AMAG Pharmaceuticals, Inc. Annual Report 2011

Plain-text annual report

Table of ContentsUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 10-KCommission file number 001-10865AMAG Pharmaceuticals, Inc.(Exact Name of Registrant as Specified in Its Charter)Delaware(State or Other Jurisdiction ofIncorporation or Organization) 04-2742593(I.R.S. EmployerIdentification No.)100 Hayden AvenueLexington, Massachusetts(Address of Principal ExecutiveOffices) 02421(Zip Code)(617) 498-3300(Registrant's Telephone Number, Including Area Code)Securities registered pursuant to Section 12(b) of the Act: Common Stock, par value $0.01 per share, NASDAQ Global Select MarketSecurities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes oo No  Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes oo No  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(MarkOne)  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACTOF 1934For the Fiscal Year Ended December 31, 2011oro TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGEACT OF 1934For the transition period from to 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 suchfiling requirements for the past 90 days. Yes  No oo Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data Filerequired to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that theregistrant was required to submit and post such files). Yes  No oo Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained,to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or anyamendment to this Form 10-K.  Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reportingcompany. See definition of "accelerated filer," "large accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Checkone): Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes oo No  The aggregate market value of the registrant's voting stock held by non-affiliates as of June 30, 2011 was approximately $398,100,000 based onthe closing price of $18.80 of the Common Stock of the registrant as reported on the NASDAQ Global Select Market on such date. As of February 16,2012, there were 21,349,163 shares of the registrant's Common Stock, par value $0.01 per share, outstanding.DOCUMENTS INCORPORATED BY REFERENCE Portions of the Proxy Statement to be filed in connection with the solicitation of proxies for the Annual Meeting of Stockholders to be held onMay 23, 2012, are incorporated by reference into Part III of this Annual Report on Form 10-K. Large accelerated filer o Accelerated filer  Non-accelerated filer o(Do not check if a smaller reporting company) Smaller Reporting Company oTable of ContentsAMAG PHARMACEUTICALS, INC.FORM 10-KFOR THE YEAR ENDED DECEMBER 31, 2011TABLE OF CONTENTS PART I Item 1. Business 2Item 1A. Risk Factors 25Item 1B. Unresolved Staff Comments 51Item 2. Properties 51Item 3. Legal Proceedings 51Item 4. [Not Applicable] 52 PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases ofEquity Securities 53Item 6. Selected Financial Data 55Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 56Item 7A. Quantitative and Qualitative Disclosures About Market Risk 84Item 8. Financial Statements and Supplementary Data 85Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure 128Item 9A. Controls and Procedures 128Item 9B. Other Information 128 PART III Item 10. Directors, Executive Officers and Corporate Governance 129Item 11. Executive Compensation 129Item 12. Security Ownership of Certain Beneficial Owners and Management and Related StockholderMatters 129Item 13. Certain Relationships and Related Transactions, and Director Independence 129Item 14. Principal Accountant Fees and Services 129 PART IV Item 15. Exhibits and Financial Statement Schedules 130Table of ContentsPART I Except for the historical information contained herein, the matters discussed in this Annual Report on Form 10-K may be deemed to be forward-looking statements that involve risks and uncertainties. We make such forward-looking statements pursuant to the safe harbor provisions of the PrivateSecurities Litigation Reform Act of 1995 and other federal securities laws. In this Annual Report on Form 10-K, words such as "may," "will," "expect,""intend," and similar expressions (as well as other words or expressions referencing future events, conditions or circumstances) are intended toidentify forward-looking statements. Examples of forward-looking statements contained in this report include statements regarding the following: our expectation that TakedaPharmaceutical Company Limited, or Takeda, will launch Feraheme in Canada in 2012, our expectation of revenue sources to fund our futureoperations, our expectations regarding the success of our collaboration with Takeda, including any potential milestone payments or royalties we mayreceive, our expectation that we will submit our Feraheme Supplemental New Drug Application in the U.S. for the treatment of anemia in all adultpatients with iron deficiency anemia in 2012, our expectation that Takeda plans to file a Type II Variation with the European Medicines Agency in 2013for the treatment of anemia in all adult patients with iron deficiency anemia, our expectation of the timing of a recommendation by the Committee forMedicinal Products for Human Use and European Medicines Agency on our Rienso™ Marketing Authorization Application and the expectedindication, the design of our two pediatric studies to be conducted to meet our Pediatric Research Equity Act requirement, our intention to conduct twoadditional pediatric studies included in our pediatric investigation plan, our plan to conduct a post-approval trial to assess the safety and efficacy ofrepeat, episodic Feraheme administration for the treatment of persistent or recurrent iron deficiency anemia and the design of such trial, ourexpectation of the timing of a decision from Swissmedic on our Rienso™ Marketing Authorization Application, our statement that our licensee inChina, 3SBio Inc., or, 3SBio, plans to begin a Feraheme clinical study in China in 2012, our expectation that sales of GastroMARK® will notmaterially increase, our expectation that Feraheme will be sold in the EU under the trade name Rienso™, our expectation that we will manufactureFeraheme drug substance and drug product for use in the European Union at our third-party manufacturers, our expectation that the majority of ourNovember 2011 restructuring charges will be paid by the end of 2012, our expectations regarding our future revenues, including expected Ferahemerevenues under our Takeda and 3SBio collaborations, our expectation that dialysis sales will not be significant in 2012, our expectation that ourreserves as a percentage of gross sales will increase in 2012, our expectation regarding future license fee revenues from 3SBio, our expectation thatour costs of product sales as a percentage of net product sales will decrease in 2012, our expectation that our research and development expenses willdecrease in 2012, our expectations regarding the amount of external expenses we expect to incur and the timing of our planned research anddevelopment projects, our expectation that selling, general and administrative expenses will decrease in 2012, our expectation regarding our dividendand interest income, our expectations regarding our short- and long-term liquidity and capital requirements and our ability to finance our operations,our expectations regarding our future cash flows, our belief that the decline in the value of our auction rate securities is temporary and that we willultimately be able to liquidate these investments without significant loss, our belief regarding the potential impact of the adoption of newly issued andfuture accounting guidance on our financial statements, our expectations that our cash and cash equivalents will remain relatively stable compared to2011, and information with respect to any other plans and strategies for our business. Our actual results and the timing of certain events may differmaterially from the results discussed, projected, anticipated or indicated in any forward-looking statements. Any forward-looking statement should beconsidered in light of the factors discussed in Part I, Item 1A below under "Risk Factors" and elsewhere in this Annual Report on Form 10-K. Wecaution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date they are made. We disclaim anyobligation, except as specifically required by law and the rules of the United States Securities and Exchange Commission to publicly update or reviseany such statements to reflect any change in company expectations or in events, conditions or circumstances on which any such statements may bebased, or that may affect the likelihood that actual results will differ from those set forth in the forward-looking statements.1Table of ContentsITEM 1. BUSINESS: Overview AMAG Pharmaceuticals, Inc., a Delaware corporation, was founded in 1981. We are a biopharmaceutical company focused on the developmentand commercialization of a therapeutic iron compound to treat iron deficiency anemia, or IDA. Our principal source of revenue is from the sale ofFeraheme® (ferumoxytol) Injection for Intravenous, or IV, use, which was approved for marketing in the U.S. in June 2009 by the U.S. Food andDrug Administration, or the FDA, for use as an IV iron replacement therapy for the treatment of IDA in adult patients with chronic kidney disease, orCKD. In December 2011, Feraheme was also granted marketing approval in Canada for use as an IV iron replacement therapy for the treatment of IDAin adult patients with CKD. We are currently pursuing marketing applications for Feraheme in the European Union, or EU, and Switzerland for thetreatment of IDA in CKD patients. We market and sell Feraheme in the U.S. through our own commercial organization, including a specialized sales force. We began commercial saleof Feraheme in the U.S. in July 2009 and sell Feraheme primarily to authorized wholesalers and specialty distributors. Under an agreement withTakeda Pharmaceutical Company Limited, or Takeda, Takeda has an exclusive license to market and sell Feraheme in Canada. We expect Takeda tolaunch Feraheme in Canada in 2012. Feraheme is approved in the U.S. for the treatment of IDA in both dialysis and non-dialysis dependent adult CKD patients. In January 2011, aprospective payment system for the reimbursement of dialysis services became effective, which significantly diminished the utilization of Feraheme inthe dialysis market. As a result of the implementation of the prospective payment system, our dialysis sales during 2011 were de minimis. Our U.S.commercial strategy is now entirely focused on growing the utilization of Feraheme in non-dialysis dependent adult CKD patients with IDA,specifically in hematology, oncology, nephrology, and hospital sites of care, where a large number of CKD patients are treated. In order to align our operating expenses with our near-term revenue projections for Feraheme, in November 2011, we initiated a corporaterestructuring, including a workforce reduction plan, which included an approximate 25% reduction in positions and the departure of our chief executiveofficer and our chief commercial officer. The workforce reduction was substantially completed by the end of 2011. In November 2011, our Board of Directors, or Board, appointed Frank E. Thomas, our then Executive Vice President and Chief Financial Officer,to serve as our Chief Operating Officer and interim President and Chief Executive Officer until a permanent successor is appointed. Our Board iscurrently conducting a search for a permanent Chief Executive Officer. We also announced, in November 2011, that we hired Jefferies & Company, Inc., or Jefferies, as our financial advisor to explore whether a sale ofour company is a viable strategy for value maximization at this time while we simultaneously establish a solid foundation from which to driveprofitability and deliver stockholder value if a sale is not pursued. We are conducting a strategic review with Jefferies to determine the optimal strategyfor growth, which involves an evaluation of all business strategies to enhance our portfolio, including in-licensing and acquisition opportunities. Prior to the FDA approval and commercial launch of Feraheme in 2009, we devoted substantially all of our resources to our research anddevelopment programs. Since then, we have incurred substantial costs related to the commercialization and development of Feraheme. We expect tocontinue to incur significant expenses to manufacture, market and sell Feraheme as an IV iron replacement therapeutic for use in adult CKD patients inthe U.S., to further develop and seek marketing approval for Feraheme for the treatment of IDA in a broad range of patients, and to obtain marketingapproval for Feraheme in countries outside of the U.S. Prior to the commercial launch of Feraheme, we financed2Table of Contentsour operations primarily from the sale of our equity securities, cash generated by our investing activities, and payments from our licensees. Since 2009,our revenues have been primarily attributable to product sales of Feraheme, along with license fee payments from Takeda. We currently expect to fundour future operations from cash from sales of Feraheme in the U.S., milestone payments we may receive from Takeda upon regulatory approval andcommercial launch of Feraheme in Canada and the EU, royalties we may receive with respect to sales of Feraheme in Canada and in the EU, cashgenerated by our investing activities, and the sale of our equity securities, if necessary. As of December 31, 2011, we had an accumulated deficit ofapproximately $439.9 million and a cash, cash equivalents and investments balance of approximately $229.7 million.Takeda Collaboration In March 2010, we entered into a License, Development and Commercialization Agreement, or the Takeda Agreement, with Takeda under whichwe granted exclusive rights to Takeda to develop and commercialize Feraheme as a therapeutic agent in Europe, Asia-Pacific countries (excludingJapan, China and Taiwan), the Commonwealth of Independent States, Canada, India and Turkey, or collectively, the Licensed Territory. Under theTakeda Agreement we may be entitled to receive milestone payments over time equaling approximately $220.0 million, including up to an aggregate of$33.0 million upon the regulatory approval and commercial launch of Feraheme in the EU and Canada, of which $3.0 million will be earned andpayable upon the first commercial sale of Feraheme in Canada.Clinical Development and Regulatory Status of Feraheme During the first quarter of 2012, we completed enrollment in our global registrational program for Feraheme in patients with IDA regardless of theunderlying cause. This program consists of two Phase III multi-center clinical trials to assess Feraheme for the treatment of IDA in a broad range ofpatients for whom treatment with oral iron is unsatisfactory, including women with abnormal uterine bleeding, or AUB, patients with cancer orgastrointestinal diseases and postpartum women. In March 2012, we reported preliminary results from the first of the two Phase III studies in our global IDA registrational program. This studywas an open label, active controlled trial that compared treatment with Feraheme to treatment with IV iron sucrose and enrolled 605 patients at 74 sitesin Europe, Asia Pacific and Australia. The patients enrolled in the study had a history of unsatisfactory oral iron therapy and had IDA associated withvarious conditions including AUB, cancer, gastrointestinal disorders or other causes. The study enrolled patients to receive a one gram IV course of either Feraheme or iron sucrose and was designed to demonstrate non-inferiority onefficacy of Feraheme as compared to iron sucrose. Of the 605 patients enrolled in the study, 406 patients were randomly assigned to receive Ferahemeand 199 were randomly assigned to receive iron sucrose. The demographics and all baseline parameters were well balanced between the two treatmentgroups. The primary efficacy endpoint of the study was the mean change in hemoglobin from the date of determination of each patient's baselinehemoglobin level to the fifth week following administration of the study drug or the proportion of patients who achieved a greater than or equal to 2.0gram per deciliter increase in hemoglobin at any time from the date of determination of their baseline hemoglobin level to the fifth week followingadministration of the study drug, depending on the regulatory authority. In this study, Feraheme achieved the predefined criteria for non-inferiority on both primary efficacy endpoints. Patients treated with Ferahemeachieved a mean increase in hemoglobin at week five of 2.7 grams per deciliter as compared to a mean increase of 2.4 grams per deciliter in patientstreated with IV iron sucrose. An increase of 2.0 grams per deciliter or more in hemoglobin at any time from baseline to week five was achieved in 84%of patients treated with Feraheme as compared to 81% of patients treated with IV iron sucrose.3Table of Contents No new safety signals were observed with Feraheme and the types of reported adverse events, or AEs, were consistent with those seen inprevious studies and those contained in the U.S. package insert for Feraheme. Overall, AEs experienced by patients in the two treatment groups werecomparable, with AEs reported in 41.4% of Feraheme-treated patients as compared to 44.2% of patients treated with IV iron sucrose. Patients in bothtreatment groups experienced protocol-defined adverse events of special interest, including moderate to severe hypotension or hypersensitivity reactions,ranging from fever alone to an anaphylactoid reaction. Cardiovascular AEs were comparable between the two treatment groups. Serious adverse events,or SAEs, were reported in 4.2% of Feraheme-treated patients as compared to 2.5% of patients treated with IV iron sucrose. The SAEs reported in twoFeraheme treated patients, or 0.5%, were reported as related to treatment by the applicable investigators in the study. The second Phase III trial in our global IDA registrational program was a double blind, placebo-controlled study to assess the efficacy and safetyof two doses of 510 milligrams each of Feraheme compared to placebo in a total of approximately 800 patients with IDA. During the second half of2012, we expect to submit a Supplemental New Drug Application, or sNDA, in the U.S. seeking marketing approval for Feraheme for the treatment ofanemia in all adult patients with IDA. In addition, we expect that Takeda will file a Type II Variation, which is the equivalent of a sNDA in the U.S.,seeking marketing approval for Feraheme for the treatment of anemia in all adult patients with IDA with the European Medicines Agency, or EMA, in2013. Further, an open label extension study is currently enrolling patients from the placebo-controlled study described above who will be followed forsix months and will be eligible to receive two doses of 510 milligrams each of Feraheme whenever they meet treatment criteria. In June 2010, we submitted our Marketing Authorization Application, or MAA, with the EMA seeking marketing approval for Feraheme for thetreatment of IDA in CKD patients. We recently received a 60 day extension in order to fully respond to the Day 180 List of Outstanding Issues. Weexpect a recommendation from the Committee for Medicinal Products for Human Use, or CHMP, on our MAA submission in the first half of 2012.Assuming a positive CHMP recommendation, we expect a final decision on our MAA by the European Commission shortly thereafter. We expect thatFeraheme will be sold in the EU under the trade name Rienso™. We have also initiated two randomized, active-controlled pediatric studies of Feraheme for the treatment of IDA in pediatric CKD patients to meetour FDA post-approval Pediatric Research Equity Act requirement to support pediatric labeling of Feraheme. One study is in dialysis-dependent CKDpatients, and the other is in CKD patients not on dialysis. Each study will assess the safety and efficacy of Feraheme treatment as compared to oral ironin approximately 144 pediatric patients. Both of these pediatric studies are currently open for enrollment. Our pediatric investigation plan, which is a requirement for approval of our MAA, was approved by the EMA in December 2009 and includes thetwo pediatric studies needed to meet the requirements of the Pediatric Research Equity Act in the U.S. described above and two additional pediatricstudies requested by the EMA, including a rollover study and a study in pediatric patients with IDA. As part of our obligations under the Takeda Agreement, we are also required to initiate a multi-center post-approval clinical trial to assess the safetyand efficacy of repeat, episodic Feraheme administration for the treatment of persistent or recurrent IDA. Final study design and timing of this trial aresubject to further discussions with Takeda. In August 2010, Takeda filed an MAA with Swissmedic, the Swiss Agency for Therapeutic Products, seeking marketing approval for Ferahemefor the treatment of IDA in CKD patients. We expect a decision from Swissmedic during the second quarter of 2012.4Table of Contents In December 2009, our licensee in China, 3SBio Inc., or 3SBio, filed an application with the Chinese State Food and Drug Administration, or theSFDA, to obtain approval to begin a registrational clinical trial necessary to file for marketing approval of Feraheme in China. If approved by theSFDA, 3SBio plans to commence a multi-center randomized efficacy and safety study of Feraheme in China involving approximately 200 CKDpatients in 2012.Other information GastroMARK®, which is marketed and sold under the trade name Lumirem® outside of the U.S, is our oral contrast agent used for delineating thebowel in magnetic resonance imaging, or MRI, and is approved and marketed in the U.S., Europe, and other countries through our licensees. Sales ofGastroMARK by our licensees have been at approximately their current levels for many years, and we do not expect sales of GastroMARK to materiallyincrease. Our common stock trades on the NASDAQ Global Select Market, or NASDAQ, under the trading symbol "AMAG."Our Core Technology Our core technology is based on coated superparamagnetic iron oxide particles and their characteristic properties. Our core competencies includethe ability to design such particles for particular applications, to manufacture the particles in controlled sizes, and to cover the particles with differentcoatings depending upon the application for which they will be used. Our technology and expertise enable us to synthesize, sterilize and stabilize theseiron oxide particles in a manner necessary for use in pharmaceutical products such as IV iron replacement therapeutics and MRI contrast agents. Our iron oxide particles are composed of bioavailable iron that is easily utilized by the body and incorporated into the body's iron stores. As aresult, our core technology is well suited for use as an IV iron replacement therapy product. Our rights to our technology are derived from and/orprotected by license agreements, patents, patent applications and trade secret protections. See "Patents and Trade Secrets."5Table of ContentsProducts The following table summarizes the uses and potential uses of our products, the names of our principal licensees, the current U.S. and foreignregulatory status, and the primary markets for our products. For a discussion of the substantive regulatory requirements applicable to the development and regulatory approval process in the U.S. and othercountries, see "Government Regulation."6Product Uses/Potential Uses Licensees U.S. Status Foreign StatusFeraheme®(ferumoxytol)Injection(1) IV iron replacement therapeuticagent for the treatment of IDA inadult patients with CKD. 3SBio (China) and Takeda (Europe,Asia-Pacific countries (excludingJapan, China and Taiwan), theCommonwealth of IndependentStates, Canada, India and Turkey). Approved and marketed. Received marketing approval fromHealth Canada, December 2011.Expected to launch in 2012.MAA filed with EMA, June 2010.CHMP recommendation expected infirst half of 2012.MAA filed with Swissmedic, August2010. Decision expected in secondquarter of 2012.Filed for CKD registrational trialwith the SFDA in China, December2009. Trial expected to begin in2012. IV iron replacement therapeuticagent in patients with IDA,regardless of the underlying cause. 3SBio (China) (option to extendlicense into additional therapeuticindications).Takeda (Europe, Asia-Pacificcountries (excluding Japan, Chinaand Taiwan), the Commonwealth ofIndependent States, Canada, Indiaand Turkey). Enrollment completed in Phase IIIglobal registrational program. sNDAexpected to be filed in 2012. Type II Variation expected to befiled with the EMA by Takeda in2013.GastroMARK®(2) Delineating the bowel in abdominalimaging. Covidien, Ltd. (U.S.) andGuerbet, S.A. (various countries inthe EU, South America, the MiddleEast, southeast Asia, Africa andeastern Europe). Approved and marketed. Approved and marketed in severalcountries.(1)Feraheme is expected to be marketed and sold under the trade name Rienso in the EU. (2)GastroMARK is marketed and sold under the trade name Lumirem outside of the U.S.Table of ContentsFeraheme for the treatment of IDA in patients with CKDOverview On June 30, 2009, Feraheme was approved for marketing in the U.S. by the FDA for use as an IV iron replacement therapy for the treatment ofIDA in adult patients with CKD. In July 2009, we began to market and sell Feraheme in the U.S. in both the dialysis and non-dialysis CKD markets,including to nephrologists, hematologists, dialysis organizations, hospitals and other end-users who treat patients with CKD. In 2010, due to a thenimpending change in the way the federal government would reimburse providers for the care of dialysis patients, the utilization of Feraheme shiftedfrom primarily dialysis patients to non-dialysis patients. Accordingly, we have since focused our commercial efforts entirely on building Ferahemeutilization in non-dialysis CKD patients. We anticipate the vast majority of all Feraheme utilization in the U.S. will continue to be in the non-dialysisCKD patient population. In December 2011, Feraheme was granted marketing approval in Canada for use as an IV iron replacement therapy for the treatment of IDA inadult patients with CKD. We are currently pursuing marketing applications for Feraheme in the EU and Switzerland for the treatment of IDA in CKDpatients and expect to receive decisions on these marketing applications during 2012.Chronic kidney disease, anemia, and iron deficiency Based on data contained in a 2007 publication in the Journal of the American Medical Association, it is estimated that approximately 10 to 15% ofthe U.S. adult population is affected by CKD, a condition generally characterized by damaged kidneys, or a reduction in kidney function below 50% ofnormal. Anemia, a common condition among CKD patients, is associated with cardiovascular complications, decreased quality of life, hospitalizations,and increased mortality. Anemia develops early during the course of CKD and worsens with advancing kidney disease. Iron deficiency is a commoncause of anemia in CKD patients and can result from multiple blood draws, hospitalizations and interventional procedures, gastrointestinal bleeding, orpoor nutritional intake. Regardless of the cause of anemia, iron replacement therapy is essential to increase iron stores and raise hemoglobin levels. Ironis also essential for effective treatment with erythropoiesis stimulating agents, or ESAs, which are commonly used in anemic patients to stimulate redblood cell production. Based on data contained in a 2009 publication in the Journal of the American Society of Nephrology, we estimate that up to1.6 million adults in the U.S. with anemia and stages 3 through 5 CKD, who are patients in the later stages of CKD but not yet on dialysis, may be irondeficient and could therefore benefit from receiving iron. Currently there are two methods used to treat IDA in CKD patients: oral iron supplements and IV iron. Oral iron is currently the first line ironreplacement therapy of choice of most physicians in both the U.S. and abroad. However, oral iron supplements are often not absorbed well by thegastrointestinal tract and frequently have unpleasant side effects, such as constipation, diarrhea, and cramping, which can cause patients to stop takingtheir medication. In addition, it can take an extended time for hemoglobin levels to improve following the initiation of oral iron treatment. Conversely,iron given intravenously allows larger amounts of iron to be provided to patients while avoiding many of the side effects and treatment complianceissues associated with oral iron, and can result in faster rises in hemoglobin levels. The administration of IV iron has been shown to be effective intreating anemia either when used alone or in combination with an ESA. Current U.S. treatment guidelines indicate that treating first with iron alone maydelay or reduce the need for ESA therapy. We believe that a small fraction of non-dialysis CKD patients in the U.S. with IDA are currently being treatedwith IV iron, and thus a significant opportunity remains to grow the market for IV iron in this patient population.Feraheme for the treatment of IDA in a broad range of patients IDA is widely prevalent in many different patient populations for whom treatment with oral iron is unsatisfactory, including women with AUB,patients with cancer or gastrointestinal diseases, and7Table of Contentspostpartum women. It is estimated that more than 4 million patients in the U.S. have IDA. Currently, approximately 40% of these patients are treatedwith oral iron and approximately 5% are treated with IV iron. Based on our belief that the product characteristics of Feraheme support clinical development in these additional patient populations, in mid-2010we initiated a global registrational program for Feraheme in a broad range of patients with IDA, regardless of the underlying cause. The developmentprogram is intended to enable the marketing approval of Feraheme for the treatment of IDA regardless of the underlying cause in major markets aroundthe world, including the U.S. This program consists of two Phase III studies and is designed to include all patients with IDA for whom treatment withoral iron is unsatisfactory, including women with AUB, patients with cancer or gastrointestinal diseases and post-partum women. One study comparestreatment with Feraheme to treatment with placebo, and the other study compares treatment with Feraheme to treatment with an IV iron sucroseproduct. Patients from the placebo-controlled study are eligible to enter an extension study to evaluate treatment with Feraheme over a six month period. We have completed enrollment in our two Phase III trials, and in March 2012, we reported preliminary results from the first of the two Phase IIIstudies in our global IDA registrational program. This study was an open label, active controlled trial that compared treatment with Feraheme totreatment with IV iron sucrose and enrolled 605 patients at 74 sites in Europe, Asia Pacific and Australia. The patients enrolled in the study had ahistory of unsatisfactory oral iron therapy and had IDA associated with various conditions including AUB, cancer, gastrointestinal disorders or othercauses. The study enrolled patients to receive a one gram IV course of either Feraheme or iron sucrose and was designed to demonstrate non-inferiority onefficacy of Feraheme as compared to iron sucrose. Of the 605 patients enrolled in the study, 406 patients were randomly assigned to receive Ferahemeand 199 were randomly assigned to receive iron sucrose. The demographics and all baseline parameters were well balanced between the two treatmentgroups. The primary efficacy endpoint of the study was the mean change in hemoglobin from the date of determination of each patient's baselinehemoglobin level to the fifth week following administration of the study drug or the proportion of patients who achieved a greater than or equal to 2.0gram per deciliter increase in hemoglobin at any time from the date of determination of their baseline hemoglobin level to the fifth week followingadministration of the study drug, depending on the regulatory authority. In this study, Feraheme achieved the predefined criteria for non-inferiority on both primary efficacy endpoints. Patients treated with Ferahemeachieved a mean increase in hemoglobin at week five of 2.7 grams per deciliter as compared to a mean increase of 2.4 grams per deciliter in patientstreated with IV iron sucrose. An increase of 2.0 grams per deciliter or more in hemoglobin at any time from baseline to week five was achieved in 84%of patients treated with Feraheme as compared to 81% of patients treated with IV iron sucrose. No new safety signals were observed with Feraheme and the types of reported AEs were consistent with those seen in previous studies and thosecontained in the U.S. package insert for Feraheme. Overall, AEs experienced by patients in the two treatment groups were comparable, with AEsreported in 41.4% of Feraheme-treated patients as compared to 44.2% of patients treated with IV iron sucrose. Patients in both treatment groupsexperienced protocol-defined adverse events of special interest, including moderate to severe hypotension or hypersensitivity reactions, ranging fromfever alone to an anaphylactoid reaction. Cardiovascular AEs were comparable between the two treatment groups. SAEs were reported in 4.2% ofFeraheme-treated patients as compared to 2.5% of patients treated with IV iron sucrose. The SAEs reported in two Feraheme treated patients, or 0.5%,were reported as related to treatment by the applicable investigators in the study.8Table of Contents We expect to file our U.S. sNDA during the second half of 2012 seeking marketing approval for Feraheme for the treatment of anemia in all adultpatients with IDA. In addition, we expect that Takeda will file a Type II Variation, which is the equivalent of a sNDA in the U.S., seeking marketingapproval for Feraheme for the treatment of anemia in all adult patients with IDA with the EMA in 2013. AUB is defined as chronic, heavy, or prolonged uterine bleeding that can result from multiple causes, including uterine abnormalities, blooddisorders, pregnancy, intrauterine devices, medications, and heavy menstrual bleeding. IDA is commonly associated with AUB, and we estimate thatmore than 3 million women in the U.S. have IDA and AUB. IDA in patients with AUB, regardless of the cause, requires treatment with ironsupplementation, either by oral or IV administration. IDA in patients with gastrointestinal diseases is likely caused by blood loss and/or the inadequate intake or absorption of iron. We estimate thatnearly 800,000 patients who have gastrointestinal diseases in the U.S. also have IDA. Oral iron has been used to treat IDA in patients withgastrointestinal diseases, but its efficacy is variable due to inconsistent bioavailability and absorption, the high incidence of gastrointestinal side effectsand patient noncompliance. IDA is also common in patients with cancer, and we estimate that nearly 400,000 cancer patients in the U.S. have IDA. Iron supplementationthrough both oral and IV administration plays an important role in treating anemia in cancer patients. While there may be some differences in theunderlying causes of anemia and iron deficiency in cancer patients who are receiving chemotherapy and those who are not, patients in both categoriesmay develop absolute IDA due to blood loss and/or the inadequate intake or absorption of iron. Oral iron has been used to treat IDA in cancer patients,but its efficacy is variable due to inconsistent bioavailability and absorption, a high incidence of gastrointestinal side effects, potential interactions withother treatments, and patient noncompliance. IV iron has been shown in small clinical trials to be well tolerated in the cancer patient population in bothpatients who are receiving chemotherapy and those who are not. Currently, only certain iron dextran IV iron products are approved in the U.S. for the treatment of all patients with IDA, regardless of theunderlying cause. All of the other currently marketed IV iron products, including Feraheme, are only approved in the U.S. for either the treatment ofIDA in CKD patients or CKD patients on hemodialysis. We believe that a new entrant into the broader IDA market could significantly increase thenumber of patients treated with IV iron.GastroMARK Images of organs and tissues in the abdomen using MRI without contrast agents can be difficult to read because the abdominal organs and tissuescannot be easily distinguished from the loops of the bowel. GastroMARK, our oral contrast agent for delineation of the bowel, flows through anddarkens the bowel when ingested. By more clearly identifying the intestinal loops, GastroMARK enhances the ability to distinguish the bowel fromadjacent tissues and organs in the upper gastrointestinal tract. GastroMARK was approved by the FDA in 1996. Our licensee, Covidien, Ltd., or Covidien, or its predecessors, have been marketingGastroMARK in the U.S. since 1997. We initially licensed the marketing rights to GastroMARK, under the tradename Lumirem, on an exclusive basisto Guerbet S.A., or Guerbet, in western Europe and Brazil. Guerbet has been marketing Lumirem in several EU countries since 1993 and subsequentlyacquired the rights to market Lumirem in several other countries in South America, the Middle East, southeast Asia, Africa, and eastern Europe. See"Licensing, Marketing and Supply Arrangements." Sales of GastroMARK by our licensees have been at approximately their current levels for many years, and we do not expect sales ofGastroMARK to materially increase.9Table of ContentsLicensing, Marketing and Supply Arrangements Although we are commercializing Feraheme in the U.S. through our own commercial organization, our commercial strategy has also included theformation of collaborations with other pharmaceutical companies to facilitate the sale and distribution of our products in the U.S. and abroad. At presentwe are parties to the following collaborations:Takeda In March 2010, we entered into a collaboration agreement with Takeda, under which we granted exclusive rights to Takeda to develop andcommercialize Feraheme as a therapeutic agent in the Licensed Territory. In December 2011, Feraheme was granted marketing approval in Canada foruse as an IV iron replacement therapy for the treatment of IDA in adult patients with CKD. We expect Takeda to launch Feraheme in Canada in 2012. Under the Takeda Agreement, except under limited circumstances, we have retained the right to manufacture Feraheme and, accordingly, areresponsible for supply of Feraheme to Takeda at a fixed cost per unit, which is capped. We are also responsible for conducting, and bearing the costsrelated to, certain pre-defined clinical studies with the costs of future modifications or additional studies to be allocated between the parties according toan agreed upon cost-sharing mechanism, which provides for a cap on such costs. In connection with the execution of the Takeda Agreement, wereceived a $60.0 million upfront payment from Takeda in April 2010. We may also receive a combination of regulatory approval and performance-basedmilestone payments, reimbursement of certain out-of-pocket regulatory and clinical supply costs, defined payments for supply of Feraheme, and tiereddouble-digit royalties on net product sales in the Licensed Territory. The milestone payments we may be entitled to receive under the agreement couldover time equal approximately $220.0 million, including up to an aggregate of $33.0 million upon the regulatory approval and commercial launch ofFeraheme in the EU and Canada, of which $3.0 million will be earned and payable upon the first commercial sale of Feraheme in Canada. Takeda hasthe unilateral right to terminate the Takeda Agreement under certain conditions, including without cause.3SBio In May 2008, we entered into a Collaboration and Exclusive License Agreement, or the 3SBio License Agreement, and a Supply Agreement, orthe 3SBio Supply Agreement, with 3SBio for the development and commercialization of Feraheme as an IV iron replacement therapeutic agent inChina. The 3SBio License Agreement grants 3SBio an exclusive license for an initial term of thirteen years to develop and commercialize Feraheme as atherapeutic agent in China for an initial indication for the treatment of IDA in patients with CKD, and an option to expand into additional therapeuticindications. In consideration of the grant of the license, we received an upfront payment of $1.0 million. We are eligible to receive certain other specifiedmilestone payments upon regulatory approval of Feraheme in China for CKD and other indications. We are also entitled to receive tiered royalties of upto 25% based on net sales of Feraheme by 3SBio in China. We retained all manufacturing rights for Feraheme under these agreements. In addition,pursuant to the 3SBio Supply Agreement, 3SBio has agreed to purchase from us, and we have agreed to supply to 3SBio, Feraheme at a predeterminedper unit supply price, which per unit price is capped, for use in connection with 3SBio's development and commercialization obligations for so long asthe 3SBio License Agreement is in effect. To date we have not provided 3SBio with any commercial product under this agreement.Guerbet In 1989, we entered into a supply and distribution agreement with Guerbet granting Guerbet an exclusive right to manufacture and sell Lumirem inwestern Europe and Brazil. This agreement was10Table of Contentssubsequently amended to expand Guerbet's exclusive rights to manufacture and sell Lumirem in various other areas, including South America, theMiddle East, southeast Asia, and eastern Europe. Under the terms of this distribution agreement, Guerbet pays us a percentage of net sales of Lumiremas the purchase price for the active ingredient of Lumirem, which we are required to sell to Guerbet under our agreement. The agreement is perpetual butterminable upon certain specified events.Covidien In 1990, we entered into a manufacturing and distribution agreement with Covidien's predecessor granting it a product license and co-marketingrights to GastroMARK in the U.S., Canada and Mexico. Covidien currently has rights to GastroMARK in the U.S. only. Under the terms of theagreement, we receive royalties based on GastroMARK net sales by Covidien as well as a percentage of sales for supplying the active ingredient. Theagreement is perpetual but terminable upon certain specified events.Manufacturing and Raw Materials Our Cambridge, Massachusetts manufacturing facility is registered with the FDA and certain foreign regulatory agencies and is subject to currentGood Manufacturing Practices, or cGMP, as prescribed by the FDA and equivalent foreign regulatory agencies. In this facility, we currentlymanufacture Feraheme for U.S. commercial sale and for use in human clinical trials as well as GastroMARK for commercial sale. In April 2011, theFDA also approved certain of our third-party contract manufacturers to produce Feraheme drug substance and drug product for the U.S. market. We manufacture Feraheme drug substance and drug product for use in the Canadian market at our Cambridge facility. Upon approval of ourMAA by the EMA, we expect to manufacture Feraheme drug substance and drug product for use in the EU market at certain of our third-party contractmanufacturers. Although we are working to establish and qualify alternative source manufacturing facilities for the production of Feraheme for Canadaand the EU, we will not have such alternative source manufacturing facilities available upon initial commercial launch of Feraheme in thosegeographies. To support the global commercialization of Feraheme, we have developed a fully integrated manufacturing support system, including qualityassurance, quality control, regulatory affairs and inventory control policies and procedures. These support systems are intended to enable us to maintainhigh standards of quality for our products. We currently purchase certain raw and other materials used to manufacture Feraheme from third-party suppliers and at present do not have anylong-term supply contracts with these third parties. Although certain of our raw or other materials are readily available, others may be obtained onlyfrom qualified suppliers. Certain materials used in Feraheme may from time to time be procured from a single source without a qualified alternativesupplier. The qualification of an alternative source may require repeated testing of the new materials and generate greater expenses to us if materials thatwe test do not perform in an acceptable manner. In addition, we sometimes obtain raw or other materials from one vendor only, even where multiplesources are available, to maintain quality control and enhance working relationships with suppliers, which could make us susceptible to price inflationby the sole supplier, thereby increasing our production costs. As a result of the high quality standards imposed on our raw and other materials, we maynot be able to obtain such materials of the quality required to manufacture Feraheme from an alternative source on commercially reasonable terms, or ina timely manner, if at all.11Table of ContentsPatents and Trade Secrets We consider the protection of our technology to be material to our business. Because of the substantial length of time and expense associated withbringing new products through development and regulatory approval to the marketplace, we place considerable importance on obtaining patent and tradesecret protection for our products. Our success depends, in large part, on our ability to maintain the proprietary nature of our technology and other tradesecrets. To do so, we must prosecute and maintain existing patents, obtain new patents and ensure trade secret protection. We must also operate withoutinfringing the proprietary rights of third parties or allowing third parties to infringe our rights. Our policy is to aggressively protect our competitive technology position by a variety of means, including applying for patents in the U.S. and inappropriate foreign countries. We currently hold a number of U.S. and foreign patents, which expire at various times through 2020. Our Ferahemepatents currently expire in 2020, however, our primary U.S. patent for Feraheme may be subject to an extension to 2023 under U.S. patent law andFDA regulations. Our foreign patents may also be eligible for extension in accordance with applicable law in certain countries. Our inability to protectour products through our patents and other intellectual property rights in any territory prior to their expiration could have a material adverse effect on ourbusiness, financial condition and prospects. We also have patent applications pending in the U.S. and have filed counterpart patent applications in certain foreign countries. Although furtherpatents may be issued on pending applications, we cannot be sure that any such patents will be issued on a timely basis, if at all. In addition, any issuedpatents may not provide us with competitive advantages or may be challenged by others, and the existing or future patents of third parties may limit ourability to commercialize our products. For example, in July 2010, Sandoz GmbH, or Sandoz, filed an opposition to one of our patents which coversFeraheme in the EU with the European Patent Office, or EPO. Although we believe that the subject patent is valid, there is a possibility that the EPOcould invalidate or require us to narrow the claims contained in the patent. We believe the Sandoz patent opposition is without merit and intend to defendagainst the opposition vigorously. However, any limitation on the protection of our technology could hinder our ability to develop and marketFeraheme.Competition The pharmaceutical and biopharmaceutical industries are subject to intense competition and rapid technological change. We and Takeda havecompetitors both in the U.S. and internationally, and many may have greater financial and other resources, and more experienced trade, sales,reimbursement and manufacturing organizations than we or Takeda do. In addition, many of our and Takeda's competitors have significant namerecognition, more established positions in the IV iron market and long-standing relationships with customers and distributors. The iron replacementtherapy market is highly sensitive to several factors including, but not limited to, the actual or perceived safety and efficacy profile of the availableproducts, the ability to obtain appropriate insurance coverage and reimbursement, price competitiveness, and product characteristics such as convenienceof administration and dosing regimens. Feraheme is approved in the U.S. for the treatment of IDA in adult patients with CKD, including both dialysis and non-dialysis CKD patients.However, in January 2011, a prospective payment system for the reimbursement of dialysis services became effective, which significantly diminishedthe utilization of Feraheme in the dialysis market. As a result of the implementation of the prospective payment system, our dialysis sales during 2011were de minimis. Our U.S. commercial strategy is now entirely focused on growing the utilization of Feraheme in non-dialysis dependent adult CKDpatients with IDA. We believe there is a significant opportunity in the U.S. for Feraheme for the treatment of IDA in CKD patients not yet on dialysis.The U.S. non-dialysis IV iron market is comprised primarily of three sites of care where a substantial number of CKD patients are treated: hematologyand oncology clinics, hospitals, and nephrology clinics.12Table of Contents There are currently two iron replacement options for treating IDA in CKD patients: oral iron supplements and IV iron. The National KidneyFoundation's Kidney Disease Outcomes Quality Initiative guidelines recommend either oral or IV iron for peritoneal dialysis patients and non-dialysispatients with stages 1 through 5 CKD. Oral iron is currently the first line iron replacement therapy of choice of most physicians in both the U.S. andabroad. However, oral iron supplements are poorly absorbed by many patients, which may adversely impact their effectiveness, and are associated withcertain side effects that may adversely affect patient compliance in using such products. The alternative to oral iron for the treatment of IDA is IV iron. Feraheme currently competes with several IV iron replacement therapies in the U.S. for the treatment of IDA in CKD patients. Venofer®, an ironsucrose complex, is approved for use in hemodialysis, peritoneal dialysis and non-dialysis dependent CKD patients and is marketed in the U.S. byFresenius Medical Care North America and American Regent Laboratories, Inc., or American Regent, a subsidiary of Luitpold Pharmaceuticals, Inc., orLuitpold. Ferrlecit®, a sodium ferric gluconate, is marketed by Sanofi-Aventis U.S. LLC and is approved for use only in hemodialysis patients.Nulecit™ (sodium ferric gluconate complex in sucrose injection), a generic version of Ferrlecit®, is marketed by Watson Pharmaceuticals, or Watson.INFeD®, an iron dextran product marketed by Watson, and Dexferrum®, an iron dextran product marketed by American Regent, are approved in theU.S. for the treatment of patients with documented iron deficiency in whom oral iron administration is unsatisfactory or impossible. In addition to the currently marketed products described above, Feraheme may also compete in the U.S. with Injectafer®, which is known asFerinject® in Europe, which is in development for a variety of anemia-related indications, including the treatment of IDA in CKD patients, whether ornot on dialysis. In October 2011, Luitpold submitted a New Drug Application, or NDA, to the FDA for Injectafer® for the treatment of IDA. The FDAhas since notified Luitpold that it has assigned a Prescription Drug User Fee Act target action date of August 3, 2012 for the Injectafer® NDA. TheInjectafer® NDA includes data and information from two new large randomized controlled clinical trials investigating the cardiovascular risk profile ofhigh dose Injectafer®. If Injectafer® is approved by the FDA, it will be marketed and sold in the U.S. by American Regent, the current distributor ofVenofer®. Feraheme will also compete with a number of branded IV iron replacement products outside of the U.S., including Venofer®, Ferrlecit®,Monofer® (iron isomaltoside 1000), Ferinject® (ferric carboxymaltose injection) (the brand name for Injectafer® outside the U.S.) and certain otheriron dextran and iron sucrose products. Monofer® is an injectable iron preparation developed by Pharmacosmos A/S, or Pharmacosmos, which iscurrently approved for marketing in approximately 22 countries for the treatment of IDA. Pharmacosmos has ongoing clinical programs includingstudies of Monofer® in gastroenterology, oncology and nephrology. It is too early to determine whether Monofer® will gain any meaningful share ofthe IV iron market in any country in which it has been or may be approved. Ferinject® is an IV iron replacement therapy developed by Vifor Pharma,the pharmaceuticals business unit of the Galenica Group, and is currently approved for marketing in approximately 37 countries, including 30 countrieswithin Europe, for the treatment of iron deficiency where oral iron is ineffective or cannot be used. Further trials with Ferinject® in CKD, oncology,cardiology, patient blood management and gynecology are ongoing. In December 2010, Vifor Pharma and Fresenius Medical Care North Americaannounced that they had created a new company which will hold the commercialization rights to Venofer® and Ferinject® outside of the U.S.Venofer® and Ferrlecit® have been marketed in many countries throughout the world, including most of Europe and Canada, for many years.Feraheme will compete primarily with Venofer®, Ferinject® and Ferrlecit® in both the Canadian and European markets. Currently, all other approvedIV iron products which are being marketed and sold in the EU are approved for marketing to all patients with IDA. Upon approval of our MAA, weexpect Feraheme to be approved only for use in CKD patients, which could13Table of Contentsput Feraheme at a competitive disadvantage unless and until it receives approval for a broader indication. The market opportunity for Feraheme in the U.S. and abroad could also be negatively affected by approved generic IV iron replacement therapyproducts that achieve commercial success. For example, in 2011, Watson launched Nulecit™, a generic version of Ferrlecit® in the U.S. Nulecit™ isapproved for marketing in the U.S. for the treatment of IDA in adult patients and in pediatric patients age six years and older undergoing chronichemodialysis who are receiving supplemental epoetin therapy. There are also a number of approved generic IV iron products in countries outside theU.S which will directly compete with Feraheme, including a generic version of Venofer®. Companies that manufacture generic products typicallyinvest far less resources in research and development than the manufacturers of branded products and can therefore price their products significantlylower than those already on the market. Therefore, competition from generic IV iron products could limit our U.S. sales and any royalties we mayreceive from Takeda. For IV iron replacement therapy in patients with CKD, the total therapeutic course of iron typically used in clinical practice is 1,000 milligrams, orone gram. Venofer® is typically administered as a slow intravenous injection over two to five minutes in doses of 100 to 200 milligrams, thus requiringfive to ten physician visits to reach a standard one gram therapeutic course. The recommended dose of Ferrlecit® and Nulecit™ is 125 milligramsadministered by intravenous infusion over one hour per dialysis session or undiluted as a slow intravenous injection per dialysis session, thus requiringten physician visits to reach a standard one gram therapeutic course. INFeD® and Dexferrum® are typically administered as a slow push in 100milligram doses and also require up to ten physician visits to receive a standard one gram therapeutic course. Feraheme is administered as a 510milligram injection followed by a second 510 milligram injection three to eight days later, each of which can be administered in less than one minute at aregular office visit without the use of infusion equipment or prolonged medical intervention. We believe that our ability to successfully compete with other IV iron products in the U.S. and internationally depends on a number of factors,including the actual or perceived safety and efficacy profile of Feraheme as compared to alternative iron replacement therapeutics, our ability to obtainand maintain favorable pricing, insurance coverage and reimbursement for Feraheme, the timing and scope of regulatory approval of Feraheme for thebroad IDA indication and of products or additional indications by our competitors, our ability to implement effective marketing campaigns, theeffectiveness of our sales force, our ability to maintain favorable patent protection for Feraheme, market acceptance of Feraheme and our ability tomanufacture sufficient quantities of Feraheme at commercially acceptable costs. In addition, our ability to effectively compete with these products in thenon-dialysis CKD market depends in part upon our ability to gain formulary access in hospitals and effectively promote Feraheme within grouppurchasing organizations and to physicians who treat non-dialysis CKD patients. Based on sales data provided by IMS Health Incorporated, or IMS, we estimate that the size of the total 2011 U.S. IV iron replacement therapynon-dialysis market was approximately 792,000 grams, which represented an increase of approximately 6.1% over 2010. Based on this IMS data, thefollowing14Table of Contentsrepresents the 2011 and 2010 U.S. market share allocation of the total IV iron non-dialysis market based on the volume of IV iron administered:Sales, Marketing and Distribution In July 2009 we began U.S. commercial sale of Feraheme, which is being marketed and sold in the U.S. through our own commercialorganization, including a specialized sales force. We sell Feraheme primarily through authorized wholesalers and specialty distributors who, in turn, sellFeraheme to nephrologists, hematologists/oncologists, hospitals and dialysis centers who treat patients with CKD. Since many hospitals andhematology, oncology and nephrology practices are members of group purchasing organizations, or GPOs, which leverage the purchasing power of agroup of entities to obtain discounts based on the collective bargaining power of the group, we also routinely enter into contracts with GPOs in thesesegments so the members of the GPOs have access to Feraheme and the related discounts. In addition, we outsource a number of our product supplychain services to third-party vendors, including services related to warehousing and inventory management, distribution, chargeback processing,accounts receivable management and customer service call center management. Our sales and marketing teams use a variety of common pharmaceutical marketing strategies to promote Feraheme including sales calls toindividual physicians or other healthcare professionals, medical education symposia, personal and non-personal promotional materials, local andnational educational programs, scientific meetings and conferences and informational websites. In addition, we provide customer service and otherrelated programs for Feraheme including physician reimbursement support services, a patient assistance program for uninsured or under-insuredpatients and a customer service call center. Our commercial strategy currently focuses on the non-dialysis dependent CKD market in the U.S. We estimate that there are 1.6 million adults inthe U.S. with stages 3 through 5 CKD and IDA, and we believe that a small fraction of those patients are currently being treated with IV iron. Webelieve there is a significant opportunity in this market to provide IV iron to non-dialysis CKD patients, and our sales team has been working to educatephysicians who treat CKD patients on the benefits of IV iron and the dosing profile of Feraheme in order to change existing treatment paradigms andexpand the IV iron use in physicians' offices, clinics, and hospitals where CKD patients are treated. In December 2011, Feraheme was granted marketing approval in Canada for use as an IV iron replacement therapy for the treatment of IDA inadult patients with CKD. Under our agreement with Takeda, Takeda will be solely responsible for Feraheme commercialization efforts in Canadaincluding the deployment of a specialized sales force, pricing and reimbursement negotiations with provincial health authorities and customers, anddevelopment of market access strategies. The following table sets forth customers who represented 10% or more of our total revenues for the years ended December 31, 2011, 2010, and2009. Revenues from Takeda related solely to15 2011 U.S. Non-dialysisIV Iron Market(792,000 grams) 2010 U.S. Non-dialysisIV Iron Market(746,000 grams) Venofer® 48% 48%INFeD® 20% 20%Feraheme 12% 9%Ferrlecit® 11% 18%Nulecit™ 5% — Dexferrum® 4% 5%Table of Contentscollaboration revenue recognized in connection with our agreement with Takeda, which we entered into in March 2010.Government RegulationOverview The development, manufacture and commercialization of pharmaceutical products are subject to extensive regulation by numerous governmentalauthorities in the U.S. and abroad. In the U.S., the Federal Food, Drug, and Cosmetic Act, or the