, or bankruptcy of, the other party; for its convenience; or for certain activities involving competing products or the challenge of certain patents. Other than in the case of a termination for convenience, the terminating party will have the right to continue the development, manufacture and commercialization of the terminated products in the terminated countries. In the case of a termination for convenience, the other party will have the right to continue. If a termination occurs, the licenses granted to the non-continuing party for the applicable product will terminate for the terminated country. Subject to certain terms and conditions, the party that has the right to continue the development or commercialization of a given product candidate may retain royalty-bearing licenses to certain intellectual property rights, and rights to certain data, for the continued development and sale of the applicable product in the country or countries for which termination applies.
 
In accordance with FASB’s ASU No. 2009-13: Multiple-Deliverable Revenue Arrangements (Topic 615), the Company identified the deliverables at the inception of the Mylan Collaboration Agreement. The deliverables were determined to include (i) six development and product licenses, for each of M834 and the five additional collaboration products, (ii) research and development services related to each of M834 and the five additional collaboration products and (iii) the Company’s participation in the joint steering committee. The Company has determined that each of the license deliverables does not have stand-alone value apart from the related research and development services deliverables because (1) there are no other vendors selling similar, competing products on a stand-alone basis, (2) Mylan does not have the contractual right to resell the license, and (3) Mylan is unable to use the license for its intended purpose without the Company’s performance of research and development services. As such, the Company determined that with respect to this arrangement separate units of accounting exist for each of the six licenses together with the related research and development services, or the combined units of accounting, as well as a separate unit of accounting for participation in the joint steering committee. VSOE and TPE were not available for the combined units of accounting. As such, the Company determined BESP for the combined units of accounting

20

based on an analysis of its existing license arrangements and other available data and the nature and extent of the research and development services to be performed. BESP for the joint steering committee unit of accounting was based on market rates for similar services. At the inception of the Mylan Collaboration Agreement, total arrangement consideration of $45 million was allocated to each of the units of accounting based on the relative selling price method. Of the $45 million, $8.2 million was allocated to the M834 combined unit of accounting, between $5.7 million and $9.0 million to the five additional combined units of accounting, considering the products’ stage of development at the time the licenses were delivered, and $51,000 was allocated to the joint steering committee unit of accounting. Changes in the key assumptions used to determine BESP for the units of accounting would not have a significant effect on the allocation of arrangement consideration.
 
At the inception of the Mylan Collaboration Agreement, the Company delivered development and product licenses for all six collaboration products and commenced revenue recognition of the arrangement consideration allocated the respective units of accounting. In addition, the Company began revenue recognition for the arrangement consideration allocated to the joint steering committee unit of accounting. The Company is recording revenue on a straight-line basis over the applicable performance period during which the research and development services are expected to be delivered, which begins upon delivery of the development and product license and ends upon FDA approval of the product. The Company currently estimates that the performance period for the M834 unit of accounting is approximately four years, an average of approximately seven years for the additional five combined units of accounting and approximately eight years for the joint steering committee unit of accounting. As of September 30, 2016, $40.4 million was deferred under this agreement, of which $7.1 million was included in current liabilities and $33.3 million was included in non-current liabilities in the consolidated balance sheet.
 
As discussed above, the Mylan Collaboration Agreement became effective on February 9, 2016. Beginning on February 9, 2016, the Company shares collaboration expenses with Mylan and, as such, the net amount due from Mylan for its 50% share of collaboration expenses is recorded as a collaboration receivable in the consolidated balance sheet and a reduction in research and development and/or general and administrative expenses in the consolidated statement of operations and comprehensive loss, in accordance with the Company’s policy, which is consistent with the nature of the cost reimbursement. Collaboration costs incurred by the Company are recorded as research and development expense and/or general and administrative expense, depending on the nature of the activities, as incurred.
 
As discussed above, Mylan will fund a portion of its 50% share of collaboration expenses, in part, through up to $200 million in contingent milestone payments across the six product candidates. The contingent payments will reduce the collaboration receivable balance and any unused portion of the contingent payment will be available to offset Mylan’s 50% share of collaboration costs in future periods. If in a given year a contingent payment is not expected to be made by Mylan and there is no balance available from a prior contingent payment balance as of the beginning of the collaboration year, the parties will reconcile total collaboration expenses on a semi-annual basis and Mylan will make a payment to the Company. For the nine months ended September 30, 2016, the Company reduced research and development expenses by $19.8 million and general and administrative expenses by $1.0 million, representing Mylan’s 50% share of collaboration expenses.
 
6. Share-Based Payments
 
Share-Based Compensation
 
The following table summarizes share-based compensation expense (income) recorded in each of the three and nine months ended September 30, 2016 and 2015 (in thousands):
 
Share-based compensation expense (income)
 
For the Three Months Ended
September 30, 2016
 
For the Three Months Ended
September 30, 2015
 
For the Nine Months Ended
September 30, 2016
 
For the Nine Months Ended
September 30, 2015
Outstanding employee and non-employee stock option grants
 
$
2,149

 
$
2,769

 
$
7,278

 
$
7,785

Outstanding restricted stock awards
 
2,688

 
1,691

 
7,161

 
(1,282
)
Employee stock purchase plan
 
102

 
97

 
317

 
284

Total compensation expense
 
$
4,939

 
$
4,557

 
$
14,756

 
$
6,787

 
During the nine months ended September 30, 2016, the Company granted 1,351,852 stock options, of which 812,302 were granted in connection with annual merit awards, 358,550 were granted to new hires and 181,000 were granted to members of our board of directors. The average grant date fair value of options granted was calculated using the Black-Scholes-Merton option-pricing model and the weighted average assumptions are noted in the table below. The weighted average grant date fair value of option awards granted during the three months ended September 30, 2016 and 2015 was $6.77 per option and $11.14

21

per option, respectively. The weighted average grant date fair value of option awards granted during the nine months ended September 30, 2016 and 2015 was $5.90 per option and $8.00 per option, respectively.
 
The following tables summarize the weighted average assumptions the Company used in its fair value calculations at the date of grant:
 
 
Weighted Average Assumptions
 
 
Stock Options
 
Employee Stock Purchase Plan
 
 
For the Three Months Ended September 30, 2016
 
For the Three Months Ended September 30, 2015
 
For the Three Months Ended September 30, 2016
 
For the Three Months Ended September 30, 2015
Expected volatility
 
60
%
 
53
%
 
58
%
 
58
%
Expected dividends
 
—

 
—

 
—

 
—

Expected life (years)
 
6.1

 
6.2

 
0.5

 
0.5

Risk-free interest rate
 
1.4
%
 
1.9
%
 
0.4
%
 
0.1
%

 
 
Weighted Average Assumptions
 
 
Stock Options
 
Employee Stock Purchase Plan
 
 
For the Nine Months Ended September 30, 2016
 
For the Nine Months Ended September 30, 2015
 
For the Nine Months Ended September 30, 2016
 
For the Nine Months Ended September 30, 2015
Expected volatility
 
58
%
 
60
%
 
57
%
 
59
%
Expected dividends
 
—

 
—

 
—

 
—

Expected life (years)
 
6.1

 
6.1

 
0.5

 
0.5

Risk-free interest rate
 
1.5
%
 
1.8
%
 
0.4
%
 
0.1
%
 
At September 30, 2016, the total remaining unrecognized compensation cost related to nonvested stock option awards amounted to $14.8 million, net of estimated forfeitures, which will be recognized over the weighted average remaining requisite service period of 2.6 years.
 
During the nine months ended September 30, 2016, the Company issued 104,892 shares of common stock to employees under the employee stock purchase plan, or ESPP, resulting in proceeds of approximately $1.1 million.
 
Restricted Stock Awards
 
The Company has also made awards of time-based and performance-based restricted common stock to its employees and officers. In the nine months ended September 30, 2016, the Company awarded 434,821 shares of time-based restricted common stock to its employees and officers. The time-based restricted common stock vest as to 25% on the one year anniversary of the grant date and as to 6.25% quarterly over three years that follow the grant date. The time-based awards are generally forfeited if the employment relationship terminates with the Company prior to vesting.

Between April 13, 2016 and September 30, 2016, the Company awarded 1,576,860 shares of performance-based restricted common stock to employees and officers. The vesting of the shares is subject to achieving up to two of three possible company-wide milestones on or before April 13, 2019; however, the Company determined that, as a result of discontinuing the necuparanib program, only two of the three company-wide milestones are possible to achieve during the vesting period. Upon achieving each of the first and second milestones, 25% of the shares will vest on the milestone achievement date, and an additional 25% of the shares will vest on the one year anniversary of such achievement date, subject to a minimum one year vesting period from the date of grant and a requirement that recipients are employees on any applicable vesting date. Each quarter, the Company evaluates the probability of achieving the milestones on or before April 13, 2019, and its estimate of the implicit service period over which the fair value of the awards will be recognized and expensed. The Company has determined that attainment of the performance conditions is probable and is expensing the fair value of the shares over the implicit service period using the accelerated attribution method. In the third quarter of 2016, the Company changed its estimate of the implicit service period, and the fair value of the shares is being recognized over the revised implicit service period. The impact of this change in estimate on the Company's net loss and net loss per share was immaterial. In the three months ended September 30, 2016, the Company recognized approximately $1.9 million of stock compensation costs related to the awards. In the nine

22

months ended September 30, 2016, the Company recognized approximately $3.6 million of stock compensation costs related to the awards.
 
Between 2011 and early 2013, the Company awarded 949,620 shares of performance-based restricted common stock to its employees and officers. The performance-based restricted common stock was scheduled to vest upon FDA approval of the GLATOPA Abbreviated New Drug Application, or ANDA, on or before the performance deadline date of March 28, 2015 according to the following schedule: 50% of the shares vest upon FDA approval and 50% vest upon the one year anniversary of FDA approval. The Company had historically determined that the performance condition was probable of being achieved by March 28, 2015 and, as a result, had recognized approximately $10.5 million of stock compensation costs related to the awards. On March 11, 2015, the Board of Directors approved an amendment to the awards that extended the performance deadline date to September 1, 2015 and provided for the forfeiture of 15% of the number of shares originally subject to each award on the 29th of each month, beginning March 29, 2015 until the shares vested or were forfeited in full. On March 29, 2015, 117,898 shares of performance-based restricted common stock were forfeited pursuant to the modified awards. The Company evaluated the modification and determined it was a Type III modification or “Improbable to Probable” pursuant to ASC 718 as the awards, on the date of modification, were no longer deemed to be probable of being earned by March 28, 2015. As a result, the Company reversed the cumulative compensation cost related to the original awards of $10.5 million in the first quarter of 2015. Also, in accordance with ASC 718, the Company re-measured the modified awards with a measurement date of March 11, 2015, and determined the aggregate compensation was $9.8 million. The FDA approved GLATOPA on April 16, 2015. The Company recognized the compensation cost attributed to the modified awards as follows: the first 50% of the awards were expensed over the period beginning on March 11, 2015 and ending on April 16, 2015, the date of FDA approval, and the remaining 50% of the awards were expensed over the period beginning on March 11, 2015 and ending on April 16, 2016, the one year anniversary of FDA approval. Accordingly, approximately $9.4 million of stock compensation cost for awards that were earned and vested was recognized in the period between March 11, 2015 and April 18, 2016.
 
As of September 30, 2016, the total remaining unrecognized compensation cost related to all nonvested time-based and performance-based restricted stock awards amounted to $15.3 million, which is expected to be recognized over the weighted average remaining requisite service period of 2.9 years.
 
A summary of the status of nonvested shares of restricted stock as of September 30, 2016 and the changes during the nine months ended September 30, 2016 are presented below (in thousands, except fair values):
 
 
 
Number of
Shares
 
Weighted
Average
Grant Date
Fair Value
Nonvested at January 1, 2016
 
761

 
$
14.61

Granted
 
2,012

 
10.05

Vested
 
(485
)
 
14.53

Forfeited
 
(228
)
 
10.99

Nonvested at September 30, 2016
 
2,060

 
$
10.57


Nonvested shares of restricted stock that have time-based or both performance-based and time-based vesting conditions as of September 30, 2016 are summarized below (in thousands):
 
Vesting Schedule
 
Nonvested
Shares
Time-based
 
620

Performance-based and time-based
 
1,440

Nonvested at September 30, 2016
 
2,060

 
7. Equity Financings
 
In May 2015, the Company sold an aggregate of 8,337,500 shares of its common stock through an underwritten public offering at a price to the public of $19.00 per share. As a result of the offering, which included the full exercise of the underwriters’ option to purchase additional shares, the Company received aggregate net proceeds of approximately $148.4 million, after deducting underwriting discounts and commissions and other offering expenses.


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In May 2014, the Company entered into an At-the-Market Equity Offering Sales Agreement, or the 2014 ATM Agreement, with Stifel, Nicolaus & Company, Incorporated, or Stifel, under which the Company was authorized to issue and sell shares of its common stock having aggregate sales proceeds of up to $75 million from time to time through Stifel, acting as sales agent and/or principal. The Company paid Stifel a commission of 2.0% of the gross proceeds from the sale of shares of its common stock under this facility. The offering was conducted by the Company pursuant to an effective shelf registration statement on Form S-3 previously filed with the SEC (Reg. No. 333-188227) and a related prospectus supplement. The Company intends to use the net proceeds from this facility to advance its development pipeline and for general corporate purposes, including working capital. Between October 2014 and April 2015, the Company sold approximately 5.4 million shares of common stock under the 2014 ATM Agreement, raising aggregate net proceeds of approximately $73.5 million. The Company concluded sales under the 2014 ATM Agreement in April 2015.
 
In April 2015, the Company entered into a new ATM Agreement, or the 2015 ATM Agreement, with Stifel, under which the Company is authorized to issue and sell shares of its common stock having aggregate sales proceeds of up to $75 million from time to time through Stifel, acting as sales agent and/or principal. The Company is required to pay Stifel a commission of 2.0% of the gross proceeds from the sale of shares of its common stock under the 2015 ATM Agreement. From April 2015 through December 2015, the Company sold approximately 0.5 million shares of common stock under the 2015 ATM Agreement pursuant to an effective shelf registration statement on Form S-3 previously filed with the SEC (Reg. No. 333-188227) and a related prospectus supplement, and raised aggregate net proceeds of approximately $9.3 million. The shelf registration statement on Form S-3 (Reg No. 333-188227) expired in April 2016. In February 2016, the Company filed a shelf registration statement on Form S-3 (Reg No. 333-209813) with the SEC registering the offer, sale and issuance, from time to time, of common stock, preferred stock, debt securities and warrants. No shares were sold under the 2015 ATM Agreement in the nine months ended September 30, 2016.
 
8. Commitments and Contingencies
 
Operating Leases

The Company leases office space and equipment under various operating lease agreements.

In September 2004, the Company entered into an agreement with Vertex Pharmaceuticals, or Vertex, to lease 53,323 square feet of office and laboratory space located on the fourth and fifth floors at 675 West Kendall Street, Cambridge, Massachusetts, for an initial term of 80 months, or the West Kendall Sublease. In November 2005, the Company amended the West Kendall Sublease to lease an additional 25,131 square feet through April 2011. In April 2010, the Company exercised its right to extend the West Kendall Sublease for one additional term of 48 months. During the extension term, which commenced on May 1, 2011, annual rental payments increased by approximately $1.2 million over the previous annual rental rate. In July 2014, the Company and Vertex entered into an agreement to extend the term of the West Kendall Sublease from May 1, 2015 through April 30, 2018, or such other earlier date as provided in accordance with the West Kendall Sublease. During the extension term, annual rental payments are approximately $4.8 million.

On February 5, 2013, the Company and BMR-Rogers Street LLC, or BMR, entered into a lease agreement, or the Second Bent Street Lease, to lease 104,678 square feet of office and laboratory space located in the basement and first and second floors at 320 Bent Street, Cambridge, Massachusetts, beginning on September 1, 2013 and ending on August 31, 2016. Annual rental payments due under the Second Bent Street Lease were approximately $6.1 million during the first lease year, $6.2 million during the second lease year, and $6.3 million during the third lease year. On December 30, 2015, the Company and BMR entered into an amendment, or the Amendment, to Second Bent Street Lease agreement. The Amendment extends the expiration date of the lease term from August 31, 2016 to February 28, 2027. Under the Amendment, the Company is not required to pay BMR any base rent from September 1, 2016 through February 28, 2017; however the Company is required to pay BMR certain operating expenses. Beginning on March 1, 2017 and ending on August 31, 2017, the Company is obligated to pay BMR an initial monthly base rent of approximately $0.6 million, or $68.00 per square foot. The Company's monthly base rent will increase by three percent of the then-current base rent on September 1 of each year during the extended term of the Lease, beginning on September 1, 2017. During the period from September 1, 2016 through June 30, 2018, BMR has agreed to pay the Company a tenant improvement allowance not to exceed $4.7 million for reimbursement of certain laboratory and office improvements.

On September 14, 2016, the Company entered into a Sublease, or the Sublease, with Biogen MA Inc., or Biogen, pursuant to which the Company will sublease approximately 79,683 square feet of office and laboratory space on the fifth floor of 301 Binney Street, Cambridge, Massachusetts, or the Premises. Biogen leases the Premises from BMR pursuant to a Lease, dated as of March 31, 2015, as amended, or the Prime Lease. The term of the Sublease will commence on January 1, 2018, and will expire on June 29, 2025, unless terminated earlier in accordance with the terms of the Sublease, or the Term. From January

24

1, 2018, through December 31, 2018, the Company is obligated to pay a monthly base rent of $504,659, or $76 per square foot. The Company’s monthly base rent will increase by approximately 3% of the then-current monthly base rent on each of January 1, 2019, and January 1, 2020. Thereafter, the Company’s monthly base rent will increase by approximately 1.85% of the then-current monthly base rent on January 1 of each of the remaining years of the Term. In addition, the Company is obligated to pay certain costs and expenses payable by Biogen under the Prime Lease. Simultaneous with the execution of the Sublease, the Company is obligated to deliver to Biogen a security deposit in the form of an irrevocable standby letter of credit in the amount of approximately two months of the monthly base rent at the average rate per square foot over the Term.

Total operating lease commitments as of September 30, 2016 are as follows (in thousands):
 
 
October 1 to December 31, 2016
$
1,267

2017
11,023

2018
15,249

2019
14,044

2020
14,460

2021
14,815

2022 and beyond
69,894

Total future minimum lease payments
$
140,752


 
Legal Contingencies
 
The Company is involved in various litigation matters that arise from time to time in the ordinary course of business. The process of resolving matters through litigation or other means is inherently uncertain and it is possible that an unfavorable resolution of these matters will adversely affect the Company, its results of operations, financial condition and cash flows. The Company’s general practice is to expense legal fees as services are rendered in connection with legal matters, and to accrue for liabilities when losses are probable and reasonably estimable. The Company evaluates, on a quarterly basis, developments in legal proceedings and other matters that could cause an increase or decrease in the amount of any accrual on its consolidated balance sheets.
 
M356-Related Litigation
 
On September 10, 2014, Teva Pharmaceuticals Industries Ltd. and related entities, or Teva, and Yeda Research and Development Co., Ltd., or Yeda, filed suit against the Company and Sandoz Inc. in the United States District Court for the District of Delaware in response to the filing by Sandoz Inc. of the ANDA with a Paragraph IV certification for M356. The suit initially alleged infringement related to two Orange Book-listed patents for COPAXONE 40 mg/mL, each expiring in 2030, and seeks declaratory and injunctive relief prohibiting the launch of the Company’s product until the last to expire of these patents. In April 2015, Teva and Yeda filed an additional suit against the Company and Sandoz Inc. in the United States District Court for the District of Delaware alleging infringement related to a third Orange Book-listed patent for COPAXONE 40 mg/mL, which issued in March 2015 and expires in 2030. In May 2015, this suit was consolidated with the initial suit filed in September 2014. In November 2015, Teva and Yeda filed a suit against the Company and Sandoz Inc. in the United States District Court for the District of Delaware alleging infringement related to a fourth Orange Book-listed patent for COPAXONE 40 mg/mL, which issued in October 2015 and expires in 2030. Teva and Yeda seek declaratory and injunctive relief prohibiting the launch of M356 until the expiration of this patent. In December 2015, this suit was consolidated with the initial suit filed in September 2014. The Company and Sandoz Inc. have asserted various defenses and filed counterclaims for declaratory judgments of non-infringement, invalidity and unenforceability of the COPAXONE 40 mg/mL patents. The trial concluded in October 2016, and the Company expects the District Court to issue a decision in the first quarter of 2017.

Enoxaparin Sodium Injection-related Litigation
 
On September 21, 2011, the Company and Sandoz Inc. sued Amphastar and Actavis, in the United States District Court for the District of Massachusetts for infringement of two of the Company’s patents. Also in September 2011, the Company filed a request for a temporary restraining order and preliminary injunction to prevent Amphastar and Actavis from selling their enoxaparin product in the United States. In October 2011, the District Court granted the Company’s motion for a preliminary injunction and entered an order enjoining Amphastar and Actavis from advertising, offering for sale or selling their enoxaparin product in the United States until the conclusion of a trial on the merits and required the Company and Sandoz Inc. to post a

25

security bond of $100 million in connection with the litigation. Amphastar and Actavis appealed the decision to the Court of Appeals for the Federal Circuit, or CAFC, and in January 2012, the CAFC stayed the preliminary injunction. In August 2012, the CAFC vacated the preliminary injunction and remanded the case to the District Court. In September 2012, the Company filed a petition with the CAFC for a rehearing by the full court en banc, which was denied. In February 2013, the Company filed a petition for a writ of certiorari for review of the CAFC decision by the United States Supreme Court, which was denied in June 2013.
 
In July 2013, the District Court granted a motion by Amphastar and Actavis for summary judgment. The Company filed a notice of appeal of that decision to the CAFC. In February 2014, Amphastar filed a motion to the CAFC for summary affirmance of the District Court ruling, which the CAFC denied in May 2014. On November 10, 2015, the CAFC affirmed the District Court summary judgment decision with respect to Actavis, reversed the District Court summary judgment decision with respect to Amphastar, and remanded the case against Amphastar to the District Court. On January 11, 2016, Amphastar filed a petition for rehearing by the CAFC, which was denied on February 17, 2016. On May 17, 2016, Amphastar filed a petition for a writ of certiorari for review of the CAFC decision by the United States Supreme Court, which was denied on October 3, 2016. The District Court trial is scheduled to begin on July 10, 2017. The collateral for the security bond posted in the litigation remains outstanding. In the event that the Company is not successful in further prosecution or settlement of this action against Amphastar, and Amphastar is able to prove they suffered damages as a result of the preliminary injunction, the Company could be liable for damages for up to $35 million of the security bond. Amphastar has filed motions to increase the amount of the security bond, which the Company and Sandoz Inc. have opposed.
 
On September 17, 2015, Amphastar filed a complaint against the Company and Sandoz Inc. in the United States District Court for the Central District of California. The complaint alleges that, in connection with filing the September 2011 patent infringement suit against Amphastar and Actavis, the Company and Sandoz Inc. sought to prevent Amphastar from selling generic enoxaparin sodium injection and thereby exclude competition for generic enoxaparin sodium injection in violation of federal and California anti-trust laws and California unfair business laws. Amphastar is seeking unspecified damages and fees. In December 2015, the Company and Sandoz Inc. filed a motion to dismiss and a motion to transfer the case. In January 2016, the case was transferred to the United States District Court for the District of Massachusetts. In February 2016, Amphastar filed a writ of mandamus with the United States Court of Appeals for the Ninth Circuit requesting that the court reverse and review the District Court’s grant of transfer, and in May 2016, the writ requested by Amphastar was denied. On July 27, 2016, the Company’s and Sandoz Inc.’s motion to dismiss was granted by the District Court, and the case was dismissed. On August 25, 2016, Amphastar filed a notice of appeal from the dismissal with the United States Court of Appeals for the First Circuit, and the Court issued a briefing schedule that concludes by the end of 2016.
 
On October 14, 2015, The Hospital Authority of Metropolitan Government of Nashville and Davidson County, Tennessee, d/b/a Nashville General Hospital, or NGH, filed a class action suit against the Company and Sandoz Inc. in the United States District Court for the Middle District of Tennessee on behalf of certain purchasers of LOVENOX or generic enoxaparin sodium injection. The complaint alleges that, in connection with filing the September 2011 patent infringement suit against Amphastar and Actavis, the Company and Sandoz Inc. sought to prevent Amphastar from selling generic enoxaparin sodium injection and thereby exclude competition for generic enoxaparin sodium injection in violation of federal anti-trust laws. NGH is seeking injunctive relief, disgorgement of profits and unspecified damages and fees. In December 2015, the Company and Sandoz Inc. filed a motion to dismiss and a motion to transfer the case to the United States District Court for the District of Massachusetts. Hearings on the motions were held before a U.S. magistrate in April 2016 and February 2016, respectively. On September 29, 2016, the magistrate judge filed a Report and Recommendation to the District Court to deny the motions to dismiss and to transfer. These motions are subject to briefing and review by the District Court. While the outcome of litigation is inherently uncertain, the Company believes this suit is without merit, and it intends to vigorously defend itself in this litigation.

Item 2.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
The following discussion of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q and the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2015.
 
This discussion contains forward-looking statements that involve significant risks and uncertainties. As a result of many important factors, such as those set forth under “Risk Factors” in Part II, Item 1A of this Quarterly Report on Form 10-Q, our actual results may differ materially from those anticipated in these forward-looking statements.
 
Overview

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We are a biotechnology company focused on developing generic versions of complex drugs, biosimilars and novel therapeutics for autoimmune diseases.
 
To date, we have devoted substantially all of our capital resource expenditures to the research and development of our products and product candidates. Although we were profitable in fiscal years 2010 and 2011, since that time we have been incurring operating losses, and we expect to incur annual operating losses over the next several years as we advance our drug development portfolio. As of September 30, 2016, we had an accumulated deficit of approximately $514.9 million. We will need to generate significant revenue to return to profitability. We expect that our return to profitability, if at all, will most likely come from the commercialization of the products in our drug development portfolio.
 
Complex Generics
 
GLATOPA®—Generic Once-daily COPAXONE® (glatiramer acetate injection) 20 mg/mL
 
On April 16, 2015, the FDA approved the ANDA for once-daily GLATOPA (glatiramer acetate injection) 20 mg/mL, a generic equivalent of once-daily COPAXONE® 20 mg/mL. GLATOPA is the first “AP” rated, substitutable generic equivalent of once-daily COPAXONE. Sandoz commenced sales of GLATOPA on June 18, 2015. Under our collaboration agreement with Sandoz AG, we earn 50% of contractually-defined profits on GLATOPA sales. For the three months ended September 30, 2016, we recorded $23.3 million in product revenues from Sandoz’ sales of GLATOPA.
 
GLATOPA was formerly referred to as M356. M356 now refers to our generic product candidate for three-times-weekly COPAXONE 40 mg/mL.
 
M356—Generic Three-times-weekly COPAXONE® (glatiramer acetate injection) 40 mg/mL
 
An ANDA with a Paragraph IV certification for our generic version of three-times-weekly COPAXONE 40 mg/mL, which was filed in February 2014, remains under review by the FDA. Our M356 formulation contains the same drug substance as GLATOPA, which we believe should help streamline the FDA review of the ANDA. To date, we are the only ANDA applicant for the three-times-weekly COPAXONE 40 mg/mL with an FDA-approved active pharmaceutical ingredient. If we are successful in our challenge of the patents related to COPAXONE 40 mg/mL, the trial for which concluded in October 2016, and assuming customary patent litigation timelines, we believe M356 could be approved, following expiration of regulatory exclusivity and of any 30-month stay, if applicable, and be on the market as early as the first quarter of 2017. In August 2015, the Patent Trial and Appeal Board of the U.S. Patent and Trademark Office, or PTAB, instituted an Inter Partes Review, or IPR, filed by a third party challenging the validity of several of the same patents relating to COPAXONE 40 mg/mL that are the subject of our patent litigation.  In August 2016, the PTAB issued opinions invalidating the COPAXONE 40 mg/mL patents that were the subject of the IPR.
 
Enoxaparin Sodium Injection—Generic LOVENOX® 
 
In June 2015, we and Sandoz amended our collaboration agreement relating to Enoxaparin Sodium Injection, replacing Sandoz’ obligation to pay us a royalty on net sales with an obligation to pay us 50% of contractually-defined profits on sales. The amendment, which was effective April 1, 2015, better aligned our interests in an evolving market that has seen continued pricing pressure.
 
Sandoz did not record any profit on sales of Enoxaparin Sodium Injection in the three months ended September 30, 2016, and therefore we recorded no product revenue for Enoxaparin Sodium Injection in the period.

Biosimilars
 
M923—Biosimilar HUMIRA® (adalimumab) Candidate
 
In connection with Baxter’s internal corporate restructuring in July 2015, Baxter assigned all of its rights and obligations under the Baxter Collaboration Agreement to Baxalta. In light of the assignment, all references to Baxter and the Baxter Collaboration Agreement have been replaced with references to Baxalta and the Baxalta Collaboration Agreement, respectively. On June 3, 2016, Baxalta Incorporated and Shire announced the completion of the combination of Baxalta Incorporated and Shire. As a result of the combination, Baxalta Incorporated is a wholly owned subsidiary of Shire. On September 27, 2016, Baxalta gave us twelve months’ prior written notice of the exercise of its right to terminate for its convenience the Baxalta Collaboration Agreement.

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Under the terms of the Baxalta Collaboration Agreement, the effective date of the termination is twelve months following the date Baxalta gave the termination notice, as more particularly set forth in the Baxalta Collaboration Agreement, or the Effective Date. As of the Effective Date, (i) Baxalta is obligated to transfer to us all ongoing regulatory, development, manufacturing and commercialization activities and related records for M923 and, at our request, assign to us any third party agreements reasonably necessary for and primarily related to the development, manufacture, and commercialization of M923 to the extent permitted by the agreements' terms, (ii) the licenses granted pursuant to the Baxalta Collaboration Agreement by us to Baxalta under our intellectual property rights relating to M923 will terminate, the licenses granted pursuant to the Baxalta Collaboration Agreement by Baxalta to us under Baxalta’s intellectual property rights relating to M923 will survive, and Baxalta is obligated to grant to us additional licenses under Baxalta’s intellectual property rights relating to M923 existing as of the Effective Date, and (iii) we are obligated to pay to Baxalta a royalty of 5% of net sales, as such term is defined in the Baxalta Collaboration Agreement, until Baxalta’s development expenses and commercialization costs, as such terms are defined in the Baxalta Collaboration Agreement, occurring through the Effective Date are reimbursed.
 
In February 2015, Baxalta commenced a randomized, double-blind, single-dose study in healthy volunteers to compare the pharmacokinetics, safety, tolerability and immunogenicity of M923 versus EU-sourced and US-sourced HUMIRA. A total of 324 healthy volunteers were enrolled in the study. The volunteers were randomized 1:1:1 to receive a single 40 mg injection of M923, US-sourced HUMIRA, or EU-sourced HUMIRA. The volunteers were followed for 71 days. In December 2015, we announced that M923 met its primary endpoint in the study as the data demonstrated pharmacokinetic bioequivalence to the reference products. In October 2015, Baxalta initiated a pivotal clinical trial of M923 in patients with chronic plaque psoriasis. The trial is a randomized, double-blind, active control, multi-center, global study in patients with chronic plaque psoriasis to compare the safety, efficacy and immunogenicity of M923 with HUMIRA. In April 2016, we and Baxalta completed enrollment in the pivotal clinical trial for M923, and we expect to report data from this trial in late 2016. The first regulatory submission for marketing approval for M923 is planned in 2017 and, subject to marketing approval and patent considerations, we are planning for the first commercial launch to be as early as 2018.
 
M834—Biosimilar ORENCIA® (abatacept) Candidate
 
On January 8, 2016, we and Mylan entered into the Mylan Collaboration Agreement, which became effective on February 9, 2016, pursuant to which we and Mylan agreed to collaborate exclusively, on a world-wide basis, to develop, manufacture and commercialize six of our biosimilar candidates, including M834. Under the terms of the Mylan Collaboration Agreement, Mylan paid us a non-refundable upfront payment of $45 million in March 2016. In addition, we and Mylan will share equally costs, including development, manufacturing, commercialization and certain legal expenses, and profits (losses) across the six product candidates. In November 2016, we initiated a randomized, double-blind, three-arm, parallel group, single-dose Phase 1 clinical trial in normal healthy volunteers to compare the pharmacokinetics, safety and immunogenicity of M834 to US-sourced and EU-sourced ORENCIA. We plan to report top-line data from the trial by the end of 2017. Subject to development, marketing approval and patent considerations, we expect to be able to launch M834 in the 2020 timeframe to be able to be among the first biosimilars of ORENCIA on the market.
 
Other Biosimilar Candidates
 
Under our Mylan collaboration, we and Mylan are also developing five other biosimilar candidates from our portfolio, in addition to M834. We and Mylan will share equally costs and profits (losses) related to these earlier stage product candidates. We and Mylan will share development responsibilities across product candidates, and Mylan will lead commercialization of the products.
 
As of September 30, 2016, we had approximately 100 employees working on our biosimilars programs. We maintain a state-of-the-art development facility for bioprocess manufacturing development and scale-up.
 
Novel Therapeutics
 
Necuparanib

On August 3, 2016, we discontinued further accrual of our Part B, or Phase 2, portion of our Phase 1/2 clinical trial evaluating necuparanib in combination with nab-paclitaxel (ABRAXANE®) and gemcitabine in patients with advanced metastatic pancreatic cancer. The decision to discontinue enrollment was based on the recommendation of the independent Data Safety Monitoring Board for the trial following the outcome of a planned interim futility analysis. On August 22, 2016, after confirming the results of the futility analysis and reviewing the unblinded safety and efficacy data and the results of various sensitivity and subgroup analyses, we decided to discontinue the necuparanib program.

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M281

We are continuing to advance M281, our Anti-FcRn program. We initiated a Phase 1 dosing study to evaluate the safety, tolerability, pharmacokinetics and pharmacodynamics of M281 in healthy volunteers in June 2016, and we expect to report data from this trial in the second half of 2017.
 
Other Novel Therapeutic Programs
 
We expect to initiate a clinical trial for M230, our selective immunomodulator of Fc receptors, or SIF3, program, in 2017. We are also advancing M254, our hsIVIg program, which is currently in pre-clinical development.
 
We believe M281, M230, and M254 could have potential as products capable of treating a large number of immunological disorders driven by antibodies, immune complexes, and Fc receptor biology. Such disorders include rheumatoid arthritis, autoimmune neurologic diseases such as Guillain-Barre syndrome, chronic inflammatory demyelinating neuropathy and myasthenia gravis, autoimmune blood disorders such as immune thrombocytopenic purpura, systemic autoimmune diseases such as dermatomyositis, lupus nephritis, and catastrophic antiphospholipid syndrome, antibody-mediated transplant rejection, and autoimmune blistering diseases, several of which have few treatment options. We continue efforts to identify and explore possible collaboration opportunities to advance these programs.
 
Equity Financings
 
In May 2015, we sold an aggregate of 8,337,500 shares of our common stock through an underwritten public offering at a price to the public of $19.00 per share. As a result of the offering, which included the full exercise of the underwriters’ option to purchase additional shares, we received aggregate net proceeds of approximately $148.4 million, after deducting underwriting discounts and commissions and other offering expenses.

In May 2014, we entered into an At-the-Market Equity Offering Sales Agreement, or the 2014 ATM Agreement, with Stifel, Nicolaus & Company, Incorporated, or Stifel, under which we were authorized to issue and sell shares of our common stock having aggregate sales proceeds of up to $75 million from time to time through Stifel, acting as sales agent and/or principal. We paid Stifel a commission of 2.0% of the gross proceeds from the sale of shares of our common stock under this facility. The offering was conducted by us pursuant to an effective shelf registration statement on Form S-3 previously filed with the SEC (Reg. No. 333-188227) and a related prospectus supplement. We intend to use the net proceeds from this facility to advance our development pipeline and for general corporate purposes, including working capital. Between October 2014 and April 2015, we sold approximately 5.4 million shares of common stock under the 2014 ATM Agreement, raising aggregate net proceeds of approximately $73.5 million. We concluded sales under the 2014 ATM Agreement in April 2015.
 
In April 2015, we entered into a new ATM Agreement, or the 2015 ATM Agreement, with Stifel, under which we are authorized to issue and sell shares of our common stock having aggregate sales proceeds of up to $75 million from time to time through Stifel, acting as sales agent and/or principal. We are required to pay Stifel a commission of 2.0% of the gross proceeds from the sale of shares of our common stock under the 2015 ATM Agreement. From April 2015 through December 2015, we sold approximately 0.5 million shares of common stock under the 2015 ATM Agreement pursuant to an effective shelf registration statement previously filed with the SEC (Reg. No. 333-188227) and a related prospectus supplement, raising aggregate net proceeds of approximately $9.3 million. We did not sell any shares of common stock under the 2015 ATM Agreement in the nine months ended September 30, 2016.
 
Results of Operations
 
Comparison of Three Months Ended September 30, 2016 and 2015
 
Collaboration Revenue
 
Collaboration revenue includes both product revenue and research and development revenue earned under our collaborative arrangements. Product revenue includes our contractually-defined profits and/or royalties earned on Sandoz’ sales of Enoxaparin Sodium Injection and GLATOPA.
 
GLATOPA®—Generic Once-daily COPAXONE® (glatiramer acetate injection) 20 mg/mL
 

29

Sandoz commenced sales of GLATOPA in the United States on June 18, 2015. We earn 50% of contractually-defined profits on Sandoz’ sales of GLATOPA. A portion of certain GLATOPA legal expenses, including any patent infringement damages, is deducted from our profits in proportion to our 50% profit sharing interest.
 
For the three months ended September 30, 2016, we recorded $23.3 million in product revenues from Sandoz’ sales of GLATOPA. For the three months ended September 30, 2015, we recorded $8.7 million in product revenues from Sandoz’ sales of GLATOPA. The increase in product revenues of $14.6 million, or 168%, from the three months ended September 30, 2015 to the three months ended September 30, 2016 was primarily due to a higher number of GLATOPA units sold. We estimate that the number of prescriptions for GLATOPA represents nearly 40% of the once-daily 20 mg/mL U.S. glatiramer acetate market.

We believe there is a meaningful market opportunity for GLATOPA. The price for COPAXONE 20 mg/mL has increased over 189% since 2009, and there is no other generic for relapsing forms of multiple sclerosis currently available in the United States. However, Teva received marketing approval of its three-times-weekly COPAXONE 40 mg/mL in January 2014. Teva’s three-times-weekly COPAXONE 40 mg/mL accounts for approximately 78% of the overall U.S. glatiramer acetate market (20 mg/mL and 40 mg/mL) based on total prescriptions. Because GLATOPA is a substitutable generic version of the once-daily 20 mg/mL formulation of COPAXONE and not the three-times-weekly COPAXONE, the market potential of GLATOPA is negatively impacted by the conversion of patients from once-daily COPAXONE to three-times-weekly COPAXONE. Teva reported $4.0 billion in worldwide sales of COPAXONE (20 mg/mL and 40 mg/mL) in 2015, $3.2 billion of which was from the United States.
 
Enoxaparin Sodium Injection—Generic LOVENOX®
 
Effective April 1, 2015, we began to earn 50% of contractually-defined profits on Sandoz’ sales of Enoxaparin Sodium Injection.

Sandoz did not record any profit on sales of Enoxaparin Sodium Injection in the three months ended September 30, 2016 or the three months ended September 30, 2015, and therefore we recorded no product revenue for Enoxaparin Sodium Injection in those periods.
 
Due to increased generic competition and resulting decreased market pricing for generic enoxaparin sodium injection products, we do not anticipate significant Enoxaparin Sodium Injection product revenue in the near future.
 
Research and Development Revenue
 
Research and development revenue generally consists of amounts earned by us under our collaborations for:
 
•
Technical development, regulatory and commercial milestones under the Sandoz and Baxalta collaborations;
 
•
Reimbursement of research and development services and reimbursement of development costs under our Sandoz and Baxalta collaborations; and
 
•
Recognition of upfront arrangement consideration under our Baxalta and Mylan collaborations.
 
Research and development revenue was $5.8 million and $5.1 million for the three months ended September 30, 2016 and 2015, respectively. The increase in research and development revenue of $0.7 million, or 14%, from the three months ended September 30, 2015 to the three months ended September 30, 2016 was primarily due to $1.8 million of revenue recognized in the third quarter of 2016 from the amortization of the $45 million non-refundable, up-front payment under the Mylan Collaboration Agreement offset, by lower reimbursable FTE and external expenses for M923.
 
We expect collaborative research and development revenue earned by us related to FTE and external expense reimbursement from Baxalta and Sandoz will fluctuate from quarter to quarter in 2016 depending on our research and development activities. We expect to recognize the arrangement consideration under our collaboration with Mylan ratably as revenue over our performance period with a quarterly revenue amount of approximately $1.8 million. We expect to recognize the remaining balance of deferred revenue under our collaboration with Baxalta ratably as revenue over our remaining performance period with a quarterly revenue amount of approximately $3.7 million for the next three quarters and approximately $3.5 million in the third quarter of 2017.
 
Research and Development Expense
 

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Research and development expenses consist of costs incurred to conduct research, such as the discovery and development of our product candidates. We recognize all research and development costs as they are incurred. We track the external research and development costs incurred for each of our product candidates. Our external research and development expenses consist primarily of:
 
•
expenses incurred under agreements with consultants, third-party contract research organizations, or CROs, and investigative sites where all of our nonclinical studies and clinical trials are conducted;

•
costs of acquiring reference comparator materials and manufacturing nonclinical study and clinical trial supplies and other materials from contract manufacturing organizations, or CMOs, and related costs associated with release and stability testing; and

•
costs associated with process development activities.
 
Internal research and development costs are associated with activities performed by our research and development organization and consist primarily of:

•
personnel-related expenses, which include salaries, benefits and share-based compensation; and

•
facilities and other allocated expenses, which include direct and allocated expenses for rent and maintenance of facilities, depreciation and amortization of leasehold improvements and equipment and laboratory and other supplies.
 
Beginning on February 9, 2016, under the Mylan Collaboration Agreement, we share collaboration expenses with Mylan. A portion of the net amount due from Mylan for its 50% share of collaboration expenses is recorded as a reduction in research and development expenses based on the nature of the cost reimbursement. Collaboration costs for development of the six biosimilar candidates under the collaboration incurred by us are recorded as research and development expense as incurred.

Research and development expense for the three months ended September 30, 2016 was $31.6 million, compared with $31.7 million for the three months ended September 30, 2015. The decrease of $0.1 million, or 1%, from the three months ended September 30, 2015 to the three months ended September 30, 2016 was due to a decrease of $7.7 million representing Mylan’s 50% share of biosimilar program collaboration costs, offset primarily by increases of: $3.2 million in third-party process development costs for our biosimilar programs under our collaboration with Mylan; $1.9 million in nonclinical study costs to advance our novel autoimmune programs; $1.8 million in necuparanib Phase 2 clinical trial costs due in part to the termination of the development program; $0.3 million in personnel-related expenses; $0.2 million in laboratory expenses; and $0.1 million in expenses for rent and maintenance of facilities.
 
The lengthy process of securing FDA approval for generics, biosimilars and new drugs requires the expenditure of substantial resources. Any failure by us to obtain, or any delay in obtaining, regulatory approvals would materially adversely affect our product development efforts and our business overall. Accordingly, we cannot currently estimate with any degree of certainty the amount of time or money that we will be required to expend in the future on our product candidates prior to their regulatory approval, if such approval is ever granted. As a result of these uncertainties surrounding the timing and outcome of any approvals, we are currently unable to estimate when, if ever, our product candidates will generate revenues and cash flows.
 
The following table sets forth, in thousands, the primary components of our research and development external expenditures, including the amortization of our intangible asset, for each of our principal development programs for the three months ended September 30, 2016 and 2015. The figures in the table include project expenditures incurred by us and reimbursed by our collaborators, but exclude project expenditures incurred by our collaborators. Although we track and accumulate personnel effort by percentage of time spent on our programs, a significant portion of our internal research and development costs, including salaries and benefits, share-based compensation, facilities, depreciation and laboratory supplies are not directly charged to programs. Therefore, our methods for accounting for internal research and development costs preclude us from reporting these costs on a project-by-project basis.
 

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Phase of Development as of
 
Three Months Ended September 30,
 
Project 
Inception to 
 
September 30, 2016
 
2016
 
2015
 
September 30, 2016
External Costs Incurred by Product Candidate:
 
 
 

 
 

 
 

GLATOPA and M356—Generic COPAXONE® (20 mg/mL and 40 mg/mL)
ANDAs filed(1)
 
$
349

 
$
274

 
$
50,506

Necuparanib
(2)
 
3,474

 
3,901

 
45,640

Biosimilars
Various(3)
 
10,085

 
4,277

 
101,888

Other novel therapeutic programs
Various(4)
 
6,189

 
4,742

 
 

Internal Costs
 
 
19,143

 
18,539

 
 

Subtotal
 
 
$
39,240

 
$
31,733

 
 
Less: Reimbursable from Mylan(5)
 
 
(7,672
)
 
—

 
 
Total Research and Development Expenses(5)
 
 
$
31,568

 
$
31,733

 
 

 
(1)
On April 16, 2015, the FDA approved the ANDA for once-daily GLATOPA. Sandoz launched GLATOPA on June 18, 2015. The ANDA for M356 is under FDA review.
 
(2)
On August 3, 2016, we discontinued further accrual of our Part B, or Phase 2, portion of our Phase 1/2 clinical trial evaluating necuparanib in combination with nab-paclitaxel (ABRAXANE®) and gemcitabine in patients with advanced metastatic pancreatic cancer. The decision to discontinue enrollment was based on the recommendation of the independent Data Safety Monitoring Board for the trial following the outcome of a planned interim futility analysis. On August 22, 2016, after confirming the results of the futility analysis and reviewing the unblinded safety and efficacy data and the results of various sensitivity and subgroup analyses, we decided to discontinue the necuparanib program.

(3)
Biosimilars include M923, a biosimilar candidate of HUMIRA® (adalimumab), M834, a biosimilar candidate of ORENCIA® (abatacept), as well as five other biosimilar candidates. Enrollment in a Baxalta-initiated pivotal clinical trial of M923 in patients with chronic plaque psoriasis was completed in April 2016. We initiated a Phase 1 clinical trial of M834 in November 2016. Our other biosimilar candidates are in discovery and process development.
 
(4)
Other novel therapeutic programs include M281, for which a Phase 1 dosing study was initiated in 2016; M230, for which we expect to initiate a clinical trial in 2017; hsIVIg; as well as other discovery and nonclinical stage programs.

(5)
As a result of the cost-sharing provisions of the Mylan Collaboration Agreement, we offset approximately $7.7 million against research and development costs during the three months ended September 30, 2016.

GLATOPA and M356 external expenditures increased by $0.1 million, or 27% from the three months ended September 30, 2015 to the three months ended September 30, 2016 as we continued to support our M356 ANDA filing. The decrease in our necuparanib external expenditures of $0.4 million, or 11%, from the three months ended September 30, 2015 to the three months ended September 30, 2016 was due to winding down the Phase 2 clinical trial. External expenditures for our biosimilars programs increased by $5.8 million, or 136%, from the three months ended September 30, 2015 to the three months ended September 30, 2016 due to an increase in development costs as we advance our biosimilars programs, including M834, under our collaboration with Mylan. The increase of $1.4 million, or 31%, in other novel therapeutic program external expenditures from the three months ended September 30, 2015 to the three months ended September 30, 2016 was due to Phase 1 clinical trial costs for M281 and nonclinical and process development costs to advance M230 towards the clinic. Finally, internal costs increased by $0.6 million, or 3%, from the three months ended September 30, 2015 to the three months ended September 30, 2016 primarily due to headcount-related costs.
 
Due to the variability in the length of time necessary to develop a product, the uncertainties related to the estimated cost of the projects and ultimate ability to obtain governmental approval for commercialization, accurate and meaningful estimates of the ultimate cost to bring our product candidates to market are not available.
 
General and Administrative Expense
 
General and administrative expenses consist primarily of salaries and other related costs for personnel in general and administrative functions, professional fees for legal and accounting services, royalty and license fees, insurance costs, and allocated rent, facility and lab supplies, and depreciation expense.
 

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Beginning on February 9, 2016, under our collaboration agreement with Mylan we share collaboration expenses. A portion of the net amount due from Mylan for its 50% share of collaboration expenses under the cost-sharing arrangement is recorded as a reduction in general and administrative expenses based on the nature of the cost reimbursement. Collaboration costs for certain legal expenses for the six biosimilar candidates under the collaboration incurred by us are recorded as general and administrative expense as incurred.
 
General and administrative expense for the three months ended September 30, 2016 was $15.8 million, compared with $12.5 million for the three months ended September 30, 2015. The increase of $3.3 million, or 26%, from the three months ended September 30, 2015 to the three months ended September 30, 2016 was due to increases of $1.4 million in personnel-related expenses due to growth in our headcount; $1.5 million in professional fees including legal expenses, consulting fees and recruiting expenses; $0.4 million in stock-based compensation expense primarily due to performance-based restricted stock awards granted in 2016; and $0.4 million in expenses for rent and maintenance of facilities. These increases were offset by a decrease of $0.4 million representing Mylan’s 50% share of collaboration costs under the cost-sharing provisions of the Mylan Collaboration Agreement.
 
We expect our general and administrative expenses, including internal and external legal and business development costs that support our various product development efforts, to vary from period to period in relation to our commercial and development activities.
 
Other Income
 
Other income includes interest income, income related to a job creation tax award and other items of income. Interest income was $0.6 million and $0.3 million for the three months ended September 30, 2016 and 2015, respectively. The increase of $0.3 million, or 100%, from the three months ended September 30, 2015 to the three months ended September 30, 2016 was caused by higher average investment balances due to 2015 fundraising activities.
 
Comparison of Nine Months Ended September 30, 2016 and 2015
 
Collaboration Revenue
 
GLATOPA®—Generic COPAXONE® (glatiramer acetate injection) 20 mg/mL
 
For the nine months ended September 30, 2016, we recorded $58.8 million in product revenues from Sandoz’ sales of GLATOPA. For the nine months ended September 30, 2015, we recorded $27.9 million in product revenues from Sandoz’ sales of GLATOPA, reflecting $36.9 million in profits net of a deduction of $9.0 million for reimbursement to Sandoz of 50% of pre-launch GLATOPA-related legal expenses incurred by Sandoz since 2008. The increase in product revenues of $30.9 million, or 111%, from the nine months ended September 30, 2015 to the nine months ended September 30, 2016 was due primarily to higher GLATOPA units sold in the 2016 period.
 
Enoxaparin Sodium Injection—Generic LOVENOX® 
 
Sandoz did not record any profit on sales of Enoxaparin Sodium Injection in the nine months ended September 30, 2016, and therefore we recorded no product revenue for Enoxaparin Sodium Injection in the period. For the nine months ended September 30, 2015, we earned $2.8 million in product revenue consisting of $2.7 million in royalties earned in the first quarter of 2015 on Sandoz’ reported net sales of Enoxaparin Sodium Injection of $25.9 million and $0.1 million in second quarter 2015 profits, net of a claw-back adjustment of $0.1 million. The decrease in our product revenue was $2.8 million, or 100%, from the nine months ended September 30, 2015 to the nine months ended September 30, 2016 and was attributed to the change in our collaboration economics and lower unit sales driven by lower market share and lower prices in response to competitor pricing reductions on enoxaparin.
 