FDC Act, and other federal and state statutes andregulations govern, among other things, the research and development, manufacturing, quality control (testing), labeling, record-keeping, approval,storage, distribution, and advertising and promotion of pharmaceutical products. In addition, many of our activities in the U.S. are subject to thejurisdiction of various other federal regulatory and enforcement departments and agencies, such as the Department of Health and Human Services, theFederal Trade Commission and the Department of Justice. Individual states, acting through their attorneys general, have become active as well, seekingto regulate the marketing of prescription drugs under state consumer protection and false advertising laws. A number of states have also enacted, or areconsidering enacting, legislation to control pharmaceutical marketing activities, such as the Physician Payment Sunshine Act, or the Sunshine Act. Our activities outside of the U.S. are also subject to regulatory requirements governing the testing, approval, safety, effectiveness, manufacturing,labeling and marketing of Feraheme. These regulatory requirements vary from country to country. The approval process may be more or less rigorousfrom country to country and the time required for approval may also vary from country to country. In Europe, Canada and some other internationalmarkets, the government provides healthcare at low direct cost to consumers and regulates pharmaceutical prices or patient reimbursement levels tocontrol costs for the government-sponsored healthcare system. Failure to comply with any of the applicable U.S. or foreign regulatory requirements may result in a variety of administrative or judicially imposedsanctions including among other things, the regulatory agency's refusal to approve pending applications, withdrawals of approval, clinical holds,warning letters, product recalls, product seizures, total or partial suspension of operations, injunctions, fines, civil penalties or criminal prosecution. The development and approval of a product candidate requires a significant number of years of work and the expenditure of substantial resources,and is often subject to unanticipated delays and may be subject to new legislation or regulations. In addition to complying with requirements as theycurrently exist, a sponsor could be negatively impacted by changes in the regulatory framework. From time to time, legislation is introduced that couldsignificantly alter laws pertaining to the approval, manufacturing, pricing, and/or marketing of drug products. Even without changes to relevant laws,U.S. and foreign regulatory agencies could release new guidance or revise its implementation of current regulations in a manner that significantly affectsus and our products, including our ability to receive marketing approval for new indications for Feraheme. It is impossible to predict whether legislativechanges will be enacted, or whether regulations or guidance will be amended or supplemented, or the potential impact of such changes.16 For the Years Ended December 31, 2011 2010 2009 AmerisourceBergen Drug Corporation 41% 36% 46%McKesson Corporation 21% <10% <10%Takeda Pharmaceuticals Company Limited 13% <10% — Cardinal Health, Inc. 13% <10% <10%Metro Medical Supply, Inc. <10% 21% 28%Table of ContentsU.S. Approval ProcessClinical Development Before new human pharmaceutical products may be marketed or sold commercially in the U.S., the FDA requires the following steps: (a) pre-clinical laboratory tests, pre-clinical safety and efficacy studies and formulation studies; (b) the submission to the FDA of an Investigational New DrugApplication, or IND, for human clinical testing, which must become effective before human clinical trials may commence; (c) adequate and well-controlled human clinical trials under current good clinical practices to establish the safety and efficacy of the drug for its intended use; (d) submissionof an NDA to the FDA; (e) approval and validation of manufacturing facilities used in production of the pharmaceutical product under cGMP; and(f) review and approval of the NDA by the FDA. Pre-clinical studies include the laboratory evaluation of product chemistry and animal studies to assess the potential safety and efficacy of a productand its formulation. The results of such laboratory tests and animal studies are submitted to the FDA as a part of an IND and are reviewed by the FDAprior to and during human clinical trials. If there are no objections from the FDA within 30 days of filing an IND, a sponsor may proceed with initialstudies in human volunteers, also known as clinical trials. Clinical trials are typically conducted in the following three sequential phases, which may overlap in some instances:•Phase I: Clinical trials which involve the initial administration of the study drug to a small group of healthy human volunteers (or, morerarely, to a group of selected patients with the targeted disease or disorder) under the supervision of a principal investigator selected bythe sponsor. These Phase I trials are designed to test for safety, dosage tolerance, absorption, distribution, metabolism, excretion andclinical pharmacology and, if possible, early indications of effectiveness. •Phase II: Clinical trials which involve a small sample of the actual intended patient population and aim to: (a) provide a preliminaryassessment of the efficacy of the investigational drug for a specific clinical indication; (b) ascertain dose tolerance and optimal doserange; and (c) collect additional clinical information relating to safety and potential adverse effects. •Phase III: If an investigational drug is found through Phase I and Phase II studies to have some efficacy and an acceptable clinicalsafety profile in the targeted patient population, Phase III studies can be initiated. Phase III studies are well-controlled comparativestudies designed to gather additional information within an expanded patient population in geographically dispersed clinical trial sites inorder to further establish safety and efficacy in conditions that the drug will be used if approved for marketing. The FDA may suspend clinical trials at any point in this process if it concludes that patients are being exposed to an unacceptable health risk. Inaddition, clinical trial results are frequently susceptible to varying interpretations by scientists, medical personnel, regulatory personnel, statisticians andothers, which may delay, limit or prevent further clinical development or regulatory approvals of a product candidate.Submission and FDA Review of an NDA Following the successful completion of Phase I, II, and III clinical trials, the results of the trials, together with the results of pre-clinical tests andstudies, are submitted to the FDA as part of an NDA. The NDA must also include information related to the preparation and manufacturing of the newdrug, analytical methods, and proposed product packaging and labeling. When the NDA is submitted, the FDA has 60 days from receipt to determinewhether the application is sufficiently complete to merit a17Table of Contentssubstantive review and should therefore be "filed." If the FDA determines that the application is incomplete, it must notify the sponsor through a"refusal-to-file" letter, and the sponsor then has the option to resubmit the NDA after addressing the concerns raised by the FDA. If the FDA acceptsthe NDA for filing, the NDA undergoes a series of reviews intended to confirm and validate the sponsor's conclusion that the drug is safe and effectivefor its proposed use. Under the Food and Drug Administration Modernization Act, an NDA is designated for either Standard Review or Priority Review. A PriorityReview designation may be given if a new drug offers major advancements in treatment or provides a treatment where no adequate therapy exists. TheFDA has, pursuant to the Prescription Drug User Fee Act, set a goal that it review and act upon 90% of NDAs with a Standard Review designationwithin ten months of their receipt and 90% of NDAs with a Priority Review designation within six months of their receipt. However, whether an NDAis designated for a Standard or Priority Review, there is no guarantee that any single submission will be acted on within these time frames, and theFDA's goals are subject to change from time to time. In addition, FDA review of a drug development program may proceed under its "Fast Track"programs, which are intended for a combination of a product and a claim that addresses an unmet medical need. Fast Track is designed to facilitate thedevelopment and expedite the review of new drugs that are intended to treat serious or life threatening conditions and demonstrate the potential toaddress unmet medical needs. A Fast Track designation provides the sponsor the benefits of scheduling meetings when needed to receive FDA inputinto development plans, the option of submitting an NDA in sections rather than all components simultaneously, or a rolling review, and the option ofrequesting evaluation of studies using surrogate endpoints. Fast Track status does not, however, necessarily lead to a Priority Review or AcceleratedApproval designation. If the FDA's evaluations of the NDA and the sponsor's manufacturing facilities are favorable, the FDA will issue an approval letter, and thesponsor may begin marketing the drug in the U.S. for the approved indications, subject to certain universal post-approval requirements described furtherbelow. The FDA may also impose drug-specific conditions on its approval, such as requirements for additional post-marketing testing or surveillance.If the FDA determines that it cannot approve the NDA in its current form, it will issue a complete response letter to indicate that the review cycle for anapplication is complete and that the application will not be approved in its current form. The complete response letter usually describes the specificdeficiencies that the FDA identified in the application and may require additional clinical or other data or impose other conditions that must be met inorder to obtain final approval of the NDA. Addressing the deficiencies noted by the FDA could be impractical or costly and may result in significantdelays prior to final approval.Adverse Event Reporting The FDA requires a sponsor to submit reports of certain information on side effects and adverse events associated with its products that occureither during clinical trials or after marketing approval. These requirements include specific and timely notification of certain serious, unexpected and/orfrequent adverse events, as well as regular periodic reports summarizing adverse drug experiences. Failure to comply with these FDA safety reportingrequirements may result in FDA regulatory action that may include civil action or criminal penalties. In addition, as a result of these reports, the FDAcould create a Tracked Safety Issue for a product in the FDA's Document Archiving, Reporting and Regulatory Tracking System, place additionallimitations on an approved product's use, such as through labeling changes, or, potentially, could require withdrawal or suspension of the product fromthe market.FDA Post-Approval Requirements Even if initial approval of an NDA is granted, such approval is subject to a wide-range of regulatory requirements, any or all of which mayadversely impact a sponsor's ability to effectively18Table of Contentsmarket and sell the approved product. Furthermore, the FDA may require the sponsor to conduct Phase IV clinical trials, also known as post-marketingrequirements or post-marketing commitments, to provide additional information on safety and efficacy. The results of such post-market studies may benegative and could lead to limitations on the further marketing of a product. Also, under the Pediatric Research Equity Act, the FDA may requirepediatric assessment of certain drugs unless waived or deferred due to the fact that necessary studies are impossible or highly impractical to conduct orwhere there is strong evidence that suggests the drug would be ineffective or unsafe or that the drug does not represent a meaningful therapeutic benefitover existing therapies and is not likely to be used in a substantial number of pediatric patients. In addition, the FDA may require a sponsor toimplement a Risk Evaluation Mitigation Strategy, or REMS, a strategy to manage a known or potential serious risk associated with the product. TheFDA may, either prior to approval or subsequent to approval if new safety data arises, require a REMS if it determines that a REMS is necessary toensure that the benefits of the product outweigh its risks. A REMS may include a medication guide, patient package insert, a plan for communicationwith healthcare providers, elements to ensure safe use of the product, and an implementation system. A REMS must also include a timetable forsubmission of assessments of the strategy at specified time intervals. Failure to comply with a REMS, including submission of a required assessment,may result in substantial civil penalties. Where a sponsor wishes to expand the originally approved prescribing information, such as adding a new indication, it must submit and obtainapproval of a sNDA. Changes to an indication generally require additional clinical studies, which can be time-consuming and require the expenditure ofsubstantial additional resources. Under the Prescription Drug User Fee Act, the timeframe for the review of a sNDA to add a new clinical indication isten months.FDA Regulation of Product Marketing and Promotion The FDA also regulates all advertising and promotional activities for products, both prior to and after approval, including but not limited to direct-to-consumer advertising, sales representative communications to healthcare professionals, promotional programming, and promotional activitiesinvolving the internet, publications, radio and TV as well as other media. Approved drug products must be promoted in a manner consistent with theirterms and conditions of approval, including the scope of their approved use. The FDA may take enforcement action against a company for promotingunapproved uses of a product, or off-label promotion, or for other violations of its advertising and labeling laws and regulations. Failure to comply withthese requirements could lead to, among other things, adverse publicity, product seizures, civil or criminal penalties, or regulatory letters, which mayinclude warnings and require corrective advertising or other corrective communications to healthcare professionals.FDA Regulation of Manufacturing Facilities Manufacturing procedures and quality control for approved drugs must conform to cGMP, which practices are described in the FDC Act andFDA guidance. cGMP requirements must be followed at all times, and domestic manufacturing establishments are subject to periodic inspections by theFDA in order to assess, among other things, cGMP compliance. In addition, prior to approval of an NDA or sNDA, the FDA will perform a pre-approval inspection of the sponsor's manufacturing facility, including its equipment, facilities, laboratories and processes, to determine the facility'scompliance with cGMP and other rules and regulations. Vendors that supply finished products or components to the sponsor that are used tomanufacture, package and label products are subject to similar regulation and periodic inspections. If the FDA identifies deficiencies during aninspection, it may issue notices on FDA Form 483 followed by warning letters listing conditions the FDA investigators believe may violate cGMP orother FDA regulations. FDA guidelines specify that a warning letter be issued only for19Table of Contentsviolations of "regulatory significance" for which the failure to adequately and promptly achieve correction may be expected to result in an enforcementaction. Product approval may be delayed or denied due to cGMP non-compliance or other issues at the sponsor's manufacturing facilities or contractorsites or suppliers included in the NDA or sNDA, and the complete resolution of these inspectional findings may be beyond the sponsor's control. Ifafter a successful completion of an FDA inspection of a sponsor's manufacturing facilities, the sponsor makes a material change in manufacturingequipment, location or process, additional regulatory review may be required. Re-inspection of the sponsor's manufacturing facilities or contractor sitesor suppliers may also occur. If the FDA determines that the sponsor's equipment, facilities, laboratories or processes do not comply with applicableFDA regulations and conditions of product approval, the FDA may seek civil, criminal or administrative sanctions and/or remedies against the sponsor,including suspension of its manufacturing operations. To supply products for use in the U.S., foreign manufacturing establishments must also comply with cGMP and are subject to periodic inspectionby the FDA or by regulatory authorities in certain of such countries under reciprocal agreements with the FDA. In complying with these requirements,manufacturers, including a drug sponsor's third-party contract manufacturers, must continue to expend time, money and effort in the area of productionand quality to ensure compliance. Failure to maintain compliance with cGMP regulations and other applicable manufacturing requirements of variousregulatory agencies could result in fines, unanticipated compliance expenditures, recall, total or partial suspension of production, suspension of theFDA's review of future sNDAs, enforcement actions, injunctions or criminal prosecution.Fraud and abuse regulation Our general operations, and the research, development, manufacture, sale and marketing of our products, are subject to extensive federal and stateregulation, including but not limited to FDA regulations, the Federal Anti-Kickback Statute, the Federal False Claims Act, and the Foreign CorruptPractices Act. Anti-kickback laws make it illegal to solicit, offer, receive or pay any remuneration in exchange for, or to induce, the referral of business,including the purchase or prescription of a particular drug, that is reimbursed by a state or federal program. False claims laws prohibit anyone fromknowingly presenting, or causing to be presented for payment to third-party payers, including Medicare and Medicaid, false or fraudulent claims forreimbursed drugs or services, claims for items or services not provided as claimed, or claims for medically unnecessary items or services. The ForeignCorrupt Practices Act and similar foreign anti-bribery laws generally prohibit companies and their intermediaries from making improper payments tonon-U.S. officials for the purpose of obtaining or retaining business. Our activities relating to the sale and marketing of our products may be subject toscrutiny under these laws. If we or our representatives fail to comply with any of these laws or regulations, a range of fines, penalties and/or othersanctions could be imposed on us, including, but not limited to, restrictions on how we market and sell Feraheme, significant fines, exclusions fromgovernment healthcare programs, including Medicare and Medicaid, litigation, or other sanctions.Other U.S. Regulatory Requirements We are also subject to regulation under local, state and federal law regarding occupational safety, laboratory practices, handling of chemicals,environmental protection and hazardous substances control. We possess a Byproduct Materials License from the Commonwealth of Massachusetts forreceipt, possession, manufacturing and distribution of radioactive materials and Registration Certificates from the federal Drug Enforcement Agency andthe Commonwealth of Massachusetts Department of Public Health for handling controlled substances. We are also registered with the federalEnvironmental Protection Agency, or EPA, as a generator of hazardous waste. All hazardous waste disposals must be made in accordance with EPAand Commonwealth of Massachusetts requirements. We are subject to20Table of Contentsthe regulations of the Occupational Safety and Health Act and have a safety program in effect to assure compliance with all of these regulations. Webelieve our procedures for handling and disposing of hazardous materials used in our research and development activities comply with all applicablefederal, state and local requirements. Nevertheless, the risk of accidental contamination or injury from these materials cannot be completely eliminatedand, in the event of an accident or injury, we could be held liable for any damages that result. Certain states also require that we obtain licenses or permits as an out-of-state distributor or manufacturer in order to market, sell and/or ship ourpharmaceutical products into their state. We have obtained licenses and permits in some states and, depending on our future activities, may also need toobtain additional licenses or permits in other areas where we decide to manufacture, market or sell our products. New laws, regulations or judicialdecisions, or new interpretations of existing laws and regulations, may require us to modify our development programs, revise the way we manufacture,market and sell our products, require additional clinical trials or post-approval safety studies, or limit coverage or reimbursement for our products. In recent years, several states have enacted legislation requiring pharmaceutical companies operating within the state to establish marketing andpromotional compliance programs or codes of conduct and/or file periodic reports with the state or make periodic public disclosures on sales, marketing,pricing, clinical trials and other activities. Similar legislation is being considered by additional states and by Congress. In addition, as part of The PatientProtection and Affordable Care Act, as amended by the Health Care and Education Affordability Reconciliation Act, or the Health Care Reform Act, thefederal government has enacted the Sunshine Act provisions. Beginning in 2013, manufacturers of drugs will be required to publicly report gifts andpayments made to physicians and teaching hospitals. Many of these requirements are new and uncertain, and the penalties for failure to comply withthese requirements are unclear. Failure to comply with any of these laws could result in a range of fines, penalties and/or other sanctions.Foreign Regulatory Process In our efforts to market and sell Feraheme outside of the U.S., we and our licensees are subject to foreign regulatory requirements. Approval of adrug by applicable regulatory agencies of foreign countries must be secured prior to the marketing of such drug in those countries. The regulatoryapproval process in countries outside of the U.S. vary widely from country to country and may in some cases be more rigorous than requirements in theU.S. Certain foreign regulatory authorities may require additional studies or studies designed with different clinical endpoints and/or comparators thanthose which we are conducting or have already completed. In addition, any adverse regulatory action taken by the FDA with respect to an approvedproduct in the U.S. may affect the regulatory requirements or decisions made by certain foreign regulatory bodies with regard to the regulatory approvalof products outside of the U.S. To obtain regulatory approval of a drug in the EU, marketing authorizations may be submitted under a centralized, mutual recognition ordecentralized procedure or national procedure (single country). Under the centralized procedure, the sponsor can submit a single application to the EMAwhich, if approved, permits the marketing of a product in all EU Member States. Under the mutual recognition procedure, the sponsor applies fornational marketing authorization in one state, and upon approval can then seek simultaneous approval in all other EU Member States. Under thedecentralized procedure, the sponsor can file simultaneously to several EU Member States, identifying a single reference member state to act as theprimary reviewer of the application. Upon approval, the product will be licensed only in the reference member state and the other countries to which itapplied. Once an applicant receives marketing authorization in an EU Member State, through any application route, the applicant is then required toengage in pricing discussions and negotiations with a separate pricing authority in that country. In certain countries, commercial sales are only able tocommence once21Table of Contentspricing approval has been received. In addition, all products irrespective of the method of filing, are afforded 10 years of exclusivity and eight years ofdata protection upon approval. In June 2010, we submitted our MAA seeking marketing approval for Feraheme for the treatment of IDA in CKDpatients with the EMA under the centralized procedure. We expect a recommendation from the CHMP on our MAA submission in 2012. Assuming apositive CHMP recommendation, we expect a final decision on our MAA by the European Commission shortly thereafter. The Canadian pharmaceutical industry is subject to federal regulation by Health Canada pursuant to the Canadian federal Food and Drugs Act.Health Canada's criteria for obtaining and maintaining marketing approval is generally similar to that of the FDA. In December 2011, Feraheme wasgranted marketing approval by Health Canada for use as an IV iron replacement therapy for the treatment of IDA in adult patients with CKD. In addition, in August 2010, Takeda filed an MAA with Swissmedic, the Swiss Agency for Therapeutic Products, seeking marketing approval forFeraheme for the treatment of IDA in CKD patients. We expect a decision from Swissmedic during 2012.Reimbursement In both the U.S. and foreign markets, our and Takeda's ability to successfully commercialize Feraheme is and will be dependent, in significant part,on the availability and extent of reimbursement to end-users from third-party payors for the use of Feraheme, including governmental payors, managedcare organizations, private health insurers, and other third-party payors. Reimbursement by a third-party payor depends on a number of factors,including the third-party's determination that the product is competitively priced, safe and effective, appropriate for the specific patient, and cost-effective. Third-party payors are increasingly challenging the prices charged for pharmaceutical products and have instituted and continue to institutecost containment measures to control or significantly influence the purchase of pharmaceutical products. For example, to reduce expenditures associatedwith pharmaceutical products, many third-party payors use cost containment methods, including: (a) formularies, which limit coverage for drugs notincluded on a predetermined list; (b) step therapy, which is a program used to encourage the use of lower cost alternative treatments; (c) variable co-payments, which may make a certain drug more expensive for patients as compared with a competing drug; and (d) utilization management controls,such as requirements for prior authorization before the payor will cover the drug or other coverage policies that limit access to certain drugs for certainuses based on the payor specific coverage policy. In addition, the U.S. and many foreign governments continue to attempt to curb health care costs through legislation, including legislation aimed atreducing the pricing and reimbursement of pharmaceutical products. The Health Care Reform Act was enacted in the U.S. in March 2010 and includescertain cost containment measures including an increase to the minimum rebates for products covered by Medicaid programs and the extension of suchrebates to drugs dispensed to Medicaid beneficiaries enrolled in Medicaid managed care organizations as well as the expansion of the 340(B) PublicHealth Services drug discount program. More recently, in August 2011, the President of the United States signed into law the Budget Control Act of2011, which is expected to result in significant federal spending cuts including cuts in Medicare and other health related spending, including a potential27.4% reduction in payment rates for physician services. The full impact of this new law on our business is uncertain. In recent years some states havealso passed legislation to control the prices of drugs as well as begun a move toward managed care to relieve some of their Medicaid cost burden. Theseand any future changes in government regulation may reduce the extent of reimbursement for Feraheme and adversely affect our future operatingresults. Currently, in physician clinic settings, Medicare Part B generally reimburses for physician-administered drugs at a rate of 106% of the drug'saverage selling price, or ASP. Beginning in 2012,22Table of ContentsFeraheme will be reimbursed at a rate of 104% of ASP in the hospital outpatient setting. ASP is defined by statute based on certain historical sales andsales incentive data, including rebates and chargebacks, for a defined period of time. Manufacturers submit the required information to the Centers forMedicare and Medicaid Services, or CMS, on a quarterly basis. CMS then confirms and publishes the ASP for products in advance of the quarter inwhich the ASP will go into effect. Under this methodology, payment rates change on a quarterly basis, and significant downward fluctuations in ASP,and therefore reimbursement rates, could negatively impact sales of a product. Because ASP is defined by statute, and changes to Medicare paymentmethodologies require legislative change, it is unclear if and when ASP reimbursement methodology will change. We cannot predict the impact anychanges in reimbursement policies may have on our ability to compete effectively. On January 1, 2011, a prospective payment system for dialysis services provided to Medicare beneficiaries who have end-stage renal disease, orESRD, became effective under which all costs of providing dialysis services are bundled together into a single prospective payment per treatment. Thisbundled approach to reimbursement has and will likely continue to alter the utilization of physician-administered drugs in the ESRD market as well asput downward pressure on the prices pharmaceutical companies can charge ESRD facilities for such drugs, particularly where alternative products areavailable. In the U.S., Feraheme is sold at a price that is substantially higher than alternative IV iron products in the dialysis setting, and as a result, thedemand for Feraheme in the dialysis setting has largely disappeared. While the prospective payment system provisions apply only to Medicare,Medicare is the predominant payor in the ESRD market, and Medicare payment policy, in time, can also influence pricing and reimbursement in thenon-Medicare markets, as private third-party payors and state Medicaid plans frequently adopt Medicare principles in setting reimbursementmethodologies, particularly in the ESRD setting. In addition, in the hospital in-patient setting, Feraheme is reimbursed by Medicare under a diagnosis related group payment system, whichprovides a fixed reimbursement based on the diagnosis and/or procedure rather than actual costs incurred in patient treatments, thereby increasing theincentive for a hospital to limit or control expenditures. As a result, Feraheme has not been nor do we expect it to be broadly used in the hospital in-patient setting. In countries outside of the U.S., market acceptance may also depend, in part, upon the availability of reimbursement within existing healthcarepayment systems. Generally, in Europe and other countries outside of the U.S., the government sponsored healthcare system is the primary payor ofhealthcare costs of patients and therefore enjoys significant market power. Some foreign countries also set prices for pharmaceutical products as part ofthe regulatory process, and we cannot guarantee that the prices set by such governments will be sufficient to generate substantial revenues or allow salesof Ferahame to be profitable in those countries. If adequate reimbursement levels are not maintained by government and other third-party payors for Feraheme, our ability to sell Feraheme maybe limited and/or our ability to establish acceptable pricing levels for Feraheme may be impaired, thereby reducing anticipated revenues and ourprospects of achieving profitability.Backlog Generally, we do not have a significant backlog. Product orders from our customers are typically fulfilled within a relatively short time of receipt ofa customer order. We had a $0.1 million and $0.2 million product sales backlog as of December 31, 2011 and 2010, respectively.Employees As of February 16, 2012, we had 174 employees. We also utilize consultants and independent contractors on a regular basis to assist in thedevelopment and commercialization of Feraheme. Our23Table of Contentssuccess depends in part on our ability to recruit and retain talented and trained scientific, clinical, regulatory, manufacturing, and commercial personnel,as well as senior management. Although we believe we have been relatively successful to date in obtaining and retaining such personnel, we may not besuccessful in the future. None of our employees is represented by a labor union, and we consider our relationship with our employees to be good.Foreign Operations We have no foreign operations. Revenues from customers outside of the U.S. amounted to approximately 14% and 10% of our total revenues forthe years ended December 31, 2011 and 2010, respectively, and were principally related to collaboration revenues recognized in connection with ouragreement with Takeda, which is based in Japan. Revenues for the year ended December 31, 2009 from customers outside of the U.S., principally inFrance, amounted to 2% of our total revenues.Research and Development We have dedicated a significant portion of our resources to our efforts to develop our products and product candidates, particularly Feraheme. Weincurred research and development expenses of $58.1 million, $54.5 million and $36.3 million during the years ended December 31, 2011, 2010 and2009, respectively. We anticipate that a significant portion of our operating expenses will continue to be related to research and development in 2012 aswe seek to obtain marketing approval for Feraheme in countries outside of the U.S. and expand the approved indications for Feraheme in the U.S.Code of Ethics Our Board has adopted a code of ethics that applies to our officers, directors and employees. We have posted the text of our code of ethics on ourwebsite at http://www.amagpharma.com in the "Investors" section. In addition, subject to NASDAQ regulations, we intend to promptly disclose(1) the nature of any amendment to our code of ethics that applies to our principal executive officer, principal financial officer, principal accountingofficer, or persons performing similar functions and (2) the nature of any waiver, including an implicit waiver, from a provision of our code of ethicsthat is granted to one of these specified officers, the name of such person who is granted the waiver, and the date of the waiver on our website (or in anyother medium required by law or the NASDAQ) in the future.Available Information Our internet website address is http://www.amagpharma.com. Through our website, we make available, free of charge, our annual reports onForm 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, any amendments to those reports, proxy and registration statements, and allof our insider Section 16 reports, as soon as reasonably practicable after such material is electronically filed with, or furnished to, the U.S. Securitiesand Exchange Commission, or the SEC. These SEC reports can be accessed through the "Investors" section of our website. The information found onour website is not part of this or any other report we file with, or furnish to, the SEC. Paper copies of our SEC reports are available free of charge uponrequest in writing to Investor Relations, AMAG Pharmaceuticals, Inc., 100 Hayden Avenue, Lexington, MA 02421. The content on any websitereferred to in this Form 10-K is not incorporated by reference into this Form 10-K unless expressly noted. For additional information regarding our segments, refer to Note L of the Notes to Financial Statements included in Part II, Item 8 "FinancialStatements and Supplementary Data" of this Annual Report on Form 10-K.24Table of ContentsITEM 1A. RISK FACTORS: The following is a summary description of some of the material risks and uncertainties that may affect our business, including our future financialand operational results. In addition to the other information in this Annual Report on Form 10-K, the following statements should be carefullyconsidered in evaluating us.We are solely dependent on the success of Feraheme. We currently derive and expect to continue to derive substantially all of our revenue from sales of Feraheme by us in the U.S. and by ourlicensees, including Takeda Pharmaceutical Company Limited, or Takeda, outside of the U.S. and, therefore, our ability to become profitable is solelydependent on our and our licensees' successful commercialization and development of Feraheme. We currently sell only one other product,GastroMARK, in the U.S. and in certain foreign jurisdictions through our licensees. However, sales of GastroMARK have been at approximately theircurrent levels for many years, and we do not expect sales of GastroMARK to materially increase. Accordingly, if we are unable to generate sufficientrevenues from sales of Feraheme, we may never be profitable, our financial condition will be materially adversely affected, and our business prospectswill be limited. We intend to continue to dedicate significant resources to our Feraheme development efforts. However, we may not be successful in our efforts toexpand the Feraheme package insert to include additional indications or obtain marketing approval for Feraheme in additional geographies. Althoughwe have completed enrollment in our global registration program for Feraheme for the treatment of iron deficiency anemia, or IDA, regardless of theunderlying cause, we are not currently conducting or sponsoring research to expand our product development pipeline beyond Feraheme and thereforeour revenues and operations will not be as diversified as some of our competitors which have multiple products or product candidates. Any failure byus to gain marketing approval for Feraheme for the treatment IDA regardless of the underlying cause, gain marketing approval for Feraheme in newgeographies, or acquire, develop and commercialize additional products and product candidates, could limit long-term shareholder value and adverselyaffect the future prospects of our business.We have a history of net losses, and we may not be able to generate sufficient revenues to achieve and maintain profitability in the future. We have a history of significant operating losses, we may not be profitable in the future, and if we do attain profitability, such profitability may notbe sustainable. In the past, we have financed our operations primarily from the sale of our equity securities, cash from sales of Feraheme, cashgenerated by our investing activities, and payments from our licensees. As of December 31, 2011, we had an accumulated deficit of approximately$439.9 million. Our losses were primarily the result of costs incurred in our efforts to manufacture, market and sell Feraheme, including costsassociated with maintaining our commercial infrastructure and marketing and promotion costs, research and development costs, such as costs associatedwith our clinical trials, and selling, general and administrative costs. We expect to continue to incur significant expenses to manufacture, market and sellFeraheme as an intravenous, or IV, iron replacement therapeutic for use in adult chronic kidney disease, or CKD, patients in the U.S., to further developand seek marketing approval for Feraheme for the treatment of IDA in a broad range of patients and to obtain marketing approval for Feraheme incountries outside of the U.S. As a result, we will need to generate sufficient revenues in future periods to achieve and maintain profitability. Weanticipate that the vast majority of any revenue we generate in the near future will be from sales of Feraheme as an IV iron replacement therapeutic agentfor use in adult CKD patients in the U.S., milestone payments we may receive from Takeda upon regulatory approval and commercial launch ofFeraheme in Canada and the European Union, or EU, and royalties we may receive with respect to sales of Feraheme in Canada and in the EU underour License, Development and Commercialization Agreement, or the Takeda Agreement, which we entered into with Takeda in 2010. We have neverindependently marketed or sold any products prior to Feraheme,25Table of Contentsand we or Takeda may not be successful in marketing or selling Feraheme. If we or Takeda are not successful in marketing and selling Feraheme, ifrevenues grow more slowly than we anticipate or if our operating expenses exceed our expectations, our business, results of operations and financialcondition could be materially adversely affected. In addition, if we are unable to achieve, maintain or increase profitability on a quarterly or annual basis,the market price of our common stock may decline.Significant safety or drug interaction problems could arise with respect to Feraheme, which could result in restrictions in Feraheme's label,recalls, withdrawal of Feraheme from the market, an adverse impact on Feraheme sales, or cause us to alter or terminate current or futureFeraheme development programs, any of which would adversely impact our future business prospects. Significant safety or drug interaction problems could arise with respect to Feraheme, including an increase in the severity or frequency of knownproblems or the discovery of previously unknown problems, and may result in a variety of adverse regulatory actions. In the U.S., under the Food andDrug Administration Amendments Act of 2007, the U.S. Food and Drug Administration, or the FDA, has broad authority to force drug manufacturersto take any number of actions if safety or drug interaction problems arise, including, but not limited to: (i) requiring manufacturers to conduct post-approval clinical studies to assess known risks or signals of serious risks, or to identify unexpected serious risks; (ii) mandating labeling changes to aproduct based on new safety information; or (iii) requiring manufacturers to implement a Risk Evaluation Mitigation Strategy where necessary to assuresafe use of the drug. Similar laws and regulations exist in countries outside of the U.S. In addition, previously unknown safety or drug interactionproblems could result in product recalls, restrictions on the product's permissible uses, or withdrawal of the product from the U.S. and/or foreignmarkets. The data submitted to both the FDA as part of our New Drug Application, or NDA, and to the European Medicines Agency, or EMA, as part ofour Marketing Authorization Application, or MAA, for Feraheme in the CKD indication was obtained in controlled clinical trials of limited duration.New safety or drug interaction issues may arise as Feraheme is used over longer periods of time by a wider group of patients some of whom may betaking numerous other medicines or by patients with additional underlying health problems. In addition, as we conduct and complete other clinical trialsfor Feraheme, new safety issues may be identified which could negatively impact our ability to successfully complete these studies, the use and/orregulatory status of Feraheme for the treatment of IDA in patients with CKD in the U.S., EU or other territories, and the prospects for approval offuture supplemental New Drug Applications, or sNDAs, such as our planned 2012 sNDA submission for Feraheme for the treatment of IDAregardless of the underlying cause. New safety or drug interaction issues may require us to, among other things, provide additional warnings and/orrestrictions on the Feraheme package insert, including a boxed warning in the U.S. or similar warnings outside of the U.S., directly alert healthcareproviders of new safety information, narrow our approved indications, alter or terminate current or planned trials for additional uses of Feraheme, oreven remove Feraheme from the market, any of which could have a significant adverse impact on potential sales of Feraheme or require us to expendsignificant additional funds. For example, in November 2010, following discussions with the FDA, we revised the Feraheme package insert to include bolded warnings andprecautions that describe events that have been reported after Feraheme administration in the post-marketing environment, including life-threateninghypersensitivity reactions and clinically significant hypotension. We also directly alerted healthcare providers of the changes to the Feraheme packageinsert. During June 2011, we made further changes to the Feraheme package insert based on additional post-marketing data. These or any futurechanges to the Feraheme package insert could adversely impact our or Takeda's ability to successfully compete in the IV iron market and could have anadverse impact on potential sales of Feraheme and our future business prospects. In addition, as more data become available and an increased numberof patients are26Table of Contentstreated with Feraheme, we may be required to make further changes to the Feraheme package insert in the U.S. or other territories, including theinclusion of a boxed warning in the U.S. or similar warnings outside of the U.S., directly alert healthcare providers of new safety information, narrowour approved indications, alter or terminate current or planned trials for additional uses of Feraheme, or even remove Feraheme from the market.Feraheme may not be widely adopted by physicians, hospitals, patients, or healthcare payors, which would adversely impact our potentialprofitability and future business prospects. The commercial success of Feraheme in the U.S. and in other territories depends upon its level of market adoption by physicians, hospitals,patients, and healthcare payors, including managed care organizations and group purchasing organizations, or GPOs. If Feraheme does not achieve anadequate level of market adoption for any reason, our potential profitability and our future business prospects will be severely adversely impacted.Feraheme represents an alternative to other products and might not be adopted if perceived to be no safer, less safe, no more effective, less effective, nomore convenient, or less convenient than currently available products. In addition, the pricing and/or reimbursement for Feraheme may not be viewed asattractive as the pricing and/or reimbursement of alternative IV iron products. The degree of market acceptance of Feraheme in the U.S. and abroaddepends on a number of factors, including but not limited to the following:•Our and Takeda's ability to demonstrate to healthcare providers, particularly hematologists, oncologists, hospitals, nephrologists, andothers who may purchase or prescribe Feraheme, the clinical efficacy and safety of Feraheme as an alternative to currently marketed IViron products which treat IDA in CKD patients; •Our and Takeda's ability to convince physicians and other healthcare providers to use IV iron, and Feraheme in particular, rather thanoral iron, which is the current treatment of choice of most physicians for treating IDA in CKD patients. •The actual or perceived safety and efficacy profile of Feraheme compared to alternative iron replacement therapeutic agents, particularlyif unanticipated adverse reactions to Feraheme result in further changes to or restrictions in the Feraheme package insert and/orotherwise create safety concerns among potential prescribers; •The results of our two Phase III multi-center clinical trials to assess Feraheme in patients with IDA regardless of the underlying cause,including the results of the first of such trials which we announced in March 2012, which could impact the actual or perceived safetyprofile of Feraheme compared to alternative iron replacement therapeutic agents; •The relative level of available reimbursement for Feraheme from payors, including government payors, such as Medicare and Medicaidin the U.S., and private payors as compared to the level of available reimbursement for alternative IV iron products; •The relative price of Feraheme as compared to alternative iron replacement therapeutic agents; •The actual or perceived convenience and ease of administration of Feraheme as compared to alternative iron replacement therapeuticagents; and •The effectiveness of our and Takeda's commercial organizations and distribution networks. We are approved to market and sell Feraheme for use in both dialysis and non-dialysis adult CKD patients in the U.S. However, Feraheme salesin the U.S. dialysis market have recently declined significantly due, in large part, to the 2011 implementation of the prospective payment system for endstage renal disease, or ESRD, drugs like Feraheme, which has made it far less likely that dialysis providers would choose to use higher priced productslike Feraheme in treating their dialysis patients. Accordingly, we expect sales of Feraheme in the U.S. dialysis market to represent an insignificant27Table of Contentsportion of our total U.S. sales going forward. As a result, unless we capture a significant share of the U.S. non-dialysis CKD market, potential U.S.Feraheme sales, our potential profitability and our future business prospects will be materially adversely impacted. The key component of our U.S. commercialization strategy is to market and sell Feraheme for use in non-dialysis adult CKD patients. The currentU.S. non-dialysis CKD market is comprised primarily of three sites of care where a substantial number of CKD patients are treated: hematology andoncology clinics, hospitals, and nephrology clinics. IV iron therapeutic products are not currently widely used by certain physicians who treat non-dialysis CKD patients in the U.S., particularly nephrologists, due to safety concerns and the inconvenience and often impracticability of administeringIV iron therapeutic products in their offices. It is often difficult to change physicians' existing treatment paradigms even when supportive clinical data isavailable. In addition, our ability to effectively market and sell Feraheme in the U.S. hospital market depends in part upon our ability to achieveacceptance of Feraheme onto hospital formularies. Since many hospitals and hematology, oncology and nephrology practices are members of GPOs,which leverage the purchasing power of a group of entities to obtain discounts based on the collective bargaining power of the group, our ability toattract customers in these sites of care also depends in part on our ability to effectively promote Feraheme within GPOs. If we are not successful ineffectively promoting Feraheme to physicians who treat non-dialysis CKD patients in the U.S. or if we are not successful in securing and maintainingformulary coverage for Feraheme or are significantly delayed in doing so, we will have difficulty achieving wide-spread U.S. market acceptance ofFeraheme in the non-dialysis CKD market and our ability to generate revenues and achieve and maintain profitability, and our long-term businessprospects could be adversely affected.We depend, to a significant degree, on the availability and extent of reimbursement from third-party payors for the use of Feraheme, and areduction in the extent of reimbursement could adversely affect our Feraheme sales revenues and results of operations. In both the U.S. and foreign markets, our and Takeda's ability to successfully commercialize Feraheme is and will be dependent, in significant part,on the availability and extent of reimbursement to end-users from third-party payors for the use of Feraheme, including governmental payors, managedcare organizations, private health insurers and other third-party payors. Reimbursement by a third-party payor depends on a number of factors,including the third-party's determination that the product is competitively priced, safe and effective, appropriate for the specific patient, and cost-effective. Third-party payors are increasingly challenging the prices charged for pharmaceutical products and have instituted and continue to institutecost containment measures to control or significantly influence the purchase of pharmaceutical products. If these entities do not provide coverage andreimbursement for Feraheme or provide an insufficient level of coverage and reimbursement, physicians and other healthcare providers may choose touse alternative IV iron replacement products, which would have an adverse affect on our ability to generate revenues. In addition, U.S. and foreign governments continue to propose and pass legislation designed to reduce the cost of health care. In the U.S., thePatient Protection and Affordable Care Act, as amended by the Health Care and Education Affordability Reconciliation Act, or the Health Care ReformAct, was enacted in March 2010 and includes certain cost containment measures including an increase to the minimum rebates for products covered byMedicaid programs and the extension of such rebates to drugs dispensed to Medicaid beneficiaries enrolled in Medicaid managed care organizations aswell as the expansion of the 340(B) Public Health Services drug discount program. More recently, in August 2011, the President of the United Statessigned into law the Budget Control Act of 2011, which is expected to result in significant federal spending cuts including cuts in Medicare and otherhealth related spending, such as a potential 27.4% reduction in payment rates for physician services. The full impact on our business of these new lawsis uncertain. In recent years some states have also passed28Table of Contentslegislation to control the prices of drugs as well as begun a move toward managed care to relieve some of their Medicaid cost burden. These and anyother future changes in government regulations or private third-party payors' reimbursement policies may reduce the extent of reimbursement forFeraheme and adversely affect our future operating results. The phase-in of the ESRD expanded prospective payment system began in the U.S. on January 1, 2011, and must be completed by January 1,2014. This bundled approach to reimbursement has and will likely continue to alter the utilization of physician-administered drugs in the ESRD marketas well as put downward pressure on the prices pharmaceutical companies can charge ESRD facilities for such drugs, particularly where alternativeproducts are available. In the U.S., Feraheme is sold at a price that is substantially higher than alternative IV iron products in the dialysis setting, and asa result, the demand for Feraheme in the dialysis setting has largely disappeared. While the prospective payment system provisions apply only toMedicare, Medicare is the predominant payor in the ESRD market, and Medicare payment policy, in time, can also influence pricing and reimbursementin the non-Medicare markets, as private third-party payors and state Medicaid plans frequently adopt Medicare principles in setting reimbursementmethodologies, particularly in the ESRD setting. Further changes in the Medicare reimbursement rate, particularly with respect to ESRD patients whoare not on dialysis, which result in lower payment rates from either or both Medicare and non-Medicare payors, would further limit our ability tosuccessfully market and sell Feraheme in the U.S. In addition, in the hospital in-patient setting, Feraheme is reimbursed by Medicare under a diagnosis related group payment system, whichprovides a fixed reimbursement based on the diagnosis and/or procedure rather than actual costs incurred in patient treatments, thereby increasing theincentive for a hospital to limit or control expenditures. As a result, Feraheme has not been nor do we expect it to be broadly used in the hospital in-patient setting. In countries outside of the U.S., market acceptance may also depend, in part, upon the availability of reimbursement within existing healthcarepayment systems. Generally, in Europe and other countries outside of the U.S., the government sponsored healthcare system is the primary payor ofhealthcare costs of patients and therefore enjoys significant market power. Some foreign countries also set prices for pharmaceutical products as part ofthe regulatory process, and we cannot guarantee that the prices set by such governments will be sufficient to generate substantial revenues or allow salesof Feraheme to be profitable in those countries. Any such limitations on the reimbursement for Feraheme in countries outside of the U.S. would havean adverse impact on Takeda's ability to generate product sales of Feraheme in such territories, which would, in turn, limit the amount of royalties wemay receive under our agreement with Takeda.In the U.S. there have been, and we expect there will continue to be, a number of federal and state healthcare initiatives implemented to reform thehealthcare system in ways that could adversely impact our business and our ability to sell Feraheme profitably. In the U.S., there have been, and we expect there will continue to be, a number of legislative and regulatory proposals aimed at changing the U.S.healthcare system. For example, the Health Care Reform Act contains a number of provisions that significantly impact the pharmaceutical industry andmay negatively affect our potential Feraheme revenues. Among other things, the Health Care Reform Act increased the minimum Medicaid drug rebatesfor pharmaceutical companies, extended the rebate provisions to Medicaid managed care organizations, and expanded the 340(b) Public Health Servicesdrug pricing program. Substantial new provisions affecting compliance have also been added, which may require us to modify our business practiceswith healthcare providers and potentially incur additional costs. While we are continuing to evaluate this legislation and its potential impact on ourbusiness, this legislation may adversely affect the demand for Feraheme in the U.S. or cause us to incur additional expenses and therefore adverselyaffect our financial position and results of operations.29Table of Contents In addition, various healthcare reform proposals have emerged at the state level in the U.S. We cannot predict the impact that newly enacted laws orany future legislation or regulation will have on us. We expect that there will continue to be a number of U.S. federal and state proposals to implementgovernmental pricing controls and limit the growth of healthcare costs. These efforts could adversely affect our business by, among other things,limiting the prices that can be charged for Feraheme or the amount of reimbursement available from governmental agencies or third-party payors,limiting the profitability of Feraheme, increasing our rebate liability or limiting the commercial opportunity for Feraheme.Competition in the pharmaceutical and biopharmaceutical industries is intense. If our competitors are able to develop and market products thatare or are perceived to be more effective, safer, more convenient or have more favorable pricing, insurance coverage and reimbursement thanFeraheme, the commercial opportunity for Feraheme in the U.S. and abroad will be adversely impacted. The pharmaceutical and biopharmaceutical industries are subject to intense competition and rapid technological change. We and Takeda havecompetitors both in the U.S. and internationally, and many may have greater financial and other resources, and more experienced trade, sales,reimbursement and manufacturing organizations than we or Takeda do. In addition, many of our and Takeda's competitors have significant namerecognition, more established positions in the IV iron market and long-standing relationships with customers and distributors. Our Ferahemecommercial opportunity will be reduced or eliminated if our competitors develop, commercialize or acquire or license technologies and drug productsthat are or are perceived to be safer, more effective, and/or easier to administer, or have more favorable pricing, insurance coverage and reimbursementthan Feraheme. Feraheme currently competes with several IV iron replacement therapies in the U.S., including Venofer®, which is marketed in the U.S. byFresenius Medical Care North America and American Regent Laboratories, Inc., or American Regent, a subsidiary of Luitpold Pharmaceuticals, Inc., orLuitpold, Ferrlecit®, which is marketed by Sanofi-Aventis U.S. LLC, Nulecit™, a generic version of Ferrlecit®, which is marketed by WatsonPharmaceuticals, Inc., or Watson, INFeD®, an iron dextran product marketed by Watson, and Dexferrum®, an iron dextran product marketed byAmerican Regent. Feraheme will also compete with a number of branded IV iron replacement products outside of the U.S., including Venofer®, Ferrlecit®,Monofer®, Ferinject® (the brand name for Injectafer® outside the U.S.) and certain other iron dextran and iron sucrose products. Monofer® is aninjectable iron preparation developed by Pharmacosmos A/S, which is currently approved for marketing in approximately 22 countries for the treatmentof IDA. Ferinject® is currently approved for marketing in approximately 37 countries, including approximately 30 countries within Europe, for thetreatment of iron deficiency where oral iron is ineffective or cannot be used. Venofer® and Ferrlecit® have been marketed in many countries throughoutthe world, including most of Europe and Canada, for many years. Feraheme will compete primarily with Venofer®, Ferinject® and Ferrlecit® in boththe Canadian and European markets. If Takeda is unable to convince physicians and other healthcare providers to switch from using the competing IViron products to Feraheme, our ability to generate revenues from royalties we expect to receive from Takeda will be limited and our operating resultswill be negatively affected. In addition, all other IV iron products currently approved and marketed and sold in the EU are approved for marketing to allpatients with IDA. Upon approval of our MAA, we expect Feraheme to be approved only for use in CKD patients, which could put Feraheme at acompetitive disadvantage unless and until it receives approval for a broader indication. In addition to the currently marketed products described above, Feraheme may also compete in the U.S. with Injectafer®, which is known asFerinject® in Europe, which is in development in the U.S. for a variety of anemia-related indications, including the treatment of IDA in CKD patients,whether or not on dialysis. In October 2011, Luitpold submitted an NDA to the FDA seeking marketing approval for Injectafer® for the treatment ofIDA. The FDA has since notified Luitpold that it has assigned a30Table of ContentsPrescription Drug User Fee Act target action date of August 3, 2012. The Injectafer® NDA includes data and information from two new largerandomized controlled clinical trials investigating the cardiovascular risk profile of high dose Injectafer®. If approved in the U.S., Injectafer® will bemarketed by American Regent, the current distributor of Venofer®. If Injectafer® or any other iron replacement therapy product is approved formarketing and sale in the U.S. or is successful in obtaining a broader iron deficiency anemia indication than Feraheme, our efforts to market and sellFeraheme in the U.S. and our ability to generate additional revenues and achieve profitability could be adversely affected. The market opportunity for Feraheme in the U.S. and abroad could also be negatively affected by approved generic IV iron replacement therapyproducts that achieve commercial success. For example, in 2011, Watson launched Nulecit™, a generic version of Ferrlecit® in the U.S. Nulecit™ isapproved for marketing in the U.S. for the treatment of IDA in adult patients and in pediatric patients age six years and older undergoing chronichemodialysis who are receiving supplemental epoetin therapy. There are also a number of approved generic IV iron products in countries outside theU.S. which will directly compete with Feraheme, including a generic version of Venofer®. Companies that manufacture generic products typicallyinvest far less resources in research and development than the manufacturers of branded products and can therefore price their products significantlylower than those already on the market. Therefore, competition from generic IV iron products could limit our U.S. sales and any royalties we mayreceive from Takeda, which would have an adverse impact on our business and results of operations. The iron replacement therapy market is highly sensitive to several factors including, but not limited to, the actual and perceived safety and efficacyprofile of the available products, the ability to obtain appropriate insurance coverage and reimbursement, price competitiveness, and productcharacteristics such as convenience of administration and dosing regimens. Feraheme may not receive the same level of market acceptance as competingiron replacement therapy products, especially since most of these products have been on the market longer and are currently widely used by physiciansin the U.S. and abroad. In addition, certain of the IV iron products that we compete with are approved for the treatment of iron deficiency anemia in abroader group of patients than Feraheme. We or Takeda may not be able to convince physicians and other healthcare providers or payers to switch fromusing the other IV iron therapeutic products to Feraheme. If we or Takeda are not able to differentiate Feraheme from other marketed IV iron products,our ability to generate revenues and achieve and maintain profitability, and our long-term business prospects could be adversely affected.The outcome of our publicly announced process of evaluating strategic alternatives to maximize stockholder value is uncertain, may not result in atransaction or may result in the disruption of our business, a decrease in our profitability, dilution to our stockholders' investment or theincurrence by us of debt or significant additional expense, any of which could have a material adverse affect on the future prospects of ourbusiness and on our stock price. In late 2011, we hired Jefferies & Company, Inc., or Jefferies, as our financial advisor to assist us in identifying and evaluating various strategiesto maximize stockholder value and leverage our core assets, including the potential sale of our company and the acquisition or in-license of additionalcompanies or assets. While we intend to complete our evaluation expeditiously, there is no guarantee that the process will result in a sale of the companyor other transaction or outcome that creates stockholder value. In addition, our announcement that we are evaluating various strategic alternatives maymake it more difficult to recruit, retain and motivate our employees, may cause a disruption in our relationship with our vendors or customers or maydeter potential vendors or customers from entering into any business transaction with us until we have announced a final outcome. As part of our strategic review, we are evaluating certain options including the sale of our company, collaboration and in-licensing opportunities,acquisitions of products or businesses, and/or31Table of Contentsstrategic alliances that we believe would be complementary to our existing business. We have limited experience with respect to these businessdevelopment activities. Any such strategic transactions by us could result in large and immediate write-offs, or the incurrence of debt, contingentliabilities, or significant additional expenses, including but not limited to the payment of $12.0 million we may be required to pay as a result of thetermination of our merger agreement with Allos Therapeutics, Inc., or Allos, if we enter into a definitive agreement for an Acquisition Transaction, asdefined in the merger agreement with Allos, on or before October 21, 2012 or such a transaction is consummated on or before such date, any of whichwould adversely impact our operating results. Management of a license arrangement, collaboration, or other strategic arrangement and/or integration ofan acquired asset or company or a sale of our company may also disrupt our ongoing business, create uncertainty among our employees and investors,and require management resources that otherwise would be available for ongoing development of our existing business and the globalcommercialization of Feraheme. We may not identify or complete any such transactions in a timely manner, on a cost-effective basis, or at all, and wemay not realize the anticipated financial benefits of any such transaction. In addition, to finance any such strategic transactions, we may choose to issueshares of our common or preferred stock as consideration, which would result in dilution to our stockholders. Alternatively, it may be necessary for usto raise additional funds through public or private financings, and such additional funds may not be available on terms that are favorable to us, if at all.In addition, proposing, negotiating and implementing collaborations, in-licensing arrangements, acquisition or sale agreements may be a lengthy andcomplex process. Other companies, including those with substantially greater financial, marketing and sales resources, may compete with us for thesearrangements, and we may not be able to enter into such arrangements on acceptable terms or at all.We have limited experience independently commercializing a pharmaceutical product, and any failure on our part to effectively execute ourFeraheme commercial plans in the U.S., particularly in light of our recent restructuring, would have an adverse impact on our business. Prior to our commercialization of Feraheme in the U.S., we had never independently marketed or sold a drug product as we had relied on ourlicensees to market and sell our previously approved products. We have an internal commercial infrastructure to market and sell Feraheme in the U.S.,and if we are unsuccessful in maintaining an effective commercial function or experience a high level of turnover, then the commercialization ofFeraheme could be severely impaired. We reduced our workforce by approximately 25% of our positions in November 2011 as part of an overallcorporate restructuring, including certain positions within our commercial function. In November 2011, we also announced the departure of our chiefexecutive officer and our chief commercial officer. This workforce reduction, together with the departure of our chief executive officer and our chiefcommercial officer, or any future reductions or departures, could harm our ability to attract and retain qualified personnel, which could prevent us fromsuccessfully commercializing Feraheme in the U.S., impair our ability to maintain sales levels and/or impair our ability to support potential sales growthand sales of Feraheme for any additional indications we may commercialize in the future. Any failure by us to successfully execute ourcommercialization plans for Feraheme in the U.S. could have a material adverse impact on our ability to generate revenues, our ability to achieveprofitability, and the future prospects for our business.Our success depends on our ability to attract and retain key employees, including the hiring of a permanent chief executive officer. Because of the specialized nature of our business, our success depends to a significant extent on the continued service of our executive officers andon our ability to continue to attract, retain and motivate qualified executive, sales, manufacturing, managerial, scientific, and medical personnel. We haveentered into employment agreements with our current senior executives but such agreements do not guarantee that these executives will remainemployed by us for any significant period of time, or at all. There is intense competition for qualified personnel in the areas of our activities, and we maynot be able to continue to attract and retain the qualified personnel necessary for the development of our business.32Table of Contents In November 2011, we initiated a corporate restructuring, including a workforce reduction plan, which included an approximate 25% reduction inpositions and the departure of our chief executive officer and our chief commercial officer. We are currently seeking a permanent chief executive officer,however, we may not be able to find qualified candidates in a timely manner, or at all. In addition, in November 2011, we announced that we hiredJefferies to help us conduct a strategic review to determine the optimal strategy for our growth. The uncertainty regarding the outcome of our strategicreview, our November 2011 workforce reduction, recent executive departures, and any future reductions or departures, could harm our ability to attractand retain qualified key personnel. If we are unable to attract such personnel, or we lose the services of our key personnel for any reason, our Ferahemedevelopment and commercialization efforts could be adversely impacted. Our failure to attract and retain such personnel or to develop such expertise could impose significant limits on our business operations and hinderour ability to successfully and efficiently commercialize Feraheme and complete our development projects.We are substantially dependent upon our collaboration with Takeda to commercialize Feraheme in certain regions outside of the U.S., includingCanada and the EU, and if Takeda fails to successfully fulfill its obligations, or is ineffective in its commercialization of Feraheme in the licensedterritories, or if our collaboration is terminated, our plans to commercialize Feraheme outside of the U.S. may be adversely affected. In March 2010, we entered into the Takeda Agreement with Takeda, under which we granted exclusive rights to Takeda to develop andcommercialize Feraheme as a therapeutic agent in Europe, Asia-Pacific countries (excluding Japan, China and Taiwan), the Commonwealth ofIndependent States, Canada, India and Turkey, or collectively, the Licensed Territory. We are highly dependent on Takeda for certain regulatory filingsoutside of the U.S. with respect to Feraheme and the commercialization of Feraheme outside of the U.S., including in Canada and the EU. If Takedafails to perform its obligations under the Takeda Agreement, delays the commercial launch of Feraheme in the Licensed Territory, or is ineffective in itscommercialization of Feraheme in the Licensed Territory or if we fail to effectively manage our relationship with Takeda, our ability to and the extent towhich we obtain regulatory approvals for Feraheme and our Feraheme commercialization efforts outside of the U.S. would be significantly harmed,which would have an adverse affect on milestone payments and royalties we expect to receive under the Takeda Agreement. Further, if we fail to fulfillcertain of our obligations under the Takeda Agreement, Takeda has the right to assume the responsibility of clinical development of Feraheme in theLicensed Territory, which would increase the cost of and delay the Feraheme development program outside of the U.S. Takeda has the unilateral right to terminate the Takeda Agreement under certain conditions, including without cause. If Takeda terminates theagreement, we would be required to either enter into alternative arrangements with third parties to commercialize Feraheme in the Licensed Territory,which we may be unable to do, or to increase our internal infrastructure, both of which would likely result in significant additional expense and delay ortermination of our Feraheme clinical development programs outside of the U.S. In addition, such a termination would prevent us from receiving themilestone payments and royalties we expect to receive under the Takeda Agreement.Our recent corporate restructuring may not result in anticipated savings, could result in total costs and expenses that are greater than expectedand could disrupt our business, all of which could have a material adverse effect on our business. As a result of the November 2011 reduction in our workforce, we recorded restructuring charges of approximately $3.5 million in the fourthquarter of 2011. We may not realize, in full or in part, the anticipated benefits, savings and improvements in our cost structure from our restructuringefforts due to unforeseen difficulties, delays or unexpected costs. If we are unable to achieve the anticipated33Table of Contentsbenefits, savings or improvements in our cost structure in the expected time frame or other unforeseen events occur, our business and results ofoperations may be adversely affected. Our restructuring plan may also be disruptive to our operations. For example, cost saving measures may distract management from our corebusiness, harm our reputation, or yield unanticipated consequences, such as attrition beyond planned reductions in workforce, increased difficulties inour day-to-day operations, reduced employee productivity and a deterioration of employee morale. Our workforce reductions could also harm our abilityto attract and retain qualified management, scientific, manufacturing and commercial personnel who are critical to our business. Any failure to attract orretain qualified personnel could prevent us from successfully commercializing and developing Feraheme, impair our ability to maintain sales levelsand/or support potential sales growth, and result in unexpected delays in our development programs and our anticipated regulatory filings, including ourplanned sNDA for Feraheme for a broad IDA indication. Moreover, although we believe it is necessary to reduce the cost of our operations to improve our performance, these initiatives may preclude usfrom making potentially significant expenditures that could improve our competitiveness over the longer term. We cannot guarantee that the costreduction measures, or other measures we may take in the future, will result in the expected cost savings, or that any cost savings will beunaccompanied by these or other unintended consequences.We have limited experience independently distributing a pharmaceutical product and our Feraheme commercialization plans could suffer if wefail to effectively manage and maintain our supply chain and distribution network. We do not have significant experience in managing and maintaining a supply chain and distribution network, and we are placing substantialreliance on third-parties to perform product supply chain services for us. Such services include packaging, warehousing, inventory management, storageand distribution of Feraheme. We have contracted with Integrated Commercialization Services, Inc., or ICS, to be our exclusive third-party logisticsprovider to perform a variety of functions related to the sale and distribution of Feraheme in the U.S., including services related to warehousing andinventory management, distribution, chargeback processing, accounts receivable management and customer service call center management. As a result,a significant amount of our U.S. inventory is stored at a single warehouse maintained by ICS. In addition, we have contracted with Catalent PharmaSolutions, LLC, or Catalent, to provide certain labeling and packaging services for final U.S. Feraheme drug product. If ICS or Catalent are unable toprovide uninterrupted supply chain services or labeling and packaging services, respectively, we may incur substantial losses of sales to wholesalers orother purchasers of Feraheme. In addition, the packaging, storage and distribution of Feraheme in the U.S. and abroad requires significant coordination among our and Takeda'smanufacturing, sales, marketing and finance organizations and multiple third parties including our third-party logistics provider, packaging and labelingprovider, distributors, and wholesalers. In most cases, we do not currently have back-up suppliers or service providers to perform these tasks. If any ofthese third-parties experience significant difficulties in their respective processes, fail to maintain compliance with applicable legal or regulatoryrequirements, fail to meet expected deadlines or otherwise do not carry out their contractual duties to us, or encounter physical or natural damages attheir facilities, our ability to deliver Feraheme to meet U.S. or foreign commercial demand could be significantly impaired. The loss of any of our third-party providers, together with a delay or inability to secure an alternate distribution source for end-users in a timely manner, could cause the distributionof Feraheme to be delayed or interrupted, which would have an adverse effect on our business, financial condition and results of operations.34Table of ContentsWe may not be able to operate our manufacturing facilities, or our contract manufacturers may not be able to operate their manufacturingfacilities, in compliance with current good manufacturing practices and other FDA and equivalent foreign regulations, which could result in asuspension of our or our contract manufacturers' ability to manufacture Feraheme, the loss of Feraheme inventory, an inability to manufacturesufficient quantities of Feraheme to meet U.S. or foreign demand, or other unanticipated compliance costs. Our Cambridge, Massachusetts manufacturing facility and our third-party contract manufacturing facilities are subject to current goodmanufacturing practices, or cGMP, regulations enforced by the FDA and equivalent foreign regulatory agencies through periodic inspections to confirmsuch compliance. We and our contract manufacturers must continually expend time, money and effort in production, record-keeping and qualityassurance and control to ensure that these manufacturing facilities meet applicable regulatory requirements. Failure to maintain ongoing compliance withcGMP regulations and other applicable manufacturing requirements of various U.S. or foreign regulatory agencies could result in, among other things,the issuance of warning letters, fines, the withdrawal or recall of Feraheme from the marketplace, total or partial suspension of Feraheme production,the loss of Feraheme inventory, suspension of the review of any future sNDAs or equivalent foreign filings, enforcement actions, injunctions orcriminal prosecution. A government-mandated recall or a voluntary recall could divert managerial and financial resources, could be difficult and costly tocorrect, could result in the suspension of sales of Feraheme, and could have a severe adverse impact on our potential profitability and the futureprospects of our business. In addition, if any U.S. or foreign regulatory agency inspects any of these manufacturing facilities and determines that theyare not in compliance with cGMP regulations or we or our contract manufacturers otherwise determine that we or they are not in compliance with theseregulations, we or our contract manufacturers could experience an inability to manufacture sufficient quantities of Feraheme to meet U.S. or foreigndemand or incur unanticipated compliance expenditures, either of which could have an adverse impact on Feraheme sales, our potential profitability andthe future prospects of our business.Any difficulties, disruptions or delays in the Feraheme manufacturing process, including our transition to alternative source manufacturingfacilities, could increase our costs, or adversely affect our profitability and future business prospects. We manufacture Feraheme for commercial use in the U.S. and for use in human clinical trials in our Cambridge, Massachusetts manufacturingfacility. In April 2011, the FDA also approved certain of our third-party contract manufacturers to produce Feraheme drug substance and drug productfor the U.S. market. We manufacture Feraheme drug substance and drug product for use in the Canadian market at our Cambridge facility. Upon approval of ourMAA by the EMA, we expect to manufacture Feraheme drug substance and drug product for use in the EU market at certain of our third-party contractmanufacturers. Although we are working to establish and qualify alternative source manufacturing facilities for the production of Feraheme for Canadaand the EU, we will not have such alternative source manufacturing facilities available upon initial commercial launch of Feraheme in thosegeographies. Our ability to manufacture Feraheme or have Feraheme manufactured in sufficient quantities and at acceptable costs to meet our commercialdemand and clinical development needs is dependent on the uninterrupted and efficient operation of these manufacturing facilities. Any difficulties,disruptions or delays in the Feraheme manufacturing process, particularly with respect to our facilities where we will manufacture Feraheme forCanadian and European supply, where we will not immediately have an approved back-up supplier, could result in product defects or shipment delays,recall or withdrawal of products previously shipped for commercial or clinical purposes, inventory write-offs or the inability to meet commercialdemand for Feraheme in a timely and cost-effective manner.35Table of Contents In addition, the transition of the manufacturing processes to third-party contract manufacturers and the oversight of such third-parties could take asignificant amount of time and may increase the risk of certain problems, including cost overruns, process reproducibility, stability issues, the inabilityto deliver required quantities of product that conform to specifications in a timely manner, or the inability to manufacture Feraheme in accordance withcGMP. If we are unable to consistently manufacture Feraheme or have Feraheme manufactured on a timely basis because of these or other factors, wemay not be able to meet commercial demand or our clinical development needs for Feraheme or may not be able to manufacture Feraheme in a cost-effective manner, particularly in light of the fixed price at which we are required to supply Feraheme to Takeda under the Takeda Agreement. As aresult, we may lose sales, fail to generate increased revenues, our clinical development programs may be delayed and/or we may lose money on oursupply of Feraheme to Takeda, any of which could have an adverse impact on our potential profitability and future business prospects.Our inability to obtain raw and other materials used in the manufacture of Feraheme could adversely impact our ability to manufacture sufficientquantities of Feraheme, which would have an adverse impact on our business. We currently purchase certain raw and other materials used to manufacture Feraheme from third-party suppliers and at present do not have anylong-term supply contracts with these third parties. These third-party suppliers may cease to produce the raw or other materials used in Feraheme orotherwise fail to supply these materials to us or fail to supply sufficient quantities of these materials to us in a timely manner for a number of reasons,including but not limited to the following:•Unexpected demand for or shortage of raw or other materials; •Labor disputes or shortages; •Manufacturing difficulties; •Regulatory requirements or action; •Adverse financial developments at or affecting the supplier; or •Import or export problems. If any of our third-party suppliers cease to supply certain raw or other materials to us for any reason we could be unable to manufacture Ferahemein sufficient quantities, on a timely basis, or in a cost-effective manner until we are able to qualify an alternative source, which could adversely affect ourability to satisfy commercial demand and our clinical development needs for Feraheme. The qualification of an alternative source may require repeated testing of the new materials and generate greater expenses to us if materials that wetest do not perform in an acceptable manner. In addition, we sometimes obtain raw or other materials from one vendor only, even where multiplesources are available, to maintain quality control and enhance working relationships with suppliers, which could make us susceptible to price inflationby the sole supplier, thereby increasing our production costs. As a result of the high quality standards imposed on our raw or other materials, we maynot be able to obtain these materials of the quality required to manufacture Feraheme from an alternative source on commercially reasonable terms, or ina timely manner, if at all. Even if we are able to obtain raw or other materials from an alternative source, if these raw or other materials are not available in a timely manner oron commercially reasonable terms, we would be unable to manufacture Feraheme, both for commercial sale and for use in our clinical trials, on a timelyand cost-effective basis, which could cause us to lose money on our supply of Feraheme to Takeda, which we are required to supply at a pre-negotiatedfixed price. Any such difficulty in obtaining raw or other materials could severely hinder our ability to manufacture Feraheme and could have a materialadverse impact on our ability to generate additional revenues and to achieve profitability.36Table of ContentsOur ability to grow revenues from sales of Feraheme could be limited if we do not obtain approval, or if we experience significant delays in ourefforts to obtain approval, in the U.S. to market and sell Feraheme for the treatment of IDA in a broad range of patients. We have recently completed enrollment in certain Phase III clinical trials to support our global registrational program to assess Feraheme for thetreatment of IDA in a broad range of patients. Before obtaining regulatory approval in the U.S. for the commercial marketing and sale of Feraheme forthe broad IDA indication, we must demonstrate through extensive human clinical trials that Feraheme is safe and effective for use in this broader patientpopulation. In March 2012 we announced results from the first of our two Phase III multi-center clinical trials to assess Feraheme in patients with IDA.Conducting clinical trials is a complex, time-consuming and expensive process that requires adherence to a wide range of regulatory requirements. TheFDA has substantial discretion in the approval process and may decide that the results of our clinical trials are insufficient for approval or that Ferahemeis not effective or safe in indications other than CKD. Clinical and other data is often susceptible to varying interpretations, and many companies thathave believed their product candidates performed satisfactorily in clinical trials have nonetheless failed to obtain FDA approval for their products. Thereis no guarantee that the FDA will determine that the results of our clinical trials, including the recently announced results from one of our trials in ourglobal registrational program for Feraheme in a broad range of patients with IDA, will adequately demonstrate that Feraheme is safe and effective insuch a patient population to grant approval. The FDA could also determine that our clinical trials and/or our manufacturing processes were not properly designed, were not conducted inaccordance with federal laws and regulations, or were otherwise not properly managed. In addition, under the FDA's current good clinical practicesregulations, or cGCP, we are responsible for conducting, recording and reporting the results of clinical trials to ensure that the data and results arecredible and accurate and that the trial participants are adequately protected. The FDA may conduct inspections of clinical investigator sites which areinvolved in our clinical development programs to ensure their compliance with cGCP regulations. If the FDA determines that we, our clinical researchorganizations or our study sites fail to comply with applicable cGCP regulations, the clinical data generated in our clinical trials may be deemedunreliable and the FDA may disqualify certain data generated from those sites or require us to perform additional clinical trials before approving ourmarketing application, which could adversely impact our ability to obtain marketing approval for Feraheme in the broad IDA indication. Any suchdeficiency in the design, implementation or oversight of our clinical development programs could cause us to incur significant additional costs,experience significant delays or prevent us from obtaining marketing approval for Feraheme for the broad IDA indication. In addition, any failure by usto obtain approval for the broad IDA indication could adversely affect the commercialization of Feraheme in its current indication. If, for any of thesereasons, we do not obtain approval, or if we experience significant delays in our efforts to obtain approval to market and sell Feraheme in the U.S. forthe treatment of IDA in a broad range of patients, our cash position, our ability to increase revenues, our ability to achieve profitability, and the futureprospects of our business could be materially adversely affected.Our ability to grow revenues from sales of Feraheme could be limited if we do not obtain approval, or if we experience significant delays in ourefforts to obtain approval, to market and sell Feraheme in countries outside of the U.S. In order for Takeda, 3SBio Inc., or 3SBio, or us to market and sell Feraheme for any indication in any country outside of the U.S., including in theEU, it will be necessary to obtain regulatory approval from the appropriate foreign regulatory authorities, which approval must include approval of ourproposed manufacturing processes and facilities. The requirements and timing for regulatory approval vary widely from country to country and may insome cases be different than or more rigorous than requirements in the U.S. For example, our MAA submitted to the EMA, for the approval ofFeraheme for the treatment of IDA in CKD patients, is largely supported by data from the clinical trials we37Table of Contentsconducted to support our U.S. NDA filing for the approval of Feraheme for the treatment of IDA in CKD patients. The EMA may require us toperform or commit to perform additional studies or provide additional data in order to obtain regulatory approval, or as a condition for approval, for theCKD indication in the EU. In addition, in March 2012 we announced results from the first of our two Phase III multi-center clinical trials to assessFeraheme in patients with IDA. The EMA has substantial discretion in the approval process and may decide that the results of our clinical trials areinsufficient for approval in either the CKD or the broader IDA indication. Clinical and other data is often susceptible to varying interpretations, and thereis no guarantee that the EMA will determine that the results of our clinical trials will adequately demonstrate that Feraheme is safe and effective in eitherthe CKD or broader IDA patient population to support approval. In addition, any adverse regulatory action taken by the FDA with respect to Ferahemein the U.S. may affect the regulatory requirements or decisions made by certain foreign regulatory bodies with regard to the regulatory approval ofFeraheme outside of the U.S. Any failure to obtain regulatory approval outside of the U.S. for Feraheme for the treatment of IDA in CKD patients or in a broad range ofpatients would prevent us from receiving expected milestone payments and royalties from Takeda and could limit the commercial success of Ferahemeand our ability to grow our revenues.We rely on third parties in the conduct of our business, including our clinical trials, and if they fail to fulfill their obligations, ourcommercialization and development plans may be adversely affected. We rely and intend to continue to rely on third-parties, including clinical research organizations, third-party manufacturers, third-party logisticsproviders, packaging and labeling providers, wholesale distributors and certain other important vendors and consultants in the conduct of our business.As a result of the current volatile and unpredictable global economic situation, there may be a disruption or delay in the performance or satisfaction ofcommitments to us by our third-party contractors or suppliers. For example, as a result of the current economic climate, our distributors, customers orsuppliers may experience difficulty in obtaining the liquidity necessary to purchase inventory or raw or other materials, may begin to maintain lowerinventory levels or may become insolvent. If such third-parties are unable to adequately satisfy their contractual commitments to us in a timely manner,our business could be severely adversely affected. In addition, we have contracted and we plan to continue to contract with certain third-parties to provide certain services, including site selection,enrollment, monitoring, data management and other services, in connection with the conduct of our clinical trials and the preparation and filing of ourregulatory applications, including our planned sNDA for the broad IDA indication in the U.S. We have limited experience conducting clinical trialsoutside the U.S., and, therefore, we are also largely relying on third-parties such as clinical research organizations to manage, monitor and carry outthese clinical trials outside of the U.S. Although we depend heavily on these parties, we do not control them and, therefore, we cannot be assured thatthese third-parties will adequately perform all of their contractual obligations to us. If our third-party service providers cannot adequately fulfill theirobligations to us in a timely manner and on a satisfactory basis or if the quality and accuracy of our clinical trial data or our regulatory submissions arecompromised due to poor quality or failure to adhere to our protocols or regulatory requirements or if such third-parties otherwise fail to adequatelydischarge their responsibilities or meet deadlines, our development plans and planned regulatory submissions both in and outside of the U.S., includingour planned sNDA for the broad IDA indication in the U.S., may be delayed or terminated, which would adversely impact our ability to generaterevenues from Feraheme sales in additional indications and/or outside of the U.S.38Table of ContentsOur operating results will likely fluctuate so you should not rely on the results of any single quarter to predict how we will perform over time. Our future operating results will likely vary from quarter to quarter depending on a number of factors, some of which we cannot control, includingbut not limited to:•The magnitude of Feraheme sales; •Any expansion or contraction of the overall size of the IV iron market, which could result from a number of factors including but notlimited to, changes in treatment guidelines or practices related to IDA; •The timing and magnitude of costs associated with the commercialization of Feraheme in the U.S., including costs associated withmaintaining our commercial infrastructure and executing our promotional and marketing strategy; •Changes in buying patterns and inventory levels of our wholesalers or distributors; •The timing and magnitude of milestone payments and royalties we may receive under the Takeda Agreement; •Any adverse impact on our financial results stemming from our recent corporate restructuring; •The timing and magnitude of costs associated with our ongoing and planned clinical studies of Feraheme in connection with ourpediatric program, our pursuit of additional indications and our development of Feraheme in countries outside of the U.S; •The timing and magnitude of costs associated with commercial-scale manufacturing of Feraheme, including costs of raw and othermaterials and costs associated with maintaining commercial inventory and qualifying additional manufacturing capacities and alternativesuppliers; •The magnitude of costs incurred in connection with business development activities, including legal and other costs associated with ourpreviously announced process to evaluate strategic alternatives; •Changes in laws and regulations affecting Feraheme from federal, state and foreign legislative and regulatory authorities, governmenthealth administration authorities, private health insurers and other third-party payors; •The initiation or outcome of any material litigation to which we are or become a party and the magnitude of costs associated with suchlitigation; and •The implementation of new or revised accounting or tax rules or policies. As a result of these and other factors, our quarterly operating results could fluctuate, and this fluctuation could cause the market price of ourcommon stock to decline. Results from one quarter should not be used as an indication of future performance.We derive a substantial amount of our revenue from a limited number of customers and the loss of one or more of these customers or a decline inrevenue from one or more of these customers could have an adverse impact on our results of operations and financial condition. In the U.S., we sell Feraheme primarily to wholesalers and specialty distributors and therefore a significant portion of our revenues is generated bya small number of customers. Four customers accounted for 88% of our product sales revenue during 2011 and three customers accounted for 92% ofour accounts receivable balance at December 31, 2011. In addition, a significant portion of our U.S. Feraheme sales are generated through a smallnumber of contracts with GPOs. For example, approximately 35% of our end-user demand in 2011 was generated by members of a single GPO withwhich we have contracted. The loss of, material reduction in sales volume to, or a significant adverse change in our relationship with any of our keywholesalers, distributors or GPOs could have a material39Table of Contentsadverse effect on our revenue in any given period and may result in significant annual or quarterly revenue fluctuations.Wholesaler and distributor buying patterns and other factors may cause our quarterly results to fluctuate, and these fluctuations may adverselyaffect our short-term results. Our results of operations, including, in particular, product sales revenues, may vary from period to period due to a variety of factors, including thebuying patterns of our U.S. wholesalers and distributors, which vary from quarter to quarter. In the event wholesalers and distributors with whom wedo business in the U.S. determine to limit their purchases of Feraheme, sales of Feraheme could be adversely affected. For example, in advance of ananticipated price increase or a reduction in expected rebates or discounts, customers may order Feraheme in larger than normal quantities which couldcause sales of Feraheme to be lower in subsequent quarters than they would have been otherwise. Further, any changes in purchasing patterns,inventory levels, increases in returns of Feraheme, delays in purchasing products or delays in payment for products by one of our distributors couldalso have a negative impact on our revenue and results of operations.If the estimates we make, or the assumptions on which we rely, in preparing our consolidated financial statements prove inaccurate, our actualresults may vary from those reflected in our projections and accruals. Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States. Thepreparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of our assets,liabilities, revenues and expenses, the amounts of charges accrued by us, and the related disclosure of contingent assets and liabilities. On an ongoingbasis, our management evaluates our critical and other significant estimates and judgments, including among others, those associated with revenuerecognition related to collaboration agreements and product sales, product sales allowances and accruals, our assessment of investments for potentialother-than-temporary impairment and our determination of the value of our investments, reserves for doubtful accounts, accrued expenses, reserves forlegal matters, income taxes and equity-based compensation expense. We base our estimates on market data, our observance of trends in our industry,and various other assumptions that we believe to be reasonable under the circumstances. If actual results differ from these estimates, there could be amaterial adverse effect on our financial results and the performance of our stock. As part of our revenue recognition policy, our estimates of product returns, rebates and chargebacks, fees and other discounts require subjectiveand complex judgments due to the need to make estimates about matters that are inherently uncertain. Any significant differences between our actualresults and our estimates could materially affect our financial position, results of operations and cash flows. For example, during 2011 we revised ourestimated Medicaid utilization based on actual rebate claims received since the launch of Feraheme in 2009, our expectations of projected state levelclaims activity, and estimated rebate claims not yet submitted, which resulted in a $2.5 million reduction of our estimated Medicaid rebate reserve relatedto Feraheme sales in 2009 and 2010. In addition, to determine the required quantities of our products and the related manufacturing schedule, we also need to make significantjudgments and estimates based on inventory levels, current market trends, anticipated sales, forecasts from our licensees, including Takeda, and otherfactors. Because of the inherent nature of estimates, there could be significant differences between our and Takeda's estimates and the actual amount ofproduct need. For example, the level of our access to wholesaler and distributor inventory levels and sales data in the U.S., which varies based on thewholesaler or distributor, affects our ability to accurately estimate certain reserves included in our financial statements. Any difference between ourestimates and the actual amount of product demand could result in unmet demand or excess inventory, each of which would adversely impact ourfinancial results and results of operations.40Table of ContentsOur stock price has been and may continue to be volatile, and your investment in our stock could decline in value or fluctuate significantly. The market price of our common stock has been, and may continue to be, volatile, and your investment in our stock could decline in value orfluctuate significantly. Our stock price has ranged between $12.65 and $19.62 in the fifty-two week period through February 16, 2012. The stockmarket has from time to time experienced extreme price and volume fluctuations, particularly in the biotechnology and pharmaceuticals sectors, whichhave often been unrelated to the operating performance of particular companies. Various factors and events, many of which are beyond our control, mayhave a significant impact on the market price of our common stock. Factors which may affect the market price of our common stock include, amongothers:•Our ability to successfully commercialize Feraheme in the U.S. and Takeda's ability to successfully commercialize Feraheme interritories outside of the U.S.; •The timing and magnitude of Feraheme revenue and actual or anticipated fluctuations in our operating results; •Changes in or our failure to meet financial estimates published by securities analysts or our own publicly disclosed financial guidance; •Any announcements or speculation regarding the status or result of our previously announced process of evaluating strategic alternativesavailable to us; •Any announcement regarding the results of our ongoing clinical trials of Feraheme in the broad IDA indication, including ourMarch 2012 announcement of the results of the first of our two Phase III multi-center clinical trials to assess Feraheme in patients withIDA regardless of the underlying cause; •Any announcements regarding decisions on our MAA for Feraheme in the EU and the impact on any expected milestone and royaltypayments; •The availability of reimbursement coverage for Feraheme or changes in the reimbursement policies of U.S. or foreign governmental orprivate payors; •Public announcements of U.S. or foreign regulatory actions with respect to Feraheme or products or product candidates of ourcompetitors; •Actual or perceived safety concerns related to Feraheme or products or product candidates of our competitors, including any actionstaken by U.S. or foreign regulatory authorities in connection with such concerns; •The status or results of clinical trials for Feraheme or products or product candidates of our competitors; •The acquisition or development of technologies, product candidates or products by us or our competitors; •Developments in patents or other proprietary rights by us or our competitors; •The initiation or outcome of any material litigation to which we are a party; •Significant collaboration, acquisition, joint venture or similar agreements by us or our competitors; •Shareholder activism and attempts to disrupt our strategy by activist investors; •Any announcement by us naming a permanent chief executive officer; •General market conditions; and •Sales of large blocks of our common stock. Thus, as a result of events both within and beyond our control, our stock price could fluctuate significantly or lose value rapidly.41Table of ContentsIf securities analysts downgrade our stock, cease coverage of us, or if our operating results do not meet analysts' forecasts and expectations, ourstock price could decline. The trading market for our common stock relies in part on the research and reports that industry or financial analysts publish about us and ourbusiness. Currently, nine financial analysts publish reports about us and our business. We do not control these or any other analysts. Furthermore, thereare many large, well-established, publicly traded companies active in our industry and market, which may mean that it is less likely that we will receivewidespread analyst coverage. In addition, our future operating results are subject to substantial uncertainty, and our stock price could declinesignificantly if we fail to meet or exceed analysts' forecasts and expectations. If any of the analysts who cover us downgrade our stock or issuecommentary or observations that are perceived by the market to be adverse to us or our stock, our stock price would likely decline rapidly. If any ofthese analysts engage in speculation about the outcome of our publicly announced strategic review process, our stock price could become volatile anddecline significantly if the outcome of the process does not align with their expectations. In addition, if these analysts cease coverage of our company,we could lose visibility in the market, which in turn could also cause our stock price to decline.If our operating results do not meet our own publicly disclosed financial guidance our stock price could decline. In January 2012, we publicly provided 2012 financial guidance, including expected 2012 Feraheme product revenue growth, estimated operatingexpenses and estimated year-end cash balance. If we fail to realize any element of our publicly disclosed financial guidance or other expectations aboutour business, our stock price could decline in value.We may need additional capital to achieve our business objectives. We have expended and will continue to expend substantial funds to successfully commercialize and develop Feraheme. Our long-term capitalrequirements will depend on many factors, including, but not limited to:•Our ability to successfully commercialize Feraheme in the U.S. and Takeda's ability to successfully commercialize Feraheme in itslicensed territories outside of the U.S.; •The magnitude of U.S. Feraheme sales and royalties we may receive under the Takeda Agreement on Feraheme sales outside of theU.S.; •Our ability to obtain U.S. regulatory approval for Feraheme to treat IDA regardless of the underlying cause and our ability to obtainregulatory approval for Feraheme outside the U.S., particularly in the EU; •Our ability to achieve the various milestones and receive the associated payments under the Takeda Agreement; •Costs associated with the U.S. commercialization of Feraheme, including costs associated with maintaining our commercialinfrastructure, executing our promotional and marketing strategy for Feraheme, and conducting our required pediatric clinical studies andany post-marketing clinical studies; •Costs associated with our development of Feraheme for the treatment of IDA in a broad range of patients in the U.S.; •Costs associated with our pursuit of marketing approval for Feraheme outside of the U.S.; •Costs associated with any acquisition or in-license transactions that we may engage in;42Table of Contents•The outcome of and costs associated with any material litigation to which we are or may become a party; •Our ability to liquidate our investments in auction rate securities, or ARS, in a timely manner and without significant loss; •Our ability to maintain successful collaborations with our licensees and/or to enter into additional alternative strategic relationships, ifnecessary; and •Our ability to raise additional capital on terms and within a timeframe acceptable to us, if necessary. We estimate that our cash resources as of December 31, 2011, combined with cash we currently expect to receive from sales of Feraheme, fromearnings on our investments, and potential milestone and royalty payments we expect to receive from Takeda will be sufficient to finance our currentlyplanned operations for at least the next twelve months. Thereafter, we may require additional funds or need to establish additional alternative strategicarrangements to execute our business plans. We may seek needed funding through additional arrangements with collaborators through public or privateequity or debt financings. We may not be able to obtain financing or to secure alternative strategic arrangements on acceptable terms or within anacceptable timeframe, if at all. Any additional equity financings or alternative strategic arrangements would be dilutive to our stockholders. In addition, the terms of any debtfinancing could greatly restrict our ability to raise additional capital and may provide rights and preferences to the investors in any such financing whichare not available to current stockholders. Our inability to raise additional capital on terms and within a timeframe acceptable to us when needed couldforce us to dramatically reduce our expenses and delay, scale back or eliminate certain of our activities and operations, including our commercializationand development activities, any of which would have a material adverse effect on our business, financial condition and future business prospects.The investment of our cash is subject to risks, which may cause losses or adversely affect the liquidity of these investments and our results ofoperations, liquidity and financial condition. As of December 31, 2011, we had $63.5 million in cash and cash equivalents, $148.7 million in short-term investments, and $17.5 million in long-term investments. These investments are subject to general credit, liquidity, market and interest rate risks, which have been and may continue to beexacerbated by the U.S. and global financial crisis which has been occurring over the past several years. The ongoing disruptions in the credit andfinancial markets have negatively affected many industries, including those in which we invest, and we may realize losses in the fair value of certain ofour investments or a complete loss of these investments, which would have an adverse effect on our results of operations, liquidity and financialcondition. As of December 31, 2011, we held a total of $17.5 million in fair market value of ARS reflecting a reduction in value of approximately$2.4 million from the par value of these securities of approximately $19.9 million. In February 2008, our ARS began to experience failed auctions andhave continued to experience failed auctions. Since that time, the continued uncertainty in the credit markets has caused almost all additional auctionswith respect to our ARS to fail and prevented us from liquidating certain of our holdings of ARS because the amount of these securities submitted forsale has exceeded the amount of purchase orders for these securities. These auctions may continue to fail indefinitely, and there could be a furtherdecline in value of these securities or any other securities, which may ultimately be deemed to be other-than-temporary. In the future, should wedetermine that these declines in value of ARS are other-than-temporary, we will recognize the credit-related portion of the loss to our consolidatedstatement of operations, which could be material. In addition, failed auctions will adversely impact the liquidity of our investments.43Table of Contents The condition of the credit markets remains dynamic and unpredictable. As a result, we may experience a reduction in value or loss of liquiditywith respect to our investments. In addition, should our investments cease paying or reduce the amount of interest paid to us, our interest income wouldsuffer. Further, as part of our determination of the fair value of our investments, we consider credit ratings provided by independent investment ratingagencies as of the valuation date. These ratings are subject to change. As the ratings of our ARS change we may be required to adjust our futurevaluation of our ARS which may adversely affect the value of these investments. These market risks associated with our investment portfolio may havean adverse effect on our results of operations, cash position, liquidity and overall financial condition.We are subject to increasingly complex corporate governance, public disclosure and accounting requirements that could adversely affect ourbusiness and financial results. We are subject to changing rules and regulations of U.S. federal and state government as well as the stock exchange on which our common stockis listed. These entities, including the Public Company Accounting Oversight Board, the NASDAQ Global Select Market, and the U.S. Securities andExchange Commission, or SEC, have issued a significant number of new and increasingly complex requirements and regulations over the last severalyears and continue to develop additional regulations and requirements in response to laws enacted by Congress. For example, in July 2010, the Dodd-Frank Wall Street Reform and Protection Act, or the Dodd-Frank Act, was enacted. There are significant corporate governance and executivecompensation-related provisions in the Dodd-Frank Act, some of which the SEC has recently implemented by adopting additional rules and regulationsin areas such as executive compensation, or "say on pay". Our efforts to comply with these requirements have resulted in, and are likely to continue toresult in, an increase in our expenses and a diversion of management's time from other business activities.Our ability to use net operating loss carryforwards and tax credit carryforwards to offset future taxable income may be limited as a result offuture transactions involving our common stock. In general, under Section 382 of the Internal Revenue Code of 1986, as amended, a corporation that undergoes an "ownership change" is subject tolimitations on its ability to utilize its pre-change net operating losses and certain other tax assets to offset future taxable income. In general, an ownershipchange occurs if the aggregate stock ownership of certain stockholders increases by more than 50 percentage points over such stockholders' lowestpercentage ownership during the testing period, which is generally three years. An ownership change could limit our ability to utilize our net operatingloss and tax credit carryforwards for taxable years including or following such "ownership change." Limitations imposed on the ability to use netoperating losses and tax credits to offset future taxable income could require us to pay U.S. federal income taxes earlier than we have estimated wouldotherwise be required if such limitations were not in effect and could cause such net operating losses and tax credits to expire unused, in each casereducing or eliminating the benefit of such net operating losses and tax credits and potentially adversely affecting our financial position. Similar rulesand limitations may apply for state income tax purposes.If we fail to comply with our reporting and payment obligations under U.S. governmental pricing programs, we could be required to reimbursegovernment programs for underpayments and could pay penalties, sanctions and fines which could have a material adverse effect on ourbusiness, financial condition and results of operations. As a condition of reimbursement by various U.S. federal and state healthcare programs for Feraheme, we are required to calculate and reportcertain pricing information to U.S. federal and state healthcare agencies. For example, we are required to provide average selling price information to theCenters for Medicare and Medicaid Services on a quarterly basis in order to compute Medicare payment rates. Price reporting and payment obligationsare highly complex and vary among products44Table of Contentsand programs. Our processes for estimating amounts due under these governmental pricing programs involve subjective decisions, and as a result, ourprice reporting calculations remain subject to the risk of errors and our methodologies for calculating these prices could be challenged under the FederalFalse Claims Act or other laws. In addition, the Health Care Reform Act modified the rules related to certain price reports and expanded the scope ofpharmaceutical product sales to which Medicaid rebates apply, among other things. Presently, uncertainty exists as many of the specific determinationsnecessary to implement this new legislation have yet to be decided and communicated to industry participants. This uncertainty in the interpretation ofthe legislation increases the chances of an error in price reporting, which could in turn lead to a legal challenge or investigation. If we become subject toinvestigations or other inquiries concerning our compliance with price reporting laws and regulations, we could be required to pay or be subject toadditional reimbursements, penalties, sanctions or fines, which could have a material adverse effect on our business, financial condition and results ofoperations.We are subject to ongoing U.S. and foreign regulatory obligations and oversight of Feraheme, and any failure by us to maintain compliance withapplicable regulations may result in several adverse consequences including the suspension of the manufacturing, marketing and sale ofFeraheme, the incurrence of significant additional expense and other limitations on our ability to commercialize Feraheme. We are subject to ongoing regulatory requirements and review both in the U.S. and in certain cases, foreign jurisdictions, pertaining to Feraheme'smanufacture, labeling, packaging, adverse event reporting, storage, marketing, promotion and record keeping. Failure to comply with such regulatoryrequirements or the later discovery of previously unknown problems with Feraheme or our manufacturing facilities may result in restrictions on ourability to manufacture, market or sell Feraheme, including its withdrawal from the market. Any such restrictions could result in a decrease in Ferahemesales, damage to our reputation or the initiation of lawsuits against us. We may also be subject to additional sanctions, including but not limited to:•Warning letters; •Civil or criminal penalties; •Suspension or withdrawal of regulatory approvals; •Temporary or permanent closing of our manufacturing facilities or those of our third party contract manufacturers; •Requirements to communicate