Research and Development Revenue
  
Research and development revenue was $16.6 million and $36.6 million for the nine months ended September 30, 2016 and 2015, respectively. The decrease in research and development revenue of $20.0 million, or 55%, from the nine months ended September 30, 2015 to the nine months ended September 30, 2016 was primarily due to $20.0 million in milestone payments we earned in the second quarter of 2015 upon GLATOPA being the sole generic of COPAXONE 20 mg/mL to receive FDA approval in April 2015 and upon first commercial sale of GLATOPA in June 2015.
 
Research and Development Expense

33

  
Beginning on February 9, 2016, under the Mylan Collaboration Agreement, we share collaboration expenses with Mylan. A portion of the net amount due from Mylan for its 50% share of collaboration expenses is recorded as a reduction in research and development expenses based on the nature of the cost reimbursement. Collaboration costs for development of the six biosimilar candidates under the collaboration incurred by us are recorded as research and development expense as incurred.

Research and development expense for the nine months ended September 30, 2016 was $93.5 million, compared with $88.5 million for the nine months ended September 30, 2015. The increase of $5.0 million, or 6%, from the nine months ended September 30, 2015 to the nine months ended September 30, 2016 primarily resulted from increases of: $12.1 million in third-party research and process development costs primarily attributable to advance our biosimilar and novel autoimmune programs; $5.5 million in personnel-related expenses, of which $1.8 million is due to increased headcount and $3.4 million is primarily attributed to share-based compensation expense associated with performance-based restricted stock awards granted in 2016 that increased the amount of research and development expenses we recorded; $3.1 million in nonclinical study costs for M281 and M834; $2.9 million in costs for the Phase 1 clinical study for M281, the Phase 2 clinical trial for necuparanib and start-up costs for the Phase 1 clinical study of M834; $0.8 million in expenses for rent and maintenance of facilities, depreciation and amortization of leasehold improvements and equipment; and $0.4 million in intangible amortization. These increases were partially offset by a decrease of $19.8 million for Mylan’s 50% share of collaboration costs under the cost-sharing provisions of the Mylan Collaboration Agreement.
  
The following table sets forth, in thousands, the primary components of our research and development external expenditures, including the amortization of our intangible asset, for each of our principal development programs for the nine months ended September 30, 2016 and 2015. The figures in the table include project expenditures incurred by us and reimbursed by our collaborators, but exclude project expenditures incurred by our collaborators. Although we track and accumulate personnel effort by percentage of time spent on our programs, a significant portion of our internal research and development costs, including salaries and benefits, share-based compensation, facilities, depreciation and laboratory supplies are not directly charged to programs. Therefore, our methods for accounting for internal research and development costs preclude us from reporting these costs on a project-by-project basis.
 
 
Phase of Development as of
 
Nine Months Ended September 30,
 
Project 
Inception to 
 
September 30, 2016
 
2016
 
2015
 
September 30, 2016
External Costs Incurred by Product Candidate:
 
 
 

 
 

 
 

GLATOPA and M356—Generic COPAXONE® (20 mg/mL and 40 mg/mL)
ANDAs filed(1)
 
$
1,643

 
$
703

 
$
50,506

Necuparanib
(2)
 
8,764

 
9,005

 
45,640

Biosimilars
Various(3)
 
26,442

 
14,656

 
101,888

Other novel therapeutic programs
Various(4)
 
16,052

 
10,143

 
 

Internal Costs
 
 
60,358

 
53,959

 
 

Subtotal
 
 
$
113,259

 
$
88,466

 


Less: Reimbursable from Mylan(5)
 
 
(19,761
)
 
—

 
 
Total Research and Development Expenses(5)
 
 
$
93,498

 
$
88,466

 
 

 
(1)
On April 16, 2015, the FDA approved the ANDA for once-daily GLATOPA. Sandoz launched GLATOPA on June 18, 2015. The ANDA for M356 is under FDA review.
 
(2)
On August 3, 2016, we discontinued further accrual of our Part B, or Phase 2, portion of our Phase 1/2 clinical trial evaluating necuparanib in combination with nab-paclitaxel (ABRAXANE®) and gemcitabine in patients with advanced metastatic pancreatic cancer. The decision to discontinue enrollment was based on the recommendation of the independent Data Safety Monitoring Board for the trial following the outcome of a planned interim futility analysis. On August 22, 2016, after confirming the results of the futility analysis and reviewing the unblinded safety and efficacy data and the results of various sensitivity and subgroup analyses, we decided to discontinue the necuparanib program.

(3)
Biosimilars include M923, a biosimilar candidate of HUMIRA® (adalimumab), M834, a biosimilar candidate of ORENCIA® (abatacept), as well as five other biosimilar candidates. Enrollment in a Baxalta-initiated pivotal clinical trial of M923 in patients with chronic plaque psoriasis was completed in April 2016. We initiated a Phase 1 clinical trial of M834 in November 2016. Our other biosimilar candidates are in discovery and process development.
 

34

(4)
Other novel therapeutic programs include M281, for which a Phase 1 dosing study was initiated in 2016; M230, for which we expect to initiate a clinical trial in 2017; hsIVIg; as well as other discovery and nonclinical stage programs.

(5)
As a result of the cost-sharing provisions of the Mylan Collaboration Agreement, we offset approximately $19.8 million against research and development costs during the nine months ended September 30, 2016.

GLATOPA and M356 external expenditures increased by $0.9 million, or 134%, from the nine months ended September 30, 2015 to the nine months ended September 30, 2016 as we continued to support our M356 ANDA filing. Necuparanib external expenditures decreased by $0.2 million, or 3%, from the nine months ended September 30, 2015 to the nine months ended September 30, 2016 as we wind down the discontinued Phase 2 clinical trial. External expenditures for our biosimilars programs increased by $11.8 million, or 80%, from the nine months ended September 30, 2015 to the nine months ended September 30, 2016 due to an increase of $12.3 million in development costs as we advance the biosimilars programs, including M834, under our collaboration with Mylan. This increase was offset by a decrease of $0.5 million for M923, reflecting that Baxalta has clinical development responsibility for that program. The increase of $5.9 million, or 58%, in other novel therapeutic programs external expenditures from the nine months ended September 30, 2015 to the nine months ended September 30, 2016 was due to Phase 1 clinical trial costs for M281 and nonclinical and process development costs to advance M230 towards the clinic. Finally, internal costs grew by $6.4 million, or 12%, from the nine months ended September 30, 2015 to the nine months ended September 30, 2016 primarily due to headcount-related costs.
 
General and Administrative Expense
 
Beginning on February 9, 2016, under our collaboration agreement with Mylan we share collaboration expenses. A portion of the net amount due from Mylan for its 50% share of collaboration expenses under the cost-sharing arrangement is recorded as a reduction in general and administrative expenses based on the nature of the cost reimbursement. Collaboration costs for certain legal expenses for the six biosimilar candidates under the collaboration incurred by us are recorded as general and administrative expense as incurred.
 
General and administrative expense for the nine months ended September 30, 2016 was $46.3 million, compared with $33.7 million for the nine months ended September 30, 2015. The increase of $12.6 million, or 37%, from the nine months ended September 30, 2015 to the nine months ended September 30, 2016 was primarily due to increases of: $8.2 million in personnel-related expenses, of which $3.1 million is due to increased headcount and $4.6 million is primarily due to share-based compensation expense associated with performance-based restricted stock awards granted in 2016 that increased the amount of general and administrative expenses we recorded; $5.0 million in increased professional fees, driven mainly by consulting, legal and recruiting expenses; and $0.4 million in expense for maintenance of facilities. These increases were partially offset by a decrease of $1.0 million for Mylan’s 50% share of collaboration costs under the cost-sharing provisions of the Mylan Collaboration Agreement.
 
Other Income
 
Other income includes interest income, income related to a job creation tax award and other items of income. Interest income was $1.6 million and $0.5 million for the nine months ended September 30, 2016 and 2015, respectively. The increase of $1.1 million, or 220%, from the nine months ended September 30, 2015 to the nine months ended September 30, 2016 was caused by higher average investment balances due to 2015 fundraising activities. Other income was $0.2 million for each of the nine months ended September 30, 2016 and 2015.
 
Liquidity and Capital Resources
 
At September 30, 2016, we had $309.0 million in cash, cash equivalents and marketable securities and $45.8 million in collaboration receivables, including $23.3 million for our profit share from GLATOPA sales in the three months ended September 30, 2016. In addition, we also held $21.8 million in restricted cash, of which $17.5 million serves as collateral for a security bond posted in the litigation against Amphastar. Our funds at September 30, 2016 were primarily invested in commercial paper, overnight repurchase agreements, asset-backed securities, corporate debt securities and United States money market funds, directly or through managed funds, with remaining maturities of 12 months or less. Our cash is deposited in and invested through highly rated financial institutions in North America. The composition and mix of cash, cash equivalents and marketable securities may change frequently as a result of our evaluation of conditions in the financial markets, the maturity of specific investments, and our near term liquidity needs. We do not believe that our cash equivalents and marketable securities were subject to significant market risk at September 30, 2016.


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We have funded our operations primarily through the sale of equity securities and payments received under our collaboration and license agreements, including product revenue from Sandoz’ sales of Enoxaparin Sodium Injection and GLATOPA. Since our inception through September 30, 2016, we have received $638 million through private and public issuances of equity securities, including approximately $148 million in net proceeds from our May 2015 public offering of common stock and approximately $83 million under our At-the-Market Equity Offering Sales Agreements, or the ATM Agreements, with Stifel, Nicolaus & Company, Incorporated, entered into in May 2014 and April 2015, respectively. As of September 30, 2016, we had received a cumulative total of $715 million under our collaborations with Sandoz, including $469 million in revenues on sales of Enoxaparin Sodium Injection and regulatory and commercial milestones related to that product, and $122 million in revenues on sales of GLATOPA and regulatory and commercial milestones related to that product. In addition, we received $86 million under our collaboration with Baxalta, including a $33 million upfront payment, $34 million in reimbursement of research and development services and costs and $19 million in license and milestone payments. In March 2016, we received a $45 million upfront payment from Mylan under the Mylan Collaboration Agreement. In October 2016, we achieved a M834-related milestone necessary to earn $25 million of the up to $200 million in contingent milestone payments from Mylan under the Mylan Collaboration Agreement, such payments representing Mylan’s funding of its share of collaboration expenses. We also expect to achieve in 2016 another milestone necessary to earn an additional $35 million of the continent milestone payments.
 
We expect to fund our planned operating and expenditure requirements through a combination of current cash, cash equivalents and marketable securities; equity financings, including sales of common stock under our 2015 ATM Agreement; and milestone payments and product revenues under existing collaboration agreements. We may also seek funding from new collaborations and strategic alliances, debt financings and other financial arrangements. Future funding transactions may or may not be similar to our prior funding transactions. There can be no assurance that future funding transactions will be available on favorable terms, or at all. We currently believe that our current capital resources and projected milestone payments and product revenues will be sufficient to meet our operating requirements through at least the end of 2018.

In February 2016, we filed a shelf registration statement on Form S-3 (Reg No. 333-209813) with the SEC registering the offer, sale and issuance, from time to time, of common stock, preferred stock, debt securities and warrants. Our prior shelf registration statement on Form S-3 (Reg No. 333-188227) expired in April 2016.
 
 
 
Nine Months Ended September 30,
 
 
2016
 
2015
 
 
(in thousands)
Net cash used in operating activities
 
$
(36,155
)
 
$
(47,182
)
Net cash provided by (used in) investing activities
 
$
80,820

 
$
(178,403
)
Net cash provided by financing activities
 
$
153

 
$
234,223

Net increase in cash and cash equivalents
 
$
44,818

 
$
8,638

 
Cash used in operating activities
 
The cash used in operating activities generally approximates our net loss adjusted for non-cash items and changes in operating assets and liabilities.
 
Cash used in operating activities was $36.2 million for the nine months ended September 30, 2016 reflecting a net loss of $62.5 million, which was partially offset by non-cash charges of $7.0 million for depreciation and amortization of property, equipment and intangible assets, $14.8 million in shared-based compensation and $0.5 million for amortization of purchased premiums on our marketable securities.  The net change in our operating assets and liabilities provided cash of $4.1 million and primarily resulted from an increase in deferred revenue of $33.1 million, due to the receipt of a $45 million upfront payment from Mylan less revenue recognized under the Baxalta and Mylan collaborations and an increase in accounts payable of $5.7 million due to the timing of vendor payments. The sources of cash described above were offset by an increase in collaboration receivable of $24.6 million driven primarily by a receivable of $20.7 million representing the net amount due from Mylan for its 50% share of collaboration expenses under the cost-sharing arrangement; a decrease in accrued expenses of $8.0 million due to the timing of vendor payments; an increase in restricted cash of $1.1 million related to a letter of credit for our 301 Binney Street sublease; and an increase in other long-term assets of $1.0 million for the non-current portion of advance payments to vendors for services to be rendered in future periods.
 
Cash used in operating activities was $47.2 million for the nine months ended September 30, 2015 reflecting a net loss of $54.1 million, which was partially offset by non-cash charges of $6.6 million for depreciation and amortization of property,

36

equipment and intangible assets, $6.8 million in shared-based compensation and $1.0 million for amortization of purchased premiums on our marketable securities. In addition, the net change in our operating assets and liabilities used cash of $7.4 million and primarily resulted from a decrease in deferred revenue of $6.6 million, due to higher amortization of the $33 million upfront payment under our Baxalta collaboration and an increase in collaboration receivable of $2.7 million, driven primarily by a receivable of $8.7 million from Sandoz for third quarter 2015 GLATOPA profit share and the collection of a $4.7 million receivable for fourth quarter 2014 Enoxaparin Sodium Injection royalties. These decreases were partially offset by the net change in accounts payable and accrued expenses of $2.1 million due to timing of vendor payments.
 
Cash provided by (used in) investing activities
 
Cash provided by investing activities of $80.8 million for the nine months ended September 30, 2016 includes cash inflows of $350.5 million from maturities of marketable securities offset by cash outflows of $264.9 million for purchases of marketable securities and $4.8 million for capital equipment and leasehold improvements.

Cash used in investing activities of $178.4 million for the nine months ended September 30, 2015 includes cash outflows of $281.5 million for purchases of marketable securities and $2.7 million for capital equipment and leasehold improvements partially offset by cash inflows of $105.8 million from maturities of marketable securities.
 
Cash provided by financing activities
 
Cash provided by financing activities of $0.2 million for the nine months ended September 30, 2016 consists of $1.2 million in proceeds from stock option exercises and purchases of shares of our common stock through our employee stock purchase plan offset by $1.0 million of cash paid to tax authorities in connection with the vesting of employee performance-based restricted stock.

Cash provided by financing activities of $234.2 million for the nine months ended September 30, 2015 includes $148.4 million of net proceeds from the sale of 8.3 million shares of our common stock through an underwritten public offering, $64.5 million of net proceeds from the sale of 4.3 million shares of our common stock under our ATM Agreements and $23.3 million from stock option exercises and purchases of shares of our common stock through our employee stock purchase plan, for total proceeds of $236.2 million. Total proceeds were partially offset by $2.0 million of cash paid to tax authorities in connection with the vesting of employee performance-based restricted stock.
 
Contractual Obligations
 
Our major outstanding contractual obligations relate to license maintenance obligations including royalties payable to third parties, purchase commitments to various contractual research and manufacturing organizations and operating lease obligations.
The following table summarizes our contractual obligations and commercial commitments at September 30, 2016 (in thousands):
Contractual obligations
Total
 
September 30, 2016
 
2017
through
2018
 
2019
through
2020
 
2021
 
After
2021
License maintenance obligations
$
1,163

 
$
—

 
$
465

 
$
465

 
$
233

 
*

Operating lease obligations
140,752

 
1,267

 
26,272

 
28,504

 
14,815

 
$
69,894

Total contractual obligations
$
141,915

 
$
1,267

 
$
26,737

 
$
28,969

 
$
15,048

 
$
69,894

* After 2021, the annual obligations, which extended through the life of the patents are approximately $0.2 million per year.
 
Critical Accounting Policies and Estimates
 
Our management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with United States generally accepted accounting principles, or GAAP. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, as well as the reported revenue generated and expenses incurred during the reporting periods.

37

Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates.
 
Please refer to the significant accounting policies described in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2015 filed with the SEC on February 26, 2016.
 
Please refer to Revenue Recognition within Note 2 “Summary of Significant Accounting Policies” to the accompanying condensed consolidated financial statements for our discussion of our revenue recognition policy for our multiple element arrangements. The notes to our condensed consolidated financial statements are contained in Part I, Item I of this Quarterly Report on Form 10-Q.
 
New Accounting Standards
 
Please refer to Note 2 “Summary of Significant Accounting Policies” to the accompanying condensed consolidated financial statements for a discussion of new accounting standards. The notes to our consolidated financial statements are contained in Part I, Item I of this Quarterly Report on Form 10-Q.
 
Item 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
We are exposed to market risk related to changes in interest rates. Our current investment policy is to maintain an investment portfolio consisting mainly of United States money market, government-secured, and high-grade corporate securities, directly or through managed funds, with maturities of twenty-four months or less. Our cash is deposited in and invested through highly rated financial institutions in North America. Our marketable securities are subject to interest rate risk and will fall in value if market interest rates increase. However, due to the conservative nature of our investments, low prevailing market rates and relatively short effective maturities of debt instruments, interest rate risk is mitigated. If market interest rates were to increase immediately and uniformly by 10% from levels at September 30, 2016, we estimate that the fair value of our investment portfolio would decline by an immaterial amount. We do not own derivative financial instruments in our investment portfolio. Accordingly, we do not believe that there is any material market risk exposure with respect to derivative, foreign currency or other financial instruments that would require disclosure under this item.

Item 4.    CONTROLS AND PROCEDURES
 
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, as of September 30, 2016. Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of September 30, 2016, our disclosure controls and procedures were effective at the reasonable assurance level.
 
There was no change in our internal control over financial reporting during the quarter ended September 30, 2016 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.


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PART II. OTHER INFORMATION
Item 1.    LEGAL PROCEEDINGS
 
M356-Related Proceedings
 
On September 10, 2014, Teva and Yeda filed suit against us and Sandoz Inc. in the United States District Court for the District of Delaware in response to the filing by Sandoz Inc. of the ANDA with a Paragraph IV certification for M356. The suit initially alleged infringement related to two Orange Book-listed patents for COPAXONE 40 mg/mL, each expiring in 2030, and seeks declaratory and injunctive relief prohibiting the launch of our product until the last to expire of these patents. In April 2015, Teva and Yeda filed an additional suit against us and Sandoz Inc. in the United States District Court for the District of Delaware alleging infringement related to a third Orange Book-listed patent for COPAXONE 40 mg/mL, which issued in March 2015 and expires in 2030. In May 2015, this suit was consolidated with the initial suit filed in September 2014. In November 2015, Teva and Yeda filed a suit against us and Sandoz Inc. in the United States District Court for the District of Delaware alleging infringement related to a fourth Orange Book-listed patent for COPAXONE 40 mg/mL, which issued in October 2015 and expires in 2030. Teva and Yeda seek declaratory and injunctive relief prohibiting the launch of M356 until the expiration of this patent. In December 2015, this suit was consolidated with the initial suit filed in September 2014. We and Sandoz Inc. have asserted various defenses and filed counterclaims for declaratory judgments of non-infringement, invalidity and unenforceability of the COPAXONE 40 mg/mL patents. The trial concluded in October 2016, and we expect the District Court to issue a decision in the first quarter of 2017.
 
M834-Related Proceedings
 
On July 2, 2015, we filed a petition for IPR with the PTAB to challenge the validity of U.S. Patent No 8,476,239, a patent for ORENCIA owned by Bristol Myers Squibb, or BMS. The PTAB issued a decision instituting the IPR proceedings in January 2016, and BMS filed for a rehearing by the full PTAB. Oral arguments took place in September 2016. A final opinion from the PTAB is due in January 2017.
 
Enoxaparin Sodium Injection-Related Proceedings
 
On September 21, 2011, we and Sandoz Inc. sued Amphastar and Actavis in the United States District Court for the District of Massachusetts for infringement of two of our patents. Also in September 2011, we filed a request for a temporary restraining order and preliminary injunction to prevent Amphastar and Actavis from selling their enoxaparin product in the United States. In October 2011, the District Court granted our motion for a preliminary injunction and entered an order enjoining Amphastar and Actavis from advertising, offering for sale or selling their enoxaparin product in the United States until the conclusion of a trial on the merits and required us and Sandoz to post a security bond of $100 million in connection with the litigation. Amphastar and Actavis appealed the decision to the Court of Appeals for the Federal Circuit, or CAFC, and in January 2012, the CAFC stayed the preliminary injunction. In August 2012, the CAFC vacated the preliminary injunction and remanded the case to the District Court. In September 2012, we filed a petition with the CAFC for rehearing by the full court en banc, which was denied. In February 2013, we filed a petition for a writ of certiorari for review of the CAFC decision by the United States Supreme Court, which was denied in June 2013.
 
In July 2013, the District Court granted a motion by Amphastar and Actavis for summary judgment. We filed a notice of appeal of that decision to the CAFC. In February 2014, Amphastar filed a motion to the CAFC for summary affirmance of the District Court ruling, which the CAFC denied in May 2014. On November 10, 2015, the CAFC affirmed the District Court summary judgment decision with respect to Actavis, reversed the District Court summary judgment decision with respect to Amphastar, and remanded the case against Amphastar to the District Court. On January 11, 2016, Amphastar filed a petition for rehearing by the CAFC, which was denied on February 17, 2016. On May 17, 2016, Amphastar filed a petition for a writ of certiorari for review of the CAFC decision by the United States Supreme Court, which was denied on October 3, 2016. The District Court trial is scheduled to begin on July 10, 2017.
 
In the event that we are not successful in further prosecution or settlement of this action against Amphastar, and Amphastar is able to prove it suffered damages as a result of the preliminary injunction, we could be liable for damages for up to $35 million of the security bond. Amphastar has filed motions to increase the amount of the security bond, which we and Sandoz Inc. have opposed. Litigation involves many risks and uncertainties, and there is no assurance that we or Sandoz Inc. will prevail in this patent enforcement suit.
 
On September 17, 2015, Amphastar filed a complaint against us and Sandoz Inc. in the United States District Court for the Central District of California. The complaint alleges that, in connection with filing the September 2011 patent infringement suit against Amphastar and Actavis, we and Sandoz Inc. sought to prevent Amphastar from selling generic enoxaparin sodium

39

injection and thereby exclude competition for generic enoxaparin sodium injection in violation of federal and California anti-trust laws and California unfair business laws. Amphastar is seeking unspecified damages and fees. In December 2015, we and Sandoz Inc. filed a motion to dismiss and a motion to transfer the case. In January 2016, the case was transferred to the United States District Court for the District of Massachusetts. In February 2016, Amphastar filed a writ of mandamus with the United States Court of Appeals for the Ninth Circuit requesting that the court reverse and review the District Court’s grant of transfer, and in May 2016, the writ requested by Amphastar was denied. On July 27, 2016, our and Sandoz Inc.’s motion to dismiss was granted by the District Court, and the case was dismissed. On August 25, 2016, Amphastar filed a notice of appeal from the dismissal with the United States Court of Appeals for the First Circuit, and the Court issued a briefing schedule that concludes by the end of 2016.
 
On October 14, 2015, The Hospital Authority of Metropolitan Government of Nashville and Davidson County, Tennessee, d/b/a Nashville General Hospital (“NGH”) filed a class action suit against us and Sandoz Inc. in the United States District Court for the Middle District of Tennessee on behalf of certain purchasers of LOVENOX or generic enoxaparin sodium injection. The complaint alleges that, in connection with filing the September 2011 patent infringement suit against Amphastar and Actavis, we and Sandoz Inc. sought to prevent Amphastar from selling generic enoxaparin sodium injection and thereby exclude competition for generic enoxaparin sodium injection in violation of federal anti-trust laws. NGH is seeking injunctive relief, disgorgement of profits and unspecified damages and fees. In December 2015, we and Sandoz Inc. filed a motion to dismiss and a motion to transfer the case to the United States District Court for the District of Massachusetts. Hearings on the motions were held before a U.S. magistrate in April 2016 and February 2016, respectively. On September 29, 2016, the magistrate judge filed a Report and Recommendation to the District Court to deny the motions to dismiss and to transfer. These motions are subject to briefing and review by the District Court. While the outcome of litigation is inherently uncertain, we believe this suit is without merit, and we intend to vigorously defend ourselves in this litigation.

Item 1A.    RISK FACTORS
 
Investing in our stock involves a high degree of risk. You should carefully consider the risks and uncertainties and other important factors described below in addition to other information included or incorporated by reference in this Quarterly Report on Form 10-Q before purchasing our stock. If any of the following risks actually occur, our business, financial condition or results of operations would likely suffer.
 
Risks Relating to Our Business

We have incurred a cumulative loss since inception. If we do not generate significant revenue, we may not return to profitability.
 
We have incurred significant losses since our inception in May 2001. At September 30, 2016, our accumulated deficit was $515 million. We may incur annual operating losses over the next several years as we expand our drug development, commercialization and discovery efforts. In addition, we must successfully develop and obtain regulatory approval for our drug candidates, and effectively manufacture, market and sell any drugs we successfully develop. Accordingly, we may not generate significant revenue in the longer term and, even if we do generate significant revenue, we may never achieve long-term profitability.
 
To be profitable, we and our collaborative partners must succeed in developing and commercializing drugs with significant market potential. This will require us and our collaborative partners to be successful in a range of challenging activities: developing product candidates; obtaining regulatory approval for product candidates through either existing or new regulatory approval pathways; clearing allegedly infringing patent rights; enforcing our patent rights; and manufacturing, distributing, marketing and selling products. Our potential profitability will also be adversely impacted by the entry of competitive products and, if so, the degree of the impact could be affected by whether the entry is before or after the launch of our products. We may never succeed in these activities and may never generate revenues that are significant.
 
Even if M356 (our generic product candidate for three-times-weekly COPAXONE 40 mg/mL) is approved by the FDA, if Teva is successful in the current M356 ANDA-related patent infringement litigation or Teva appeals a loss at trial, Sandoz may defer launch of M356 until the relevant COPAXONE patents expire or are ultimately determined not to be valid, unenforceable or not infringed. Otherwise, we may have to reimburse Sandoz for significant damages from contractual profits if Sandoz launches before those patents expire and they are ultimately determined to be enforceable, valid and infringed. In addition, Teva may allege that we and Sandoz, in manufacturing and selling GLATOPA and/or M356, are infringing COPAXONE patents other than those at issue in our current M356 patent litigation. If this occurs we may expend substantial resources from contractual profits in resulting litigation, the outcome of which would be uncertain. Any unfavorable outcome in such litigation could decrease or halt GLATOPA sales or future M356 sales, if any, prior to a

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successful defense of such litigation or expiration of any such patents, and we and Sandoz may incur significant damages, reducing our contractual profits and having a material adverse effect on our business.
 
Should Teva succeed in the current M356 ANDA-related patent infringement litigation, the launch of M356, if approved, may not occur until the patents expire, which would impair our ability to commercialize M356 and would harm our business and financial condition. If M356 is approved by the FDA prior to a decision in the patent infringement litigation, and Sandoz launches prior to such decision, and if Teva is ultimately successful, we and Sandoz may be liable for significant damages, including damages in excess of M356 product revenue, and our business and financial condition would be materially harmed. The possibility of incurring liability for such damages may reduce the scope of, or may delay, any launch of M356 prior to a favorable outcome of the patent infringement litigation by Sandoz. In addition, if we are unsuccessful in litigation, or pending the outcome of litigation or while litigation is pending, a court could issue a temporary injunction or a permanent injunction preventing us from manufacturing and selling M356 and prohibiting the use of previously manufactured product for commercial sale until a favorable outcome of the litigation or the expiration of the patents.
 
Teva may also assert that our manufacturing and sale of M356 and/or GLATOPA infringes COPAXONE-related patents other than those at issue in the current M356 ANDA-related patent infringement litigation, including patents that may issue in the future. If so, we would expect to incur significant expenses under the terms of our collaboration with Sandoz to respond to and litigate these claims. Furthermore, we may be ordered to pay damages from the sale of M356 and/or GLATOPA if we are found to have infringed Teva’s patents. Litigation concerning intellectual property and proprietary technologies can be protracted and expensive, and can distract management and other key personnel from running our business.
 
If other generic versions of the brand name drugs, or other biosimilars of the reference products, for which we have products or product candidates, including GLATOPA, M356, M923 and M834, are approved and successfully commercialized, our business would suffer.

Pricing and market share of generic and biosimilar products may decline, often dramatically, as other generics or biosimilars of the same brand name drug or reference product, respectively, enter the market. Competing generics include brand name manufacturers’ “authorized generics” of their own brand name products. Generally, earlier-to-market generics and biosimilars are better able to gain significantly greater market share than later-to-market competing generics and biosimilars, respectively. Accordingly, revenue and profits from GLATOPA and, if approved, our generic and biosimilar product candidates, may be significantly reduced based on the timing and number of competing generics and biosimilars, respectively. We expect GLATOPA and, if approved, certain of our generic and biosimilar product candidates may face intense and increasing competition from other generics and biosimilars. For example, Mylan announced that the FDA has accepted for filing its ANDAs for generic versions of COPAXONE, and Synthon announced that it submitted ANDAs to the FDA for generic versions of COPAXONE. A launch of an additional generic version of COPAXONE could significantly reduce anticipated revenue from GLATOPA and, if approved and launched, M356.

In addition, the first biosimilar determined to be interchangeable with a particular reference product for any condition of use is eligible for a period of market exclusivity that delays an FDA determination that a second or subsequent biosimilar product is interchangeable with that reference product for any condition of use until the earlier of: (1) one year after the first commercial marketing of the first interchangeable product; (2) 18 months after resolution of a patent infringement suit instituted under 42 U.S.C. § 262(l)(6) against the applicant that submitted the application for the first interchangeable product, based on a final court decision regarding all of the patents in the litigation or dismissal of the litigation with or without prejudice; (3) 42 months after approval of the first interchangeable product, if a patent infringement suit instituted under 42 U.S.C. § 262(l)(6) against the applicant that submitted the application for the first interchangeable product is still ongoing; or (4) 18 months after approval of the first interchangeable product if the applicant that submitted the application for the first interchangeable product has not been sued under 42 U.S.C. § 262(l)(6). A determination that another company’s product is interchangeable with HUMIRA, ORENCIA or another of the reference products for which we have a biosimilar product candidate prior to approval of M923, M834 or our other applicable biosimilar product candidates may therefore delay any determination that our product is interchangeable with the reference product, which may materially adversely affect our results of operations and delay, prevent or limit our ability to generate revenue.
 
If an alternative version of a name brand drug or reference product, such as COPAXONE, HUMIRA or ORENCIA, is developed that has a new product profile and labeling, the alternative version of the product could significantly reduce the market share of the original name brand drug or reference product, and may cause a significant decline in sales or potential sales of our corresponding generic or biosimilar product.
 
Brand companies may develop alternative versions of a reference brand product as part of a life cycle extension strategy, and may obtain approval of the alternative version under a supplemental new drug application, for a drug, or biologics license

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application, for a biologic. The alternative version may offer patients added benefits such as a more convenient form of administration or dosing regimen. Should the brand company succeed in obtaining an approval of an alternative product, it may capture a significant share of the collective reference brand product market and significantly reduce the market for the original reference brand product and thereby the potential size of the market for our generic or biosimilar products. For example, Teva’s three-times-weekly COPAXONE 40 mg/mL, which launched in early 2014, accounts for approximately 78% of the overall U.S. glatiramer acetate market (20 mg/mL and 40 mg/mL) based on total prescriptions. As a result, the market potential for GLATOPA has decreased, and may decrease further as additional patients are converted from once-daily COPAXONE to three-times-weekly COPAXONE. In addition, the alternative product may be protected by additional patent rights as well as have the benefit, in the case of drugs, of an additional three years of FDA marketing approval exclusivity, which would prohibit a generic version of the alternative product for some period of time. As a result, our business, including our financial results and our ability to fund future discovery and development programs, would suffer.
 
If the market for a name brand drug, or reference product, such as COPAXONE, HUMIRA or ORENCIA, significantly declines, sales or potential sales of our corresponding generic and biosimilars product and product candidates may suffer and our business would be materially impacted.

Competition in the biotechnology industry is intense. Reference products face competition on numerous fronts as technological advances are made or new products are introduced that may offer patients a more convenient form of administration, increased efficacy or improved safety profile. As new products are approved that compete with the reference product to our generic products and product candidates and our biosimilar product candidates, respectively, sales of reference products may be significantly and adversely impacted and may render the reference products obsolete.
 
Current injectable treatments commonly used to treat multiple sclerosis, including COPAXONE, are competing with novel therapeutic products, including oral therapies. These oral therapies may offer patients a more convenient form of administration than COPAXONE and may provide increased efficacy.
 
If the market for the reference product is impacted, we in turn may lose significant market share or market potential for our generic or biosimilar products and product candidates, and the value for our generic or biosimilar pipeline could be negatively impacted. As a result, our business, including our financial results and our ability to fund future discovery and development programs, would suffer.

We will require substantial funds and may require additional capital to execute our business plan and, if additional capital is not available, we may need to delay, limit or cease our product development efforts or other operations. If we are unable to fund our obligations under our collaboration agreements, we may breach those agreements and our collaboration partners could terminate those agreements.
 
As of September 30, 2016, we had cash, cash equivalents and marketable securities totaling approximately $309.0 million. For the nine months ended September 30, 2016, we had a net loss of $62.5 million and our operations used cash of $36.2 million. We will continue to require substantial funds to conduct research and development, process development, manufacturing, nonclinical testing and clinical trials of our product candidates, as well as funds necessary to manufacture and market products that are approved for commercial sale. Because successful development and commercialization of our product candidates is uncertain, we are unable to estimate the actual funds we will require to complete research and development and commercialize our products under development.
 
Our future capital requirements will depend on many factors, including but not limited to:
 
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the level of sales of GLATOPA;
 
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the successful commercialization of M356 and our other product candidates;
 
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the cost of advancing our product candidates and funding our development programs, including the costs of nonclinical and clinical studies and obtaining regulatory approvals;

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the receipt of continuation payments under our Mylan Collaboration Agreement;

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the continuation without disruption of development and manufacturing activities of M923 during the twelve month notice period leading up to, and after, the effective date of Baxalta’s termination of the Baxalta Collaboration Agreement;


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•
the timing of FDA approval of the products of our competitors;

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the cost of litigation, including with Amphastar relating to enoxaparin, that is not otherwise covered by our collaboration agreement, or potential patent litigation with others, as well as any damages, including possibly treble damages, that may be owed to third parties should we be unsuccessful in such litigation;

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the ability to enter into additional collaborations for our non-partnered programs, as well as the terms and timing of any milestone, royalty or profit share payments thereunder;

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the continued progress in our research and development programs, including completion of our nonclinical studies and clinical trials;

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the cost of acquiring and/or in-licensing other technologies, products or assets; and

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the cost of manufacturing, marketing and sales activities, if any.
 
We expect to finance and manage our planned operating and capital expenditure requirements principally through our current cash, cash equivalents and marketable securities, capital raised through our collaboration agreements and equity financings, including utilization of our At-the-Market financing facility, and milestone payments and product revenues under existing collaboration agreements. We believe that these funds will be sufficient to meet our operating requirements through at least the end of 2018. We may seek additional funding in the future through third-party collaborations and licensing arrangements, public or private debt financings or from other sources. Any additional capital raised through the sale of equity may dilute existing investors’ percentage ownership of our common stock. Capital raised through debt financing would require us to make periodic interest payments and may impose potentially restrictive covenants on the conduct of our business. Additional funds may not be available to us on acceptable terms or at all. In addition, the terms of any financing may adversely affect the holdings or the rights of our stockholders. If we are unable to obtain funding on a timely basis, we may be required to significantly curtail one or more of our research or development programs. We also may not be able to fund our obligations under one or more of our collaboration agreements, which could enable one or more of our collaborators to terminate their agreements with us, and therefore harm our business, financial condition and results of operations.
 
We may need to enter into collaborations, joint ventures or other alliances with other companies that can provide capabilities and funds for the development and commercialization of our product candidates. If we are unsuccessful in forming or maintaining these arrangements on favorable terms, our business could be adversely affected.
 
Because we have limited internal capabilities for late-stage product development, manufacturing, sales, marketing and distribution, we may need to enter into strategic alliances with other companies. For example, we have entered into collaboration agreements to develop and commercialize our complex generics programs and our biosimilar programs. In the future, we may also find it necessary to form similar strategic alliances with major pharmaceutical companies to jointly develop and/or commercialize other product candidates across our product areas. In such alliances, we would expect our collaboration partners to provide substantial capabilities in clinical development, manufacturing, regulatory affairs, sales and marketing. We may not be successful in entering into any such alliances. Even if we do succeed in securing such alliances, we may not be able to maintain them if, for example, development or approval of a product candidate is delayed or sales of an approved product are disappointing. If we are unable to secure or maintain such alliances we may not have the capabilities necessary to continue or complete development of our product candidates and bring them to market, which may have an adverse effect on our business.
 
In addition to product development and commercialization capabilities, we may depend on our alliances with other companies to provide substantial additional funding for development and potential commercialization of our product candidates. These arrangements may require us to relinquish rights to some of our technologies, product candidates or products which we would otherwise pursue on our own. These alliances may also involve the other company purchasing a significant number of shares of our common stock. Future alliances may involve similar or greater sales of equity, debt financing or other funding arrangements. We may not be able to obtain funding on favorable terms from these alliances, and if we are not successful in doing so, we may not have sufficient funds to develop a particular product candidate internally or to bring product candidates to market. Failure to bring our product candidates to market will prevent us from generating sales revenue, and this may substantially harm our business. Furthermore, any delay in entering into these alliances could delay the development and commercialization of our product candidates and reduce their competitiveness even if they reach the market. As a result, our business and operating results may be adversely affected.
 
Our future GLATOPA product revenue is dependent on the continued successful commercialization of GLATOPA.
 

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Our near-term ability to generate GLATOPA product revenue depends, in large part, on Sandoz’ continued ability to manufacture and commercialize GLATOPA, maintain pricing levels and market share and compete with Teva’s three-times-weekly COPAXONE 40 mg/mL, which currently accounts for approximately 78% of the overall U.S. glatiramer acetate market (20 mg/mL and 40 mg/mL) based on total prescriptions. Because GLATOPA is only a substitutable generic version of the once-daily 20 mg/mL formulation of COPAXONE, the market potential of GLATOPA is negatively impacted by the conversion of patients from once-daily COPAXONE to three-times-weekly COPAXONE. In addition, other competitors may in the future receive approval to market generic versions of the 20 mg/mL formulation of COPAXONE which would further impact our product revenue, which is based on a fifty-percent contractual profit share and, as a result, our business, including our near-term financial results and our ability to utilize GLATOPA revenue to fund future discovery and development programs, may suffer.
 
Any future Enoxaparin product revenue is dependent on the continued successful manufacture and commercialization of Enoxaparin Sodium Injection.
 
Our near-term ability to generate Enoxaparin product revenue depends, in large part, on Sandoz’ continued ability to manufacture and commercialize Enoxaparin Sodium Injection, maintain pricing levels and market share and compete with LOVENOX brand competition as well as authorized and other generic competition.
 
Sandoz is facing increasing competition and pricing pressure from brand, authorized generic and other currently-approved generic competitors, which has and will continue to impact Sandoz’ net sales and profits from Enoxaparin Sodium Injection, and therefore our product revenue. Furthermore, other competitors may in the future receive approval to market generic enoxaparin products which would further impact our product revenue, which is based on a fifty-percent contractual profit share.
 
Due to these circumstances, the resulting market price for our Enoxaparin Sodium Injection product has substantially decreased and may decrease further. In the year ended December 31, 2015, we received $5.1 million in product revenue from Sandoz’ sales of Enoxaparin Sodium Injection, and we do not anticipate significant enoxaparin revenue in the near term. As a result, our business, including our near-term financial results, may suffer.
 
If our patent litigation against Amphastar related to Enoxaparin Sodium Injection is not successful or third parties are successful in anti-trust litigation against us relating to Enoxaparin Sodium Injection, we may be liable for damages and our business may be materially harmed.
 
In the event that we are not successful in our continued prosecution of our suit against Amphastar and Amphastar is able to prove it suffered damages as a result of the preliminary injunction preventing it from selling its enoxaparin product in the United States having been in effect, we could be liable for up to $35 million of the security bond for such damages. This amount may be increased if Amphastar is successful in their motion to increase the amount of the security bond. Moreover, if third parties are successful in anti-trust litigation against us for asserting our enoxaparin patent rights, they may be able to recover damages incurred as a result of enforcement of our patent rights, thereby negatively affecting our financial condition and results of operations.

If efforts by manufacturers of brand name drugs and reference products to delay or limit the use of generics or biosimilars are successful, our sales of generic and biosimilar products may suffer.
 
Many manufacturers of branded products have increasingly used legislative, regulatory and other means to delay regulatory approval and to seek to restrict competition from manufacturers of generic drugs and biosimilars. These efforts have included:
 
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settling patent lawsuits with generic or biosimilar companies, resulting in such patents remaining an obstacle for generic or biosimilar approval by others;
 
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seeking to restrict biosimilar commercialization options by making mandatory the optional right to adjudicate patent rights under Section 351(l) of the Biologics Price, Competition and Innovation Act or restricting access by biosimilar and generic applicants to the use of inter partes patent review proceedings at the U.S. Patent Office to challenge invalid biologic patent rights;

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settling paragraph IV patent litigation with generic companies to prevent the expiration of the 180-day generic marketing exclusivity period or to delay the triggering of such exclusivity period;


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•
submitting Citizen Petitions to request the FDA Commissioner to take administrative action with respect to prospective and submitted generic drug or biosimilar applications or to influence the adoption of policy with regard to the submission of biosimilar applications;

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appealing denials of Citizen Petitions in United States federal district courts and seeking injunctive relief to reverse approval of generic drug or biosimilar applications;

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restricting access to reference products for equivalence and biosimilarity testing that interfere with timely generic and biosimilar development plans, respectively;

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conducting medical education with physicians, payers and regulators that claim that generic or biosimilar products are too complex for generic or biosimilar approval and influence potential market share;

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seeking state law restrictions on the substitution of generic and biosimilar products at the pharmacy without the intervention of a physician or through other restrictive means such as excessive recordkeeping requirements or patient and physician notification;

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seeking federal or state regulatory restrictions on the use of the same non-proprietary name as the reference brand product for a biosimilar or interchangeable biologic;

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seeking federal reimbursement policies that do not promote adoption of biosimilars and interchangeable biologics;

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seeking changes to the United States Pharmacopeia, an industry recognized compilation of drug and biologic standards;

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pursuing new patents for existing products or processes which could extend patent protection for a number of years or otherwise delay the launch of generic drugs or biosimilars; and

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influencing legislatures so that they attach special regulatory exclusivity or patent extension amendments to unrelated federal legislation.
 
The FDA’s practice is to rule within 150 days on Citizen Petitions that seek to prevent approval of an ANDA if the petition was filed after the Medicare Prescription Drug Improvement and Modernization Act of 2003, or MMA. If, at the end of the 150-day period, the ANDA is not ready for approval or rejection, then the FDA has typically denied and dismissed the petition without acting on the petition. For example, Teva Neuroscience, Inc. filed eight Citizen Petitions regarding GLATOPA, all of which have been denied, dismissed or withdrawn. Teva also sought reversal of the denial of a Citizen Petition in federal court. Other third parties may also file Citizen Petitions requesting that the FDA adopt specific approval standards for generic or biosimilar products. Teva may seek to file additional Citizen Petitions pertaining to the M356 ANDA, and seek to delay or prevent the FDA approval of the M356 ANDA, which could materially harm our business.
 
If these efforts to delay or block competition are successful, we may be unable to sell our generic and biosimilar products, if approved, which could have a material adverse effect on our sales and profitability.

If we or our collaborative partners and other third parties are unable to satisfy FDA quality standards and related regulatory requirements, experience manufacturing difficulties or are unable to manufacture sufficient quantities of our products or product candidates, our development and commercialization efforts may be materially harmed.
 
We have limited personnel with experience in, and we do not own facilities for, manufacturing any products. We depend upon our collaborative partners and other third parties to provide raw materials meeting FDA quality standards and related regulatory requirements, manufacture the drug substance, produce the final drug product and provide certain analytical services with respect to our products and product candidates. We, our collaborative partners or our third-party contractors may have difficulty meeting FDA manufacturing requirements, including, but not limited to, reproducibility, validation and scale-up, and continued compliance with current good manufacturing practices requirements. If we, our collaborative partners or our third-party manufacturers or suppliers are unable to satisfy the FDA manufacturing requirements for our products and product candidates, or are unable to produce our products in sufficient quantities to meet the requirements for the launch of the product or to meet market demand, our revenue and gross margins could be adversely affected, which could have a material adverse impact on our business.
 

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Competition in the biotechnology and pharmaceutical industries is intense, and if we are unable to compete effectively, our financial results will suffer.
 
The markets in which we intend to compete are undergoing, and are expected to continue to undergo, rapid and significant technological change. We expect competition to intensify as technological advances are made or new biotechnology products are introduced. New developments by competitors may render our current or future product candidates and/or technologies non-competitive, obsolete or not economical. Our competitors’ products may be more efficacious or marketed and sold more effectively than any of our products.
 
Many of our competitors have:
 
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significantly greater financial, technical and human resources than we have at every stage of the discovery, development, manufacturing and commercialization process;

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more extensive experience in commercializing generic drugs, biosimilars and novel therapeutics, conducting nonclinical studies, conducting clinical trials, obtaining regulatory approvals, challenging patents and manufacturing and marketing pharmaceutical products;

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products that have been approved or are in late stages of development; and

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collaborative arrangements in our target markets with leading companies and/or research institutions.
 
We face, and will continue to face, competition with regard to our products and, if approved, our product candidates, based on many different factors, including:
 
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the safety and effectiveness of our products;

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with regard to our generic products and our generic and biosimilar product candidates, the differential availability of clinical data and experience and willingness of physicians, payers and formularies to rely on biosimilarity data;

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the timing and scope of regulatory approvals for these products and regulatory opposition to any product approvals;

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the availability and cost of manufacturing, marketing, distribution and sales capabilities;

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the effectiveness of our marketing, distribution and sales capabilities;

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the price of our products;

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the availability and amount of third-party reimbursement for our products; and

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the strength of our patent positions.
 
Our competitors may develop or commercialize products with significant advantages in regard to any of these factors. Our competitors may therefore be more successful in commercializing their products than we are, which could adversely affect our competitive position and business.

If we or our collaborators are unable to establish and maintain key customer distribution arrangements, sales of our products, and therefore revenue, would be adversely impacted.
 
Drug products and biologics are sold through various channels, including retail, mail order, and to hospitals through group purchasing organizations, or GPOs. The distribution of such products is also managed by pharmacy benefit management firms such as Express Scripts or CVS. These purchasers and pharmacy benefit management firms rely on competitive bidding, discounts and rebates across their purchasing arrangements. We also believe that we, in collaboration with commercial collaboration partners, will need to maintain adequate drug supplies, remain price competitive, comply with FDA regulations and provide high-quality products to establish and maintain these relationships. The GPOs, pharmacy benefit management firms and other customers with whom we or our collaborators have established contracts may also have relationships with our competitors and may decide to contract for or otherwise prefer products other than ours, limiting access of products to certain market segments. Our sales could also be negatively affected by any rebates, discounts or fees that are required by, or offered to, GPOs, pharmacy benefit management firms, and customers, including wholesalers, distributors, retail chains or mail order

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services, to gain and retain market acceptance for our or our competitors’ products. For example, if pharmacy benefit management firms, distributors and other customers contract with Teva for net price discounts or rebates on COPAXONE 20 mg/mL and 40 mg/mL in exchange for exclusivity or preferred status for COPAXONE prior to approval and launch of M356, our opportunity to capture market share would be significantly restricted for the term of these contracts even after a launch of M356. If we or our collaborators are unable to establish and maintain competitive distribution arrangements with all of these customers, sales of our products, our revenue and our profits would suffer.
 
Even if we receive approval to market our product candidates, the market may not be receptive to our product candidates upon their commercial introduction, which could adversely affect our ability to generate sufficient revenue from product sales to maintain or grow our business.
 
Even if our product candidates are successfully developed and approved for marketing, our success and growth will also depend upon the acceptance of our products by patients, physicians and third-party payers. Acceptance of our products will be a function of our products being clinically useful, being cost effective and demonstrating sameness, in the case of our generic product candidate, and biosimilarity or interchangeability, in the case of our biosimilar product candidates, with an acceptable side effect profile as compared to existing or future treatments. In addition, even if our products achieve market acceptance, we may not be able to maintain that market acceptance over time.
 
Factors that we believe will materially affect market acceptance of our product candidates under development include:

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the timing of our receipt of any marketing approvals, the terms of any approval and the countries in which approvals are obtained;

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the safety, efficacy and ease of administration of our products;

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the competitive pricing of our products;

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physician confidence in the safety and efficacy of complex generic products or biosimilars;

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the absence of, or limited clinical data available from sameness, biosimilarity or interchangeability testing of our complex generic or biosimilar products;

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the success and extent of our physician education and marketing programs;

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the clinical, medical affairs, sales, distribution and marketing efforts of competitors; and

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the availability and amount of government and third-party payer reimbursement.
 
If our products do not achieve market acceptance, we will not be able to generate sufficient revenue from product sales to maintain or grow our business.
 
If we are not able to retain our current management team or attract and retain qualified scientific, technical and business personnel, our business will suffer.
 
We are dependent on the members of our management team for our business success. Our employment arrangements with our executive officers are terminable by either party on short notice or no notice. We do not carry key person life insurance on the lives of any of our personnel. The loss of any of our executive officers would result in a significant loss in the knowledge and experience that we, as an organization, possess and could cause significant delays, or outright failure, in the development and approval of our product candidates. In addition, there is intense competition from numerous pharmaceutical and biotechnology companies, universities, governmental entities and other research institutions, for human resources, including management, in the technical fields in which we operate, and we may not be able to attract and retain qualified personnel necessary for the successful development and commercialization of our product candidates. Another component of retention is the intrinsic value of equity awards, including stock options. Many stock options granted to our executives and employees are now under pressure given our recent stock performance. If we lose key members of our management team, or are unable to attract and retain qualified personnel, our business could be negatively affected.

There is a substantial risk of product liability claims in our business. If our existing product liability insurance is insufficient, a product liability claim against us that exceeds the amount of our insurance coverage could adversely affect our business.

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Our business exposes us to significant potential product liability risks that are inherent in the development, manufacturing and marketing of human therapeutic products. Product liability claims could delay or prevent completion of our development programs. If we succeed in marketing products, such claims could result in a recall of our products or a change in the approved indications for which they may be used. We cannot be sure that the product liability insurance coverage we maintain will be adequate to cover any incident or all incidents. Furthermore, clinical trial and product liability insurance is becoming increasingly expensive. As a result, we may be unable to maintain sufficient insurance at a reasonable cost to protect us against losses that could have a material adverse effect on our business. These liabilities could prevent or interfere with our product development and commercialization efforts.
 