with physicians and other customers about concerns related to actual or potential safety, efficacy, or otherissues involving Feraheme; •Changes to the Feraheme package insert; •Implementation of risk mitigation programs; •Restrictions on our continued manufacturing, marketing or sale of Feraheme; or •Recalls or a refusal by regulators to consider or approve applications for additional indications. Any of the above sanctions could have a material adverse impact on our ability to generate revenues and to achieve profitability and cause us toincur significant additional expenses.If we or Takeda market or distribute Feraheme in a manner that violates federal, state or foreign healthcare fraud and abuse laws, marketingdisclosure laws or other federal, state or foreign laws and regulations, we may be subject to civil or criminal penalties. In addition to FDA and related regulatory requirements in the U.S. and abroad, we are subject to extensive additional federal, state and foreignhealthcare regulation, which includes but is not limited to, the Federal False Claims Act, the Federal Anti-Kickback Statute, the Foreign CorruptPractices Act45Table of Contentsand similar laws in countries outside of the U.S. False claims laws prohibit anyone from knowingly presenting, or causing to be presented for paymentto third-party payors, including Medicare and Medicaid, false or fraudulent claims for reimbursed drugs or services, claims for items or services notprovided as claimed, or claims for medically unnecessary items or services. Anti-kickback laws make it illegal to solicit, offer, receive or pay anyremuneration in exchange for, or to induce, the referral of business, including the purchase or prescription of a particular drug, that is reimbursed by astate or federal program. The Foreign Corrupt Practices Act and similar foreign anti-bribery laws generally prohibit companies and their intermediariesfrom making improper payments to non-U.S. officials for the purpose of obtaining or retaining business. Similar laws and regulations exist in manyother countries throughout the world in which we intend to commercialize Feraheme through Takeda and our other licensees. We have developed andimplemented a corporate compliance program based on what we believe are current best practices in the pharmaceutical industry, but we cannotguarantee that we, our employees, our consultants or our contractors are or will be in compliance with all federal, state and foreign regulations. If we,our representatives, or our licensees, including Takeda, fail to comply with any of these laws or regulations, a range of fines, penalties and/or othersanctions could be imposed on us and/or Takeda, including, but not limited to, restrictions on how we and/or Takeda market and sell Feraheme,significant fines, exclusions from government healthcare programs, including Medicare and Medicaid, litigation, or other sanctions. Even if we are notdetermined to have violated these laws, government investigations into these issues typically require the expenditure of significant resources andgenerate negative publicity, which could also have an adverse effect on our business, financial condition and results of operations. In recent years, several U.S. states have enacted legislation requiring pharmaceutical companies to establish marketing and promotional complianceprograms or codes of conduct and/or to file periodic reports with the state or make periodic public disclosures on sales, marketing, pricing, clinical trials,and other activities. Similar legislation is being considered by additional states, Congress and foreign governments. In addition, as part of the HealthCare Reform Act, the federal government has enacted the Physician Payment Sunshine Act and related regulations. Beginning in 2013, manufacturersof drugs will be required to publicly report gifts and payments made to physicians and teaching hospitals. Many of these requirements are new anduncertain, and the penalties for failure to comply with these requirements are unclear. Compliance with these laws is difficult, time consuming andcostly, and if we are found to not be in full compliance with these laws, we may face enforcement actions, fines and other penalties, and we couldreceive adverse publicity which could have an adverse effect on our business, financial condition and results of operations. If we fail to comply with any federal, state or foreign laws or regulations governing our industry, we could be subject to a range of regulatoryactions that could adversely affect our ability to commercialize Feraheme, harm or prevent sales of Feraheme, or substantially increase the costs andexpenses of commercializing and marketing Feraheme, all of which could have a material adverse effect on our business, financial condition and resultsof operations.Our business could be negatively affected as a result of the actions of activist shareholders. Proxy contests have been waged against many companies in the biopharmaceutical industry over the last few years. In 2011, MSMB CapitalManagement LLC, or MSMB Capital, filed a preliminary consent solicitation statement with the SEC seeking to remove and replace all of our currentdirectors with MSMB Capital's nominees. The review, consideration and response to MSMB Capital's efforts to gain control of our Board of Directors,or Board, require the expenditure of significant time and resources by us and may be a significant distraction for our management and employees.MSMB Capital's efforts to replace our current Board members may also create uncertainty for our employees, and this uncertainty may adversely affectour ability to retain and attract key employees, including a permanent chief executive officer. The impact of MSMB Capital's efforts due to these or otherfactors46Table of Contentsmay undermine our business and have a material adverse effect on our results of operations. MSMB Capital has not yet formally commenced itsproposed consent solicitation. If faced with a proxy contest, we may not be able to successfully defend against the contest, which would be disruptive to our business. Even if weare successful, our business could be adversely affected by a proxy contest for the following reasons:•Responding to proxy contests and other actions by activist shareholders may be costly and time-consuming and may disrupt ouroperations and divert the attention of management and our employees; •Perceived uncertainties as to our future direction may result in our inability to consummate potential acquisitions, collaborations or in-licensing opportunities and may make it more difficult to attract and retain qualified personnel, including a permanent chief executiveofficer; and •If individuals are elected to our Board with a specific agenda different from ours, it may adversely affect our ability to effectively andtimely implement our strategic plan and create additional value for our stockholders.Our success depends on our ability to maintain the proprietary nature of our technology. We rely on a combination of patents, trademarks, copyrights and trade secrets in the conduct of our business. The patent positions ofpharmaceutical and biopharmaceutical firms are generally uncertain and involve complex legal and factual questions. We may not be successful or timelyin obtaining any patents for which we submit applications. The breadth of the claims obtained in our patents may not provide significant protection forour technology. The degree of protection afforded by patents for licensed technologies or for future discoveries may not be adequate to protect ourproprietary technology. The patents issued to us may not provide us with any competitive advantage. In addition, there is a risk that others willindependently develop or duplicate similar technology or products or circumvent the patents issued to us. Our Feraheme patents are currently scheduled to expire in 2020. These and any other patents issued to us may be contested or invalidated. Forexample, in July 2010, Sandoz GmbH, or Sandoz, filed an opposition to one of our patents which covers Feraheme in the EU with the European PatentOffice, or EPO. Although we believe that the subject patent is valid, there is a possibility that the EPO could invalidate or require us to narrow theclaims contained in our patent. We believe the Sandoz patent opposition is without merit and intend to defend against the opposition vigorously,however, this or future patent interference proceedings involving our patents may result in substantial costs to us, distract our management, prevent usor Takeda from marketing and selling Feraheme, increase the risk that a generic version of Feraheme could enter the market to compete with Feraheme,limit our development and commercialization of Feraheme or otherwise harm our competitive position and our ability to commercialize Feraheme. In addition, claims of infringement or violation of the proprietary rights of others may be asserted against us. If we are required to defend againstsuch claims or to protect our own proprietary rights against others, it could result in substantial costs to us and the distraction of our management. Anadverse ruling in any litigation or administrative proceeding could prevent us from marketing and selling Feraheme, increase the risk that a genericversion of Feraheme could enter the market to compete with Feraheme, limit our development and commercialization of Feraheme, or otherwise harmour competitive position and result in additional significant costs. In addition, any successful claim of infringement asserted against us could subject usto monetary damages or injunction, which could prevent us or Takeda from making or selling Feraheme. We also may be required to obtain licenses touse the relevant technology. Such licenses may not be available on commercially reasonable terms, if at all.47Table of Contents The laws of foreign countries may not protect our intellectual property rights to the same extent as do the laws of the U.S. In countries where wedo not have or have not applied for patents for Feraheme, such as in China, where we license certain development and commercial rights to Ferahemeto 3SBio, we may be unable to prevent others from developing or selling similar products. In addition, in jurisdictions outside the U.S. where we havepatent rights, we may be unable to prevent unlicensed parties from selling or importing products or technologies derived elsewhere using ourproprietary technology. We also rely upon unpatented trade secrets and improvements, unpatented know-how and continuing technological innovation to develop andmaintain our competitive position, which we seek to protect, in part, by confidentiality agreements with our corporate licensees, collaborators,employees and consultants. These agreements, however, may be breached. We may not have adequate remedies for any such breaches, and our tradesecrets might otherwise become known or might be independently discovered by our competitors, particularly in China, where we license certaindevelopment and commercial rights to Feraheme to 3SBio. In addition, we cannot be certain that others will not independently develop substantiallyequivalent or superseding proprietary technology, or that an equivalent product will not be marketed in competition with Feraheme, therebysubstantially reducing the value of our proprietary rights.If we identify a material weakness in our internal controls over financial reporting, our ability to meet our reporting obligations and the tradingprice of our stock could be negatively affected. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonablepossibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. Accordingly, amaterial weakness increases the risk that the financial information we report contains material errors. We regularly review and update our internal controls, disclosure controls and procedures, and corporate governance policies. In addition, we arerequired under the Sarbanes-Oxley Act of 2002 to report annually on our internal control over financial reporting. Any system of internal controls,however well designed and operated, is based in part on certain assumptions and can provide only reasonable, not absolute, assurances that theobjectives of the system are met. If we, or our independent registered public accounting firm, determine that our internal controls over our financialreporting are not effective, or we discover areas that need improvement in the future, these shortcomings could have an adverse effect on our businessand financial results, and the price of our common stock could be negatively affected. If we cannot conclude that we have effective internal control over our financial reporting, or if our independent registered public accounting firm isunable to provide an unqualified opinion regarding the effectiveness of our internal control over financial reporting, investors could lose confidence inthe reliability of our financial statements, which could lead to a decline in our stock price. Failure to comply with reporting requirements could alsosubject us to sanctions and/or investigations by the SEC, the NASDAQ Global Select Market or other regulatory authorities.An adverse determination in any current or future lawsuits in which we are a defendant, including the class action lawsuit to which we arecurrently a party, could have a material adverse affect on us. A purported class action complaint was originally filed on March 18, 2010 in the United States District Court for the District of Massachusetts,entitled Silverstrand Investments et. al. v. AMAG Pharm., Inc., et. al., Civil Action No. 1:10-CV-10470-NMG, and was amended on September 15,2010 and on December 17, 2010. The second amended complaint, or SAC, filed on December 17, 2010 alleged that we and our former President andChief Executive Officer, former Executive Vice President and Chief Financial Officer, our Board, and certain underwriters in our January 2010 offeringof common stock violated certain federal securities laws by making certain alleged false and misleading48Table of Contentsstatements and omissions in a registration statement filed in January 2010. The plaintiff sought unspecified damages on behalf of a purported class ofpurchasers of our common stock pursuant to our common stock offering on or about January 21, 2010. On August 11, 2011, the Court issued anOpinion and Order dismissing the SAC in its entirety for failure to state a claim upon which relief could be granted. On September 14, 2011, theplaintiffs filed a Notice of Appeal to the United States Court of Appeals for the First Circuit. Whether or not the plaintiff's appeal is successful, this typeof litigation is often expensive and diverts management's attention and resources, which could adversely affect the operation of our business. If we areultimately required to pay significant defense costs, damages or settlement amounts, such payments could adversely affect our operations. We may also be the target of similar litigation in the future. Any future litigation could result in substantial costs and divert our management'sattention and resources, which could cause serious harm to our business, operating results and financial condition. We maintain liability insurance,however, if any costs or expenses associated with this or any other litigation exceed our insurance coverage, we may be forced to bear some or all ofthese costs and expenses directly, which could be substantial.Product liability lawsuits could divert our resources, result in substantial liabilities and reduce the commercial potential of Feraheme. The administration of Feraheme to humans, whether in clinical trials or after approved for commercial use, may expose us to liability claims,whether or not Feraheme is actually at fault for causing an injury. As Feraheme is used over longer periods of time by a wider group of patients takingnumerous other medicines or by patients with additional underlying health problems, the likelihood of adverse drug reactions or unintended side effects,including death, may increase. Although we maintain product liability insurance coverage for claims arising from the use of our products in clinical trialsand commercial use, coverage is expensive, and we may not be able to maintain sufficient insurance at a reasonable cost, if at all. Product liabilityclaims, whether or not they have merit, could also decrease demand for Feraheme, subject us to product recalls or harm our reputation, cause us to incursubstantial costs, and divert management's time and attention.Our shareholder rights plan, certain provisions in our charter and by-laws, certain contractual relationships and certain Delaware lawprovisions could discourage an acquisition of us by others, even if an acquisition would be beneficial to our stockholders, and may preventattempts by our stockholders to replace or remove our current members of our Board. In 2009 we adopted a shareholder rights plan, the provisions of which are intended to deter a hostile takeover by making any proposed hostileacquisition of us more expensive and less desirable to a potential acquirer by enabling our stockholders (other than the potential hostile acquiror) topurchase significant amounts of additional shares of our common stock at dilutive prices. The rights issued pursuant to our shareholder rights planbecome exercisable generally upon the earlier of 10 days after a person or group acquires 20% or more of our outstanding common stock or 10business days after the announcement by a person or group of an intention to acquire 20% of our outstanding common stock via tender offer or similartransaction. The shareholder rights plan could delay or discourage transactions involving an actual or potential change in control of us or ourmanagement, including transactions in which stockholders might otherwise receive a premium for their shares over then current prices. In addition, certain provisions in our certificate of incorporation and our by-laws may discourage, delay or prevent a change of control or takeoverattempt of our company by a third-party as well as substantially impede the ability of our stockholders to benefit from a change of control or effect achange in management and our Board. These provisions include:•The ability of our Board to increase or decrease the size of the Board without stockholder approval;49Table of Contents•Advance notice requirements for the nomination of candidates for election to our Board and for proposals to be brought before ourannual meeting of stockholders; •The authority of our Board to designate the terms of and issue new series of preferred stock without stockholder approval; •Non-cumulative voting for directors; and •Limitations on the ability of our stockholders to call special meetings of stockholders. As a Delaware corporation, we are subject to the provisions of Section 203 of the Delaware General Corporation Law, or Section 203, whichprevents us from engaging in any business combination with any "interested stockholder," which is defined generally as a person that acquires 15% ormore of a corporation's outstanding voting stock, for a period of three years after the date of the transaction in which the person became an interestedstockholder, unless the business combination is approved in the manner prescribed in Section 203. These provisions could have the effect of delaying orpreventing a change of control, whether or not it is desired by, or beneficial to, our stockholders. As a result of the termination of our merger agreement with Allos, we may be required to pay Allos a fee of $12.0 million (in addition to the$2.0 million expense reimbursement fee we paid to Allos in October 2011) if we enter into a definitive agreement for an Acquisition Transaction, asdefined in the Agreement and Plan of Merger and Reorganization on or before October 21, 2012 or such a transaction is consummated on or beforesuch date. Such potential payment could delay or discourage transactions involving an actual or potential change in control of our company. In addition to the above factors, an acquisition of our company could be made more difficult by employment agreements we have in place with ourexecutive officers, as well as a company-wide change of control policy which provide for severance benefits as well as the full acceleration of vesting ofany outstanding options or restricted stock units in the event of a change of control and subsequent termination of employment. Further, our SecondAmended and Restated 2007 Equity Incentive Plan generally permits our Board to provide for the acceleration of vesting of options granted under thatplan in the event of certain transactions that result in a change of control.We are subject to environmental laws and potential exposure to environmental liabilities. Because we use certain hazardous materials in the production of our products, we are subject to various federal, state and local environmental lawsand regulations that govern our operations, including the import, handling and disposal of non-hazardous and hazardous wastes, and emissions anddischarges into the environment. Failure to comply with these laws and regulations could result in costs for corrective action, penalties or the impositionof other liabilities. We also are subject to laws and regulations that impose liability and clean-up responsibility for releases of hazardous substances intothe environment. Under certain of these laws and regulations, a current or previous owner or operator of property may be liable for the costs ofremediating the release or spill of hazardous substances or petroleum products on or from its property, without regard to whether the owner or operatorknew of, or caused, the contamination, and such owner or operator may incur liability to third parties impacted by such contamination. The presence of,or failure to remediate properly the release or spill of, these substances could adversely affect the value of, and our ability to transfer or encumber, ourreal property.50Table of ContentsITEM 1B. UNRESOLVED STAFF COMMENTS: None.ITEM 2. PROPERTIES: In May 2008, we entered into a lease agreement for certain real property located at 100 Hayden Avenue, Lexington, Massachusetts for use as ourprincipal executive offices. The term of the lease began on May 22, 2008 and will continue until August 31, 2016 with two successive five yearextension terms at our option. The aggregate size of rentable floor area for the offices is 55,924 square feet, and the rent for the initial term commencedin February 2009. During any extension term, the base rent will be an amount agreed upon by us and the landlord. In addition to base rent, we are also required topay a proportionate share of the landlord's annual operating costs. On May 20, 2008, in connection with our facility lease, we delivered to the landlord asecurity deposit of approximately $0.5 million in the form of an irrevocable letter of credit. The cash securing this letter of credit is classified on ourbalance sheet as a long-term asset and is restricted in its use. Our manufacturing and quality operations are located in a building we own comprised of approximately 25,000 square feet located at 61 MooneyStreet, Cambridge, Massachusetts. If we decide to expand our manufacturing capacity or acquire additional manufacturing facilities in addition to ourcurrent third-party manufacturing facilities, we might not be able to do so on a timely basis, if at all, because the acquisition of, and required regulatoryapprovals for, additional pharmaceutical manufacturing space can be time-consuming and expensive.ITEM 3. LEGAL PROCEEDINGS: A purported class action complaint was originally filed on March 18, 2010 in the United States District Court for the District of Massachusetts,entitled Silverstrand Investments et. al. v. AMAG Pharm., Inc., et. al., Civil Action No. 1:10-CV-10470-NMG, and was amended on September 15,2010 and on December 17, 2010. The second amended complaint, or SAC, filed on December 17, 2010 alleged that we and our former President andChief Executive Officer, former Executive Vice President and Chief Financial Officer, our Board, and certain underwriters in our January 2010 offeringof common stock violated certain federal securities laws, specifically Sections 11 and 12(a)(2) of the Securities Act of 1933, as amended, and that ourformer President and Chief Executive Officer and former Executive Vice President and Chief Financial Officer violated Section 15 of such Act,respectively, by making certain alleged false and misleading statements and omissions in a registration statement filed in January 2010. The plaintiffsought unspecified damages on behalf of a purported class of purchasers of our common stock pursuant to our common stock offering on or aboutJanuary 21, 2010. On August 11, 2011, the Court issued an Opinion and Order dismissing the SAC in its entirety for failure to state a claim uponwhich relief could be granted. A separate Order of Dismissal was filed on August 15, 2011. On September 14, 2011, the plaintiffs filed a Notice ofAppeal to the United States Court of Appeals for the First Circuit, or the Court of Appeals. Plaintiffs' appeal brief was filed on February 1, 2012.Responding briefs are due on March 16, 2012 and the plaintiff's reply brief is due on March 16, 2012. The Court of Appeals has not yet scheduled oralargument for the appeal. On February 11, 2010, we submitted to FINRA Dispute Resolution, Inc. an arbitration claim against our broker-dealer, Jefferies & Company, Inc.,or Jefferies, and two former Jefferies employees, Anthony J. Russo, and Robert A. D'Addario, who managed our cash account with Jefferies. Wealleged that Jefferies, Russo and D'Addario wrongfully marketed and sold a balance of $54.1 million in unsuitable auction rate securities, or ARS, to usfrom September 2007 through January 2008. We further alleged that Jefferies, Russo and D'Addario misrepresented or omitted material facts51Table of Contentsconcerning the nature and risks of ARS, which were inconsistent with our investment objectives to maintain liquidity and flexibility in our portfolio. InFebruary 2012, we entered into a settlement agreement whereby the parties agreed to dismiss all claims related to this matter with prejudice. In addition, during 2010 we received correspondence from a supplier with whom we have an agreement related to the supply of a certain materialused in the production of certain of our products. This correspondence suggests that we are in violation of the terms of the agreement. We believe wehave valid arguments against such allegations, and we intend to vigorously defend against any such allegations. We may periodically become subject to legal proceedings and claims arising in connection with ongoing business activities, including claims ordisputes related to patents that have been issued or that are pending in the field of research on which we are focused. Other than the above actions, weare not aware of any material claims against us as of December 31, 2011.ITEM 4. [NOT APPLICABLE] 52Table of ContentsPART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUERPURCHASES OF EQUITY SECURITIES: Market Information Our common stock trades on the NASDAQ Global Select Market, or NASDAQ, under the trading symbol "AMAG." On February 16, 2012, theclosing price of our common stock, as reported on the NASDAQ, was $16.99 per share. The following table sets forth, for the periods indicated, thehigh and low sale prices per share for our common stock as reported on the NASDAQ.Stockholders On February 16, 2012, we had approximately 101 stockholders of record of our common stock, and we believe that the number of beneficialholders of our common stock was approximately 22,000 based on responses from brokers to a search conducted by Broadridge FinancialSolutions, Inc. on our behalf.Dividends We have never declared or paid a cash dividend on our common stock. We currently anticipate that we will retain all of our earnings for use in thedevelopment of our business and do not anticipate paying any cash dividends in the foreseeable future.Repurchases of Equity Securities There were no purchases by us, or any affiliated purchaser of ours, of our equity securities that are registered pursuant to Section 12 of theSecurities Exchange Act of 1934, as amended, or the Exchange Act, during the three months ended December 31, 2011.Securities Authorized for Issuance Under Equity Compensation Plans See Part III, Item 12 for information regarding securities authorized for issuance under our equity compensation plans. Such information isincorporated by reference to our definitive proxy statement pursuant to Regulation 14A, to be filed with the U.S. Securities and Exchange Commission,or the SEC, not later than 120 days after the close of our year ended December 31, 2011.Five-Year Comparative Stock Performance Graph The following graph compares the yearly percentage change in the cumulative total stockholder return on our common stock with the cumulativetotal return on the NASDAQ Global Market and NASDAQ Biotechnology Index over the past five years. The comparisons assume $100 was investedon53 High Low Year Ended December 31, 2011 First quarter $19.47 $15.93 Second quarter $19.40 $15.18 Third quarter $19.48 $12.65 Fourth quarter $19.62 $13.05 Year Ended December 31, 2010 First quarter $52.49 $33.29 Second quarter $37.89 $29.78 Third quarter $40.00 $16.70 Fourth quarter $21.22 $13.75 Table of ContentsDecember 31, 2006 in our common stock, in the NASDAQ Global Market and the NASDAQ Biotechnology Index, and assumes reinvestment ofdividends, if any. The stock price performance shown in this performance graph is not necessarily indicative of future price performance. Information used in thegraph was obtained from Research Data Group, Inc., a source we believe is reliable. However, we are not responsible for any errors or omissions insuch information. The material in this section is being furnished and shall not be deemed "filed" with the SEC for purposes of Section 18 of the Exchange Act orotherwise subject to the liability of that section, nor shall the material in this section be deemed to be incorporated by reference in any registrationstatement or other document filed with the SEC under the Securities Act of 1933, except as otherwise expressly stated in such filing.54 12/31/06 12/31/07 12/31/08 12/31/09 12/31/10 12/31/2011 AMAGPharmaceuticals, Inc. $100.00 $100.69 $60.03 $63.68 $30.31 $31.66 NASDAQ Global Market $100.00 $87.50 $40.91 $49.82 $55.97 $47.81 NASDAQ BiotechnologyIndex $100.00 $102.53 $96.57 $110.05 $117.19 $124.54 Table of ContentsITEM 6. SELECTED FINANCIAL DATA: The following table sets forth selected financial data as of and for the years ended December 31, 2011, 2010, 2009, 2008 and 2007. The selectedfinancial data set forth below has been derived from our audited financial statements. This information should be read in conjunction with the financialstatements and the related notes thereto included in Part II, Item 8 of this Annual Report on Form 10-K, Management's Discussion and Analysis ofFinancial Condition and Results of Operations included in Part II, Item 7 of this Annual Report on Form 10-K, and other financial information includedelsewhere in this Annual Report on Form 10-K. 55 For the Years Ended December 31, 2011 2010 2009 2008 2007 (in thousands, except per share data) Statement of Operations Data Revenues: Product sales, net $52,813 $59,978 $16,482 $751 $1,208 License fee and other collaboration revenues 8,321 6,132 516 959 1,096 Royalties 115 135 180 228 248 Total revenues 61,249 66,245 17,178 1,938 2,552 Costs and expenses: Cost of product sales 10,531 7,606 1,013 292 320 Research and development expenses 58,140 54,462 36,273 31,716 24,236 Selling, general and administrative expenses 68,863 84,939 77,829 49,536 20,396 Restructuring expenses 3,508 2,224 — — — Total costs and expenses 141,042 149,231 115,115 81,544 44,952 Other income (expense): Interest and dividend income, net 1,747 1,741 3,154 9,139 12,506 (Losses) gains on investments, net (193) 408 942 (3,024) — Fair value adjustment of settlement rights — (788) (778) 1,566 — Litigation settlement — — — — (4,000) Total other income (expense) 1,554 1,361 3,318 7,681 8,506 Net loss before income taxes (78,239) (81,625) (94,619) (71,925) (33,894)Income tax benefit 1,170 472 1,268 278 — Net loss $(77,069)$(81,153)$(93,351)$(71,647)$(33,894) Net loss per share—basic and diluted: $(3.64)$(3.90)$(5.46)$(4.22)$(2.15) Weighted average shares outstanding used to compute net loss per share: Basic and diluted 21,189 20,806 17,109 16,993 15,777 December 31, 2011 2010 2009 2008 2007 (in thousands) Balance Sheet Data Working capital (current assets less current liabilities) $201,037 $254,073 $85,168 $149,918 $282,196 Total assets $267,224 $336,076 $184,619 $231,955 $294,851 Long-term liabilities $47,634 $54,079 $4,081 $4,149 $879 Stockholders' equity $180,596 $245,286 $142,977 $213,414 $285,954 Table of ContentsITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS: Overview AMAG Pharmaceuticals, Inc., a Delaware corporation, was founded in 1981. We are a biopharmaceutical company focused on the developmentand commercialization of a therapeutic iron compound to treat iron deficiency anemia, or IDA. Our principal source of revenue is from the sale ofFeraheme® (ferumoxytol) Injection for Intravenous, or IV, use, which was approved for marketing in the U.S. in June 2009 by the U.S. Food andDrug Administration, or the FDA, for use as an IV iron replacement therapy for the treatment of IDA in adult patients with chronic kidney disease, orCKD. In December 2011, Feraheme was also granted marketing approval in Canada for use as an IV iron replacement therapy for the treatment of IDAin adult patients with CKD. We are currently pursuing marketing applications for Feraheme in the European Union, or EU, and Switzerland for thetreatment of IDA in CKD patients. We market and sell Feraheme in the U.S. through our own commercial organization, including a specialized sales force. We began commercial saleof Feraheme in the U.S. in July 2009 and sell Feraheme primarily to authorized wholesalers and specialty distributors. Under an agreement withTakeda Pharmaceutical Company Limited, or Takeda, Takeda has an exclusive license to market and sell Feraheme in Canada. We expect Takeda tolaunch Feraheme in Canada in 2012. Feraheme is approved in the U.S. for the treatment of IDA in both dialysis and non-dialysis dependent adult CKD patients. In January 2011, aprospective payment system for the reimbursement of dialysis services became effective, which significantly diminished the utilization of Feraheme inthe dialysis market. As a result of the implementation of the prospective payment system, our dialysis sales during 2011 were de minimis. Our U.S.commercial strategy is now entirely focused on growing the utilization of Feraheme in non-dialysis dependent adult CKD patients with IDA,specifically in hematology, oncology, nephrology, and hospital sites of care, where a large number of CKD patients are treated. In order to align our operating expenses with our near-term revenue projections for Feraheme, in November 2011, we initiated a corporaterestructuring, including a workforce reduction plan, which included an approximate 25% reduction in positions and the departure of our chief executiveofficer and chief commercial officer. The workforce reduction was substantially completed by the end of 2011. In connection with the reduction in ourworkforce, in the fourth quarter of 2011 we recorded restructuring charges of approximately $3.5 million related primarily to employee severance andbenefits. We expect that the majority of such amounts will be paid by the end of 2012. In November 2011, our Board of Directors, or Board, appointed Frank E. Thomas, our then Executive Vice President and Chief Financial Officer,to serve as our Chief Operating Officer and interim President and Chief Executive Officer until a permanent successor is appointed. Our Board iscurrently conducting a search for a permanent chief executive officer. We also announced, in November 2011, that we hired Jefferies & Company, Inc., or Jefferies, as our financial advisor to explore whether a sale ofour company is a viable strategy for value maximization at this time while we simultaneously establish a solid foundation from which to driveprofitability and deliver stockholder value if a sale is not pursued. We are conducting a strategic review with Jefferies to determine the optimal strategyfor growth, which involves an evaluation of all business strategies to enhance our portfolio, including in-licensing and acquisition opportunities. Prior to the FDA approval and commercial launch of Feraheme in 2009, we devoted substantially all of our resources to our research anddevelopment programs. Since then, we have incurred substantial costs related to the commercialization and development of Feraheme. We expect tocontinue to incur significant expenses to manufacture, market and sell Feraheme as an IV iron replacement56Table of Contentstherapeutic for use in adult CKD patients in the U.S., to further develop and seek marketing approval for Feraheme for the treatment of IDA in a broadrange of patients, and to obtain marketing approval for Feraheme in countries outside of the U.S. Prior to the commercial launch of Feraheme, wefinanced our operations primarily from the sale of our equity securities, cash generated by our investing activities, and payments from our licensees.Since 2009, our revenues have been primarily attributable to product sales of Feraheme, along with license fee payments from Takeda. We currentlyexpect to fund our future operations from cash from sales of Feraheme in the U.S., milestone payments we may receive from Takeda upon regulatoryapproval and commercial launch of Feraheme in Canada and the EU, royalties we may receive with respect to sales of Feraheme in Canada and in theEU, cash generated by our investing activities, and the sale of our equity securities, if necessary. As of December 31, 2011, we had an accumulateddeficit of approximately $439.9 million and a cash, cash equivalents and investments balance of approximately $229.7 million.Takeda Collaboration In March 2010, we entered into a License, Development and Commercialization Agreement, or the Takeda Agreement, with Takeda under whichwe granted exclusive rights to Takeda to develop and commercialize Feraheme as a therapeutic agent in Europe, Asia-Pacific countries (excludingJapan, China and Taiwan), the Commonwealth of Independent States, Canada, India and Turkey, or collectively, the Licensed Territory. Under theTakeda Agreement we may be entitled to receive milestone payments over time equaling approximately $220.0 million, including up to an aggregate of$33.0 million upon the regulatory approval and commercial launch of Feraheme in the EU and Canada, of which $3.0 million will be earned andpayable upon the first commercial sale of Feraheme in Canada.Clinical Development and Regulatory Status of Feraheme During the first quarter of 2012, we completed enrollment in our global registrational program for Feraheme in patients with IDA regardless of theunderlying cause. This program consists of two Phase III multi-center clinical trials to assess Feraheme for the treatment of IDA in a broad range ofpatients for whom treatment with oral iron is unsatisfactory, including women with abnormal uterine bleeding, or AUB, patients with cancer orgastrointestinal diseases and postpartum women. In March 2012, we reported preliminary results from the first of the two Phase III studies in our global IDA registrational program. This studywas an open label, active controlled trial that compared treatment with Feraheme to treatment with IV iron sucrose and enrolled 605 patients at 74 sitesin Europe, Asia Pacific and Australia. The patients enrolled in the study had a history of unsatisfactory oral iron therapy and had IDA associated withvarious conditions including AUB, cancer, gastrointestinal disorders or other causes. The study enrolled patients to receive a one gram IV course of either Feraheme or iron sucrose and was designed to demonstrate non-inferiority onefficacy of Feraheme as compared to iron sucrose. Of the 605 patients enrolled in the study, 406 patients were randomly assigned to receive Ferahemeand 199 were randomly assigned to receive iron sucrose. The demographics and all baseline parameters were well balanced between the two treatmentgroups. The primary efficacy endpoint of the study was the mean change in hemoglobin from the date of determination of each patient's baselinehemoglobin level to the fifth week following administration of the study drug or the proportion of patients who achieved a greater than or equal to 2.0gram per deciliter increase in hemoglobin at any time from the date of determination of their baseline hemoglobin level to the fifth week followingadministration of the study drug, depending on the regulatory authority. In this study, Feraheme achieved the predefined criteria for non-inferiority on both primary efficacy endpoints. Patients treated with Ferahemeachieved a mean increase in hemoglobin at week five of 2.7 grams per deciliter as compared to a mean increase of 2.4 grams per deciliter in patientstreated with57Table of ContentsIV iron sucrose. An increase of 2.0 grams per deciliter or more in hemoglobin at any time from baseline to week five was achieved in 84% of patientstreated with Feraheme as compared to 81% of patients treated with IV iron sucrose. No new safety signals were observed with Feraheme and the types of reported adverse events, or AEs, were consistent with those seen inprevious studies and those contained in the U.S. package insert for Feraheme. Overall, AEs experienced by patients in the two treatment groups werecomparable, with AEs reported in 41.4% of Feraheme-treated patients as compared to 44.2% of patients treated with IV iron sucrose. Patients in bothtreatment groups experienced protocol-defined adverse events of special interest, including moderate to severe hypotension or hypersensitivity reactions,ranging from fever alone to an anaphylactoid reaction. Cardiovascular AEs were comparable between the two treatment groups. Serious adverse events,or SAEs, were reported in 4.2% of Feraheme-treated patients as compared to 2.5% of patients treated with IV iron sucrose. The SAEs reported in twoFeraheme treated patients, or 0.5%, were reported as related to treatment by the applicable investigators in the study. The second Phase III trial in our global IDA registrational program was a double blind, placebo-controlled study to assess the efficacy and safetyof two doses of 510 milligrams each of Feraheme compared to placebo in a total of approximately 800 patients with IDA. During the second half of2012, we expect to submit a Supplemental New Drug Application, or sNDA, in the U.S. seeking marketing approval for Feraheme for the treatment ofanemia in all adult patients with IDA. In addition, we expect that Takeda will file a Type II Variation, which is the equivalent of a sNDA in the U.S.,seeking marketing approval for Feraheme for the treatment of anemia in all adult patients with IDA with the European Medicines Agency, or EMA, in2013. Further, an open label extension study is currently enrolling patients from the placebo-controlled study described above who will be followed forsix months and will be eligible to receive two doses of 510 milligrams each of Feraheme whenever they meet treatment criteria. In June 2010, we submitted our Marketing Authorization Application, or MAA, with the EMA seeking marketing approval for Feraheme for thetreatment of IDA in CKD patients. We recently received a 60 day extension in order to fully respond to the Day 180 List of Outstanding Issues. Weexpect a recommendation from the Committee for Medicinal Products for Human Use, or CHMP, on our MAA submission in the first half of 2012.Assuming a positive CHMP recommendation, we expect a final decision on our MAA by the European Commission shortly thereafter. We expect thatFeraheme will be sold in the EU under the trade name Rienso™. We have also initiated two randomized, active-controlled pediatric studies of Feraheme for the treatment of IDA in pediatric CKD patients to meetour FDA post-approval Pediatric Research Equity Act requirement to support pediatric labeling of Feraheme. One study is in dialysis-dependent CKDpatients, and the other is in CKD patients not on dialysis. Each study will assess the safety and efficacy of Feraheme treatment as compared to oral ironin approximately 144 pediatric patients. Both of these pediatric studies are currently open for enrollment. Our pediatric investigation plan, which is a requirement for approval of our MAA, was approved by the EMA in December 2009 and includes thetwo pediatric studies needed to meet the requirements of the Pediatric Research Equity Act in the U.S. described above and two additional pediatricstudies requested by the EMA, including a rollover study and a study in pediatric patients with IDA. As part of our obligations under the Takeda Agreement, we are also required to initiate a multi-center post-approval clinical trial to assess the safetyand efficacy of repeat, episodic Feraheme administration for the treatment of persistent or recurrent IDA. Final study design and timing of this trial aresubject to further discussions with Takeda.58Table of Contents In August 2010, Takeda filed an MAA with Swissmedic, the Swiss Agency for Therapeutic Products, seeking marketing approval for Ferahemefor the treatment of IDA in CKD patients. We expect a decision from Swissmedic during the second quarter of 2012. In December 2009, our licensee in China, 3SBio Inc., or 3SBio, filed an application with the Chinese State Food and Drug Administration, or theSFDA, to obtain approval to begin a registrational clinical trial necessary to file for marketing approval of Feraheme in China. If approved by theSFDA, 3SBio plans to commence a multi-center randomized efficacy and safety study of Feraheme in China involving approximately 200 CKDpatients in 2012.Other information GastroMARK®, which is marketed and sold under the trade name Lumirem® outside of the U.S, is our oral contrast agent used for delineating thebowel in magnetic resonance imaging and is approved and marketed in the U.S., Europe, and other countries through our licensees. Sales ofGastroMARK by our licensees have been at approximately their current levels for many years, and we do not expect sales of GastroMARK to materiallyincrease.Critical Accounting Policies Our management's discussion and analysis of our financial condition and results of operations is based on our financial statements, which havebeen prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statementsrequires management to make certain estimates and assumptions that affect the reported amount of assets, liabilities, revenues and expenses, and therelated disclosure of contingent assets and liabilities. The most significant estimates and assumptions are used in, but are not limited to, revenuerecognition related to product sales and collaboration agreements, product sales allowances and accruals, assessing investments for potential other-than-temporary impairment and determining values of investments, accrued expenses and equity-based compensation expense. Actual results could differmaterially from those estimates. In making these estimates and assumptions, management employs critical accounting policies. Our critical accountingpolicies include revenue recognition and related sales allowances, valuation of investments and equity-based compensation. Revenue recognition and related sales allowances. We recognize net product sales in accordance with current accounting guidance related to therecognition, presentation and disclosure of revenue in financial statements, which outlines the basic criteria that must be met to recognize revenue andprovides guidance for disclosure of revenue in financial statements. We recognize revenue when:•Persuasive evidence of an arrangement exists; •Delivery of product has occurred or services have been rendered; •The sales price charged is fixed or determinable; and •Collection is reasonably assured. We record product sales allowances and accruals related to prompt payment discounts, chargebacks, governmental and other rebates, distributor,wholesaler and group purchasing organization, or GPO, fees, and product returns as a reduction of revenue in our consolidated statement of operationsat the time product sales are recorded. Calculating these gross-to-net sales adjustments involves estimates and judgments based primarily on actualFeraheme sales data, forecasted customer buying patterns blended with historical experience of products similar to Feraheme sold by others and othermarket research. In addition, we also monitor our distribution channel to determine whether additional allowances or accruals are required based oninventory in our sales channel.59Table of Contents Product sales allowances and accruals are primarily comprised of both direct and indirect fees, discounts and rebates, and provisions for estimatedproduct returns. Direct fees, discounts and rebates are contractual fees and price adjustments payable to wholesalers, specialty distributors and othercustomers that purchase products directly from us. Indirect fees, discounts and rebates are contractual price adjustments payable to healthcare providersand organizations, such as certain physicians, clinics, hospitals, GPO and dialysis organizations that typically do not purchase products directly from usbut rather from wholesalers and specialty distributors. In accordance with guidance related to accounting for fees and consideration given by a vendor toa customer, including a reseller of a vendor's products, these fees, discounts and rebates are presumed to be a reduction of the selling price of Feraheme.Product sales allowances and accruals are based on definitive contractual agreements or legal requirements (such as Medicaid laws and regulations)related to the purchase and/or utilization of the product by these entities. Product sales allowances and accruals are recorded in the same period that the related revenue is recognized and are estimated using eitherhistorical, actual and/or other data, including estimated patient usage, applicable contractual rebate rates, contract performance by the benefit providers,other current contractual and statutory requirements, historical market data based upon experience of Feraheme and other products similar to Feraheme,specific known market events and trends such as competitive pricing and new product introductions and current and forecasted customer buyingpatterns and inventory levels, and the shelf life of Feraheme. As part of this evaluation, we also review changes to federal and other legislation, changesto rebate contracts, changes in the level of discounts, and changes in product sales trends. Reserve estimates are evaluated quarterly and may requirechanges to our estimates to better align our estimates with actual results. Although allowances and accruals are recorded at the time of product sale,certain rebates are typically paid out, on average, up to six months or longer after the sale.Classification of Product Sales Allowance and Accruals Allowances against receivable balances primarily relate to prompt payment discounts, provider chargebacks and certain government agencychargebacks and are recorded at the time of sale, resulting in a reduction in product sales revenue or deferred revenue and the reporting of product salesreceivables net of allowances. Accruals related to Medicaid and provider volume rebates, wholesaler and distributor fees, GPO fees, other discounts tohealthcare providers and product returns are recorded at the time of sale, resulting in a reduction in product sales revenue and the recording of anincrease in accrued expenses.Discounts We typically offer a 2% prompt payment discount to our customers as an incentive to remit payment in accordance with the stated terms of theinvoice. Because we anticipate that those customers who are offered this discount will take advantage of the discount, we accrue 100% of the promptpayment discount, based on the gross amount of each invoice, at the time of sale. We adjust the accrual quarterly to reflect actual experience.Chargebacks Chargeback reserves represent our estimated obligations resulting from the difference between the prices at which we sell Feraheme to wholesalersand the sales price ultimately paid to wholesalers under fixed price contracts by third-party payors, including governmental agencies. We determine ourchargeback estimates based on actual Feraheme sales data and forecasted customer buying patterns. Actual chargeback amounts are determined at thetime of resale to the qualified healthcare provider, and we generally issue credits for such amounts within several weeks of receiving notification fromthe60Table of Contentswholesaler. Estimated chargeback amounts are recorded at the time of sale, and we adjust the allowance quarterly to reflect actual experience.Governmental and Other Rebates Governmental and other rebate reserves relate to our reimbursement arrangements with state Medicaid programs or performance rebate agreementswith certain classes of trade. We determine our estimates for Medicaid rebates based on market research data related to utilization rates by various end-users and actual Feraheme sales data and forecasted customer buying patterns blended with historical experience of products similar to Feraheme soldby others. Due to the extended time period between the sale of Feraheme and our receipt of the related Medicaid rebate claim, which can be over a year,we currently have limited actual claims payment data, and therefore are not able to solely rely on our actual Feraheme claims experience. In estimatingthese reserves, we provide for a Medicaid rebate associated with both those expected instances where Medicaid will act as the primary insurer as well asin those instances where we expect Medicaid will act as the secondary insurer. For rebates associated with reaching defined performance goals, wedetermine our estimates using actual Feraheme sales data and forecasted customer buying patterns. Rebate amounts generally are invoiced quarterly andare paid in arrears, and we expect to pay such amounts within several weeks of notification by the Medicaid or provider entity. We adjust the accrualquarterly to reflect actual experience. During 2011, we revised our estimated Medicaid utilization based on actual rebate claims received since the 2009 launch of Feraheme, ourexpectations of state level activity, and estimated rebate claims not yet submitted, which resulted in a $2.5 million reduction of our estimated Medicaidrebate reserve related to Feraheme sales from 2009 and 2010. This change in estimate was reflected as an increase in our net product sales in 2011. As aresult, our gross to net percentage for 2011 was significantly lower than it otherwise would have been had we not reduced our Medicaid rebate reserve.If we determine in future periods that our actual rebate experience is not indicative of expected claims or if other factors affect estimated claims rates, wemay be required to change our current estimated Medicaid accumulated reserve, which would affect our earnings in the period of the change in estimateand could be significant.Distributor/Wholesaler and Group Purchasing Organization Fees Fees under our arrangements with distributors and wholesalers are usually based upon units of Feraheme purchased during the prior month orquarter and are usually paid by us within several weeks of our receipt of an invoice from the wholesaler or distributor, as the case may be. Fees underour arrangements with GPOs are usually based upon member purchases during the prior quarter and are generally billed by the GPO within 30 daysafter period end. Current accounting standards related to consideration given by a vendor to a customer, including a reseller of a vendor's products,specify that cash consideration given by a vendor to a customer is presumed to be a reduction of the selling price of the vendor's products or servicesand therefore should be characterized as a reduction of revenue. Consideration should be characterized as a cost incurred if we receive, or will receive,an identifiable benefit (goods or services) in exchange for the consideration and we can reasonably estimate the fair value of the benefit received.Because the fees we pay to wholesalers do not meet the foregoing conditions to be characterized as a cost, we have characterized these fees as areduction of revenue. We generally pay such amounts within several weeks of our receipt of an invoice from the distributor, wholesaler, or GPO.Accordingly, we accrue the estimated fee due, based on the gross amount of each invoice to the customer, at the time of sale. We adjust the accrualquarterly to reflect actual experience.Product Returns Consistent with industry practice, we generally offer our distributors and wholesaler customers a limited right to return product purchased directlyfrom us which is principally based upon the product's61Table of Contentsexpiration date which once packaged, is currently four years in the U.S. We currently estimate product returns based upon historical trends in thepharmaceutical industry and trends for products similar to Feraheme sold by others. Due to the extended period between the sale of Feraheme andwhen the limited right of return is allowable, which can be several years, we currently have limited actual returns data, and therefore are not able tosolely rely on our actual returns experience. We track actual returns by individual production lots. Returns on lots eligible for credits under our returnedgoods policy are monitored and compared with historical return trends and rates. In addition to the factors discussed above, we consider several additional factors in our estimation process, including our internal sales forecastsand inventory levels in the distribution channel. We expect that wholesalers will not stock significant inventory due to the product's cost and expense tostore. Based on the level of inventory in the distribution channel, we determine whether an adjustment to the sales return reserve is appropriate. If necessary, our estimated rate of returns may be adjusted for historical return patterns as they become available and for known or expectedchanges in the marketplace. To date, returns and adjustments to our estimated rate of returns have been minimal. However, Feraheme is still early in itsproduct lifecycle and historical returns experience may not be indicative of Feraheme's future rate of returns. A future revision to our product returnsestimate would result in a corresponding change to our net product sales in the period in which the change is made and could be significant. A 1.0%increase in our returns as a percentage of gross sales for the year ended December 31, 2011 would have resulted in approximately a $0.7 milliondecrease in net product sales.Multiple Element Arrangements and Milestone Payments From time to time, we may enter into collaborative license and development agreements with biotechnology and pharmaceutical companies for thedevelopment and commercialization of our products or product candidates. The terms of the agreements may include non-refundable license fees,payments based upon the achievement of certain milestones and performance goals, reimbursement of certain out-of-pocket costs, payments formanufacturing services, and royalties on product sales. We evaluate revenue from arrangements that have multiple elements to determine whether the components of the arrangement represent separateunits of accounting as defined in the accounting guidance related to revenue arrangements with multiple deliverables. Under current accountingguidance, which governs any agreements that contain multiple elements that are either entered into or modified subsequent to January 1, 2011,companies are required to establish the fair value of undelivered products and services based on a separate revenue recognition process usingmanagement's best estimate of the selling price for an undelivered item when there is no other means to determine the fair value of that undelivered item.Unmodified agreements entered into prior to January 1, 2011, including our agreements with Takeda and 3SBio, are accounted for under previousaccounting guidance, which provides that an element of a contract can be accounted for separately if the delivered elements have standalone value andthe fair value of all undelivered elements is determinable. If an element is considered to have standalone value but the fair value of any of the undelivereditems cannot be determined, all elements of the arrangement are recognized as revenue as a single unit of accounting over the period of performance forsuch undelivered items or services. Significant management judgment is required in determining what elements constitute deliverables and whatdeliverables or combination of deliverables should be considered units of accounting.62Table of Contents When multiple deliverables are combined and accounted for as a single unit of accounting, we base our revenue recognition pattern on the last to bedelivered element. Revenue is recognized using either a proportional performance or straight-line method, depending on whether we can reasonablyestimate the level of effort required to complete our performance obligations under an arrangement and whether such performance obligations areprovided on a best-efforts basis. To the extent we cannot reasonably estimate our performance obligations, we recognize revenue on a straight-line basisover the period we expect to complete our performance obligations. Significant management judgment is required in determining the level of effortrequired under an arrangement and the period over which we are expected to complete our performance obligations under an arrangement. We may haveto revise our estimates based on changes in the expected level of effort or the period we expect to complete our performance obligations. Our collaboration agreements may entitle us to additional payments upon the achievement of performance-based milestones. If a milestone involvessubstantive effort on our part and its achievement is not considered probable at the inception of the collaboration, we recognize the milestoneconsideration as revenue in the period in which the milestone is achieved only if it meets the following additional criteria: (1) the milestone considerationreceived is commensurate with either the level of effort required to achieve the milestone or the enhancement of the value of the item delivered as a resultof a specific outcome resulting from our performance to achieve the milestone; (2) the milestone is related solely to past performance; and (3) themilestone consideration is reasonable relative to all deliverables and payment terms in the arrangement. There is significant judgment involved indetermining whether a milestone meets all of these criteria. For milestones that do not meet the above criteria and are therefore not consideredsubstantive milestones, we recognize that portion of the milestone payment equal to the percentage of the performance period completed at the time themilestone is achieved and the above conditions are met. The remaining portion of the milestone will be recognized over the remaining performanceperiod using a proportional performance or straight-line method. Amounts received prior to satisfying the above revenue recognition criteria are recorded as deferred revenue in our consolidated balance sheets.Amounts not expected to be recognized within the next 12 months are classified as long-term deferred revenue.Takeda Agreement In March 2010, we entered into a collaboration agreement with Takeda. Under the Takeda Agreement, except under limited circumstances, we haveretained the right to manufacture Feraheme and, accordingly, are responsible for supply of Feraheme to Takeda at a fixed price per unit, which iscapped. We are also responsible for conducting, and bearing the costs related to, certain pre-defined clinical studies with the costs of futuremodifications or additional studies to be allocated between the parties according to an agreed upon cost-sharing mechanism, which provides for a cap onsuch costs. In connection with the execution of the Takeda Agreement, we received a $60.0 million upfront payment from Takeda in April 2010, whichwe recorded as deferred revenue. We may also receive a combination of regulatory approval and performance-based milestone payments,reimbursement of certain out-of-pocket regulatory and clinical supply costs, defined payments for supply of Feraheme, and tiered double-digit royaltieson net product sales by Takeda in the Licensed Territory under the Takeda Agreement. The milestone payments we may be entitled to receive under theagreement could over time equal approximately $220.0 million, including up to an aggregate of $33.0 million upon the regulatory approval andcommercial launch of Feraheme in the EU and Canada. We have determined that the Takeda Agreement includes four deliverables: the license, access to future know-how and improvements to theFeraheme technology, regulatory and clinical research services, and the manufacturing and supply of product. Pursuant to the accounting guidance ineffect when we signed the Takeda Agreement and which governed revenue recognition on multiple element63Table of Contentsarrangements, we evaluated the four deliverables under the Takeda Agreement and determined that our obligation to provide manufacturing supply ofproduct meets the criteria for separation and is therefore treated as a single unit of accounting, which we refer to as the supply unit of accounting.Further, we concluded that the license is not separable from the undelivered future know-how and technological improvements or the undeliveredregulatory and clinical research services. Accordingly, these deliverables are being combined and also treated as a single unit of accounting, which werefer to as the combined unit of accounting. We have allocated the consideration to be received under the Takeda Agreement based upon a residual value approach for the combined unit ofaccounting determined at the date on which we entered into the Takeda Agreement. There is significant judgment involved in assessing whether theconsideration being received for the supply of Feraheme is fair value. In assessing the consideration to be allocated to the supply unit of accounting, wedetermined that the amount of the consideration allocated to this unit should be based upon the estimated fair value of manufacturing profit to be earnedover the expected term of the performance obligation. Based on an analysis of our estimated costs to supply Feraheme as well as profit earned by third-party contract pharmaceutical manufacturers, we have determined that the consideration to be received for product supply in addition to the royalties tobe received related to those sales represents fair value in return for our supply of product. Therefore, no other consideration under the contract is beingallocated to the supply unit of accounting. Of the $220.0 million in potential milestone payments, we have determined that any payments which maybecome due upon approval by certain regulatory agencies will be deemed substantive milestones and, therefore, will be accounted for as revenue in theperiod in which they are achieved. All remaining milestone payments will be accounted for in accordance with our revenue attribution method for theupfront payment as defined below. With respect to the combined unit of accounting, our obligation to provide access to our future know-how and technological improvements is thefinal deliverable and is an obligation which exists throughout the term of the Takeda Agreement. Because we cannot reasonably estimate the total levelof effort required to complete the obligations under the combined deliverable, we are recognizing the entire $60.0 million upfront payment, the$1.0 million reimbursed to us in 2010 for certain expenses incurred prior to entering the agreement, as well as any milestone payments that are achievedand not deemed to be substantive milestones into revenues on a straight-line basis over a period of ten years from March 31, 2010, the date on whichwe entered the Takeda Agreement, which represented the then current patent life of Feraheme and our best estimate of the period over which we willsubstantively perform our obligations. The potential milestone payments that may be received in the future will be recognized into revenue on acumulative catch up basis when they become due and payable. Under the terms of the Takeda Agreement, Takeda is responsible for reimbursing us for certain out-of-pocket regulatory and clinical trial supplycosts associated with carrying out our regulatory and clinical research services under the collaboration agreement. Because we are acting as the principalin carrying out these services, any reimbursement payments received from Takeda will be recorded in license fee and other collaboration revenues in ourconsolidated statement of operations to match the costs that we incur during the period in which we perform those services. Valuation of investments. The fair value of our investments is generally determined from quoted market prices received from pricing servicesbased upon market transactions. We also have investments in auction rate securities, or ARS, which consist entirely of municipal debt securities backedby student loans and which, prior to 2008, we recorded at cost, which approximated fair market value due to their variable interest rates. Prior toFebruary 2008, these ARS typically reset through an auction process every 7 or 28 days, which generally allowed existing investors to either roll overtheir holdings and continue to own their securities or liquidate their holdings by selling their securities at par value. In February 2008, our ARS began toexperience failed auctions and have continued to experience failed auctions since that time. As a result of the lack of significant observable ARS marketactivity since64Table of ContentsFebruary 2008, we use a discounted cash flow methodology to value these securities as opposed to valuing them at their par value. Our valuationanalysis considers, among other items, assumptions that market participants would use in their estimates of fair value, such as the collateral underlyingthe security, the creditworthiness of the issuer and any associated guarantees, credit ratings of the security by the major securities rating agencies, theability or inability to sell the investment in an active market or to the issuer, the timing of expected future cash flows, and the expectation of the next timethe security will have a successful auction or when call features may be exercised by the issuer. We believe there are several significant assumptions thatare utilized in our valuation analysis, the two most critical of which are the discount rate and the average expected term. Holding all other factors constant, if we were to increase the discount rate utilized in our ARS valuation analysis by 50 basis points, or one-half ofa percentage point, this change would have the effect of reducing the fair value of our ARS by approximately $0.4 million as of December 31, 2011.Similarly, holding all other factors constant, if we were to increase the average expected term utilized in our fair value calculation by one year, thischange would have the effect of reducing the fair value of our ARS by approximately $0.5 million as of December 31, 2011. We also consider creditratings with respect to our investments provided by investment ratings agencies. As of December 31, 2011, the majority of our ARS portfolio was ratedAAA by at least one of the major securities ratings agencies and all of our investments conformed to the requirements of our investment policy, whichrequires that, when purchased, all of our investments meet high credit quality standards as defined by credit ratings of the major securities ratingsagencies. These ratings are subject to change. In order to assess whether our investments in debt securities which experience a decline in fair value below amortized cost basis are other-than-temporarily impaired, we evaluate whether (i) we have the intent to sell the security or (ii) it is more likely than not that we will be required to sell thesecurity prior to recovery of its amortized cost basis. If either of these conditions is met, we recognize the difference between the amortized cost of thesecurity and its fair value at the impairment measurement date in our consolidated statement of operations. If neither of these conditions is met, we mustperform additional analyses to evaluate whether there could be a credit loss associated with the security. Factors we consider in making this judgmentinclude, but are not limited to:•The extent to which the market value is less than the cost basis; •The length of time that the market value has been less than the cost basis; •Whether the unrealized loss is event-driven, credit-driven or a result of changes in market interest rates or risk premium; •The investment's rating and whether the investment is investment-grade and/or has been downgraded since its purchase; •Whether the issuer is current on all payments in accordance with the contractual terms of the investment and is expected to meet all of itsobligations under the terms of the investment; •Any underlying collateral and the extent to which the recoverability of the carrying value of our investment may be affected by changesin such collateral; •Whether we have a favorable history in redeeming similar securities at prices at or above fair value; •Unfavorable changes in expected cash flows; and •Other subjective factors. If we determine from this analysis that we do not expect to receive cash flows sufficient to recover the entire amortized cost of the security, a creditloss exists, and the impairment is considered65Table of Contentsother-than-temporary and is recognized in our consolidated statement of operations. Our assessment of whether unrealized losses are other-than-temporary requires significant judgment. Equity-Based Compensation. Under the fair value recognition guidance of equity-based compensation accounting rules, equity-basedcompensation cost is generally required to be measured at the grant date (based upon an estimate of the fair value of the compensation granted) andrecorded to expense over the requisite service period, which generally is the vesting period. Because equity-based compensation expense is based onawards ultimately expected to vest, we must make certain judgments about whether employees and directors will complete the requisite service period.Accordingly, we have reduced the compensation expense being recognized for estimated forfeitures. Under the current accounting guidance, forfeituresare estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Forfeitures areestimated based upon historical experience. If factors change and we employ different assumptions in future periods, the compensation expense that werecord in the future may differ significantly from what we have recorded in the current period. We estimate the fair value of equity-based compensation involving stock options based on the Black-Scholes option pricing model. We estimate thefair value of our restricted stock units whose vesting is contingent upon market conditions using the Monte-Carlo simulation model. These modelsrequire the input of several factors such as the expected option term, the expected risk-free interest rate over the expected option term, the expectedvolatility of our stock price over the expected option term, and the expected dividend yield over the expected option term and are subject to variousassumptions. The fair value of awards whose fair values are calculated using the Black-Scholes option pricing model is generally being amortized on astraight-line basis over the requisite service period and is recognized based on the proportionate amount of the requisite service period that has beenrendered during each reporting period. The fair value of awards with market conditions is being amortized based upon the estimated derived serviceperiod. We believe our valuation methodologies are appropriate for estimating the fair value of the equity awards we grant to our employees anddirectors. Our equity award valuations are estimates and thus may not be reflective of actual future results or amounts ultimately realized by recipients ofthese grants. These amounts, and the amounts applicable to future quarters, are also subject to future quarterly adjustments based upon a variety offactors, which include, but are not limited to, changes in estimated forfeiture rates and the issuance of new equity-based awards. The fair value ofrestricted stock units granted to our employees and directors is determined based upon the quoted closing market price per share on the date of grant,adjusted for assumed forfeitures. As with any accounting policy that applies judgments and estimates, actual results could significantly differ from thoseestimates which could result in a material adverse impact to our financial results.Impact of Recently Issued and Proposed Accounting Pronouncements In June 2011, the Financial Accounting Standards Board, or FASB, issued amended guidance on the presentation of comprehensive income infinancial statements. This amendment provides companies the option to present the components of net income and other comprehensive income either asone continuous statement of comprehensive income or as two separate but consecutive statements. It eliminates the option to present components ofother comprehensive income as part of the statement of changes in stockholders' equity. The provisions of this guidance are effective for interim andannual periods beginning in 2012. We do not expect the adoption of this guidance to have an impact on our consolidated financial statements. In May 2011, the FASB issued an amendment to the accounting guidance for fair value measurements and related disclosures. This amendmentclarifies the application of certain existing fair value measurement guidance and expands the disclosures for fair value measurements that are estimatedusing significant unobservable inputs, or Level 3 measurements. This guidance is effective for66Table of Contentsinterim and annual periods beginning after December 15, 2011. We do not expect the adoption of this amendment to have an impact on our consolidatedfinancial statements. In January 2010, the FASB issued an amendment to the accounting for fair value measurements and disclosures. This amendment detailsadditional disclosures on fair value measurement, requires a gross presentation of activities within a Level 3 roll-forward, and adds a new requirement tothe disclosure of transfers in and out of Level 1 and Level 2 measurements. The new disclosures are required of all companies that are required toprovide disclosures about recurring and nonrecurring fair value measurements. This amendment was effective as of January 1, 2011. We have adoptedall provisions of this pronouncement and such adoption did not have a significant impact on our consolidated financial statements. In October 2009, the FASB issued an amendment to the accounting for multiple-deliverable revenue arrangements. This amendment providesguidance on whether multiple deliverables exist, how the arrangements should be separated, and how the consideration paid should be allocated. As aresult of this amendment, companies may be able to separate multiple-deliverable arrangements in more circumstances than under then existingaccounting guidance. This guidance amends the requirement to establish the fair value of undelivered products and services based on objective evidenceand instead provides for separate revenue recognition based upon management's best estimate of the selling price for an undelivered item when there isno other means to determine the fair value of that undelivered item. The then existing guidance required that the fair value of the undelivered item reflectthe price of the item either sold in a separate transaction between unrelated third parties or the price charged for each item when the item is soldseparately by the vendor. If the fair value of all of the elements in the arrangement was not determinable, then revenue was generally deferred until all ofthe items were delivered or fair value was determined. This amendment became effective prospectively for revenue arrangements entered into ormaterially modified beginning on January 1, 2011. The initial adoption of this guidance did not have any impact on our consolidated financialstatements; however, it will likely impact us if we enter into any future transactions involving multiple deliverables or if we enter into any materialmodifications to any of our existing collaborations.Results of Operations—Years Ended December 31, 2011, 2010 and 2009Revenues Our total revenues for the years ended December 31, 2011, 2010 and 2009 consisted of the following (in thousands): The $5.0 million decrease in our total revenues in 2011 as compared to 2010 was primarily attributable to a $7.2 million decrease in net productsales. The $7.2 million decrease in net product sales was due to lower Feraheme product sales in the dialysis segment in 2011 as compared to 2010,partially offset by increased sales in the non-dialysis segment in 2011 as compared to 2010. Our net product sales for 2011 also include $2.5 millionassociated with a reduction of our estimated Medicaid rebate reserve related to Feraheme sales during 2009 and 2010, as discussed in more detailbelow. The decrease in 2011 total revenues as compared to 2010 total revenues was also partially offset by a67 Years Ended December 31, 2011 to 2010change 2010 to 2009change 2011 2010 2009 $ Change %Change $ Change %Change Product sales,net $52,813 $59,978 $16,482 $(7,165) -12%$43,496 >100%License fee andothercollaborationrevenues 8,321 6,132 516 2,189 36% 5,616 >100%Royalties 115 135 180 (20) -15% (45) -25% Total $61,249 $66,245 $17,178 $(4,996) -8%$49,067 >100% Table of Contents$2.2 million increase in our license fee and other collaboration revenues associated with the Takeda Agreement, which we entered into in March 2010. The $49.1 million increase in our total revenues in 2010 as compared to 2009 was primarily attributable to a $43.5 million increase in net productsales, as well as a $5.6 million increase in our license fee and other collaboration revenues. The increase in net product sales in 2010 as compared to2009 was largely due to the fact that 2010 was the first full year during which we marketed and sold Feraheme in the U.S. following its FDA approvalin mid-2009. The increase in license fee and other collaboration revenues was due to revenues associated with the Takeda Agreement. The following table sets forth customers who represented 10% or more of our total revenues for the years ended December 31, 2011, 2010 and2009.Net Product Sales Net product sales for the years ended December 31, 2011, 2010 and 2009 consisted of the following (in thousands): Our total net product sales decreased by $7.2 million in 2011 as compared to 2010. The $7.2 million decrease was primarily due to decreased salesof Feraheme to dialysis providers during 2011 as compared to 2010, including a decrease of $6.8 million in net sales related to a launch incentiveprogram which we initiated in 2009 and under which we recognized revenues of $7.0 million during 2010 as compared to $0.2 million during 2011.Our Feraheme net product sales to dialysis customers in 2011 were de minimis relative to our dialysis sales during 2010 principally as a result of theJanuary 2011 implementation of the Medicare prospective payment system, which made it unlikely that dialysis providers would choose to useFeraheme. The decreased Feraheme net product sales in the dialysis segment was only partially offset by increased Feraheme net product sales in thenon-dialysis segment in 2011 as compared to 2010. In addition, during 2011, we revised our estimated Medicaid utilization reserves based on actualrebate claims received since the launch of Feraheme in 2009, our expectations of state level activity, and estimated rebate claims not yet submitted,which resulted in a $2.5 million reduction of our estimated Medicaid rebate reserve related to Feraheme sales prior to 2011. We also offered higheraverage customer discounts, chargebacks and rebates to our end-users during 2011 as compared to 2010. During 2011, we reduced our gross productsales by recording allowances of $23.6 million, excluding the $2.5 Medicaid rebate reserve reduction, as compared to allowances of $22.2 millionrecorded during 2010. The $43.5 million increase in net product sales during 2010 as compared to 2009 was primarily due to an increase in the total number of Ferahemeunits sold in 2010 as compared to 2009. The year ended68 For the Years EndedDecember 31, 2011 2010 2009 AmerisourceBergen Drug Corporation 41% 36% 46%McKesson Corporation 21% <10% <10%Takeda Pharmaceuticals Company Limited 13% <10% — Cardinal Health, Inc. 13% <10% <10%Metro Medical Supply, Inc. <10% 21% 28% Years Ended December 31, 2011 to 2010change 2010 to 2009 change 2011 2010 2009 $ Change %Change $ Change %Change Feraheme $52,097 $59,339 $15,774 $(7,242) -12%$43,565 >100%GastroMARK 716 639 708 77 12% (69) -10% Total $52,813 $59,978 $16,482 $(7,165) -12%$43,496 >100% Table of ContentsDecember 31, 2010 was our first full year during which we marketed and sold Feraheme following its FDA approval in mid-2009. Our net product sales may fluctuate from period to period as a result of a number of factors, including but not limited to the following:•Wholesaler demand forecasts and buying decisions as well as end-user demand, which can create uneven purchasing patterns by ourcustomers; •Changes or adjustments to our reserves or changes in the timing or availability of government or customer discounts, rebates andincentives; •Changes in the actual or perceived safety and efficacy profile of Feraheme, or products that compete with Feraheme, which could causecustomers to reduce, discontinue or increase their use of Feraheme; •The introduction of new products into the market that compete with Feraheme, such as Nulecit™ or, if approved, Injectafer®; •Changes in our contracting strategies and discounts; and •Any expansion or contraction of the overall size of the IV iron market, which could result from a number of factors including but notlimited to, changes in treatment guidelines or practices related to IDA. Our net product sales may also fluctuate from period to period due to the enactment of or changes in legislation that impact third-partyreimbursement coverage and pricing. In January 2011, the implementation of the Medicare prospective payment system had the effect of significantlydiminishing the utilization of Feraheme in the dialysis market and as a result, our Feraheme sales in the dialysis setting have significantly declined. Weexpect our dialysis sales for 2012 and beyond will not be significant. An analysis of our product sales allowances and accruals for the years ended December 31, 2011, 2010 and 2009 is as follows (in thousands):69 December 31,2011 December 31,2010 December 31,2009 Product sales allowances and accruals Discounts and chargebacks $13,851 $5,113 $804 Government and other rebates 8,544 16,374 4,329 Medicaid rebate reserve adjustment (2,532) (599) — Returns 1,259 1,334 463 Total product sales allowances and accruals $21,122 $22,222 $5,596 Total gross product sales $73,935 $82,200 $22,078 Total product sales allowances and accruals as a percent of total grossproduct sales 29% 27% 25%Table of Contents An analysis of the amount of, and change in, reserves for the years ended December 31, 2011 and 2010 is as follows (in thousands): During 2011 and 2010, we decreased our product sales allowances and accruals by approximately $2.8 million and $0.7 million, respectively, forchanges in estimates relating to sales in prior years. These adjustments were primarily caused by differences between actual Medicaid utilization andclaims experience to date as compared to our initial estimates, including our 2011 revision of our estimated Medicaid utilization. This revision was basedon actual rebate claims received since the launch of Feraheme in 2009, our expectations of state level activity, and estimated rebate claims not yetsubmitted, which resulted in a $2.5 million reduction of our estimated Medicaid rebate reserve related to Feraheme sales during 2009 and 2010. There are several factors that make it difficult to predict future changes in our sales allowances and accruals as a percentage of gross product salesincluding, but not limited to, the following:•Variations in, and the success of pricing, fee, rebate and discount structures implemented in our efforts to increase adoption ofFeraheme; •Variations in our customer mix; •Changes in legislation, such as the Health Care and Education Affordability Reconciliation Act, or the Health Care Reform Act, theBudget Control Act of 2011 or any future legislation; and •Adjustments and refinements to our prior estimates and assumptions. Overall, we expect that our reserves as a percentage of gross sales will increase during 2012 due primarily to our efforts to increase adoption andutilization of Feraheme, our efforts to address continuing reimbursement and competitive pricing pressures, as well as the expected customer mix andutilization rates, all of which will negatively affect our future average net selling price of Feraheme. There are a number of factors that make it difficult to predict the magnitude of future Feraheme sales, including but not limited to, the following:•The magnitude and timing of adoption of Feraheme by physicians, hospitals and other healthcare payors and providers; •Any expansion or contraction of the overall size of the IV iron market, which could result from a number of factors including but notlimited to, changes in treatment guidelines or practices related to IDA;70 Discounts Rebates andFees Returns Total Balance at January 1, 2010 $499 $5,194 $463 $6,156 Current provisions relating to sales in current year 5,113 16,374 1,405 22,892 Other provisions relating to deferred revenue — (1,085) — (1,085)Adjustments relating to sales in prior year — (599) (71) (670)Payments/returns relating to sales in current year (3,965) (8,540) — (12,505)Payments/returns relating to sales in prior year (499) (3,126) — (3,625) Balance at December 31, 2010 $1,148 $8,218 $1,797 $11,163 Current provisions relating to sales in current year 14,074 8,605 1,259 23,938 Other provisions relating to deferred revenue — (18) — (18)Adjustments relating to sales in prior years (223) (2,593) — (2,816)Payments/returns relating to sales in current year (12,251) (6,195) (55) (18,501)Payments/returns relating to sales in prior years (926) (4,916) (159) (6,001) Balance at December 31, 2011 $1,822 $3,101 $2,842 $7,765 Table of Contents•The effect of federal and other legislation such as the Health Care Reform Act and the Budget Control Act of 2011; •The inventory levels maintained by Feraheme wholesalers, distributors and other customers; •The frequency of re-orders by existing customers; •The impact of any actual or perceived safety or efficacy issues with Feraheme; and •The impact of and any actions taken by us or our competitors to address pricing and reimbursement considerations related to Ferahemeor products that compete with Feraheme. As a result of these and other factors, future Feraheme sales could vary significantly from quarter to quarter and, accordingly, our Feraheme netproduct revenues in current or previous quarters may not be indicative of future Feraheme net product revenues.License Fee and Other Collaboration Revenues License fee and other collaboration revenues for the years ended December 31, 2011, 2010 and 2009 consisted of the following (in thousands): Most of our license fee and other collaboration revenues for 2011 and 2010 related to revenue recognized under the Takeda Agreement, which weentered into in March 2010. During 2011 and 2010, we recorded $6.1 million and $4.6 million, respectively, of revenues associated with theamortization of $61.0 million of deferred revenues recorded in connection with the Takeda Agreement. The $1.5 million increase in 2011 as comparedto 2010 was the result of recognizing a full year of the upfront payment from Takeda during 2011 as compared to nine months during 2010. The$61.0 million of deferred revenues was comprised of a $60.0 million upfront payment which we received from Takeda in April 2010, as well asapproximately $1.0 million reimbursed to us during 2010 for certain expenses incurred prior to entering the agreement, which we considered anadditional upfront payment. As of December 31, 2011, we had approximately $50.3 million remaining in deferred revenues related to the $61.0 millionupfront payments received from Takeda. In addition, under the terms of the Takeda Agreement, Takeda is responsible for reimbursing us for certain out-of-pocket regulatory and clinicaltrial supply costs we incur in the conduct of certain regulatory and clinical research services we perform under the agreement. Because we are acting asthe principal in carrying out these activities, any reimbursement payments received from Takeda is recorded in license fee and other collaborationrevenues in our consolidated statement of operations and offsets the costs that we incur during the period in which we perform those services. During2011 and 2010, we recorded $2.0 million and $1.5 million, respectively, of revenues associated with the reimbursement of out-of pocket regulatory andclinical supply costs in connection with the Takeda Agreement. Our license fee revenues of $0.5 million for 2009 consisted solely of deferred license fee revenues that were being amortized through the end ofour performance obligations in connection with our agreements with Bayer Healthcare Pharmaceuticals, or Bayer, which were terminated in November2008, relating to Feridex I.V.®, a product we no longer manufacture or sell. In 1995, we entered into a71 Years Ended December 31, 2011 to 2010 change 2010 to 2009 change 2011 2010 2009 $ Change %Change $ Change %Change Deferred licensefee revenuesfrom Takeda $6,096 $4,572 $— $1,524 33%$4,572 N/A Reimbursementrevenuesprimarily fromTakeda 2,225 1,560 — 665 43% 1,560 N/A Deferred licensefee revenuesfrom Bayer — — 516 — — (516) -100% Total $8,321 $6,132 $516 $2,189 36%$5,616 >100% Table of ContentsLicense and Marketing Agreement and a Supply Agreement, or the Bayer Agreements, with Bayer, granting Bayer a product license and exclusivemarketing rights to Feridex I.V. in the U.S. and Canada. In connection with our decision to cease manufacturing Feridex I.V., the Bayer Agreementswere terminated in November 2008 by mutual agreement. Pursuant to the termination agreement, Bayer could continue to sell any remaining FeridexI.V. inventory in its possession through April 1, 2009. As a result of the termination of these agreements, we do not expect any additional license feerevenues from Bayer. In May 2008, we entered into a Collaboration and Exclusive License Agreement, or the 3SBio License Agreement, with 3SBio for thedevelopment and commercialization of Feraheme as an IV iron replacement therapeutic agent in China. In consideration of the grant of the license, wereceived an upfront payment of $1.0 million, the recognition of which has been deferred and is being recognized under the proportional performancemethodology as we supply Feraheme to 3SBio over the thirteen year initial term of the agreement. We did not record any revenues associated with ouragreement with 3SBio during 2011, 2010 or 2009 and we do not expect license fee revenues under this agreement to be significant in 2012.Costs and ExpensesCost of Product Sales Cost of product sales for the years ended December 31, 2011, 2010 and 2009 consisted of the following (in thousands): Our cost of product sales are primarily comprised of manufacturing costs associated with Feraheme. Our cost of product sales increased by$2.9 million, or 38%, during 2011 as compared to 2010 primarily due to higher idle capacity costs at our Cambridge, Massachusetts manufacturingfacility. The high idle capacity costs resulted from reduced production activity due to our alignment of production volumes with our then current andexpected Feraheme sales. Idle capacity costs are included in cost of product sales in the period incurred. Our cost of product sales increased by $6.6 million during 2010 as compared to 2009. This increase was attributable to a number of factorsincluding an increase in the average per unit cost of Feraheme sold during 2010, primarily due to increased general production costs and because alarger portion of the costs of Feraheme sold during 2009 had been previously expensed to research and development as a result of our policy toexpense costs associated with the manufacture of Feraheme prior to its initial June 2009 marketing approval by the FDA. In addition, the increase incost of product sales from 2009 to 2010 was partially due to certain idle capacity costs at our Cambridge, Massachusetts manufacturing facility. We expect our cost of product sales as a percentage of net product sales to decrease during 2012 as compared to 2011 as we reduce our idlecapacity costs at our Cambridge, Massachusetts manufacturing facility.Research and Development Expenses Research and development expenses include external expenses, such as costs of clinical trials, contract research and development expenses, certainmanufacturing research and development costs, regulatory filing fees, consulting and professional fees and expenses, and internal expenses, such as72 Years Ended December 31, 2011 to 2010 change 2010 to 2009 change 2011 2010 2009 $ Change %Change $ Change %Change Cost ofProductSales $10,531 $7,606 $1,013 $2,925 38%$6,593 >100%Percentageof NetProductSales 20% 13% 6% Table of Contentscompensation of employees engaged in research and development activities, the manufacture of product needed to support research and developmentefforts, related costs of facilities, and other general costs related to research and development. Where possible, we track our external costs by majorproject. To the extent that external costs are not attributable to a specific project or activity, they are included in other external costs. Prior to the initialregulatory approval of our products or development of new manufacturing processes, costs associated with manufacturing process development and themanufacture of drug product are recorded as research and development expenses. Subsequent to initial regulatory approval, costs associated with themanufacture of our products for commercial sale are capitalized in inventory and recorded as cost of product sales when sold. Research and development expenses for the years ended December 31, 2011, 2010 and 2009 consisted of the following (in thousands): Years Ended December 31, 2011 to 2010change 2010 to 2009change 2011 2010 2009 $ Change %Change $ Change %Change External Researchand DevelopmentExpenses Feraheme to treatIDAregardless ofthe underlyingcause $27,405 $17,132 $797 $10,273 60%$16,335 >100%Feraheme to treatIDA in CKDpatients 9,385 11,003 346 (1,618) -15% 10,657 >100%Feraheme as atherapeuticagent in AUBpatients — — 1,131 — — (1,131) -100%Feraheme as atherapeuticagent, general 917 799 4,331 118 15% (3,532) -82%Ferahememanufacturingprocessdevelopmentand materials 2,752 3,059 2,929 (307) -10% 130 4%Feraheme as animaging agent — 2,483 2,524 (2,483) -100% (41) -2%Other externalcosts 263 763 1,133 (500) -66% (370) -33% Total $40,722 $35,239 $13,191 $5,483 16%$22,048 >100% Internal Researchand DevelopmentExpenses Compensation,payroll taxes,benefits andother expenses 15,544 15,715 18,636 (171) -1% (2,921) -16%Equity-basedcompensationexpense 1,874 3,508 4,446 (1,634) -47% (938) -21% Total $17,418 $19,223 $23,082 $(1,805) -9%$(3,859) -17% Total Research andDevelopmentExpenses $58,140 $54,462 $36,273 $3,678 7%$18,189 50% 2011 as compared to 2010 Total research and development expenses incurred in 2011 increased by $3.7 million, or 7%, from 2010 due to greater external research anddevelopment expenses resulting from increased clinical trial activity during 2011, primarily related to our clinical trials for the treatment of IDA in abroad range of patients, partially offset by a decrease in internal research and development expenses. Our external research and development expenses increased by $5.5 million, or 16%, in 2011 as compared to 2010. The increase in our externalexpenses was due primarily to costs incurred in connection with our Phase III clinical development program for Feraheme to treat IDA regardless ofthe underlying cause, which was initiated in June 2010, and costs incurred related to certain of our73 Table of Contentspediatric studies of Feraheme. These increases were partially offset by a reduction in costs associated with our global clinical program to support ourMAA in the EU for the treatment of IDA in CKD patients, which was completed in 2012, as well as certain costs incurred in 2010 in connection with aclinical trial for Feraheme as an imaging agent, which was discontinued in 2010. Our internal research and development expenses decreased by $1.8 million, or 9%, in 2011 as compared to 2010. The decrease in internal costswas primarily attributable to the reduction of equity-based compensation expense and the net decrease of other compensation-related benefits principallydue to our October 2010 and November 2011 corporate restructurings, which resulted in lower headcount in our research and developmentdepartments.2010 as compared to 2009 Total research and development expenses incurred in 2010 increased by $18.2 million, or 50%, from 2009 due to a significant increase in ourexternal research and development expenses, partially offset by a decrease in our internal research and development expenses. Our external research and development expenses increased by $22.0 million, or greater than 100%, in 2010 as compared to 2009. The increase inour external expenses was due primarily to costs incurred in connection with our Phase III clinical development program for Feraheme to treat IDAregardless of the underlying cause and costs associated with our global clinical study to support our MAA in the EU for the treatment of IDA in CKDpatients, including costs incurred to prepare for certain of our pediatric studies of Feraheme. These increases were partially offset by certain costsincurred during 2009 which were not incurred during 2010, including costs associated with our efforts to address the manufacturing observations notedby the FDA during a 2008 inspection of our Cambridge, Massachusetts manufacturing facility and costs associated with our then-planned clinical trialfor Feraheme in patients with AUB, which was discontinued in 2009. Our internal research and development expenses decreased by $3.9 million, or 17%, in 2010 as compared to 2009. The decrease in internal costswas due primarily to reduced compensation-related costs in 2010 resulting from the allocation of internal manufacturing costs to inventory during thefull year of 2010, whereas such costs were expensed prior to the June 2009 marketing approval of Feraheme by the FDA, as well as reductions incompensation-related costs primarily due to our October 2010 restructuring, which resulted in lower headcount in our research and developmentdepartments. The decrease in internal costs was also attributable in part to a reduction of equity-based compensation expense due to the effects of ourOctober 2010 restructuring as well as our application of a higher forfeiture rate in 2010 as compared to 2009 resulting from a routine annual analysis ofour historical forfeiture experience.Research and Development Activities We expect research and development expenses to decrease in 2012 as compared to 2011 primarily due to the completion of our clinicaldevelopment program of Feraheme for the treatment of IDA regardless of the underlying cause and our study to support our Feraheme MAA in theEU for the treatment of IDA in CKD patients, partially offset by costs related to the preparation and submission of our planned regulatory filings in2012, including our Feraheme sNDA in the U.S. for Feraheme to treat IDA regardless of the underlying cause, as well as other miscellaneous researchand development related activities in support of our Feraheme development programs. We do not track our internal costs by project since our research and development personnel work on a number of projects concurrently and muchof our fixed costs benefit multiple projects or our operations in general. We track our external costs on a major project basis, in most cases through thelater of the completion of the last trial in the project or the last submission of a regulatory filing to the74Table of ContentsFDA or applicable foreign regulatory body. The following two major research and development projects are currently ongoing:•Feraheme to treat IDA regardless of the underlying cause. This project currently includes: (1) a Phase III clinical study evaluatingFeraheme treatment compared to treatment with placebo; (2) a Phase III clinical study evaluating Feraheme treatment compared totreatment with another IV iron; and (3) an extension study. •Feraheme to treat IDA in CKD patients. This project currently includes: (1) a post-approval clinical study evaluating Ferahemetreatment compared to treatment with another IV iron to support our MAA submission; (2) two ongoing pediatric studies that are beingconducted as part of our post-approval Pediatric Research Equity Act requirement to support pediatric CKD labeling of Feraheme;(3) two additional pediatric studies to be conducted in accordance with our approved pediatric investigation plan to support our MAAsubmission; and (4) a multi-center clinical trial to be conducted to assess the safety and efficacy of repeat, episodic Ferahemeadministration for the treatment of persistent or recurrent IDA. Through December 31, 2011, we have incurred aggregate external research and development expenses of approximately $45.3 million related toour current program for the development of Feraheme to treat IDA regardless of the underlying cause. We currently estimate that the total remainingexternal costs associated with the efforts needed to complete this development project will be in the range of approximately $15.0 to $20.0 million, themajority of which will be incurred by the end of 2012. Through December 31, 2011, we have incurred aggregate external research and development expenses of approximately $20.7 million related toour current program for the development of Feraheme to treat IDA in CKD patients. We currently estimate that the total remaining external costsassociated with this development project will be in the range of approximately $28.0 to $38.0 million over the next several years. Conducting clinical trials involves a number of uncertainties, many of which are out of our control. Our estimates of external costs associated withour research and development projects could therefore vary from our current estimates for a variety of reasons including but not limited to the following:delays in our clinical trials due to slow enrollment, unexpected results from our clinical sites that affect our ability to complete the studies in a timelymanner, unanticipated adverse reactions to Feraheme either in commercial use or in a clinical trial setting, inadequate performance or errors by third-party service providers, any deficiencies in the design or oversight of these studies by us, the need to conduct additional clinical trials, or any adverseregulatory action or delay in the submission of any applicable regulatory filing. As a result, we are unable to reasonably estimate the specific timing ofany expected net cash inflows resulting from these projects, provided however, we expect regulatory decisions on our marketing applications forFeraheme in the CKD indication from the EMA and Swissmedic in 2012. If one or more of these regulatory applications is approved, we expect thatFeraheme will be launched commercially in the approved territory or territories shortly thereafter, at which point we will receive certain milestonepayments and we will begin receiving royalty payments in accordance with the Takeda Agreement. In December 2011, Feraheme was grantedmarketing approval in Canada, and we expect Takeda to launch Feraheme in Canada during 2012, at which point we will be entitled to a $3.0 millionmilestone payment and begin to receive royalty payments on the sale of Feraheme in Canada shortly thereafter.Selling, General and Administrative Expenses Our selling, general and administrative expenses include costs related to our commercial personnel, including our specialized sales force, medicaleducation professionals, pharmacovigilance and safety monitoring and other commercial support personnel, costs related to our administrativepersonnel,75Table of Contentsincluding our legal, finance and executive personnel, external and facilities costs required to support the marketing and sale of Feraheme and other costsassociated with our corporate activities. Selling, general and administrative expenses for the years ended December 31, 2011, 2010 and 2009 consisted of the following (in thousands): Total selling, general and administrative expenses incurred in 2011 decreased by $16.1 million, or 19%, as compared to 2010. Compensation,payroll taxes and benefits decreased by $5.7 million during 2011 as compared to 2010 primarily as a result of reduced headcount resulting from ourOctober 2010 restructuring. In addition, sales and marketing consulting, professional, and other expenses decreased by $10.7 million during 2011 ascompared to 2010 due to reduced costs related to the reduction or elimination of field-based contract nurses, advertising and marketing materials, andcertain other general marketing costs. Our general and administrative consulting, professional and other expenses increased by $3.4 million during 2011as compared to 2010 primarily due to $4.5 million of costs incurred in connection with our then proposed merger with Allos Therapeutics, Inc., orAllos, including a $2.0 million expense reimbursement fee paid to Allos after the merger was terminated. The $3.0 million decrease in equity-basedcompensation expense during 2011 as compared to 2010 was due primarily to a $1.6 million reduction of equity-based compensation expenseassociated with the 2011 departures of certain of our executive officers, including our former chief financial officer, our chief executive officer and ourchief commercial officer, and the expected impact on our equity compensation forfeitures resulting from our November 2011 corporate workforcereduction, partially offset by the expense associated with equity awards to new employees and additional equity awards to existing employees. This$1.6 million includes a reduction of expense of approximately $0.7 million previously recorded for certain of our former chief executive officer'soutstanding equity awards as the result of the modification of the terms of such awards pursuant to his November 2011 separation agreement. The $7.1 million, or 9%, increase in selling, general and administrative expenses for 2010 as compared to 2009 was due primarily to increasedprofessional and consulting fees and other expenses in 2010. The increase in professional and consulting fees was primarily driven by increased costsassociated with consulting and data acquisition fees in support of our commercialization of Feraheme. In addition, during 2010 we incurredsignificantly higher legal and other consulting and professional fees in connection with a securities class action lawsuit, which was filed against us inMarch 2010, our Takeda collaboration and a number of other legal matters. The increase in total selling, general and administrative expenses was alsodue in part to an increase in compensation-related costs incurred to support the commercialization of Feraheme, including costs associated with a greateraverage headcount and annual salary increases, partially offset by a reduction in other compensation-related costs primarily due to our October 2010restructuring. The $0.4 million decrease in equity-based compensation expense was due primarily to the effects of our October 2010 restructuring aswell as the application of a higher forfeiture rate to our equity-based compensation in 2010 as compared to 2009, resulting from a routine76 Years Ended December 31, 2011 to 2010 change 2010 to 2009change 2011 2010 2009 $ Change %Change $Change %Change Compensation,payroll taxesand benefits $29,553 $35,274 $33,447 $(5,721) -16%$1,827 5%Sales andmarketingconsulting,professionalfees, and otherexpenses 16,859 27,593 24,047 (10,734) -39% 3,546 15%General andadministrativeconsulting,professionalfees and otherexpenses 14,903 11,498 9,403 3,405 30% 2,095 22%Equity-basedcompensationexpense 7,548 10,574 10,932 (3,026) -29% (358) -3% Total $68,863 $84,939 $77,829 $(16,076) -19%$7,110 9% Table of Contentsannual analysis of our historical forfeiture experience. The decreased equity-based compensation expense was partially offset by expenses associatedwith equity awards to both new and existing employees. We expect total selling, general and administrative expenses will be less in 2012 as compared to 2011.Restructuring Expense In November 2011, in order to align our operating expenses with our near-term revenue projections for Feraheme, we initiated a corporaterestructuring, including a workforce reduction plan, which included an approximate 25% reduction in positions and the departure of our chief executiveofficer and our chief commercial officer. The workforce reduction was substantially completed by the end of 2011. In connection with the reduction inour workforce, in the fourth quarter of 2011 we recorded restructuring charges of approximately $3.5 million related primarily to employee severanceand benefits. We expect that the majority of such amounts will be paid by the end of 2012. In October 2010, we also initiated a corporate restructuring, including a workforce reduction plan, pursuant to which we reduced our workforce byapproximately 24%. The majority of the workforce reduction was completed during 2010 and the remaining positions were eliminated by the end of2011. We recorded restructuring charges of $2.2 million during 2010 related primarily to employee severance and benefits. These expenses weresubstantially paid by the end of 2011.Other Income (Expense) Other income (expense) for the years ended December 31, 2011, 2010 and 2009 consisted of the following (in thousands): Other income (expense) in 2011 remained relatively stable as compared to 2010. During 2011, we recorded net realized losses of approximately$0.2 million primarily attributable to our participation in a June 2011 purchase offer from the issuer of one of our ARS investments. During 2010, werecorded a $0.4 million realized loss related to the redemption in October 2010 of one of our ARS investments in a tender offer from the issuer. Inaddition, during 2010, we recognized both a realized gain of $0.8 million related to the redemption of certain ARS subject to settlement rights and acorresponding realized loss of $0.8 million related to the exercise of the settlement rights. Other income (expense) in 2010 decreased by $2.0 million, or 59%, as compared to 2009. The $2.0 million decrease was primarily attributable to a$1.4 million decrease in interest and dividend income as a result of lower average interest rates earned in 2010 as compared to 2009 due to ourmaintaining higher average investment balances in high quality but lower interest bearing, and shorter duration, U.S. government backed money marketand debt securities. In addition, during 2010, we recorded a $0.4 million realized loss in our consolidated statement of operations related to one of ourARS investments which we elected to redeem in a tender offer from the issuer in October 2010. We expect interest and dividend income to remain relatively consistent with current levels during 2012.77 Years Ended December 31, 2011 to 2010 change 2010 to 2009 change 2011 2010 2009 $ Change % Change $ Change %Change Interest anddividendincome, net $1,747 $1,741 $3,154 $6 — $(1,413) -45%(Losses) gainsoninvestments,net (193) 408 942 (601) <(100%) (534) -57%Fair valueadjustmentofsettlementrights — (788) (778) 788 -100% (10) 1% Total $1,554 $1,361 $3,318 $193 14%$(1,957) -59% Table of ContentsIncome Tax Benefit We recognized an income tax benefit of $1.2 million, $0.5 million and $1.1 million during the years ended December 31, 2011, 2010 and 2009,respectively, as the result of our recognition of a corresponding income tax expense associated with the increase in value of certain securities as a resultof their redemption at prices higher than the fair market value at which they were recorded. This income tax expense was recorded in othercomprehensive income. In addition, during 2009, we recognized $0.2 million in income tax benefits associated with U.S. research and development taxcredits against which we had previously provided a full valuation allowance, but which became refundable as a result of legislation passed in that year.Net Loss For the reasons stated above, we incurred a net loss of $77.1 million, $81.2 million and $93.4 million, or $3.64, $3.90 and $5.46 per basic anddiluted share, for the years ended December 31, 2011, 2010 and 2009, respectively.Liquidity and Capital ResourcesGeneral We finance our operations primarily from the sale of Feraheme, payments from our licensees, cash generated from our investing activities, and thesale of our common stock. We expect to continue to incur significant expenses to manufacture, market and sell Feraheme as an IV iron replacementtherapeutic for use in adult CKD patients in the U.S., Canada and the EU, to further develop and seek regulatory approval for Feraheme for thetreatment of IDA in a broad range of patients and in countries outside of the U.S. Our long-term capital requirements will depend on many factors, including, but not limited to, the following:•Our ability to successfully commercialize Feraheme in the U.S. and Takeda's ability to successfully commercialize Feraheme in itslicensed territories outside of the U.S.; •The magnitude of U.S. Feraheme sales and royalties we may receive under the Takeda Agreement on Feraheme sales outside of theU.S.; •Our ability to obtain U.S. regulatory approval for Feraheme to treat IDA regardless of the underlying cause and our ability to obtainmarketing approval for Feraheme outside the U.S., particularly in the EU; •Our ability to achieve the various milestones and receive the associated payments under the Takeda Agreement; •Costs associated with the U.S. commercialization of Feraheme, including costs associated with maintaining our commercialinfrastructure, executing our promotional and marketing strategy for Feraheme and conducting our required pediatric clinical trials andany post-marketing clinical studies; •Costs associated with our development of Feraheme for the treatment of IDA in a broad range of patients in the U.S.; •Costs associated with our pursuit of approval for Feraheme outside of the U.S.; •The outcome of and costs associated with any material litigation to which we are or may become a party;78Table of Contents•Our ability to liquidate our investments in ARS in a timely manner and without significant loss; •Our ability to maintain successful collaborations with our licensees and/or to enter into additional strategic relationships or acquisitions,if necessary; and •Our ability to raise additional capital on terms and within a timeframe acceptable to us, if necessary. As of December 31, 2011, our investments consisted of corporate debt securities, U.S. treasury and government agency securities, commercialpaper and ARS. We place our cash and investments in instruments that meet high credit quality and diversification standards, as specified in ourinvestment policy. Our investment policy also limits the amount of our credit exposure to any one issue or issuer, excluding U.S. government entities,and seeks to manage these assets to achieve our goals of preserving principal, maintaining adequate liquidity at all times, and maximizing returns. Cash, cash equivalents and investments as of December 31, 2011 and 2010 consisted of the following (in thousands): The $64.2 million decrease in cash, cash equivalents and investments as of December 31, 2011 as compared to December 31, 2010 was primarilydue to cash used in operations partially offset by cash received from Feraheme sales and interest income. We expect that during 2012 our cash, cash equivalents and investments balances, in the aggregate, will remain relatively stable. Our expectationassumes our continued investment in the development and commercialization of Feraheme, the continued realignment of our cost structure followingour November 2011 corporate restructuring, and the potential receipt of $33.0 million in milestone payments from Takeda. We believe that our cash,cash equivalents, and short-term investments as of December 31, 2011 and the cash we currently expect to receive from sales of Feraheme, earnings onour investments, and potential milestone and royalty payments from Takeda will be sufficient to satisfy our cash flow needs for at least the next twelvemonths, including projected operating expenses related to our ongoing development and commercialization programs for Feraheme. In November 2011, in order to align our operating expenses with our near-term revenue projections for Feraheme, we initiated a corporaterestructuring, including a workforce reduction plan, which included an approximate 25% reduction in positions. As a result of this reduction in ourworkforce, we recorded restructuring charges of approximately $3.5 million in the fourth quarter of 2011. These estimated restructuring charges relatedprimarily to employee severance and benefits. The workforce reduction was substantially completed by the end of 2011, and we expect that the majorityof our restructuring charges will be paid by the end of 2012. In February 2008, our ARS began to experience failed auctions and have continued to experience failed auctions since that time. As a result of thelack of significant observable ARS market activity since February 2008, we use a discounted cash flow methodology to value these securities asopposed to valuing them at their par value. Our valuation analysis considers, among other items, assumptions that market participants would use in theirestimates of fair value, such as the collateral underlying the security, the creditworthiness of the issuer and any associated guarantees, credit ratings ofthe security by the major securities rating agencies, the ability or inability to sell the investment in an active market79 December 31, 2011 2010 $ Change % Change Cash and cash equivalents $63,474 $112,646 $(49,172) -44%Short-term investments 148,703 147,619 1,084 1%Long-term investments 17,527 33,597 (16,070) -48% Total $229,704 $293,862 $(64,158) -22% Table of Contentsor to the issuer, the timing of expected future cash flows, and the expectation of the next time the security will have a successful auction or when callfeatures