Our business and operations would suffer in the event of system failures or security breaches.
 
Our internal computer systems are vulnerable to damage from computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures. Any system failure or security breach by employees or others may pose a risk that sensitive data, including clinical trial data, intellectual property, trade secrets or personal information belonging to us, our patients or our collaborators may be exposed to unauthorized persons or to the public. If such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our development programs and our business operations. For example, the loss of clinical trial data from completed or future clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. Likewise, we rely on third parties to manufacture and commercialize our products and conduct clinical trials, and similar events relating to their computer systems could also have a material adverse effect on our business. To the extent that any disruption or security breach were to result in a loss of, or damage to, our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability, the further development and commercialization of our products and product candidates could be delayed, and the trading price of our common stock could be adversely affected.
 
As we continue to evolve from a company primarily involved in drug discovery and development into one that is also involved in the development and commercialization of multiple pharmaceutical products, we may have difficulty managing our growth and expanding our operations successfully.
 
As we advance an increasing number of product candidates through the development process, we will need to expand our development, regulatory, manufacturing, quality, distribution, sales and marketing capabilities or contract with other organizations to provide these capabilities for us. As our operations expand, we expect that we will need to lease additional or alternative facilities and manage additional relationships with various collaborative partners, suppliers and other organizations. The market for laboratory and office facilities is highly competitive near our current location. If we are not successful in leasing additional or alternative space in our current area and have to move our facilities, the timing of our development programs could be disrupted.
 
In addition, our ability to manage our operations and growth requires us to continue to improve our operational, financial and management controls, reporting systems and procedures. For example, some jurisdictions, such as the District of Columbia, have imposed licensing requirements for sales representatives. In addition, the District of Columbia and the Commonwealth of Massachusetts, as well as the federal government, by way of the Sunshine Act provisions of the Patient Protection and Affordable Care Act of 2010, have established reporting requirements that would require public reporting of consulting and research fees to health care professionals. Because the reporting requirements vary in each jurisdiction, compliance will be complex and expensive and may create barriers to entering the commercialization phase. The need to build new systems as part of our growth could place a strain on our administrative and operational infrastructure. We may not be able to make improvements to our management information and control systems in an efficient or timely manner and may discover deficiencies in existing systems and controls. Such requirements may also impact our opportunities to collaborate with physicians at academic research centers as new restrictions on academic-industry relationships are put in place. In the past, collaborations between academia and industry have led to important new innovations, but the new laws may have an effect on these activities. While we cannot predict whether any legislative or regulatory changes will have negative or positive effects, they could have a material adverse effect on our business, financial condition and potential profitability.
 
We may incur costs and allocate resources to identify and develop additional product candidates or acquire or make investments in companies or technologies without realizing any benefit, which could have an adverse effect on our business, results of operations and financial condition or cash flows.
 
Along with continuing to progress our current product candidates, the long-term success of our business also depends on our ability to successfully identify, develop and commercialize additional product candidates. Research programs to identify

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new product candidates require substantial technical, financial and human resources. We may focus our efforts and resources on potential programs and product candidates that ultimately prove to be unsuccessful.
 
In addition, we may acquire or invest in companies, products and technologies. Such transactions involve a number of risks, including:

•
we may find that the acquired company or assets does not further our business strategy, or that we overpaid for the company or assets, or that economic conditions change, all of which may generate a future impairment charge;

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difficulty integrating the operations and personnel of the acquired business, and difficulty retaining the key personnel of the acquired business;

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difficulty incorporating the acquired technologies;

•
difficulties or failures with the performance of the acquired technologies or products;

•
we may face product liability risks associated with the sale of the acquired company’s products;

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disruption or diversion of management’s attention by transition or integration issues and the complexity of managing diverse locations;

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difficulty maintaining uniform standards, internal controls, procedures and policies;

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the acquisition may result in litigation from terminated employees or third parties; and

•
we may experience significant problems or liabilities associated with product quality, technology and legal contingencies.
 
These factors could have a material adverse effect on our business, results of operations and financial condition or cash flows, particularly in the case of a larger acquisition or multiple acquisitions in a short period of time. From time to time, we may enter into negotiations for acquisitions that are not ultimately consummated. Such negotiations could result in significant diversion of management time, as well as out-of-pocket costs.
 
The consideration paid in connection with an acquisition also affects our financial results. If we were to proceed with one or more significant acquisitions in which the consideration included cash, we could be required to use a substantial portion of our available cash to consummate any acquisition. To the extent we issue shares of stock or other rights to purchase stock, including options or other rights, existing stockholders may be diluted and earnings per share may decrease. In addition, acquisitions may result in the incurrence of debt, large one-time write-offs and restructuring charges. They may also result in goodwill and other intangible assets that are subject to impairment tests, which could result in future impairment charges.
 
If we fail to maintain appropriate internal controls in the future, we may not be able to report our financial results accurately, which may adversely affect our stock price and our business.
 
Our efforts to comply with Section 404 of the Sarbanes-Oxley Act of 2002 and the related regulations regarding our required assessment of our internal controls over financial reporting and our external auditors’ audit of that assessment requires the commitment of significant financial and managerial resources.
 
Internal control over financial reporting has inherent limitations, including human error, the possibility that controls could be circumvented or become inadequate because of changed conditions, and fraud. If we are unable to maintain effective internal controls, we may not have adequate, accurate or timely financial information, and we may be unable to meet our reporting obligations as a publicly traded company or comply with the requirements of the SEC or the Sarbanes-Oxley Act of 2002. This could result in a restatement of our financial statements, the imposition of sanctions, including the inability of registered broker dealers to make a market in our stock, or investigation by regulatory authorities. Any such action or other negative results caused by our inability to meet our reporting requirements or comply with legal and regulatory requirements or by disclosure of an accounting, reporting or control issue could adversely affect the trading price of our stock and our business.
 
Risks Relating to Development and Regulatory Approval
 

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The future success of our business is significantly dependent on the success of our M356 product candidate. If we are not able to obtain regulatory approval for the commercial sale of our M356 product candidate, our future results of operations will be adversely affected.
 
Our future results of operations depend to a significant degree on our ability to obtain regulatory approval for and commercialize M356. Our application for M356 has been under review with the FDA since February 2014. To receive approval, we will be required to demonstrate to the satisfaction of the FDA, among other things, that M356:

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contains the same active ingredients as COPAXONE 40 mg/mL;

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is of the same dosage form, strength and route of administration as COPAXONE 40 mg/mL, and has the same labeling as the approved labeling for COPAXONE 40 mg/mL, with certain exceptions; and

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meets compendia or other applicable standards for strength, quality, purity and identity, including potency.
 
In addition, approval of a generic product generally requires demonstrating that the generic drug is bioequivalent to the reference listed drug upon which it is based, meaning that there are no significant differences with respect to the rate and extent to which the active ingredients are absorbed and become available at the site of drug action. However, the FDA may or may not waive the requirements for certain bioequivalence data (including clinical data) for certain drug products, including injectable solutions that have been shown to contain the same active and inactive ingredients in the same concentration as the reference listed drug.
 
Determination of therapeutic equivalence of M356 to COPAXONE 40 mg/mL will be based, in part, on our demonstration of the chemical equivalence of our version to their respective reference listed drugs. The FDA may not agree that we have adequately characterized M356 or that M356 and COPAXONE 40 mg/mL are chemical equivalents. In that case, the FDA may require additional information, including nonclinical or clinical trial results, to determine therapeutic equivalence or to confirm that any inactive ingredients or impurities do not compromise the product’s safety and efficacy. Provision of sufficient information for approval may be difficult, expensive and lengthy. We cannot predict whether M356 will receive FDA approval as therapeutically equivalent to COPAXONE 40 mg/mL.
 
In the event that the FDA modifies its current standards for therapeutic equivalence with respect to generic versions of COPAXONE 40 mg/mL, or requires us to conduct clinical trials or complete other lengthy procedures, the commercialization of M356 could be delayed or prevented or become more expensive. Delays in any part of the process or our inability to obtain regulatory approval for M356 could adversely affect our operating results by restricting or significantly delaying our introduction of M356.
 
Although health care reform legislation that establishes a regulatory pathway for the approval by the FDA of biosimilars has been enacted, the standards for determining biosimilarity and interchangeability for biosimilars are only just being implemented by the FDA. Therefore, substantial uncertainty remains about the potential value of our scientific approach and regulatory strategy for biosimilar development.
 
The regulatory climate in the United States for follow-on versions of biologic and complex protein products remains uncertain, even following the enactment of legislation establishing a regulatory pathway for the approval of biosimilars under the Biologics Price Competition and Innovation Act, or BPCI Act. For example, the FDA only recently issued guidance on certain matters concerning approval of biosimilars, including quality considerations and scientific considerations and to date, only four biosimilar products have been approved under the 351(k) pathway, and, to our knowledge, only a limited number of biosimilar applications have been accepted for review by the FDA. The pathway contemplates approval of two categories of follow-on biologic products: (1) biosimilar products, which are highly similar to the existing reference product, notwithstanding minor differences in clinically inactive components, and for which there are no clinically meaningful differences from the reference product and (2) interchangeable biologic products, which in addition to being biosimilar can be expected to produce the same clinical result in any given patient without an increase in risk due to switching from the reference product. Only interchangeable biosimilar products would be considered substitutable at the retail pharmacy level without the intervention of a physician. The legislation authorizes but does not require the FDA to establish standards or criteria for determining biosimilarity and interchangeability, and also authorizes the FDA to use its discretion to determine the nature and extent of product characterization, nonclinical testing and clinical testing on a product-by-product basis.
 
Our competitive advantage in this area will depend on our success in demonstrating to the FDA that our analytics, biocharacterization and protein engineering platform technology provides a level of scientific assurance that facilitates determinations of biosimilarity and/or interchangeability, reduces the need for large scale clinical trials or other testing, and

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raises the scientific quality requirements for our competitors to demonstrate that their products are highly similar to a reference product. Our ability to succeed will depend in part on our ability to invest in new programs and develop data in a timeframe that enables the FDA to consider our approach within the context of the biosimilar meeting and application review process. In addition, the FDA will likely require significant new resources and expertise to review biosimilar applications, and the timeliness of the review and approval of our future applications could be adversely affected if there were a decline or even limited growth in FDA funding. Our strategy to reduce and target clinical requirements by relying on analytical and functional nonclinical data may not be successful or may take longer than strategies that rely more heavily on clinical trial data.
 
The regulatory pathway also creates a number of additional obstacles to the approval and launch of biosimilar and interchangeable products, including:
 
•
a requirement for the applicant, as a condition to using the pre-approval patent exchange and clearance process, to share, in confidence, the information in its abbreviated pathway application with the reference product company’s and patent owner’s counsel;

•
the inclusion of multiple potential patent rights in the patent clearance process; and

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a grant to each reference product company of 12 years of marketing exclusivity following the reference product approval.
 
Furthermore, the regulatory pathway creates the risk that the brand company, during its 12-year marketing exclusivity period, will develop and replace its product with a non-substitutable or modified product that may also qualify for an additional 12-year marketing exclusivity period, reducing the opportunity for substitution at the retail pharmacy level for interchangeable biosimilars. Finally, the legislation also creates the risk that, as reference product and biosimilar companies gain experience with the regulatory pathway, subsequent FDA determinations or court rulings could create additional areas for potential disputes and resulting delays in biosimilars approval.
 
In addition, there is reconsideration and legislative debate that could lead to the repeal or amendment of the healthcare legislation. If the legislation is significantly amended or is repealed with respect to the biosimilar approval pathway, our opportunity to develop biosimilars (including interchangeable biologics) could be materially impaired and our business could be materially and adversely affected. Similarly, the legislative debate at the federal level regarding the federal government budget in 2013 restricted federal agency funding for the biosimilar pathway, including biosimilar user fee funding for fiscal year 2014, and has resulted in delays in the conduct of meetings with biosimilar applicants and the review of biosimilar meeting and application information. The scheduling and conduct of biosimilar meeting and applications review was also suspended during the U.S. Government shutdown in October 2013, and could be subject to future suspensions as a result of future deadlocks in passage of federal appropriations bills in 2016 or future years. Depending on the timing and the extent of these funding, meeting and review disruptions, our development of biosimilar products could be delayed.
 
Our opportunity to realize value from the potential of the biosimilars market is difficult and challenging due to the significant scientific and development expertise required to develop and consistently manufacture complex protein biologics.
 
The market potential of biosimilars may be difficult to realize, in large part due to the challenges of successfully developing and manufacturing biosimilars. Biologics are therapeutic proteins and are much more complex and much more difficult to characterize and replicate than small-molecule, chemically synthesized drugs. Proteins tend to be 100 to 1000 times larger than conventional drugs, and are more susceptible to physical factors such as light, heat and agitation. They also have greater structural complexity. Protein molecules differ from one another primarily in their sequence of amino acids, which results in folding of the protein into a specific three-dimensional structure that determines its activity. Although the sequence of amino acids in a protein is consistently replicated, there are a number of changes that can occur following synthesis that create inherent variability. Chief among these is the glycosylation, or the attachment of sugars at certain amino acids. Glycosylation is critical to protein structure and function, and thoroughly characterizing and matching the glycosylation profile of a targeted biologic is essential and poses significant scientific and technical challenges. Furthermore, it is often challenging to consistently manufacture proteins with complex glycosylation profiles, especially on a commercial scale. Protein-based therapeutics are inherently heterogeneous and their structure is highly dependent on the production process and conditions. Products from one production facility can differ within an acceptable range from those produced in another facility. Similarly, physicochemical differences can also exist among different lots of the same product produced at the same facility. The physicochemical complexity and size of biologics creates significant technical and scientific challenges in their replication as biosimilar products. Accordingly, the technical complexity involved and expertise and technical skill required to successfully develop and manufacture biosimilars poses significant barriers to entry. Any difficulties encountered in developing and producing, or any inability to develop and produce, biosimilars could adversely affect our business, financial condition and results of operations.

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Even if we are able to obtain regulatory approval for our generic and biosimilar product candidates as therapeutically equivalent or interchangeable, state pharmacy boards or agencies may conclude that our products are not substitutable at the pharmacy level for the corresponding name brand drug or reference product. If our generic or biosimilar products are not substitutable at the pharmacy level for their corresponding name brand drug or reference product, this could materially reduce sales of our products and our business would suffer.
 
Although the FDA may determine that a generic product is therapeutically equivalent to a brand product and provide it with an “A” rating in the FDA’s Orange Book, this designation is not binding on state pharmacy boards or agencies for generic drugs. As a result, in states that do not deem our generic drugs and product candidates therapeutically equivalent, physicians will be required to specifically prescribe a generic product alternative rather than have a routine substitution at the pharmacy level for the prescribed brand product. Should this occur with respect to one of our generic drugs or product candidates, it could materially reduce sales in those states which would substantially harm our business.
 
While a designation of interchangeability is a finding by the FDA that a biosimilar can be substituted at the pharmacy without physician intervention or prescription, reference product pharmaceutical companies are lobbying state legislatures to enact physician prescription requirements, or in the absence of a prescription, physician and patient notification requirements, special labeling requirements and alternative naming requirements which if enacted could create barriers to substitution and adoption rates of interchangeable biologics as well as biosimilars. Should this occur with respect to one of our biosimilars or interchangeable biologic product candidates, it could materially reduce sales in those states which would substantially harm our business.

If our nonclinical studies and clinical trials for our novel product candidates are not successful, we will not be able to obtain regulatory approval for commercial sale of those product candidates.
 
To obtain regulatory approval for the commercial sale of our novel product candidates, we are required to demonstrate through nonclinical studies and clinical trials that our product candidates are safe and effective. Nonclinical studies and clinical trials of novel product candidates are lengthy and expensive and the historical failure rate for novel product candidates is high.
 
A failure of one or more of our nonclinical studies or clinical trials can occur at any stage of testing. We may experience numerous unforeseen events during, or as a result of, nonclinical studies and clinical trials that could delay or prevent our ability to receive regulatory approval or commercialize our novel product candidates, including:
 
•
regulators or institutional review boards may not authorize us to commence a clinical trial or conduct a clinical trial at a prospective trial site;

•
our nonclinical studies or clinical trials may produce negative or inconclusive results, and we may be required to conduct additional nonclinical studies or clinical trials or we may abandon projects that we previously expected to be promising;

•
enrollment in our clinical trials may be slower than we anticipate, resulting in significant delays, and participants may drop out of our clinical trials at a higher rate than we anticipate;

•
we might have to suspend or terminate our clinical trials if the participants are being exposed to unacceptable health risks;

•
regulators or institutional review boards may require that we hold, suspend or terminate clinical research for various reasons, including noncompliance with regulatory requirements or if, in their opinion, participants are being exposed to unacceptable health risks;

•
the cost of our clinical trials may be greater than we anticipate;

•
the effects of our product candidates may not be the desired effects or may include undesirable side effects or our product candidates may have other unexpected characteristics; and

•
we may decide to modify or expand the clinical trials we are undertaking if new agents are introduced that influence current standard of care and medical practice, warranting a revision to our clinical development plan.
 

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The results from nonclinical studies of a novel product candidate and in initial human clinical studies of a novel product candidate may not predict the results that will be obtained in subsequent human clinical trials. If we are required by regulatory authorities to conduct additional clinical trials or other testing of our novel product candidates that we did not anticipate, if we are unable to successfully complete our clinical trials or other tests, or if the results of these trials are not positive or are only modestly positive, we may be delayed in obtaining marketing approval for our novel product candidates or we may not be able to obtain marketing approval at all. Our product development costs will also increase if we experience delays in testing or approvals. Significant clinical trial delays could allow our competitors to bring products to market before we do and impair our ability to commercialize our products or potential products. If any of these events occur, our business will be materially harmed.
 
Failure to obtain regulatory approval in foreign jurisdictions would prevent us from marketing our products abroad.
 
We intend in the future to market our products, if approved, outside of the United States, either directly or through collaborative partners. In order to market our products in the European Union and many other foreign jurisdictions, we must obtain separate regulatory approvals and comply with the numerous and varying regulatory requirements of each jurisdiction. The approval procedure and requirements vary among countries, and can require, among other things, conducting additional testing in each jurisdiction. The time required to obtain approval abroad may differ from that required to obtain FDA approval. The foreign regulatory approval process may include all of the risks associated with obtaining FDA approval, and we may not obtain foreign regulatory approvals on a timely basis, if at all. Approval by the FDA does not ensure approval by regulatory authorities in other countries, and approval by one foreign regulatory authority does not ensure approval by regulatory authorities in any other foreign country or by the FDA. We and our collaborators may not be able to file for regulatory approvals and may not receive necessary approvals to commercialize our products in any market outside of the United States. The failure to obtain these approvals could materially adversely affect our business, financial condition, and results of operations.

Even if we obtain regulatory approvals, our marketed products will be subject to ongoing regulatory review. If we fail to comply with continuing United States and foreign regulations, we could lose our approvals to market products and our business would be seriously harmed.
 
Even after approval, any drugs or biological products we develop will be subject to ongoing regulatory review, including the review of clinical results which are reported after our products are made commercially available. Any regulatory approvals that we obtain for our product candidates may also be subject to limitations on the approved indicated uses for which the product may be marketed or to the conditions of approval, or contain requirements for potentially costly post-marketing testing, including Phase 4 clinical trials, and surveillance to monitor the safety and efficacy of the product candidate. In addition, the manufacturer and manufacturing facilities we use to produce any of our product candidates will be subject to periodic review and inspection by the FDA, or foreign equivalent, and other regulatory agencies. We will be required to report any serious and unexpected adverse experiences and certain quality problems with our products and make other periodic reports to the FDA. The discovery of any new or previously unknown problems with the product, manufacturer or facility may result in restrictions on the product or manufacturer or facility, including withdrawal of the product from the market. Certain changes to an approved product, including in the way it is manufactured or promoted, often require prior FDA approval before the product as modified may be marketed. If we fail to comply with applicable FDA regulatory requirements, we may be subject to fines, warning letters, civil penalties, refusal by the FDA to approve pending applications or supplements, suspension or withdrawal of regulatory approvals, product recalls and seizures, injunctions, operating restrictions, refusal to permit the import or export of products, and/or criminal prosecutions and penalties.
 
Similarly, our commercial activities will be subject to comprehensive compliance obligations under state and federal reimbursement, Sunshine Act, anti-kickback and government pricing regulations. If we make false price reports, fail to implement adequate compliance controls or our employees violate the laws and regulations governing relationships with health care providers, we could also be subject to substantial fines and penalties, criminal prosecution and debarment from participation in the Medicare, Medicaid, or other government reimbursement programs.
 
In addition, the FDA’s policies may change and additional government regulations may be enacted that could prevent, limit, or delay regulatory approval of our product candidates. We cannot predict the likelihood, nature, or extent of government regulation that may arise from future legislation or administrative action, either in the United States or abroad. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approval that we may have obtained and we may not achieve or sustain profitability, which would adversely affect our business.


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If third-party payers do not adequately reimburse customers for any of our approved products, they might not be purchased or used, and our revenue and profits will not develop or increase.

Our revenue and profits will depend heavily upon the availability of adequate reimbursement for the use of our approved product candidates from governmental and other third-party payers, both in the United States and in foreign markets. Reimbursement by a third-party payer may depend upon a number of factors, including the third-party payer’s determination that use of a product is:

•
 a covered benefit under its health plan;

•
safe, effective and medically necessary;

•
appropriate for the specific patient;

•
cost-effective; and

•
neither experimental nor investigational.

Obtaining coverage and reimbursement approval for a product from each government or other third-party payer is a time-consuming and costly process that could require us to provide supporting scientific, clinical and cost-effectiveness data for the use of our products to each payer. We may not be able to provide data sufficient to gain acceptance with respect to coverage and reimbursement. There is substantial uncertainty whether any particular payer will reimburse the use of any drug product incorporating new technology. Even when a payer determines that a product is eligible for reimbursement, the payer may impose coverage limitations that preclude payment for some uses that are approved by the FDA or comparable authority. Moreover, eligibility for coverage does not imply that any product will be reimbursed in all cases or at a rate that allows us to make a profit or even cover our costs. Interim payments for new products, if applicable, may also not be sufficient to cover our costs and may not be made permanent. Reimbursement rates may vary according to the use of the product and the clinical setting in which it is used, may be based on payments allowed for lower-cost products that are already reimbursed, may be incorporated into existing payments for other products or services, and may reflect budgetary constraints and/or imperfections in Medicare, Medicaid or other data used to calculate these rates. Net prices for products may be reduced by mandatory discounts or rebates required by government health care programs or by any future relaxation of laws that restrict imports of certain medical products from countries where they may be sold at lower prices than in the United States.

There have been, and we expect that there will continue to be, federal and state proposals to constrain expenditures for medical products and services, which may affect payments for our products. The Centers for Medicare and Medicaid Services, or CMS, frequently change product descriptors, coverage policies, product and service codes, payment methodologies and reimbursement values. Third-party payers often follow Medicare coverage policy and payment limitations in setting their own reimbursement rates, and both CMS and other third-party payers may have sufficient market power to demand significant price reductions. Due in part to actions by third-party payers, the health care industry is experiencing a trend toward containing or reducing costs through various means, including lowering reimbursement rates, limiting therapeutic class coverage and negotiating reduced payment schedules with service providers for drug products.

We also anticipate that application of the existing and evolving reimbursement regimes to biosimilar products will be somewhat uncertain as CMS and private payers determine whether or not to apply generic drug reimbursement approaches to reimbursement or to develop alternative approaches under Medicare, Medicaid and private insurance coverage. For example, under Medicare Part B, the assignment of reimbursement codes to a reference drug product and its generic equivalent creates a strong incentive for generic conversion. CMS has proposed to group all non-interchangeable biosimilars of a reference biologic under a single, separate reimbursement code from the code for the reference biologic. CMS has not determined that interchangeable biologic products should be under the same reimbursement code as their reference biologics. If separate codes are instituted, the value of interchangeability could be reduced or significantly impaired. Reimbursement uncertainty could adversely impact market acceptance of biosimilar products.

Our inability to promptly obtain coverage and profitable reimbursement rates from government-funded and private payers for our products could have a material adverse effect on our operating results and our overall financial condition.

Federal legislation will increase the pressure to reduce prices of pharmaceutical products paid for by Medicare or may otherwise seek to limit healthcare costs, either of which could adversely affect our revenue, if any.


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The Medicare Modernization Act of 2003, or MMA, changed the way Medicare covers and reimburses for pharmaceutical products. The legislation introduced a new reimbursement methodology based on average sales prices for drugs that are used in hospital settings or under the direct supervision of a physician and, starting in 2006, expanded Medicare coverage for drug purchases by the elderly. In addition, the MMA requires the creation of formularies for self-administered drugs, and provides authority for limiting the number of drugs that will be covered in any therapeutic class and provides for plan sponsors to negotiate prices with manufacturers and suppliers of covered drugs. As a result of the MMA and the expansion of federal coverage of drug products, we expect continuing pressure to contain and reduce costs of pharmaceutical products. Cost reduction initiatives and other provisions of this legislation could decrease the coverage and price that we receive for our products and could materially adversely affect our operating results and overall financial condition. While the MMA generally applies only to drug benefits for Medicare beneficiaries, private payers often follow Medicare coverage policy and payment limitations in setting their own reimbursement policies and any reduction in coverage or payment that results from the MMA may result in a similar reduction in coverage or payments from private payers.

Furthermore, health care reform legislation that was enacted in 2010 and is now being implemented could significantly change the United States health care system and the reimbursement of products. A primary goal of the law is to reduce or limit the growth of health care costs, which could change the market for pharmaceuticals and biological products.

The law contains provisions that will affect companies in the pharmaceutical industry and other healthcare-related industries by imposing additional costs and changes to business practices. Provisions affecting pharmaceutical companies include an increase to the mandatory rebates for drugs sold into the Medicaid program, an extension of the rebate requirement to drugs used in risk-based Medicaid managed care plans, an extension of mandatory discounts for drug products sold to certain critical access hospitals, cancer hospitals and other covered entities, and discounts and fees applicable to brand-name drugs. Although many of these provisions may not apply directly to us, they may change business practices in our industry and, assuming our products are approved for commercial sale, such changes could adversely impact our profitability.

Moreover, increasing efforts by governmental and third-party payers, in the United States and abroad, to cap or reduce healthcare costs or introduce price controls or price negotiation may cause the government or other organizations to limit both coverage and level of reimbursement for approved products and, as a result, they may not cover or provide adequate payment for our products and product candidates. We expect to experience pricing pressures in connection with the sale of any of our products and product candidates due to the trend toward managed healthcare, the increasing influence of health maintenance organizations and additional legislative changes. The downward pressure on healthcare costs in general, particularly prescription drugs and surgical procedures and other treatments, has become very intense. As a result, increasingly high barriers are being erected to the entry of new products.

Additionally, the BPCI Act establishes an abbreviated regulatory pathway for the approval of biosimilars and provides that brand biologic products may receive 12 years of market exclusivity, with a possible six-month extension for pediatric products. By creating a new approval pathway for biosimilars and adjusting reimbursement for biosimilars, the new law could promote the development and commercialization of biosimilars. However, given the uncertainty of how the law will be interpreted and implemented, the impact of the law on our strategy for biosimilars as well as novel biologics remains uncertain. Other provisions in the law, such as the comparative effectiveness provisions, may ultimately impact positively or negatively both brand and biosimilars products alike depending on an applicant’s clinical data, effectiveness and cost profile. If a brand product cannot be shown to provide a benefit over other therapies, then it might receive reduced coverage and reimbursement. While this might increase market share for biosimilars based on cost savings, it could also have the effect of reducing biosimilars’ market share.

The full effects of the United States health care reform legislation cannot be known until the new law is implemented through regulations or guidance issued by the CMS and other federal and state health care agencies. While we cannot predict whether any legislative or regulatory changes will have negative or positive effects, they could have a material adverse effect on our business, financial condition and potential profitability. In addition, litigation may prevent some or all of the legislation from taking effect. Consequently, there is uncertainty regarding implementation of the new legislation.

Foreign governments tend to impose strict price or reimbursement controls, which may adversely affect our revenue, if any.

In some foreign countries, particularly the countries of the European Union, the pricing and/or reimbursement of prescription pharmaceuticals are subject to governmental control. In these countries, pricing negotiations with governmental authorities can take considerable time after the receipt of marketing approval for a product. To obtain reimbursement or pricing approval in some countries, we may be required to conduct a clinical trial that compares the cost-effectiveness of our product candidate to other available therapies. If reimbursement of our products is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, our business could be adversely affected.

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If we do not comply with laws regulating the protection of the environment and health and human safety, our business could be adversely affected.
 
Our research and development involves, and may in the future involve, the use of hazardous materials and chemicals and certain radioactive materials and related equipment. If an accident occurs, we could be held liable for resulting damages, which could be substantial. We are also subject to numerous environmental, health and workplace safety laws and regulations, including those governing laboratory procedures, exposure to blood-borne pathogens and the handling of biohazardous materials. Insurance may not provide adequate coverage against potential liabilities and we do not maintain insurance for environmental liability or toxic tort claims that may be asserted against us. Additional federal, state and local laws and regulations affecting our operations may be adopted in the future. We may incur substantial costs to comply with, and substantial fines or penalties if we violate, any of these laws or regulations.
 
The FDA has reported that it has a substantial backlog of ANDA filings that have resulted in significant delays in review and approval of applications. As a result, the review and potential approval of our applications for M356 may be significantly delayed.
 
The FDA has reported that it has a substantial backlog of ANDA filings that have resulted in significant delays in the review and approval of ANDAs and amendments or supplements due to insufficient staffing and resources. Resource constraints have also resulted in significant delays in conducting ANDA-related pre-approval inspections. Until the backlog of ANDA filings is reduced, our applications and supplements may be subject to significant delays during their review cycles, which may adversely affect our business.
 
Risks Relating to Patents and Licenses
 
If we are not able to obtain and enforce patent protection for our discoveries, our ability to successfully commercialize our product candidates will be harmed and we may not be able to operate our business profitably.
 
Our success depends, in part, on our ability to protect proprietary methods and technologies that we develop under the patent and other intellectual property laws of the United States and other countries, so that we can prevent others from using our inventions and proprietary information. Because patent applications in the United States and many foreign jurisdictions are typically not published until 18 months after filing, or in some cases not at all, and because publications of discoveries in scientific literature lag behind actual discoveries, we cannot be certain that we were the first to make the inventions claimed in issued patents or pending patent applications, or that we were the first to file for protection of the inventions set forth in our patent applications. As a result, we may be required to obtain licenses under third-party patents to market our proposed products. If licenses are not available to us on acceptable terms, or at all, we will not be able to market the affected products.
 
Assuming the other requirements for patentability are met, the first inventor to file a patent application is entitled to the patent. We may be subject to a third-party preissuance submission of prior art to the the U.S. Patent and Trademark Office, or U.S. PTO, or become involved in opposition, derivation, reexamination, IPR or interference proceedings challenging our patent rights or the patent rights of others. For example, several of our European patents are being challenged in opposition proceedings before the European Patent Office. An adverse determination in any such submission, proceeding or litigation could reduce the scope of, or invalidate, our patent rights, allow third parties to commercialize our technology or products and compete directly with us, without payment to us, or result in our inability to manufacture or commercialize products without infringing third-party patent rights.
 
Our strategy depends on our ability to rapidly identify and seek patent protection for our discoveries. This process is expensive and time consuming, and we may not be able to file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner.
 
Despite our efforts to protect our proprietary rights, unauthorized parties may be able to obtain and use information that we regard as proprietary. The issuance of a patent does not guarantee that it is valid or enforceable, so even if we obtain patents, they may not be valid or enforceable against third parties.

Our pending patent applications may not result in issued patents. The patent position of pharmaceutical or biotechnology companies, including ours, is generally uncertain and involves complex legal and factual considerations. The standards which the U.S. PTO and its foreign counterparts use to grant patents are not always applied predictably or uniformly and can change. There is also no uniform, worldwide policy regarding the subject matter and scope of claims granted or allowable in pharmaceutical or biotechnology patents. The laws of some foreign countries do not protect proprietary information to the same

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extent as the laws of the United States, and many companies have encountered significant problems and costs in protecting their proprietary information in these foreign countries.
 
The breadth of patent claims allowed in any patents issued to us or to others may be unclear. The allowance of broader claims may increase the incidence and cost of patent interference proceedings and/or opposition proceedings, and the risk of infringement litigation. On the other hand, the allowance of narrower claims may limit the value of our proprietary rights. Our issued patents may not contain claims sufficiently broad to protect us against third parties with similar technologies or products, or provide us with any competitive advantage. Moreover, once they have issued, our patents and any patent for which we have licensed or may license rights may be challenged, narrowed, invalidated or circumvented. If our patents are invalidated or otherwise limited, other companies will be better able to develop products that compete with ours, which could adversely affect our competitive business position, business prospects and financial condition.
 
We also rely on trade secrets, know-how and technology, which are not protected by patents, to maintain our competitive position. If any trade secret, know-how or other technology not protected by a patent were to be disclosed to or independently developed by a competitor, our business and financial condition could be materially adversely affected.
 
Third parties may allege that we are infringing their intellectual property rights, forcing us to expend substantial resources in resulting litigation, the outcome of which would be uncertain. Any unfavorable outcome of such litigation could have a material adverse effect on our business, financial position and results of operations.
 
The issuance of our own patents does not guarantee that we have the right to practice the patented inventions. Third parties may have blocking patents that could be used to prevent us from marketing our own patented product and practicing our own patented technology.
 
If any party asserts that we are infringing its intellectual property rights or that our creation or use of proprietary technology infringes upon its intellectual property rights, we might be forced to incur expenses to respond to and litigate the claims. Furthermore, we may be ordered to pay damages, potentially including treble damages, if we are found to have willfully infringed a party’s patent rights. In addition, if we are unsuccessful in litigation, or pending the outcome of litigation, a court could issue a temporary injunction or a permanent injunction preventing us from marketing and selling the patented drug or other technology for the life of the patent that we have been alleged or deemed to have infringed. Litigation concerning intellectual property and proprietary technologies is widespread and can be protracted and expensive, and can distract management and other key personnel from performing their duties for us.
 
Any legal action against us or our collaborators claiming damages and seeking to enjoin any activities, including commercial activities relating to the affected products, and processes could, in addition to subjecting us to potential liability for damages, require us or our collaborators to obtain a license in order to continue to manufacture or market the affected products and processes. Any license required under any patent may not be made available on commercially acceptable terms, if at all. In addition, some licenses may be non-exclusive, and therefore, our competitors may have access to the same technology licensed to us.
 
If we fail to obtain a required license or are unable to design around a patent, we may be unable to effectively market some of our technology and products, which could limit our ability to generate revenue or achieve profitability and possibly prevent us from generating revenue sufficient to sustain our operations.
 
If we remain involved in patent litigation or other proceedings to determine or enforce our intellectual property rights, we could incur substantial costs which could adversely affect our business.
 
We may need to continue to resort to litigation to enforce a patent issued to us or to determine the scope and validity of a third-party patent or other proprietary rights such as trade secrets in jurisdictions where we intend to market our products, including the United States, the European Union, and many other foreign jurisdictions. The cost to us of any litigation or other proceeding relating to determining the validity of intellectual property rights, even if resolved in our favor, could be substantial and could divert our management’s efforts. Some of our competitors may be able to sustain the costs of complex patent litigation more effectively than we can because they may have substantially greater resources. Moreover, the failure to obtain a favorable outcome in any litigation in a jurisdiction where there is a claim of patent infringement could significantly delay the marketing of our products in that particular jurisdiction. Counterclaims for damages and other relief may be triggered by such enforcement actions. The costs, uncertainties and counterclaims resulting from the initiation and continuation of any litigation could limit our ability to continue our operations.
 

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We in-license a portion of our proprietary technologies and if we fail to comply with our obligations under any of the related agreements, we could lose license rights that are necessary to develop our product candidates.
 
We are a party to and rely on a number of in-license agreements with third parties, such as those with the Massachusetts Institute of Technology and Rockefeller University, which give us rights to intellectual property that may be necessary for certain parts of our business. In addition, we expect to enter into additional licenses in the future. Our current in-license arrangements impose various diligence, development, royalty and other obligations on us. If we breach our obligations with regard to our exclusive in-licenses, they could be converted to non-exclusive licenses or the agreements could be terminated, which would result in our being unable to develop, manufacture and sell products that are covered by the licensed technology.
 
Risks Relating to Our Dependence on Third Parties
 
The 2006 Sandoz Collaboration Agreement is important to our business. If Sandoz AG fails to adequately perform under this collaboration, or if we or Sandoz AG terminate all or a portion of this collaboration, the development and commercialization of some of our products and product candidates, including GLATOPA and M356, would be impacted, delayed or terminated and our business would be adversely affected.
 
Either we or Sandoz AG may terminate the 2006 Sandoz Collaboration Agreement for material uncured breaches or certain events of bankruptcy or insolvency by the other party. For some of the products, for any termination of the 2006 Sandoz Collaboration Agreement other than a termination by Sandoz AG due to our uncured breach or bankruptcy, or a termination by us alone due to the need for clinical trials, we will be granted an exclusive license under certain intellectual property of Sandoz AG to develop and commercialize the particular product. In that event, we would need to expand our internal capabilities or enter into another collaboration, which could cause significant delays that could prevent us from completing the development and commercialization of such product. For some products, if Sandoz AG terminates the 2006 Sandoz Collaboration Agreement due to our uncured breach or bankruptcy, or if there is a termination by us alone due to the need for clinical trials, Sandoz AG would retain the exclusive right to develop and commercialize the applicable product. In that event, we would no longer have any influence over the development or commercialization strategy of such product. In addition, for other products, if Sandoz AG terminates due to our uncured breach or bankruptcy, Sandoz AG retains a right to license certain of our intellectual property without the obligation to make any additional payments for such licenses. For certain products, if the 2006 Sandoz Collaboration Agreement is terminated other than due to our uncured breach or bankruptcy, neither party will have a license to the other party’s intellectual property. In that event, we would need to expand our internal capabilities or enter into another collaboration, which, if we were able to do so, could cause significant delays that could prevent us from completing the development and commercialization of such product. Any alternative collaboration could also be on less favorable terms to us. Accordingly, if the 2006 Sandoz Collaboration Agreement is terminated, our introduction of certain products may be significantly delayed, or our revenue may be significantly reduced, either of which could have a material adverse effect on our business.
 
Under our collaboration agreement, we are dependent upon Sandoz AG to successfully continue to commercialize GLATOPA and are significantly dependent on Sandoz AG to successfully commercialize M356. We do not fully control Sandoz AG’s commercialization activities or the resources it allocates to our products. While the 2006 Sandoz Collaboration Agreement contemplates joint decision making and alignment, our interests and Sandoz AG’s interests may differ or conflict from time-to-time or we may disagree with Sandoz AG’s level of effort or resource allocation. Sandoz AG may internally prioritize our products differently than we do or it may fail to allocate sufficient resources to effectively or optimally commercialize our products and alignment may only be achieved through dispute resolution. If these events were to occur, our business would be adversely affected.
 
The development and commercialization of our lead biosimilar, M923, could be delayed or terminated as a result of Baxalta’s notice of termination of the Baxalta Collaboration Agreement, and our business may be adversely affected.
 
On September 27, 2016, Baxalta gave us twelve months’ prior written notice of the exercise of its right to terminate for its convenience the Baxalta Collaboration Agreement. Under the terms of the Baxalta Collaboration Agreement, we have the right to research, develop, manufacture and commercialize M923 or license a third party to do so after the effective date of the termination. Prior to the effective date of the termination, Baxalta is obligated to continue to perform development and manufacturing activities for M923. If Baxalta does not allocate sufficient resources for development and commercialization of M923 during the twelve month notice period, there could be significant delays in the M923 program. In addition, there could be changes or delays in the timing of the M923 program in connection with the transition of the M923 program back to us. In the event we elect to research, develop, manufacture and commercialize M923, we would need to expand our internal capabilities, in connection with which there could be significant delays in the M923 program. In the event we elect to license M923 to a third party, the terms of such a license and collaboration could be less favorable than those under the Baxalta Collaboration

58

Agreement, and finding and negotiating a new collaboration could cause significant delays in the M923 program. Any of the delays described above could prevent us from commercializing M923. In addition, we may need to seek additional financing to support the research, development and commercialization of M923, or alternatively we may decide to discontinue M923, which could have a material adverse effect on our business.
 
The Mylan Collaboration Agreement is important to our business. If we or Mylan fail to adequately perform under the Agreement, or if we or Mylan terminate the Agreement, the development and commercialization of one or more of our biosimilar candidates, including M834, could be delayed or terminated and our business would be adversely affected.
 
The Mylan Collaboration Agreement may be terminated by either party for breach by, or bankruptcy of, the other party; for its convenience; or for certain activities involving competing products or the challenge of certain patents. Other than in the case of a termination for convenience, the terminating party shall have the right to continue the development, manufacture and commercialization of the terminated products in the terminated countries. In the case of a termination for convenience, the other party shall have the right to continue. If a termination occurs, the licenses granted to the non-continuing party for the applicable product will terminate for the terminated country. Subject to certain terms and conditions, the party that has the right to continue the development or commercialization of a given product candidate may retain royalty-bearing licenses to certain intellectual property rights, and rights to certain data, for the continued development and sale of the applicable product in the country or countries for which termination applies.
 
If the Mylan Collaboration Agreement was terminated and we had the right to continue the development and commercialization of one or more terminated products, to fully exercise that right, we would need to expand our internal capabilities or enter into another collaboration, which, if we were able to do so, could cause significant delays that could prevent us from commercializing those products. Any alternative collaboration could be on less favorable terms to us. In addition, we may need to seek additional financing to support the development and commercialization of any terminated products, or alternatively we may decide to discontinue one or more terminated products, which could have a material adverse effect on our business. If the Mylan Collaboration Agreement was terminated and Mylan had the right to continue the development and commercialization of one or more terminated products, we would have no influence or input into those activities.
 
Under the Mylan Collaboration Agreement, we are dependent upon Mylan to successfully perform its responsibilities and activities, including conducting clinical trials for certain products and leading the commercialization of products. We do not control Mylan’s execution of its responsibilities, including commercialization activities, or the resources it allocates to our products. Our interests and Mylan’s interests may differ or conflict from time to time, or we may disagree with Mylan’s level of effort or resource allocation. Mylan may internally prioritize our products differently than we do or it may not allocate sufficient resources to effectively or optimally execute its responsibilities or activities. If these events were to occur, our business would be adversely affected.
 
We and our collaborative partners depend on third parties for the manufacture of products. If we encounter difficulties in our supply or manufacturing arrangements, our business may be materially adversely affected.
 
We have a limited number of personnel with experience in, and we do not own facilities for, manufacturing products. In addition, we do not have, and do not intend to develop, the ability to manufacture material for our clinical trials or at commercial scale. To develop our product candidates, apply for regulatory approvals and commercialize any products, we or our collaborative partners need to contract for or otherwise arrange for the necessary manufacturing facilities and capabilities. In order to generate revenue from the sales of Enoxaparin Sodium Injection and GLATOPA, sufficient quantities of such product must also be produced in order to satisfy demand. If these contract manufacturers are unable to manufacture sufficient quantities of product, comply with regulatory requirements, or breach or terminate their manufacturing arrangements with us, the development and commercialization of the affected products or product candidates could be delayed, which could have a material adverse effect on our business. In addition, any change in these manufacturers could be costly because the commercial terms of any new arrangement could be less favorable and the expenses relating to the transfer of necessary technology and processes could be significant.
 
We have relied upon third parties to produce material for nonclinical and clinical studies and may continue to do so in the future. We cannot be certain that we will be able to obtain and/or maintain long-term supply and supply arrangements of those materials on acceptable terms, if at all. If we are unable to arrange for third-party manufacturing, or to do so on commercially reasonable terms, we may not be able to complete development of our products or market them.
 
In addition, the FDA and other regulatory authorities require that our products be manufactured according to current good manufacturing practices, or cGMP, regulations and that proper procedures are implemented to assure the quality of our

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sourcing of raw materials and the manufacture of our products. Any failure by us, our collaborative partners or our third-party manufacturers to comply with cGMP, and/or our failure to scale-up our manufacturing processes could lead to a delay in, or failure to obtain, regulatory approval. In addition, such failure could be the basis for action by the FDA to withdraw approvals for product candidates previously granted to us and for other regulatory action, including product recall or seizure, fines, imposition of operating restrictions, total or partial suspension of production or injunctions. To the extent we rely on a third-party manufacturer, the risk of non-compliance with cGMPs may be greater and the ability to effect corrective actions for any such noncompliance may be compromised or delayed.
 
If we are unable to establish sales and marketing capabilities or enter into agreements with third parties to market and sell our product candidates, we may be unable to generate product revenue.
 
We do not have a sales organization and have no experience as a company in the sale, marketing or distribution of pharmaceutical products. There are risks involved with establishing our own sales and marketing capabilities, as well as entering into arrangements with third parties to perform these services. For example, developing a sales force is expensive and time consuming and could delay any product launch. In addition, to the extent that we enter into arrangements with third parties to perform sales, marketing or distribution services, we will have less control over sales of our products and our future revenue would depend heavily on the success of the efforts of these third parties.
 
A significant change in the business operations of, a change in the financial condition of, a change in senior executive management within, or a change in control of our third party collaborators, or any future collaboration partners or third party manufacturers could have a negative impact on our business operations.
 
Since many of our product candidates are developed under collaborations with third parties, we do not have sole decision making authority with respect to commercialization or development of those product candidates. We have built relationships and work collaboratively with our third party collaborators and manufacturers to ensure the success of our development and commercialization efforts. A significant change in the senior management team, a change in the financial condition or a change in the business operations, including a change in control or internal corporate restructuring, of any of our collaboration partners or third party manufacturers, could result in delayed timelines on our products. In addition, we may have to re-establish working relationships and familiarize new counterparts with our products and business. Any such change may result in the collaboration partner or third party manufacturer internally re-prioritizing our programs or decreasing resources or funding allocated to support our programs. For example, in June 2016, Baxalta Incorporated and Shire announced the completion of a combination of Baxalta Incorporated and Shire, as a result of which Baxalta Incorporated became a wholly-owned subsidiary of Shire. On September 27, 2016, Baxalta gave us twelve months’ prior written notice of the exercise of its right to terminate for its convenience the Baxalta Collaboration Agreement. As a result, we are dependent on Shire to allocate resources for development and commercialization of M923 during the twelve month notice period, and there could be changes or delays in the timing of the M923 program in connection with the transition of the M923 program back to us. Similar changes with respect to any of our other collaborators may negatively impact our business operations.
 
General Company Related Risks
 
Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of us, which may be beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove our current management.
 
Provisions in our certificate of incorporation and our by-laws may delay or prevent an acquisition of us or a change in our management. In addition, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors. Because our board of directors is responsible for appointing the members of our management team, these provisions could in turn affect any attempt by our stockholders to replace current members of our management team. These provisions include:
 
•
a classified board of directors;

•
a prohibition on actions by our stockholders by written consent; and

•
limitations on the removal of directors.
 
Moreover, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which prohibits a person who owns in excess of 15% of our outstanding voting stock from merging or combining with us for a period of three years after the date of the transaction in which the person acquired in excess of 15%

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of our outstanding voting stock, unless the merger or combination is approved in a prescribed manner. Finally, these provisions establish advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted upon at stockholder meetings. These provisions would apply even if the offer may be considered beneficial by some stockholders.
 
Our stock price may be volatile, and purchasers of our common stock could incur substantial losses.
 
The stock market in general and the market prices for securities of biotechnology companies in particular have experienced extreme volatility that often has been unrelated or disproportionate to the operating performance of these companies. The trading price of our common stock has been, and is likely to continue to be, volatile. Furthermore, our stock price could be subject to wide fluctuations in response to a variety of factors, including the following:
 
•
delays in achievement of, or failure to achieve, program milestones that are associated with the valuation of our company or significant milestone revenue;

•
failure of GLATOPA to sustain profitable sales or market share that meet expectations of securities analysts;

•
other adverse FDA decisions relating to our GLATOPA or M356 programs, including an FDA decision to require additional data, including requiring clinical trials, as a condition to M356 ANDA approval;

•
litigation involving our company or our general industry or both, including litigation pertaining to the launch of our collaborative partners’ or our competitors’ products, including without limitation, a decision in the M356 patent litigation or a competitors’ related patent litigation that prevents the launch or delays the launch of our M356 product;

•
a decision in favor of, or against, Amphastar in our patent litigation suits, a settlement related to any case; or a decision in favor of third parties in anti-trust litigation filed against us;

•
announcements by other companies regarding the status of their ANDAs for generic versions of COPAXONE;

•
FDA approval of other companies’ ANDAs for generic versions of COPAXONE;

•
marketing and/or launch of other companies’ generic versions of COPAXONE;

•
adverse FDA decisions regarding the development requirements for one of our biosimilar development candidates or failure of our other product applications to meet the requirements for regulatory review and/or approval;

•
results or delays in our or our competitors’ clinical trials or regulatory filings;

•
enactment of legislation that repeals the law enacting the biosimilar regulatory approval pathway or amends the law in a manner that is adverse to our biosimilar development strategy;

•
failure to demonstrate therapeutic equivalence, biosimilarity or interchangeability with respect to our technology-enabled generic product candidate, M356, or biosimilars such as M923 or M834;

•
demonstration of or failure to demonstrate the safety and efficacy for our novel product candidates;

•
our inability to manufacture any products in conformance with cGMP or in sufficient quantities to meet the requirements for the commercial sale of the product or to meet market demand;

•
failure of any of our product candidates, if approved, to achieve commercial success;

•
the discovery of unexpected or increased incidence in patients’ adverse reactions to the use of our products or product candidates or indications of other safety concerns;

•
developments or disputes concerning our patents or other proprietary rights;

•
changes in estimates of our financial results or recommendations by securities analysts;

•
termination of any of our product development and commercialization collaborations;

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•
significant acquisitions, strategic partnerships, joint ventures or capital commitments by us or our competitors;

•
investors’ general perception of our company, our products, the economy and general market conditions;

•
rapid or disorderly sales of stock by holders of significant amounts of our stock; or

•
significant fluctuations in the price of securities generally or biotech company securities specifically.
 
If any of these factors cause an adverse effect on our business, results of operations or financial condition, the price of our common stock could fall and investors may not be able to sell their common stock at or above their respective purchase prices.
 
We could be subject to class action litigation due to stock price volatility, which, if it occurs, will distract our management and could result in substantial costs or large judgments against us.
 
The stock market in general has recently experienced extreme price and volume fluctuations. In addition, the market prices of securities of companies in the biotechnology industry have been extremely volatile and have experienced fluctuations that have often been unrelated or disproportionate to the operating performance of these companies. These fluctuations could adversely affect the market price of our common stock. In the past, securities class action litigation has often been brought against companies following periods of volatility in the market prices of their securities. We may be the target of similar litigation in the future. Securities litigation could result in substantial costs and divert our management’s attention and resources, which could cause serious harm to our business, operating results and financial condition.


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Item 6.    EXHIBITS
 
 
 
 
Incorporated by Reference to
Exhibit
Number
 
Description
 
Form or
Schedule
 
Exhibit
No.
 
Filing
Date
with SEC
 
SEC File
Number
*10.1
 
Sublease, between Biogen MA Inc. and the Registrant, dated September 14, 2016.
 
 
 
 
 
 
 
 
*31.1
 
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 
 
 
 
 
 
 
 
*31.2
 
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 
 
 
 
 
 
 
 
**32.1
 
Certifications of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 
 
 
 
 
 
 
*101.INS
 
XBRL Instance Document.
 
 
 
 
 
 
 
 
*101.SCH
 
XBRL Taxonomy Extension Schema Document.
 
 
 
 
 
 
 
 
*101.CAL
 
XBRL Taxonomy Extension Calculation Linkbase Document.
 
 
 
 
 
 
 
 
*101.DEF
 
XBRL Taxonomy Extension Definition Linkbase Document.
 
 
 
 
 
 
 
 
*101.LAB
 
XBRL Taxonomy Extension Label Linkbase Document.
 
 
 
 
 
 
 
 
*101.PRE
 
XBRL Taxonomy Extension Presentation Linkbase Document.
 
 
 
 
 
 
 
 
 
*
Filed herewith.
 
**
Furnished herewith.
 
 
The following materials from the Registrant’s Quarterly Report on Form 10-Q for the period ended September 30, 2016, formatted in XBRL (Extensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets at September 30, 2016 and December 31, 2015, (ii) the Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and nine months ended September 30, 2016 and 2015, (iii) the Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2016 and 2015, and (iv) Notes to Unaudited, Condensed Consolidated Financial Statements.


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SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 
Momenta Pharmaceuticals, Inc.
 
 
 
Date: November 4, 2016
By:
/s/ Craig A. Wheeler
 
 
Craig A. Wheeler, President and Chief Executive Officer
 
 
(Principal Executive Officer)
 
 
 
 
 
 
Date: November 4, 2016
By:
/s/ Richard P. Shea
 
 
Richard P. Shea, Senior Vice President and Chief Financial Officer
 
 
(Principal Financial and Accounting Officer)

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SUBLEASE
This SUBLEASE is made as of September 14, 2016, by and between Biogen MA Inc., a Massachusetts corporation having an address at 225 Binney Street, Cambridge Massachusetts 02142 (“Sublessor”), and Momenta Pharmaceuticals, Inc., a Delaware corporation having an address at 675 West Kendall Street, Cambridge, Massachusetts 02142 (“Sublessee”).
BACKGROUND
A.    Under the Lease dated as of March 31, 2015, by and between BMR-Rogers Street LLC, as “Landlord” (“Prime Lessor”) and Sublessor, as “Tenant,” as the same has been amended by a First Amendment to Lease dated February 23, 2016 and by a Second Amendment to Lease of even date herewith (such lease, as the same has been amended, and all renewals, modifications and extensions of such lease are collectively referred to in this Sublease as the “Prime Lease”), a redacted copy of which is attached hereto as Exhibit A, whereby Sublessor leases approximately 79,683 square feet of rentable space on the fifth (5th) floor in the building known as and numbered 301 Binney Street, Cambridge, Massachusetts (the “Building”) (all as more particularly described in the Prime Lease, the “Premises”).
B.    Sublessee desires to sublease the entire Premises from Sublessor and Sublessor is willing to sublease the entire Premises to Sublessee, all on the terms and conditions set forth in this Sublease.
For good and valuable consideration, the receipt and sufficiency of which are acknowledged by Sublessor and Sublessee, Sublessor and Sublessee agree as follows:
1.    Sublease of Subleased Premises. For the rent and upon the terms and conditions in this Sublease, Sublessor subleases to Sublessee, and Sublessee subleases from Sublessor approximately 79,683 square feet of rentable space located on the fifth floor of the Building as shown on Exhibit B attached hereto (the “Sublease Premises”), being all of the Premises demised to Sublessor under the Prime Lease.
2.    Term. The term (the “Term”) of this Sublease shall commence upon the date (the “Commencement Date”) that is the later to occur of (i) the date on which each of the following conditions has been satisfied: (a) the Consent Contingency (as defined in Paragraph 25 of this Sublease) has been satisfied, and (b) this Sublease has been fully executed and delivered by Sublessor and Sublessee, and (ii) January 1, 2018, and shall expire at 11:59 p.m. on June 29, 2025 or such earlier date on which this Sublease may terminate under the terms or provisions of the Prime Lease, this Sublease or applicable law (the “Expiration Date”).
3.    Rent.
(a)    Commencing on January 1, 2018, Sublessee shall pay to Sublessor the following amounts as base rent (the “Base Rent”) during the Term of this Sublease:

Dates

Annual Base Rent Per Annum
Monthly Base Rent
Rent Per Square Foot
1/1/18 – 12/31/18
$6,055,908.00
$504,659.00
$76.00
1/1/19 – 12/31/19
$6,237,585.24
$519,798.77
$78.28
1/1/20 – 12/31/20
$6,424,840.29
$535,403.36
$80.63
1/1/21 – 12/31/21
$6,543,567.96
$545,297.33
$82.12
1/1/22 – 12/31/22
$6,664,686.12
$555,390.51
$83.64
1/1/23 – 12/31/23
$6,788,194.77
$565,682.90
$85.19
1/1/24 – 12/31/24
$6,913,297.08
$576,108.09
$86.76
1/1/25 – 6/29/25
$7,041,586.71
$586,798.89
$88.37
(b)    Notwithstanding the foregoing, Sublessee shall make the first payment of Base Rent, together with the security deposit described below, at the time of Sublessee’s execution and delivery of this Sublease to Sublessor. The Base Rent is intended to be absolutely net of any and all other costs and expenses that may be or become due and payable by Sublessor under the Prime Lease (except as otherwise expressly provided in paragraph (c) below), including without limitation Sublessor’s share of Operating Expenses, the Property Management Fee and Personal Property Taxes payable by Sublessor to Prime Lessor under the Prime Lease, all of which shall be paid by Sublessee as additional rent in addition to the Base Rent set forth above. Base Rent and additional rent shall sometimes be referred to as “Rent” in this Sublease. All Rent shall be due and payable in monthly installments in advance on the first day of each calendar month, without demand, deduction, counterclaim or setoff, except as expressly otherwise provided in this Sublease. Rent for any partial month shall be prorated and paid on the first day of any partial month. Sublessee shall pay as additional rent for all other expenses for which Sublessor is or would be responsible under the Prime Lease.
(c)    As additional rent, Sublessee shall pay all amounts for which Sublessor is required to pay to Prime Lessor under the Prime Lease in connection with the Sublease Premises (other than the Base Rent due under the Prime Lease and any Additional Rent payable by Sublessor to Prime Lessor pursuant to Section 29.4(f) of the Prime Lease), including without limitation Sublessor’s share (as determined under the Prime Lease) of Operating Expenses, the Property Management Fee and Personal Property Taxes. In addition to the Base Rent and additional rent, Sublessee agrees to pay to Sublessor all Sublessee Surcharges (as hereinafter defined) as further additional rent hereunder as hereinafter provided. As used herein, the term “Sublessee Surcharges” shall mean any and all amounts which become due and payable by Sublessor to the Prime Lessor under the Prime Lease, and which would not have become due and payable but for the acts and/or failures to act of Sublessee under this Sublease or which are otherwise attributable to the Sublease Premises, including, but not limited to: (i) any increases in the Prime Lessor’s fire, rent or other insurance premiums resulting from any act or omission of Sublessee, and (ii) any additional rent or charges under the Prime Lease payable by Sublessor on account of any other additional service as may be provided for or on behalf of Sublessee under the Prime Lease, or with the consent of the Prime Lessor, and (iii) the reasonable charges for any services that may be provided for Sublessee or the Sublease Premises hereunder where a separate charge is provided for. Sublessee shall pay any Sublessee Surcharge within thirty (30) days after the presentation of a statement therefor by the Sublessor to Sublessee, provided that all payments of additional rent shall in any event be made to Sublessor (or, if Sublessor directs in writing, to Prime Lessor) no later than five (5) business days prior to the date on which the same will become due under the Prime Lease.
(d)    In the event the Term commences or ends on a day other than the first day of a calendar month, then the Rent for such fraction of a month shall be prorated for such period on the basis of the number of days in the month and shall be paid at the then-current rate for such fractional month.
(e)    Any failure or delay by Sublessor in billing any sum set forth in this Section 4 shall not constitute a waiver of Sublessee’s obligation to pay the same in accordance with the terms of this Sublease.
4.    Electricity; Utilities. As provided in the Prime Lease, the Sublease Premises are separately metered for electricity and other utilities to be used by Sublessee. Sublessee shall pay for all water (including the cost to service, repair and replace reverse osmosis, de-ionized and other treated water), gas, heat, light, power, telephone, internet service, cable television, other telecommunications and other utilities supplied to the Premises, together with any fees, surcharges and taxes thereon, all payments to be on or prior to the date on which such payments are due, all as additional rent.
5.    Permitted Uses. Sublessee shall use the Sublease Premises only for the “Permitted Use” under the Prime Lease. Sublessee shall not do, suffer or permit anything to be done in or upon the Subleased Premises except in compliance with and as permitted by the Prime Lease and applicable law. Sublessee shall not cause or permit the Subleased Premises, the Premises or the Property to be used in any way that violates any Applicable Laws (as defined in the Prime Lease), or constitutes a nuisance or waste. Sublessee shall comply with the certificate of occupancy relating to the Subleased Premises and with all laws, statutes, ordinances, orders, rules, regulations and requirements of all federal, state and municipal governments and the appropriate agencies, officers, departments, boards and commissions thereof, and the board of fire underwriters and/or the fire insurance rating organization or similar organization performing the same or similar functions, whether now or hereafter in force, applicable to the Subleased Premises.
6.    Condition of Subleased Premises.
(a)    Sublessor is subleasing the Sublease Premises to Sublessee in their existing condition, AS IS, WHERE IS and without representation or warranty by Sublessor, except that (1) Sublessor will be responsible for decommissioning the laboratory facilities in the Sublease Premises and will, on request of Sublessee, provide reasonable documentation thereof, and (2) the Sublease Premises will be delivered broom clean with all of Sublessor’s furniture, fixtures and equipment (other than laboratory equipment) removed. By way of clarification, Sublessor shall not remove, and Sublessee shall accept, Sublessor’s telecommunication wiring in the Subleased Premises. Sublessee represents that it has made or caused to be made a thorough examination and inspection of the Subleased Premises and is familiar with the condition of every part of the Subleased Premises. Sublessee acknowledges that, except as expressly provided in this Sublease, (i) it enters into this Sublease without relying upon any representations, warranties or promises by Sublessor, its agents, representatives, employees, servants or any other person in respect of the Building or the Subleased Premises, (ii) no rights, easements or licenses are acquired by Sublessee by implication or otherwise except as expressly set forth in this Sublease (including, without limitation, in Section 6(c) below), (iii) Sublessor shall have no obligation to do any work or pay any allowance or contribution in order to make the Subleased Premises suitable and ready for occupancy and use by Sublessee, and (iv) the Subleased Premises are in satisfactory condition. Sublessee’s taking of possession of the Sublease Premises shall be confirmation that the Sublease Premises were at such time in good, sanitary and satisfactory condition and repair.
(b)    Sublessee shall keep and maintain the Subleased Premises, and the fixtures and equipment in the Subleased Premises clean and in good order, repair and condition, as required of Sublessor under the Prime Lease. Sublessee, at its sole cost and expense, shall be responsible for providing its own cleaning services to the Subleased Premises in the manner required under the Prime Lease.
(c)    Sublessor acknowledges that Sublessee may desire to make certain alterations and/or improvements in and to the Sublease Premises to make the same more suitable for Sublessee’s use and occupancy (the “Sublease Improvements”). Sublessee shall perform the Sublease Improvements in full accordance with the terms and conditions of the Prime Lease, including without limitation Article 17 and Exhibit B thereof, and of this Sublease, and at Sublessee’s sole cost and expense. Neither Sublessor nor Prime Lessor shall be required to perform any work, or make any contribution toward, or reimburse, any cost incurred by Sublessee in connection with any Sublease Improvements.
(d)    The terms and conditions of the Prime Lease (including without limitation Article 17 thereof) shall be applicable to any alteration, addition or improvement that Sublessee may desire to make with respect to the Sublease Premises, including without limitation the Sublease Improvements. In addition to obtaining the consent of Prime Lessor, Sublessee shall obtain the prior written approval of the Sublessor, which approval shall not be unreasonably withheld, conditioned, or delayed, prior to making any such alteration, addition or improvement. Unless otherwise expressly provided in the Prime Lease, Sublessee shall have the right to perform its own construction work, with contractors and subcontractors who are reputable, qualified and properly licensed or accredited and insured, and who are first reasonably approved by Sublessor. Sublessor may elect (for its own benefit and not that of Sublessee) to review and inspect any such work by Sublessee, and Sublessee will reimburse Sublessor for the reasonable out-of-pocket costs thereof. The following changes shall be applicable to incorporation of Article 17 into this Sublease:
(i)    the provisions of Section 17.1 of the Prime Lease after the fourth sentence shall not be incorporated into this Sublease, and shall have no force or effect hereunder;

(ii)    before commencing any Alterations, Sublessee shall give Sublessor at least twenty-one (21) days’ prior written notice of the proposed commencement of such work, and submit to Sublessor any material or information required under the Prime Lease to be submitted to Prime Lessor

(iii)    with respect to the portions of Section 17.6 following the first sentence, Sublessor agrees to make any request of Prime Lessor with respect to an insurance claim described therein for damage caused by Sublessee, but Sublessee shall be responsible for all costs and expenses, including without limitation the cost to repair such damage or any portion thereof which was not reimbursed by Prime Lessor’s insurance; and

(iv)    Sublessee shall be responsible for removing any Alteration made by Sublessee (including without limitation any Sublease Improvements) that Sublessor is required to remove under the terms of the Prime Lease, as if such Alterations had been made by Sublessor.

(e)    Sublessee shall, at its sole cost and expense, perform the Sublease Improvements and any other tenant improvement work necessary to make the Subleased Premises ready for Sublessee’s use and occupancy in accordance with the terms of the Prime Lease, including without limitation the Work Letter attached thereto as Exhibit B as incorporated in this Sublease by reference. Sublessee shall give Sublessor at least sixty (60) days prior written notice of Sublessee’s intention to commence the Sublease Premises Work.

7.    Insurance. Sublessee shall maintain throughout the Term of this Sublease such insurance in respect of the Sublease Premises and the conduct and operation of Sublessee’s business in the Sublease Premises, with Sublessor and Prime Lessor listed as additional insureds as is required of “Tenant” under the terms of the Prime Lease (including, without limitation, Article 23 as incorporated in this Sublease by reference) with no penalty to Sublessor or Prime Lessor resulting from deductibles or self-insured retentions effected in Sublessee’s insurance coverage, and with such other endorsements and provisions as Sublessor or Prime Lessor may reasonably request. If Sublessee fails to procure or maintain such insurance, pay all premiums and charges therefor and provide Sublessor with certificate(s) of such insurance, which failure continues for two (2) business days after written notice to Sublessee thereof, then Sublessor may (but shall not be obligated to) do so, whereupon Sublessee shall reimburse Sublessor upon demand for Sublessor’s reasonable, out of pocket costs incurred in so doing. All such insurance policies shall, to the extent obtainable, contain endorsements providing that (i) such policies may not be canceled except upon thirty (30) days’ prior notice (which may come from the insurer or from Sublessee) to Sublessor and Prime Lessor, (ii) no act or omission of Sublessee shall affect or limit the obligations of the insurer with respect to any other named or additional insured and (iii) Sublessee shall be solely responsible for the payment of all premiums under such policies and Sublessor, notwithstanding that it is or may be a named insured, shall have no obligation for the payment of any insurance premiums. Such insurance shall otherwise be reasonably acceptable to Sublessor in both form and substance. No less than fifteen (15) days before the Commencement Date, Sublessee shall deliver to Sublessor and Prime Lessor a certificate evidencing the coverages required by Article 23. Any endorsements to such certificates shall also be delivered to Sublessor and Prime Lessor immediately upon issuance of such certificates. Sublessee shall procure and pay for renewals of such insurance from time to time before the expiration of such insurance, and Sublessee shall deliver to Sublessor and Prime Lessor such renewal certificates at least thirty (30) days before the expiration of any existing policy. In the event Sublessee fails so to deliver any such renewal certificate at least thirty (30) days before the expiration of any existing policy, which failure continues for two (2) business days after written notice to Sublessee thereof, then, in addition to its other rights and remedies in respect of such breach of this Sublease by Sublessee, Sublessor shall have the right, but not the obligation, to obtain such insurance on Sublessee’s behalf, whereupon Sublessee shall reimburse Sublessor upon demand for Sublessor’s costs incurred in so doing.
Sublessee shall include in all insurance policies required to be maintained under this Sublease any clauses or endorsements in favor of Prime Lessor including, but not limited to, waivers of the right of subrogation, which Sublessor is required to provide as “Tenant” under the provisions of the Prime Lease. Sublessee releases and waives all claims against Sublessor for loss or damage to Sublessee’s personal property and its alterations in the Subleased Premises to the extent that any loss or damage is insurable under policies of casualty insurance Sublessee carries or is required to carry under this Sublease.
8.    Security Deposit.
(a)    Sublessee shall deliver to Sublessor at the time of execution of this Sublease by Sublessee a security deposit equal to $1,100,687.84 (i.e., two (2) months’ Base Rent at the average rate per square foot), as security for Sublessee’s faithful performance of Sublessee’s obligations hereunder. If Sublessee defaults (which term, including the singular, shall, wherever used in this Sublease, mean any default that continues after notice to Sublessee thereof and application of the applicable cure period) with respect to any provision of this Sublease, Sublessor may (but shall have no obligation to) use all or any portion of said deposit for the payment of any Base Rent or other charge due hereunder to pay any other sum to which Sublessor may become obligated by reason of Sublessee’s default or to compensate Sublessor for any loss or damage which Sublessor may suffer thereby. If Sublessor so uses or applies all or any portion of said deposit, Sublessee shall within ten (10) days after written demand therefor deposit cash with Sublessor in an amount sufficient to restore said deposit to its full amount. Sublessor shall not be required to keep said security deposit separate from its general accounts. So long as no default then exists, said deposit, or so much thereof as shall not then have been applied by Sublessor, shall be returned, without payment of interest or other amount for its use, to Sublessee within a reasonable time after the expiration of the term hereof, and after Sublessee has vacated and delivered the Sublease Premises as required hereunder. Sublessor may retain an amount reasonably calculated to be sufficient to pay any final amount of additional rent for the year in which the Term ends, with a reconciling refund or payment to be made promptly after the actual amount thereof has been determined. No trust relationship is created herein between Sublessor and Sublessee with respect to said security deposit. Sublessee acknowledges that the security deposit is not an advance payment of any kind or a measure of or limit on Sublessor’s damages in the event of Sublessee’s default. Any application of the security deposit by Sublessor shall be without prejudice to any other right or remedy Sublessor may have. If Sublessor conveys Sublessor’s interest under this Sublease, the security deposit, or any part thereof not previously applied, shall be turned over by Sublessor to Sublessor’s grantee, and, when so turned over, Sublessee agrees to look solely to such grantee for proper application of the security deposit in accordance with the terms of this Section 8, and the return thereof in accordance herewith. Sublessee hereby waives the provisions of any law which is inconsistent with this Section 8.
Sublessor and Sublessee agree that, instead of a cash security deposit, Sublessee will satisfy the security deposit requirement under this Sublease by delivering to Sublessor, at the time of execution of this Sublease by Sublessee, a clean irrevocable standby letter of credit in favor of Sublessor in the amount of the security deposit referred to above. Any such letter of credit shall be drawn on Silicon Valley Bank, Bank of America, N.A., or another bank reasonably approved by Sublessor from time to time, and shall be in form and substance reasonably acceptable to Sublessor. In the event of a material adverse change in the financial position of any bank which has issued a letter of credit hereunder, Sublessor reserves the right, on any scheduled expiration or renewal date of any such letter (or, in the event that Sublessor reasonably determines that the condition of the issuing bank is in imminent danger of insolvency, upon ten (10) business days’ notice), to request that Sublessee change the issuing bank to another bank reasonably approved by Sublessor. Regardless of whether Sublessor shall have previously requested that Sublessee change issuing banks, if the bank on which the original letter of credit or any replacement letter is drawn is declared insolvent or placed into conservatorship or receivership, Sublessee shall, within twenty (20) days thereafter, replace the then-outstanding letter of credit with a like letter of credit from another bank reasonably acceptable to Sublessor. The letter of credit shall be assignable by Sublessor at any time and from time to time to any successor or successors, without cost or charge to Sublessor.
(b)    The letter of credit shall contain a so-called “Evergreen” clause, whereby the issuing bank agrees to automatically extend the term of the letter of credit from year to year throughout the Term, with a final expiry date no sooner than thirty (30) days beyond the Term hereof unless, not less than sixty (60) days prior to the date on which the letter would expire absent such extension, the issuing bank gives notice to Sublessor, by commercial overnight delivery or by certified or registered mail, of non-extension. In the event of notice from the issuing bank of non-extension, Sublessee shall, not later than twenty (20) days prior to the date on which the outstanding letter shall expire without extension, obtain a replacement letter of credit from a bank reasonably acceptable to Sublessor, under all of the terms and conditions set forth above. Upon the occurrence of any default on the part of Sublessee hereunder, Sublessor may at its election draw all or a portion of the letter of credit, and within ten (10) days Sublessee shall cause the issuing bank to replenish the letter of credit to the original full amount. Upon the failure of Sublessee to replace any such letter at least twenty (20) days prior to its expiration, and written certification thereof by Sublessor to the issuing bank, Sublessor may at its election draw the full amount or any part thereof, and either (x) hold, use and apply the proceeds thereof as if such proceeds were originally deposited with Sublessor in cash under this Section 8, or (y) use such proceeds (or any excess proceeds after application) to obtain from another bank a replacement letter of credit, and the cost of such replacement shall be deducted from the available balance and reimbursed by Sublessee. Sublessee hereby agrees, if so requested by Sublessor, to enter into a letter of credit agreement with the bank so designated by Sublessor, failing which Sublessor may do so in Sublessee’s name and behalf. The order in which Sublessor applies the proceeds of the cash security deposit and the proceeds of the letter of credit shall be determined by Sublessor from time to time in its sole and unfettered discretion.
(c)    From and after the time at which Sublessor shall have drawn all or any portion of the proceeds of such a letter of credit, Sublessor shall have the right from time to time without prejudice to any other remedy Sublessor may have on account thereof, to apply such proceeds, or any part thereof, to Sublessor’s damages arising from any then-existing or subsequently occurring default by Sublessee hereunder. While Sublessor holds any unapplied proceeds, Sublessor may commingle the same as hereinabove provided, and shall not be required to pay interest thereon. There then existing no default of Sublessee hereunder (nor any event or circumstance which, with the giving of notice or the passage of time, or both, would constitute a default by Sublessee),, at the expiration of the term of this Sublease and delivery of the Sublease Premises to Sublessor in accordance herewith and payment of all amounts then due and coming due, Sublessor shall return to Sublessee the proceeds thereof (or, if not drawn upon, any letter of credit), or so much thereof as shall not have theretofore been applied or returned in accordance with the terms of this Section, within thirty (30) days after the expiration of the term hereof, and after Sublessee has vacated and delivered the Premises as required hereunder. Sublessor may retain an amount reasonably calculated by Sublessor (taking into account information then available for prior years) to be sufficient to pay any final amount of additional rent for the year in which the Term ends, with a reconciling refund or payment to be made promptly after the actual amount thereof has been determined. If Sublessor conveys Sublessor’s interest under this Sublease, the proceeds (or, if not drawn upon, any letter of credit), or any part thereof not previously applied, may be turned over or endorsed by Sublessor to Sublessor’s grantee, whereupon Sublessee agrees to look solely to such grantee for proper application of the proceeds in accordance with the terms of this Section, and the return thereof in accordance herewith.
9.    No Assignment or Subletting.
(a)    Sublessee shall not assign, sell, mortgage, pledge or in any manner transfer this Sublease or any interest in this Sublease, or the Term or estate granted or the rentals under this Sublease, or sublet the Subleased Premises or any part of the Subleased Premises, or grant any concession or license or otherwise permit occupancy of all or any part of the Subleased Premises by any person, or take any action or undertake any Transfer or other transaction, without in each and every instance (and regardless of whether the Prime Lessor’s consent is required) obtaining the prior written consent of Sublessor, which Sublessor agrees not to unreasonably withhold, delay or condition. In addition, if such transaction would require the consent of Prime Lessor under Article 29 of the Prime Lease, then Sublessee shall also be required to obtain the prior written consent of Prime Lessor in accordance with Article 29 of the Prime Lease. For the avoidance of doubt, and without limiting the applicability of any other provision of the Prime Lease, the provisions of Section 29.4(f) of the Prime Lease will apply to any transfer by Sublessee hereunder. Neither the consent of Sublessor or Prime Lessor to any Transfer, assignment, subletting, concession, or license, nor the references in this Sublease to assignees, Sublessees, concessionaires or licensees, shall in any way be construed to relieve Sublessee or any assignee or sub-sublessee of the requirement of obtaining the consent of Sublessor and Prime Lessor to any further assignment or subletting or to the making of any assignment, subletting, concession or license for all or any part of the Subleased Premises, Sublessee and any such assignee, Sublessee or sub-Sublessee under this Sublease agreeing to be bound by the provisions of this Sublease and the Prime Lease as to any further assignment, subleasing or other arrangement for which consent is required under this Sublease and the Prime Lease.
(b)    Notwithstanding the foregoing, Sublessee shall have the right to assign, without Sublessor’s prior written consent (but subject to any consent requirement in the Prime Lease), Sublessee’s interest in this Sublease thereof to any person or entity into or with which Sublessee is merged or consolidated; provided that Sublessee shall notify Sublessor in writing at least ten (10) business days prior to the last date on which the same is to be delivered to Prime Lessor (an “Exempt Assignment”) and otherwise comply with the requirements of this Sublease and the Prime Lease regarding such assignment; and provided, further, that the person or entity that will be the tenant under this Lease after the Exempt Assignment has a net worth (as of both the day immediately prior to and the day immediately after the Exempt Transfer) that is equal to or greater than that of Sublessee on the date hereof, or immediately prior to such assignment, whichever is greater.
(c)    In the case of any proposed Transfer, Sublessee shall give Sublessor the Transfer Notice no later than ten (10) business days prior to the last date on which the same may be delivered to Prime Lessor or, if Prime Lessor’s consent is not required, then no later than twenty-five (25) days prior to the date when Sublessee desires the Transfer to be effective. Notwithstanding any assignment or subletting, including, without limitation, any assignment or subletting permitted or consented to, the original Sublessee named in this Sublease and any other person(s) who at any time was or were Sublessee shall remain fully liable under this Sublease. Any act and omission of any sub-sublessee or assignee of Sublessee, or of anyone claiming by, under or through any sub-sublessee or assignee of Sublessee, that shall be in conflict with the terms of this Sublease shall constitute a breach by Sublessee under this Sublease. If this Sublease is assigned, or if the Subleased Premises or any part of the Subleased Premises is underlet or occupied by any person or entity other than Sublessee, Sublessor may, after default by Sublessee, following notice and the expiration of any applicable cure period, collect rent from the assignee, undertenant or occupant, and apply the net amount collected to the Rent payable by Sublessee under this Sublease, but no assignment, underletting, occupancy or collection shall be deemed a waiver of the provisions of this Sublease, the acceptance of the assignee, undertenant or occupant as tenant, or a release of Sublessee from the further performance by Sublessee of the covenants under this Sublease to be performed on the part of Sublessee. Any attempted assignment or subletting or other arrangement, whether by Sublessee or any assignee or Sublessee of Sublessee, without the prior written consent of the Sublessor and Prime Lessor shall be void. Tenant shall reimburse Sublessor for Sublessor’s reasonable, out of pocket costs and expenses, including reasonable attorneys’ fees, charges and disbursements incurred in connection with the review, processing and documentation of any request for consent or any Exempt Assignment (including without limitation any amount that Sublessor is required to pay to Prime Lessor under the Prime Lease).
10.    Primacy and Incorporation of Prime Lease.
(a)    Sublessee has reviewed the Prime Lease, a redacted version of which is attached to this Sublease as Exhibit A. This Sublease is and shall be subject and subordinate to the Prime Lease and to all matters to which the Prime Lease is or shall be subject and subordinate, and to all amendments, modifications, renewals and extensions of or to the Prime Lease (provided, however, that Sublessor agrees that it will not agree to amend or modify the Prime Lease in any way that will materially adversely reduce or impair any of the express rights of Sublessee under this Sublease, or materially increase the obligations of Sublessee under this Sublease) and Sublessor purports to convey, and Sublessee takes, no greater rights than those accorded to or taken by Sublessor as “Tenant” under the terms of the Prime Lease. Sublessee covenants that it will perform and observe all of the provisions contained in the Prime Lease to be performed and observed by the “Tenant” under the Prime Lease to the extent incorporated in this Sublease. Notwithstanding anything in this Sublease to the contrary, Sublessee shall have no obligation to (i) cure any default of Sublessor under the Prime Lease unless caused by Sublessee’s default under this Sublease, (ii) perform any obligation of Sublessor under the Prime Lease which arose before the Commencement Date and Sublessor failed to perform, (iii) repair any damage to the Subleased Premises caused by Sublessor, (iv) remove any alterations or additions installed within the Subleased Premises before the Commencement Date, (v) indemnify Sublessor or Prime Lessor with respect to claims to the extent arising from the negligence or willful misconduct of Sublessor, or (vi) discharge any liens on the Subleased Premises or the Building that arise out of any work performed, or claimed to be performed, by or at the direction of Sublessor, except work to be undertaken for or on behalf of Sublessee. Except to the extent inconsistent with the context of this Sublease, capitalized terms used and not otherwise defined in this Sublease shall have the meanings ascribed to them in the Prime Lease. Further, except as set forth below, the terms, covenants and conditions of the provisions of the Prime Lease are incorporated in this Sublease by reference as if such terms, covenants and conditions were stated in this Sublease to be the terms, covenants and conditions of this Sublease, so that except to the extent that they are inconsistent with or modified by the provisions of this Sublease, for the purpose of incorporation by reference each and every referenced term, covenant and condition of the Prime Lease binding upon or inuring to the benefit of the “Landlord” under the Prime Lease shall, in respect of this Sublease and the Subleased Premises, be binding upon or inure to the benefit of Sublessor, and each and every referenced term, covenant and condition of the Prime Lease binding upon or inuring to the benefit of the “Tenant” under the Prime Lease shall, in respect of this Sublease, be binding upon or inure to the benefit of Sublessee, with the same force and effect as if such terms, covenants and conditions were completely set forth in this Sublease. Notwithstanding anything in this Sublease to the contrary, for purposes of this Sublease, as to such incorporated terms, covenants and conditions:
(i)    references in the Prime Lease to the “Premises” shall be deemed to refer to the “Subleased Premises” under this Sublease;
(ii)    references in the Prime Lease to “Landlord” and to “Tenant” shall be deemed to refer to “Sublessor” and “Sublessee” under this Sublease, respectively, except that where the terms “Landlord” is used in the context of ownership or management of the entire Building, such term shall be deemed to mean only “Prime Lessor”;
(iii)    references in the Prime Lease to “this Lease” shall be deemed to refer to “this Sublease” (except when such reference in the Prime Lease is, by its terms (unless modified by this Sublease), a reference to any other section of the Prime Lease, in which event such reference shall be deemed to refer to the particular section of the Prime Lease);
(iv)    references in the Prime Lease to the “Term Commencement” and “Rent Commencement Date” shall be deemed to refer to the “Commencement Date” under this Sublease;
(v)    references in the Prime Lease to the “Base Rent”, “additional rent” and “rent” shall be deemed to refer to the “Base Rent”, “additional rent” and “Rent”, respectively, as defined under this Sublease, it being agreed and understood that Sublessee shall pay the Base Rent specified in this Sublease and not the Base Rent specified in the Prime Lease; and
(vi)    references in the Prime Lease to the “Term” shall be deemed to refer to the “Term” of this Sublease.
The following provisions of the Prime Lease, Exhibits and Schedules annexed thereto are not incorporated in this Sublease by reference and shall not, except as to definitions set forth in the Prime Lease, have any applicability to this Sublease: Articles/Sections: 2.3 through 2.7, 2.9, 2.10, 4.1 through 4.4, 5, 17.1 (after the fourth sentence),27, 29.1 (second sentence), 33, 35.1, 40.5. 42, 43, 45, Exhibits A, B (Sections 1.1, 2 (but paragraphs 2.1 – 2.5 are incorporated)), G, I, and J.
Where reference is made in the following Sections to “Landlord”, such references shall be deemed to refer only to “Prime Lessor”: Articles/Sections: 2.11, 12.8 (last sentence), 14.1, 16.9, 18.1, 21.9 (first sentence), 23.1, 23.2, 24, 28.1 (after third sentence), 41.3, 41.5.
(b)    Notwithstanding any incorporation of any provision of the Prime Lease by reference, Sublessee acknowledges that under the Prime Lease, the services, repairs, restorations, equipment and access to and for the Premises and insurance coverage of the Building are in fact to be provided by Prime Lessor and Sublessor shall have no obligation to provide any such services, repairs, restorations, equipment, access or insurance coverage, and Sublessor will have no liability to Sublessee for any loss or damage arising from or suffered by Sublessee as a result or consequence of any failure by Prime Lessor to perform such obligations. Sublessee shall look solely to Prime Lessor for the furnishing of such services, repairs, restorations, equipment, access and insurance coverage, and Sublessor shall have no obligation to provide any such services, repairs, restorations, equipment, access or to furnish any such insurance coverage. Upon receipt of any request from Sublessee, Sublessor shall cooperate reasonably with Sublessee in attempting to obtain for Sublessee’s benefit the performance by Prime Lessor of its obligations under the Prime Lease, and Sublessor agrees to use its commercially reasonable efforts to enforce the terms and conditions of the Prime Lease against Prime Lessor, but Sublessor shall in no event be obligated to commence litigation against Prime Lessor, nor shall Sublessor be liable to Sublessee, nor shall the obligations of Sublessee under this Sublease be impaired or the performance of Sublessee be excused, because of any failure or delay on Prime Lessor’s part in furnishing such services, repairs, restorations, equipment, access or insurance coverage. If Sublessee desires any after hours HVAC service, Sublessee must give Sublessor at least such prior notice as is reasonably necessary to allow Sublessor to process the same and transmit the request to Prime Lessor in the time required of Prime Lessor under the terms of the Prime Lease and Sublessor shall provide such request to Prime Lessor promptly after receipt. Sublessee shall reimburse Sublessor for the costs of obtaining such after hours HVAC use in accordance with Paragraph 3 of this Sublease.
(c)    Notwithstanding anything to the contrary contained in the Prime Lease, the time limits (the “Notice Periods”) contained in the Prime Lease for the giving of notices, making of demands or performing of any act, condition or covenant on the part of the “Tenant” (including any grace periods set forth in Section 31.4 of the Prime Lease), under the Prime Lease, or for the exercise by “Tenant” under the Prime Lease of any right, remedy or option, are changed for the purposes of incorporation in this Sublease by reference by shortening the Notice Periods in each instance by five (5) days (or by three (3) days if the notice period is ten (10) days or less), so that in each instance Sublessee shall have five (5) (or three (3), as applicable) fewer days to observe or perform under this Sublease than Sublessor has as “Tenant” under the Prime Lease. Notwithstanding the foregoing provisions of this Paragraph 10(c), if the Prime Lease allows a Notice Period of five (5) days or less, then Sublessee shall nevertheless be allowed the number of days equal to one-half of the number of days in each Notice Period to give any such notices, make any such demands, perform any such acts, conditions or covenants or exercise any such rights, remedies or options. If one-half of the number of days in the Notice Period is not a whole number, Sublessee has the number of days equal to one-half of the number of days in the Notice Period rounded up to the next whole number.
(d)    Notwithstanding anything to the contrary contained in this Sublease (including, without limitation, the provisions of the Prime Lease incorporated in this Sublease by reference), Sublessor makes no representations or warranties whatsoever with respect to the Subleased Premises, this Sublease, the Prime Lease or any other matter, either express or implied, except as expressly set forth in this Sublease, except further that Sublessor represents and warrants, as of the date of execution of this Sublease, (i) that it is the holder of the interest of the “Tenant” under the Prime Lease and Sublessor’s interest as “Tenant” under the Prime Lease is not the subject of any lien, assignment, conflicting sublease, or other hypothecation or pledge, (ii) that the Prime Lease is in full force and effect, unmodified and constitutes the entire agreement between Prime Lessor and Sublessor in respect of the Subleased Premises, (iii) that no notices of default have been served on Sublessor under the Prime Lease which have not been cured and (iv) to the best of Sublessor’s knowledge, neither Sublessor nor Prime Lessor is in default under the Prime Lease.
11.    Certain Services and Rights. The only services or rights to which the Sublessee is entitled under this Sublease, including without limitation rights relating to the repair, maintenance and restoration of the Subleased Premises, are those services and rights to which Sublessor is entitled under the Prime Lease. Sublessor has no obligation to furnish any services whatsoever to Sublessee, any such obligation being that of Prime Lessor under the Prime Lease, and that, as set forth in Paragraph 10(b) of this Sublease, the sole obligation of Sublessor under this Sublease with respect to such services is to cooperate reasonably with Sublessee to obtain Prime Lessor’s performance.
12.    Compliance with Prime Lease. Sublessee shall neither do nor permit anything to be done that could, after notice and failure to timely cure, if applicable, cause the Prime Lease to be terminated or forfeited by reason of any right of termination or forfeiture reserved or vested in Prime Lessor under the Prime Lease as a result of a “Tenant” default under the Prime Lease, and without limitation of any other indemnification or hold harmless obligation, Sublessee shall defend, indemnify and hold Sublessor and its agents, employees, officers and contractors harmless from and against any and all liabilities, claims, suits, demands, judgments, costs, losses, interest and expenses (including, without being limited to, reasonable attorneys’ fees and expenses) of any kind whatsoever by reason of any breach or default on the part of Sublessee under the Prime Lease, or by any other act, omission, condition or circumstance by reason of which the Prime Lease is or could be so terminated or forfeited. Subject to Section 10(c) above, to the extent that Sublessor is entitled under the Prime Lease to receive notice from Prime Lessor of any breach, default or other non-compliance, Sublessee shall be entitled to notice from Sublessor with respect to any breach, default or other non-compliance on the part of Sublessee. Sublessor agrees to give Sublessee prompt notice of any liability, claim, etc. to which the foregoing indemnity applies and the right to defend same with counsel reasonably acceptable to Sublessor. Sublessee covenants that Sublessee will not do anything that could constitute a breach or default under the provisions of the Prime Lease, or omit to do anything that Sublessee is obligated to do under the terms of this Sublease that could constitute a breach or default under the Prime Lease.
13.    Default. If Sublessee shall default in any of its obligations under this Sublease beyond applicable cure periods, Sublessor shall have available to it all of the rights and remedies available to Prime Lessor under the Prime Lease, including without limitation Sections 31.5 through 31.11 of the Prime Lease as incorporated in this Sublease by reference, as though Sublessor were the “Landlord” and Sublessee the “Tenant” under the Prime Lease. Sublessee shall reimburse Sublessor for all reasonable out of pocket costs and expenses, including reasonable attorneys’ fees, incurred by Sublessor in asserting or enforcing its rights under this Sublease against Sublessee or any assignee, sub-Sublessee or other person claiming under Sublessee.
14.    Brokerage. Sublessee and Sublessor represent that they have not dealt with any broker in connection with this Sublease other than CBRE/New England (the “Broker”). Each party shall indemnify and hold harmless the other from and against any and all liabilities, claims, suits, demands, judgments, costs, losses, interest and expenses (including, without being limited to, reasonable attorneys’ fees and expenses) which the indemnified party may be subject to or suffer by reason of any claim made by any person, firm or corporation other than the Broker for any commission, expense or other compensation as a result of the execution and delivery of this Sublease, which is based on alleged conversations or negotiations by such person, firm or corporation with the indemnifying party. Sublessor shall pay the Broker the brokerage commission or other compensation due the Broker in connection with this Sublease under separate agreements between Sublessor and Broker.
15.    Notices; Communication. All notices, consents, approvals, demands, bills, statements and requests which are required or permitted to be given by either party to the other under this Sublease shall be in writing and are governed by Section 39 of the Prime Lease as incorporated in this Sublease by reference, except that the mailing addresses for Sublessor and Sublessee are initially those first set forth above, and after the Commencement Date, to Sublessee at the Subleased Premises. Sublessee shall not communicate directly with Prime Lessor unless with the express prior consent of Sublessor, provided, however, that (without imposing any obligation on Prime Lessor to accept or recognize any such notice or communication), Sublessee may communicate directly with Prime Lessor with respect to day-to-day operational matters relating to the Subleased Premises (such as, but not limited to, requests for HVAC or elevator service and the like) provided that Sublessee shall be solely responsible for any cost, obligation or liability arising from or as a result of such direct communication. Sublessee shall furnish Sublessor with a simultaneous copy of all such communication between Sublessee and Prime Lessor.
16.    Interpretation. This Sublease shall be construed without regard to any presumption or other rule suggesting construction or interpretation against the party causing this Sublease to be drafted. All terms and words used in this Sublease, regardless of the number or gender in which they are used, shall be deemed to include any other number and any other gender as the context may require. The word “person” as used in this Sublease means a natural person or persons, a partnership, a corporation or any other form of business or legal association or entity.
17.    Fire or Casualty; Eminent Domain. In the event that the Prime Lease is terminated by Prime Lessor under Article 24 of the Prime Lease, then this Sublease shall likewise be terminated, without the need for any further notice or election, effective on the day before the Prime Lease termination becomes effective. Sublessor agrees that, so long as this Sublease is in full force and effect and Sublessee is not in default hereunder, Sublessor will not exercise any right it may have to unilaterally terminate the Prime Lease under Article 24 thereof without the prior written consent of Sublessee, which consent shall not be unreasonably withheld, delayed or conditioned. In the event the Subleased Premises (or access thereto or systems serving the Subleased Premises) are subjected to a fire or other casualty or to a taking by eminent domain that interferes with the use and enjoyment by Sublessee of a material portion of the Subleased Premises, Sublessee shall, to the extent Sublessor is entitled to and actually receives an abatement of rent under the Prime Lease, be entitled to an equitable adjustment of Rent until tenantable occupancy is restored or Sublessor is no longer entitled to such abatement. If the estimated time for repairs (as determined in accordance with Article 24 of the Prime Lease) shall exceed twelve (12) months from the date of the Damage Repair Estimate (and provided such casualty was not intentionally caused by Sublessee or its agents, employees or contractors) Sublessee may, by notice to Sublessor, terminate this Sublease. In the event of any taking of the Subleased Premises, Sublessee assigns to Prime Lessor any right Sublessee may have to any damages or award. Sublessee shall not make claims against Sublessor, Prime Lessor or the condemning authority for damages.
18.    Signage. Subject to the consent of Prime Lessor if required under the terms and provisions of the Prime Lease, Sublessee shall have the right, at its sole cost and expense, to install signage consistent with Sublessor’s signage rights on the Building lobby directory and on the entrance to the Subleased Premises.
19.    Right to Cure Sublessee’s Defaults. If Sublessee fails to make any payment or perform any other obligation of Sublessee under this Sublease, then Sublessor has the right, but not the obligation, after notice to Sublessee, or without notice to Sublessee in the case of any emergency, and without waiving or releasing Sublessee from any obligations of Sublessee under this Sublease, to make such payment or perform such other obligation of Sublessee in such manner and to such extent as Sublessor deems necessary, and in exercising any such right, to pay any incidental costs and expenses, employ attorneys, and incur and pay reasonable attorneys’ fees. Sublessee shall pay to Sublessor upon demand as additional rent all reasonable sums so paid by Sublessor and all incidental costs and expenses of Sublessor in connection therewith, together with interest thereon at an annual rate equal to the rate two percent (2%) above the base rate or prime rate then published as such in the Wall Street Journal, or, if less, the maximum rate permitted by law. Such interest is payable with respect to the period commencing on the date such expenditures are made by Sublessor and ending on the date such amounts are repaid by Sublessee. The provisions of this Paragraph survive the Expiration Date or the sooner termination of this Sublease.
20.    Termination of Prime Lease; Surrender. This Sublease automatically terminates if the Prime Lease expires or is terminated for any reason before the Expiration Date. Sublessor will not liable to Sublessee by reason of any termination of the Prime Lease or this Sublease. As long as this Sublease is in full force and effect and Sublessee is not in default under this Sublease, Sublessor shall not (i) voluntarily surrender the Prime Lease, except in accordance with rights expressly reserved to Sublessor as “Tenant” under the Prime Lease, including, without limitation, such rights as are available under Article 24 of the Prime Lease in the event of a taking or casualty, or (ii) commit an Event of Default (as defined in the Prime Lease) under the Prime Lease that results in the Prime Lease being terminated (unless as a result of any default or breach by Sublessee under this Sublease). Nothing in this Sublease prevents an assignment by Sublessor of the Prime Lease to any third party or parties (subject, however, to the terms of this Sublease); provided, however, that no such assignment shall affect the liabilities of Sublessor under this Sublease.
Upon the expiration or termination of this Sublease, whether by forfeiture, lapse of time or otherwise, or upon the termination of Sublessee’s right of possession, Sublessee shall (i) remove (and restore any damage resulting from such removal) any and all of Sublessee’s movable personal property and signage, and (ii) at once surrender and deliver to Sublessor the Subleased Premises in the condition and repair required by, and in accordance with the provisions of, this Sublease. If Sublessee fails to remove any of Sublessee’s personal property from the Subleased Premises, such property is deemed abandoned (and Sublessee is deemed to have relinquished all right, title and interest in such property), and Sublessor is authorized, without liability to Sublessee for loss or damage thereto, at the sole risk of Sublessee, to (a) remove and store such property at Sublessee’s risk and expense; (b) retain such property, in which case all right, title and interest in such property shall accrue to Sublessor; (c) sell such property and retain the proceeds from such sale; or (d) otherwise dispose or destroy such property.
21.    Consents and Approvals. All references in this Sublease to the consent or approval of Prime Lessor and/or Sublessor shall be deemed to mean the written consent or approval of Prime Lessor and/or Sublessor, as the case may be, and no such consent or approval of Prime Lessor and/or Sublessor, as the case may be, shall be effective for any purpose unless such consent or approval is set forth in a written instrument executed by Prime Lessor and/or Sublessor, as the case may be. All references in this Sublease to the consent or approval of Sublessee shall be deemed to mean the written consent or approval of Sublessee, and no such consent or approval of Sublessee shall be effective for any purpose unless such consent or approval is set forth in a written instrument executed by Sublessee. In all provisions requiring the approval or consent of Sublessor (whether under the express terms of this Sublease or the terms of the Prime Lease incorporated in this Sublease), Sublessee shall obtain the approval or consent of Prime Lessor as well as obtain like approval or consent of Sublessor. If Sublessor is required or has determined to give its consent or approval to a matter as to which consent or approval has been requested by Sublessee, Sublessor shall cooperate reasonably with Sublessee in endeavoring to obtain any required Prime Lessor’s consent or approval upon and subject to the following terms and conditions: (i) Sublessee shall reimburse Sublessor for any reasonable out-of-pocket costs incurred by Sublessor in connection with any consent or approval under this Sublease or under the Prime Lease, (ii) Sublessor is not required to make any payments to Prime Lessor or to enter into any agreements or to modify the Prime Lease or this Sublease in order to obtain any such consent or approval, (iii) if Sublessee agrees or is otherwise obligated to make any payments to Sublessor or Prime Lessor in connection with such request for such consent or approval, Sublessee has made arrangements satisfactory to Sublessor for such payments, and (iv) Sublessee shall indemnify and hold Sublessor harmless from and against all liabilities, claims, suits, demands, judgments, costs, losses, interest and expenses (including, without being limited to, reasonable attorneys’ fees and expenses) Sublessor suffers or incurs in connection with seeking such consent or approval (including, without being limited to, claims by prospective Sublessees, sub-Sublessees, assignees and brokers if consent to a sublease or sub-sublease or assignment is not granted or is unreasonably conditioned). Nothing contained in this Article is deemed to require Sublessor to give any consent or approval simply because Prime Lessor has given such consent or approval, and Sublessor shall never be required to give any consent or approval if Prime Lessor has refused (for whatever reason) to do so. If Sublessee desires to do act for which Prime Lessor’s consent or approval (or that of any third party or parties) is required, then Sublessee shall deliver all necessary or appropriate materials, applications, plans, specifications and the like to Sublessor no later than fifteen (15) days prior to the date on which Sublessor must deliver the same to Prime Lessor.
22.    Conversion of Core Space. The Subleased Premises contain certain existing mechanical core space, as more fully shown on Exhibit I attached to the Prime Lease, as to which Sublessor has certain rights to convert the same to office and laboratory space. Such conversion requires the Conversion Approvals, as defined in the Prime Lease. So long as this Sublease is in full force and effect, and no default exists hereunder on the part of Sublessee, and Sublessee is in actual occupancy of all or substantially all of the Subleased Premises, and upon request by Sublessee, Sublessor will undertake to seek the Conversion Approvals, provided that Sublessee shall bear all costs and expenses in connection therewith (whether or not such efforts are successful). Sublessor will not have any obligation to seek from Prime Lessor or independently pay all or any portion of the contribution to be provided by the Prime Lessor toward the cost of construction. Sublessor shall have no liability to Sublessee in the event that Sublessor is not successful in obtaining the Conversion Approvals.
23.    No Privity of Estate. Nothing contained in this Sublease creates any privity of estate or of contract between Sublessee and Prime Lessor and Prime Lessor is not obligated to recognize or to provide for the non-disturbance of the rights of Sublessee under this Sublease.
24.    Waiver of Jury Trial and Right to Counterclaim. Sublessor and Sublessee each waive any rights which they may have to trial by jury in any summary action or other action, proceeding or counterclaim arising out of or in any way connected with this Sublease, the relationship of Sublessor and Sublessee, the Subleased Premises and the use and occupancy of the Subleased Premises, and any claim for injury or damages. Sublessee also waives all right to assert or interpose a counterclaim (other than mandatory or compulsory counterclaims) in any summary proceeding or other action or proceeding to recover or obtain possession of the Subleased Premises.
25.    Consent of Prime Lessor. Notwithstanding anything to the contrary contained in this Sublease, the effectiveness of this Sublease is subject to and conditioned upon the written approval of, and consent to, this Sublease by Prime Lessor in form reasonably acceptable to each of Sublessor and Sublessee (the “Consent”). Without limitation, the Consent must (i) consent to this Sublease, (ii) waive any right of termination or recapture that Prime Lessor may have in respect of this Sublease, (iii) confirm that (notwithstanding any provision of the Prime Lease to the contrary) Sublessor’s ongoing rights under the Prime Lease (including without limitation the right to extend the Term of the Prime Lease and the right to expand the size of the Premises) will not be impaired or affected as a consequence of this Sublease, and all such rights will remain unaffected, and (iv) waive the 90-day maximum advance notice period under Section 29.2 of the Prime Lease. This Sublease shall not become effective unless and until the Consent is fully executed and delivered by Prime Lessor, Sublessor and Sublessee (the “Consent Contingency”). Each of Sublessor and Sublessee shall execute and deliver the Consent in the form provided by Prime Lessor and reasonably approved by Sublessor and Sublessee, even if the Consent has not been signed by Prime Lessor. If the Consent Contingency is not satisfied before the date that is ninety (90) days after submission of the request for the Consent, then from and after such date, either party may terminate this Sublease by providing written notice to the other unless the Consent Contingency is satisfied before the date on which such notice of termination is provided. If this Sublease is terminated under this Paragraph 25, then this Sublease shall cease to have any further force or effect and the parties hereto shall have no further obligations to each other with respect to this Sublease, except that any Rent or other funds paid under this Sublease by Sublessee shall be promptly refunded by Sublessor.
26.    Limitation of Liability. If Sublessor is in default under this Sublease and, as a consequence, Sublessee recovers a monetary judgment against Sublessor, the judgment shall be satisfied only out of Sublessor’s then equity interest as lessee under the Prime Lease. By way of clarification, Sublessor and Sublessee expressly agree that Sublessee may offset against Rent and Additional Rent payable under this Sublease the amount of any such monetary judgment plus interest thereon at the rate set forth in Section 19 above. No partner, director, officer, shareholder, employee, advisor or agent of Sublessor shall be personally liable in any manner or to any extent under or in connection with this Sublease. In no event shall either Sublessor or Sublessee, or any of the respective partners, directors, officers, shareholders, employees, advisors or agents of Sublessor or Sublessee, be responsible for (i) any indirect or consequential/special damages, or (ii) any damages in the nature of interruption or loss of business. For purposes of this Sublease, “indirect or consequential/special damages” shall not include, without limitation, any liability, claim, suit, damage, judgment, cost, loss, interest or expense incurred by Sublessor as a result of a breach or default under the Prime Lease, to the extent resulting from or relating to a breach or default by Sublessee of any provision of this Sublease.
27.    Holdover. If Sublessee fails to surrender and deliver the Subleased Premises as and when required under this Sublease, Sublessee shall become a tenant at sufferance only, subject to all of the terms, covenants and conditions in this Sublease specified, except the rate of Base Rent increases to (i) 150% of the rate of Base Rent then in effect for the first thirty (30) days of such holdover and (ii) thereafter Sublessee shall pay 200% of the rate of Base Rent then in effect for the remainder of such holdover. In addition, Sublessee shall protect, defend (with counsel reasonably approved by Sublessor), indemnify and hold harmless Sublessor and its officers, directors, agents and employees from and against any and all liability, claims, suits, demands, judgments, costs, losses, interest and expenses (including, without being limited to, reasonable attorneys’ fees and expenses) that Sublessor may suffer, under Section 3.02 of the Prime Lease or otherwise, by reason of any holdover by Sublessee under this Sublease. The terms and provisions of this Paragraph 27 shall survive the expiration or earlier termination of this Sublease.
28.    Recording. Sublessor and Sublessee agree to execute, acknowledge, and deliver a notice of this Sublease in statutory form that is first approved in writing by Prime Lessor, which notice Sublessee may record at its sole expense.
29.    Attorney’s Fees. If either Sublessor or Sublessee bring any action or legal proceeding for an alleged breach of any provision of this Sublease, to recover Rent, to terminate this Sublease or otherwise to enforce, protect or establish any term or covenant of this Sublease, the prevailing party is entitled to recover from the non-prevailing party as a part of such action or proceeding, or in a separate action brought for that purpose, reasonable attorneys’ fees, court costs, and expert fees as may be fixed by the court.
30.    Parking. Sublessor grants to Sublessee the right to use up to the number of “Elected Spaces” provided to Sublessor under Section 13.3 of the Prime Lease, upon payment by Sublessee of the fees, charges and costs provided for therein, as and when the same become due and payable. Sublessee’s use of the parking spaces provided under this Paragraph 30 and Sublessee’s rights with respect to such parking spaces shall otherwise be in accordance with the terms of the Prime Lease. Sublessee shall not assign, license or sublease Sublessee’s rights under this Paragraph 30 except in connection with an assignment of Sublessee’s interest in this Sublease or a sub-sublease of all or any portion of the Subleased Premises, in either such case to the extent such transfer is permitted hereunder.
31.    Survival. Without limitation of any other matters that are stated to survive the expiration or earlier termination of this Sublease or the Prime Lease, Paragraphs 3 (Rent), 4 (Electricity; Utilities), 14 (Brokerage), 24 (Waiver of Jury Trial and Right to Counterclaim), and 26 (Limitation on Liability) of this Sublease will survive the expiration or earlier termination of this Sublease.
[TEXT ENDS HERE – SIGNATURES FOLLOW]





IN WITNESS WHEREOF, Sublessor and Sublessee have executed this Sublease as a sealed instrument as of the date first written above.
SUBLESSOR
BIOGEN MA INC.
By:    /s/ Paul J. Clancy
Name:    Paul J. Clancy
Title:    Chief Financial Officer

SUBLESSEE

MOMENTA PHARMACEUTICALS, INC.