may be exercised by the issuer. We believe we will ultimately be able to liquidate our investments in ARS without significant loss prior to theirmaturity dates primarily due to the collateral securing most of our ARS. Our ARS balance has declined from a par value of $105.4 million atDecember 31, 2007 to a par value of $19.9 million at December 31, 2011 without the recognition of a material loss. However, it could take until finalmaturity of the ARS to realize the par value of our remaining ARS investments. In the event that we need to access our investments in these securities,we will not be able to do so until a future auction is successful, the issuer calls the security pursuant to a mandatory tender or redemption prior tomaturity, a buyer is found outside the auction process, or the securities mature. As of December 31, 2011, we held a total of $17.5 million in fair market value of ARS, reflecting a reduction of approximately $2.4 million fromthe par value of these securities of approximately $19.9 million. As of December 31, 2011, all of our ARS were municipal bonds with an auction resetfeature and were classified as available-for-sale. The majority of our ARS portfolio was rated AAA as of December 31, 2011 by at least one of themajor securities rating agencies and was primarily collateralized by student loans substantially guaranteed by the U.S. government under the FederalFamily Education Loan Program. As of December 31, 2011, all of our ARS continue to pay interest according to their stated terms. The ongoing uncertainty in the global financial markets has had an adverse impact on financial market activities world-wide, resulting in, amongother things, volatility in security prices, periodic diminished liquidity and credit availability, ratings downgrades of certain investments and decliningvaluations of others. Although we invest our excess cash in investment grade securities, there can be no assurance that changing circumstances will notaffect our future financial position, results of operations or liquidity.Year Ended December 31, 2011Cash flows from operating activities During 2011, our use of $63.8 million of cash in operations was attributable principally to our net loss of approximately $77.1 million, adjusted forthe following:•Non-cash operating items of $15.2 million including equity-based compensation expense, depreciation, income tax benefit, and othernon-cash items; •A decrease in deferred revenues and other long-term liabilities of $6.7 million, which reflects timing differences between the receipt andpayment of cash associated with certain transactions and the recognition of such amounts in our results of operations; •A combined decrease of $3.1 million in accounts receivable, prepaid assets and inventories; and •An increase of $1.7 million in accounts payable and accrued expenses. Our net loss of $77.1 million was primarily the result of commercialization expenses, including marketing and promotion costs, compensation andother expenses, research and development costs, including costs associated with our clinical trials, and general and administrative costs, partially offsetby net product and collaboration revenues.Cash flows from investing activities Cash provided by investing activities was $14.0 million during 2011 and was primarily attributable to proceeds from the sales and maturities of ourinvestments partially offset by purchases of investments.80Table of ContentsYear Ended December 31, 2010Cash flows from operating activities During 2010, our use of $1.5 million of cash in operations was attributable principally to our net loss of approximately $81.2 million, adjusted forthe following:•The receipt of $60.0 million in an upfront payment we received from Takeda during 2010; •A decrease of $9.5 million in accounts receivable, excluding the change in receivables generated from a launch incentive program; •$8.9 million we received in connection with Feraheme sales deferred under a launch incentive program; •Additional costs of $6.7 million capitalized to inventory as of December 31, 2010; •An increase of $2.7 million in accounts payable and accrued expenses, including an increase of $4.4 million of reserves for commercialdiscounts, rebates and returns; and •Non-cash operating items of $18.5 million including equity-based compensation expense, depreciation, income tax benefit, and othernon-cash items. Our net loss of $81.2 million was primarily the result of commercialization expenses, including marketing and promotion costs, compensation andother expenses, research and development costs, including costs associated with our clinical trials, and general and administrative costs, partially offsetby net product and collaboration revenues.Cash flows from investing activities Cash used in investing activities was $103.7 million during 2010 and was primarily attributable to the net purchase of investments, including theuse of proceeds received from our January 2010 public offering of common stock.Cash flows from financing activities Cash provided by financing activities was $167.8 million in 2010. In January 2010, we sold 3.6 million shares of our common stock at a publicoffering price of $48.25 per share, which resulted in net proceeds to us of approximately $165.6 million.Contractual Obligations In July 2011, we entered into an Agreement and Plan of Merger and Reorganization, or the Merger Agreement, with Alamo Acquisition Sub, Inc.,a Delaware corporation and our wholly-owned subsidiary, and Allos, which was amended in August 2011. In October 2011, pursuant to the terms ofthe Merger Agreement, we terminated the Merger Agreement and paid Allos an expense reimbursement fee of $2.0 million in connection with suchtermination, which was recorded as an expense in our consolidated statement of operations in 2011. Under the terms of the Merger Agreement, we arerequired to pay Allos a termination fee of $14.0 million (less the $2.0 million expense reimbursement fee we paid Allos in October 2011) in the eventthat we enter into certain acquisition transactions on or prior to October 21, 2012 or such a transaction is consummated on or before such date. We currently have no long-term debt obligations or capital lease obligations. Our contractual obligations primarily consist of our obligations undernon-cancellable operating leases and other81Table of Contentspurchase obligations. Future lease obligations and purchase commitments, as of December 31, 2011, are as follows (in thousands):Operating and Facility Lease Obligations We have entered into certain operating leases, including leases of certain automobiles and certain laboratory and office equipment which expirethrough 2012. We lease approximately 90 automobiles for our field-based employees. This lease requires an initial minimum lease term of 12 monthsper automobile. We are responsible for certain disposal costs in the event of termination of the lease. In May 2008, we entered into a lease agreement for certain real property located at 100 Hayden Avenue, Lexington, Massachusetts for use as ourprincipal executive offices. The term of the lease began on May 22, 2008 and will continue until August 31, 2016 with two successive five yearextension terms at our option. The aggregate size of rentable floor area for the offices is 55,924 square feet, and the rent for the initial term commencedin February 2009. The lease requires us to pay rent as follows (in thousands): During any extension term, the base rent will be an amount agreed upon by us and the landlord. In addition to base rent, we are also required topay a proportionate share of the landlord's annual operating costs.Purchase Commitments During 2011, we entered into various agreements with third-parties for which we had remaining purchase commitments of approximately$3.3 million as of December 31, 2011. These agreements principally related to certain purchase orders for materials and testing as well as certainoutsourced commercial activities, information technology infrastructure and other operational activities.Other Funding Commitments As of December 31, 2011, we had several ongoing clinical studies in various clinical trial stages. Our most significant clinical trial expenditureswere to clinical research organizations, or CROs. The contracts with CROs are generally cancellable, with notice, at our option. We have recordedaccrued expenses in our consolidated balance sheet of approximately $7.5 million representing expenses incurred with these organizations as ofDecember 31, 2011, net of any amounts prepaid to these CROs.82 Payment due by period Total Less than1 year 1-3 years 3-5 years More than5 years Facility lease obligations $10,001 $2,065 $4,197 $3,739 $— Purchase commitments 3,282 3,049 233 — — Operating lease obligations, excluding facility lease 410 291 119 — — Total $13,693 $5,405 $4,549 $3,739 $— Period Minimum LeasePayments Year Ended December 31, 2012 $2,015 Year Ended December 31, 2013 2,071 Year Ended December 31, 2014 2,127 Year Ended December 31, 2015 2,183 Year Ended December 31, 2016 1,556 Total $9,952 Table of ContentsAs a result of our cancellation rights, we have not included these CRO contracts in the contractual obligations table above.Severance Arrangements We have entered into employment agreements or other arrangements with each of our executive officers and certain of our non-executiveemployees, which provide for salary continuation payments and, in certain instances, the acceleration of the vesting of certain equity awards to suchindividuals in the event that the individual is terminated other than for cause, as defined in the applicable employment agreements or arrangements. In November 2011, we initiated a corporate restructuring, including a workforce reduction plan, which included an approximate 25% reduction inpositions and the departure of our chief executive officer and chief commercial officer. In connection with the reduction in our workforce, in the fourthquarter of 2011 we recorded restructuring charges of approximately $3.5 million related primarily to employee severance and benefits. We expect thatthe majority of such amounts will be paid by the end of 2012.Indemnification Agreements In the course of operating our business, we have entered into a number of indemnification arrangements under which we may be required to makepayments to or on behalf of certain third parties including our directors, officers, and certain employees as well as certain other third parties with whomwe enter into agreements. For further discussion of how this may affect our business, refer to Note M of the Notes to Financial Statements included inPart II, Item 8 "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K.Legal Proceedings A purported class action complaint was originally filed on March 18, 2010 in the United States District Court for the District of Massachusetts,entitled Silverstrand Investments et. al. v. AMAG Pharm., Inc., et. al., Civil Action No. 1:10-CV-10470-NMG, and was amended on September 15,2010 and on December 17, 2010. The second amended complaint, or SAC, filed on December 17, 2010 alleged that we and our former President andChief Executive Officer, former Executive Vice President and Chief Financial Officer, our Board, and certain underwriters in our January 2010 offeringof common stock violated certain federal securities laws, specifically Sections 11 and 12(a)(2) of the Securities Act of 1933, as amended, and that ourformer President and Chief Executive Officer and former Executive Vice President and Chief Financial Officer violated Section 15 of such Act,respectively, by making certain alleged false and misleading statements and omissions in a registration statement filed in January 2010. The plaintiffsought unspecified damages on behalf of a purported class of purchasers of our common stock pursuant to our common stock offering on or aboutJanuary 21, 2010. On August 11, 2011, the Court issued an Opinion and Order dismissing the SAC in its entirety for failure to state a claim uponwhich relief could be granted. A separate Order of Dismissal was filed on August 15, 2011. On September 14, 2011, the plaintiffs filed a Notice ofAppeal to the United States Court of Appeals for the First Circuit, or the Court of Appeals. Plaintiffs' appeal brief was filed on February 1, 2012.Responding briefs are due on March 16, 2012 and the plaintiff's reply brief is due on March 16, 2012. The Court of Appeals has not yet scheduled oralargument for the appeal. In February 2010, we submitted to FINRA Dispute Resolution, Inc. an arbitration claim against our broker-dealer, Jefferies & Company, Inc., orJefferies, and two former Jefferies employees, Anthony J. Russo, and Robert A. D'Addario, who managed our cash account with Jefferies. We allegedthat Jefferies, Russo and D'Addario wrongfully marketed and sold a balance of $54.1 million in83Table of Contentsunsuitable ARS to us from September 2007 through January 2008. We further alleged that Jefferies, Russo and D'Addario misrepresented or omittedmaterial facts concerning the nature and risks of ARS, which were inconsistent with our investment objectives to maintain liquidity and flexibility in ourportfolio. In February 2012, we entered into a settlement agreement whereby the parties agreed to dismiss all claims related to this matter with prejudice. In addition, during 2010 we received correspondence from a supplier with whom we have an agreement related to the supply of a certain materialused in the production of certain of our products. This correspondence suggests that we are in violation of the terms of the agreement. We believe wehave good and valid arguments against such allegations, and we intend to vigorously defend against any such allegations.Off-Balance Sheet Arrangements As of December 31, 2011, we did not have any off-balance sheet arrangements as defined in Regulation S-K, Item 303(a)(4)(ii).ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK: As of December 31, 2011 and 2010, our investments equaled $166.2 million and $181.2 million, respectively, and were invested in corporate debtsecurities, U.S. treasury and government agency securities, commercial paper and auction rate securities. These investments are subject to interest raterisk and will fall in value if market interest rates increase. However, even if market interest rates for comparable investments were to increaseimmediately and uniformly by 50 basis points, or one-half of a percentage point, from levels at December 31, 2011 and 2010, this would have resultedin a hypothetical decline in fair value of our investments, excluding ARS, which are described below, of approximately $0.6 million and $0.7 million,respectively. As of December 31, 2011, we held a total of $17.5 million in fair market value of auction rate securities, reflecting an impairment of approximately$2.4 million compared to the par value of these securities of $19.9 million. For further discussion on the analysis of the sensitivity of assumptionsutilized in the valuation of our auction rate securities, please refer to our critical accounting policy on the valuation of investments included in Part II,Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" of this Annual Report on Form 10-K.84Table of ContentsITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA: Index To Consolidated Financial Statements85Management's Annual Report on Internal Control over Financial Reporting 86Report of Independent Registered Public Accounting Firm 87Consolidated Balance Sheets—as of December 31, 2011 and 2010 88Consolidated Statements of Operations—for the years ended December 31, 2011, 2010 and 2009 89Consolidated Statements of Comprehensive Loss—for the years ended December 31, 2011, 2010 and 2009 90Consolidated Statements of Stockholders' Equity—for the years ended December 31, 2011, 2010 and 2009 91Consolidated Statements of Cash Flows—for the years ended December 31, 2011, 2010 and 2009 92Notes to Consolidated Financial Statements 93Table of ContentsMANAGEMENT'S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING Management is responsible for establishing and maintaining adequate internal controls over financial reporting, as such term is defined inRule 13a-15(f) under the Securities and Exchange Act of 1934, as amended, or the Exchange Act. Because of its inherent limitations, internal controlover financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to therisk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures maydeteriorate. Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, weconducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control—IntegratedFramework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under the framework inInternal Control—Integrated Framework, management concluded that our internal control over financial reporting was effective as of December 31,2011. Our internal control over financial reporting as of December 31, 2011 has been audited by PricewaterhouseCoopers LLP, an independentregistered public accounting firm, as stated in their report which is included herein.86Table of ContentsREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of AMAG Pharmaceuticals, Inc. In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, comprehensive loss,stockholders' equity, and cash flows present fairly, in all material respects, the financial position of AMAG Pharmaceuticals, Inc. and its subsidiaries atDecember 31, 2011 and 2010, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2011in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in allmaterial respects, effective internal control over financial reporting as of December 31, 2011, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company's managementis responsible for these financial statements, for maintaining effective internal control over financial reporting and for its assessment of the effectivenessof internal control over financial reporting, included in the accompanying Management's Annual Report on Internal Control over Financial Reporting.Our responsibility is to express opinions on these financial statements and on the Company's internal control over financial reporting based on ourintegrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Thosestandards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of materialmisstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statementsincluded examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principlesused and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control overfinancial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists,and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performingsuch other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company'sinternal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail,accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions arerecorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts andexpenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) providereasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have amaterial effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of anyevaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that thedegree of compliance with the policies or procedures may deteriorate.Boston, MassachusettsMarch 8, 201287Table of ContentsAMAG Pharmaceuticals, Inc. Consolidated Balance Sheets (in thousands, except share and per share data) The accompanying notes are an integral part of these consolidated financial statements.88 As of December 31, 2011 2010 ASSETS Current assets: Cash and cash equivalents $63,474 $112,646 Short-term investments 148,703 147,619 Accounts receivable, net 5,932 5,785 Inventories 15,206 16,344 Receivable from collaboration 428 441 Prepaid and other current assets 6,288 7,949 Total current assets 240,031 290,784 Property, plant and equipment, net 9,206 11,235 Long-term investments 17,527 33,597 Restricted cash 460 460 Total assets $267,224 $336,076 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $3,732 $4,553 Accrued expenses 28,916 25,555 Deferred revenues 6,346 6,603 Total current liabilities 38,994 36,711 Long-term liabilities: Deferred revenues 45,196 51,292 Other long-term liabilities 2,438 2,787 Total liabilities 86,628 90,790 Commitments and contingencies (Notes M & N) Stockholders' equity: Preferred stock, par value $0.01 per share, 2,000,000 shares authorized; none issued — — Common stock, par value $0.01 per share, 58,750,000 shares authorized; 21,306,413and 21,137,428 shares issued and outstanding at December 31, 2011 and 2010,respectively 213 211 Additional paid-in capital 625,133 614,942 Accumulated other comprehensive loss (4,842) (7,028)Accumulated deficit (439,908) (362,839) Total stockholders' equity 180,596 245,286 Total liabilities and stockholders' equity $267,224 $336,076 Table of ContentsAMAG Pharmaceuticals, Inc. Consolidated Statements of Operations (in thousands, except per share data) The accompanying notes are an integral part of these consolidated financial statements.89 Years Ended December 31, 2011 2010 2009 Revenues: Product sales, net $52,813 $59,978 $16,482 License fee and other collaboration revenues 8,321 6,132 516 Royalties 115 135 180 Total revenues 61,249 66,245 17,178 Costs and expenses: Cost of product sales 10,531 7,606 1,013 Research and development expenses 58,140 54,462 36,273 Selling, general and administrative expenses 68,863 84,939 77,829 Restructuring expenses 3,508 2,224 — Total costs and expenses 141,042 149,231 115,115 Other income (expense): Interest and dividend income, net 1,747 1,741 3,154 (Losses) gains on investments, net (193) 408 942 Fair value adjustment of settlement rights — (788) (778) Total other income (expense) 1,554 1,361 3,318 Net loss before income taxes (78,239) (81,625) (94,619)Income tax benefit 1,170 472 1,268 Net loss $(77,069)$(81,153)$(93,351) Net loss per share: Basic and diluted $(3.64)$(3.90)$(5.46)Weighted average shares outstanding used to compute net loss per share: Basic and diluted 21,189 20,806 17,109 Table of ContentsAMAG Pharmaceuticals, Inc. Consolidated Statements of Comprehensive Loss (in thousands) The accompanying notes are an integral part of these consolidated financial statements.90 Years Ended December 31, 2011 2010 2009 Net loss $(77,069)$(81,153)$(93,351) Other comprehensive income (loss): Unrealized gains (losses) on securities: Holding gains (losses) arising during period, net of tax 1,980 497 2,029 Reclassification adjustment for (gains) losses included in net loss 206 400 5 Net unrealized gains (losses) on securities 2,186 897 2,034 Total comprehensive loss $(74,883)$(80,256)$(91,317) Table of ContentsAMAG Pharmaceuticals, Inc. Consolidated Statements of Stockholders' Equity (in thousands) Common Stock AdditionalPaid—inCapital AccumulatedDeficit AccumulatedOtherComprehensiveIncome (Loss) TotalStockholders'Equity Shares Amount Balance atDecember 31,2008 17,018 $170 $411,538 $(188,335)$(9,959)$213,414 Net sharesissued inconnectionwith theexercise ofstock optionsand restrictedstock units 304 3 4,044 — — 4,047 Shares issuedin connectionwithemployeestockpurchase plan 41 1 1,155 — — 1,156 Non-cashequity-basedcompensation — — 15,677 — — 15,677 Unrealizedgains onsecurities, netof tax of$1.1 million — — — — 2,034 2,034 Net loss — — — (93,351) — (93,351) Balance atDecember 31,2009 17,363 174 432,414 (281,686) (7,925) 142,977 Net sharesissued inconnectionwith theexercise ofstock optionsand restrictedstock units 132 1 1,336 — — 1,337 Shares issuedin connectionwithemployeestockThe accompanying notes are an integral part of these consolidated financial statements.91purchase plan 42 — 892 — — 892 Non-cashequity-basedcompensation — — 14,777 — — 14,777 Unrealizedgains onsecurities, netof tax of$0.5 million — — — — 897 897 Shares issuedin connectionwithfinancing, netof financingcosts of$8.1 million 3,600 36 165,523 — — 165,559 Net loss — — — (81,153) — (81,153) Balance atDecember 31,2010 21,137 211 614,942 (362,839) (7,028) 245,286 Net sharesissued inconnectionwith theexercise ofstock optionsand restrictedstock units 132 1 120 — — 121 Shares issuedin connectionwithemployeestockpurchase plan 37 1 507 — — 508 Non-cashequity-basedcompensation — — 9,564 — — 9,564 Unrealizedgains onsecurities, netof tax of$1.2 million — — — — 2,186 2,186 Net loss — — — (77,069) — (77,069) Balance atDecember 31,2011 21,306 $213 $625,133 $(439,908)$(4,842)$180,596 Table of ContentsAMAG Pharmaceuticals, Inc. Consolidated Statements of Cash Flows (in thousands) The accompanying notes are an integral part of these consolidated financial statements.92 Years Ended December 31, 2011 2010 2009 Cash flows from operating activities: Net loss $(77,069)$(81,153)$(93,351)Adjustments to reconcile net loss to net cash used in operating activities: Depreciation 2,536 2,405 1,913 Non-cash equity-based compensation expense 10,038 14,523 15,421 Non-cash income tax benefit (1,170) (481) (1,089)Amortization of premium/discount on purchased securities 3,639 1,679 490 Fair value adjustment of settlement rights — 788 778 Losses (gains) on investments, net 193 (408) (942)Changes in operating assets and liabilities: Accounts receivable, net (147) 21,565 (26,942)Inventories 1,506 (6,675) (9,063)Receivable from collaboration 13 (441) — Prepaid and other current assets 1,661 (2,477) (762)Accounts payable and accrued expenses 1,698 2,745 13,215 Deferred revenues (6,353) 46,697 9,682 Other long-term liabilities (349) (294) (68) Total adjustments 13,265 79,626 2,633 Net cash used in operating activities (63,804) (1,527) (90,718) Cash flows from investing activities: Proceeds from sales or maturities of available-for-sale investments 141,095 160,079 74,543 Purchase of available-for-sale investments (126,585) (262,597) (310)Capital expenditures (507) (1,223) (2,835)Change in restricted cash — — 61 Net cash provided by (used in) investing activities 14,003 (103,741) 71,459 Cash flows from financing activities: Proceeds from the exercise of stock options 121 1,337 4,047 Proceeds from the issuance of common stock, net of underwriting discountsand other expenses — 165,559 — Proceeds from the issuance of common stock under ESPP 508 892 1,156 Net cash provided by financing activities 629 167,788 5,203 Net(decrease) increase in cash and cash equivalents (49,172) 62,520 (14,056)Cash and cash equivalents at beginning of the year 112,646 50,126 64,182 Cash and cash equivalents at end of the year $63,474 $112,646 $50,126 Supplemental data: Non-cash investing activities: Accrued construction in process $— $— $272 Table of ContentsNotes to Consolidated Financial Statements A. Description of Business AMAG Pharmaceuticals, Inc., a Delaware corporation, was founded in 1981. We are a biopharmaceutical company focused on the developmentand commercialization of a therapeutic iron compound to treat iron deficiency anemia, or IDA. Our principal source of revenue is from the sale ofFeraheme® (ferumoxytol) Injection for Intravenous, or IV, use, which was approved for marketing in the U.S. in June 2009 by the U.S. Food andDrug Administration, or the FDA, for use as an IV iron replacement therapy for the treatment of IDA in adult patients with chronic kidney disease, orCKD. We market and sell Feraheme in the U.S. through our own commercial organization and began shipping Feraheme to our customers in July2009. In December 2011, Feraheme was granted marketing approval in Canada for use as an IV iron replacement therapy for the treatment of IDA inadult patients with CKD. Under our License, Development and Commercialization Agreement, or the Takeda Agreement, with Takeda PharmaceuticalCompany Limited, or Takeda, Takeda has an exclusive license to market and sell Feraheme in Canada. We expect Takeda to launch Feraheme inCanada in 2012. In addition, we are currently pursuing marketing applications for Feraheme in the European Union, or EU, and Switzerland for thetreatment of IDA in CKD patients. GastroMARK®, which is marketed and sold under the trade name Lumirem® outside of the U.S, is our oral contrast agent used for delineating thebowel in magnetic resonance imaging, and is approved and marketed in the U.S., Europe and other countries through our licensees. We are subject to risks common to companies in the pharmaceutical industry including, but not limited to, our sole dependence on the success ofFeraheme, our potential inability to become profitable in the future, the potential development of significant safety or drug interaction problems withrespect to Feraheme, uncertainties regarding market acceptance of Feraheme, uncertainties related to patient insurance coverage and third-partyreimbursement for Feraheme, uncertainties related to the impact of current and future healthcare initiatives and legislation, competition in our industry,uncertainties related to our recent publicly announced process of evaluating strategic alternatives, our limited experience commercializing anddistributing a pharmaceutical product, our dependence on key personnel, our reliance on our licensees to commercialize Feraheme in certain territoriesoutside of the U.S., any adverse results from our recent corporate restructuring, our potential inability to operate our manufacturing facilities incompliance with current good manufacturing practices, our potential inability to obtain raw or other materials and manufacture sufficient quantities ofFeraheme, uncertainty of the regulatory approval process for the broader Feraheme indication, for any indications outside of the U.S. or for potentialalternative manufacturing facilities and processes, the potential fluctuation of our operating results, our reliance on a limited number of customers,potential differences between actual future results and the estimates or assumptions used by us in preparation of our consolidated financial statements,the volatility of our stock price, our potential inadvertent failure to comply with reporting and payment obligations under government pricing programs,our potential inadvertent failure to comply with the regulations of the FDA or other federal, state or foreign government agencies, uncertainties related tothe actions of activist stockholders, uncertainties related to the protection of proprietary technology, potential product liability, potential legislative andregulatory changes, and potential costs and liabilities associated with pending or future litigation. Throughout this Annual Report on Form 10-K, AMAG Pharmaceuticals, Inc. and our consolidated subsidiaries are collectively referred to as "theCompany," "we," "us," or "our."93Table of ContentsB. Summary of Significant Accounting PoliciesUse of Estimates and Assumptions The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of Americarequires management to make certain estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and therelated disclosure of contingent assets and liabilities. The most significant estimates and assumptions are used in, but are not limited to, revenuerecognition related to product sales and collaboration agreements, product sales allowances and accruals, assessing investments for potential other-than-temporary impairment and determining values of investments, reserves for doubtful accounts, accrued expenses, reserves for legal matters, income taxesand equity-based compensation expense. Actual results could differ materially from those estimates.Principles of Consolidation The accompanying consolidated financial statements include our accounts and the accounts of our wholly-owned subsidiaries, Alamo AcquisitionSub, Inc., AMAG Europe Limited, and AMAG Securities Corporation. Alamo Acquisition Sub, Inc. was incorporated in Delaware in July 2011.AMAG Europe Limited was incorporated in October 2009 in London, England. AMAG Securities Corporation is a Massachusetts corporation whichwas incorporated in August 2007. All intercompany account balances and transactions between the companies have been eliminated.Cash and Cash Equivalents Cash and cash equivalents consist principally of cash held in commercial bank accounts, money market funds and U.S. Treasury securities havingan original maturity of less than three months. At December 31, 2011, substantially all of our cash and cash equivalents were held in either commercialbank accounts or money market funds.Investments We account for and classify our investments as either "available-for-sale," "trading," or "held-to-maturity," in accordance with current guidancerelated to the accounting and classification of certain investments in debt and equity securities. The determination of the appropriate classification by usis based on a variety of factors, including management's intent at the time of purchase. As of December 31, 2011 and 2010, all of our investments wereclassified as available-for-sale securities. Available-for-sale securities are those securities which we view as available for use in current operations, if needed. We generally classify ouravailable-for-sale securities as short-term investments, even though the stated maturity date may be one year or more beyond the current balance sheetdate. Available-for-sale investments are stated at fair value with their unrealized gains and losses included as a separate component of stockholders'equity entitled "Accumulated other comprehensive loss," until such gains and losses are realized or until an unrealized loss is considered other-than-temporary. Due to our belief that the market for auction rate securities, or ARS, will likely take in excess of twelve months to fully recover, we haveclassified our ARS as long-term investments. We recognize and report other-than-temporary impairments of our debt securities in accordance with current accounting guidance, which requiresthat for debt securities with a decline in fair value below amortized cost basis, an other-than-temporary impairment exists if (i) we have the intent to sellthe security or (ii) it is more likely than not that we will be required to sell the security prior to recovery of its amortized cost basis. If either of theseconditions is met, we recognize the difference between the amortized cost of the security and its fair value at the impairment measurement date in ourconsolidated statement of operations. If neither of these conditions is met, we must perform94Table of Contentsadditional analyses to evaluate whether the unrealized loss is associated with the creditworthiness of the security rather than other factors, such asinterest rates or market factors. These factors include evaluation of the security, issuer and other factors such as the duration of the period that, andextent to which, the fair value was less than cost basis, the financial health of and business outlook for the issuer, including industry and sectorperformance, operational and financing cash flow factors, overall market conditions and trends, underlying collateral, whether we have a favorablehistory in redeeming similar securities at prices at or above fair value, and credit ratings with respect to our investments provided by investments ratingsagencies. If we determine from this analysis that we do not expect to receive cash flows sufficient to recover the entire amortized cost of the security, acredit loss exists. In this situation, the impairment is considered other-than-temporary and is recognized in our consolidated statement of operations.Fair Value of Financial Instruments Under current accounting standards, fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (anexit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on themeasurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservableinputs. Current accounting guidance establishes a hierarchy used to categorize how fair value is measured and which is based on three levels of inputs, ofwhich the first two are considered observable and the third unobservable, as follows:Level 1—Quoted prices in active markets for identical assets or liabilities.Level 2—Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quotedprices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the fullterm of the assets or liabilities.Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. We hold certain assets that are required to be measured at fair value on a recurring basis, including our cash equivalents and short- and long-terminvestments. The following tables represent the fair value hierarchy as of December 31, 2011 and 2010 for those assets that we measure at fair value ona recurring basis (in thousands):95 Fair Value Measurements at December 31, 2011 Using: Total Quoted Prices inActive Markets forIdentical Assets(Level 1) Significant OtherObservable Inputs(Level 2) SignificantUnobservableInputs(Level 3) Money market funds $55,995 $55,995 $— $— Corporate debt securities 94,626 — 94,626 — U.S. treasury and government agencysecurities 48,086 — 48,086 — Commercial paper 5,991 — 5,991 — Auction rate securities 17,527 — — 17,527 $222,225 $55,995 $148,703 $17,527 Table of Contents With the exception of our ARS, which are valued using Level 3 inputs, as discussed below, and our money market funds, the fair value of ourinvestments is primarily determined from independent pricing services which use Level 2 inputs to determine fair value. Independent pricing servicesnormally derive security prices from recently reported trades for identical or similar securities, making adjustments based upon other significantobservable market transactions. At the end of each reporting period, we perform quantitative and qualitative analyses of prices received from thirdparties to determine whether prices are reasonable estimates of fair value. After completing our analyses, we did not adjust or override any fair valuemeasurements provided by our pricing services as of either December 31, 2011 or 2010. In addition, there were no transfers or reclassifications of anysecurities between Level 1 and Level 2 during either of the years ended December 31, 2011 and 2010. We also analyze when the volume and level of activity for an asset or liability have significantly decreased and when circumstances indicate that atransaction may not be considered orderly. In order to determine whether the volume and level of activity for an asset or liability have significantlydecreased, we assess current activity as compared to normal market activity for the asset or liability. We rely on many factors such as trading volume,trading frequency, the levels at which market participants indicate their willingness to buy and sell our securities, as reported by market participants, andcurrent market conditions. Using professional judgment and experience, we evaluate and weigh the relevance and significance of all applicable factors todetermine if there has been a significant decrease in the volume and level of activity for an asset, group of similar assets or liabilities. Similarly, in orderto identify transactions that are not orderly, we take into consideration the activity in the market which can influence the determination and occurrence ofan orderly transaction. Also, we inquire as to whether there may have been restrictions on the marketing of the security to a single or limited number ofparticipants. Where possible, we assess the financial condition of the seller to determine whether observed transactions may have been forced. If there isa significant disparity between the trading price for a security held by us as compared to the trading prices of similar recent transactions, we considerwhether this disparity is an indicator of a disorderly trade. Using professional judgment and experience, we evaluate and weigh the relevance andsignificance of all applicable factors to determine if the evidence suggests that a transaction or group of similar transactions is not orderly. Based uponthese procedures, we determined that market activity for our non-ARS assets appeared normal and that transactions did not appear disorderly as ofDecember 31, 2011 and 2010.96 Fair Value Measurements at December 31, 2010 Using: Total Quoted Prices inActiveMarkets forIdentical Assets(Level 1) Significant OtherObservable Inputs(Level 2) SignificantUnobservableInputs(Level 3) Money market funds $110,238 $110,238 $— $— Corporate debt securities 83,768 — 83,768 — U.S. treasury and government agencysecurities 50,925 — 50,925 — Foreign government securities 2,431 — 2,431 — Commercial paper 10,495 — 10,495 — Auction rate securities 33,597 — — 33,597 $291,454 $110,238 $147,619 $33,597 Table of Contents The following table provides a rollforward of our assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3)for the years ended December 31, 2011 and 2010 (in thousands): Gains and losses (realized or unrealized) included in earnings in the table above are reported in other income (expense) in our consolidatedstatement of operations.Inventories Inventories are stated at the lower of cost or market (net realizable value), with approximate cost being determined on a first-in, first-out basis. Prior to initial approval from the FDA or other regulatory agencies, we expense costs relating to the production of inventory in the period incurred.After such time as the product receives initial regulatory approval, we begin to capitalize the inventory costs related to the product. Prior to the FDAapproval of Feraheme for commercial sale in June 2009, all production costs related to Feraheme were expensed to research and development.Subsequent to receiving FDA approval, costs related to the production of Feraheme are capitalized to inventory, including the costs of convertingpreviously existing raw or other materials to inventory and vialing, labeling, and packaging inventory manufactured prior to approval whose costs hadalready been recorded as research and development expense. We continue to expense costs associated with clinical trial material as research anddevelopment expense.Property, Plant and Equipment Property, plant and equipment are recorded at cost and depreciated when placed into service using the straight-line method, based on the followingestimated useful lives: buildings—40 years; building improvements—over the shorter of the remaining useful life of the building or the life of theimprovement; laboratory and production equipment—5 years; and furniture and fixtures—5 years. The furniture, fixtures, and leasehold improvementsassociated with our facility lease are being depreciated over the shorter of their useful lives or the remaining life of the original lease (excluding optionallease renewal terms). Costs for capital assets not yet placed in service are capitalized on our balance sheets, and the cost of maintenance and repairs is expensed asincurred. Upon sale or other disposition of property and equipment, the cost and related depreciation are removed from the accounts and any resultinggain or97 December 31, 2011 December 31, 2010 Balance at beginning of period $33,597 $58,328 Transfers to Level 3 — — Total gains (losses) (realized or unrealized): Included in earnings (210) (390)Included in other comprehensive income (loss) 3,790 1,184 Purchases, issuances, sales and settlements: Purchases — — Issuances — — Sales — — Settlements (19,650) (25,525) Balance at end of period $17,527 $33,597 The amount of total gains (losses) for the period included in earnings attributable to the change in unrealized gains (losses) relating to assets still held at end of period $— $— Table of Contentsloss is charged to our consolidated statement of operations. Currently, our long-lived assets consist entirely of property and equipment. Long-livedassets to be held and used are evaluated for impairment whenever events or changes in circumstances indicate that the carrying value of the asset maynot be recoverable. Determination of recoverability is based on an estimate of undiscounted future cash flows resulting from the use of the asset (assetgroup) and its eventual disposition. In the event such cash flows are not expected to be sufficient to recover the carrying amount of the assets, the assetsare written down to their estimated fair values.Patents We expense all patent-related costs as incurred.Research and Development Expenses Research and development expenses include external expenses, such as costs of clinical trials, regulatory filing fees, contract research anddevelopment expenses, certain manufacturing research and development costs, consulting and professional fees and expenses, and internal expenses,such as compensation of employees engaged in research and development activities, the manufacture of product needed to support research anddevelopment efforts, related costs of facilities, and other general costs related to research and development. Manufacturing costs are expensed asincurred until a product has received the necessary initial regulatory approval.Advertising Costs Advertising costs are expensed as incurred and are included in selling, general and administrative expenses in our consolidated statement ofoperations. Advertising costs, including promotional expenses and costs related to trade shows were $3.1 million, $7.4 million and $7.5 million for theyears ended December 31, 2011, 2010 and 2009, respectively.Revenue RecognitionNet Product Sales We recognize net product sales in accordance with current accounting guidance related to the recognition, presentation and disclosure of revenue infinancial statements, which outlines the basic criteria that must be met to recognize revenue and provides guidance for disclosure of revenue in financialstatements. We recognize revenue when:•Persuasive evidence of an arrangement exists; •Delivery of product has occurred or services have been rendered; •The sales price charged is fixed or determinable; and •Collection is reasonably assured. We record product sales allowances and accruals related to prompt payment discounts, chargebacks, governmental and other rebates, distributor,wholesaler and group purchasing organization, or GPO, fees, and product returns as a reduction of revenue in our consolidated statement of operationsat the time product sales are recorded. Calculating these gross-to-net sales adjustments involves estimates and judgments based primarily on actualFeraheme sales data, forecasted customer buying patterns blended with historical experience of products similar to Feraheme sold by others, and othermarket research. In addition, we also monitor our distribution channel to determine whether additional allowances or accruals are required based oninventory in our sales channel. An98Table of Contentsanalysis of our product sales allowances and accruals for the years ended December 31, 2011, 2010 and 2009 is as follows (in thousands): Product sales allowances and accruals are primarily comprised of both direct and indirect fees, discounts and rebates and provisions for estimatedproduct returns. Direct fees, discounts and rebates are contractual fees and price adjustments payable to wholesalers, specialty distributors and othercustomers that purchase products directly from us. Indirect fees, discounts and rebates are contractual price adjustments payable to healthcare providersand organizations, such as certain physicians, clinics, hospitals, GPOs, and dialysis organizations that typically do not purchase products directly fromus but rather from wholesalers and specialty distributors. In accordance with guidance related to accounting for fees and consideration given by avendor to a customer, including a reseller of a vendor's products, these fees, discounts and rebates are presumed to be a reduction of the selling price ofFeraheme. Product sales allowances and accruals are based on definitive contractual agreements or legal requirements (such as Medicaid laws andregulations) related to the purchase and/or utilization of the product by these entities and are recorded in the same period that the related revenue isrecognized. We estimate product sales allowances and accruals using either historical, actual and/or other data, including estimated patient usage,applicable contractual rebate rates, contract performance by the benefit providers, other current contractual and statutory requirements, historical marketdata based upon experience of Feraheme and other products similar to Feraheme, specific known market events and trends such as competitive pricingand new product introductions and current and forecasted customer buying patterns and inventory levels, and the shelf life of Feraheme. As part of thisevaluation, we also review changes to federal and other legislation, changes to rebate contracts, changes in the level of discounts, and changes in productsales trends. Although allowances and accruals are recorded at the time of product sale, certain rebates are typically paid out, on average, up to sixmonths or longer after the sale.Classification of Product Sales Allowances and Accruals Allowances against receivable balances primarily relate to prompt payment discounts, provider chargebacks and certain government agencychargebacks and are recorded at the time of sale, resulting in a reduction in product sales revenue or deferred revenue and the reporting of product salesreceivables net of allowances. Accruals related to Medicaid and provider volume rebates, wholesaler and distributor fees, GPO fees, other discounts tohealthcare providers and product returns are recorded at the time of sale, resulting in a reduction in product sales revenue and the recording of anincrease in accrued expenses.Discounts We typically offer a 2% prompt payment discount to our customers as an incentive to remit payment in accordance with the stated terms of theinvoice. Because we anticipate that those customers99 Years Ended December 31, 2011 2010 2009 Product sales allowances and accruals Discounts and chargebacks $13,851 $5,113 $804 Government and other rebates 8,544 16,374 4,329 Medicaid rebate reserve adjustment (2,532) (599) — Returns 1,259 1,334 463 Total product sales allowances and accruals $21,122 $22,222 $5,596 Total gross product sales $73,935 $82,200 $22,078 Total product sales allowances and accruals as a percent of total gross productsales 29% 27% 25%Table of Contentswho are offered this discount will take advantage of the discount, we accrue 100% of the prompt payment discount, based on the gross amount of eachinvoice, at the time of sale. We adjust the accrual quarterly to reflect actual experience.Chargebacks Chargeback reserves represent our estimated obligations resulting from the difference between the prices at which we sell Feraheme to wholesalersand the sales price ultimately paid to wholesalers under fixed price contracts by third-party payors, including governmental agencies. We determine ourchargeback estimates based on actual Feraheme sales data and forecasted customer buying patterns. Actual chargeback amounts are determined at thetime of resale to the qualified healthcare provider, and we generally issue credits for such amounts within several weeks of receiving notification fromthe wholesaler. Estimated chargeback amounts are recorded at the time of sale, and we adjust the allowance quarterly to reflect actual experience.Governmental and Other Rebates Governmental and other rebate reserves relate to our reimbursement arrangements with state Medicaid programs or performance rebate agreementswith certain classes of trade. We determine our estimates for Medicaid rebates based on market research data related to utilization rates by various end-users and actual Feraheme sales data and forecasted customer buying patterns blended with historical experience of products similar to Feraheme soldby others. Due to the extended time period between the sale of Feraheme and our receipt of the related Medicaid rebate claim, which can be over a year,we currently have limited actual claims payment data, and therefore are not able to solely rely on our actual Feraheme claims experience. In estimatingthese reserves, we provide for a Medicaid rebate associated with both those expected instances where Medicaid will act as the primary insurer as well asin those instances where we expect Medicaid will act as the secondary insurer. For rebates associated with reaching defined performance goals, wedetermine our estimates using actual Feraheme sales data and forecasted customer buying patterns. Rebate amounts generally are invoiced quarterly andare paid in arrears, and we expect to pay such amounts within several weeks of notification by the Medicaid or provider entity. We adjust the accrualquarterly to reflect actual rebate experience and estimated future claims. During 2011, we revised our estimated Medicaid utilization based on actual rebate claims received since the 2009 launch of Feraheme, ourexpectations of state level activity, and estimated rebate claims not yet submitted, which resulted in a $2.5 million reduction of our estimated Medicaidrebate reserve related to Feraheme sales from 2009 and 2010. The reduction in our estimated Medicaid rebate reserve had an impact of $0.12 per basicand diluted share for 2011. If we determine in future periods that our actual rebate experience is not indicative of expected claims or if other factorsaffect estimated claims rates, we may be required to change our current estimated Medicaid accumulated reserve, which would affect our earnings in theperiod of the change in estimate and could be significant.Distributor/Wholesaler and Group Purchasing Organization Fees Fees under our arrangements with distributors and wholesalers are usually based upon units of Feraheme purchased during the prior month orquarter and are usually paid by us within several weeks of our receipt of an invoice from the wholesaler or distributor, as the case may be. Fees underour arrangements with GPOs are usually based upon member purchases during the prior quarter and are generally billed by the GPO within 30 daysafter period end. Current accounting standards related to consideration given by a vendor to a customer, including a reseller of a vendor's products,specify that cash consideration given by a vendor to a customer is presumed to be a reduction of the selling price of the vendor's products or servicesand therefore should be characterized as a reduction of revenue. Consideration should be characterized as a cost incurred if we receive, or will receive,an identifiable100Table of Contentsbenefit (goods or services) in exchange for the consideration and we can reasonably estimate the fair value of the benefit received. Because the fees wepay to wholesalers do not meet the foregoing conditions to be characterized as a cost, we have characterized these fees as a reduction of revenue. Wegenerally pay such amounts within several weeks of our receipt of an invoice from the distributor, wholesaler, or GPO. Accordingly, we accrue theestimated fee due, based on the gross amount of each invoice to the customer, at the time of sale. We adjust the accrual quarterly to reflect actualexperience.Product Returns Consistent with industry practice, we generally offer our distributors and wholesaler customers a limited right to return product purchased directlyfrom us which is principally based upon the product's expiration date which, once packaged, is currently four years in the U.S. We currently estimateproduct returns based upon historical trends in the pharmaceutical industry and trends for products similar to Feraheme sold by others. Due to theextended period between the sale of Feraheme and when the limited right of return is allowable, which can be several years, we currently have limitedactual returns data, and therefore are not able to solely rely on our actual returns experience. We track actual returns by individual production lots.Returns on lots eligible for credits under our returned goods policy are monitored and compared with historical return trends and rates. In addition to the factors discussed above, we consider several additional factors in our estimation process, including our internal sales forecastsand inventory levels in the distribution channel. We expect that wholesalers will not stock significant inventory due to the product's cost and expense tostore. Based on the level of inventory in the distribution channel, we determine whether an adjustment to the sales return reserve is appropriate. If necessary, our estimated rate of returns may be adjusted for historical return patterns as they become available and for known or expectedchanges in the marketplace. To date, returns and adjustments to our estimated rate of returns have been minimal. However, Feraheme is still early in itsproduct lifecycle and historical returns experience may not be indicative of Feraheme's future rate of returns. A future revision to our product returnsestimate would result in a corresponding change to our net product sales in the period in which the change is made and could be significant.License Fee and Other Collaboration Revenues The terms of product development and commercialization agreements entered into between us and our collaborative licensees may include non-refundable license fees, payments based on the achievement of certain milestones and performance goals, reimbursement of certain out-of-pocket costs,payment for manufacturing services, and royalties on product sales. We recognize license fee and research and development revenue under collaborativearrangements over the term of the applicable agreements using a proportional performance model, if practical. Otherwise, we recognize such revenue ona straight-line basis. Under this model, revenue is generally recognized in an amount equal to the lesser of the amount due under the agreements or anamount based on the proportional performance to date. In cases where project costs or other performance metrics are not estimable but there is anestablished contract period, revenues are recognized on a straight-line basis over the term of the relevant agreement. In cases where we are reimbursedfor certain research and development costs associated with our collaboration agreements and where we are acting as the principal in carrying out theseservices, any reimbursement payments are recorded in license fee and other collaboration revenues in our consolidated statement of operations to matchthe costs that we incur during the period in which we perform those services. Nonrefundable payments and fees are recorded as deferred revenue uponreceipt and may require deferral of revenue recognition to future periods.101Table of ContentsRoyalty Revenues We receive royalty revenues under license and marketing agreements with several companies that sell products that we developed. The licenseagreements provide for the payment of royalties to us based on sales of the licensed product. As we do not have the ability to reliably estimate ourroyalties in any given period, we currently recognize royalty revenue when cash payments are received.Multiple Element Arrangements and Milestone Payments We evaluate revenue from arrangements that have multiple elements to determine whether the components of the arrangement represent separateunits of accounting as defined in the accounting guidance related to revenue arrangements with multiple deliverables. Under current accountingguidance, which governs any agreements that contain multiple elements that are either entered into or modified subsequent to January 1, 2011,companies are required to establish the fair value of undelivered products and services based on a separate revenue recognition process usingmanagement's best estimate of the selling price for an undelivered item when there is no other means to determine the fair value of that undelivered item.Unmodified agreements entered into prior to January 1, 2011, including our agreements with Takeda and 3SBio, Inc., or 3SBio, are accounted for underprevious accounting guidance, which provides that an element of a contract can be accounted for separately if the delivered elements have standalonevalue and the fair value of all undelivered elements is determinable. If an element is considered to have standalone value but the fair value of theundelivered items cannot be determined, all elements of the arrangement are recognized as revenue as a single unit of accounting over the period ofperformance for such undelivered items or services. When multiple deliverables are combined and accounted for as a single unit of accounting, we base our revenue recognition pattern on the last to bedelivered element. Revenue is recognized using either a proportional performance or straight-line method, depending on whether we can reasonablyestimate the level of effort required to complete our performance obligations under an arrangement and whether such performance obligations areprovided on a best-efforts basis. To the extent we cannot reasonably estimate our performance obligations, we recognize revenue on a straight-line basisover the period we expect to complete our performance obligations. Our collaboration agreements may entitle us to additional payments upon the achievement of performance-based milestones. If a milestone involvessubstantive effort on our part and its achievement is not considered probable at the inception of the collaboration, we recognize the milestoneconsideration as revenue in the period in which the milestone is achieved only if it meets the following additional criteria: (1) the milestone considerationreceived is commensurate with either the level of effort required to achieve the milestone or the enhancement of the value of the item delivered as a resultof a specific outcome resulting from our performance to achieve the milestone; (2) the milestone is related solely to past performance; and (3) themilestone consideration is reasonable relative to all deliverables and payment terms in the arrangement. For milestones that do not meet the above criteriaand are therefore not considered substantive milestones, we recognize that portion of the milestone payment equal to the percentage of the performanceperiod completed at the time the