By:    /s/ Richard P. Shea
Name:    Richard P. Shea
Title:    Chief Financial Officer











EXHIBIT A
PRIME LEASE (REDACTED)
[See Attached]
 











    


A-1





LEASE

by and between

BMR-ROGERS STREET LLC,
a Delaware limited liability company

and

BIOGEN MA INC.,
a Massachusetts corporation





    


APPROVED
BIOMED REALTY LEGAL
/s/CAM
BioMed Realty form dated 11/25/14




Table of Contents
1. Lease of Premises
1

2. Basic Lease Provisions
2

3. Term
4

4. Possession and Commencement Date.
4

5. Condition of Premises
6

6. Rentable Area
6

7. Rent
7

8. Access
8

9. Operating Expenses
8

10. Taxes on Tenant’s Property
14

11. [Intentionally omitted]
14

12. Use
14

13. Rules and Regulations, CC&Rs, Parking Facilities and Common Area
17

14. Project Control by Landlord
19

15. Quiet Enjoyment
20

16. Utilities and Services
20

17. Alterations
23

18. Repairs and Maintenance
26

19. Liens
27

20. Estoppel Certificate
28

21. Hazardous Materials
28

22. Odors and Exhaust
32

23. Insurance; Waiver of Subrogation
33

24. Damage or Destruction
36

25. Eminent Domain
38

26. Surrender
39

27. Holding Over
40

28. Indemnification and Exculpation
41

29. Assignment or Subletting
42

30. Subordination and Attornment
46

31. Defaults and Remedies
47

32. Bankruptcy
52

33. Brokers
52

34. Definition of Landlord
53

35. Limitation of Liability
53

36. Joint and Several Obligations
54

37. Representations
54

38. Confidentiality
54

39. Notices
55

40. Miscellaneous
55

41. Rooftop Installation Area
58

42. Options to Extend Term
59

43. Expansion Option
61

44. Conversion of Core Space to Office/Laboratory Space
62

45. Right of First Offer
63



i

LEASE
THIS LEASE (this “Lease”) is entered into as of this 31st day of March, 2015 (the “Execution Date”), by and between BMR-ROGERS STREET LLC, a Delaware limited liability company (“Landlord”), and BIOGEN MA INC., a Massachusetts corporation (“Tenant”).
RECITALS
A.    WHEREAS, pursuant to that certain ground lease dated as of March 30, 1999, by and among MBA-Rogers Street, LLC (“Ground Lessor,” as successor-in-interest to O&T Realty, LLC, and MBA-Cambridge, LLC (collectively, “Initial Ground Lessor”)), as landlord, and Rogers Street, LLC, a Delaware limited liability company (“Initial Ground Lessee”), as tenant; as such ground lease has been amended by that certain letter agreement dated as of July 29, 1999, between Initial Ground Lessor and Initial Ground Lessee, and that certain Agreement Regarding Arbitration and Lease Amendments dated as of December 15, 1999, by and between Initial Ground Lessor and Initial Ground Lessee; and as such ground lease has been assigned pursuant to that certain Assignment and Assumption of Ground Lease dated as of April 4, 2007, by and between Initial Ground Lessee and Landlord (such ground lease, as so amended and assigned, and as the same may be further amended, amended and restated, supplemented or otherwise modified from time to time, the “Ground Lease”), Landlord leases certain real property described on Exhibit A-1 attached hereto (the “Property”) and the improvements located thereon, including the buildings at 301 Binney Street (the “Building”), 320 Bent Street and 157 Sixth Street in Cambridge, Massachusetts; and
B.    WHEREAS, Landlord wishes to lease to Tenant, and Tenant desires to lease from Landlord, certain premises (the “Premises”) located on the fifth (5th) floor of the Building, pursuant to the terms and conditions of this Lease, as detailed below.
AGREEMENT
NOW, THEREFORE, Landlord and Tenant, in consideration of the mutual promises contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound, agree as follows:
1.    Lease of Premises. Effective on the Term Commencement Date (as defined below), Landlord hereby leases to Tenant, and Tenant hereby leases from Landlord, the Premises, as shown on Exhibit A attached hereto, including exclusive shafts, cable runs, mechanical spaces and rooftop areas, for use by Tenant in accordance with the Permitted Use (as defined below) and no other uses. The Property and all landscaping, parking facilities, private drives and other improvements and appurtenances related thereto, including the Building and other buildings located on the Property, are hereinafter collectively referred to as the “Project.” All portions of the Building that are for the non-exclusive use of the tenants of the Building only, and not the tenants of the Project generally, such as service corridors, stairways, elevators, public restrooms and public lobbies (all to the extent located in the Building), are hereinafter referred to as “Building Common Area.” All portions of the Project that are for the non-exclusive use of tenants of the Project generally, including driveways, sidewalks, parking areas, and landscaped areas, are hereinafter referred to as “Project Common Area.” The Building Common Area and Project Common Area are collectively referred to herein as “Common Area.”


2.    Basic Lease Provisions. For convenience of the parties, certain basic provisions of this Lease are set forth herein. The provisions set forth herein are subject to the remaining terms and conditions of this Lease and are to be interpreted in light of such remaining terms and conditions.
2.1.    This Lease shall take effect upon the Execution Date and, except as specifically otherwise provided within this Lease, each of the provisions hereof shall be binding upon and inure to the benefit of Landlord and Tenant from the date of execution and delivery hereof by all parties hereto.
2.2.    In the definitions below, each current Rentable Area (as defined below) is expressed in rentable square feet. The parties have agreed upon the Rentable Area, and neither the Rentable Area nor Tenant’s Pro Rata Share (as defined below) are subject to change, absent physical change in the Building or the Premises.
Definition or Provision
Means the Following (As of the Execution Date)
Approximate Rentable Area of Premises
79,683 square feet
Approximate Rentable Area of Building
417,290 square feet
Tenant’s Pro Rata Share of Building
19.10%
2.3.    Monthly and annual installments of Base Rent for the Premises (“Base Rent”) as of the Rent Commencement Date (as defined below), subject to adjustment pursuant to this Lease:


Dates
Square Feet of Rentable Area
Base Rent per Square Foot of Rentable Area

Monthly Base Rent

Annual Base Rent
Lease Year 1
79,683
++++
++++
++++
Lease Year 2
79,683
++++
++++
++++
Lease Year 3
79,683
++++
++++
++++
Lease Year 4
79,683
++++
++++
++++
Lease Year 5
79,683
++++
++++
++++
Lease Year 6
79,683
++++
++++
++++
Lease Year 7
79,683
++++
++++
++++
Lease Year 8
79,683
++++
++++
++++
Lease Year 9
79,683
++++
++++
++++
Lease Year 10
79,683
++++
++++
 ++++

2
The portions of this Exhibit marked with ++++ signify a redaction in the original Exhibit.


“Lease Year” means a period of twelve (12) consecutive calendar months during the Term, beginning on the Rent Commencement Date or any anniversary of the Rent Commencement Date, except that if the Rent Commencement Date does not fall on the first (1st) day of a calendar month, then (a) the first (1st) Lease Year shall begin on the Rent Commencement Date and end on the last day of the calendar month prior to the first (1st) annual anniversary of the Rent Commencement Date, (b) each succeeding Lease Year shall begin on the day following the last day of the prior Lease Year, and (c) the partial month, if any, at the end of the Term shall be included in the final Lease Year.
2.4.    The Term Commencement Date is defined in Section 4.1.
2.5.    Estimated Term Expiration Date: June 30, 2025. The Term Expiration Date is defined in Article 3.
2.6.    ++++
2.7.    ++++
2.8.    Permitted Use: General office and laboratory use in conformity with all federal, state, municipal and local laws, codes, ordinances, rules and regulations of Governmental Authorities (as defined below), committees, associations, or other regulatory committees, agencies or governing bodies having jurisdiction over the Premises, the Building, the Property, the Project, Landlord or Tenant, including both statutory and common law and hazardous waste rules and regulations (“Applicable Laws”)
2.9.    ++++
2.10.    Address for Rent Payment:
BMR-Rogers Street LLC Attention Entity 635
P.O. Box 511415
Los Angeles, California 90051-7970

2.11.    Address for Notices to Landlord:
BMR-Rogers Street LLC
17190 Bernardo Center Drive
San Diego, California 92128
Attn: Vice President, Real Estate Legal
2.12.    Address for Notices to Tenant:
Biogen MA, Inc.
225 Binney Street
Cambridge, MA 02142
Attn: Mr. Edward Dondero
With a copy to:    Biogen MA, Inc.
225 Binney Street
Cambridge, MA 02142
Attn: Harry Carey, Esq.


3
The portions of this Exhibit marked with ++++ signify a redaction in the original Exhibit.


2.13.    Address for Invoices to Tenant:
Biogen MA Inc.
Fourteen Cambridge Center
Cambridge, MA 02142
Attn: Accounts Payable
2.14.    The following Exhibits are attached hereto and incorporated herein by reference:
Exhibit A
Premises
Exhibit A-1
Property
Exhibit B
Work Letter
Exhibit B-1
Tenant Work Insurance Schedule
Exhibit C-1
Acknowledgement of Term Commencement Date
Exhibit C-2
Acknowledgement of Rent Commencement Date and Term Expiration Date
Exhibit D
Rules and Regulations
Exhibit E
Tenant’s Personal Property
Exhibit F
Form of Estoppel Certificate
Exhibit G
Expansion Space
Exhibit H
Rooftop Installation Area
Exhibit I
Core Space
Exhibit J
Form of Guaranty

3.    Term. The actual term of this Lease (as the same may be extended pursuant to Article 42 hereof, and as the same may be earlier terminated in accordance with this Lease, the “Term”) shall commence on the actual Term Commencement Date (as defined in Article 4) and end on the date (the “Term Expiration Date”) that is one hundred twenty (120) months (plus the partial month, if any) after the actual Rent Commencement Date, subject to extension or earlier termination of this Lease as provided herein.
4.    Possession and Commencement Date.
4.1.    The “Term Commencement Date” shall be the day on which this Lease is fully executed and Landlord delivers possession of the Premises to Tenant in the Delivery Condition (as defined below). Landlord shall prepare and present to Tenant, and Tenant shall execute and deliver to Landlord, written acknowledgment of the actual Term Commencement Date and the Term Expiration Date within ten (10) days after Tenant takes occupancy of the Premises, in the form attached as Exhibit C-1 hereto. Failure to execute and deliver such acknowledgment, however, shall not affect the Term Commencement Date or Landlord’s or Tenant’s liability hereunder. “Delivery Condition” means that the Premises are broom clean and free of personal property or equipment of any other party and free of construction debris.

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4.5.    Tenant shall select the architect, engineer and general contractor, each of which shall be subject to approval by Landlord (which approval shall not be unreasonably withheld, conditioned or delayed), in accordance with the terms set forth in the Work Letter.
4.6.    Tenant and its approved architects, consultants, contractors, subcontractors and material suppliers shall have access to the Premises for construction of the Tenant Improvements, including non-exclusive use of freight elevators in the Building; provided that such access and use shall not unreasonably interfere with the rights of other tenants in the Building. Landlord and Tenant will cooperate with one another and will use reasonable efforts to coordinate Tenant’s construction of the Tenant Improvements with work being done by or for the benefit of other tenants in the Building to minimize any interference. Subject to the Rules and Regulations and the foregoing provision, and provided that Tenant does not cause any noise or odors that unreasonably interfere with or disturb other tenants (in Landlord’s reasonable determination), Tenant may undertake the Tenant Improvements during normal business hours.
4.7.    Tenant shall pay for all water, gas, heat, light, power, telephone, internet service, cable television, other telecommunications and other utilities supplied to the Premises for use during Tenant’s construction of the Tenant Improvements and until the Term Commencement Date, together with any fees, surcharges and taxes thereon.
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6.    Rentable Area.
6.1.    The term “Rentable Area” of the Premises shall be as set forth in Section 2.2.
6.2.    The Rentable Area of the Premises and the Building set forth above are deemed conclusive between the parties and are not subject to remeasurement, except that, in the event that the size of the Premises or the Building is actually reduced or expanded, the Rentable Area of the Premises or the Building (as applicable) and Tenant’s Pro Rata Share shall be reasonably adjusted pursuant to calculations made by Landlord’s architect using a method consistent with the initial determination of Rentable Area for the Premises and the Building.

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7.    Rent.
7.1.    Tenant shall pay to Landlord as Base Rent for the Premises the sums set forth in Section 2.3, commencing on the Rent Commencement Date. Tenant shall execute and deliver to Landlord written acknowledgment of the Rent Commencement Date and the Term Expiration Date within ten (10) days after Tenant takes occupancy of the Premises for the Permitted Use and Landlord’s request therefor, in the form attached as Exhibit C-2 hereto. Base Rent shall be paid in equal monthly installments as set forth in Section 2.3, each in advance on the first day of each and every calendar month during the Term.
7.2.    In addition to Base Rent, Tenant shall pay to Landlord as additional rent (“Additional Rent”) at times hereinafter specified in this Lease (a) Tenant’s Adjusted Share (as defined below) of Operating Expenses (as defined below), (b) the Property Management Fee (as defined below) and (c) any other amounts that Tenant assumes or agrees to pay under the provisions of this Lease that are owed to Landlord, including any and all other sums that may become due by reason of any default of Tenant or failure on Tenant’s part to comply with the agreements, terms, covenants and conditions of this Lease to be performed by Tenant, after notice and the lapse of any applicable cure periods.
7.3.    Base Rent and Additional Rent shall together be denominated “Rent.” Rent shall be paid to Landlord, without abatement, deduction or offset (except as may be otherwise specifically provided in this Lease), in lawful money of the United States of America pursuant to the wiring instructions set forth in Section 2.10 or to such other person or at such other place as Landlord may from time designate in writing. In the event the Term commences or ends on a day other than the first day of a calendar month, then the Rent for such fraction of a month shall be prorated for such period on the basis of the number of days in the month and shall be paid at the then-current rate for such fractional month.
7.4.    Tenant’s obligation to pay Rent shall not be discharged or otherwise affected by (a) any Applicable Laws now or hereafter applicable to the Premises, (b) any other restriction on Tenant’s use, (c) except as expressly provided herein, any casualty or taking or (d) any other occurrence; and Tenant waives all rights now or hereafter existing to terminate or cancel this Lease or quit or surrender the Premises or any part thereof, or to assert any defense in the nature of constructive eviction to any action seeking to recover rent. Tenant’s obligation to pay Rent with respect to any period or obligations arising, existing or pertaining to the period prior to the date of the expiration or earlier termination of the Term or this Lease shall survive any such expiration or earlier termination; provided, however, that nothing in this sentence shall in any way affect Tenant’s obligations with respect to any other period. Notwithstanding anything to the contrary in this Lease, if (i) due to Landlord’s negligence, Landlord has failed to materially comply with its obligations under this Lease, (ii) such failure continues for a period of thirty (30) days after written notice from Tenant, and (iii) Tenant is unable to use a material portion of the Premises for the Permitted Use due solely and directly to negligent Landlord’s failure to materially comply with its obligations, then Tenant may deliver a second written notice thereof to Landlord. If Landlord has not remedied its negligent failure to materially comply with its obligations under this Lease within thirty (30) days after such second notice and Tenant remains unable to use such material portion of the Premises for the Permitted Use due solely and directly to Landlord’s negligent failure to materially comply with its obligations under this Lease, then Tenant’s Base Rent and Operating Expenses (or, to the extent that less than all of the Premises are affected, a proportionate amount (based on the Rentable Area of the Premises that is rendered unusable) of Base Rent and Operating Expenses) shall thereafter be abated until the Premises are again usable by Tenant for the Permitted Use. During any period while Landlord is pursuing a cure of its obligations hereunder, Tenant will cooperate with Landlord and will provide Landlord with the necessary access to the Premises to pursue its remedy.

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8.    Access. Subject to accidents; breakage; casualties (to the extent not caused by the party claiming Force Majeure); Severe Weather Conditions (as defined below); physical natural disasters (but excluding weather conditions that are not Severe Weather Conditions); strikes, lockouts or other labor disturbances or labor disputes (other than labor disturbances and labor disputes resulting solely from the acts or omissions of the party claiming Force Majeure); acts of terrorism; riots or civil disturbances; wars or insurrections; shortages of materials (which shortages are not unique to the party claiming Force Majeure); government regulations, moratoria or other governmental actions, inactions or delays; failures by third parties to deliver gas, oil or another suitable fuel supply, or inability of the party claiming Force Majeure, by exercise of reasonable diligence, to obtain gas, oil or another suitable fuel; or other causes beyond the reasonable control of the party claiming that Force Majeure has occurred (collectively, “Force Majeure”), Tenant shall have access to the Premises, Building and parking facilities in accordance with the terms of this Lease twenty-four (24) hours per day, seven (7) days per week. “Severe Weather Conditions” means weather conditions that are materially worse than those that reasonably would be anticipated for the Property at the applicable time based on historic meteorological records.
9.    Operating Expenses.
9.1.    As used herein, the term “Operating Expenses” shall include:
(a)    Government impositions, including property tax costs consisting of real and personal property taxes (including amounts due under any improvement bond upon the Building or the Project (including the parcel or parcels of real property upon which the Building and areas serving the Building are located)) or assessments in lieu thereof imposed by any federal, state, regional, local or municipal governmental authority, agency or subdivision (each, a “Governmental Authority”); taxes on or measured by gross rentals received from the rental of space in the Project; taxes based on the square footage of the Premises, the Building or the Project, as well as any parking charges, utilities surcharges or any other costs levied, assessed or imposed by, or at the direction of, or resulting from Applicable Laws or interpretations thereof, promulgated by any Governmental Authority in connection with the use or occupancy of the Project or the parking facilities serving the Project; any fee for a business license to operate an office building; and any expenses, including the reasonable cost of attorneys or experts, reasonably incurred by Landlord in seeking reduction by the taxing authority of the applicable taxes, less any tax refund, abatement, credit or reduction (each to the extent attributed to a Lease Year during the Term) obtained as a result of an application for review thereof; and
    

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(b)    All other actual costs of any kind paid or incurred by Landlord in connection with the operation or maintenance of the Building and the Project, which shall include costs of repairs and replacements (provided, however, capital replacements shall only be included in Operating Expenses as provided below in this Section) to improvements within the Project as appropriate to maintain the Project as required hereunder; costs of utilities furnished to the Common Area; sewer fees; cable television; trash collection for Common Area; cleaning for Common Area, including windows; HVAC; maintenance of landscaping and grounds; snow removal; maintenance of drives and parking areas; maintenance of the roof; security services and devices; building supplies; maintenance or replacement of equipment utilized for operation and maintenance of the Project; license, permit and inspection fees; sales, use and excise taxes on goods and services purchased by Landlord in connection with the operation, maintenance or repair of the Building or Project systems and equipment; to the extent not included in the Property Management Fee, telephone, postage, stationery supplies and other expenses incurred in connection with the operation, maintenance or repair of the Project; accounting, legal and other professional fees and expenses incurred in connection with the operation of the Project; costs of furniture, draperies, carpeting, landscaping supplies, and other customary and ordinary items of personal property provided by Landlord for use in Common Area; capital expenditures incurred (i) in replacing obsolete equipment, (ii) for the primary purpose of reducing Operating Expenses or (iii) required by any Governmental Authority to comply with changes in Applicable Laws that take effect after the Execution Date or to ensure continued compliance with Applicable Laws in effect as of the Execution Date, in each case amortized over the useful life thereof, as reasonably determined by Landlord, in accordance with generally accepted accounting principles; costs of complying with Applicable Laws (except to the extent such costs are incurred to remedy non- compliance as of the Execution Date with Applicable Laws); costs to keep the Project in compliance with, or fees otherwise required under, any CC&Rs (as defined below); insurance premiums, including premiums for commercial general liability, property casualty, earthquake, terrorism and environmental coverages; portions of insured losses paid by Landlord as part of the commercially reasonable deductible portion of a loss pursuant to the terms of insurance policies; service contracts; costs of services of independent contractors retained to do work of a nature referenced above; and costs of compensation (including employment taxes and fringe benefits) of all persons who perform regular and recurring duties connected with the day-to-day operation and maintenance of the Project, its equipment, the adjacent walks, landscaped areas, drives and parking areas, including janitors, floor waxers, window washers, watchmen, gardeners, sweepers, plow truck drivers, handymen, and engineering/maintenance personnel.
(c)    Notwithstanding the foregoing, Operating Expenses shall not include any state, federal or local net income, franchise, capital stock, estate, transfer or inheritance taxes, or taxes that are the personal obligation of Tenant or of another tenant of the Project; any leasing commissions or expenses (including leasehold improvements, redecoration or renovation work) that relate to preparation of rental space for a tenant; expenses of initial development and construction of the Project or any expansion or elective upgrade of the Project (excluding any upgrades to the Common Areas; provided, however that elective upgrades to items in the Common Areas that at the time are still in good working order shall be excluded from Operating Expenses to the extent they constitute capital expenditures), including grading, paving, landscaping and decorating (as distinguished from maintenance, repair and replacement of the foregoing); capital expenditures other than those expressly described and amortized as provided in Section 9.1(b); legal expenses relating to other tenants; costs of repairs or services to the extent reimbursed by payment of proceeds from insurance companies, warranties, guaranties or any other third party or parties to the extent received by Landlord (with Landlord hereby agreeing to use commercially reasonable efforts (which in no event shall include litigation) to collect such reimbursements from third parties); principal amount of or interest upon loans to Landlord or secured by a mortgage or deed of trust covering the Project or a portion thereof (provided that interest upon a government assessment or improvement bond payable in installments shall constitute an Operating Expense under Subsection 9.1(a)); salaries of executive officers of Landlord; depreciation claimed by Landlord for tax purposes (provided that this exclusion of depreciation is not intended to delete from Operating Expenses actual costs of repairs and replacements that are provided for in Section 9.1(b)); the cost of cleaning or janitorial services provided for space leased or intended to be leased to other tenants in the Building; the cost of any work or service performed for any tenant in the Building (other than Tenant) to a materially greater extent or in a materially more favorable manner than that furnished generally to other tenants (including Tenant) in the Building; the general corporate overhead costs and expenses of the Landlord entity (except to the extent of the Property Management Fee (as defined below)); costs and expenses incurred in any dispute with any particular tenant; any costs (other than the Property Management Fee) representing an amount paid to an entity related to Landlord that is materially in excess of the amount that would have been paid absent such relationship; taxes that are excluded from Operating Expenses by the last sentence of Section 9.1(a); rent on ground leases or other underlying leases; costs, liabilities and expenses incurred in connection with the removal, enclosure, encapsulation or other handling of and the cost of defending against claims in regard to Hazardous Materials (i) in existence at the Building or the Project prior to the Term Commencement Date, (ii) due to the gross negligence or willful misconduct of Landlord, or (iii) for which the person or entity that is responsible for causing such Hazardous Materials to be on the Project is identified by Landlord; the cost of correcting defects in the design, construction, equipment of or latent defects in the Building or the Project; the cost of any work or services performed for any facility other than the Building or Project; direct costs or allocable costs (such as real estate taxes) associated with parking operations if there is a separate charge to Tenant for parking; charitable

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or political contributions; cost of acquiring and maintaining sculptures, paintings and other works of art, to the extent such items are materially more expensive than typical office décor in buildings similar to the Building; reserve funds; costs of mitigation or impact fees or subsidies, imposed or incurred prior to the date of the Lease or imposed solely as a result of another tenant’s use of the Building or its premises; costs and expenses attributed to the parking facility located on the Property that services the Building; late fees or charges incurred by Landlord due to late payment of expenses, except to the extent attributable to Tenant’s or any Tenant Party’s actions or inactions; and charges for electricity, water or other utilities, services or goods and applicable taxes for which Tenant or any other tenant, occupant, person or other party reimburses Landlord or pays to third parties (except as part of Operating Expenses). There shall also be excluded from Operating Expenses the following: costs or expenses incurred for the maintenance, operation or replacement of air handling units serving any portion of the Building that is not Common Area available for Tenant’s use pursuant to this Lease; costs or expenses incurred in connection with the financing or sale of the Building or Land or any portion thereof; real estate brokers’ leasing commissions; costs of providing any service directly to any other tenant in the Building, which service is not available to Tenant and all other similarly-situated tenants in the Building; costs expressly excluded from Operating Expenses elsewhere in this Lease or that are charged to or paid by Tenant under other provisions of this Lease; professional fees and disbursements and other costs and expenses related to the ownership (as opposed to the use, occupancy, operation, maintenance and repair) of the Project; and any item that, if included in Operating Expenses, would involve a double collection for such item by Landlord. To the extent that Tenant uses more than Tenant’s Pro Rata Share of any item of Operating Expenses, Tenant shall pay Landlord for such excess in addition to Tenant’s obligation to pay Tenant’s Pro Rata Share of Operating Expenses (such excess, together with Tenant’s Pro Rata Share, “Tenant’s Adjusted Share”). Landlord shall use reasonable efforts to notify Tenant (which notification may be by email) with respect to which Operating Expenses (if any) Tenant is obligated to pay Tenant’s Adjusted Share of Operating Expenses (as opposed to Tenant’s Pro Rata Share) when Landlord has actual knowledge thereof.

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9.2.    Tenant shall pay to Landlord on the first day of each calendar month of the Term, as Additional Rent, (a) the Property Management Fee (as defined below) and (b) Landlord’s reasonable estimate of Tenant’s Adjusted Share of Operating Expenses with respect to the Building and the Project, as applicable, for such month.
(x)    The “Property Management Fee” shall equal three percent (3%) of Base Rent due from Tenant.
(y)    Within one hundred twenty (120) days after the conclusion of each calendar year (or such longer period as may be reasonably required by Landlord, but in any event not to exceed one hundred eighty (180) days), Landlord shall furnish to Tenant a statement showing in reasonable detail the actual Operating Expenses and Tenant’s Adjusted Share of Operating Expenses (“Landlord’s Statement”). Any additional sum due from Tenant to Landlord shall be due and payable within forty-five (45) days after receipt of an invoice therefor. If the amounts paid by Tenant pursuant to this Section exceed Tenant’s Adjusted Share of Operating Expenses for the previous calendar year, then Landlord shall credit the difference against the Rent next due and owing from Tenant; provided that, if the Lease term has expired, Landlord shall accompany Landlord’s Statement with payment for the amount of such difference.
(z)    Any amount due under this Section for any period that is less than a full month shall be prorated for such fractional month on the basis of the number of days in the month.
9.3.    Landlord’s annual statement shall be final and binding upon Tenant unless Tenant, within ninety (90) days after Tenant’s receipt thereof, shall contest any item therein by giving written notice to Landlord, specifying each item contested and the reasons therefor; provided that Tenant shall in all events pay the amount specified in Landlord’s annual statement, pending the results of the Independent Review and determination of the Accountant(s), as applicable and as each such term is defined below. If, during such ninety (90) day period, Tenant reasonably and in good faith questions or contests the correctness of Landlord’s statement of Tenant’s Adjusted Share of Operating Expenses, Landlord shall provide Tenant with reasonable access to Landlord’s books and records to the extent relevant to determination of Operating Expenses, and such information as Landlord reasonably determines to be responsive to Tenant’s written inquiries. In the event that, after Tenant’s review of such information, Landlord and Tenant cannot agree upon the amount of Tenant’s Adjusted Share of Operating Expenses, then Tenant shall have the right to have either (ii) an independent public accounting firm, or (ii) a commercial real estate professional employed by DTZ (provided, however, that any such commercial real estate professional may not conduct an Independent Review more than one (1) time for any calendar year), with such independent public accounting firm or commercial real estate professional hired by Tenant on an hourly basis and not on a contingent-fee basis (at Tenant’s sole cost and expense) and approved by Landlord (which approval Landlord shall not unreasonably withhold or delay) audit and review such of Landlord’s books and records for the year in question as directly relate to the determination of Operating Expenses for such year (the “Independent Review”), but not books and records of entities other than Landlord. Landlord shall make such books and records available at the location where Landlord maintains them in the ordinary course of its business. Landlord need not provide copies of any books or records. Tenant shall commence the Independent Review within thirty (30) days after the date Landlord has given Tenant access to Landlord’s books and records for the Independent Review. Tenant shall complete the Independent Review and notify Landlord in writing of Tenant’s specific objections to Landlord’s calculation of Operating Expenses (including Tenant’s accounting firm’s written statement of the basis, nature and amount of each proposed adjustment) no later than ninety (90) days after Landlord has first given Tenant access to Landlord’s books and records for the Independent Review. Landlord shall review the results of any such Independent Review. The parties shall endeavor to agree promptly and reasonably upon Operating Expenses taking into account the results of such Independent Review. If, as of the date that is sixty (60) days after Tenant has submitted the Independent Review to Landlord, the parties have not agreed on the appropriate adjustments to Operating Expenses, then the parties shall engage a mutually agreeable independent third party accountant with at least ten (10) years’ experience in commercial real estate accounting in the Boston/Cambridge area (the “Accountant”). If the parties cannot agree on the Accountant, each shall within ten (10) days after such impasse appoint an Accountant (different from the accountant and accounting firm that conducted the Independent Review) and, within ten (10) days after the appointment of both such Accountants, those two Accountants shall select a third (which cannot be the accountant and accounting firm that conducted the Independent Review). If either party fails to timely appoint an Accountant, and such failure continues for ten (10) days after written notice thereof, then the Accountant the other party appoints shall be the sole Accountant. Within ten (10) days after appointment of the Accountant(s), Landlord and Tenant shall each simultaneously give the Accountant(s) (with a copy to the other party) its determination of Operating Expenses, with such supporting data or information as each submitting party determines appropriate. Within ten (10) days after such submissions, the Accountant(s) shall (by majority vote, if there are three Accountants) select either Landlord’s or Tenant’s determination of Operating Expenses. The Accountant(s) may not select or designate any other determination of Operating Expenses. The determination of the Accountant(s) shall bind the parties. If the parties agree or the Accountant(s) determine that the Operating Expenses actually paid by Tenant for the calendar year in question exceeded Tenant’s obligations for such calendar year, then Landlord shall, at Tenant’s option, either (a) credit the excess to the next succeeding installments of estimated Additional Rent or (b) pay the excess to Tenant within thirty (30) days after such

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agreement or the delivery of such results, as the case may be. If the parties agree or the Accountant(s) determine that Tenant’s payments of Operating Expenses for such calendar year were less than Tenant’s obligation for the calendar year, then Tenant shall pay the deficiency to Landlord within thirty (30) days after such agreement or the delivery of such results, as the case may be. If the Independent Review reveals or the Accountant(s) determine that the Operating Expenses billed to Tenant by Landlord and paid by Tenant to Landlord for the applicable calendar year in question exceeded by more than five percent (5%) what Tenant should have been billed during such calendar year, then Landlord shall pay the reasonable cost of the Independent Review. In all other cases, Tenant shall pay the cost of the Independent Review. In all instances, each party shall pay the cost of its own Accountant, and the cost of any third Accountant shall be split evenly between the parties.

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9.4.    Tenant shall not be responsible for Operating Expenses with respect to any time period prior to the Term Commencement Date; provided, however, that Landlord may annualize certain Operating Expenses incurred prior to the Term Commencement Date over the course of the budgeted year during which the Term Commencement Date occurs, and Tenant shall be responsible for the annualized portion of such Operating Expenses corresponding to the number of days during such year, commencing with the Term Commencement Date, for which Tenant is otherwise liable for Operating Expenses pursuant to this Lease. Tenant’s responsibility for Tenant’s Adjusted Share of Operating Expenses shall continue to the latest of (a) the Expiration Date or, subject to Subsection 9.4(c), the date of termination of the Lease, (b) the date Tenant has fully vacated the Premises and (c) if termination of the Lease is due to a default by Tenant, the date of rental commencement of a replacement tenant.
9.5.    Operating Expenses for the calendar year in which Tenant’s obligation to share therein commences and for the calendar year in which such obligation ceases shall be prorated on an equitable basis reasonably determined by Landlord. Expenses such as taxes, assessments and insurance premiums that are incurred for an extended time period shall be prorated based upon the time periods to which they apply so that the amounts attributed to the Premises relate in a reasonable manner to the time period wherein Tenant has an obligation to share in Operating Expenses. Any Operating Expense that is not billed to Tenant on or before the second (2nd) anniversary of the last day of the calendar year in which the Operating Expense was billed to Landlord (specifically excluding, however, any Operating Expenses or adjustment to Operating Expenses for which Landlord receives a bill, invoice or written notice from a third party after such second (2nd) anniversary) shall be deemed waived by Landlord, and Tenant shall have no liability with respect thereto.
9.6.    [Intentionally omitted]
9.7.    In the event that the Building or Project is less than fully occupied during a calendar year, Tenant acknowledges that Landlord may extrapolate those particular items of Operating Expenses that vary depending on the occupancy of the Building or Project, as applicable, to equal Landlord’s reasonable estimate of what such Operating Expenses would have been had the Building or Project, as applicable, been ninety-five percent (95%) occupied during such calendar year; provided, however, that Landlord shall not recover more than one hundred percent (100%) of Operating Expenses.

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10.    Taxes on Tenant’s Property.
10.1.    Tenant shall pay prior to delinquency any and all taxes levied against any personal property or trade fixtures placed by Tenant in or about the Premises or on any gross or net receipts of or sales by Tenant (collectively, “Tenant’s Personal Taxes”). Notwithstanding the forgoing, Tenant may, in compliance with Applicable Laws, withhold payment of any of Tenant’s Personal Taxes if payment thereof would interfere with or diminish Tenant’s right to appeal or contest any such taxes. Tenant shall indemnify, save, defend (at Landlord’s option and with counsel reasonably acceptable to Landlord) and hold the Landlord Indemnitees harmless from and against any Claims arising from any delay or nonpayment of any Tenant’s Personal Taxes.
10.2.    If any such taxes on Tenant’s personal property or trade fixtures are levied against Landlord or Landlord’s property and if Landlord, after written notice to Tenant, pays such taxes, then Tenant shall, upon demand, repay to Landlord the taxes so paid by Landlord.
11.    [Intentionally omitted]
12.    Use.
12.1.    Tenant shall use the Premises for the Permitted Use, and shall not use the Premises, or permit or suffer the Premises to be used, for any other purpose without Landlord’s prior written consent, which consent Landlord may withhold in its sole and absolute discretion.
12.2.    Tenant shall not use or occupy the Premises in violation of Applicable Laws; zoning ordinances; or the certificate of occupancy issued for the Building or the Project, and shall, upon five (5) days’ written notice from Landlord, discontinue any use of the Premises that is declared or claimed by any Governmental Authority having jurisdiction to be a violation of any of the above, or that in Landlord’s reasonable opinion violates any of the above. Tenant shall comply with any direction of any Governmental Authority having jurisdiction that shall, by reason of the nature of Tenant’s use or occupancy of the Premises, impose any duty upon Tenant or Landlord with respect to the Premises or with respect to the use or occupation thereof.
12.3.    Tenant shall not do or permit to be done anything that will invalidate or increase the cost of any fire, environmental, extended coverage or any other insurance policy covering the Building or the Project and shall comply with all commercially reasonable rules, orders, regulations and requirements of the insurers of the Building and the Project of which Tenant is advised in writing; provided, however, that Tenant may use the Premises for a Permitted Use that increases the cost of any fire, environmental, extended coverage or any other insurance policy covering the Building or the Project shall if Tenant shall promptly pay for all such increases; provided further, however, that if any such use by Tenant is not insured by Landlord’s insurance provider or an insurance provider reasonably acceptable to Landlord in Landlord’s sole discretion, then such use by Tenant is specifically prohibited under the terms of this Lease. If Tenant fails to observe or perform the forgoing obligations, Tenant shall have thirty (30) days after written notice from Landlord to cure such default. Further, Tenant shall promptly, upon demand, reimburse Landlord for any additional premium charged for such policy by reason of Tenant’s failure to comply with the provisions of this Article after the expiration of applicable notice and grace periods.

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12.4.    Tenant shall keep all doors opening onto public corridors closed, except when in use for ingress and egress
12.5.    No additional locks or bolts of any kind shall be placed upon any of the doors or windows by Tenant, nor shall any changes be made to existing locks or the mechanisms thereof without Landlord’s prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed. Tenant shall, upon termination of this Lease, return to Landlord all keys to offices and restrooms either furnished to or otherwise procured by Tenant. In the event any key so furnished to Tenant is lost, Tenant shall pay to Landlord the cost of replacing the same or of changing the lock or locks opened by such lost key if Landlord shall deem it necessary to make such change.
12.6.    No awnings or other projections shall be attached to any outside wall of the Building. No curtains, blinds, shades or screens shall be attached to or hung in, or used in connection with, any window or door of the Premises other than Landlord’s standard window coverings. Neither the interior nor exterior of any windows shall be coated or otherwise sunscreened without Landlord’s prior written consent, nor shall any bottles, parcels or other articles be placed on the windowsills or items attached to windows that are visible from outside the Premises. No equipment, furniture or other items of personal property shall be placed on any exterior balcony without Landlord’s prior written consent.
12.7.    No sign, advertisement or notice (“Signage”) shall be exhibited, painted or affixed by Tenant on any exterior part of the Premises or the Building without Landlord’s prior written consent, which may be granted or withheld in Landlord's sole discretion. Interior directory and suite Signage shall be inscribed, painted or affixed for Tenant by Landlord at Landlord’s sole cost and expense, and shall be of a size, color and type and be located in a place consistent with that used for other tenants in the Building. The directory tablet shall be provided exclusively for the display of the name and location of tenants only. Tenant shall not place anything on the exterior of the corridor walls or corridor doors.
12.8.    Tenant may only place equipment within the Premises with floor loading consistent with the Building’s structural design unless Tenant obtains Landlord’s prior written approval. Tenant may place such equipment only in a location designed to carry the weight of such equipment. ++++
12.9.    Tenant shall cause any equipment or machinery to be installed in the Premises so as to reasonably prevent unusual or unreasonable sounds or vibrations therefrom from extending into the Common Area or other offices in the Project.
12.10.    Tenant shall not (a) do or permit anything to be done in or about the Premises that shall in any way unreasonably obstruct or interfere with the rights of other tenants or occupants of the Project, or injure them, (b) use or allow the Premises to be used for unlawful purposes, (c) cause, maintain or permit any nuisance or waste in, on or about the Premises, the Building or the Project or (d) take any other action that would in Landlord’s reasonable determination in any manner unreasonably and adversely affect other tenants’ quiet use and enjoyment of their space or adversely impact their ability to conduct business in a professional and suitable work environment. Notwithstanding anything in this Lease to the contrary, Tenant may not install any security systems (including cameras) outside the Premises or that record sounds or images outside the Premises without Landlord’s prior written consent, which Landlord may withhold in its reasonable discretion. ++++

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12.11.    Except to the extent compliance is required as a result of the Tenant Improvements, any Alterations, or Tenant’s particular use of the Premises (as opposed to office and lab use generally), Landlord shall be responsible for ensuring the Common Areas of the Building comply with the Americans with Disabilities Act, 42 U.S.C. § 12101, et seq., and any state and local accessibility laws, codes, ordinances and rules (collectively, and together with regulations promulgated pursuant thereto, the “ADA”), and Landlord shall indemnify, save, defend and hold Tenant harmless from and against any demands, claims, liabilities, losses, costs, expenses, actions, causes of action, damages, suits or judgments, and all reasonable expenses (including reasonable attorneys’ fees, charges and disbursements, regardless of whether the applicable demand, claim, action, cause of action or suit is voluntarily withdrawn or dismissed) incurred in investigating or resisting the same (collectively, “Claims”) arising out of any such failure to comply with the ADA. Notwithstanding any other provision herein to the contrary, Tenant shall be responsible for all liabilities, costs and expenses arising out of or in connection with the compliance of the Premises and the Common Areas (but only to the extent compliance of the Common Areas is required as a result of the Tenant Improvements, any Alterations or Tenant’s particular use of the Premises as opposed to office or lab use generally or Tenant’s failure to maintain the Premises as required by this Lease) with the ADA, and Tenant shall indemnify, save, defend (at Landlord’s option and with counsel reasonably acceptable to Landlord) and hold Landlord and its affiliates, employees, agents and contractors; and any lender, mortgagee, ground lessor or beneficiary (each, a “Lender” and, collectively with Landlord and its affiliates, employees, agents and contractors, the “Landlord Indemnitees”) harmless from and against any Claims arising out of any such failure to comply with the ADA. This Section (as well as any other provisions of this Lease dealing with indemnification of the Landlord Indemnitees by Tenant) shall be deemed to be modified in each case by the insertion in the appropriate place of the following: “except as otherwise provided in Mass. G.L. Ter. Ed., C. 186, Section 15.” The provisions of this Section shall survive the expiration or earlier termination of this Lease.
12.12.    Tenant shall maintain temperature and humidity in the Premises in accordance with ASHRAE standards at all times; provided, however, that Tenant shall not be in default of the forgoing obligation to the extent Landlord fails to supply the quantities of circulating water necessary to maintain temperature and humidity in the Premises in accordance with ASHRAE standards.
12.13.    Tenant shall establish and maintain a chemical safety program administered by a licensed, qualified individual in accordance with the requirements of the Massachusetts Water Resources Authority (“MWRA”) and any other applicable Governmental Authority. Tenant shall be solely responsible for all costs incurred in connection with such chemical safety program, and Tenant shall provide Landlord with such documentation as Landlord may reasonably require evidencing Tenant’s compliance with the requirements of (a) the MWRA and any other applicable Governmental Authority with respect to such chemical safety program and (b) this Section. Notwithstanding the foregoing, Landlord shall obtain and maintain during the Term (m) any permit required by the MWRA (“MWRA Permit”) and (n) a wastewater treatment operator license from the Commonwealth of Massachusetts with respect to Tenant’s use of the Acid Neutralization Tank (as defined below) in the Building. Tenant shall not introduce anything into the Acid Neutralization Tank (x) in violation of the terms of the MWRA Permit, (y) in violation of Applicable Laws or (z) that would interfere with the proper functioning of the Acid Neutralization Tank. Tenant agrees to reasonably cooperate with Landlord in order to obtain the MWRA Permit and the wastewater treatment operator license. Tenant shall reimburse Landlord within ten (10) business days after demand for any costs incurred by Landlord pursuant to this Section.

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13.    Rules and Regulations, CC&Rs, Parking Facilities and Common Area.
13.1.    Tenant shall have the non-exclusive right, in common with others, to use the Common Area in conjunction with Tenant’s use of the Premises for the Permitted Use, and such use of the Common Area and Tenant’s use of the Premises shall be subject to the rules and regulations adopted by Landlord and attached hereto as Exhibit D, together with such other reasonable and nondiscriminatory rules and regulations of which Tenant is advised as are hereafter promulgated by Landlord in its reasonable discretion (the “Rules and Regulations”); provided, however, that in the case of any conflict between the provisions of this Lease and any such Rules and Regulations, the provisions of this Lease shall control. Tenant shall and shall ensure that its contractors, subcontractors, employees, subtenants and invitees faithfully observe and comply with the Rules and Regulations. Landlord shall use reasonable efforts to enforce the Rule and Regulations, but shall not be responsible to Tenant for the violation or non- performance by any other tenant or any agent, employee or invitee thereof of any of the Rules and Regulations.
13.2.    This Lease is subject to any recorded covenants, conditions or restrictions on the Project or Property (including that certain PTDM Ordinance – Final Amendment Decision, issued on May 24, 2002, by the City of Cambridge (as the same may be amended from time to time, the “PTDM”)), as the same may be amended, amended and restated, supplemented or otherwise modified from time to time (the “CC&Rs”). Tenant shall comply with the CC&Rs. Tenant acknowledges that Tenant, at its sole cost and expense, shall comply with the tenant requirements in the PTDM, including the requirements set forth in the “Alternative Work Programs,” “Public Transportation Incentives,” “Ridesharing Programs” and “Provisions of Bicycle and Pedestrian Amenities” sections thereof. Tenant, at its sole cost and expense, shall also comply with the reporting requirements set forth in the PTDM at Landlord’s request. Any costs incurred by Landlord in connection with the PTDM shall constitute an Operating Expense.
13.3.    Tenant shall have a non-exclusive, irrevocable license to use up to fifty-seven (57) parking spaces (the “Maximum Number”) within the parking facilities serving the Building in common on an unreserved basis with other tenants of the Building and the Project during the Term at a cost of Two Hundred Eighty Dollars ($280) per parking space per month, which amount shall be increased or decreased by Landlord based upon rates for comparable parking garages in East Cambridge from time to time upon thirty (30) days’ prior written notice from Landlord to Tenant to reflect then-current market rent, and which rent Tenant shall pay simultaneously with payments of Base Rent as Additional Rent. Tenant shall initially notify Landlord, on or before the Term Commencement Date, how many parking spaces (up to the Maximum Number) it desires. If Tenant does not make an election on or before the Execution Date, it shall be deemed to have elected the Maximum Number. The spaces so elected, or deemed to have been elected, by Tenant are hereinafter referred to as the “Elected Spaces.” Upon thirty (30) days’ prior written notice from Tenant to Landlord, Tenant may choose not to license or to release its license to use any portion of the Elected Spaces. If, at any time, Tenant elects less than the Maximum Number of parking spaces, then Landlord, in its sole discretion, may grant the use of such unlicensed spaces to a third party. Tenant may request to license at a later date any such unlicensed spaces (provided that in no event shall Tenant have the right to use more than the Maximum Number) upon thirty (30) days’ prior written notice to Landlord. In the event that all or any portion of the unlicensed spaces are available, Landlord shall reinstate Tenant’s license to use the same, such spaces shall be deemed to be Elected Spaces and Tenant shall be obliged to pay the corresponding parking fee as set forth in this Section.

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13.4.    During the Term, Landlord shall provide Tenant with parking passes for use by standard size automobiles, pick-up trucks and sport utility vehicles in an amount equal to the Elected Spaces and at the initial cost set forth in Section 13.2. Use of the parking spaces shall be on an unreserved basis. Tenant shall pay for such parking passes (regardless of whether used by Tenant) in accordance with the rate set forth in Section 13.2. Such payments shall constitute Additional Rent for purposes of this Lease. Payments under this Section shall be made at the places and times and subject to the conditions specified for payments of Base Rent, or at such other places and times as Landlord shall specify in writing. To the extent applicable to Tenant’s use of the parking spaces, the provisions of this Lease shall apply, including the Rules and Regulations. Without limiting Landlord’s other remedies under this Lease, if Tenant shall fail to pay the amounts due for such parking spaces for more than thirty (30) days after notice of such failure more than once in any calendar year, then Landlord may terminate Tenant’s rights to such spaces upon written notice by Landlord and the expiration of a ten (10) day grace period, and the fee for such parking spaces shall abate from and after the date of such termination.
13.5.    Tenant’s rights under this Article shall not be assigned or sublicensed except in connection with a Transfer in accordance with Article 29.
13.6.    Tenant, at its sole cost and expense, shall comply with the applicable terms and conditions set forth in the PTDM; provided that Landlord shall provide Tenant with a copy of any amendments to the PTDM. Tenant acknowledges that is has received a copy of the PTDM. Tenant shall cooperate with Landlord as required for Landlord to fulfill Landlord’s obligations under the PTDM. Landlord shall comply with the terms of the PTDM; provided that Landlord shall not be deemed to be responsible for any tenant’s (or any other Building occupant’s) compliance with the PTDM.
13.7.    The Charles River Transportation Management Association (of which Landlord or an affiliate of Landlord is currently a member) provides certain programs to help improve transportation in the Cambridge area. Their website is www.charlesrivertma.org.

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13.8.    Tenant agrees not to unreasonably overburden the parking facilities and agrees to cooperate with Landlord and other tenants in the use of the parking facilities. Nothing in this Section, however, is intended to create an affirmative duty on Landlord’s part to monitor parking.
13.9.    Subject to the terms of this Lease including the Rules and Regulations and the rights of other tenants of the Building, Tenant shall have the non-exclusive right to access the freight loading dock, at no additional cost.
14.    Project Control by Landlord.
14.1.    Landlord reserves full control over the Building and the Project to the extent not inconsistent with Tenant’s enjoyment of the Premises as provided by this Lease. This reservation includes Landlord’s right to subdivide the Project; convert the Building and other buildings within the Project to condominium units; change the size of the Project by selling all or a portion of the Project or adding real property and any improvements thereon to the Project; grant easements and licenses to third parties; maintain or establish ownership of the Building separate from fee title to the Property; make additions to or reconstruct portions of the Building and the Project; install, use, maintain, repair, replace and relocate for service to the Premises and other parts of the Building or the Project pipes, ducts, conduits, wires and appurtenant fixtures, wherever located in the Premises, the Building or elsewhere at the Project; and alter or relocate any other Common Area or facility, including private drives, lobbies, entrances and landscaping; provided, however, that such rights shall be exercised in a way that does not unreasonably adversely affect or unreasonably diminish Tenant’s beneficial use and occupancy of the Premises, including the Permitted Use and Tenant’s access to and use of the Premises, and any costs thereof shall only be included in Operating Expenses to the extent permitted under Section 9.1. Tenant acknowledges that Landlord specifically reserves the right to allow the exclusive use of corridors and restroom facilities located on specific floors to one or more tenants occupying such floors; provided, however, that Tenant shall not be deprived of the use of the corridors reasonably required to serve the Premises or of restroom facilities serving the floor upon which the Premises are located.
14.2.    Possession of areas of the Premises necessary for utilities, services, safety and operation of the Building is reserved to Landlord.
14.3.    Tenant shall, at Landlord’s request, promptly execute such further documents, in form and substance reasonably acceptable to Tenant, as may be reasonably appropriate to assist Landlord in the performance of its obligations hereunder; provided that Tenant need not execute any document that creates additional liability for Tenant or that deprives Tenant of the quiet enjoyment and use of the Premises as provided for in this Lease.
14.4.    Landlord may, at any and all reasonable times during non-business hours (or during business hours, if (a) with respect to Subsections 14.4(u) through 14.4(y), Tenant so requests, and (b) with respect to Subsection 14.4(z), if Landlord so requests), and upon twenty- four (24) hours’ prior notice (which may be oral or email to the office manager or other Tenant- designated individual at the Premises) (provided that no time restrictions shall apply or advance notice be required if an emergency necessitates immediate entry), enter the Premises to (u) inspect the same and to determine whether Tenant is in compliance with its obligations hereunder, (v) supply any service Landlord is required to provide hereunder, (w) alter, improve or repair any portion of the Building other than the Premises for which access to the Premises is reasonably necessary, (x) post notices of nonresponsibility, (y) access the telephone equipment, electrical substation and fire risers and (z) show the Premises to prospective tenants during the final year of the Term and current and prospective purchasers and lenders at any time. In connection with any such alteration, improvement or repair as described in Subsection 14.4(w), Landlord may erect in the Premises or elsewhere in the Project scaffolding and other structures reasonably required for the alteration, improvement or repair work to be performed. In no event shall Tenant’s Rent abate as a result of Landlord’s activities pursuant to this Section; provided, however, that all such activities shall be conducted in such a manner so as to cause no material adverse interference to Tenant. ++++

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15.    Quiet Enjoyment. So long as Tenant is not in Default under this Lease, Landlord covenants that Tenant may peacefully and quietly have, hold and enjoy the Premises, free from any claim by Landlord or persons claiming under Landlord, but subject to all of the terms and provisions hereof, provisions of Applicable Laws and rights of record to which this Lease is or may become subordinate. This covenant is in lieu of any other quiet enjoyment covenant, either express or implied.
16.    Utilities and Services.
16.1.    Tenant shall pay for all water (including the cost to service, repair and replace reverse osmosis, de-ionized and other treated water), gas, heat, light, power, telephone, internet service, cable television, other telecommunications and other utilities supplied to the Premises, together with any fees, surcharges and taxes thereon. The Premises have been separately metered for the purpose of measuring Tenant’s consumption of utility services at the Premises and shall be paid by Tenant directly to the supplier of such utilities or services.
++++

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16.3.    Tenant shall pay for, prior to delinquency of payment therefor, any utilities and services that may be furnished to the Premises from the Execution Date through the Term Expiration Date or, to the extent Tenant occupies the Premises after the expiration or earlier termination of the Term, after the Term. Tenant shall pay for, prior to delinquency of payment therefor, any telephone, internet service, cable television and other telecommunications, together with any fees, surcharges and taxes thereon.
16.4.    Tenant shall not, without Landlord’s prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed, use any device in the Premises (other than usual and customary office and laboratory equipment) that will in any way (a) increase the amount of ventilation, air exchange, gas, steam, electricity or water required or consumed in the Premises based upon Tenant’s Pro Rata Share of the Building or Project (as applicable) beyond the existing capacity of the Building or the Project usually furnished or supplied for the Permitted Use or (b) exceed Tenant’s Pro Rata Share of the Building’s or Project’s (as applicable) capacity to provide such utilities or services.
16.5.    If Tenant shall require utilities or services in excess of those usually furnished or supplied for tenants in similar spaces in the Building or the Project by reason of Tenant’s equipment or extended hours of business operations, then Tenant shall first procure Landlord’s consent for the use thereof, which consent Landlord shall not unreasonably withhold, condition or delay, but which consent Landlord may condition upon the availability of such excess utilities or services, and Tenant shall pay as Additional Rent an amount equal to the actual cost of providing such excess utilities and services.
16.6.    Landlord shall provide water in Common Area for lavatory and landscaping purposes only, which water shall be from the local municipal or similar source. Water servicing the Premises shall be separately metered.
16.7.    If Tenant fails to timely make the payments required by this Article, Landlord may pay such charges and collect the same from Tenant. Any such costs or expenses incurred or payments made by Landlord for any of the reasons or purposes stated in this Section shall be deemed to be Additional Rent payable by Tenant and collectible by Landlord as such.

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16.8.    Landlord reserves the right to stop service of the elevator, plumbing, ventilation, air conditioning and utility systems, when Landlord reasonably deems necessary or desirable, due to accident, emergency or the need to make repairs, alterations or improvements, until such repairs, alterations or improvements shall have been completed, and, except as provided in Section 16.2, Landlord shall further have no responsibility or liability for failure to supply elevator facilities, plumbing, ventilation, air conditioning or utility service when prevented from doing so by Force Majeure; a failure by a third party to deliver gas, oil or another suitable fuel supply; or Landlord’s inability by exercise of reasonable diligence to obtain gas, oil or another suitable fuel. Without limiting the foregoing, it is expressly understood and agreed that any covenants on Landlord’s part to furnish any service pursuant to any of the terms, covenants, conditions, provisions or agreements of this Lease, or to perform any act or thing for the benefit of Tenant, shall not be deemed breached if Landlord is unable to furnish or perform the same by virtue of Force Majeure. Except in the case of an emergency, Landlord shall give Tenant at least two (2) business days’ prior notice (which may be verbal) of any such service stoppage.
16.9.    For the Premises, Landlord shall (a) maintain and operate the HVAC supply air systems (except for those air handling units exclusively serving the Premises and the distribution system servicing the Premises, which Tenant shall operate and maintain at its sole cost and expense) used for the Permitted Use only and (b) subject to Subsection 16.9(a), furnish HVAC as reasonably required (except as this Lease otherwise provides) for reasonably comfortable occupancy of the Premises twenty-four (24) hours a day, every day during the Term, subject to casualty, eminent domain or as otherwise specified in this Article. Notwithstanding anything to the contrary in this Section, but subject to the provisions of Section 16.2, Landlord shall have no liability, and Tenant shall have no right or remedy, on account of any interruption or impairment in HVAC services; provided that Landlord diligently endeavors to cure any such interruption or impairment. Tenant shall ensure that its building management system is integrated into Landlord’s base building management system to enable connectivity of utility metering for remote data and information access. In addition, the chilled and heated water utilized for the HVAC system serving the Premises shall be separately submetered, and Tenant shall pay for the usage shown thereon at Landlord's standard rates in effect from time to time, with such amounts due and payable within thirty (30) days after demand therefor.
16.10.    For any utilities serving the Premises for which Tenant is billed directly by such utility provider, Tenant agrees to furnish to Landlord (a) any invoices or statements for such utilities within thirty (30) days after Tenant’s receipt thereof, (b) within thirty (30) days after Landlord’s request, any other utility usage information reasonably requested by Landlord, and (c) within thirty (30) days after each calendar year during the Term, authorization to allow Landlord to access Tenant’s usage information necessary for Landlord to complete an ENERGY STAR® Statement of Performance (or similar comprehensive utility usage report (e.g., related to Labs 21), if requested by Landlord) and any other information reasonably requested by Landlord for the immediately preceding year; and Tenant shall comply with any other energy usage or consumption requirements required by Applicable Laws. Tenant shall retain records of utility usage at the Premises, including invoices and statements from the utility provider, for at least thirty-six (36) months. Tenant acknowledges that any utility information for the Premises, the Building and the Project may be shared with third parties, including Landlord’s consultants and Governmental Authorities. In the event that Tenant fails to comply with this Section, Tenant hereby authorizes Landlord to collect utility usage information directly from the applicable utility providers or from Tenant’s consultant. In addition to the foregoing, Tenant shall comply with all Applicable Laws related to the disclosure and tracking of energy consumption at the Premises. The provisions of this Section shall survive the expiration or earlier termination of this Lease.

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17.    Alterations.
17.1.    Tenant shall make no alterations, additions or improvements other than the Tenant Improvements in or to the Premises or engage in any construction, demolition, reconstruction, renovation or other work (whether major or minor) of any kind in, at or serving the Premises, including any construction, demolition, reconstruction, renovation, or other work that affects any Building systems, including elevator, plumbing, air conditioning, heating, electrical, security, life safety and power (“Alterations”) without Landlord’s prior written approval, which approval Landlord shall not unreasonably withhold, condition or delay; provided, however, that, in the event any proposed Alteration affects (a) any structural portions of the Building, including exterior walls, the roof, the foundation or slab, foundation or slab systems (including barriers and subslab systems) or the core of the Building, (b) the exterior of the Building or (c) any Building systems, including elevator, plumbing, HVAC, electrical, security, life safety and power, then Landlord may withhold its approval in its sole and absolute discretion. Tenant shall, in making any Alterations other than Cosmetic Alterations, use only those architects, contractors, suppliers and mechanics of which Landlord has given prior written approval, which approval shall be given or withheld in Landlord’s reasonable discretion. In seeking Landlord’s approval, Tenant shall provide Landlord, at least fourteen (14) days in advance of any proposed construction, with plans, specifications, certified stamped engineering drawings and calculations by Tenant’s engineer of record or architect of record (including connections to the Building’s structural system, modifications to the Building’s envelope, non-structural penetrations in slabs or walls, and modifications or tie-ins to life safety systems), work contracts, requests for laydown areas and such other information concerning the nature and cost of the Alterations as Landlord may reasonably request. In no event shall Tenant use or Landlord be required to approve any architects, consultants, contractors, subcontractors or material suppliers that Landlord reasonably believes are likely to cause labor disharmony. ++++

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17.2.    Tenant shall not construct or permit to be constructed partitions or other obstructions that are reasonably likely to interfere (other than in a de minimis manner) with free access to mechanical installation or service facilities of the Building or with other tenants’ components located within the Building, or interfere with the moving of Landlord’s equipment to or from the enclosures containing such installations or facilities.
17.3.    Tenant shall accomplish any work performed on the Premises or the Building in such a manner as to permit any life safety systems to remain fully operable at all times.
17.4.    Any work performed on the Premises, the Building or the Project by Tenant or Tenant’s contractors shall be done at such times and in such manner as set forth in the Rules and Regulations. Tenant covenants and agrees that all work done by Tenant or Tenant’s contractors shall be performed in full compliance with Applicable Laws. Within thirty (30) days after completion of any Alterations for which CADD files are typically produced, Tenant shall provide Landlord with complete “as built” drawing print sets and electronic CADD files on disc (or files in such other current format in common use as Landlord reasonably approves or requires) showing any changes in the Premises, as well as a commissioning report prepared by a licensed, qualified commissioning agent hired by Tenant and approved by Landlord for all new or affected mechanical, electrical and plumbing systems. Any such “as built” plans shall show the applicable Alterations as an overlay on the Building as-built plans; provided that Landlord provides the Building “as built” plans to Tenant.
17.5.    Before commencing any Alterations or Tenant Improvements, Tenant shall give Landlord at least fourteen (14) days’ prior written notice of the proposed commencement of such work.
17.6.    Tenant shall repair any damage to the Premises caused by Tenant’s removal of any property from the Premises. ++++

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17.7.    The Premises plus any Alterations, Signage, Tenant Improvements, attached equipment, decorations, fixtures, movable laboratory casework and related appliances, trade fixtures, and additions and improvements attached to or built into the Premises made by either of the parties (including all floor and wall coverings; paneling; sinks and related plumbing fixtures; laboratory benches; exterior venting fume hoods; walk-in freezers and refrigerators; ductwork; conduits; electrical panels and circuits; business and trade fixtures; attached machinery and equipment; and built-in furniture and cabinets, in each case, together with all additions and accessories thereto), shall (unless, prior to such construction or installation, Landlord elects otherwise in writing) at all times remain the property of Landlord, shall remain in the Premises and shall (unless, prior to construction or installation thereof, Landlord elects otherwise in writing) be surrendered to Landlord upon the expiration or earlier termination of this Lease. For the avoidance of doubt, the items listed on Exhibit E, a draft of which Tenant will prepare and deliver to Landlord for Landlord’s approval, which shall not be unreasonably withheld, conditioned or delayed, within six (6) months after the Effective Date (which Exhibit E may be updated by Tenant from and after the Term Commencement Date, subject to Landlord’s written consent, which consent shall not be unreasonably withheld, conditioned or delayed), constitute Tenant’s property and shall be removed by Tenant upon the expiration or earlier termination of the Lease.
17.8.    Notwithstanding any other provision of this Article to the contrary, in no event shall Tenant remove any improvement from the Premises as to which Landlord contributed payment, including the Tenant Improvements, without Landlord’s prior written consent, which consent Landlord may withhold in its sole and absolute discretion. In addition, Landlord shall not require that Tenant remove any Tenant Improvements or any cabling or low-voltage wiring.
17.9.    If Tenant shall fail to remove any of its property from the Premises prior to the expiration or earlier termination of this Lease, then Landlord may, at its option, remove the same in any manner that Landlord shall choose and store such effects without liability to Tenant for loss thereof or damage thereto, and Tenant shall pay Landlord, upon demand, any costs and expenses incurred due to such removal and storage or Landlord may, at its sole option and without notice to Tenant, sell such property or any portion thereof at private sale and without legal process for such price as Landlord may obtain and apply the proceeds of such sale against any (a) amounts due by Tenant to Landlord under this Lease and (b) any actual expenses incident to the removal, storage and sale of such personal property.

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17.10.    Tenant shall reimburse Landlord for Landlord’s actual out-of-pocket costs incurred for plan review, engineering review, coordination, scheduling and supervision of any Alterations (not to exceed Five Thousand Dollars ($5,000) for each review). To the extent Tenant does not perform such remedial work within a reasonable period of time after notice from Landlord, and if Landlord thereafter performs the same, Tenant shall reimburse Landlord for any extra expenses actually incurred by Landlord by reason of faulty work done by Tenant or its contractors, or by reason of delays caused by such work, or by reason of inadequate clean-up.
17.11.    Within sixty (60) days after final completion of the Tenant Improvements or any Alterations performed by Tenant with respect to the Premises, Tenant shall submit to Landlord documentation showing the amounts expended by Tenant with respect to such Tenant Improvements and Alterations, together with supporting documentation reasonably acceptable to Landlord.
17.12.    Tenant shall take, and shall cause its contractors to take, commercially reasonable steps to protect the Premises during the performance of any Alterations or Tenant Improvements, including covering or temporarily removing any window coverings so as to guard against dust, debris or damage.
17.13.    Tenant shall require its contractors and subcontractors performing work on the Premises to include Landlord and its affiliates and Lenders as additional insureds on their respective commercial general liability, automobile and umbrella insurance policies.
18.    Repairs and Maintenance.
18.1.    Landlord shall repair and maintain the structural and exterior portions and Common Area of the Building and the Project, including roofing and covering materials; foundations (including any structural slabs); exterior walls; plumbing; fire sprinkler systems (if any); HVAC systems; elevators; and electrical systems installed or furnished by Landlord. Landlord shall also maintain any utility meters serving the Premises, at Tenant’s sole cost and expense. Landlord will keep, manage and maintain the Building and the Project consistent with other similar properties in the Kendall Square rental market, and in full accordance with Applicable Laws. Landlord shall maintain (or provide for the maintenance) in a neat, attractive and first-class condition all signs, roadways, landscaped areas, parking areas, sidewalks and entrances areas that are owned by Landlord.
18.2.    Except for services of Landlord, if any, required by Section 18.1, Tenant shall at Tenant’s sole cost and expense maintain and keep the Premises and every part thereof in good condition and repair, excepting damage thereto from ordinary wear and tear and matters for which Tenant is not responsible under the terms of this Lease, and shall, within ten (10) days after receipt of written notice from Landlord, provide to Landlord any usual and customary maintenance records that Landlord reasonably requests. Tenant shall, upon the expiration or sooner termination of the Term, surrender the Premises to Landlord in as good a condition as when received, ordinary wear and tear excepted and with the Tenant Improvements in substantially the same condition as existed upon completion of the Tenant Improvements; and shall, at Landlord’s request and Tenant’s sole cost and expense, remove all wiring and equipment (other than low voltage wiring and cabling) installed by or on behalf of a Tenant Party (as defined below), and repair any damage to the Premises caused thereby, unless instructed by Landlord not to do so, whereupon Tenant shall surrender the Premises with all such material intact. Without limiting Landlord’s maintenance and repair obligations in this Lease, Landlord shall have no obligation to alter, remodel, improve, repair, decorate or paint the Premises or any part thereof.

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18.3.    Except as otherwise set forth herein, Landlord shall not be liable for any failure to make any repairs or to perform any maintenance that is Landlord’s obligation pursuant to this Lease unless such failure shall persist for an unreasonable time (determined under the particular circumstances) after Tenant provides Landlord with written notice (which may be given by e- mail to the Building or property management office) of the need of such repairs or maintenance or after Landlord has independent, actual knowledge of such need. Tenant waives its rights under Applicable Laws now or hereafter in effect to make repairs at Landlord’s expense.
18.4.    This Article relates to repairs and maintenance arising in the ordinary course of operation of the Building and the Project. In the event of a casualty described in Article 24, Article 24 shall apply in lieu of this Article. In the event of eminent domain, Article 25 shall apply in lieu of this Article.
18.5.    Except to the extent otherwise provided in Section 9.1, costs incurred by Landlord pursuant to this Article shall constitute Operating Expenses.
19.    Liens.
19.1.    Subject to the immediately succeeding sentence, Tenant shall keep the Premises, the Building and the Project free from any liens arising out of work or services performed, materials furnished or obligations incurred to or by Tenant. Tenant further covenants and agrees that any mechanic’s or materialman’s lien filed against the Premises, the Building or the Project for work or services claimed to have been done for, or materials claimed to have been furnished to, or obligations incurred by Tenant shall be discharged or bonded by Tenant within ten (10) days after notice to Tenant of the filing thereof, at Tenant’s sole cost and expense.
19.2.    Should Tenant fail to discharge or bond against any lien of the nature described in Section 19.1, Landlord may, at Landlord’s election, pay such claim or post a statutory lien bond or otherwise provide security to eliminate the lien as a claim against title, and Tenant shall within ten (10) days after demand reimburse Landlord for the costs thereof as Additional Rent. Tenant shall indemnify, save, defend (at Landlord’s option and with counsel reasonably acceptable to Landlord) and hold the Landlord Indemnitees harmless from and against any Claims arising from any such liens, including any administrative, court or other legal proceedings related to such liens.
19.3.    In the event that Tenant leases or finances the acquisition of office equipment, furnishings or other personal property of a removable nature utilized by Tenant in the operation of Tenant’s business, Tenant warrants that any Uniform Commercial Code financing statement shall, upon its face or by exhibit thereto, indicate that such financing statement is applicable only to removable personal property of Tenant located within the Premises. In no event shall the address of the Premises, the Building or the Project be furnished on a financing statement without qualifying language as to applicability of the lien only to removable personal property located in an identified suite leased by Tenant. Should any holder of a financing statement record or place of record a financing statement that appears to constitute a lien against any interest of Landlord or against equipment that may be located other than within an identified suite leased by Tenant, Tenant shall, within ten (10) days after filing such financing statement, cause (a) a copy of the lender security agreement or other documents to which the financing statement pertains to be furnished to Landlord to facilitate Landlord’s ability to demonstrate that the lien of such financing statement is not applicable to Landlord’s interest and (b) Tenant’s lender to amend such financing statement and any other documents of record to clarify that any liens imposed thereby are not applicable to any interest of Landlord in the Premises, the Building or the Project. Landlord will, on request by Tenant, execute and deliver a commercially reasonable waiver or subordination of lien, in form and substance reasonably acceptable to each party, that may be required in connection with any such lease or financing.

27
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20.    Estoppel Certificate.     Tenant shall, within fifteen (15) days after receipt of written notice from Landlord, execute, acknowledge and deliver a statement in writing substantially in the form attached to this Lease as Exhibit F, or on any other form reasonably requested by a current or proposed Lender or encumbrancer or proposed purchaser, (a) certifying that this Lease is unmodified and in full force and effect (or, if modified, stating the nature of such modification and certifying that this Lease as so modified is in full force and effect) and the dates to which rental and other charges are paid in advance, if any, (b) acknowledging that there are not, to Tenant’s knowledge, any uncured defaults on the part of Landlord hereunder, or specifying such defaults if any are claimed, and (c) setting forth such further factual information with respect to this Lease or the Premises as may be requested thereon. Any such statement may be relied upon by any prospective purchaser or encumbrancer of all or any portion of the Property. Tenant’s failure to deliver such statement within the prescribed time if such failure continues for more than five (5) days after Landlord gives Tenant written notice thereof shall, at Landlord’s option, constitute a Default (as defined below) under this Lease, and, in any event, the statements contained in the certificate prepared by Landlord and delivered to Tenant for execution shall be binding upon Tenant. Tenant shall provide Landlord, on the same terms and conditions, with similar statements from the Guarantor with respect to the Guaranty.
21.    Hazardous Materials.
21.1.    Tenant shall not cause or permit any Hazardous Materials (as defined below) to be brought upon, kept or used in or about the Premises, the Building or the Project in violation of Applicable Laws by Tenant or any of its employees, agents, contractors or invitees (collectively with Tenant (each, a “Tenant Party”). If (a) Tenant breaches such obligation, (b) the presence of Hazardous Materials as a result of such a breach results in contamination of the Project, any portion thereof, or any adjacent property, (c) contamination of the Premises otherwise occurs during the Term or any extension or renewal hereof or holding over hereunder (other than if such contamination results from (i) migration of Hazardous Materials from outside the Premises not caused by a Tenant Party (a “Migration Event”) or (ii) to the extent such contamination is caused by the negligence or willful misconduct of any Landlord Party (as defined below)) or (d) contamination of the Project occurs as a result of Hazardous Materials that are placed on or under or are released into the Project by a Tenant Party, then Tenant shall indemnify, save, defend (at Landlord’s option and with counsel reasonably acceptable to Landlord) and hold the Landlord Indemnitees harmless from and against any and all Claims of any kind or nature, including (w) diminution in value of the Project or any portion thereof, (x) damages for the loss or restriction on use of rentable or usable space or of any amenity of the Project, (y) damages arising from any adverse impact on marketing of space in the Project or any portion thereof and (z) sums paid in settlement of Claims that arise before, during or after the Term as a result of such breach or contamination. This indemnification by Tenant includes costs incurred in connection with any investigation of site conditions or any clean-up, remedial, removal or restoration work required by any Governmental Authority because of Hazardous Materials present in the air, soil or groundwater above, on, under or about the Project. Without limiting the foregoing, if the presence of any Hazardous Materials in, on, under or about the Project, any portion thereof or any adjacent property caused or permitted by any Tenant Party results in any contamination of the Project, any portion thereof or any adjacent property, then Tenant shall promptly take all actions at its sole cost and expense as are necessary to return the Project, any portion thereof or any adjacent property to its respective condition existing prior to the time of such contamination; provided that Landlord’s written approval of such action shall first be obtained, which approval Landlord shall not unreasonably withhold; and provided, further, that it shall be reasonable for Landlord to withhold its consent if such actions could have a material adverse long-term or short-term effect on the Project, any portion thereof or any adjacent property. Tenant’s obligations under this Section shall not be affected, reduced or limited by any limitation on the amount or type of damages, compensation or benefits payable by or for Tenant under workers’ compensation acts, disability benefit acts, employee benefit acts or similar legislation. Notwithstanding the foregoing, Landlord shall indemnify, save, defend (at Tenant’s option and with counsel reasonably acceptable to Tenant) and hold the Tenant Parties harmless from and against any and all Claims resulting from the presence of Hazardous Materials at the Project in violation of Applicable Laws as of the Execution Date, unless placed at the Project by a Tenant Party. ++++

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21.2.    Landlord acknowledges that it is not the intent of this Article to prohibit Tenant from operating its business for the Permitted Use. Tenant may operate its business according to the custom of Tenant’s industry so long as the use or presence of Hazardous Materials is strictly and properly monitored in accordance with Applicable Laws. As a material inducement to Landlord to allow Tenant to use Hazardous Materials in connection with its business, Tenant agrees to deliver to Landlord (a) a list identifying each type of Hazardous Material to be present at the Premises that is subject to regulation under any environmental Applicable Laws, (b) a list of any and all approvals or permits from Governmental Authorities required in connection with the presence of such Hazardous Material at the Premises and (c) correct and complete copies of (i) written notices of violations of Applicable Laws received by Tenant and related to Hazardous Materials at the Project and (ii) plans relating to the installation of any storage tanks to be installed in, on, under or about the Project (provided that installation of storage tanks shall only be permitted after Landlord has given Tenant its written consent to do so, which consent Landlord shall not unreasonably withhold, condition or delay) and closure plans or any other documents required by any and all Governmental Authorities for any storage tanks installed in, on, under or about the Project for the closure of any such storage tanks (collectively, “Hazardous Materials Documents”). Tenant shall deliver to Landlord updated Hazardous Materials Documents prior to the Term Commencement Date and, thereafter, within fourteen (14) days after receipt of a written request therefor from Landlord, not more often than once per year, unless (m) there are any changes to the Hazardous Materials Documents or (n) Tenant initiates any Alterations or changes its business, in either case in a way that involves any material increase in the types or amounts of Hazardous Materials. For each type of Hazardous Material listed, the Hazardous Materials Documents shall include (t) the chemical name, (u) the material state (e.g., solid, liquid, gas or cryogen), (v) the concentration, (w) the storage amount and storage condition (e.g., in cabinets or not in cabinets), (x) the use amount and use condition (e.g., open use or closed use), (y) the location (e.g., room number or other identification) and (z) if known, the chemical abstract service number. Notwithstanding anything in this Section to the contrary, Tenant shall not be required to provide Landlord with any Hazardous Materials Documents containing information of a proprietary nature, which Hazardous Materials Documents, in and of themselves, do not contain a reference to any Hazardous Materials or activities related to Hazardous Materials. Landlord may, at Landlord’s expense, cause the Hazardous Materials Documents to be reviewed by a person or firm qualified to analyze Hazardous Materials to confirm compliance with the provisions of this Lease and with Applicable Laws. In the event that a review of the Hazardous Materials Documents indicates non-compliance with this Lease or Applicable Laws, Tenant shall, at its expense, diligently take steps to bring its storage and use of Hazardous Materials into compliance. Notwithstanding anything in this Lease to the contrary or Landlord’s review into Tenant’s Hazardous Materials Documents or use or disposal of hazardous materials, however, Landlord shall not have and expressly disclaims any liability related to Tenant’s or other tenants’ use or disposal of Hazardous Materials, it being acknowledged by Tenant that Tenant is best suited to evaluate the safety and efficacy of its Hazardous Materials usage and procedures.

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21.3.    [Intentionally omitted]
21.4.    If Landlord reasonably believes that any Hazardous Materials have been released in violation of this Lease or Applicable Laws on the Project, Landlord shall have the right to conduct appropriate tests of the Project or any portion thereof to demonstrate that Hazardous Materials are present or that contamination has occurred due to the acts or omissions of a Tenant Party. Tenant shall pay all reasonable costs of such tests if such tests reveal that Hazardous Materials exist at the Project in violation of this Lease.
21.5.    If storage tanks storing Hazardous Materials are now or hereafter permitted by Landlord to be installed or utilized by Tenant on the Premises (regardless of who places such storage tanks, if such storage tanks are utilized by Tenant), then Tenant shall monitor the storage tanks, maintain appropriate records, implement reporting procedures, and take or cause to be taken all other steps necessary or required under the Applicable Laws. Tenant shall have no responsibility or liability for storage tanks installed by anyone other than Tenant unless Tenant utilizes such tanks, in which case Tenant’s responsibility for such tanks shall be as set forth in this Section.

30
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21.6.    Tenant shall promptly report to Landlord any actual or suspected presence of mold or water intrusion at the Premises.
21.7.    The obligations of each party under this Article shall survive the expiration or earlier termination of the Lease. During any period of time needed by Tenant or Landlord after the termination of this Lease to complete the removal from the Premises of any such Hazardous Materials (for which Tenant is responsible pursuant to the terms of this Lease), Tenant shall be deemed a holdover tenant and subject to the provisions of Article 27.
21.8.    As used herein, the term “Hazardous Material” means any toxic, explosive, corrosive, flammable, infectious, radioactive, carcinogenic, mutagenic or otherwise hazardous substance, material or waste that is, at the time in question, regulated by Applicable Laws or any Governmental Authority.
21.9.    Notwithstanding anything to the contrary in this Lease, Landlord shall have sole control over the equitable allocation of fire control areas (as defined in the Uniform Building Code as adopted by the city or municipality(ies) in which the Project is located (the “UBC”)) within the Project for the storage of Hazardous Materials. Upon Landlord’s written request, Tenant agrees that it shall enter into a written agreement with other tenants of the Building and the Project concerning the equitable allocation of hazardous chemical storage. Notwithstanding anything to the contrary in this Lease, the quantity of Hazardous Materials allowed by this Section 21.9 is specific to Tenant and shall not run with the Lease in the event of a Transfer (as defined in Article 29). In the event of a Transfer, if the use of Hazardous Materials by such new tenant (“New Tenant”) is such that New Tenant utilizes fire control areas in the Project in excess of New Tenant’s Pro Rata Share of the Building or the Project, as applicable, then New Tenant shall, at its sole cost and expense and upon Landlord’s written request, establish and maintain a separate area of the Premises classified by the UBC as an “H” occupancy area for the use and storage of Hazardous Materials, or take such other action as is necessary to ensure that its share of the fire control areas of the Building and the Project is not greater than New Tenant’s Pro Rata Share of the Building or the Project, as applicable. Notwithstanding anything in this Lease to the contrary, Landlord shall not have and expressly disclaims any liability related to Tenant’s or other tenants’ use or disposal of fire control areas, it being acknowledged by Tenant that Tenant and other tenants are best suited to evaluate the safety and efficacy of its Hazardous Materials usage and procedures.

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22.    Odors and Exhaust. Tenant will design and operate the exhaust distribution systems consistent with established ASHRAE standards such that no other occupants of the Building or the Project (including persons legally present in any outdoor areas of the Project) will be subjected to odors or fumes (whether or not noxious) arising from Tenant’s operations in the Premises, and that the Building and the Project will not be damaged by any exhaust, in each case from Tenant’s operations. Landlord and Tenant therefore agree as follows:
22.1.    Tenant shall not cause or permit (or conduct any activities that would cause) any release of any noxious odors or fumes of any kind from the Premises.
22.2.    If the Building has a ventilation system that, in Landlord’s judgment, is adequate, suitable, and appropriate to vent the Premises in a manner that does not release odors affecting any indoor or outdoor part of the Project, Tenant shall vent the Premises through such system. If Landlord at any time determines that any existing ventilation system is inadequate, or if no ventilation system exists, Tenant shall in compliance with Applicable Laws vent all fumes and odors from the Premises (and remove odors from Tenant’s exhaust stream) as Landlord reasonably requires. The placement and configuration of all ventilation exhaust pipes, louvers and other equipment shall be subject to Landlord’s approval. Tenant acknowledges Landlord’s legitimate desire to maintain the Project (indoor and outdoor areas) in an odor-free manner, and Landlord may require Tenant to abate and remove all odors in a manner that goes beyond the requirements of Applicable Laws.
22.3.    Tenant shall, at Tenant’s sole cost and expense, provide commercially reasonable levels of odor eliminators and other devices (such as filters, air cleaners, scrubbers and whatever other equipment shall from time to time be consistent with established ASHRAE standards for like installations) to eliminate unreasonable odors, fumes or other substances in Tenant’s exhaust stream that emanate from Tenant’s operations in the Premises. Any work Tenant performs under this Section shall constitute Alterations. To the extent Landlord determines it is reasonably feasible and practicable, Landlord shall impose a similar requirement on the other tenants of the Building, but Landlord shall not be liable to Tenant for the lack of enforcement thereof.
22.4.    Tenant’s responsibility to remove, eliminate and abate odors, fumes and exhaust caused by Tenant’s operations shall continue throughout the Term. Landlord’s approval of the Tenant Improvements shall not preclude Landlord from reasonably requiring additional measures (consistent with established ASHRAE standards for like installations) to eliminate unreasonable odors, fumes and other substances in Tenant’s exhaust stream (as Landlord may designate in Landlord’s discretion to cause Tenant to comply with the terms hereof). To the extent reasonably necessary to control odors or fumes caused by Tenant’s operations in the Premises, Tenant shall install additional equipment as Landlord reasonably requires from time to time under the preceding sentence. Such installations shall constitute Alterations.
22.5.    If Tenant fails to install satisfactory odor control equipment within thirty (30) days (or such longer period as is reasonably necessary; provided Tenant has ceased to cause the odor to be disseminated outside the Premises or has commenced and diligently pursued the installation of such odor control equipment within the aforementioned thirty (30) day period) after Landlord’s written demand made at any time, then Landlord may, without limiting Landlord’s other rights and remedies, require Tenant to cease and suspend any operations in the Premises that, in Landlord’s determination, cause such odors, fumes or exhaust. For example, if Landlord reasonably determines that Tenant’s production of a certain type of product causes odors, fumes or exhaust, and Tenant does not install satisfactory odor control equipment within thirty (30) days (or such longer period as is reasonably necessary; provided Tenant commences and diligently pursues the installation of such odor control equipment within the aforementioned thirty (30) day period) after Landlord’s written request, then Landlord may require Tenant to stop producing such type of product in the Premises unless and until Tenant has installed odor control equipment reasonably satisfactory to Landlord.

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23.    Insurance; Waiver of Subrogation.
23.1.    Landlord shall maintain property insurance for the Building and the Project in amounts equal to full replacement cost (exclusive of the costs of excavation, foundations and footings, engineering costs or such other costs to the extent the same are not incurred in the event of a rebuild and without reference to depreciation taken by Landlord upon its books or tax returns), providing protection against any peril generally included within the classification “Special Form,” together with insurance against sprinkler damage (if applicable), vandalism and malicious mischief. Landlord, subject to availability thereof, shall further insure, if Landlord reasonably deems it appropriate, coverage against flood, environmental hazard, earthquake, loss or failure of building equipment, rental loss during the period of repairs or rebuilding, Workers’ Compensation insurance and fidelity bonds for employees employed to perform services. Notwithstanding the foregoing, Landlord may, but shall not be deemed required to, provide insurance for any improvements installed by Tenant or that are in addition to the standard improvements customarily furnished by Landlord; provided that Landlord shall provide insurance for the Tenant Improvements to the extent the same constitute fixtures of the Building that are owned by Landlord pursuant to this Lease, without regard to whether or not such are made a part of or are affixed to the Building.
23.2.    In addition, Landlord shall carry Commercial General Liability insurance with combined single limits of not less than Five Million Dollars ($5,000,000) per occurrence/general aggregate for bodily injury (including death), or property damage with respect to the Project, to be written on an occurrence basis.
23.3.    Tenant shall, at its own cost and expense, procure and maintain during the Term the following insurance for the benefit of Tenant and Landlord (as their interests may appear) with insurers financially acceptable and lawfully authorized to do business in the state where the Premises are located:    
(a)    Commercial General Liability insurance on a broad-based occurrence coverage form, with coverages including but not limited to bodily injury (including death), property damage (including loss of use resulting therefrom), premises/operations, personal & advertising injury, and contractual liability with limits of liability of not less than $2,000,000 for bodily injury and property damage per occurrence, $2,000,000 general aggregate, which limits may be met by use of excess and/or umbrella liability insurance provided that such coverage is at least as broad as the primary coverages required herein.
(b)    Commercial Automobile Liability insurance covering liability arising from the use or operation of any auto, including those owned, hired or otherwise operated or used by or on behalf of the Tenant. The coverage shall be on a broad-based occurrence form with combined single limits of not less than $1,000,000 per accident for bodily injury and property damage.

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(c)     Property insurance covering property damage to the full replacement cost value. Covered property shall include all tenant improvements in the Premises (to the extent not insured by Landlord pursuant to Section 23.1) and Tenant’s Property including personal property, furniture, fixtures, machinery, equipment, stock, inventory and improvements and betterments, which may be owned by Tenant or Landlord and required to be insured hereunder, or which may be leased, rented, borrowed or in the care custody or control of Tenant, or Tenant’s agents, employees or subcontractors. Such insurance shall be written on an “all risk” of physical loss or damage basis including the perils of fire, extended coverage, electrical injury, mechanical breakdown, windstorm, vandalism, malicious mischief, sprinkler leakage, back-up of sewers or drains, flood, earthquake, terrorism and such other risks Landlord may from time to time designate, for the full replacement cost value of the covered items with an agreed amount endorsement with no co-insurance.
(d)     Workers’ Compensation insurance as is required by statute or law, or as may be available on a voluntary basis and Employers’ Liability insurance with limits of not less than the following: each accident, Five Hundred Thousand Dollars ($500,000); disease ($500,000); disease (each employee), Five Hundred Thousand Dollars ($500,000).
(e)    Pollution Legal Liability insurance is required if Tenant stores, handles, generates or treats Hazardous Materials, as determined solely by Landlord, on or about the Premises. Such coverage shall include bodily injury, sickness, disease, death or mental anguish or shock sustained by any person; property damage including physical injury to or destruction of tangible property including the resulting loss of use thereof, clean-up costs, and the loss of use of tangible property that has not been physically injured or destroyed; and defense costs, charges and expenses incurred in the investigation, adjustment or defense of claims for such compensatory damages. Coverage shall apply to both sudden and non-sudden pollution conditions including the discharge, dispersal, release or escape of smoke, vapors, soot, fumes, acids, alkalis, toxic chemicals, liquids or gases, waste materials or other irritants, contaminants or pollutants into or upon land, the atmosphere or any watercourse or body of water. Claims-made coverage is permitted, provided the policy retroactive date is continuously maintained prior to the commencement date of this agreement, and coverage is continuously maintained during all periods in which Tenant occupies the Premises and for a period of two (2) years thereafter. Coverage shall be maintained with limits of not less than $1,000,000 per incident with a $2,000,000 policy aggregate. The provisions of this Section shall survive the expiration or earlier termination of this Lease.
(f)    During all construction by Tenant at the Premises, with respect to tenant improvements being constructed (including the Tenant Improvements and any Alterations, insurance required in Exhibit B-1 must be in place.
The insurance required of Tenant by this Article shall be with companies at all times having a current rating of not less than A- and financial category rating of at least Class VII in “A.M. Best’s Insurance Guide” current edition. Tenant shall obtain for Landlord from the insurance companies/broker or cause the insurance companies/broker to furnish certificates of insurance evidencing all coverages required herein to Landlord. No such policy shall be cancelable or subject to reduction of coverage or other modification or cancellation except after twenty (20) days’ prior written notice to Landlord from Tenant or its insurers (except in the event of non- payment of premium, in which case ten (10) days’ written notice shall be given). All such policies shall be written as primary policies, not contributing with and not in excess of the coverage that Landlord may carry. Tenant’s required policies shall contain severability of interests clauses stating that, except with respect to limits of insurance, coverage shall apply separately to each insured or additional insured. Tenant shall, no later than five (5) business days after replacement or renewal of any policy required hereunder, furnish Landlord with renewal certificates of insurance or binders. Tenant agrees that if Tenant does not take out and maintain such insurance, and such failure continues for five (5) days after written notice to Tenant, Landlord may (but shall not be required to) procure such insurance on Tenant’s behalf and at its cost to be paid by Tenant as Additional Rent. Commercial General Liability, Commercial Automobile Liability, Umbrella Liability and Pollution Legal Liability insurance as required above shall name Landlord, BioMed Realty, L.P., and BioMed Realty Trust, Inc., and their respective officers, employees, agents, general partners, members, subsidiaries, affiliates and Lenders (“Landlord Parties”) as additional insureds as respects liability arising from work or operations performed by or on behalf of Tenant, Tenant’s use or occupancy of Premises, and ownership, maintenance or use of vehicles by or on behalf of Tenant.

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23.4.    In each instance where insurance is to name Landlord Parties as additional insureds, Tenant shall, upon Landlord’s written request, also designate and furnish certificates evidencing such Landlord Parties as additional insureds to (a) any Lender of Landlord holding a security interest in the Building or the Project, (b) the landlord under any lease whereunder Landlord is a tenant of the real property upon which the Building is located if the interest of Landlord is or shall become that of a tenant under a ground lease rather than that of a fee owner and (c) any management company retained by Landlord to manage the Project. No such additional insured coverage shall protect or insure against loss arising from the gross negligence of an additional insured.
23.5.    Subject to Section 23.6, Tenant assumes the risk of damage to any fixtures, goods, inventory, merchandise, equipment and leasehold improvements (except to the extent caused by Landlord’s gross negligence or willful misconduct). Further, Tenant assumes the risk of and Landlord shall not be liable for injury to Tenant’s business or any loss of income therefrom, relative to such damage, all as more particularly set forth within this Lease. Tenant shall, at Tenant’s sole cost and expense, carry such insurance as Tenant desires for Tenant’s protection with respect to personal property of Tenant or business interruption.
23.6.    Landlord and Tenant each hereby waive any and all rights of recovery against the other or against the officers, directors, employees, agents and representatives of the other on account of loss or damage sustained by such waiving party or its property or the property of others under such waiving party’s control, in each case to the extent that such loss or damage is insured against (or required under this Lease to be insured) under any insurance policy that either Landlord or Tenant may have in force at the time of such loss or damage or is obligated to carry pursuant to this Lease. Such waivers shall continue so long as their respective insurers so permit. Any termination of such a waiver shall be by written notice to the other party, containing a description of the circumstances hereinafter set forth in this Section. Landlord and Tenant, upon obtaining the policies of insurance required or permitted under this Lease, shall give notice to the insurance carrier or carriers that the foregoing mutual waiver of subrogation is contained in this Lease. If such policies shall not be generally obtainable from reputable insurers with such waiver or shall be so obtainable only at a premium over that chargeable without such waiver, then the party seeking such policy shall notify the other of such conditions, and the party so notified shall have ten (10) days thereafter to either (a) procure such insurance with companies reasonably satisfactory to the other party or (b) agree to pay such additional premium (in Tenant’s case, in the proportion that the area of the Premises bears to the insured area). If the parties do not accomplish either (a) or (b), then this Section shall have no effect during such time as such policies shall not be obtainable or the party in whose favor a waiver of subrogation is desired refuses to pay the additional premium. If such policies shall at any time be generally unobtainable from reputable insurers, but shall be subsequently obtainable, then neither party shall be subsequently liable for a failure to obtain such insurance until a reasonable time after notification thereof by the other party. If the release of either Landlord or Tenant, as set forth in the first sentence of this Section, shall contravene Applicable Laws, then the liability of the party in question shall be deemed not released but shall be secondary to the liability of the other party’s insurer.

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23.7.    Any costs incurred by Landlord pursuant to this Article shall constitute a portion of Operating Expenses.
24.    Damage or Destruction.
24.1.    In the event of a partial destruction of (a) the Premises or (b) Common Area of the Building or the Project ((a) and (b) together, the “Affected Areas”) by fire or other perils covered by special form insurance not exceeding twenty-five percent (25%) of the full insurable value thereof, and provided that (x) the damage thereto is such that the Affected Areas may be repaired, reconstructed or restored within a period of twelve (12) months from the date of the happening of such casualty, (y) Landlord shall receive insurance proceeds sufficient to cover the cost of such repairs, reconstruction and restoration (except for any deductible amount provided by Landlord’s policy, which deductible amount, if paid by Landlord, shall constitute an Operating Expense) and (z) such casualty was not intentionally caused by a Tenant Party, then Landlord shall commence and proceed diligently with the work of repair, reconstruction and restoration of the Affected Areas and this Lease shall continue in full force and effect. To the extent reasonably practicable, Landlord shall commence the work or repair, reconstruction and restoration of the Affected Areas within two (2) months after the date of the Damage Repair Estimate (as defined below); provided that, for purposes of this Section, preparing requests for proposals, obtaining estimates or signing contracts with designers or contractors shall constitute commencement of the work or repair, reconstruction and restoration of the Affected Areas.
24.2.    In the event of any damage to or destruction of the Building or the Project other than as described in Section 24.1, Landlord may elect to repair, reconstruct and restore the Building or the Project, as applicable, in which case this Lease shall continue in full force and effect. If Landlord elects not to repair, reconstruct and restore the Building or the Project, as applicable, then this Lease shall terminate as of the date of such damage or destruction. In the event of any damage or destruction (regardless of whether such damage is governed by Section 24.1 or this Section), if (a) in Landlord’s determination as set forth in the Damage Repair Estimate (as defined below), the Affected Areas cannot be repaired, reconstructed or restored within twelve (12) months after the date of the Damage Repair Estimate, or (b) the Affected Areas are not actually repaired, reconstructed and restored within the longer of (i) twelve (12) months after the Damage Repair Estimate or (ii) the period estimated for repair, reconstruction or restoration as set forth in the Damage Repair Estimate, then Tenant shall have the right to terminate this Lease by delivering written notice thereof (the “Casualty Termination Notice”) (y) with respect to Subsection 24.2(a), no later than fifteen (15) days after Landlord delivers to Tenant the Damage Repair Estimate, and (z) with respect to Subsection 24.2(b), no later than fifteen (15) days after such period expires. If Tenant provides Landlord with a Casualty Termination Notice pursuant to Subsection 24.2(z), Landlord shall have an additional thirty (30) days after receipt of such Casualty Termination Notice to substantially complete the repair, reconstruction or restoration of the Affected Areas. If Landlord does not substantially complete the repair, reconstruction and restoration of the Affected Areas within such thirty (30) day period, then this Lease shall be terminated upon the expiration of such thirty (30) day period, except as to any provisions that expressly survive the termination of this Lease.

36
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24.3.    Landlord shall give written notice to Tenant within sixty (60) days following the date of damage or destruction of its election not to repair, reconstruct or restore the Building or the Project, as applicable. In addition, as soon as reasonably practicable, but in any event within sixty (60) days following the date of damage or destruction, Landlord shall notify Tenant of Landlord’s good faith estimate of the period of time in which the repairs, reconstruction and restoration will be completed (the “Damage Repair Estimate”), which estimate shall be based upon the opinion of a contractor reasonably selected by Landlord and experienced in comparable repair, reconstruction and restoration of similar buildings. Additionally, Landlord shall give written notice to Tenant within sixty (60) days following the date of damage or destruction of its election not to repair, reconstruct or restore the Building or the Property, as applicable.
24.4.    Upon any termination of this Lease under any of the provisions of this Article, the parties shall be released thereby without further obligation to the other from the date possession of the Premises is surrendered to Landlord, except with regard to (a) items occurring prior to the damage or destruction and (b) provisions of this Lease that, by their express terms, survive the expiration or earlier termination hereof. Notwithstanding the foregoing, any Rent that has been paid and is attributable to any period after the effective date of such termination shall be reimbursed to Tenant within thirty (30) days after demand by Tenant.
24.5.    In the event of repair, reconstruction and restoration as provided in this Article, all Rent to be paid by Tenant under this Lease shall be abated proportionately based on the extent to which Tenant’s use of the Premises is impaired during the period of such repair, reconstruction or restoration, unless Landlord provides Tenant with other space in the Project during the period of repair, reconstruction and restoration that, in Tenant’s reasonable opinion, is suitable for the temporary conduct of Tenant’s business; provided, however, that the amount of such abatement shall be reduced by the proceeds of business interruption insurance actually received by Tenant with respect to the Premises.
24.6.    Notwithstanding anything to the contrary contained in this Article, should Landlord be delayed or prevented from completing the repair, reconstruction or restoration of the damage or destruction to the Premises after the occurrence of such damage or destruction by Force Majeure or delays caused by a Tenant Party, then the time for Landlord to commence or complete repairs, reconstruction and restoration shall be extended on a day-for-day basis.