milestone is achieved and the above conditions are met. The remaining portion of the milestone will be recognized overthe remaining performance period using a proportional performance or straight-line method.Shipping and Handling Costs We utilize a third-party logistics provider, which is a subsidiary of one of our distribution customers, to provide us with various shipping andhandling services related to sales of Feraheme. Current accounting standards related to consideration given by a vendor to a customer, including areseller of a vendor's products, specify that cash consideration given by a vendor to a customer is102Table of Contentspresumed to be a reduction of the selling price of the vendor's products or services and therefore should be characterized as a reduction of revenue.However, that presumption is overcome and the consideration should be characterized as a cost incurred if both of the following conditions are met:•We receive, or will receive, an identifiable benefit (goods or services) in exchange for the consideration; and •We can reasonably estimate the fair value of the benefit received. Since both of the above conditions were met with respect to the costs we incurred for shipping and handling services, we have recorded$0.1 million, $0.2 million and $0.1 million as a selling, general and administrative expense during the years ended December 31, 2011, 2010 and 2009,respectively.Equity-Based Compensation Under the fair value recognition guidance of equity-based compensation accounting rules, equity-based compensation cost is generally required tobe measured at the grant date (based upon an estimate of the fair value of the compensation granted) and recorded to expense over the requisite serviceperiod, which generally is the vesting period. Because equity-based compensation expense is based on awards ultimately expected to vest, we mustmake certain judgments about whether employees and directors will complete the requisite service period. Accordingly, we have reduced thecompensation expense being recognized for estimated forfeitures. Under the current accounting guidance, forfeitures are estimated at the time of grantand revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Forfeitures are estimated based upon historicalexperience. If factors change and we employ different assumptions in future periods, the compensation expense that we record in the future may differsignificantly from what we have recorded in the current period. We estimate the fair value of equity-based compensation involving stock options based on the Black-Scholes option pricing model. We estimate thefair value of our restricted stock units whose vesting is contingent upon market conditions using the Monte-Carlo simulation model. These modelsrequire the input of several factors such as the expected option term, the expected risk-free interest rate over the expected option term, the expectedvolatility of our stock price over the expected option term, and the expected dividend yield over the expected option term and are subject to variousassumptions. The fair value of awards whose fair values are calculated using the Black-Scholes option pricing model is generally being amortized on astraight-line basis over the requisite service period and is recognized based on the proportionate amount of the requisite service period that has beenrendered during each reporting period. The fair value of awards with market conditions is being amortized based upon the estimated derived serviceperiod. We believe our valuation methodologies are appropriate for estimating the fair value of the equity awards we grant to our employees anddirectors. Our equity award valuations are estimates and thus may not be reflective of actual future results or amounts ultimately realized by recipients ofthese grants. These amounts, and the amounts applicable to future quarters, are also subject to future quarterly adjustments based upon a variety offactors, which include, but are not limited to, changes in estimated forfeiture rates and the issuance of new equity-based awards. The fair value ofrestricted stock units granted to our employees and directors is determined based upon the quoted closing market price per share on the date of grant,adjusted for assumed forfeitures. As with any accounting policy that applies judgments and estimates, actual results could significantly differ from thoseestimates which could result in a material adverse impact to our financial results.Income Taxes Deferred tax assets and deferred tax liabilities are recognized based on temporary differences between the financial reporting and tax basis of assetsand liabilities using future enacted rates. A103Table of Contentsvaluation allowance is recorded against deferred tax assets if it is more likely than not that some or all of our deferred tax assets will not be realized.Concentrations and Significant Customer Information Financial instruments which potentially subject us to concentrations of credit risk consist principally of cash, cash equivalents, investments, andaccounts receivable. As of December 31, 2011, our cash, cash equivalents and investments amounted to approximately $229.7 million. We currentlyinvest our excess cash primarily in U.S. government and agency money market funds, and investments in corporate debt securities, U.S. treasury andgovernment agency securities, commercial paper and ARS. As of December 31, 2011 we had approximately $56.0 million of our total $63.5 millioncash and cash equivalents balance invested in institutional money market funds, of which $31.8 million was invested in a single fund, which iscollateralized solely by U.S. treasury and government agency securities. Our operations are located solely within the U.S. We are focused principally on developing, manufacturing, and commercializing Feraheme. Weperform ongoing credit evaluations of our customers and generally do not require collateral. The following table sets forth customers who represented10% or more of our total revenues for the years ended December 31, 2011, 2010 and 2009. In addition, approximately 35% of our end-user demand in 2011 was generated by members of a single GPO with which we have contracted.Revenues from customers outside of the U.S. amounted to approximately 14% and 10% of our total revenues for the years ended December 31, 2011and 2010, respectively, and were principally related to collaboration revenue recognized in connection with our collaboration agreement with Takeda,which is based in Japan. Revenues for the year ended December 31, 2009 from customers outside of the U.S., principally in France, amounted to 2% ofour total revenues.Comprehensive Income (Loss) The current accounting guidance related to comprehensive income (loss) requires us to display comprehensive loss and its components as part ofour consolidated financial statements. Our comprehensive loss consists of net loss and other comprehensive income (loss). Other comprehensiveincome (loss) includes changes in equity that are excluded from net loss, which for all periods presented related to unrealized holding gains and losseson available-for-sale investments, net of tax.104 Years Ended December 31, 2011 2010 2009 AmerisourceBergen Drug Corporation 41% 36% 46%McKesson Corporation 21% <10% <10%Takeda Pharmaceuticals Company Limited 13% <10% — Cardinal Health, Inc. 13% <10% <10%Metro Medical Supply, Inc. <10% 21% 28%Table of ContentsNet Loss per Share We compute basic net loss per share by dividing net loss by the weighted average number of common shares outstanding during the relevantperiod. The following table sets forth the potential common shares issuable upon the exercise of outstanding options and the vesting of restricted stockunits (prior to consideration of the treasury stock method), the total of which was excluded from our computation of diluted net loss per share becausesuch options and restricted stock units were anti-dilutive due to a net loss in the relevant periods (in thousands): The components of basic and diluted net loss per share were as follows (in thousands, except per share data):C. Investments As of December 31, 2011 and 2010, the combined total of our short- and long-term investments equaled $166.2 million and $181.2 million,respectively, and consisted of securities classified as available-for-sale in accordance with accounting standards which provide guidance related toaccounting and classification of certain investments in debt and equity securities.105 Years Ended December 31, 2011 2010 2009 Options to purchase shares of common stock 1,817 2,411 2,416 Shares of common stock issuable upon the vesting of restricted stock units 669 385 216 Total 2,486 2,796 2,632 Years Ended December 31, 2011 2010 2009 Net loss $(77,069)$(81,153)$(93,351)Weighted average common shares outstanding 21,189 20,806 17,109 Net loss per share: Basic and diluted $(3.64)$(3.90)$(5.46)Table of Contents The following is a summary of our short- and long-term investments as of December 31, 2011 and 2010 (in thousands): 106 December 31, 2011 AmortizedCost GrossUnrealizedGains GrossUnrealizedLosses EstimatedFairValue Short-term investments: Corporate debt securities Due in one year or less $74,687 $81 $(115)$74,653 Due in one to three years 19,950 73 (50) 19,973 U.S. treasury and government agency securities Due in one year or less 26,770 67 (7) 26,830 Due in one to three years 21,028 228 — 21,256 Commercial paper Due in one year or less 5,997 — (6) 5,991 Total short-term investments $148,432 $449 $(178)$148,703 Long-term investments: Auction rate securities Due after five years 19,900 — (2,373) 17,527 Total long-term investments $19,900 $— $(2,373)$17,527 Total short and long-term investments $168,332 $449 $(2,551)$166,230 December 31, 2010 AmortizedCost GrossUnrealizedGains GrossUnrealizedLosses EstimatedFairValue Short-term investments: Corporate debt securities Due in one year or less $37,660 $65 $(12)$37,713 Due in one to three years 45,883 197 (25) 46,055 U.S. treasury and government agency securities Due in one year or less 22,554 39 (1) 22,592 Due in one to three years 28,103 235 (5) 28,333 Foreign government securities Due in one year or less 2,431 — — 2,431 Commercial paper Due in one year or less 10,493 2 — 10,495 Total short-term investments $147,124 $538 $(43)$147,619 Long-term investments: Auction rate securities Due after five years 39,550 — (5,953) 33,597 Total long-term investments $39,550 $— $(5,953)$33,597 Total short and long-term investments $186,674 $538 $(5,996)$181,216 Table of ContentsAuction Rate Securities As of December 31, 2011, we held a total of $17.5 million in fair market value of ARS, reflecting a reduction of approximately $2.4 million fromthe par value of these securities of approximately $19.9 million. As of December 31, 2011, all of our ARS were municipal bonds with an auction resetfeature and were classified as available-for-sale. The majority of our ARS portfolio was rated AAA as of December 31, 2011 by at least one of themajor securities rating agencies and was primarily collateralized by student loans substantially guaranteed by the U.S. government under the FederalFamily Education Loan Program. As of December 31, 2011, all of our ARS continue to pay interest according to their stated terms. In February 2008, our ARS began to experience failed auctions and have continued to experience failed auctions since that time. As a result of thelack of significant observable ARS market activity since February 2008, we use a discounted cash flow methodology to value these securities asopposed to valuing them at their par value. Our valuation analysis considers, among other items, assumptions that market participants would use in theirestimates of fair value, such as the collateral underlying the security, the creditworthiness of the issuer and any associated guarantees, credit ratings ofthe security by the major securities rating agencies, the ability or inability to sell the investment in an active market or to the issuer, the timing ofexpected future cash flows, and the expectation of the next time the security will have a successful auction or when call features may be exercised by theissuer. In addition, for all available-for-sale debt securities with unrealized losses, management performs an analysis to assess whether we intend to sellor whether we would more likely than not be required to sell the security before the expected recovery of the amortized cost basis. In the event that weintend to sell a security, or may be required to do so, the decline in fair value of the security would be deemed to be other-than-temporary and the fullamount of the unrealized loss would be recorded in our consolidated statement of operations as an impairment loss. Regardless of our intent to sell asecurity, we perform additional analyses on all securities with unrealized losses to evaluate whether there could be a credit loss associated with thesecurity. Based on the methodology and the analysis above, we have estimated the fair value of our ARS to be $17.5 million and have recorded the$2.4 million reduction in fair value as an unrealized loss to accumulated other comprehensive loss as of December 31, 2011. Due to our belief that the market for ARS will likely take in excess of twelve months to fully recover, we have classified our portfolio of ARS aslong-term investments in our consolidated balance sheet as of December 31, 2011. We believe that the impairment related to our ARS is primarilyattributable to the lack of liquidity of these investments, coupled with the ongoing uncertainty in the credit and capital markets, and we have no reason tobelieve that any of the underlying issuers of our ARS are presently at risk of default. For all of our ARS, the underlying maturity date is in excess ofone year, and the majority have final maturity dates which occur approximately 25 to 35 years in the future. We believe we will ultimately be able toliquidate our investments in ARS without significant loss prior to their maturity dates primarily due to the collateral securing most of our ARS.However, it could take until final maturity of the ARS to realize the par value of our remaining ARS investments. As a result, we believe the decline invalue of our ARS is a temporary impairment and similarly, any future fluctuation in fair value related to our ARS that we deem to be temporary,including any recoveries of previous write-downs, would be recorded to accumulated other comprehensive loss. If we determine that any futureunrealized loss is other-than-temporary, we will record a charge to our consolidated statement of operations. In the event that we need to access ourinvestments in these securities, we will not be able to do so until a future auction is successful, the issuer calls the security pursuant to a mandatorytender or redemption prior to maturity, a buyer is found outside the auction process, or the securities mature. In addition, as part of our determination ofthe fair value of our investments, we consider credit ratings provided by independent investment rating agencies as of the valuation date. These ratingsare subject to change, and we may be required to adjust our future valuation of these ARS which may adversely affect the value of these investments.Based upon the107Table of Contentsvarious analyses described above, we did not recognize any unrealized credit losses related to our securities during the years ended December 31, 2011and 2010.Impairments and Unrealized Gains and Losses on Investments The following is a summary of the fair value of our investments with unrealized losses that are deemed to be temporarily impaired and theirrespective gross unrealized losses aggregated by investment category and length of time that individual securities have been in a continuous unrealizedloss position as of December 31, 2011 and 2010 (in thousands): We did not recognize any other-than-temporary impairment losses in our consolidated statements of operations related to our securities duringeither of the years ended December 31, 2011 or 2010. Future events may occur, or additional information may become available, which may cause us toidentify credit losses where we do not expect to receive cash flows sufficient to recover the entire amortized cost basis of a security and which maynecessitate the recording of future realized losses on securities in our portfolio. Significant losses in the estimated fair values of our investments couldhave a material adverse effect on our earnings in future periods.Realized Gains and Losses on Investments Gains and losses are determined on the specific identification method. During 2011, we recorded net realized losses of approximately $0.2 millionto our consolidated statement of operations. These net realized losses were primarily attributable to our participation in a June 2011 purchase offer froman issuer of one of our ARS holdings with a par value of $5.0 million which resulted in our receipt of proceeds of approximately $4.8 million and ourrecognition of a $0.2 million realized loss.D. Accounts Receivable Our accounts receivable were $5.9 million and $5.8 million as of December 31, 2011 and 2010, respectively, and primarily represented amounts December 31, 2011 Less than 12 Months 12 Months or Greater Total FairValue UnrealizedLosses FairValue UnrealizedLosses FairValue UnrealizedLosses Corporate debtsecurities $34,097 $(161)$4,124 $(4)$38,221 $(165)U.S. treasury andgovernmentagencysecurities 8,841 (7) — — 8,841 (7)Commercialpaper 5,991 (6) — — 5,991 (6)Auction ratesecurities — — 19,900 (2,373) 19,900 (2,373) $48,929 $(174)$24,024 $(2,377)$72,953 $(2,551) December 31, 2010 Less than 12 Months 12 Months or Greater Total FairValue UnrealizedLosses FairValue UnrealizedLosses FairValue UnrealizedLosses Corporate debtsecurities $31,005 $(37)$— $— $31,005 $(37)U.S. treasury andgovernmentagencysecurities 13,447 (6) — — 13,447 (6)Auction ratesecurities — — 33,597 (5,953) 33,597 (5,953) $44,452 $(43)$33,597 $(5,953)$78,049 $(5,996) due from wholesalers and distributors to whom we sell Feraheme directly. Accounts receivable are recorded net of reserves for estimated chargeback108Table of Contentsobligations, prompt payment discounts and any allowance for doubtful accounts. Reserves for other sales-related allowances such as rebates,distribution and other fees, and product returns are included in accrued expenses in our consolidated balance sheets. As part of our credit management policy, we perform ongoing credit evaluations of our customers, and we have not required collateral from anycustomer. To date, we have not experienced significant bad debts. Accordingly, we have not established an allowance for doubtful accounts at eitherDecember 31, 2011 or 2010. If the financial condition of any of our significant customers was to deteriorate and result in an impairment of its ability tomake payments owed to us, an allowance for doubtful accounts may be required which could have a material effect on earnings in the period of anysuch adjustment. Customers which represented greater than 10% of our accounts receivable balances as of December 31, 2011 and 2010 were as follows:E. Inventories Our major classes of inventories were as follows as of December 31, 2011 and 2010 (in thousands): Included in work in process and finished goods inventories as of December 31, 2011 and 2010 was approximately $3.0 million and $1.5 million,respectively, of Feraheme produced in third-party manufacturing facilities and using processes for which we have not yet received regulatory approval.We believe future regulatory approval of these facilities and processes is probable and that this inventory is realizable. On a quarterly basis, we analyze our inventory levels to determine whether we have any obsolete, expired, or excess inventory. If any inventory isexpected to expire prior to being sold, has a cost basis in excess of its net realizable value, is in excess of expected sales requirements as determined byinternal sales forecasts, or fails to meet commercial sale specifications, the inventory is written-down through a charge to cost of goods sold. Thedetermination of whether inventory costs will be realizable requires estimates by management. A critical input in this determination is future expectedinventory requirements, based on internal sales forecasts. Once packaged, Feraheme currently has a shelf-life of four years in the U.S., and as a resultof comparison to internal sales forecasts, we expect to fully realize the carrying value of our current Feraheme inventory. If actual market conditions areless favorable than those projected by management, additional inventory write-downs may be required. Charges for inventory write-downs are notreversed if it is later determined that the product is saleable. Equity-based compensation of approximately $0.1 million and $0.8 million was capitalized into inventory for the years ended December 31, 2011and 2010, respectively.109 December 31, 2011 2010 AmerisourceBergen Drug Corporation 44% 65%McKesson Corporation 33% 10%Cardinal Health, Inc. 15% 14%Metro Medical Supply, Inc. <10% 18% December 31, 2011 2010 Raw materials $1,892 $2,332 Work in process 3,696 55 Finished goods 9,618 13,957 Total inventories $15,206 $16,344 Table of ContentsF. Property, Plant and Equipment Property, plant and equipment consisted of the following as of December 31, 2011 and 2010, respectively (in thousands):G. Current and Long-Term LiabilitiesAccrued Expenses Accrued expenses consisted of the following as of December 31, 2011 and 2010 (in thousands):Deferred Revenues Deferred revenues consisted of the following as of December 31, 2011 and 2010 (in thousands):110 December 31, 2011 2010 Land $360 $360 Buildings and improvements 11,308 11,163 Laboratory and production equipment 7,662 7,424 Furniture and fixtures 5,382 4,927 Construction in process 86 417 24,798 24,291 Less—accumulated depreciation (15,592) (13,056) Property, plant and equipment, net $9,206 $11,235 December 31, 2011 2010 Clinical, manufacturing and regulatory consulting fees and expenses $11,468 $4,987 Commercial rebates, fees and returns 5,943 10,015 Salaries, bonuses, and other compensation 5,924 5,176 Restructuring expense 2,366 1,324 Professional, license, and other fees and expenses 1,966 1,827 Commercial consulting fees and expenses 1,249 2,226 Total accrued expenses $28,916 $25,555 December 31, 2011 2010 Short-term deferred revenues: Takeda $6,096 $6,096 Sales of Feraheme under launch incentive program 250 507 Total $6,346 $6,603 Long-term deferred revenues: Takeda $44,196 $50,292 3SBio 1,000 1,000 Total $45,196 $51,292 Table of Contents During 2010, under the terms of our collaboration agreement with Takeda, we received certain payments, including a $60.0 million upfront fee and$1.0 million reimbursed to us for certain expenses incurred prior to entering the agreement. We have recorded such payments as deferred revenue whichwe are recognizing on a straight-line basis over a period of 10 years, which represents the current patent life of Feraheme and our best estimate of theperiod over which we will substantially perform our obligations. In consideration of the grant of the license to 3SBio in 2008, we received an upfront payment of $1.0 million, the recognition of which has beendeferred and is being recognized under the proportional performance methodology as we supply Feraheme to 3SBio over the thirteen year initial term ofthe agreement.Other Long-Term Liabilities Other long-term liabilities at both December 31, 2011 and 2010 consisted solely of deferred rent related to the lease of our principal executiveoffices in Lexington, Massachusetts.H. Income Taxes For the years ended December 31, 2011, 2010 and 2009, we recognized $1.2 million, $0.5 million and $1.1 million in tax benefits, respectively,which were the result of our recognition of corresponding income tax expense associated with the increase in the value of certain securities that wecarried at fair market value during the same respective periods. The corresponding income tax expense has been recorded in other comprehensiveincome. In addition, during 2009, we recognized an additional $0.2 million in tax benefits associated with U.S. research and development tax creditsagainst which we had previously provided a full valuation allowance, but which became refundable as a result of legislation passed in that year. The reconciliation of the statutory U.S. federal income tax rate to our effective income tax rate is as follows: Deferred tax assets and deferred tax liabilities are recognized based on temporary differences between the financial reporting and tax basis of assetsand liabilities using future enacted rates. A valuation allowance is recorded against deferred tax assets if it is more likely than not that some or all111 Years Ended December 31, 2011 2010 2009 Statutory U.S. federal tax rate (34.0)% (34.0)% (34.0)%State taxes, net of federal benefit (3.4)% (5.8)% (2.3)%Permanent items, net 2.8% 2.2% 2.1%Tax credits (1.6)% (2.2)% (1.0)%Valuation allowance 34.7% 39.2% 33.9% Total tax (benefit) expense (1.5)% (0.6)% (1.3)% Table of Contentsof the deferred tax assets will not be realized. The components of our deferred tax assets and liabilities are as follows (in thousands): Due to the uncertainty surrounding the realization of favorable tax attributes in future tax returns, we have recorded a full valuation allowanceagainst our otherwise recognizable net deferred tax assets. The valuation allowance increased by approximately $26.8 million, $27.9 million and$28.7 million for the years ended December 31, 2011, 2010 and 2009, respectively, primarily due to an increase in our net operating loss, or NOL,carryforwards, capitalized research and development expense, and equity-based compensation expense. At December 31, 2011, we had federal NOL carryforwards of approximately $202.1 million and state NOL carryforwards of up to $138.1 million.We also had federal capital loss carryforwards of $1.7 million to offset future capital gains and an additional $24.4 million and $16.5 million of federaland state NOLs, respectively, not reflected above which were attributable to deductions from the exercise of equity awards. The benefit from thesedeductions will be recorded as a credit to additional paid-in capital if and when realized through a reduction of taxes paid in cash. Our federal NOLs willbegin to expire in 2011, and our most significant state NOLs expire at various dates through 2032. Our capital loss carryforwards will expire in 2015.In addition, we have federal and state tax credits of approximately $9.5 million and $4.7 million, respectively, to offset future tax liabilities. Our taxcredits will expire periodically through 2032 if not utilized. Utilization of our NOLs and research and development, or R&D, credit carryforwards may be subject to a substantial annual limitation due toownership change limitations that have occurred previously or that could occur in the future in accordance with Section 382 of the Internal RevenueCode of 1986, or Section 382, as well as similar state provisions. These ownership changes may limit the amount of NOL and R&D creditcarryforwards that can be utilized annually to offset future taxable income and taxes, respectively. In general, an ownership change as defined bySection 382 results from transactions increasing the ownership of certain shareholders or public groups in the stock of a corporation by more than50 percentage points over a three-year period. Since our formation, we have raised capital through the issuance of capital stock on several occasions.These financings, combined with the purchasing shareholders' subsequent disposition of those shares, may have resulted in a change of control asdefined by Section 382 or could result in a change of control in the future upon subsequent disposition. In May 2011, we conducted an analysis underSection 382 to determine if historical changes in ownership through December 31, 2010 would limit or otherwise restrict our ability to utilize theseNOL and R&D credit carryforwards. As a result of this analysis, we do not believe there are any significant limitations on our ability to utilize thesecarryforwards. However, changes in112 December 31, 2011 2010 Assets Net operating loss carryforwards $75,738 $61,097 Tax credit carryforwards 12,560 11,279 Deferred revenue 19,321 21,861 Equity award expense 10,331 9,534 Capitalized research & development 43,463 29,146 Other 6,406 8,257 Liabilities Depreciation (130) (331) 167,689 140,843 Valuation allowance (167,689) (140,843) Net deferred taxes $— $— Table of Contentsownership after December 31, 2010 could affect the limitation in future years. Any limitation may result in expiration of a portion of the NOL or R&Dcredit carryforwards before utilization. At December 31, 2011 and 2010, we had no unrecognized tax benefits. We have not, as yet, conducted a study of our R&D credit carryforwards.Such a study could result in an adjustment to our R&D credit carryforwards; however, until a study is completed and any adjustment is known, noamounts are being presented as an uncertain tax position. A full valuation allowance has been provided against our R&D credits and, if an adjustment isrequired, this adjustment would be offset by an adjustment to the valuation allowance. Thus, there would be no impact to the consolidated balance sheetor statement of operations if an adjustment were required. We would recognize both accrued interest and penalties related to unrecognized benefits in income tax expense. We have not recorded any interestor penalties on any unrecognized benefits since inception. The statute of limitations for assessment by the Internal Revenue Service, or the IRS, and state tax authorities is closed for tax years prior toSeptember 30, 2007, although carryforward attributes that were generated prior to tax year 2007 may still be adjusted upon examination by the IRS orstate tax authorities if they either have been or will be used in a future period. We file income tax returns in the U.S. federal and various statejurisdictions. There are currently no federal or state audits in progress.I. Equity-Based Compensation We currently maintain several equity compensation plans, including our Second Amended and Restated 2007 Equity Incentive Plan, or the 2007Plan, our Amended and Restated 2000 Stock Plan, or the 2000 Plan, and our 2010 Employee Stock Purchase Plan, or the 2010 ESPP.Second Amended and Restated 2007 Equity Incentive Plan Our 2007 Plan was originally approved by our stockholders in November 2007. In each of May 2009 and May 2010, our stockholders approvedproposals to amend and restate our 2007 Plan to, among other things, increase the number of shares authorized for issuance thereunder by 600,000 and800,000 shares, respectively. The 2007 Plan provides for the grant of stock options, restricted stock units, restricted stock, stock, and other equity interests in our company toemployees, officers, directors, consultants, and advisors of our company and our subsidiaries. The terms and conditions of each such grant, including,but not limited to, the number of shares, the exercise price, term of the option/award and vesting requirements, are determined by our Board ofDirectors, or Board, or the Compensation Committee of our Board. Our Board may award stock options in the form of nonqualified stock options orincentive stock options, or ISOs. ISOs may be granted at an exercise price no less than fair market value of a share of our common stock on the date ofgrant, as determined by our Board or the Compensation Committee of our Board, subject to certain limitations. All stock options granted under the 2007Plan have a ten year term. Our Board establishes the vesting schedule for stock options and the method of payment for the exercise price. In general,options granted vest at a rate of 25 percent on each of the first four anniversaries of the grant date. Our standard stock option agreement allows forpayment of the exercise price for vested stock options either through cash remittance of the exercise price to us in exchange for newly issued shares, orthrough a non-cash exchange of previously issued shares held by the recipient equal in value to the exercise price in exchange for newly issued shares.The latter method results in no cash being received by us, but also results in a lower number of total shares subsequently being outstanding (ascompared to a cash exercise), as a direct result of previously issued shares being exchanged in return for the issuance of new shares. Shares returned tous in this manner are retired. We generally issue common stock from previously authorized but unissued shares to satisfy option exercises and restrictedstock awards.113Table of Contents In addition, the amendment approved by our stockholders in May 2009 replaced a limitation on the number of shares in the aggregate which couldbe issued under the 2007 Plan with respect to restricted stock units, restricted stock, stock and similar equity interests in our company with a fungibleshare reserve whereby the number of shares available for issuance under the 2007 Plan is reduced by one share of our common stock issued pursuant toan option or stock appreciation right and by 1.5 shares for each share of our common stock issued pursuant to a restricted stock unit award or othersimilar equity-based award. As of December 31, 2011, we have granted options and restricted stock units covering 3,935,925 shares of common stock under our 2007 Plan, ofwhich 1,401,621 stock options and 244,229 restricted stock units have expired or terminated, and of which 35,338 options have been exercised and176,543 shares of common stock have been issued pursuant to restricted stock units that became fully vested. The number of options and restrictedstock units outstanding under this plan as of December 31, 2011 was 1,409,185 and 669,009, respectively. The remaining number of shares availablefor future grants as of December 31, 2011 was 1,286,300, not including shares subject to outstanding awards under the 2000 Plan, which will be addedto the total number of shares available for issuance under the 2007 Plan to the extent that such awards expire or terminate for any reason prior toexercise. All outstanding stock options granted under our 2007 Plan have an exercise price equal to the closing price of a share of our common stock onthe grant date and a ten-year term.Amended and Restated 2000 Stock Plan Our 2000 Plan provided for the grant of options and other equity-based awards to our directors, officers, employees and consultants. The termsand conditions of each such grant, including, but not limited to, the number of shares, the exercise price, term of the option/award and vestingrequirements, were determined by our Board or the Compensation Committee of our Board. As of December 31, 2011, we have granted stock optionsand restricted stock units covering 2,182,700 shares of common stock under the 2000 Plan, of which 700,476 stock options and 1,500 restricted stockunits have expired or terminated, and of which 1,030,382 stock options have been exercised and 42,500 shares of common stock have been issuedpursuant to restricted stock units that became fully vested. The remaining number of shares underlying outstanding stock options which were issuedpursuant to our 2000 Plan as of December 31, 2011 was 407,842. There were no remaining restricted stock units which were issued pursuant to our2000 Plan as of December 31, 2011. All outstanding stock options granted under the 2000 Plan have an exercise price equal to the closing price of ourcommon stock on the grant date. In November 2007, the 2000 Plan was succeeded by our 2007 Plan and, accordingly, no further grants may be madeunder this plan. Any shares that remained available for issuance under the 2000 Plan as of the date of adoption of the 2007 Plan are included in thenumber of shares that may be issued under the 2007 Plan. Any shares subject to outstanding awards granted under the 2000 Plan that expire orterminate for any reason prior to exercise will be added to the total number of shares available for issuance under the 2007 Plan.114Table of ContentsEquity-based compensation expense Equity-based compensation expense, excluding amounts that have been capitalized into inventory, for the years ended December 31, 2011, 2010and 2009 consisted of the following (in thousands): We reduce the compensation expense being recognized to account for estimated forfeitures, which we estimate based primarily on historicalexperience. Under the current accounting guidance, forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actualforfeitures differ from those estimates. Equity-based compensation expense of $0.1 million and $0.8 million was capitalized into inventory for the years ended December 31, 2011 and2010, respectively. Capitalized equity-based compensation expense is recognized into cost of product sales when the related product is sold. Equity-based compensation expense for the years ended December 31, 2011, 2010 and 2009 included approximately less than $0.1 million,$0.4 million and $0.7 million, respectively, in equity-based compensation expense associated with grants subject to market or performance conditions.In addition, during 2011 we reduced our equity-based compensation expense by approximately $0.7 million to reflect the modification of the terms ofcertain of our former chief executive officer's outstanding equity awards pursuant to his November 2011 separation agreement. Due to the uncertainty surrounding the realization of the favorable tax attributes in future tax returns associated with operating losses we incurredin the past, we have not recognized any excess tax benefits from the exercise of options. Accordingly, there was no impact recorded in cash flows fromfinancing activities or cash flows from operating activities as reported in the accompanying consolidated statements of cash flows. The following table summarizes the weighted average assumptions we utilized for purposes of valuing grants of options to our employees andnon-employee directors: Risk free interest rates utilized are based upon published U.S. Treasury yields at the date of the grant for the expected option term. We estimate ourexpected stock price volatility by basing it on a blend of the historical volatility of our own common stock price and the historical volatility of othersimilar companies over the prior period equivalent to our expected option term to better reflect expected future volatility. To compute the expected optionterm, we use the calculated historical term of stock options.115 Years Ended December 31, 2011 2010 2009 Cost of product sales $616 $441 $43 Research and development 1,874 3,508 4,446 Selling, general and administrative 7,548 10,574 10,932 Total equity-based compensation expense $10,038 $14,523 $15,421 Years Ended December 31, 2011 2010 2009 Employees Non-EmployeeDirectors Employees Non-EmployeeDirectors Employees Non-EmployeeDirectors Risk freeinterestrate (%) 1.67 1.36 2.47 1.61 2.21 1.70 Expectedvolatility(%) 51 51 58 53 60 58 Expectedoptionterm(years) 5.50 4.00 5.50 4.00 5.40 4.13 Dividendyield none none none none none none Table of Contents The following table summarizes details regarding our stock option plans for the year ended December 31, 2011 (excluding restricted stock units,which are presented separately below): The weighted average grant date fair value of stock options granted during the years ended December 31, 2011, 2010 and 2009 was $7.40, $18.57,and $18.32, respectively. A total of 481,008 stock options vested during the year ended December 31, 2011. The total grant date fair value of optionsthat vested during the years ended December 31, 2011, 2010 and 2009 was $9.8 million, $12.0 million, and $9.6 million, respectively. The aggregateintrinsic value of options exercised during the years ended December 31, 2011, 2010 and 2009, excluding purchases made pursuant to our employeestock purchase plans, measured as of the exercise date, was approximately $0.1 million, $1.1 million, and $9.2 million, respectively. The intrinsic valueof a stock option is the amount by which the fair market value of the underlying stock exceeds the exercise price of the common stock option. In the year ended December 31, 2011, we issued an aggregate of 590,800 restricted stock units to our employees and directors pursuant to our2007 Plan. In general, these grants vest on an annual basis over a three or four year period. The estimated fair value of restricted stock units granted wasdetermined at the grant date based upon the quoted market price per share on the date of the grant. The estimated fair value of restricted stock unitawards issued during 2011 was approximately $9.4 million. At December 31, 2011, the amount of unrecorded expense, net of forfeitures, associatedwith restricted stock units attributable to future periods was approximately $4.7 million. This expense is expected to be amortized primarily on astraight-line basis over a weighted average amortization period of approximately 2.5 years. This estimated expense is subject to change based upon avariety of future events, which include, but are not limited to, changes in estimated forfeiture rates, achievement of a market condition earlier thanexpected, and the issuance of new restricted stock awards.116 December 31, 2011 Options Weighted AverageExercise Price WeightedAverageRemainingContractualTerm Aggregate IntrinsicValue ($ inmillions) Outstanding at beginning of year 2,410,767 $38.22 Granted 173,350 15.80 Exercised (12,989) 9.32 Expired and/or forfeited (754,101) 40.96 Outstanding at end of year 1,817,027 $35.16 6.5 $0.7 Outstanding at end of year—vested andunvested expected to vest 1,700,720 $35.27 6.4 $0.7 Exercisable at end of year 1,106,926 $37.56 6.4 $0.2 Table of Contents The following table summarizes details regarding restricted stock units granted under our equity incentive plans for the year ended December 31,2011: At December 31, 2011, the amount of unrecorded equity-based compensation expense, net of forfeitures, attributable to future periods wasapproximately $11.0 million, of which $6.3 million was associated with stock options and $4.7 million was associated with restricted stock units. Suchamounts will be amortized primarily to research and development or selling, general and administrative expense, generally on a straight-line basis overweighted average amortization periods of approximately 1.9 and 2.5 years, respectively. These future estimates are subject to change based upon avariety of future events, which include, but are not limited to, changes in estimated forfeiture rates, and the issuance of new stock options and otherequity-based awards.2010 Employee Stock Purchase Plan In May 2010, our stockholders approved our 2010 ESPP as the successor to and continuation of the 2006 Employee Stock Purchase Plan, or 2006ESPP. The 2010 ESPP authorizes the issuance of up to 100,000 shares of our common stock to eligible employees. Currently, eligible employees maypurchase shares (subject to certain plan and/or income tax limitations) in semi-annual offerings through payroll deductions of up to an annual maximumof 10% of the employee's total compensation, as defined by our Board. The purchase price per share is the lesser of 85% of the fair market value of ourcommon stock on the first or last day of the plan period. During 2011, we issued 36,323 shares under our 2010 ESPP. The assumptions used for awards granted under our employee stock purchase plans were as follows: The weighted average fair value for purchase rights granted under our 2010 ESPP and our 2006 ESPP, during the years ended December 31,2011, 2010 and 2009 was $5.01, $13.66, and $15.65, respectively, and was estimated using the Black-Scholes option-pricing model.117 December 31, 2011 UnvestedRestrictedStock Units Weighted AverageGrant DateFair Value Outstanding at beginning of year 385,565 $27.63 Granted 590,800 15.99 Vested (119,793) 25.87 Forfeited (187,563) 20.93 Outstanding at end of year 669,009 $21.16 Outstanding at end of year and expected to vest 515,482 $20.96 Years Ended December 31, 2011 2010 2009 Risk free interest rate (%) 0.09 0.22 0.21 Expected volatility (%) 37 42 52 Expected option term (years) 0.5 0.5 0.5 Dividend yield none none none Table of ContentsJ. Employee Savings Plan We provide a 401(k) Plan to our employees by which they may defer compensation for income tax purposes under Section 401(k) of the InternalRevenue Code. Each employee may elect to defer a percentage of his or her salary up to a specified maximum. Our 401(k) Plan provides, among otherthings, for a company contribution of 3% of each employee's combined salary and certain other compensation for the plan year. Salary deferred byemployees and contributions by us to the 401(k) Plan are not taxable to employees until withdrawn from the 401(k) Plan and contributions aredeductible by us when made. The amount of our company contribution for the 401(k) Plan was $1.0 million, $1.3 million, and $1.1 million for the yearsended December 31, 2011, 2010 and 2009, respectively.K. Stockholders' EquityPreferred Stock Our certificate of incorporation authorizes our Board to issue preferred stock from time to time in one or more series. The rights, preferences,restrictions, qualifications and limitations of such stock are determined by our Board. In September 2009, our Board adopted a shareholder rights plan,or Rights Plan. The terms of the Rights Plan provide for a dividend distribution of one preferred share purchase right, or Right, for each outstandingshare of our common stock, par value $0.01 per share, to shareholders of record as of September 17, 2009, and for one such Right to attach to eachnewly issued share of common stock thereafter. Each Right entitles shareholders to purchase one one-thousandth of a share of Series A JuniorParticipating Preferred Stock for each outstanding share of our common stock. The Rights issued pursuant to our Rights Plan become exercisablegenerally upon the earlier of 10 days after a person or group, or an Acquiring Person, acquires 20% or more of our outstanding common stock or 10business days after the announcement by a person or group of an intention to acquire 20% of our outstanding common stock via tender offer or similartransaction. In that event, each holder of a Right, other than the Acquiring Person, would for a period of 60 days be entitled to purchase, at the exerciseprice of the Right, such number of shares of our common stock having a current value of twice the exercise price of the Right. Once a person becomesan Acquiring Person, until such Acquiring Person acquires 50% or more of our common stock, our Board can exchange the Rights, in part or in whole,for our common stock at an exchange ratio of one share of common stock per Right. If we are acquired in a merger or other business combinationtransaction, each holder of a Right, other than the Acquiring Person, would then be entitled to purchase, at the exercise price of the Right, such numberof shares of the acquiring company's common stock having a current value of twice the exercise price of the Right. The Board may redeem the Rights orterminate the Rights Plan at any time before a person or group becomes an Acquiring Person. The Rights will expire on September 17, 2019 unless theRights are earlier redeemed or exchanged by us.Common Stock Transactions In January 2010, we sold 3,600,000 shares of our common stock, $0.01 par value per share, in an underwritten public offering at a price to thepublic of $48.25 per common share, resulting in gross proceeds of approximately $173.7 million. Net proceeds to us after deducting fees, commissionsand other expenses related to the offering were approximately $165.6 million. The shares were issued pursuant to a shelf registration statement onForm S-3 which became effective upon filing.L. Business Segments We have determined that we conduct our operations in one business segment: the manufacture, development and commercialization of productsderived from our proprietary technology for use in118Table of Contentstreating human diseases. Long-lived assets consist entirely of property and equipment and are located in the U.S. for all periods presented.M. Commitments and ContingenciesCommitmentsOperating and Facility Lease Obligations We have entered into certain operating leases, including leases of certain automobiles, and certain laboratory and office equipment which expirethrough 2012. Expense associated with these operating leases amounted to approximately $0.8 million, $1.0 million, and $0.9 million for the yearsended December 31, 2011, 2010 and 2009, respectively. Future minimum lease payments associated with all noncancellable automobile, equipment,service and lease agreements, excluding facility-related leases are approximately $0.3 million for 2012. We lease approximately 90 automobiles for ourfield-based employees. This lease requires an initial minimum lease term of 12 months per automobile. We are responsible for certain disposal costs inthe event of termination of the lease. In May 2008, we entered into a lease agreement for certain real property located at 100 Hayden Avenue, Lexington, Massachusetts for use as ourprincipal executive offices. The term of the lease began on May 22, 2008 and will continue until August 31, 2016 with two successive five yearextension terms at our option. In accordance with accounting guidance related to accounting for operating leases with scheduled rent increases, werecognize rent expense on this facility on a straight-line basis over the initial term of the lease. In addition, as provided for under the lease, we receivedapproximately $2.2 million of tenant improvement reimbursements from the landlord. These reimbursements are being recorded as a deferred rentliability in our consolidated balance sheets and are amortized on a straight-line basis as a reduction to rent expense over the term of the lease. We haverecorded all tenant improvements as leasehold improvements and are amortizing these improvements over the shorter of the estimated useful life of theimprovement or the remaining life of the initial lease term. Amortization of leasehold improvements is included in depreciation expense. The lease requires us to pay rent as follows (in thousands): During any extension term, the base rent will be an amount agreed upon by us and the landlord. In addition to base rent, we are also required topay a proportionate share of the landlord's annual operating costs. Facility-related rent expense recorded for the years ended December 31, 2011, 2010, and 2009 was $1.7 million, $1.7 million, and $1.6 million,respectively. In addition, in connection with our facility lease, in May 2008 we delivered to the landlord a security deposit of approximately $0.5 million in theform of an irrevocable letter of credit. The cash securing this letter of credit is classified on our balance sheets as a long-term asset and is restricted in itsuse.119Period Minimum LeasePayments Year Ended December 31, 2012 $2,015 Year Ended December 31, 2013 2,071 Year Ended December 31, 2014 2,127 Year Ended December 31, 2015 2,183 Year Ended December 31, 2016 1,556 Total $9,952 Table of ContentsPurchase Commitments During 2011 we entered into various agreements with third-parties for which we had remaining purchase commitments of approximately$3.3 million as of December 31, 2011. These agreements principally related to certain outsourced commercial activities, our information technologyinfrastructure, and other operational activities.Severance Arrangements We have entered into employment agreements or other arrangements with each of our executive officers and certain of our non-executiveemployees, which provide for salary continuation payments and, in certain instances, the acceleration of the vesting of certain equity awards to suchindividuals in the event that the individual is terminated other than for cause, as defined in the applicable employment agreements or arrangements. In November 2011, we initiated a corporate restructuring, including a workforce reduction plan, which included an approximate 25% reduction inpositions and the departure of our chief executive officer and chief commercial officer. In connection with the reduction in our workforce, in the fourthquarter of 2011 we recorded restructuring charges of approximately $3.5 million related primarily to employee severance and benefits. We expect thatthe majority of such amounts will be paid by the end of 2012.Indemnification Obligations As permitted under Delaware law, pursuant to our certificate of incorporation, by-laws and agreements with all of our current directors, executiveofficers, and certain of our employees, we are obligated to indemnify such individuals for certain events or occurrences while the officer, director oremployee is, or was, serving at our request in such capacity. The maximum potential amount of future payments we could be required to make underthese indemnification obligations is not capped. Our director and officer insurance policy limits our initial exposure to $1.0 million and our policyprovides significant coverage. As a result, we believe the estimated fair value of these indemnification obligations is likely to be immaterial. We are also a party to a number of other agreements entered into in the ordinary course of business, which contain typical provisions and whichobligate us to indemnify the other parties to such agreements upon the occurrence of certain events. Such indemnification obligations are usually ineffect from the date of execution of the applicable agreement for a period equal to the applicable statute of limitations. Our aggregate maximum potentialfuture liability under such indemnification provisions is uncertain. Except as described above, we have not incurred any expenses as a result of suchindemnification provisions. Accordingly, we have determined that the estimated aggregate fair value of our potential liabilities under suchindemnification provisions is not significant, and we have not recorded any liability related to such indemnification.ContingenciesLegal Proceedings A purported class action complaint was originally filed on March 18, 2010 in the United States District Court for the District of Massachusetts,entitled Silverstrand Investments et. al. v. AMAG Pharm., Inc., et. al., Civil Action No. 1:10-CV-10470-NMG, and was amended on September 15,2010 and on December 17, 2010. The second amended complaint, or SAC, filed on December 17, 2010 alleged that we and our former President andChief Executive Officer, former Executive Vice President and Chief Financial Officer, our Board, and certain underwriters in our January 2010 offeringof common stock violated certain federal securities laws, specifically Sections 11 and 12(a)(2) of the120Table of ContentsSecurities Act of 1933, as amended, and that our former President and Chief Executive Officer and former Executive Vice President and Chief FinancialOfficer violated Section 15 of such Act, respectively, by making certain alleged false and misleading statements and omissions in a registrationstatement filed in January 2010. The plaintiff sought unspecified damages on behalf of a purported class of purchasers of our common stock pursuant toour common stock offering on or about January 21, 2010. On August 11, 2011, the Court issued an Opinion and Order dismissing the SAC in itsentirety for failure to state a claim upon which relief could be granted. A separate Order of Dismissal was filed on August 15, 2011. On September 14,2011, the plaintiffs filed a Notice of Appeal to the United States Court of Appeals for the First Circuit, or the Court of Appeals. Plaintiffs' appeal briefwas filed on February 1, 2012. Responding briefs are due on March 16, 2012 and the plaintiff's reply brief is due on March 16, 2012. The Court ofAppeals has not yet scheduled oral argument for the appeal. We are currently unable to predict the outcome or reasonably estimate the range of potentialloss associated with this matter, if any, and have therefore not recorded any potential estimated liability as we do not believe that such a liability isprobable nor do we believe that a range of loss is currently estimable. In February 2010, we submitted to FINRA Dispute Resolution, Inc. an arbitration claim against our broker-dealer, Jefferies & Company, Inc., orJefferies, and two former Jefferies employees, Anthony J. Russo, and Robert A. D'Addario, who managed our cash account with Jefferies. We allegedthat Jefferies, Russo and D'Addario wrongfully marketed and sold a balance of $54.1 million in unsuitable ARS to us from September 2007 throughJanuary 2008. We further alleged that Jefferies, Russo and D'Addario misrepresented or omitted material facts concerning the nature and risks of ARS,which were inconsistent with our investment objectives to maintain liquidity and flexibility in our portfolio. In February 2012, we entered into asettlement agreement whereby the parties agreed to dismiss all claims related to this matter with prejudice. During 2010 we received correspondence from a supplier with whom we have an agreement related to the supply of a certain material used in theproduction of certain of our products. This correspondence suggests that we are in violation of the terms of the agreement. We believe we have validarguments against such allegations, and we intend to vigorously defend against any such allegations. We are currently unable to predict the outcome orreasonably estimate the range of potential loss associated with this potential claim, if any, and have therefore not recorded any estimated liability as wedo not believe that such a liability is probable nor do we believe that a range of loss is currently estimable. We may periodically become subject to legal proceedings and claims arising in connection with ongoing business activities, including claims ordisputes related to patents that have been issued or that are pending in the field of research on which we are focused. Other than the above actions, weare not aware of any material claims against us at December 31, 2011. We expense legal costs as they are incurred.Contractual Obligations In July 2011, we entered into an Agreement and Plan of Merger and Reorganization, or the Merger Agreement, with Alamo Acquisition Sub, Inc.,a Delaware corporation and our wholly-owned subsidiary, and Allos Therapeutics, Inc., or Allos, which was amended in August 2011. In October2011, pursuant to the terms of the Merger Agreement, we terminated the Merger Agreement and paid Allos an expense reimbursement fee of$2.0 million in connection with such termination. We have recorded this fee in selling, general and administrative expenses on our consolidatedstatement of operations. In addition, we will be required to pay Allos a termination fee of $14.0 million (less the $2.0 million expense reimbursement feewe paid to Allos in October 2011) if we enter into a definitive agreement for an Acquisition Transaction, as defined in the Merger Agreement, on orbefore October 21, 2012 or such a transaction is consummated on or before such date.121Table of ContentsN. Collaborative Agreements Our commercial strategy includes the formation of collaborations with other pharmaceutical companies to facilitate the sale and distribution of ourproducts, primarily outside of the U.S. As of December 31, 2011, we were a party to the following collaborations:Takeda In March 2010, we entered into the Takeda Agreement with Takeda under which we granted exclusive rights to Takeda to develop andcommercialize Feraheme as a therapeutic agent in Europe, Asia-Pacific countries (excluding Japan, China and Taiwan), the Commonwealth ofIndependent States, Canada, India and Turkey, or collectively, the Licensed Territory. Under the Takeda Agreement, except under limited circumstances, we have retained the right to manufacture Feraheme and, accordingly, areresponsible for supply of Feraheme to Takeda at a fixed price per unit, which is capped. We are also responsible for conducting, and bearing the costsrelated to, certain pre-defined clinical studies with the costs of future modifications or additional studies to be allocated between the parties according toan agreed upon cost-sharing mechanism, which provides for a cap on such costs. In connection with the execution of the Takeda Agreement, wereceived a $60.0 million upfront payment from Takeda in April 2010, which we recorded as deferred revenue. We may also receive a combination ofregulatory approval and performance-based milestone payments, reimbursement of certain out-of-pocket regulatory and clinical supply costs, definedpayments for supply of Feraheme, and tiered double-digit royalties on net product sales in the Licensed Territory under the Takeda Agreement. Themilestone payments we may be entitled to receive under the agreement could over time equal approximately $220.0 million, including up to an aggregateof $33.0 million upon the regulatory approval and commercial launch of Feraheme in the EU and Canada, of which $3.0 million will be earned andpayable upon the first commercial sale of Feraheme in Canada. Of the $220.0 million in potential milestone payments, we have determined that anypayments which may become due upon approval by certain regulatory agencies will be deemed substantive milestones and, therefore, will be accountedfor as revenue in the period in which they are achieved. All remaining milestone payments will be accounted for in accordance with our revenueattribution method for the upfront payment as defined below. We have determined that the Takeda Agreement includes four deliverables: the license, access to future know-how and improvements to theFeraheme technology, regulatory and clinical research services, and the manufacturing and supply of