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24.7.    If Landlord is obligated to or elects to repair, reconstruct or restore as herein provided, then Landlord shall be obligated to make such repairs, reconstruction or restoration only with regard to (a) those portions of the Premises that were originally provided at Landlord’s expense and (b) the Common Area portion of the Affected Areas. The repairs, reconstruction or restoration of improvements not originally provided by Landlord or at Landlord’s expense shall be the obligation of Tenant. Tenant shall be entitled to settle, adjust and receive the proceeds of any insurance policies held by Tenant, and to use the proceeds thereof as Tenant deems appropriate. In the event Tenant has elected to upgrade certain improvements from Landlord’s building standard (the “Building Standard”), Landlord shall, upon the need for replacement due to an insured loss, provide only the Building Standard, unless Tenant again elects to upgrade such improvements and pay any incremental costs related thereto, except to the extent that excess insurance proceeds, if received, are adequate to provide such upgrades, in addition to providing for basic repairs, reconstruction and restoration of the Premises, the Building and the Project.
24.8.    Notwithstanding anything to the contrary contained in this Article, Landlord shall not have any obligation whatsoever to repair, reconstruct or restore the Premises if the damage resulting from any casualty covered under this Article occurs during the last twenty-four (24) months of the Term or any extension thereof, or to the extent that insurance proceeds are not available therefor. In either event, Landlord shall promptly notify Tenant and, unless Tenant decides to exercise an available extension option under this Lease within fifteen (15) days after the receipt of such notice, then either party shall have the right to terminate this Lease by notice to the other.
24.9.    Landlord’s obligation, should it elect or be obligated to repair, reconstruct or restore, shall be limited to the Affected Areas. Tenant shall, at its expense, replace or fully repair all of Tenant’s personal property and any Alterations installed by Tenant existing at the time of such damage or destruction. If Affected Areas are to be repaired, reconstructed or restored in accordance with the foregoing, Landlord shall make available to Tenant any portion of insurance proceeds it receives that are allocable to the Alterations constructed by Tenant pursuant to this Lease; provided Tenant is not then in default (a) of any non-monetary obligation under this Lease of which Landlord has delivered notice to Tenant, and (b) of any monetary obligation under this Lease, and subject to the requirements of any Lender of Landlord.
24.10.    This Article sets forth the terms and conditions upon which this Lease may terminate in the event of any damage or destruction. Accordingly, the parties hereby waive the provisions of any Applicable Laws (and any successor statutes) permitting the parties to terminate this Lease as a result of any damage or destruction.
25.    Eminent Domain.
25.1.    In the event (a) the whole of all Affected Areas or (b) such part thereof as shall substantially interfere (in Tenant’s reasonable determination) with Tenant’s use and occupancy of the Premises for the Permitted Use shall be taken for any public or quasi-public purpose by any lawful power or authority by exercise of the right of appropriation, condemnation or eminent domain, or sold to prevent such taking, Tenant or Landlord may terminate this Lease effective as of the date possession is required to be surrendered to such authority, except with regard to (y) items occurring prior to the taking and (z) provisions of this Lease that, by their express terms, survive the expiration or earlier termination hereof.

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25.2.    In the event of a partial taking of (a) the Building or the Project or (b) drives, walkways or parking areas serving the Building or the Project for any public or quasi-public purpose by any lawful power or authority by exercise of right of appropriation, condemnation, or eminent domain, or sold to prevent such taking, then, without regard to whether any portion of the Premises occupied by Tenant was so taken, and provided Landlord also terminates the leases of other tenants similarly affected by such taking, Landlord may elect to terminate this Lease (except with regard to (y) items occurring prior to the taking and (z) provisions of this Lease that, by their express terms, survive the expiration or earlier termination hereof) as of such taking if such taking is, in Landlord’s reasonable opinion, of a material nature such as to make it uneconomical to continue use of the unappropriated portion for purposes of renting office or laboratory space.
25.3.    Tenant shall be entitled to any award that is specifically awarded as compensation for (a) the taking of Tenant’s personal property that was installed at Tenant’s expense and (b) the costs of Tenant moving to a new location. Except as set forth in the previous sentence, any award for such taking shall be the property of Landlord.
25.4.    If, upon any taking of the nature described in this Article, this Lease continues in effect, then Landlord shall promptly proceed to restore the Affected Areas to substantially their same condition prior to such partial taking. To the extent such restoration is infeasible, as determined by Landlord in its commercially reasonable discretion, the Rent shall be decreased proportionately to reflect the loss of any portion of the Premises no longer available to Tenant. In addition, prior to and during any such period of restoration, all Base Rent and Operating Expenses to be paid by Tenant pursuant to this Lease shall be abated proportionately based on the extent to which Tenant’s use of the Premises for the Permitted Use is impaired.
25.5.    This Article sets forth the terms and conditions upon which this Lease may terminate in the event of any damage or destruction. Accordingly, the parties hereby waive the provisions of any Applicable Laws (and any successor statutes) permitting the parties to terminate this Lease as a result of any damage or destruction.
26.    Surrender.
26.1.    At least thirty (30) days prior to Tenant’s surrender of possession of any part of the Premises, Tenant shall provide Landlord with a facility decommissioning and Hazardous Materials closure plan for the Premises (“Exit Survey”) prepared by an independent third party state-certified professional with appropriate expertise, which Exit Survey must be reasonably acceptable to Landlord. The Exit Survey shall comply with the American National Standards Institute’s Laboratory Decommissioning guidelines (ANSI/AIHA Z9.11-2008) or any successor standards published by ANSI or any successor organization (or, if ANSI and its successors no longer exist, a similar entity publishing similar standards). In addition, at least ten (10) days prior to Tenant’s surrender of possession of any part of the Premises, Tenant shall (a) provide Landlord with written evidence of all appropriate governmental releases obtained by Tenant in accordance with Applicable Laws, including laws pertaining to the surrender of the Premises, (b) place Laboratory Equipment Decontamination Forms on all decommissioned equipment to assure safe occupancy by future users and (c) conduct a site inspection with Landlord. In addition, Tenant agrees to remain responsible after the surrender of the Premises for the remediation of any recognized environmental conditions set forth in the Exit Survey and comply with any recommendations set forth in the Exit Survey for which Tenant is responsible pursuant to this Lease or Applicable Laws. Tenant’s obligations under this Section shall survive the expiration or earlier termination of the Lease.

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26.2.    No surrender of possession of any part of the Premises shall release Tenant from any of its obligations hereunder, unless such surrender is accepted in writing by Landlord.
26.3.    The voluntary or other surrender of this Lease by Tenant shall not effect a merger with Landlord’s fee title or leasehold interest in the Premises, the Building, the Property or the Project, unless Landlord consents in writing, and shall, at Landlord’s option, operate as an assignment to Landlord of any or all subleases.
26.4.    The voluntary or other surrender of any ground or other underlying lease that now exists or may hereafter be executed affecting the Building or the Project, or a mutual cancellation thereof or of Landlord’s interest therein by Landlord and its lessor shall not effect a merger with Landlord’s fee title or leasehold interest in the Premises, the Building or the Property and shall, at the option of the successor to Landlord’s interest in the Building or the Project, as applicable, operate as an assignment of this Lease.
27.    ++++

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28.    Indemnification and Exculpation.
28.1.    Tenant agrees to indemnify, save, defend (at Landlord’s option and with counsel reasonably acceptable to Landlord) and hold the Landlord Indemnitees harmless from and against any and all Claims of any kind or nature, real or alleged, arising from injury to or death of any person or damage to any property occurring within or about the Premises, the Building, the Property or the Project, arising directly or indirectly out of (a) the presence at or use or occupancy of the Premises or Project by a Tenant Party, (b) an act or omission on the part of any Tenant Party, (c) a breach or default by Tenant in the performance of any of its obligations hereunder or (d) injury to or death of persons or damage to or loss of any property, real or alleged, arising from the serving of alcoholic beverages at the Premises or Project, including liability under any dram shop law, host liquor law or similar Applicable Law, except to the extent directly caused by Landlord’s or a Landlord Party’s negligence or willful misconduct. Tenant’s obligations under this Section shall not be affected, reduced or limited by any limitation on the amount or type of damages, compensation or benefits payable by or for Tenant under workers’ compensation acts, disability benefit acts, employee benefit acts or similar legislation. Tenant’s obligations under this Section shall survive the expiration or earlier termination of this Lease. Subject to Sections 23.6, 28.2 and 31.12 and any subrogation provisions contained in the Work Letter, Landlord agrees to indemnify, save, defend (at Tenant’s option and with counsel reasonably acceptable to Tenant) and hold the Tenant Parties harmless from and against any and all Claims arising from injury to or death of any person or damage to or loss of any physical property occurring within or about the Premises, the Building, the Property or the Project to the extent directly arising out of Landlord’s gross negligence or willful misconduct. Landlord’s obligations under this Section shall not be affected, reduced or limited by any limitation on the amount or type of damages, compensation or benefits payable by or for Landlord under workers’ compensation acts, disability benefit acts, employee benefit acts or similar legislation. Landlord’s obligations under this Section shall survive the expiration or earlier termination of this Lease.
28.2.    Notwithstanding anything in this Lease to the contrary, Landlord shall not be liable to Tenant for and Tenant assumes all risk of (a) damage or losses caused by fire, electrical malfunction, gas explosion or water damage of any type (including broken water lines, malfunctioning fire sprinkler systems, roof leaks or stoppages of lines), unless any such loss is due to Landlord’s gross negligence or willful disregard of written notice by Tenant of need for a repair that Landlord is responsible to make for an unreasonable period of time, and (b) damage to personal property or scientific research, including loss of records kept by Tenant within the Premises (in each case, regardless of whether such damages are foreseeable). Tenant further waives any claim for injury to Tenant’s business or loss of income relating to any such damage or destruction of personal property as described in this Section. Notwithstanding anything in the foregoing or this Lease to the contrary, except (x) as otherwise provided in this Lease (including Section 27.2), (y) as may be provided by Applicable Laws or (z) in the event of Tenant’s breach of Article 21 or Section 26.1, in no event shall Landlord or Tenant be liable to the other for any consequential, special or indirect damages arising out of this Lease, including lost profits (provided that this Subsection 28.2(z) shall not limit Tenant’s liability for Base Rent or Additional Rent pursuant to this Lease).

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28.3.    Landlord shall not be liable for any damages arising from any act, omission or neglect of any other tenant in the Building or the Project, or of any other third party; provided, however, that nothing in this Section shall relieve Landlord of its repair and maintenance obligations expressly set forth in this Lease.
28.4.    Tenant acknowledges that security devices and services, if any, while intended to deter crime, may not in given instances prevent theft or other criminal acts. Landlord shall not be liable for injuries or losses caused by criminal acts of third parties, and Tenant assumes the risk that any security device or service may malfunction or otherwise be circumvented by a criminal. If Tenant desires protection against such criminal acts, then Tenant shall, at Tenant’s sole cost and expense, obtain appropriate insurance coverage. Tenant’s security programs and equipment for the Premises shall be coordinated with Landlord and subject to Landlord’s reasonable approval.
28.5.    The provisions of this Article shall survive the expiration or earlier termination of this Lease.
29.    Assignment or Subletting.
29.1.    Except as hereinafter expressly permitted, none of the following (each, a “Transfer”), either voluntarily or by operation of Applicable Laws, shall be directly or indirectly performed without Landlord’s prior written consent (which consent, subject to the terms of this Article, shall not be unreasonably withheld, conditioned or delayed): (a) Tenant selling, hypothecating, assigning, pledging, encumbering or otherwise transferring this Lease or subletting the Premises or (b) a controlling interest in Tenant being sold, assigned or otherwise transferred (other than as a result of shares in Tenant being sold on a public stock exchange). ++++ In no event shall Tenant perform a Transfer to or with an entity that is a tenant at the Project or that is in discussions or negotiations with Landlord to lease premises at the Project if Landlord has comparable space available for lease at the Project.

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29.2.    In the event Tenant desires to effect a Transfer, then, at least fifteen (15) but not more than ninety (90) days prior to the date when Tenant desires the Transfer to be effective (the “Transfer Date”), Tenant shall provide written notice to Landlord (the “Transfer Notice”) containing information (including references) concerning the business and experience of the proposed transferee, assignee or sublessee; the Transfer Date; the most recent unconsolidated financial statements of Tenant and of the proposed transferee, assignee or sublessee satisfying the requirements of Section 40.2 (“Required Financials”); any ownership or commercial relationship between Tenant and the proposed transferee, assignee or sublessee; and the consideration and all other material terms and conditions of the proposed Transfer, all in such detail as Landlord shall reasonably require. Within fifteen (15) days after receipt of a Transfer Notice, Landlord shall either (a) reasonably withhold its consent to the Transfer and state in reasonable detail the grounds therefor or (b) consent to the same. If Landlord has not denied consent as provided in the preceding sentence within such fifteen (15) day period, Landlord will be deemed to have consented.
29.3.    Landlord, in determining whether consent should be given to a proposed Transfer, may give consideration to (a) the financial strength of Tenant and of such transferee, assignee or sublessee (notwithstanding Tenant remaining liable for Tenant’s performance), (b) any change in use that such transferee, assignee or sublessee proposes to make in the use of the Premises and (c) Landlord’s desire to exercise its rights under Section 29.7 to cancel this Lease. In no event shall Landlord be deemed to be unreasonable for declining to consent to a Transfer to a transferee, assignee or sublessee of poor reputation, lacking financial qualifications or seeking a change in the Permitted Use, or jeopardizing directly or indirectly the status of Landlord or any of Landlord’s affiliates as a Real Estate Investment Trust under the Internal Revenue Code of 1986 (as the same may be amended from time to time, the “Revenue Code”). Notwithstanding anything contained in this Lease to the contrary, (w) no Transfer shall be consummated on any basis such that the rental or other amounts to be paid by the occupant, assignee, manager or other transferee thereunder would be based, in whole or in part, on the income or profits derived by the business activities of such occupant, assignee, manager or other transferee; (x) Tenant shall not furnish or render any services to an occupant, assignee, manager or other transferee with respect to whom transfer consideration is required to be paid, or manage or operate the Premises or any capital additions so transferred, with respect to which transfer consideration is being paid; (y) Tenant shall not consummate a Transfer with any person in which Landlord owns an interest, directly or indirectly (by applying constructive ownership rules set forth in Section 856(d)(5) of the Revenue Code); and (z) Tenant shall not consummate a Transfer with any person or in any manner that could cause any portion of the amounts received by Landlord pursuant to this Lease or any sublease, license or other arrangement for the right to use, occupy or possess any portion of the Premises to fail to qualify as “rents from real property” within the meaning of Section 856(d) of the Revenue Code, or any similar or successor provision thereto or which could cause any other income of Landlord to fail to qualify as income described in Section 856(c)(2) of the Revenue Code.

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29.4.    The following are conditions precedent to a Transfer or to Landlord considering a request by Tenant to a Transfer:
(a)    Tenant shall remain fully liable under this Lease and Guarantor shall remain fully liable under the Guaranty during the unexpired Term and after the Term with respect to any provisions that survive the expiration or earlier termination thereof. Tenant agrees that it shall not be (and shall not be deemed to be) a guarantor or surety of this Lease, however, and waives its right to claim that is it is a guarantor or surety or to raise in any legal proceeding any guarantor or surety defenses permitted by this Lease or by Applicable Laws;
(b)    [Intentionally omitted]
(c)    ++++
(d)    Tenant shall provide Landlord with evidence respecting the relevant business experience and financial responsibility and status of the proposed transferee, assignee or sublessee;
(e)    Tenant shall reimburse Landlord for Landlord’s actual costs and expenses, including reasonable attorneys’ fees, charges and disbursements incurred in connection with the review, processing and documentation of such request (provided that Tenant shall not be required to reimburse costs and expenses in an amount that exceeds Three Thousand Five Hundred Dollars ($3,500) per transaction);
(f)    ++++ if Tenant’s transfer of rights or sharing of the Premises provides for the receipt by, on behalf of or on account of Tenant of any consideration of any kind whatsoever (including a premium rental for a sublease or lump sum payment for an assignment, but excluding Tenant’s reasonable costs in marketing and subleasing the Premises) in excess of the rental and other charges due to Landlord under this Lease, Tenant shall pay fifty percent (50%) of all of such excess to Landlord, after making deductions from such excess for all reasonable marketing expenses, tenant improvement funds expended by Tenant, alterations, cash concessions, brokerage commissions, attorneys’ fees and free rent actually paid by Tenant. If such consideration consists of cash paid to Tenant, payment to Landlord shall be made upon receipt by Tenant of such cash payment;
(g)    The proposed transferee, assignee or sublessee shall agree that, in the event Landlord gives such proposed transferee, assignee or sublessee notice that Tenant is in Default under this Lease, such proposed transferee, assignee or sublessee shall thereafter make all payments otherwise due Tenant directly to Landlord, which payments shall be received by Landlord without any liability being incurred by Landlord, except to credit such payment against those due by Tenant under this Lease, and any such proposed transferee, assignee or sublessee shall agree to attorn to Landlord or its successors and assigns should this Lease be terminated for any reason; provided, however, that in no event shall Landlord or its Lenders, successors or assigns be obligated to accept such attornment;
(h)    Landlord’s consent to any such Transfer shall be effected on Landlord’s commercially reasonable forms;

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(i)    Tenant shall not then be in default hereunder of any material non- monetary obligation under this Lease of which Tenant has received written notice or any monetary obligation under this Lease in any respect;
(j)    Such proposed transferee, assignee or sublessee’s use of the Premises shall be the same as the Permitted Use;
(k)    Landlord shall not be bound by any provision of any agreement pertaining to the Transfer, except for Landlord’s written consent to the same;
(l)    Tenant shall pay all transfer and other taxes (including interest and penalties) assessed or payable for any Transfer;
(m)    Landlord’s consent (or waiver of its rights) for any Transfer shall not waive Landlord’s right to consent or refuse consent to any later Transfer;
(n)    Tenant shall deliver to Landlord one executed copy of any and all written instruments evidencing or relating to the Transfer; and
(o)    Tenant shall deliver to Landlord a list of Hazardous Materials (as defined below), certified by the proposed transferee, assignee or sublessee to be true and correct, that the proposed transferee, assignee or sublessee intends to use or store in the Premises. Additionally, Tenant shall deliver to Landlord, on or before the date any proposed transferee, assignee or sublessee takes occupancy of the Premises, all of the items relating to Hazardous Materials of such proposed transferee, assignee or sublessee as described in Section 21.2.
29.5.    Any Transfer that is not in compliance with the provisions of this Article or with respect to which Tenant does not fulfill its obligations pursuant to this Article shall be void and shall, at the option of Landlord, terminate this Lease.
29.6.    Notwithstanding any Transfer, Tenant shall remain fully and primarily liable for the payment of all Rent and other sums due or to become due hereunder, and for the full performance of all other terms, conditions and covenants to be kept and performed by Tenant. The acceptance of Rent or any other sum due hereunder, or the acceptance of performance of any other term, covenant or condition thereof, from any person or entity other than Tenant shall not be deemed a waiver of any of the provisions of this Lease or a consent to any Transfer.
29.7.    If Tenant delivers to Landlord a Transfer Notice indicating a desire to transfer this Lease to a proposed transferee or assignee or to sublease any portion of the Premises to any sublessee for seventy-five percent (75%) or more of the remainder of the Term, other than pursuant to an Exempt Transfer or as provided within Section 29.4, then Landlord shall have the option, exercisable by giving notice to Tenant at any time within ten (10) business days after Landlord’s receipt of such Transfer Notice, to terminate this Lease as of the date specified in the Transfer Notice as the Transfer Date, except for those provisions that, by their express terms, survive the expiration or earlier termination hereof with respect to the space subject to the Transfer Notice (in which event Base Rent and Additional Rent shall be adjusted to reflect the revised rentable square footage of the Premises less the rentable square footage of the space subject to the Transfer Notice). If Landlord exercises such option, then Tenant shall have the right to withdraw such Transfer Notice by delivering to Landlord written notice of such election within five (5) business days after Landlord’s delivery of notice electing to exercise Landlord’s option to terminate this Lease. In the event Tenant withdraws the Transfer Notice as provided in this Section, this Lease shall continue in full force and effect. No failure of Landlord to exercise its option to terminate this Lease shall be deemed to be Landlord’s consent to a proposed Transfer.

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The portions of this Exhibit marked with ++++ signify a redaction in the original Exhibit.


29.8.    If Tenant sublets the Premises or any portion thereof, Tenant hereby immediately and irrevocably assigns to Landlord, as security for Tenant’s obligations under this Lease, all rent from any such subletting, and Landlord may, after the occurrence of a Default (and while the same remains uncured), collect such rent and apply it toward Tenant’s obligations under this Lease; provided that, until the occurrence of a Default (as defined below) by Tenant, Tenant shall have the right to collect such rent.
30.    Subordination and Attornment.
30.1.    This Lease shall be subject and subordinate to the lien of any mortgage, deed of trust, or lease in which Landlord is tenant now or hereafter in force against the Building or the Project and to all advances made or hereafter to be made upon the security thereof without the necessity of the execution and delivery of any further instruments on the part of Tenant to effectuate such subordination.
30.2.    Notwithstanding the foregoing, Tenant shall execute and deliver such further commercially reasonable instrument or instruments evidencing such subordination of this Lease to the lien of any such mortgage or mortgages or deeds of trust or lease in which Landlord is tenant as may be required by Landlord on the lender’s commercially reasonable standard form, as modified to include commercially reasonable comments submitted by Tenant; provided that such instrument(s) contain customary non-disturbance language, reasonably acceptable to Tenant. If any such mortgagee, beneficiary or landlord under a lease wherein Landlord is tenant (each, a “Mortgagee”) so elects, however, this Lease shall be deemed prior in lien to any such lease, mortgage, or deed of trust upon or including the Premises regardless of date and Tenant shall execute a statement in writing to such effect at Landlord’s request. If Tenant fails to execute and deliver any such instrument within ten (10) days after Landlord or such Mortgagee has made written request therefor, ++++ then such failure shall be a Default hereunder.
30.3.    [Intentionally omitted]
30.4.    In the event any proceedings are brought for foreclosure, or in the event of the exercise of the power of sale under any mortgage or deed of trust made by Landlord covering the Premises, and upon the assumption by the purchaser of Landlord’s obligations hereunder, Tenant shall at the election of the purchaser at such foreclosure or sale attorn to the purchaser upon any such foreclosure or sale and recognize such purchaser as Landlord under this Lease.

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31.    Defaults and Remedies.
31.1.    Late payment by Tenant to Landlord of Rent and other sums due shall cause Landlord to incur costs not contemplated by this Lease, the exact amount of which shall be extremely difficult and impracticable to ascertain. Such costs include processing and accounting charges and late charges that may be imposed on Landlord by the terms of any mortgage or trust deed covering the Premises. Therefore, if any installment of Rent due from Tenant is not received by Landlord within five (5) business days after the date such payment is due, Tenant shall pay to Landlord (a) an additional sum of three percent (3%) of the overdue Rent as a late charge plus (b) interest on the unpaid amount at an annual rate (the “Default Rate”) equal to the lesser of (a) twelve percent (12%) and (b) the highest rate permitted by Applicable Laws. The parties agree that this late charge represents a fair and reasonable estimate of the costs that Landlord shall incur by reason of late payment by Tenant and shall be payable as Additional Rent to Landlord due with the next installment of Rent or within five (5) days after Landlord’s demand, whichever is earlier. Landlord’s acceptance of any Additional Rent (including a late charge or any other amount hereunder) shall not be deemed an extension of the date that Rent is due or prevent Landlord from pursuing any other rights or remedies under this Lease, at law or in equity. Notwithstanding the foregoing, no such late charge or interest will be imposed with respect to the first (1st) such late payment in any twelve (12) month period.
31.2.    No payment by Tenant or receipt by Landlord of a lesser amount than the Rent payment herein stipulated shall be deemed to be other than on account of the Rent, nor shall any endorsement or statement on any check or any letter accompanying any check or payment as Rent be deemed an accord and satisfaction, and Landlord may accept such check or payment without prejudice to Landlord’s right to recover the balance of such Rent or pursue any other remedy provided in this Lease or in equity or at law. Similarly, no payment by either party or receipt by the other of a lesser amount than the amount then due hereunder shall be deemed to be other than on account of the amount then due, nor shall any endorsement or statement on any check or any letter accompanying any check or payment be deemed an accord and satisfaction, and the payee may accept such check or payment without prejudice to its right to recover the balance of such amount or pursue any other remedy provided in this Lease or in equity or at law. If a dispute shall arise as to any amount or sum of money to be paid by either party hereunder, the other party shall have the right to make payment “under protest,” such payment shall not be regarded as a voluntary payment, and there shall survive the right on the party paying to institute suit for recovery of the payment paid under protest.
31.3.    If Tenant fails to pay any sum of money required to be paid by it hereunder or perform any other act on its part to be performed hereunder, in each case within the applicable cure period (if any) described in Section 31.4, then Landlord may (but shall not be obligated to), without waiving or releasing Tenant from any obligations of Tenant, make such payment or perform such act; provided that such failure by Tenant unreasonably interfered with the use of the Building or the Project by any other tenant or with the efficient operation of the Building or the Project, or resulted or could have resulted in a violation of Applicable Laws or the cancellation of an insurance policy maintained by Landlord. Notwithstanding the foregoing, in the event of an emergency, Landlord shall have the right to enter the Premises and act in accordance with its rights as provided elsewhere in this Lease. In addition to the late charge described in Section 31.1, Tenant shall pay to Landlord as Additional Rent all actual, out-of-pocket sums so paid or incurred by Landlord, together with interest at the Default Rate, computed from the date such sums were paid or incurred.

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31.4.    The occurrence of any one or more of the following events shall constitute a “Default” hereunder by Tenant:
(a)    [Intentionally omitted];
(b)    Tenant fails to make any payment of Rent, as and when due, or to satisfy its obligations under Article 19, where such failure shall continue for a period of five (5) business days after receipt of written notice thereof from Landlord to Tenant;
(c)    Tenant fails to observe or perform any obligation or covenant contained herein (other than described in Section 31.4(b)) to be performed by Tenant, where such failure continues for a period of thirty (30) days after written notice thereof from Landlord to Tenant; provided that, if the nature of Tenant’s default is such that it reasonably requires more than thirty (30) days to cure, Tenant shall not be deemed to be in Default if Tenant commences such cure within such thirty (30) day period and thereafter diligently prosecutes the same to completion; and provided, further, that such period shall be reasonably extended in the case of any such non- monetary default that cannot be cured within such period only if (i) Tenant can reasonably cure the default, (ii) Tenant promptly commences the cure and (iii) Tenant diligently pursues the cure to completion;
(d)    Tenant makes an assignment for the benefit of creditors;
(e)    A receiver, trustee or custodian is appointed to or does take title, possession or control of all or substantially all of Tenant’s assets and such appointment is not dismissed or stayed within sixty (60) days;
(f)    Tenant or Guarantor files a voluntary petition under the United States Bankruptcy Code or any successor statute (as the same may be amended from time to time, the “Bankruptcy Code”) or an order for relief is entered against Tenant or Guarantor pursuant to a voluntary or involuntary proceeding commenced under any chapter of the Bankruptcy Code;
(g)    Any involuntary petition is filed against Tenant or Guarantor under any chapter of the Bankruptcy Code and is not dismissed within one hundred twenty (120) days;
(h)    A default by Guarantor exists under the Guaranty, after the expiration of any applicable notice and cure periods;
(i)     Tenant fails to deliver an estoppel certificate in accordance with Article 20 ++++; or
(j)     Tenant’s interest in this Lease is attached, executed upon or otherwise judicially seized and such action is not released within one hundred twenty (120) days of the action.
Notices given under this Section shall specify the alleged default and shall demand that Tenant perform the provisions of this Lease or pay the Rent that is in arrears, as the case may be, within the applicable period of time, or quit the Premises. No such notice shall be deemed a forfeiture or a termination of this Lease unless Landlord elects otherwise in such notice.

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31.5.    In the event of a Default by Tenant, and at any time thereafter, with or without notice or demand and without limiting Landlord in the exercise of any right or remedy that Landlord may have, Landlord has the right to do any or all of the following:
(a)    Halt any Tenant Improvements and Alterations and order Tenant’s contractors, subcontractors, consultants, designers and material suppliers to stop work;
(b)    Terminate Tenant’s right to possession of the Premises by written notice to Tenant or by any lawful means, in which case Tenant shall immediately surrender possession of the Premises to Landlord. In such event, Landlord shall have the immediate right to re-enter and remove all persons and property, and such property may be removed and stored in a public warehouse or elsewhere at the cost and for the account of Tenant, all with service of notice and legal process and without being deemed guilty of trespass or becoming liable for any loss or damage that may be occasioned thereby; and
(c)    Terminate this Lease, in which event Tenant shall immediately surrender possession of the Premises to Landlord. In such event, Landlord shall have the immediate right to peaceably and with process of law re-enter and remove all persons and property, and such property may be removed and stored in a public warehouse or elsewhere at the cost and for the account of Tenant, all with notice and legal process and without being deemed guilty of trespass or becoming liable for any loss or damage that may be occasioned thereby. In the event that Landlord shall elect to so terminate this Lease, then Landlord shall be entitled to recover from Tenant all damages incurred by Landlord by reason of Tenant’s default, including the sum of:
(i)    The worth at the time of determination by Landlord of any unpaid Rent that had accrued at the time of such termination; plus
(ii)     The costs of restoring the Premises to the condition required under the terms of this Lease; plus
(iii)     An amount (the “Election Amount”) equal to the positive difference (if any, and measured at the time of such termination) between (1) the then-present value of the total Rent and other benefits that would have accrued to Landlord under this Lease for the remainder of the Term if Tenant had fully complied with the Lease minus (2) the then- present cash rental value of the Premises as determined by Landlord for what would be the then- unexpired Term if the Lease remained in effect, computed using the discount rate of the Federal Reserve Bank of San Francisco at the time of the award plus one (1) percentage point (the “Discount Rate”). Landlord and Tenant agree that the Election Amount represents a reasonable forecast of the minimum damages expected to occur in the event of a breach, taking into account the uncertainty, time and cost of determining elements relevant to actual damages, such as fair market rent, time and costs that may be required to re-lease the Premises, and other factors; and that the Election Amount is not a penalty.
As used in Section 31.5(c), “worth at the time of determination by Landlord” shall be computed by allowing interest at the Default Rate.

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31.6.    In addition to any other remedies available to Landlord at law or in equity and under this Lease, Landlord may continue this Lease in effect after Tenant’s Default or abandonment and recover Rent as it becomes due. In addition, provided that Landlord attempts to mitigate its damages to the extent required by Applicable Laws, Landlord shall not be liable in any way whatsoever for its failure or refusal to relet the Premises. For purposes of this Section, the following acts by Landlord will not constitute the termination of Tenant’s right to possession of the Premises:
(a)    Acts of maintenance or preservation or efforts to relet the Premises, including alterations, remodeling, redecorating, repairs, replacements or painting as Landlord shall consider advisable for the purpose of reletting the Premises or any part thereof; or
(b)    The appointment of a receiver upon the initiative of Landlord to protect Landlord’s interest under this Lease or in the Premises.
Notwithstanding the foregoing, in the event of a Default by Tenant, Landlord may elect at any time to terminate this Lease and to recover damages to which Landlord is entitled.
31.7.    If Landlord does not elect to terminate this Lease as provided in Section 31.5, then Landlord may, from time to time, recover all Rent as it becomes due under this Lease. At any time thereafter, Landlord may elect to terminate this Lease and to recover damages to which Landlord is entitled.
31.8.    In the event Landlord elects to terminate this Lease and relet the Premises, Landlord may execute any new lease in its own name. Tenant hereunder shall have no right or authority whatsoever to collect any Rent from such tenant. The proceeds of any such reletting shall be applied as follows:
(a)    First, to the payment of any indebtedness other than Rent due hereunder from Tenant to Landlord, including storage charges or brokerage commissions owing from Tenant to Landlord as the result of such reletting;
(b)    Second, to the payment of the costs and expenses of reletting the Premises, including (i) alterations and repairs that Landlord deems reasonably necessary and advisable and (ii) reasonable attorneys’ fees, charges and disbursements incurred by Landlord in connection with the retaking of the Premises and such reletting;
(c)    Third, to the payment of Rent and other charges due and unpaid hereunder; and
(d)    Fourth, to the payment of future Rent and other damages payable by Tenant under this Lease.
31.9.    All of Landlord’s rights, options and remedies hereunder shall be construed and held to be nonexclusive and cumulative. Landlord shall have the right to pursue any one or all of such remedies, or any other remedy or relief that may be provided by Applicable Laws, whether or not stated in this Lease. No waiver of any default of either party hereunder shall be implied from any acceptance by the other of any Rent or other payments due hereunder or any omission by Landlord to take any action on account of such default if such default persists or is repeated, and no express waiver shall affect defaults other than as specified in such waiver. Notwithstanding any provision of this Lease to the contrary, in no event shall Landlord be required to mitigate its damages with respect to any default by Tenant, unless and to the extent required by Applicable Law. Any obligation imposed by Applicable Law upon Landlord to relet the Premises after any termination of this Lease shall be subject to the reasonable requirements of Landlord to (a) lease to high quality tenants on such terms as Landlord may from time to time deem appropriate in its reasonable discretion and (b) develop the Project in a harmonious manner with a mix of uses, tenants, floor areas, terms of tenancies, etc., as determined by Landlord. Landlord shall not be obligated to relet the Premises to any party to whom Landlord or an affiliate of Landlord may desire to lease other available comparable space in the Project or at another property owned by Landlord or an affiliate of Landlord.

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31.10.    Landlord’s termination of (a) this Lease or (b) Tenant’s right to possession of the Premises shall not relieve Tenant of any liability to Landlord that has previously accrued or that shall arise based upon events that occurred prior to the later to occur of (y) the date of Lease termination and (z) the date Tenant surrenders possession of the Premises.
31.11.    To the extent permitted by Applicable Laws, Tenant waives any and all rights of redemption granted by or under any present or future Applicable Laws if Tenant is evicted or dispossessed for any cause, or if Landlord obtains possession of the Premises due to Tenant’s default hereunder or otherwise.
31.12.    Landlord shall not be in default or liable for damages under this Lease unless Landlord fails to perform obligations required of Landlord within a reasonable time, but in no event shall such failure continue for more than thirty (30) days after written notice from Tenant specifying the nature of Landlord’s failure; provided, however, that if (a) the failure by Landlord gives rise to or creates a situation wherein there is an imminent risk of personal or bodily injury or Tenant is not able to reasonably and safely conduct its business, then Landlord shall respond promptly and take such steps as shall be reasonable under the circumstances, and (b) the nature of Landlord’s obligation is such that more than thirty (30) days are required for its performance, then Landlord shall not be in default if Landlord commences performance within such thirty (30) day period and thereafter diligently prosecutes the same to completion. In no event shall Tenant have the right to terminate or cancel this Lease or to withhold or abate rent or to set off any Claims against Rent as a result of any default or breach by Landlord of any of its covenants, obligations, representations, warranties or promises hereunder, except as may otherwise be expressly set forth in this Lease.
31.13.    In the event of any default by Landlord, Tenant shall, simultaneously with giving notice to Landlord, give notice by registered or certified mail to any (a) beneficiary of a deed of trust or (b) mortgagee under a mortgage covering the Premises, the Building or the Project and to any landlord of any lease of land upon or within which the Premises, the Building or the Project is located (in each case, however, only if Tenant has been provided with the notice addresses of the same by Landlord or pursuant to a subordination, nondisturbance and attornment agreement), and shall offer such beneficiary, mortgagee or landlord a reasonable opportunity to cure the default, including time to obtain possession of the Building or the Project by power of sale or a judicial action if such should prove necessary to effect a cure; provided that Landlord shall furnish to Tenant in writing, upon written request by Tenant, the names and addresses of all such persons who are to receive such notices.

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32.    Bankruptcy. In the event a debtor, trustee or debtor in possession under the Bankruptcy Code, or another person with similar rights, duties and powers under any other Applicable Laws, proposes to cure any default under this Lease or to assume or assign this Lease and is obliged to provide adequate assurance to Landlord that (a) a default shall be cured, (b) Landlord shall be compensated for its damages arising from any breach of this Lease and (c) future performance of Tenant’s obligations under this Lease shall occur, then such adequate assurances shall include any or all of the following, as designated by Landlord in its sole and absolute discretion:
32.1.    Those acts specified in the Bankruptcy Code or other Applicable Laws as included within the meaning of “adequate assurance,” even if this Lease does not concern a shopping center or other facility described in such Applicable Laws;
32.2.    A prompt cash payment to compensate Landlord for any monetary defaults or actual damages arising directly from a breach of this Lease;
32.3.    A cash deposit in an amount to be determined by Landlord; or
32.4.    The assumption or assignment of all of Tenant’s interest and obligations under this Lease.
++++

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34.    Definition of Landlord. With regard to obligations imposed upon Landlord pursuant to this Lease, the term “Landlord,” as used in this Lease, shall refer only to Landlord or Landlord’s then-current successor-in-interest. In the event of any transfer, assignment or conveyance of Landlord’s interest in this Lease or in Landlord’s fee title to or leasehold interest in the Property, as applicable, and upon the written assumption by the transferee of all of Landlord’s covenants and obligations, then Landlord herein named (and in case of any subsequent transfers or conveyances, the subsequent Landlord) shall be automatically freed and relieved, from and after the date of such transfer, assignment or conveyance, from all liability for the performance of any covenants or obligations contained in this Lease thereafter to be performed by Landlord and, without further agreement, the transferee, assignee or conveyee of Landlord’s in this Lease or in Landlord’s fee title to or leasehold interest in the Property, as applicable, shall be deemed to have assumed and agreed to observe and perform any and all covenants and obligations of Landlord hereunder during the tenure of its interest in the Lease or the Property. Landlord or any subsequent Landlord may transfer its interest in the Premises or this Lease without Tenant’s consent.
35.    Limitation of Liability.
35.1.    If Landlord is in default under this Lease and, as a consequence, Tenant recovers a monetary judgment against Landlord, the judgment shall be satisfied only out of the rents, issues, profits and proceeds of the Project, including (a) the proceeds of sale received on execution of the judgment and levy against the right, title and interest of Landlord in the Building and the Project, (b) rent or other income from such real property receivable by Landlord or (c) the consideration received by Landlord from the sale, financing, refinancing or other disposition of all or any part of Landlord’s right, title or interest in the Building or the Project.
35.2.    Neither Landlord nor any of its affiliates, nor any of their respective partners, shareholders, directors, officers, employees, members or agents shall be personally liable for Landlord’s obligations or any deficiency under this Lease, and service of process shall not be made against any shareholder, director, officer, employee or agent of Landlord or any of Landlord’s affiliates. No partner, shareholder, director, officer, employee, member or agent of Landlord or any of its affiliates shall be sued or named as a party in any suit or action, and service of process shall not be made against any partner or member of Landlord except as may be necessary to secure jurisdiction of the partnership, joint venture or limited liability company, as applicable. No partner, shareholder, director, officer, employee, member or agent of Landlord or any of its affiliates shall be required to answer or otherwise plead to any service of process, and no judgment shall be taken or writ of execution levied against any partner, shareholder, director, officer, employee, member or agent of Landlord or any of its affiliates.
35.3.    No individual (as opposed to a corporation, limited liability company, partnership, joint venture or other entity) who is a shareholder, director, officer, employee, member or agent of Tenant (such person in such capacity being referred to as a “Tenant Individual”) shall be personally liable for Tenant’s obligations or any deficiency under this Lease, and service of process shall not be made against any such Tenant Individual. No Tenant Individual shall be sued or named as a party in any suit or action. No Tenant Individual shall be required to answer or otherwise plead to any service of process, and no judgment shall be taken or writ of execution levied against any Tenant Individual.

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35.4.    Each of the covenants and agreements of this Article shall be applicable to any covenant or agreement either expressly contained in this Lease or imposed by Applicable Laws and shall survive the expiration or earlier termination of this Lease.
36.    Joint and Several Obligations. If more than one person or entity executes this Lease as Tenant, then:
36.1.    Each of them is jointly and severally liable for the keeping, observing and performing of all of the terms, covenants, conditions, provisions and agreements of this Lease to be kept, observed or performed by Tenant, and such terms, covenants, conditions, provisions and agreements shall be binding with the same force and effect upon each and all of the persons executing this Agreement as Tenant; and
36.2.    The term “Tenant,” as used in this Lease, shall mean and include each of them, jointly and severally. The act of, notice from, notice to, refund to, or signature of any one or more of them with respect to the tenancy under this Lease, including any renewal, extension, expiration, termination or modification of this Lease, shall be binding upon each and all of the persons executing this Lease as Tenant with the same force and effect as if each and all of them had so acted, so given or received such notice or refund, or so signed.
37.    Representations. Each of Landlord and Tenant (in this Article, each a “Representing Party”) guarantees, warrants and represents to the other party that (a) the Representing Party is duly incorporated or otherwise established or formed and validly existing under the laws of its state of incorporation, establishment or formation, (b) the Representing Party has and is duly qualified to do business in the state in which the Property is located, (c) the Representing Party has full corporate, partnership, trust, association or other appropriate power and authority to enter into this Lease and to perform all of its obligations hereunder, (d) each person (and all of the persons if more than one signs) signing this Lease on behalf of the Representing Party is duly and validly authorized to do so and (e) neither (i) the execution, delivery or performance of this Lease nor (ii) the consummation of the transactions contemplated hereby will violate or conflict with any provision of documents or instruments under which the Representing Party is constituted or to which the Representing Party is a party. In addition, Tenant guarantees, warrants and represents that none of (x) it, (y) its affiliates or partners nor (z) to the best of its knowledge, its members, shareholders or other equity owners or any of their respective employees, officers, directors, representatives or agents is a person or entity with whom U.S. persons or entities are restricted from doing business under regulations of the Office of Foreign Asset Control (“OFAC”) of the Department of the Treasury (including those named on OFAC’s Specially Designated and Blocked Persons List) or under any statute, executive order (including the September 24, 2001, Executive Order Blocking Property and Prohibiting Transactions with Persons Who Commit, Threaten to Commit, or Support Terrorism) or other similar governmental action.
38.    Confidentiality. Tenant shall keep the terms and conditions of this Lease and any information provided to Tenant or its employees, agents or contractors pursuant to Article 9 confidential and shall not (a) disclose to any third party any material financial terms of this Lease or any other Lease-related document (including subleases, assignments, work letters, construction contracts, letters of credit, subordination agreements, non-disturbance agreements, brokerage agreements or estoppels) or (b) provide to any third party an original or copy of this Lease (or any Lease-related document). Landlord shall not release to any third party any non- public financial information or non-public information about Tenant’s ownership structure that Tenant gives Landlord. Notwithstanding the foregoing, confidential information under this Section may be released by Landlord or Tenant under the following circumstances: (x) if required by Applicable Laws or in any judicial proceeding; provided that the releasing party has given the other party reasonable notice of such requirement, if feasible, (y) to a party’s attorneys, accountants, brokers and other bona fide consultants or advisers (with respect to this Lease only); provided such third parties agree to be bound by this Section or (z) to bona fide prospective assignees or subtenants of this Lease; provided they agree in writing to be bound by this Section.

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39.    Notices. Except as otherwise stated in this Lease, any notice, consent, demand, invoice, statement or other communication required or permitted to be given hereunder shall be in writing and shall be given by (a) personal delivery or (b) overnight delivery with a reputable international overnight delivery service, such as FedEx Any such notice, consent, demand, invoice, statement or other communication shall be deemed delivered (y) upon receipt, if given in accordance with Subsection 39(a); (z) one (1) business day after deposit with a reputable international overnight delivery service, if given if given in accordance with Subsection 39(b). Except as otherwise stated in this Lease, any notice, consent, demand, invoice, statement or other communication required or permitted to be given pursuant to this Lease shall be addressed to Tenant at the Premises, or to Landlord or Tenant at the addresses shown in Sections 2.10 and 2.11 or 2.12, respectively. Either party may, by notice to the other given pursuant to this Section, specify additional or different addresses for notice purposes.
40.    Miscellaneous.
40.1.    Landlord reserves the right to change the name of the Building or the Project in its sole discretion.
40.2.    To induce Landlord to enter into this Lease, Tenant agrees that it shall promptly furnish to Landlord, from time to time, upon Landlord’s written request, but no more often than annually, the most recent year-end unconsolidated financial statements reflecting Tenant’s current financial condition audited by a nationally recognized accounting firm. Tenant shall, within ninety (90) days after the end of Tenant’s financial year, furnish Landlord with a certified copy of Tenant’s year-end consolidated financial statements for the previous year audited by a nationally recognized accounting firm. Tenant represents and warrants that, to the best knowledge of Tenant’s officers responsible for this Lease, all financial statements, records and information furnished by Tenant to Landlord in connection with this Lease are true, correct and complete in all material respects. If audited financials are not otherwise prepared, unaudited financials complying with generally accepted accounting principles and certified by the chief financial officer of Tenant as true, correct and complete in all respects shall suffice for purposes of this Section. The provisions of this Section shall not apply at any time while Tenant or its parent company is a corporation or other entity whose shares are traded on any nationally recognized stock exchange. Tenant shall provide Landlord, on the same terms and conditions, with similar statements from Guarantor with respect to the Guaranty.

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40.3.    Submission of this instrument for examination or signature by Tenant does not constitute a reservation of or option for a lease, and shall not be effective as a lease or otherwise until execution by and delivery to both Landlord and Tenant.
40.4.    The terms of this Lease are intended by the parties as a final, complete and exclusive expression of their agreement with respect to the terms that are included herein, and may not be contradicted or supplemented by evidence of any other prior or contemporaneous agreement.
40.5.    ++++
40.6.    Where applicable in this Lease, the singular includes the plural and the masculine or neuter includes the masculine, feminine and neuter. The words “include,” “includes,” “included” and “including” mean “‘include,’ etc., without limitation.” The word “shall” is mandatory and the word “may” is permissive. The section headings of this Lease are not a part of this Lease and shall have no effect upon the construction or interpretation of any part of this Lease. Landlord and Tenant have each participated in the drafting and negotiation of this Lease, and the language in all parts of this Lease shall be in all cases construed as a whole according to its fair meaning and not strictly for or against either Landlord or Tenant.
40.7.    Except as otherwise expressly set forth in this Lease, each party shall pay its own costs and expenses incurred in connection with this Lease and such party’s performance under this Lease; provided that, if either party commences an action, proceeding, demand, claim, action, cause of action or suit against the other party arising out of or in connection with this Lease, then the substantially prevailing party shall be reimbursed by the other party for all reasonable costs and expenses, including reasonable attorneys’ fees and expenses, incurred by the substantially prevailing party in such action, proceeding, demand, claim, action, cause of action or suit, and in any appeal in connection therewith (regardless of whether the applicable action, proceeding, demand, claim, action, cause of action, suit or appeal is voluntarily withdrawn or dismissed).
40.8.    Time is of the essence with respect to the performance of every provision of this Lease.
40.9.    Each provision of this Lease performable by Tenant shall be deemed both a covenant and a condition.

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40.10.    Notwithstanding anything to the contrary contained in this Lease, Tenant’s obligations under this Lease are independent and shall not be conditioned upon performance by Landlord.
++++
40.12.    Any provision of this Lease that shall prove to be invalid, void or illegal shall in no way affect, impair or invalidate any other provision hereof, and all other provisions of this Lease shall remain in full force and effect and shall be interpreted as if the invalid, void or illegal provision did not exist.
40.13.    Each of the covenants, conditions and agreements herein contained shall inure to the benefit of and shall apply to and be binding upon the parties hereto and their respective heirs; legatees; devisees; executors; administrators; and permitted successors and assigns. This Lease is for the sole benefit of the parties and their respective heirs, legatees, devisees, executors, administrators and permitted successors and assigns, and nothing in this Lease shall give or be construed to give any other person or entity any legal or equitable rights. Nothing in this Section shall in any way alter the provisions of this Lease restricting assignment or subletting.
40.14.    This Lease shall be governed by, construed and enforced in accordance with the laws of the state in which the Premises are located, without regard to such state’s conflict of law principles.
40.15.    Each of Landlord and Tenant guarantees, warrants and represents that the individual or individuals signing this Lease on such party’s behalf have the power, authority and legal capacity to sign this Lease on behalf of and to bind all entities, corporations, partnerships, limited liability companies, joint venturers or other organizations and entities on whose behalf such individual or individuals have signed.
40.16.    This Lease may be executed in one or more counterparts, each of which, when taken together, shall constitute one and the same document.
40.17.    No provision of this Lease may be modified, amended or supplemented except by an agreement in writing signed by Landlord and Tenant.
40.18.    No waiver of any term, covenant or condition of this Lease shall be binding upon a party hereto unless executed in writing by such party. The waiver by a party hereto of any breach or default of any term, covenant or condition contained in this Lease shall not be deemed to be a waiver of any preceding or subsequent breach or default of such term, covenant or condition or any other term, covenant or condition of this Lease.
40.19.    To the extent permitted by Applicable Laws, the parties waive trial by jury in any action, proceeding or counterclaim brought by the other party hereto related to matters arising out of or in any way connected with this Lease; the relationship between Landlord and Tenant; Tenant’s use or occupancy of the Premises; or any claim of injury or damage related to this Lease or the Premises.

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40.20.    Tenant’s obligations under this Lease shall be guaranteed by the Guarantor pursuant to the Guaranty.
41.    Rooftop Installation Area.
41.1.    Tenant may use those portions of the Building identified as a “Rooftop Installation Area” on Exhibit H attached hereto (the “Rooftop Installation Area”) solely to operate, maintain, repair and replace rooftop antennae, mechanical equipment, communications antennas and other equipment installed by Tenant in the Rooftop Installation Area in accordance with this Article (“Tenant’s Rooftop Equipment”). Tenant’s Rooftop Equipment shall be only for Tenant’s use (as well as that of any permitted sublessee or assignee) of the Premises for the Permitted Use.
41.2.    Tenant shall install Tenant’s Rooftop Equipment at its sole cost and expense, at such times and in such manner as Landlord may reasonably designate, and in accordance with this Article and the applicable provisions of this Lease regarding Alterations. Tenant’s Rooftop Equipment and the installation thereof shall be subject to Landlord’s prior written approval, which approval shall not be unreasonably withheld, conditioned or delayed. Among other reasons, Landlord may withhold approval if the installation or operation of Tenant’s Rooftop Equipment could reasonably be expected to damage the structural integrity of the Building or to transmit vibrations or noise or cause other adverse effects beyond the Premises to an extent not customary in first class laboratory buildings, unless Tenant implements measures that are acceptable to Landlord in its reasonable discretion to avoid any such damage or transmission.
41.3.    Tenant shall comply with any roof or roof-related warranties. Unless such work is performed by Landlord’s roofing contractor, Tenant shall obtain a letter from Landlord’s roofing contractor within thirty (30) days after completion of any Tenant work on the rooftop stating that such work did not affect any such warranties. Tenant, at its sole cost and expense, shall inspect the Rooftop Installation Area with reasonable frequency, and correct any loose bolts, fittings or other appurtenances and repair any damage to the roof caused by the installation or operation of Tenant’s Rooftop Equipment. Tenant shall not permit the installation, maintenance or operation of Tenant’s Rooftop Equipment to violate any Applicable Laws or constitute a nuisance. Tenant shall pay Landlord within thirty (30) days after demand (a) all applicable taxes, charges, fees or impositions imposed on Landlord by Governmental Authorities as the result of Tenant’s use of the Rooftop Installation Areas in excess of those for which Landlord would otherwise be responsible for the use or installation of Tenant’s Rooftop Equipment and (b) the amount of any increase in Landlord’s insurance premiums as a result of the installation of Tenant’s Rooftop Equipment. Upon Tenant’s written request to Landlord, Landlord shall use commercially reasonable efforts to cause other tenants to remedy any interference in the operation of Tenant’s Rooftop Equipment caused by any such tenants’ equipment installed after the applicable piece of Tenant’s Rooftop Equipment; provided, however, that Landlord shall not be required to request that such tenants waive their rights under their respective leases.
41.4.    If Tenant’s Equipment (a) causes physical damage to the structural integrity of the Building, (b) interferes with any telecommunications, mechanical or other systems located at or near or servicing the Building or the Project that were installed prior to the installation of Tenant’s Rooftop Equipment, (c) interferes with any other service provided to other tenants in the Building or the Project by rooftop or penthouse installations that were installed prior to the installation of Tenant’s Rooftop Equipment or (d) interferes with any other tenants’ business, in each case in excess of that permissible under Federal Communications Commission regulations, then Tenant shall cooperate with Landlord to determine the source of the damage or interference and promptly repair such damage and eliminate such interference, in each case at Tenant’s sole cost and expense, within ten (10) days after receipt of notice of such damage or interference (which notice may be oral; provided that Landlord also delivers to Tenant written notice of such damage or interference within twenty-four (24) hours after providing oral notice). Tenant’s responsibility to pay for physical damage to the structural integrity of the Building is subject to the waiver of subrogation in Section 23.6.

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41.5.    Landlord reserves the right to cause Tenant to relocate Tenant’s Rooftop Equipment to comparably functional space on the roof or in the penthouse of the Building by giving Tenant prior written notice thereof. Landlord agrees to pay the reasonable costs thereof. Tenant shall arrange for the relocation of Tenant’s Rooftop Equipment within sixty (60) days after receipt of Landlord’s notification of such relocation. In the event Tenant fails to arrange for relocation within such sixty (60)-day period, Landlord shall have the right to arrange for the relocation of Tenant’s Rooftop Equipment in a manner that does not unnecessarily interrupt or interfere with Tenant’s use of the Premises for the Permitted Use.
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44.    Conversion of Core Space to Office/Laboratory Space.
44.1.    The Premises contain certain existing mechanical core space within Tenant’s Premises, as more fully shown on Exhibit I attached hereto (the “Core Space”), that Tenant desires to convert to office and laboratory space available for Tenant’s use and occupancy for the Permitted Use. Such conversion requires modifying or amending one or more permits applicable to the Building (such modification and all other actions necessary to permit the lawful use of the Core Space for the Permitted Use, the “Conversion Approvals”).
44.2.    Subject to the written consent of Landlord’s ground lessor, Tenant may seek the Conversion Approvals in accordance with the terms of this Article. Landlord will reasonably cooperate with Tenant in such application at no cost to Landlord. Tenant shall have no right to use the Core Space for the Permitted Use unless and until it successfully obtains the Conversion Approvals. If Tenant is successful in obtaining the Conversion Approvals, it shall be permitted to utilize the Core Space for the Permitted Use in accordance with the terms of this Lease.
44.3.    Tenant shall not be entitled to apply for the Conversion Approvals unless, at the time of such application, Tenant is leasing one hundred percent (100%) of the Premises.
44.4.    Tenant shall apply for the Conversion Approvals at Tenant's sole cost and expense, but Landlord shall use commercially reasonable efforts to work cooperatively with Tenant until the Outside Approval Date to obtain the Conversion Approvals. Any Core Space as to which Tenant successfully obtains the Conversion Approvals is herein referred to as “Converted Space.”
44.5.    If Tenant obtains the Conversion Approvals, then Tenant shall perform construction in the Converted Space to make it suitable for Tenant's use for the Permitted Use. All such construction work shall be performed in accordance with the terms of this Lease, including Article 18 hereof. Landlord shall contribute up to One Hundred Sixty Thousand Dollars ($160,000) toward the cost of such construction (including the cost of design and permitting), which shall be disbursed in accordance with the provisions of the Work Letter, but with an outside date for the disbursement of such funds of the date that is eighteen (18) months after the Conversion Approvals are obtained.
44.6.    Upon the expiration or termination of the Lease, Tenant shall have no obligation to restore the Converted Space to the condition it was in prior to obtaining the Conversion Approvals, or to replace any Landlord property or equipment that was removed from the Converted Space by Tenant during its renovation.

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IN WITNESS WHEREOF, the parties hereto have executed this Lease as a sealed Massachusetts instrument as of the date first above written.

LANDLORD:

BMR-ROGERS STREET LLC,
a Delaware limited liability company

By:    /s/ Kevin M. Simonsen
Name:    Kevin M. Simonsen
Title:    Sr. VP, Real Estate Legal        

TENANT:

BIOGEN MA INC.,
a Massachusetts corporation

By:    ______________________
Name:    ______________________
Title:    ______________________




IN WITNESS WHEREOF, the parties hereto have executed this Lease as a sealed Massachusetts instrument as of the date first above written.

LANDLORD:

BMR-ROGERS STREET LLC,
a Delaware limited liability company

By:    ______________________
Name:    ______________________
Title:    ______________________

TENANT:

BIOGEN MA INC.,
a Massachusetts corporation

By:    /s/ Jorg Thommes
Name:    Jorg Thommes
Title:    SVP, OTI







EXHIBIT A
PREMISES
[see attached 8 pages]

A-1


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EXHIBIT A-1
PROPERTY
PARCEL ONE (304-322 Bent Street):
The land with the buildings thereon, situated in Cambridge, Middlesex County, Massachusetts, and shown as the parcel containing 40,000 square feet of land on a plan entitled “Boston &. Albany R.R.- Cambridge land conveyed by B & A R.R. Co. to Stahleker Steel Corp.”, dated October 30,1945, and signed by L. J. Murphy, District Engineer and recorded with the Middlesex South District Registry of Deeds, Book 6944, Page 383, and bounded and described according to said plan, as follows:
NORTHEASTERLY:    by Bent Street, 200 feet;
SOUTHEASTERLY:    by land of the Boston & Albany R.R. Co., 200.02 feet;
SOUTHWESTERLY:    by Rogers Street, 200 feet;
NORTHWESTERLY:    by Fulkerson Street, formerly known as Ninth Street, 200.02 feet.

PARCEL TWO (301 Binney Street/157 Sixth Street):
a.    Parcel 1:
A certain parcel of land situated in Cambridge, in Middlesex County and Commonwealth of Massachusetts, bounded and described as follows:
NORTHWESTERLY:
on Binney Street two hundred (200) feet, thence turning at right angles and running;
NORTHEASTERLY:
along land shown on the plan hereinafter mentioned as belonging to Associates Transport, Inc., two hundred (200) feet to a point on the private way shown as Rogers Street on the plan hereinafter mentioned; thence turning at right angles and running;
SOUTHEASTERLY:
on Rogers Street two hundred (200) feet to a point on Sixth Street; thence turning at right angles and running;
SOUTHWESTERLY:
on Sixth Street two hundred (200) feet to the point of beginning.
Containing 40,000 square feet and being the parcel of land shown on the plan entitled “Plan of Land in Cambridge, Mass.” dated August 8, 1945, William S. Crocker, C.E., said plan being duly recorded with Middlesex South Registry District Deeds, Book 6893, Page 509; and also being the parcel of land shown on a plan of land entitled “Plan of Land in Cambridge, Mass. Property of Industrial Stainless Steel Inc.” dated October 21,1960, Schofield Brothers, Reg. Land Surveyors, said plan being duly recorded with the Middlesex South Registry of Deeds as Plan Number 1664 of 1960 at Book 9706, Page End.
b.    Parcel 2:
A certain parcel of land with the buildings thereon situated in said Cambridge, bounded and described as follows:
NORTHERLY:    by Rogers Street, three-hundred thirty-five and 27/100 (335.27) feet
EASTERLY:    by land now or formerly of Harry J. Dowd, two hundred and No/100 (200) feet;
SOUTHERLY:    by Binney Street; and
WESTERLY:    by Fulkerson Street.

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Parcels 1 and 2 of Parcel Two together comprise Lots A, B, C and D as shown on a plan of land entitled “Plan Showing Sub-division of Land in Cambridge, Massachusetts”, dated July 29, 1940, Wm. H. McGinness C.E., said plan being duly recorded with the Middlesex South Registry of Deeds as Plan Number 1052 of 1940, at Book 6445, Page 394.


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EXHIBIT B
WORK LETTER
This Work Letter (this “Work Letter”) is made and entered into as of the 31st day of March, 2015, by and between BMR-ROGERS STREET LLC, a Delaware limited liability company (“Landlord”), and BIOGEN MA INC., a Massachusetts corporation (“Tenant”), and is attached to and made a part of that certain Lease dated as of March 31, 2015 (as the same may be amended, amended and restated, supplemented or otherwise modified from time to time, the “Lease”), by and between Landlord and Tenant for the Premises located at 301 Binney Street, Cambridge, Massachusetts. All capitalized terms used but not otherwise defined herein shall have the meanings given them in the Lease.
1.    General Requirements.
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1.2.    Schedule.     The schedule for design and development of the Tenant Improvements, including the time periods for preparation and review of construction documents, approvals and performance, shall be in accordance with a schedule to be prepared by Tenant (the “Schedule”). Tenant shall prepare the Schedule so that it is a reasonable schedule for the completion of the Tenant Improvements. The Schedule shall clearly identify all activities requiring Landlord participation, including but not limited to specific dates and time periods Tenant’s contractor will require access to building areas outside of the Premises. As soon as the Schedule is completed, Tenant shall deliver the same to Landlord for Landlord’s approval, which approval shall not be unreasonably withheld, conditioned or delayed. Such Schedule shall be approved or disapproved by Landlord within ten (10) business days after delivery to Landlord. Landlord’s failure to respond within such ten (10) business day period, if such failure continues for five (5) business days after written notice thereof, shall be deemed approval by Landlord. If Landlord disapproves the Schedule, then Landlord shall notify Tenant in writing of its objections to such Schedule, and the parties shall confer and negotiate in good faith to reach agreement on the Schedule. The Schedule shall be subject to adjustment as mutually agreed upon in writing by the parties, or as provided in this Work Letter.
1.3.    Tenant’s Architects, Contractors and Consultants. The architect, engineering consultants, design team, general contractor and subcontractors responsible for the construction of the Tenant Improvements shall be selected by Tenant and approved by Landlord, which approval Landlord shall not unreasonably withhold, condition or delay. Landlord may refuse to approve any architects, consultants, contractors, subcontractors or material suppliers that Landlord reasonably believes do not have sufficient experience to perform work in an occupied Class A laboratory research building and in tenant-occupied lab areas. Tenant, in the construction of the Tenant Improvements, shall not do anything or permit anything to be done which causes labor disharmony, and Tenant shall immediately take all reasonable actions (including removing any architects, consultants, contractors, subcontractors or suppliers ) to prevent or end any such labor disharmony. All Tenant contracts related to the Tenant Improvements shall provide that Tenant may assign such contracts and any warranties with respect to the Tenant Improvements to Landlord at any time.
2.    Tenant Improvements. ++++    
2.1.    Work Plans. Tenant shall prepare and submit to Landlord for approval schematics covering the Tenant Improvements prepared in conformity with the applicable provisions of this Work Letter (the “Draft Schematic Plans”). The Draft Schematic Plans shall contain sufficient information and detail to accurately describe the proposed design to Landlord and such other information as Landlord may reasonably request. Landlord shall notify Tenant in writing within ten (10) business days after receipt of the Draft Schematic Plans whether Landlord approves or objects to the Draft Schematic Plans and of the manner, if any, in which the Draft Schematic Plans are unacceptable. Landlord’s failure to respond within such ten (10) business day period, if such failure continues for five (5) business days after written notice thereof, shall be deemed approval by Landlord. If Landlord reasonably objects to the Draft Schematic Plans, then Tenant shall revise the Draft Schematic Plans and cause Landlord’s objections to be remedied in the revised Draft Schematic Plans. Tenant shall then resubmit the revised Draft Schematic Plans to Landlord for approval, such approval not to be unreasonably withheld, conditioned or delayed. Landlord’s approval of or objection to revised Draft Schematic Plans and Tenant’s correction of the same shall be in accordance with this Section until Landlord has approved

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the Draft Schematic Plans in writing or been deemed to have approved them. The iteration of the Draft Schematic Plans that is approved or deemed approved by Landlord without objection shall be referred to herein as the “Approved Schematic Plans.”
2.2.    Construction Plans. Tenant shall prepare final plans and specifications for the Tenant Improvements that (a) are consistent with and are logical evolutions of the Approved Schematic Plans and (b) incorporate any other Tenant-requested (and Landlord-approved) Changes (as defined below). As soon as such final plans and specifications (“Construction Plans”) are sufficiently complete for a set thereof to be submitted to the appropriate Governmental Authorities for the issuance of permits, Tenant shall deliver the same to Landlord for Landlord’s approval, which approval shall not be unreasonably withheld, conditioned or delayed with respect to any iteration of plans submitted pursuant to this Section. All such Construction Plans shall be submitted by Tenant to Landlord in electronic .pdf, CADD and full- size hard copy formats and shall be approved or disapproved by Landlord within ten (10) business days after delivery to Landlord. Landlord’s failure to respond within such ten (10) business day period, if such failure continues for five (5) business days after written notice thereof, shall be deemed approval by Landlord. If the Construction Plans are disapproved by Landlord, then Landlord shall notify Tenant in writing of its objections to such Construction Plans, and the parties shall confer and negotiate in good faith to reach agreement on the Construction Plans. Promptly after submission of the Construction Plans to Landlord for approval by Landlord, two (2) copies of such Construction Plans shall be initialed and dated by Landlord and Tenant, and Tenant shall promptly submit such Construction Plans to all appropriate Governmental Authorities for approval. Landlord’s initialing of the Construction Plans and Tenant’s submission of the Construction Plans with any Governmental Authorities shall not be deemed to be Landlord’s approval of the Construction Plans, and any Constructions Plans shall remain subject to Landlord’s review and approval. As further Construction Plans are developed, Tenant shall submit the same to Landlord for further approval, and shall pay a fee as invoiced by Landlord within thirty (30) days after receipt of an invoice therefor in the amount of Landlord’s out-of-pocket actual third party expenses (not to exceed Five Thousand Dollars ($5,000.00) in connection with the review thereof for Landlord to conduct any further review. Subsequent iterations of the Construction Plans will be consistent with iterations theretofore submitted (subject to Changes (as defined below) approved in writing by Landlord). The foregoing provisions of this Section with respect to timing shall apply with respect to the timing of approvals by Landlord of all subsequent iterations of the Construction Plans. The Construction Plans so approved, and all change orders specifically permitted by this Work Letter, are referred to herein as the “Approved Plans.”
2.3.    Changes to the Tenant Improvements.    Any material changes to the Approved Plans (each, a “Change”) shall be requested and instituted in accordance with the provisions of this Article 2 and shall be subject to the written approval of the non-requesting party in accordance with this Work Letter.
    (a)    Change Request. Either Landlord (unless Tenant reasonably disapproves thereof within five (5) days after receipt of the applicable Change Request (as defined below)) or Tenant may request Changes after Landlord approves the Approved Plans by notifying the other party thereof in writing in substantially the same form as the AIA standard change order form (a “Change Request”), which Change Request shall detail the nature and extent of any requested Changes, including (a) the Change, (b) the party required to perform the Change and (c) any modification of the Approved Plans and the Schedule, as applicable, necessitated by the Change. If the nature of a Change requires revisions to the Approved Plans, then the requesting party shall be solely responsible for the cost and expense of such revisions and any increases in the cost of the Tenant Improvements as a result of such Change. Change Requests shall be signed by the requesting party’s Authorized Representative.
    (b)    Approval of Changes. All Change Requests shall be subject to the other party’s prior written approval, which approval shall not be unreasonably withheld, conditioned or delayed. The non-requesting party shall have five (5) business days after receipt of a Change Request to notify the requesting party in writing of the non-requesting party’s decision either to approve or object to the Change Request. The non-requesting party’s failure to respond within such five (5) business day period, if such failure continues for three (3) business days after written notice thereof, shall be deemed approval by the non-requesting party.
2.4.    Preparation of Estimates.     Tenant shall, before proceeding with any Change, using its best efforts, prepare as soon as is reasonably practicable (but in no event more than five (5) business days after delivering a Change Request to Landlord or receipt of a Change Request) an estimate of the increased costs or savings that would result

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from such Change, as well as an estimate of such Change’s effects on the Schedule. Landlord shall have five (5) business days after receipt of such information from Tenant to (a) in the case of a Tenant-initiated Change Request, approve or reject such Change Request in writing, or (b) in the case of a Landlord-initiated Change Request, notify Tenant in writing of Landlord’s decision either to proceed with or abandon the Landlord-initiated Change Request.
2.5.    Quality Control Program; Coordination.     Tenant shall provide Landlord with information regarding the following (together, the “QCP”): (a) Tenant’s general contractor’s quality control program and (b) evidence of subsequent monitoring and action plans. The QCP shall be subject to Landlord’s reasonable review and approval and shall specifically address the Tenant Improvements. Tenant shall ensure that the QCP is regularly implemented on a scheduled basis and shall provide Landlord with reasonable prior notice and access to attend all inspections and meetings between Tenant and its general contractor. At the conclusion of the Tenant Improvements, Tenant shall deliver the quality control log to Landlord, which shall include all records of quality control meetings and testing and of inspections held in the field, including inspections relating to concrete, steel roofing, piping pressure testing and system commissioning.
3.    Completion of Tenant Improvements.     Tenant, at its sole cost and expense (except for the TI Allowance), shall perform and complete the Tenant Improvements in all respects (a) in substantial conformance with the Approved Plans, (b) otherwise in compliance with provisions of the Lease and this Work Letter and (c) in accordance with Applicable Laws, the requirements of Tenant’s insurance carriers, the requirements of Landlord’s insurance carriers (to the extent Landlord provides its insurance carriers’ requirements to Tenant) and the board of fire underwriters having jurisdiction over the Premises. The Tenant Improvements shall be deemed completed at such time as Tenant shall furnish to Landlord (t) evidence satisfactory to Landlord that (i) all Tenant Improvements have been completed and paid for in full (which shall be evidenced by the architect’s certificate of completion and the general contractor’s and each subcontractor’s and material supplier’s final unconditional waivers and releases of liens, each in a form acceptable to Landlord and complying with Applicable Laws and a Certificate of Substantial Completion in the form of the American Institute of Architects document G704, executed by the project architect and the general contractor, together with a statutory notice of substantial completion from the general contractor), (ii) all Tenant Improvements have been accepted by Landlord, (iii) any and all liens related to the Tenant Improvements have either been discharged of record (by payment, bond, order of a court of competent jurisdiction or otherwise) or waived by the party filing such lien and (iv) no security interests relating to the Tenant Improvements are outstanding, (u) all certifications and approvals with respect to the Tenant Improvements that may be required from any Governmental Authority and any board of fire underwriters or similar body for the use and occupancy of the Premises (including a certificate of occupancy for the Premises for the Permitted Use), (v) certificates of insurance required by the Lease to be purchased and maintained by Tenant, (w) an affidavit from Tenant’s architect certifying that all work performed in, on or about the Premises is in accordance with the Approved Plans, (x) complete “as built” drawing print sets, project specifications and shop drawings and electronic CADD files on disc (showing the Tenant Improvements as an overlay on the Building “as built” plans (provided that Landlord provides the Building “as-built” plans provided to Tenant) of all contract documents for work performed by their architect and engineers in relation to the Tenant Improvements, (y) a commissioning report prepared by a licensed, qualified commissioning agent hired by Tenant and approved by Landlord for all new or affected mechanical, electrical and plumbing systems (which report Landlord may hire a licensed, qualified commissioning agent to peer review, and whose reasonable recommendations Tenant’s commissioning agent shall perform and incorporate into a revised report) and (z) such other “close out” materials as Landlord reasonably requests consistent with Landlord’s own requirements for its contractors, such as copies of manufacturers’ warranties, operation and maintenance manuals and the like.
4.    Insurance.
4.1.    Property Insurance.     At all times during the period beginning with commencement of construction of the Tenant Improvements and ending with final completion of the Tenant Improvements, Tenant shall maintain, or cause to be maintained (in addition to the insurance required of Tenant pursuant to the Lease), property insurance coverage with respect to the general contractor’s and any subcontractors’ machinery, tools and equipment. Coverage shall be carried on a primary basis by such general contractor or the applicable subcontractor(s). Tenant agrees to pay any deductible, and Landlord is not responsible for any deductible, for a claim under such insurance. Such property insurance shall contain an express waiver of any right of subrogation by the insurer against Landlord and the Landlord Parties, and shall name Landlord and its affiliates as loss payees as their interests may appear.

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4.2.    Workers’ Compensation Insurance.     At all times during the period of construction of the Tenant Improvements, Tenant shall, or shall cause its contractors or subcontractors to, maintain statutory workers’ compensation insurance as required by Applicable Laws.
5.    Liability.     Tenant assumes sole responsibility and liability for any and all injuries or the death of any persons, including Tenant’s contractors and subcontractors and their respective employees, agents and invitees, and for any and all damages to property caused by, resulting from or arising out of any act or omission on the part of Tenant, Tenant’s contractors or subcontractors, or their respective employees, agents and invitees in the prosecution of the Tenant Improvements. Subject to the conditions of Section 23.6 of the Lease, Tenant agrees to indemnify, save, defend (at Landlord’s option and with counsel reasonably acceptable to Landlord) and hold the Landlord Indemnitees harmless from and against all Claims due to, because of or arising out of any and all such injuries, death or damage, whether real or alleged, and Tenant and Tenant’s contractors and subcontractors shall assume and defend at their sole cost and expense all such Claims; provided, however, that nothing contained in this Work Letter shall be deemed to indemnify or otherwise hold Landlord harmless from or against liability caused by any Landlord Party’s negligence or willful misconduct. Any deficiency in design or construction of the Tenant Improvements shall be solely the responsibility of Tenant, notwithstanding the fact that Landlord may have approved of the same in writing.
6.    TI Allowance.
6.1.    Application of TI Allowance. Landlord shall contribute toward the costs and expenses incurred in connection with the performance of the Tenant Improvements, in accordance with Article 4 of the Lease. If the entire TI Allowance is not applied toward or reserved for the costs of the Tenant Improvements, then Tenant shall not be entitled to a credit of such unused portion of the TI Allowance. Furthermore, Tenant shall not be entitled to any portion of the TI Allowance for which a Fund Request (as defined below) has not been received by Landlord by the date which is eighteen (18) months after the Term Commencement Date. Tenant may apply the TI Allowance for the payment of construction and other costs in accordance with the terms and provisions of the Lease.
6.2.        Approval of Budget for the Tenant Improvements. Notwithstanding anything to the contrary set forth elsewhere in this Work Letter or the Lease, Landlord shall not have any obligation to expend any portion of the TI Allowance until Landlord and Tenant shall have approved in writing the budget for the Tenant Improvements (the “Approved Budget”). Prior to Landlord’s approval of the Approved Budget, Tenant shall pay all of the costs and expenses incurred in connection with the Tenant Improvements as they become due. Landlord shall not be obligated to reimburse Tenant for costs or expenses relating to the Tenant Improvements that exceed the amount of the TI Allowance. Landlord shall not unreasonably withhold, condition or delay its approval of any budget for Tenant Improvements that is proposed by Tenant.
6.3.        Fund Requests. Upon submission by Tenant to Landlord of (a) a statement (a “Fund Request”) setting forth the total amount of the TI Allowance requested, (b) a summary of the Tenant Improvements performed using AIA standard form Application for Payment (G 702) executed by the general contractor and by the architect, (c) invoices from the general contractor, the architect, and any subcontractors, material suppliers and other parties requesting payment with respect to the amount of the TI Allowance then being requested and (d) except with respect to the final Fund Request, conditional lien releases from the general contractor and each subcontractor and material supplier with respect to the Tenant Improvements performed that correspond to the Fund Request each in a form acceptable to Landlord and complying with Applicable Laws, then Landlord shall, within thirty (30) days following receipt by Landlord of a Fund Request and the accompanying materials required by this Section, pay to (as elected by Landlord) the applicable contractors, subcontractors and material suppliers or Tenant (for reimbursement for payments made by Tenant to such contractors, subcontractors or material suppliers either prior to Landlord’s approval of the Approved TI Budget or as a result of Tenant’s decision to pay for the Tenant Improvements itself and later seek reimbursement from Landlord in the form of one lump sum payment in accordance with the Lease and this Work Letter), the amount of Tenant Improvement costs set forth in such Fund Request or, subject to Section 2 of this Work Letter, Landlord’s pari passu share thereof if Excess TI Costs exist based on the Approved Budget; provided, however, that Landlord shall not be obligated to make any payments under this Section until the budget for the Tenant Improvements is approved in accordance with Section 6.2, and any Fund Request under this Section shall be subject to the payment limits set forth in Section 6.2 above and Article 4 of the Lease.

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6.4.    Accrual Information.     In addition to the other requirements of this Section 6, Tenant shall, no more often than once every calendar quarter during construction of the Tenant Improvements, provide Landlord with a written summary of all work performed by Tenant or its agents, employees or contractors for which a Fund Request has not yet been issued to Landlord, including the following: the amount that Tenant will seek from Landlord related to such work and the dates on which such work was performed. Such information shall be provided to Landlord within ten (10) business days after Landlord’s request therefor.
7.    Miscellaneous.
7.1.    Incorporation of Lease Provisions.     Sections 40.6 through 40.19 of the Lease are incorporated into this Work Letter by reference, and shall apply to this Work Letter in the same way that they apply to the Lease.
7.2.    General.     Except as otherwise set forth in the Lease or this Work Letter shall not apply to improvements performed in any additional premises added to the Premises at any time or from time to time, whether by any options under the Lease or otherwise; or to any portion of the Premises or any additions to the Premises in the event of a renewal or extension of the original Term, whether by any options under the Lease or otherwise, unless the Lease or any amendment or supplement to the Lease expressly provides that such additional premises are to be delivered to Tenant in the same condition as the initial Premises.
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IN WITNESS WHEREOF, Landlord and Tenant have executed this Work Letter as a sealed Massachusetts instrument to be effective on the date first above written.

LANDLORD:

BMR-ROGERS STREET LLC,
a Delaware limited liability company

By:     /s/ Kevin M. Simonsen          
Name:    Kevin M. Simonsen
Title:    Sr. VP, Real Estate Legal        


TENANT:

BIOGEN MA INC.,
a Massachusetts corporation

By:     ______________________    
Name:    ______________________
Title:    ______________________



B-6
The portions of this Exhibit marked with ++++ signify a redaction in the original Exhibit.


IN WITNESS WHEREOF, Landlord and Tenant have executed this Work Letter as a sealed Massachusetts instrument to be effective on the date first above written.

LANDLORD:

BMR-ROGERS STREET LLC,
a Delaware limited liability company

By:     ______________________         
Name:    ______________________
Title:    ______________________


TENANT:

BIOGEN MA INC.,
a Massachusetts corporation

By:     /s/ Jorg Thommes          
Name:    Jorg Thommes
Title:    SVP, OTI


B-7
The portions of this Exhibit marked with ++++ signify a redaction in the original Exhibit.

EXHIBIT B-1
TENANT WORK INSURANCE SCHEDULE
Tenant shall be responsible for requiring all of Tenant contractors doing construction or renovation work to purchase and maintain such insurance as shall protect it from the claims set forth below which may arise out of or result from any Tenant Improvements, Alterations or other work performed on the Premises by Tenant (collectively, “Tenant Work”) whether such Tenant Work is completed by Tenant or by any Tenant contractors or by any person directly or indirectly employed by Tenant or any Tenant contractors, or by any person for whose acts Tenant or any Tenant contractors may be liable:
1.    Claims under workers’ compensation, disability benefit and other similar employee benefit acts which are applicable to the Tenant Work to be performed.
2.    Claims for damages because of bodily injury, occupational sickness or disease, or death of employees under any applicable employer’s liability law.
3.    Claims for damages because of bodily injury, or death of any person other than Tenant’s or any Tenant contractors’ employees.
4.    Claims for damages insured by usual personal injury liability coverage which are sustained (a) by any person as a result of an offense directly or indirectly related to the employment of such person by Tenant or any Tenant contractors or (b) by any other person.
5.    Claims for damages, other than to the Tenant Work itself, because of injury to or destruction of tangible property, including loss of use therefrom.
6.    Claims for damages because of bodily injury or death of any person or property damage arising out of the ownership, maintenance or use of any motor vehicle.
Tenant contractors’ Commercial General Liability Insurance shall include premises/operations (including explosion, collapse and underground coverage if such Tenant Work involves any underground work), elevators, independent contractors, products and completed operations, and blanket contractual liability on all written contracts, all including broad form property damage coverage.
Tenant contractors’ Commercial General, Automobile, Employers and Umbrella Liability Insurance shall be written for not less than limits of liability as follows:
a. Commercial General Liability:
Bodily Injury and Property Damage
Commercially reasonable amounts, but in any event no less than $1,000,000 per occurrence and $2,000,000 general aggregate, with $2,000,000 products and completed operations aggregate.
b. Commercial Automobile Liability:
Bodily Injury and Property Damage
$1,000,000 per accident


B-1-1

c. Employer’s Liability:
Each Accident
Disease – Policy Limit
Disease – Each Employee

$500,000
$500,000
$500,000

d. Umbrella Liability:
Bodily Injury and Property Damage
Commercially reasonable amounts (excess of coverages a, b and c above), but in any event no less than $5,000,000 per occurrence / aggregate.
All subcontractors for Tenant contractors shall carry the same coverages and limits as specified above, unless different limits are reasonably approved by Landlord. The foregoing policies shall contain a provision that coverages afforded under the policies shall not be canceled or not renewed until at least thirty (30) days’ prior written notice has been given to the Landlord. Certificates of insurance including required endorsements showing such coverages to be in force shall be filed with Landlord prior to the commencement of any Tenant Work and prior to each renewal. Coverage for completed operations must be maintained for the lesser of ten (10) years and the applicable statue of repose following completion of the Tenant Work, and certificates evidencing this coverage must be provided to Landlord. The minimum A.M. Best’s rating of each insurer shall be A- VII. Landlord and its mortgagees shall be named as an additional insureds under Tenant contractors’ Commercial General Liability, Commercial Automobile Liability and Umbrella Liability Insurance policies as respects liability arising from work or operations performed, or ownership, maintenance or use of autos, by or on behalf of such contractors. Each contractor and its insurers shall provide waivers of subrogation with respect to any claims covered or that should have been covered by valid and collectible insurance, including any deductibles or self-insurance maintained thereunder.
If any contractor’s work involves the handling or removal of asbestos (as determined by Landlord in its sole and absolute discretion), such contractor shall also carry Pollution Legal Liability insurance. Such coverage shall include bodily injury, sickness, disease, death or mental anguish or shock sustained by any person; property damage, including physical injury to or destruction of tangible property (including the resulting loss of use thereof), clean-up costs and the loss of use of tangible property that has not been physically injured or destroyed; and defense costs, charges and expenses incurred in the investigation, adjustment or defense of claims for such damages. Coverage shall apply to both sudden and non-sudden pollution conditions including the discharge, dispersal, release or escape of smoke, vapors, soot, fumes, acids, alkalis, toxic chemicals, liquids or gases, waste materials or other irritants, contaminants or pollutants into or upon land, the atmosphere or any watercourse or body of water. Claims-made coverage is permitted, provided the policy retroactive date is continuously maintained prior to the Term Commencement Date, and coverage is continuously maintained during all periods in which Tenant occupies the Premises. Coverage shall be maintained with limits of not less than $1,000,000 per incident with a $2,000,000 policy aggregate.

B-1-2

EXHIBIT C-1
ACKNOWLEDGEMENT OF TERM COMMENCEMENT DATE
THIS ACKNOWLEDGEMENT OF TERM COMMENCEMENT DATE is entered into as of [_______], 2015, with reference to that certain Lease (the “Lease”) dated as of [_______], 2015, by BIOGEN MA INC., a Massachusetts corporation (“Tenant”), in favor of BMR-Rogers Street LLC, a Delaware limited liability company (“Landlord”). All capitalized terms used herein without definition shall have the meanings ascribed to them in the Lease.
Tenant hereby confirms the following:
1.    Tenant accepted possession of the Premises for construction of improvements or the installation of personal or other property on [_______], 2015.
2.    To the best of Tenant’s knowledge, all conditions of the Lease to be performed by Landlord as a condition to the full effectiveness of the Lease have been satisfied, and Landlord has fulfilled all of its duties in the nature of inducements offered to Tenant to lease the Premises, except:____________________.
3.    In accordance with the provisions of Article 4 of the Lease, the Term Commencement Date is [_______], 2015.
4.    The Lease is in full force and effect, and the same represents the entire agreement between Landlord and Tenant concerning the Premises [, except [_______]].
5.    To the best of Tenant’s knowledge, Tenant has no existing defenses against the enforcement of the Lease by Landlord, and there exist no offsets or credits against Rent owed or to be owed by Tenant.
6.    The undersigned Tenant has not made any prior assignment, transfer, hypothecation or pledge of the Lease or of the rents thereunder or sublease of the Premises or any portion thereof.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

C-1-1



IN WITNESS WHEREOF, Tenant has executed this Acknowledgment of Term Commencement Date as of the date first written above.
TENANT:

BIOGEN MA INC.,
a Massachusetts corporation

By:     ______________________    
Name:    ______________________
Title:    ______________________


C-1-2


EXHIBIT C-2
ACKNOWLEDGEMENT OF TERM COMMENCEMENT DATE
AND TERM EXPIRATION DATE
THIS ACKNOWLEDGEMENT OF RENT COMMENCEMENT DATE AND TERM EXPIRATION DATE is entered into as of [_______], 2015, with reference to that certain Lease (the “Lease”) dated as of [_______], 2015, by BIOGEN MA INC., a Massachusetts corporation (“Tenant”), in favor of BMR-Rogers Street LLC, a Delaware limited liability company (“Landlord”). All capitalized terms used herein without definition shall have the meanings ascribed to them in the Lease.
Tenant hereby confirms the following:
1.    Tenant first occupied the Premises for the Permitted Use on [_______], 20[_].
2.    To the best of Tenant’s knowledge, the Premises are in good order, condition and repair.
3.        The Tenant Improvements are substantially complete in accordance with the Approved Plans (as defined in the Work Letter), except for minor punch list items.
4.    To the best of Tenant’s knowledge, all conditions of the Lease to be performed by Landlord as a condition to the full effectiveness of the Lease have been satisfied, and Landlord has fulfilled all of its duties in the nature of inducements offered to Tenant to lease the Premises.
5.    In accordance with the provisions of Article 7 of the Lease, the Rent Commencement Date is [_______], 20[_], and, unless the Lease is terminated prior to the Term Expiration Date pursuant to its terms, the Term Expiration Date shall be [_______], 20[_].
6.    The Lease is in full force and effect, and the same represents the entire agreement between Landlord and Tenant concerning the Premises [, except [_______]].
7.    To the best of Tenant’s knowledge, Tenant has no existing defenses against the enforcement of the Lease by Landlord, and there exist no offsets or credits against Rent owed or to be owed by Tenant.
8.    The obligation to pay Rent is presently in effect and all Rent obligations on the part of Tenant under the Lease commenced to accrue on [_______], 20[_], with Base Rent payable on the dates and amounts set forth in the chart below:
Dates
Approximate Square Feet of Rentable Area
Base Rent per Square Foot of Rentable Area
Monthly Base Rent
Annual Base Rent
[ ]/[ ]/[__]-
[ ]/[ ]/[__]
[ ]
$[         ] annually
[ ]
[ ]
9.    The undersigned Tenant has not made any prior assignment, transfer, hypothecation or pledge of the Lease or of the rents thereunder or sublease of the Premises or any portion thereof.

[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

C-2-1



IN WITNESS WHEREOF, Tenant has executed this Acknowledgment of Rent Commencement Date and Term Expiration Date as of the date first written above.
TENANT:

BIOGEN MA INC.,
a Massachusetts corporation

By:     ______________________    
Name:    ______________________
Title:    ______________________     


C-2-2


EXHIBIT D
RULES AND REGULATIONS
NOTHING IN THESE RULES AND REGULATIONS (“RULES AND REGULATIONS”) SHALL SUPPLANT ANY PROVISION OF THE LEASE. IN THE EVENT OF A CONFLICT OR INCONSISTENCY BETWEEN THESE RULES AND REGULATIONS AND THE LEASE, THE LEASE SHALL PREVAIL.
1.    No Tenant Party shall encumber or obstruct the common entrances, lobbies, elevators, sidewalks and stairways of the Building(s) or the Project or use them for any purposes other than ingress or egress to and from the Building(s) or the Project.
2.    Except as specifically provided in the Lease, no sign, placard, picture, advertisement, name or notice shall be installed or displayed on any part of the outside of the Premises or the Building without Landlord’s prior written consent. Landlord shall have the right to remove, at Tenant’s sole cost and expense and without notice, any sign installed or displayed in violation of this rule.
3.    If Landlord objects in writing to any curtains, blinds, shades, screens, hanging plants or other similar objects attached to or used in connection with any window or door of the Premises or placed on any windowsill, and (a) such window, door or windowsill is visible from the exterior of the Premises and (b) such curtain, blind, shade, screen, hanging plant or other object is not included in plans approved by Landlord, then Tenant shall promptly remove such curtains, blinds, shades, screens, hanging plants or other similar objects at its sole cost and expense.
4.    Deliveries shall be made no earlier than 7 a.m. and no later than 6 p.m., and shall comply with the City of Cambridge Truck Traffic and Noise Ordinance. No deliveries shall be made that impede or interfere with other tenants in or the operation of the Project. Movement of furniture, office equipment or any other large or bulky material(s) through the Common Area shall be restricted to such hours as Landlord may designate and shall be subject to reasonable restrictions that Landlord may impose. Tenant will ensure all overhead loading dock doors are secured after receipt of any delivery. Tenant must accept all deliveries. Building personnel, security or Landlord's third party contractors will not accept any deliveries on behalf of Tenant.
5.    Tenant shall not place a load upon any floor of the Premises that exceeds the load per square foot that (a) such floor was designed to carry or (b) is allowed by Applicable Laws. Fixtures and equipment that cause noises or vibrations that may be transmitted to the structure of the Building to such a degree as to be objectionable to other tenants shall be placed and maintained by Tenant, at Tenant’s sole cost and expense, on vibration eliminators or other devices sufficient to eliminate such noises and vibrations to levels reasonably acceptable to Landlord and the affected tenants of the Project.
6.    Tenant shall not use any method of HVAC other than that shown in the Tenant Improvement plans approved in writing by Landlord.
7.    Tenant shall not install any radio, television or other antennae; cell or other communications equipment; or other devices on the roof or exterior walls of the Premises except in accordance with the Lease. Tenant shall not interfere with radio, television or other digital or electronic communications at the Project or elsewhere.
8.    Canvassing, peddling, soliciting and distributing handbills or any other written material within, on or around the Project (other than within the Premises) are prohibited. Tenant shall cooperate with Landlord to prevent such activities by any Tenant Party.
9.    The loading dock shall be used for all deliveries. All persons parking at the loading dock must adhere to a thirty (30) minute limit when making deliveries. Vehicles left unattended beyond the time limit are subject to towing at the vehicle owner’s expense. Landlord shall not be responsible for damage to vehicles, businesses or personnel incurred due to parking or loading dock operations.

D-1


10.    Except as otherwise permitted under the Lease, Tenant shall not mark, paint, drill into or in any way deface any part of the Building or Premises. No boring, driving of nails or screws, cutting or stringing of wires shall be permitted except with Landlord’s prior written consent, which Landlord shall not unreasonably withhold, or as Landlord may direct.
11.    Tenant shall only discharge industrial sewage if Tenant, at its sole cost and expense, obtains all necessary permits and licenses therefor, including (without limitation) permits from State and local authorities having jurisdiction thereover.
12.    Tenant shall store all of its trash, garbage and Hazardous Materials in receptacles within its Premises or in receptacles designated by Landlord outside of the Premises. Tenant shall not place in any such receptacle any material that cannot be disposed of in the ordinary and customary manner of trash, garbage and Hazardous Materials disposal. Any Hazardous Materials transported through Common Area shall be held in secondary containment devices. Tenant shall be responsible, at its sole cost and expense, for Tenant’s removal of its Hazardous Materials. Tenant is encouraged to participate in the waste removal and recycling program in place at the Project.
13.    The Premises shall not be used for lodging or for any improper purpose. No cooking shall be done or permitted in the Premises; provided, however, that Tenant may use (a) equipment approved in accordance with the requirements of insurance policies that Landlord or Tenant is required to purchase and maintain pursuant to the Lease for brewing coffee, tea, hot chocolate and similar beverages, (b) microwave ovens for employees’ use and (c) equipment shown on Tenant Improvement plans approved by Landlord; provided, further, that any such equipment and microwave ovens are used in accordance with Applicable Laws.
14.    Tenant shall not, without Landlord’s prior written consent, use the name of the Project, if any, in connection with or in promoting or advertising Tenant’s business except as Tenant’s address.
15.    Tenant shall comply with all safety, fire protection and evacuation procedures and regulations established by Landlord or any Governmental Authority.
16.    Tenant assumes any and all responsibility for protecting the Premises from theft, robbery and pilferage, which responsibility includes keeping doors locked and other means of entry to the Premises closed.
17.    Tenant shall not modify any locks to the Premises without Landlord’s prior written consent, which consent Landlord shall not unreasonably withhold, condition or delay. Tenant shall furnish Landlord with copies of keys, pass cards or similar devices for locks to the Premises.
18.    Tenant shall cooperate and participate in all reasonable security programs affecting the Premises.
19.    Tenant shall not permit any animals in the Project, other than for guide animals or for use in laboratory experiments.
20.    Bicycles shall not be taken into the Building (including the elevators and stairways of the Building) except into areas designated by Landlord.
21.    The water and wash closets and other plumbing fixtures shall not be used for any purposes other than those for which they were constructed, and no sweepings, rubbish, rags or other substances shall be deposited therein.
22.    Discharge of industrial sewage shall only be permitted if Tenant, at its sole expense, first obtains all necessary permits and licenses therefor from all applicable Governmental Authorities.
23.    Smoking is prohibited at the Project, except in designated outdoor areas, if any.
24.    The Project’s hours of operation are currently 24 hours a day, seven days a week.

D-2


25.    Tenant shall comply with all orders, requirements and conditions now or hereafter imposed by Applicable Laws or Landlord (“Waste Regulations”) regarding the collection, sorting, separation and recycling of waste products, garbage, refuse and trash generated by Tenant (collectively, “Waste Products”), including (without limitation) the separation of Waste Products into receptacles reasonably approved by Landlord and the removal of such receptacles in accordance with any collection schedules prescribed by Waste Regulations.
26.    Tenant, at Tenant’s sole cost and expense, shall cause the Premises to be exterminated on a monthly basis to Landlord’s reasonable satisfaction and shall cause all portions of the Premises used for the storage, preparation, service or consumption of food or beverages to be cleaned daily in a manner reasonably satisfactory to Landlord, and to be treated against infestation by insects, rodents and other vermin and pests whenever there is evidence of any infestation. Tenant shall not permit any person to enter the Premises or the Project for the purpose of providing such extermination services, unless such persons have been approved by Landlord. If requested by Landlord, Tenant shall, at Tenant’s sole cost and expense, store any refuse generated in the Premises by the consumption of food or beverages in a cold box or similar facility.
27.    If Tenant desires to use any portion of the Common Area for a Tenant-related event, Tenant must notify Landlord in writing at least thirty (30) days prior to such event on the form attached as Attachment 1 to this Exhibit, which use shall be subject to Landlord’s prior written consent, not to be unreasonably withheld, conditioned or delayed. Notwithstanding anything in this Lease or the completed and executed Attachment to the contrary, Tenant shall be solely responsible for setting up and taking down any equipment or other materials required for the event, and shall promptly pick up any litter and report any property damage to Landlord related to the event. Any use of the Common Area pursuant to this Section shall be subject to the provisions of Article 28 of the Lease.
Landlord may waive any one or more of these Rules and Regulations for the benefit of Tenant or any other tenant, but no such waiver by Landlord shall be construed as a waiver of such Rules and Regulations in favor of Tenant or any other tenant, nor prevent Landlord from thereafter enforcing any such Rules and Regulations against any or all of the tenants of the Project, including Tenant. These Rules and Regulations are in addition to, and shall not be construed to in any way modify or amend, in whole or in part, the terms covenants, agreements and conditions of the Lease. Landlord reserves the right to make such other and additional reasonable and uniform rules and regulations as, in its judgment, may from time to time be needed for safety and security, the care and cleanliness of the Project, or the preservation of good order therein; provided, however, that Landlord shall provide reasonable written notice to Tenant of such rules and regulations prior to them taking effect; and provided, further, that no such additional rule or regulation shall adversely affect Tenant’s use or enjoyment of the Project as permitted under the Lease for the Permitted Use. Tenant agrees to abide by these Rules and Regulations and any such additional rules and regulations issued or adopted by Landlord. Tenant shall be responsible for the observance of these Rules and Regulations by all Tenant Parties.




D-3


ATTACHMENT 1 TO EXHIBIT D
REQUEST FOR USE OF COMMON AREA
[TENANT LETTERHEAD]
VIA [_______]

[Date]

BMR-Rogers Street LLC
17190 Bernardo Center Drive
San Diego, California 92128
Attn: Senior Director, East Coast Operations

Re:    Notice of Request to Use Common Area

To Whom It May Concern:

[NOTE: INSERT NAME OF TENANT] requests that it have use of the common area as described below:

Event Description: ________________________________________________

Date: ___________________________________________________________

Location at Property: ______________________________________________

Number of Attendees: ______________________________________________

Open to the Public?     [____] YES    [____] NO

Food and/or Beverages?    [____] YES    [____] NO

If YES:
•
will alcohol be served (Note: Proof of an insurance endorsement for serving alcohol must be provided) [____] YES    [____] NO

•
please describe: ______________________________

Other Amenities (tent, band, etc.): _____________________________________

Other Event Details: ________________________________________________

Please let us know at your earliest convenience whether such use is approved.


D-1-1



Sincerely,

[Name]
[Title]

To Be Completed by Landlord:


[____] APPROVED    DENIED [____]


The following conditions apply to approval (if approved):

1. _________________________________________________________________         
2. _________________________________________________________________         
3. _________________________________________________________________         
4. _________________________________________________________________         
5. _________________________________________________________________         

BMR-ROGERS STREET LLC

By:     __________________
Name:     __________________
Its:    __________________
Title:     __________________


D-1-2


EXHIBIT E
TENANT’S PROPERTY


E-1

EXHIBIT F
FORM OF ESTOPPEL CERTIFICATE

To:    BMR-Rogers Street LLC
17190 Bernardo Center Drive
San Diego, California 92128
Attention: Vice President, Real Estate Legal

BioMed Realty, L.P.
17190 Bernardo Center Drive
San Diego, California 92128

Re:
Suite [____] (the “Premises”) at 301 Binney Street, Cambridge, Massachusetts (the “Property”)
The undersigned tenant (“Tenant”) hereby certifies to you as follows:
1.        Tenant is a tenant at the Property under a lease (the “Lease”) for the Premises dated as of [_______], 20[_]. The Lease has not been cancelled, modified, assigned, extended or amended [except as follows: [___]], and there are no other agreements, written or oral, affecting or relating to Tenant’s lease of the Premises or any other space at the Property. The lease term expires on [_______], 20[_].
2.    Tenant took possession of the Premises, currently consisting of [___] square feet, on [_______], 20[_], and commenced to pay rent on [_______], 20[_]. Tenant has full possession of the Premises, has not assigned the Lease or sublet any part of the Premises, and does not hold the Premises under an assignment or sublease [, except as follows: [___]].
3.    All base rent, rent escalations and additional rent under the Lease have been paid through [_______], 20[_]. There is no prepaid rent [, except $[___]. Tenant currently has no right to any future rent abatement under the Lease [, except as follows: [___]].
4.    Base rent is currently payable in the amount of $[___] per month.
5.    Tenant is currently paying estimated payments of additional rent of $[___] per month on account of real estate taxes, insurance, management fees and Common Area maintenance expenses.
6.    All work to be performed for Tenant under the Lease has been performed as required under the Lease and has been accepted by Tenant[, except [___]], and all allowances to be paid to Tenant, including allowances for tenant improvements, moving expenses or other items, have been paid[, except as follows: [___]].
7.    To the best of Tenant’s knowledge, the Lease is in full force and effect, free from default and free from any event that could become a default under the Lease, and Tenant has no claims against the landlord or offsets or defenses against rent, and there are no disputes with the landlord[, except as follows: [___]]. Tenant has received no notice of prior sale, transfer, assignment, hypothecation or pledge of the Lease or of the rents payable thereunder [, except [___]].
8.    Tenant has the following expansion rights or options for leasing additional space at the Property: [___]. Tenant has no rights or options to purchase the Property.

F-1

9.    To Tenant’s knowledge, no hazardous wastes have been generated, treated, stored or disposed of by or on behalf of Tenant in, on or around the Premises or the Project in violation of any environmental laws[, except as follows: [___]].
10.    The undersigned has executed this Estoppel Certificate with the knowledge and understanding that [INSERT NAME OF LANDLORD, PURCHASER OR LENDER, AS APPROPRIATE] or its assignee is [acquiring the Property/making a loan secured by the Property] in reliance on this certificate and that the undersigned shall be bound by this certificate. The statements contained herein may be relied upon by [INSERT NAME OF PURCHASER OR LENDER, AS APPROPRIATE], [LANDLORD], BioMed Realty, L.P., BioMed Realty Trust, Inc., and any [other] mortgagee of the Property and their respective successors and assigns.

Any capitalized terms not defined herein shall have the respective meanings given in the Lease.

Dated this [__] day of [_______], 20[_].

BIOGEN MA INC.,
a Massachusetts corporation

By:     __________________
Name:     __________________
Title:     __________________
    
 


F-2

++++

G-1

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EXHIBIT H
ROOFTOP PLAN
[see attached 6 pages]

H-1

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EXHIBIT I
++++

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EXHIBIT J
++++



J-1
The portions of this Exhibit marked with ++++ signify a redaction in the original Exhibit.

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Exhibit 31.1
 
CERTIFICATION
 
I, Craig A. Wheeler, certify that:
 
1.
I have reviewed this Quarterly Report on Form 10-Q of Momenta Pharmaceuticals, Inc.;
 
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
 
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
 
a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
d) 
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
 
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
 
a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
 
b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
 
Dated: November 4, 2016
/s/ Craig A. Wheeler
 
Craig A. Wheeler
 
President and Chief Executive Officer





Exhibit 31.2
 
CERTIFICATION
 
I, Richard P. Shea, certify that:
 
1.
I have reviewed this Quarterly Report on Form 10-Q of Momenta Pharmaceuticals, Inc.;
 
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
 
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
 
a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
d)
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
 
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
 
a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
 
b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
 
Dated: November 4, 2016
/s/ Richard P. Shea
 
Richard P. Shea
 
Senior Vice President and Chief Financial Officer





Exhibit 32.1
 
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
 
AS ADOPTED PURSUANT TO
 
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
 
In connection with the Quarterly Report on Form 10-Q of Momenta Pharmaceuticals, Inc. (the “Company”) for the period ended September 30, 2016 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Craig A. Wheeler, President and Chief Executive Officer of the Company, and Richard P. Shea, Senior Vice President and Chief Financial Officer of the Company, each hereby certifies, pursuant to 18 U.S.C. Section 1350, that:
 
(1)  The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
 
(2)  The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
 
Dated: November 4, 2016
/s/ Craig A. Wheeler
 
Craig A. Wheeler
 
President and Chief Executive Officer
 
 
Dated: November 4, 2016
/s/ Richard P. Shea
 
Richard P. Shea
 
Senior Vice President and Chief Financial Officer




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