product. Pursuant to the accounting guidance ineffect when we signed the Takeda Agreement, and which governed revenue recognition on multiple element arrangements, we evaluated the fourdeliverables under the Takeda Agreement and determined that our obligation to provide manufacturing supply of product meets the criteria forseparation and is therefore treated as a single unit of accounting, which we refer to as the supply unit of accounting. Further, we concluded that thelicense is not separable from the undelivered future know-how and technological improvements or the undelivered regulatory and clinical researchservices. Accordingly, these deliverables are being combined and also treated as a single unit of accounting, which we refer to as the combined unit ofaccounting. With respect to the combined unit of accounting, our obligation to provide access to our future know-how and technological improvements is thefinal deliverable and is an obligation which exists throughout the term of the Takeda Agreement. Because we cannot reasonably estimate the total levelof effort required to complete the obligations under the combined deliverable, we are recognizing the entire $60.0 million upfront payment, the$1.0 million reimbursed to us in 2010 for certain expenses incurred prior to entering the agreement, as well as any milestone payments that are achievedand not deemed to be substantive milestones into revenues on a straight-line basis over a period of ten years from March 31, 2010, the date on whichwe entered the Takeda Agreement, which represented the then122Table of Contentscurrent patent life of Feraheme and our best estimate of the period over which we will substantively perform our obligations. The potential milestonepayments that may be received in the future will be recognized into revenue on a cumulative catch up basis when they become due and payable. Under the terms of the Takeda Agreement, Takeda is responsible for reimbursing us for certain out-of-pocket regulatory and clinical trial supplycosts associated with carrying out our regulatory and clinical research services under the collaboration agreement. Because we are acting as the principalin carrying out these services, any reimbursement payments received from Takeda will be recorded in license fee and other collaboration revenues in ourconsolidated statement of operations to match the costs that we incur during the period in which we perform those services. Revenues related to the combined unit of accounting and any reimbursement revenues are recorded in license fee and other collaboration revenuesin our consolidated statement of operations. During the years ended December 31, 2011 and 2010, we recorded approximately $6.1 million and$4.6 million in revenues, respectively, associated with the upfront payment. In addition, we recorded $2.0 million and $1.5 million for the years endedDecember 31, 2011 and 2010, respectively, associated with other reimbursement revenues received from Takeda. Payments to be received for supply ofthe drug product and royalties will be recorded in product sales and royalties in our consolidated statement of operations.3SBio In 2008, we entered into a Collaboration and Exclusive License Agreement, or the 3SBio License Agreement, and a Supply Agreement, or the3SBio Supply Agreement, with 3SBio for the development and commercialization of Feraheme as an IV iron replacement therapeutic agent in China.The 3SBio License Agreement grants 3SBio an exclusive license for an initial term of thirteen years to develop and commercialize Feraheme as atherapeutic agent in China for an initial indication for the treatment of IDA in patients with CKD, and an option to expand into additional therapeuticindications. In consideration of the grant of the license, we received an upfront payment of $1.0 million, the recognition of which has been deferred andis being recognized under the proportional performance methodology as we supply Feraheme to 3SBio over the thirteen year initial term of theagreement. We are eligible to receive certain other specified milestone payments upon regulatory approval of Feraheme in China for CKD and otherindications. We are also entitled to receive tiered royalties of up to 25% based on net sales of Feraheme by 3SBio in China. We retained allmanufacturing rights for Feraheme under these agreements. In addition, pursuant to the 3SBio Supply Agreement, 3SBio has agreed to purchase fromus, and we have agreed to supply to 3SBio, Feraheme at a predetermined supply price for use in connection with 3SBio's development andcommercialization obligations described above for so long as the 3SBio License Agreement is in effect. To date we have not provided 3SBio with anycommercial product under this agreement.Guerbet In 1989, we entered into a supply and distribution agreement with Guerbet S.A., or Guerbet, granting Guerbet an exclusive right to manufactureand sell Lumirem in western Europe and Brazil. This agreement was subsequently amended to expand Guerbet's exclusive rights to manufacture andsell Lumirem in various other areas, including South America, the Middle East, southeast Asia, and eastern Europe. Under the terms of this distributionagreement, Guerbet pays us a percentage of net sales of Lumirem as the purchase price for the active ingredient of Lumirem, which we are required tosell to Guerbet under our agreement. The agreement is perpetual but terminable upon certain specified events.123Table of ContentsCovidien In 1990, we entered into a manufacturing and distribution agreement with the predecessor of Covidien Ltd., or Covidien, granting it a productlicense and co-marketing rights to GastroMARK in the U.S., Canada and Mexico. Covidien currently has rights to GastroMARK in the U.S. only.Under the terms of the agreement, we receive royalties based on GastroMARK sales by Covidien as well as a percentage of sales for supplying theactive ingredient. The agreement is perpetual but terminable upon certain specified events.O. Restructuring In November 2011, we initiated a corporate restructuring, including a workforce reduction plan, which included an approximate 25% reduction inpositions. As a result of this reduction in our workforce, we recorded restructuring charges of approximately $3.5 million, which were recordedprimarily during the fourth quarter of 2011. These estimated restructuring charges relate primarily to employee severance and benefits. The workforcereduction was substantially completed by the end of 2011, and we expect that the majority of our restructuring charges will be paid by the end of 2012. In October 2010, we also initiated a separate corporate restructuring plan, including a workforce reduction, pursuant to which we would reduce ourworkforce by approximately 24%. During the fourth quarter of 2010, we recorded $2.2 million of restructuring related costs as operating expenses,primarily related to employee severance, benefits and related costs. The majority of the workforce reduction was completed during 2010, and theremaining reductions were completed by the end of 2011. Expenses associated with this restructuring plan were substantially paid by the end of 2011. The following table outlines the components of our restructuring expenses which were recorded in operating expenses and current liabilities for theyears ended December 31, 2011 and 2010 (in thousands):124 December 31, 2011 2010 Accrued restructuring, beginning of period $1,324 $— Employee severance, benefits and related costs 3,697 2,224 Payments (2,523) (900)Other adjustments (132) — Accrued restructuring, end of period $2,366 $1,324 Table of ContentsP. Consolidated Quarterly Financial Data—Unaudited The following tables provide unaudited consolidated quarterly financial data for the years ended December 31, 2011 and 2010 (in thousands,except per share data): Quarterly loss per share totals differ from annual loss per share totals due to rounding. (a) In the quarter ended September 30, 2011, we revised our estimated Medicaid utilization, which resulted in a $2.5 million reduction of ourestimated Medicaid rebate reserve related to Feraheme sales in 2009 and 2010. (b) In April 2010, we received a $60.0 million upfront payment in connection with our collaboration agreement with Takeda. March 31, 2011 June 30, 2011 September 30, 2011 December 31, 2011 Product sales, net $11,022 $13,081 $15,802(a)$12,908 License fee and othercollaborationrevenues 2,327 2,288 1,707 1,999 Royalties 36 33 46 — Total revenues 13,385 15,402 17,555 14,907 Cost of product sales 3,041 2,082 2,669 2,739 Operating expenses 33,200 33,521 32,124 28,158 Restructuringexpenses(b) — — — 3,508 Interest and dividendincome, net 560 452 378 357 Gains (losses) oninvestments, net 1 (209) 14 1 Income tax benefit — 396 215 559 Net loss $(22,295)$(19,562)$(16,631)$(18,581) Net loss per share—basic and diluted $(1.05)$(0.92)$(0.78)$(0.87) March 31, 2010 June 30, 2010 September 30, 2010 December 31, 2010 Product sales, net $13,295 $16,226 $15,173 $15,284 License fee and othercollaborationrevenues(c) — 2,529 1,684 1,919 Royalties 11 72 35 17 Total revenues 13,306 18,827 16,892 17,220 Cost of product sales 1,010 1,884 2,274 2,438 Operating expenses 35,824 38,788 32,017 32,772 Restructuringexpenses(b) — — — 2,224 Interest and dividendincome, net 471 404 448 418 Gains (losses) oninvestments, net 4 794 (396) 6 Fair value adjustmentof settlement rights — (788) — — Income tax benefit — 111 351 10 Net loss $(23,053)$(21,324)$(16,996)$(19,780) Net loss per share—basicand diluted $(1.15)$(1.01)$(0.81)$(0.94) (c) In each of November 2011 and October 2010 we carried out a corporate restructuring pursuant to which we reduced our workforce byapproximately 25% and 24%, respectively, as of such dates, and in both instances, we incurred charges related to employee severance and other relatedcosts.125Table of ContentsQ. Valuation and Qualifying Accounts (in thousands)R. Recently Issued and Proposed Accounting Pronouncements In June 2011, the Financial Accounting Standards Board, or FASB, issued amended guidance on the presentation of comprehensive income infinancial statements. This amendment provides companies the option to present the components of net income and other comprehensive income either asone continuous statement of comprehensive income or as two separate but consecutive statements. It eliminates the option to present components ofother comprehensive income as part of the statement of changes in stockholders' equity. The provisions of this guidance are effective for interim andannual periods beginning in 2012. We do not expect the adoption of this guidance to have an impact on our consolidated financial statements. In May 2011, the FASB issued an amendment to the accounting guidance for fair value measurements and related disclosures. This amendmentclarifies the application of certain existing fair value measurement guidance and expands the disclosures for fair value measurements that are estimatedusing significant unobservable inputs, or Level 3 measurements. This guidance is effective for interim and annual periods beginning after December 15,2011. We do not expect the adoption of this amendment to have an impact on our consolidated financial statements. In January 2010, the FASB issued an amendment to the accounting for fair value measurements and disclosures. This amendment detailsadditional disclosures on fair value measurement, requires a gross presentation of activities within a Level 3 roll-forward, and adds a new requirement tothe disclosure of transfers in and out of Level 1 and Level 2 measurements. The new disclosures are required of all companies that are required toprovide disclosures about recurring and nonrecurring fair value measurements. This amendment was effective as of January 1, 2011. We have adoptedall provisions of this pronouncement and such adoption did not have a significant impact on our consolidated financial statements.126 Balance atBeginningof Period Additions(a) OtherAdditions(b) DeductionsCharged toReserves Balance atEnd ofPeriod Year ended December 31, 2011: Accounts receivable allowances(c) $1,148 $14,074 $— $(13,400)$1,822 Rebates, fees and returns reserves $10,015 $9,864 $— $(13,936)$5,943 Year ended December 31, 2010: Accounts receivable allowances(c) $499 $5,113 $— $(4,464)$1,148 Rebates, fees and returns reserves $5,657 $17,779 $— $(13,421)$10,015 Year ended December 31, 2009: Accounts receivable allowances(c) $— $804 $— $(305)$499 Rebates, fees and returns reserves $— $4,792 $1,119 $(254)$5,657 (a)Additions to sales discounts, rebates, fees and returns reserves are recorded as a reduction of revenues. (b)Additions to rebate reserves related to deferred revenues are recorded as a reduction to deferred revenues. (c)We have not recorded an allowance for doubtful accounts in any of the years presented above.Table of Contents In October 2009, the FASB issued an amendment to the accounting for multiple-deliverable revenue arrangements. This amendment providesguidance on whether multiple deliverables exist, how the arrangements should be separated, and how the consideration paid should be allocated. As aresult of this amendment, companies may be able to separate multiple-deliverable arrangements in more circumstances than under existing accountingguidance. This guidance amends the requirement to establish the fair value of undelivered products and services based on objective evidence and insteadprovides for separate revenue recognition based upon management's best estimate of the selling price for an undelivered item when there is no othermeans to determine the fair value of that undelivered item. The existing guidance previously required that the fair value of the undelivered item reflect theprice of the item either sold in a separate transaction between unrelated third parties or the price charged for each item when the item is sold separatelyby the vendor. If the fair value of all of the elements in the arrangement was not determinable, then revenue was generally deferred until all of the itemswere delivered or fair value was determined. This amendment became effective prospectively for revenue arrangements entered into or materiallymodified beginning on January 1, 2011. The initial adoption of this guidance did not have any impact on our consolidated financial statements; however,it will likely impact us if we enter into any future transactions involving multiple deliverables or if we enter into any material modifications to any of ourexisting collaborations.127Table of ContentsITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE: None.ITEM 9A. CONTROLS AND PROCEDURES: Managements' Evaluation of our Disclosure Controls and Procedures Our principal executive officer and principal financial officer, after evaluating the effectiveness of our "disclosure controls and procedures" (asdefined in the Exchange Act Rule 13a-15(e), or Rule 15d-15(e)), with the participation of our management, have each concluded that, as ofDecember 31, 2011, the end of the period covered by this Annual Report on Form 10-K, our disclosure controls and procedures were designed andwere effective to provide reasonable assurance that information we are required to disclose in the reports that we file or submit under the SecuritiesExchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and ExchangeCommission's rules and forms and that such information is accumulated and communicated to management, including our principal executive officerand principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. It should be noted that any system of controls isdesigned to provide reasonable, but not absolute, assurances that the system will achieve its stated goals under all reasonably foreseeable circumstances.Management's Annual Report on Internal Control Over Financial Reporting The report of our management on management's annual report on internal control over financial reporting is contained in Part II, Item 8 "FinancialStatements and Supplementary Data" of this Annual Report on Form 10-K for the year ended December 31, 2011.Changes in Internal Control Over Financial Reporting There were no changes in our internal control over financial reporting that occurred during the fourth quarter of the year ended December 31, 2011that materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting.ITEM 9B. OTHER INFORMATION: None.128Table of ContentsPART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE: The information required under this item is incorporated herein by reference to the proposal related to the election of our directors and the sectionentitled "Executive Officers and Compensation" in our definitive proxy statement pursuant to Regulation 14A, to be filed with the Securities andExchange Commission, or the SEC, not later than 120 days after the close of our year ended December 31, 2011.ITEM 11. EXECUTIVE COMPENSATION: The information required under this item is incorporated herein by reference to the section entitled "Executive Officers and Compensation" in ourdefinitive proxy statement pursuant to Regulation 14A, to be filed with the SEC not later than 120 days after the close of our year ended December 31,2011.ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATEDSTOCKHOLDER MATTERS: The information required under this item is incorporated herein by reference to the section entitled "Security Ownership of Certain BeneficialOwners and Management" in our definitive proxy statement pursuant to Regulation 14A, to be filed with the SEC not later than 120 days after the closeof our year ended December 31, 2011.ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE: The information required under this item is incorporated herein by reference to the section entitled "Certain Relationships and RelatedTransactions" and to the proposal related to the election of our directors in our definitive proxy statement pursuant to Regulation 14A, to be filed withthe SEC not later than 120 days after the close of our year ended December 31, 2011.ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES: The information required under this item is incorporated herein by reference to the proposal related to the ratification of appointment of independentauditor in our definitive proxy statement pursuant to Regulation 14A, to be filed with the SEC not later than 120 days after the close of our year endedDecember 31, 2011.129Table of ContentsPART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES: (a)The following documents are filed as part of this Annual Report on Form 10-K: 1.Financial Statements.Management's Annual Report on Internal Control over Financial ReportingReport of Independent Registered Public Accounting FirmConsolidated Balance Sheets—as of December 31, 2011 and 2010Consolidated Statements of Operations—for the years ended December 31, 2011, 2010 and 2009Consolidated Statements of Comprehensive Loss—for the years ended December 31, 2011, 2010 and 2009Consolidated Statements of Stockholders' Equity—for the years ended December 31, 2011, 2010 and 2009Consolidated Statements of Cash Flows—for the years ended December 31, 2011, 2010 and 2009Notes to Consolidated Financial Statements2.Financial Statement Schedules. No financial statement schedules have been submitted because they are not required, not applicable, orbecause the information required is included in the financial statements or the notes thereto. 3.Exhibit Index.130ExhibitNumber Description3.1, 4.1 Certificate of Incorporation of the Company, as restated (incorporated herein by reference to Exhibit 3.1 to the Company's Quarterly Reporton Form 10-Q for the quarter ended March 31, 2010, File No. 001-10865).3.2, 4.2 By-Laws of the Company, as amended (incorporated herein by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filedNovember 28, 2008, File No. 0-14732).3.3, 4.3 Certificate of Designation of Series A Junior Participating Preferred Stock (incorporated herein by reference to Exhibit 3.1 and 4.1 to theCompany's Current Report on Form 8-K filed September 4, 2009, File No. 0-14732).4.4 Specimen certificate representing the Company's Common Stock (incorporated herein by reference to Exhibit 4.3 to the Current Report onForm 8-K filed September 4, 2009, File No. 0-14732).4.5 Rights Agreement dated as of September 4, 2009 by and among AMAG Pharmaceuticals, Inc. and American Stock Transfer & TrustCompany, LLC (incorporated herein by reference to Exhibit 4.2 to the Company's Current Report on Form 8-K filed September 4, 2009,File No. 0-14732).4.6 Form of Rights Certificate (incorporated herein by reference to Exhibit 4.3 to the Company's Current Report on Form 8-K filedSeptember 4, 2009, File No. 0-14732).10.1* Representative Form of Indemnification Agreement (incorporated herein by reference to Exhibit 10.2 to the Company's Annual Report onForm 10-K for the year ended December 31, 2009, File No. 001-10865).Table of Contents131ExhibitNumber Description10.2* Summary of the Company's Change of Control Policy applicable to executive officers (incorporated herein by reference to Exhibit 10.5 tothe Company's Current Report on Form 8-K filed February 13, 2006, File No. 0-14732).10.3* AMAG Pharmaceuticals, Inc. 2010 Employee Stock Purchase Plan (incorporated herein by reference to Exhibit 10.1 to Appendix B to theCompany's Definitive Proxy Statement on Schedule 14A, filed April 19, 2010, File No. 001-10865).10.4*+ AMAG Pharmaceuticals, Inc.'s Non-Employee Director Compensation Policy.10.5* Separation and Consulting Agreement dated as of November 4, 2011 between the Company and Brian J.G. Pereira, M.D. (incorporatedherein by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed November 4, 2011, File No. 001-10865).10.6* Form of Second Amended and Restated Employment Agreement dated as of December 15, 2009 between the Company and each thenexecutive officer of the Company (other than the then current CEO) (incorporated herein by reference to Exhibit 10.2 to the Company'sCurrent Report on Form 8-K filed December 17, 2009, File No. 0-14732).10.7* Form of Amendment to Employment Agreements dated as of February 1, 2011 between the Company and each then executive officer ofthe Company (other than the then current CEO) (incorporated herein by reference to Exhibit 10.2 to the Company's Current Report onForm 8-K filed February 4, 2011, File No. 001-10865).10.8*+ Employment Agreement dated as August 1, 2011 between the Company and Frank Thomas.10.9* Form of Employment Agreement Amendment dated as November 3, 2011 between the Company and each then executive officer(incorporated herein by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed November 4, 2011, File No. 001-10865).10.10* Second Amendment to Employment Agreement dated as of November 30, 2011 between the Company and Frank Thomas (incorporatedherein by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed December 2, 2011, File No. 001-10865).10.11*+ Retention Agreement between the Company and Scott Holmes dated as of December 2, 2011.10.12* Advanced Magnetics, Inc. Amended and Restated 2000 Stock Plan (incorporated herein by reference to Appendix A to the Company'sdefinitive proxy statement for the year ended September 30, 2005, File No. 0-14732).10.13* Form of Stock Option Grant under the Company's 2000 Stock Plan (employees) (incorporated herein by reference to Exhibit 10.1 to theCompany's Quarterly Report on Form 10-Q for the quarter ended March 31, 2005, File No. 0-14732).10.14* Form of Stock Option Grant under the Company's 2000 Stock Plan (non-employees) (incorporated herein by reference to Exhibit 10.2 tothe Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2005, File No. 0-14732).10.15* AMAG Pharmaceuticals, Inc. Second Amended and Restated 2007 Equity Incentive Plan (incorporated herein by reference to Exhibit 10.3to Appendix B to the Company's Definitive Proxy Statement on Schedule 14A, filed April 19, 2010, File No. 001-10865).10.16* Form of Option Agreement (ISO) under the Company's 2007 Equity Incentive Plan (incorporated herein by reference to Exhibit 10.2 to theCompany's Current Report on Form 8-K filed November 30, 2007, File No. 0-14732).10.17* Form of Option Agreement (Nonqualified Option) under the Company's 2007 Equity Incentive Plan (incorporated herein by reference toExhibit 10.3 to the Company's Current Report on Form 8-K filed November 30, 2007, File No. 0-14732).10.18* Form of Restricted Stock Unit Agreement under the Company's 2007 Equity Incentive Plan (incorporated herein by reference toExhibit 10.4 to the Company's Current Report on Form 8-K filed November 30, 2007, File No. 0-14732).Table of Contents132ExhibitNumber Description10.19* Form of Option Agreement (Nonqualified Option) for Annual Director Grants under the Company's Second Amended and Restated 2007Equity Incentive Plan (incorporated herein by reference to Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q for the quarterended June 30, 2010, File No. 001-10865).10.20* Form of Restricted Stock Unit Agreement for Annual Director Grants under the Company's Second Amended and Restated 2007 EquityIncentive Plan (incorporated herein by reference to Exhibit 10.5 to the Company's Quarterly Report on Form 10-Q for the quarter endedJune 30, 2010, File No. 001-10865).10.21*+ Form of November 2011 Restricted Stock Unit Agreement under the Company's Second Amended and Restated 2007 Equity IncentivePlan between the Company and the Company's executive officers.10.22*+ Form of November 2011 Restricted Stock Unit Agreement under the Company's Second Amended and Restated 2007 Equity IncentivePlan between the Company and each non-executive employee of the Company.10.23 Lease Agreement, dated as of May 27, 2008, by and between AMAG Pharmaceuticals, Inc. and Mortimer B. Zuckerman and Edward H.Linde, trustees of 92 Hayden Avenue Trust under Declaration of Trust dated August 18, 1983 (incorporated herein by reference toExhibit 10.1 to the Company's Current Report on Form 8-K filed May 29, 2008, File No. 0-14732).10.24 Collaboration and Exclusive License Agreement between the Company and 3SBio Inc., dated as of May 25, 2008 (incorporated herein byreference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2008, File No. 0-14732)(confidential treatment previously granted).10.25 Supply Agreement between the Company and 3SBio Inc., dated as of May 25, 2008 (incorporated herein by reference to Exhibit 10.2 to theCompany's Quarterly Report on Form 10-Q for the quarter ended June 30, 2008, File No. 0-14732) (confidential treatment previouslygranted).10.26 Commercial Outsourcing Services Agreement, dated October 2008, by and between the Company and Integrated CommercializationServices, Inc. (incorporated herein by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed July 1, 2009, FileNo. 0-14732). (confidential treatment previously granted).10.27 First Amendment to Commercial Outsourcing Services Agreement, dated April 14, 2011, by and between the Company and IntegratedCommercialization Services, Inc. (incorporated herein by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q forthe quarter ended June 30, 2011, File No. 001-10865).10.28 Second Amendment to Commercial Outsourcing Services Agreement, dated effective as of December 1, 2011, by and between theCompany and Integrated Commercialization Services, Inc. (incorporated herein by reference to Exhibit 10.1 to the Company's CurrentReport on Form 8-K filed December 22, 2011, File No. 001-10865). (confidential treatment previously granted).10.29 Commercial Packaging Services Agreement, dated May 29, 2009, by and between the Company and Catalent Pharma Solutions LLC.(incorporated herein by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed July 1, 2009, File No. 0-14732).(confidential treatment previously granted).10.30 License, Development and Commercialization Agreement by and between the Company and Takeda Pharmaceutical Company Limited,dated March 31, 2010 (incorporated herein by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarterended March 31, 2010, File No. 001-10865) (confidential treatment previously granted).Table of Contents133ExhibitNumber Description10.31 Agreement and Plan of Merger and Reorganization, dated July 19, 2011, by and among AMAG Pharmaceuticals, Inc., Alamo AcquisitionSub, Inc. and Allos Therapeutics, Inc. (incorporated herein by reference to Exhibit 2.1 to the Company's Current Report on Form 8-K filedJuly 22, 2011, File No. 001-10865).10.32 Amendment No. 1 to Agreement and Plan of Merger and Reorganization, dated as of August 8, 2011, by and among AMAGPharmaceuticals, Inc., Alamo Acquisition Sub, Inc. and Allos Therapeutics, Inc. (incorporated herein by reference to Exhibit 2.1 to theCompany's Current Report on Form 8-K filed August 8, 2011, File No. 001-10865).21.1+ Subsidiaries of the Company.23.1+ Consent of PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm.31.1+ Certification Pursuant to Rule 13a-14(a)/15d-14(a) of the Exchange Act, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of2002.31.2+ Certification Pursuant to Rule 13a-14(a)/15d-14(a) of the Exchange Act, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of2002.32.1++ Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2++ Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.101++ The following materials from AMAG Pharmaceuticals, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2011,formatted in Extensible Business Reporting Language (XBRL): (i) Consolidated Balance Sheets, (ii) Consolidated Statements ofOperations, (iii) Consolidated Statements of Comprehensive Loss, (iv) Consolidated Statements of Stockholders' Equity, (v) ConsolidatedStatements of Cash, and (vi) Notes to Consolidated Financial Statements, tagged as blocks of text.+Exhibits marked with a plus sign ("+") are filed herewith. ++Exhibits marked with a double plus sign ("++") are furnished herewith. *Exhibits marked with a single asterisk reference management contracts, compensatory plans or arrangements, filed in response to Item 15(a)(3)of the instructions to Form 10-K.The other exhibits listed have previously been filed with the SEC and are incorporated herein by reference, as indicated.(b)Exhibits. We hereby file or furnish as exhibits, as the case may be, to this Form 10-K those exhibits listed in Part IV, Item 15(a)(3) above. (c)Financial Statement Schedules. No financial statement schedules have been submitted because they are not required, not applicable, or becausethe information required is included in the financial statements or the notes thereto.Table of ContentsSIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signedon its behalf by the undersigned, thereunto duly authorized. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of theregistrant and in the capacities and on the dates indicated.134 AMAG PHARMACEUTICALS, INC. By: /s/ FRANK E. THOMASFrank E. ThomasExecutive Vice President,Chief Operating Officer, andInterim President andChief Executive OfficerName Title Date/s/ FRANK E. THOMASFrank E. Thomas Executive Vice President, Chief Operating Officer, and Interim President and ChiefExecutive Officer (Principal Executive Officer) March 8, 2012/s/ SCOTT A. HOLMESScott A. Holmes Chief Accounting Officer, Vice President and Controller (Principal Financial andAccounting Officer) March 8, 2012/s/ JOSEPH V. BONVENTRE, MD, PHDJoseph V. Bonventre, MD, PhD Director March 8, 2012/s/ RAJIV DE SILVARajiv De Silva Director March 8, 2012/s/ MICHAEL NARACHIMichael Narachi Director March 8, 2012/s/ ROBERT J. PEREZRobert J. Perez Director March 8, 2012/s/ LESLEY RUSSELL, MB. CH.B., MRCPLesley Russell, MB. Ch.B., MRCP Director March 8, 2012/s/ GINO SANTINIGino Santini Director March 8, 2012/s/ DAVEY S. SCOONDavey S. Scoon Director March 8, 2012Table of Contents135ExhibitNumber Description 3.1, 4.1 Certificate of Incorporation of the Company, as restated (incorporated herein by reference to Exhibit 3.1 to the Company's QuarterlyReport on Form 10-Q for the quarter ended March 31, 2010, File No. 001-10865). 3.2, 4.2 By-Laws of the Company, as amended (incorporated herein by reference to Exhibit 3.1 to the Company's Current Report on Form 8-Kfiled November 28, 2008, File No. 0-14732). 3.3, 4.3 Certificate of Designation of Series A Junior Participating Preferred Stock (incorporated herein by reference to Exhibit 3.1 and 4.1 to theCompany's Current Report on Form 8-K filed September 4, 2009, File No. 0-14732). 4.4 Specimen certificate representing the Company's Common Stock (incorporated herein by reference to Exhibit 4.3 to the Current Reporton Form 8-K filed September 4, 2009, File No. 0-14732). 4.5 Rights Agreement dated as of September 4, 2009 by and among AMAG Pharmaceuticals, Inc. and American Stock Transfer & TrustCompany, LLC (incorporated herein by reference to Exhibit 4.2 to the Company's Current Report on Form 8-K filed September 4, 2009,File No. 0-14732). 4.6 Form of Rights Certificate (incorporated herein by reference to Exhibit 4.3 to the Company's Current Report on Form 8-K filedSeptember 4, 2009, File No. 0-14732). 10.1* Representative Form of Indemnification Agreement (incorporated herein by reference to Exhibit 10.2 to the Company's Annual Report onForm 10-K for the year ended December 31, 2009, File No. 001-10865). 10.2* Summary of the Company's Change of Control Policy applicable to executive officers (incorporated herein by reference to Exhibit 10.5 tothe Company's Current Report on Form 8-K filed February 13, 2006, File No. 0-14732). 10.3* AMAG Pharmaceuticals, Inc. 2010 Employee Stock Purchase Plan (incorporated herein by reference to Exhibit 10.1 to Appendix B tothe Company's Definitive Proxy Statement on Schedule 14A, filed April 19, 2010, File No. 001-10865). 10.4*+ AMAG Pharmaceuticals, Inc.'s Non-Employee Director Compensation Policy. 10.5* Separation and Consulting Agreement dated as of November 4, 2011 between the Company and Brian J.G. Pereira, M.D. (incorporatedherein by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed November 4, 2011, File No. 001-10865). 10.6* Form of Second Amended and Restated Employment Agreement dated as of December 15, 2009 between the Company and each thenexecutive officer of the Company (other than the then current CEO) (incorporated herein by reference to Exhibit 10.2 to the Company'sCurrent Report on Form 8-K filed December 17, 2009, File No. 0-14732). 10.7* Form of Amendment to Employment Agreements dated as of February 1, 2011 between the Company and each then executive officer ofthe Company (other than the then current CEO) (incorporated herein by reference to Exhibit 10.2 to the Company's Current Report onForm 8-K filed February 4, 2011, File No. 001-10865). 10.8*+ Employment Agreement dated as August 1, 2011 between the Company and Frank Thomas. 10.9* Form of Employment Agreement Amendment dated as November 3, 2011 between the Company and each then executive officer(incorporated herein by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed November 4, 2011, File No. 001-10865). 10.10* Second Amendment to Employment Agreement dated as of November 30, 2011 between the Company and Frank Thomas (incorporatedherein by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed December 2, 2011, File No. 001-10865).Table of Contents136ExhibitNumber Description 10.11*+ Retention Agreement between the Company and Scott Holmes dated as of December 2, 2011. 10.12* Advanced Magnetics, Inc. Amended and Restated 2000 Stock Plan (incorporated herein by reference to Appendix A to the Company'sdefinitive proxy statement for the year ended September 30, 2005, File No. 0-14732). 10.13* Form of Stock Option Grant under the Company's 2000 Stock Plan (employees) (incorporated herein by reference to Exhibit 10.1 to theCompany's Quarterly Report on Form 10-Q for the quarter ended March 31, 2005, File No. 0-14732). 10.14* Form of Stock Option Grant under the Company's 2000 Stock Plan (non-employees) (incorporated herein by reference to Exhibit 10.2 tothe Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2005, File No. 0-14732). 10.15* AMAG Pharmaceuticals, Inc. Second Amended and Restated 2007 Equity Incentive Plan (incorporated herein by reference toExhibit 10.3 to Appendix B to the Company's Definitive Proxy Statement on Schedule 14A, filed April 19, 2010, File No. 001-10865). 10.16* Form of Option Agreement (ISO) under the Company's 2007 Equity Incentive Plan (incorporated herein by reference to Exhibit 10.2 tothe Company's Current Report on Form 8-K filed November 30, 2007, File No. 0-14732). 10.17* Form of Option Agreement (Nonqualified Option) under the Company's 2007 Equity Incentive Plan (incorporated herein by reference toExhibit 10.3 to the Company's Current Report on Form 8-K filed November 30, 2007, File No. 0-14732). 10.18* Form of Restricted Stock Unit Agreement under the Company's 2007 Equity Incentive Plan (incorporated herein by reference toExhibit 10.4 to the Company's Current Report on Form 8-K filed November 30, 2007, File No. 0-14732). 10.19* Form of Option Agreement (Nonqualified Option) for Annual Director Grants under the Company's Second Amended and Restated2007 Equity Incentive Plan (incorporated herein by reference to Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q for thequarter ended June 30, 2010, File No. 001-10865). 10.20* Form of Restricted Stock Unit Agreement for Annual Director Grants under the Company's Second Amended and Restated 2007 EquityIncentive Plan (incorporated herein by reference to Exhibit 10.5 to the Company's Quarterly Report on Form 10-Q for the quarter endedJune 30, 2010, File No. 001-10865). 10.21*+ Form of November 2011 Restricted Stock Unit Agreement under the Company's Second Amended and Restated 2007 Equity IncentivePlan between the Company and the Company's executive officers. 10.22*+ Form of November 2011 Restricted Stock Unit Agreement under the Company's Second Amended and Restated 2007 Equity IncentivePlan between the Company and each non-executive employee of the Company. 10.23 Lease Agreement, dated as of May 27, 2008, by and between AMAG Pharmaceuticals, Inc. and Mortimer B. Zuckerman and Edward H.Linde, trustees of 92 Hayden Avenue Trust under Declaration of Trust dated August 18, 1983 (incorporated herein by reference toExhibit 10.1 to the Company's Current Report on Form 8-K filed May 29, 2008, File No. 0-14732). 10.24 Collaboration and Exclusive License Agreement between the Company and 3SBio Inc., dated as of May 25, 2008 (incorporated hereinby reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2008, File No. 0-14732)(confidential treatment previously granted).Table of Contents137ExhibitNumber Description 10.25 Supply Agreement between the Company and 3SBio Inc., dated as of May 25, 2008 (incorporated herein by reference to Exhibit 10.2 tothe Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2008, File No. 0-14732) (confidential treatmentpreviously granted). 10.26 Commercial Outsourcing Services Agreement, dated October 2008, by and between the Company and Integrated CommercializationServices, Inc. (incorporated herein by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed July 1, 2009, FileNo. 0-14732). (confidential treatment previously granted). 10.27 First Amendment to Commercial Outsourcing Services Agreement, dated April 14, 2011, by and between the Company and IntegratedCommercialization Services, Inc. (incorporated herein by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q forthe quarter ended June 30, 2011, File No. 001-10865). 10.28 Second Amendment to Commercial Outsourcing Services Agreement, dated effective as of December 1, 2011, by and between theCompany and Integrated Commercialization Services, Inc. (incorporated herein by reference to Exhibit 10.1 to the Company's CurrentReport on Form 8-K filed December 22, 2011, File No. 001-10865). (confidential treatment previously granted). 10.29 Commercial Packaging Services Agreement, dated May 29, 2009, by and between the Company and Catalent Pharma Solutions LLC.(incorporated herein by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed July 1, 2009, File No. 0-14732).(confidential treatment previously granted). 10.30 License, Development and Commercialization Agreement by and between the Company and Takeda Pharmaceutical Company Limited,dated March 31, 2010 (incorporated herein by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarterended March 31, 2010, File No. 001-10865) (confidential treatment previously granted). 10.31 Agreement and Plan of Merger and Reorganization, dated July 19, 2011, by and among AMAG Pharmaceuticals, Inc., AlamoAcquisition Sub, Inc. and Allos Therapeutics, Inc. (incorporated herein by reference to Exhibit 2.1 to the Company's Current Report onForm 8-K filed July 22, 2011, File No. 001-10865). 10.32 Amendment No. 1 to Agreement and Plan of Merger and Reorganization, dated as of August 8, 2011, by and among AMAGPharmaceuticals, Inc., Alamo Acquisition Sub, Inc. and Allos Therapeutics, Inc. (incorporated herein by reference to Exhibit 2.1 to theCompany's Current Report on Form 8-K filed August 8, 2011, File No. 001-10865). 21.1+ Subsidiaries of the Company. 23.1+ Consent of PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm. 31.1+ Certification Pursuant to Rule 13a-14(a)/15d-14(a) of the Exchange Act, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Actof 2002. 31.2+ Certification Pursuant to Rule 13a-14(a)/15d-14(a) of the Exchange Act, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Actof 2002. 32.1++ Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 32.2++ Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.Table of Contents138ExhibitNumber Description 101++ The following materials from AMAG Pharmaceuticals, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2011,formatted in Extensible Business Reporting Language (XBRL): (i) Consolidated Balance Sheets, (ii) Consolidated Statements ofOperations, (iii) Consolidated Statements of Comprehensive Loss, (iv) Consolidated Statements of Stockholders' Equity,(v) Consolidated Statements of Cash, and (vi) Notes to Consolidated Financial Statements, tagged as blocks of text.+Exhibits marked with a plus sign ("+") are filed herewith. ++Exhibits marked with a double plus sign ("++") are furnished herewith. *Exhibits marked with a single asterisk reference management contracts, compensatory plans or arrangements, filed in response to Item 15(a)(3)of the instructions to Form 10-K.The other exhibits listed have previously been filed with the SEC and are incorporated herein by reference, as indicated.Exhibit 10.4 AMAG PHARMACEUTICALS, INC. Non-Employee Director Compensation Policy The Board of Directors (the “Board”) of AMAG Pharmaceuticals, Inc. (the “Company” or “AMAG”) has approved the following policy whichestablishes compensation to be paid to non-employee directors of the Company, effective as of January 1, 2012, which policy supersedes in its entirety thepolicy previously amended and restated on May 25, 2010, to provide an inducement to obtain and retain the services of qualified persons to serve as membersof the Company’s Board. Each such director will receive as compensation for his or her services equity grants and cash compensation, all as further set forthherein. Applicable Persons This Policy shall apply to each director of the Company who is not an employee of the Company or any Affiliate (each, an “Outside Director”). Affiliate shall mean a corporation which is a direct or indirect parent or subsidiary of the Company, as determined pursuant to Section 424 of the InternalRevenue Code of 1986, as amended. Equity Grants Equity Grant Upon Initial Appointment or Election as a Director Each new Outside Director, on the date of his or her initial appointment or election to the Board, will receive an equity grant comprised of twocomponents: (i) an inducement grant and (ii) an annual grant. As an inducement to joining the Board, each new Outside Director will be granted a non-qualified stock option to purchase 6,000 shares of theCompany’s common stock pursuant to the Company’s Second Amended and Restated 2007 Equity Incentive Plan (the “Stock Plan”), subject to automaticadjustment in the event of any stock split or other recapitalization affecting the Company’s common stock. Such option shall vest in equal monthlyinstallments over a period of two years from the date of his or her election to the Board, provided such Outside Director continues to serve as a member of theBoard. Upon joining the Board, each new Outside Director who joins the Board subsequent to the date of the Annual Meeting of Stockholders will alsoreceive an annual equity grant of non-qualified stock options and restricted stock units (“RSUs”) on the date of his or her appointment or election as describedbelow under the heading “Annual Equity Grant;” provided, that the amount of options and RSUs granted to such new Outside Director will be pro-rated basedon the number of expected months of service before the next Annual Meeting of Stockholders; provided further, that such options and RSUs will vest in equalmonthly installments beginning on the first day of the first full month following appointment or election and continuing on the first day of each monththereafter through the first day of the month in which the next Annual Meeting of Stockholders is to be held, so long as the newly-appointed Outside Director continues to serve as a member of the Board. Annual Equity Grant At the first meeting of the Board following the Annual Meeting of Stockholders, each Outside Director, other than the Chair, will be provided anequity grant comprised of (i) a non-qualified stock option to purchase 3,800 shares of the Company’s common stock and (ii) RSUs covering a total of 2,300shares of the Company’s common stock, in each case pursuant to the Stock Plan and subject to automatic adjustment in the event of any stock split or otherrecapitalization affecting the Company’s common stock. The foregoing equity grants are intended to provide each Outside Director with an equity grantcomparable in value to annual grants provided to non-employee directors of companies in AMAG’s then current peer group as established by theCompensation Committee of the Board (the “Compensation Committee”). The foregoing options and RSUs will vest in twelve equal monthly installmentsbeginning on the first day of the first full month following the Annual Meeting of Stockholders and continuing on the first day of each of the following elevenmonths thereafter, so long as the Outside Director continues to serve as a member of the Board; provided, that delivery of any vested shares of common stockunderlying the foregoing RSUs shall be deferred until the earlier of (i) the third anniversary of the date of grant or (ii) the date the Outside Director’s service tothe Company terminates; provided, that such termination constitutes a “separation from service” as such term is defined in Treasury RegulationSection 1.409A-1(h). At the first meeting of the Board following the Annual Meeting of Stockholders, the Chair of the Board, provided that he or she is also an OutsideDirector, will be provided an equity grant comprised of (i) a non-qualified stock option to purchase 7,600 shares of the Company’s common stock and(ii) RSUs covering a total of 3,800 shares of the Company’s common stock, in each case pursuant to the Stock Plan and subject to automatic adjustment inthe event of any stock split or other recapitalization affecting the Company’s common stock. The foregoing options and RSUs will vest in twelve equalmonthly installments beginning on the first day of the first full month following the Annual Meeting of Stockholders and continuing on the first day of each ofthe following eleven months thereafter, so long as the Chair continues to serve as a member of the Board; provided, that delivery of any vested shares ofcommon stock underlying the foregoing RSUs shall be deferred until the earlier of (i) the third anniversary of the date of grant or (ii) the date the Chair’sservice to the Company terminates; provided, that such termination constitutes a “separation from service” as such term is defined in Treasury RegulationSection 1.409A-1(h). 2 Exercise Price and Term of Options Each option granted to an Outside Director shall have an exercise price per share equal to the fair market value of the common stock of the Companyon the date of grant of the option (as determined by the Board in accordance with the Stock Plan), have a term of ten years and shall be subject to the termsand conditions of the Stock Plan. Each such option grant shall be evidenced by the issuance of the Company’s form non-qualified stock option agreement forOutside Director grants. Early Termination of Options or RSUs Upon Termination of Service If an Outside Director ceases to be a member of the Board for any reason, any then vested and unexercised options granted to such Outside Directormay be exercised by the Outside Director (or, in the case of the director’s death or disability, by the director’s personal representative, or the director’ssurvivors) within three years after the date the director ceases to be a member of the Board and in no event later than the expiration date of the option. If an Outside Director’s service to the Company is terminated (provided, that such termination constitutes a “separation from service” as such term isdefined in Treasury Regulation Section 1.409A-1(h)), all then vested and undelivered shares underlying any RSUs held by such Outside Director shall bedelivered to the Outside Director (or, in the case of the director’s death or disability, by the director’s personal representative, or the director’s survivors) as ofthe date he or she ceases to be a member of the Board. Retainer Fees Each Outside Director, other than the Chair, will receive an aggregate annual retainer fee of $30,000, payable in four equal quarterly installments.The Chair, provided that he or she is also an Outside Director, will receive an aggregate annual retainer fee of $60,000, payable in four equal quarterlyinstallments. Each member of each of the Company’s standing committees, other than the Chair, will also be paid an additional aggregate annual retainer fee infour equal quarterly installments as follows: Audit Committee: $10,000Compensation Committee: $7,500Nominating and Corporate Governance Committee: $5,000 The Chair of each of the standing committees will be paid an additional aggregate annual retainer fee in four equal quarterly installments as follows: Audit Committee: $20,000Compensation Committee: $15,000Nominating and Corporate Governance Committee: $10,000 3 Per Meeting Fees In addition to the foregoing retainer fees, each Outside Director will receive (i) a per meeting fee of $1,000 for each meeting of the full Board attendedby such Outside Director, (ii) a per meeting fee of $500 for each meeting of each standing Committee of the Board (Audit, Compensation, and Nominatingand Corporate Governance) attended by such Outside Director, (iii) a per meeting fee of $1,000 for each meeting of any ad hoc Committee of the full Boardattended by such Outside Director (other than the Chair of such Committee), and (iv) a per meeting fee of $2,000 for each meeting of any ad hoc Committee ofthe Board attended by the Chair of such ad hoc Committee; provided, that he or she is an Outside Director. The foregoing per meeting fees will be paid by the Company quarterly in arrears. Expenses Upon presentation of documentation of such expenses reasonably satisfactory to the Company, each Outside Director shall be reimbursed for his orher reasonable out-of-pocket business expenses incurred in connection with attending meetings of the Board, Committees thereof or in connection with otherBoard related business. Amendments The Board shall review this Policy from time to time to assess whether any amendments in the type and amount of compensation provided hereinshould be adjusted in order to fulfill the objectives of this Policy. Interpretation of Policy Any interpretation of or decisions regarding the application of this Policy shall be made by the Compensation Committee of the Board. 4Exhibit 10.8 EMPLOYMENT AGREEMENT This Employment Agreement (the “Agreement”) is entered into as of August 1, 2011 (the “Effective Date”) by and between AMAGPharmaceuticals, Inc., a Delaware corporation with offices at 100 Hayden Avenue, Lexington, MA 02421 (the “Company”), and Frank Thomas of [address](“you”). Whereas, the Company desires to employ you, and you desire to accept employment with the Company on and subject to the terms and conditionsset forth in this Agreement. Now therefore, in consideration of the premises and mutual agreements hereinafter set forth, and intending to be legally bound hereby, the partieshereto agree as follows: 1. Position; Duties. a) Position. You shall serve as Executive Vice President and Chief Financial Officer, reporting to the Chief Executive Officer of the Company. b) Duties. You shall perform for the Company the duties customarily associated with the office of Executive Vice President andChief Financial Officer and such other duties as may be assigned to you from time to time by the Company’s Chief Executive Officer or the Company’sBoard of Directors (the “Board”) that are consistent with the duties normally performed by those performing the role of the most senior executives of similarentities. You shall devote substantially your full business time and best efforts to the performance of your duties hereunder and the business and affairs of theCompany and will not undertake or engage in any other employment, occupation or business enterprise; provided, however, that you may participate as amember of the board of directors or advisory board of other entities and in professional organizations and civic and charitable organizations; provided further,that any such positions are disclosed to the Chief Executive Officer and/or the Board or the Audit Committee thereof and do not materially interfere with yourduties and responsibilities to the Company. You shall be based in the Company’s principal offices, which currently are in Lexington, Massachusetts. 2. Term. The term of this Agreement shall commence on the Effective Date and continue for a three-year period unless terminated earlierpursuant to Section 4 below (the “Initial Term”). The term of this Agreement shall automatically renew for additional three-year terms (each, a “RenewalTerm”) following the Initial Term and any Renewal Term unless either party provides written notice to the other party at least sixty (60) days before the end ofthe Initial Term or any Renewal Term, as applicable, that it does not desire to renew this Agreement, in which case this Agreement shall expire at the end of theInitial Term or any Renewal Term, as applicable. The Initial Term and any Renewal Term are referred to herein collectively as the “Term.” 3. Compensation and Benefits. The Company shall pay you the following compensation and benefits for all services rendered by you underthis Agreement: a) Base Salary. The Company will pay you an initial base salary at the annualized rate of $350,000 (“Base Salary”), minuswithholdings as required by law and other deductions authorized by you, which amount shall be paid in equal installments at the Company’s regular payrollintervals, but not less often than monthly. Your base salary may be increased annually by the Board or the Compensation Committee in their sole discretion. b) Bonus. You will be eligible to receive an annual performance bonus (the “Annual Bonus”) of up to 50% of Base Salary for eachfiscal year during the Term of this Agreement beginning with the fiscal year ending December 31, 2011 based on the extent to which, in the discretion of theBoard or the Compensation Committee in consultation with the Chief Executive Officer you achieve or exceed specific and measurable individual andCompany performance objectives established by the Board or the Compensation Committee in consultation with the Chief Executive Officer andcommunicated to you in advance. The exact amount of the bonus for any year during the Term shall be determined by the Board or the CompensationCommittee in its sole discretion and may be more than the target bonus in the event you achieve all of your personal and Company performance objectives orless than the target bonus if you do not achieve all of your personal and Company performance objectives. The Company shall pay the Annual Bonus no laterthan two and a half months after the end of the fiscal year to which the applicable bonus relates. Unless otherwise provided herein, no bonus shall be deemedto have been earned by you for any year in which you are not actively employed by the Company on the last day of the fiscal year to which the bonus relates. c) Equity Compensation. In addition to the stock options and restricted stock units to be granted to you as set forth in the offerletter dated July 22, 2011, you shall be eligible to receive stock options or other equity compensation under the Company’s equity incentive plans asdetermined by the Board or the Compensation Committee from time to time. d) Vacation. You will receive four (4) weeks of paid vacation per calendar year which shall accrue ratably on a monthly basis. e) Benefits. You will be eligible to participate in all group health, dental, 401(k), and other insurance and/or benefit plans that theCompany may offer to similarly situated executives of the Company from time to time on the same terms as offered to such other executives. f) Business Expenses. The Company will reimburse you for all reasonable and usual business expenses incurred by you in theperformance of your duties hereunder in accordance with the Company’s expense reimbursement policy. 4. Termination. Your employment with the Company may be terminated prior to the expiration of the Term as follows: a) Death. This Agreement shall terminate automatically upon your death. 2 b) Disability. The Company may terminate your employment in accordance with applicable laws in the event that you shall beprevented, by illness, accident, disability or any other physical or mental condition (to be determined by means of a written opinion of a competent medicaldoctor chosen by mutual agreement of the Company and you or your personal representative(s)) from substantially performing your duties and responsibilitieshereunder for one or more periods totaling one hundred and twenty (120) days in any twelve (12) month period. c) By the Company for Cause. The Company may terminate your employment for “Cause” upon written notice to you. Forpurposes of this Agreement, “Cause” shall mean any of: (i) fraud, embezzlement or theft against the Company or any of its affiliates; (ii) you are convicted of,or plead guilty or no contest to, a felony; (iii) willful nonperformance by you (other than by reason of illness) of your material duties hereunder and failure toremedy such nonperformance within ten (10) business days following written notice from the Chief Executive Officer, the Board and/or your supervisoridentifying the nonperformance and the actions required to cure it; or (iv) you commit an act of gross negligence, engage in willful misconduct or otherwise actwith willful disregard for the Company’s best interests, and you fail to remedy such conduct within ten (10) business days following written notice from theChief Executive Officer, the Board and/or your supervisor identifying the gross negligence, willful misconduct or willful disregard and the actions required tocure it (if such conduct can be cured). d) By the Company Other Than For Death, Disability or Cause. The Company may terminate your employment other than forCause, disability or death upon thirty (30) days prior written notice to you. e) By You For Good Reason or Any Reason. You may terminate your employment at any time with or without Good Reason uponthirty (30) days prior written notice to the Company. For purposes of this Agreement, “Good Reason” shall mean that any of the following occurs without yourprior written consent: (i) a material adverse change in your title, position, duties or responsibilities; (ii) a material reduction by the Company in your BaseSalary or your target Annual Bonus opportunity in the total annual amount that you are then eligible to receive, unless such reduction is in connection with aproportionate reduction of compensation applicable to all other executive officers; (iii) any relocation of your principal place of business to a location more than50 miles from the Company’s current executive offices in Lexington, MA; or (iv) a material breach by the Company of any of the terms or provisions of thisAgreement and failure to remedy such breach within thirty (30) days following written notice from you identifying the breach. 5. Payment Upon Termination. In the event that your employment with the Company terminates, you will be paid the following: a) Termination for Any Reason. In the event that your employment terminates for any reason, the Company shall pay you for thefollowing items that were earned and accrued but unpaid as of the date of your termination: (i) your Base Salary; (ii) a cash payment for all accrued, unusedvacation calculated at your then Base Salary rate; (iii) reimbursement for any unpaid business expenses; and (iv) such other benefits and payments to 3 which you may be entitled by law or pursuant to the benefit plans of the Company then in effect. In addition, if your employment terminates due to yourdeath, the Board or the Compensation Committee, in consultation with the Chief Executive Officer and/or your supervisor, shall determine the extent to whichany of the individual performance objectives established pursuant to Section 3(b) above were met as of the time of your death. If, based on that determination,the Board or the Compensation Committee determines that a bonus is due, the Company shall pay your estate an amount equal to such bonus, pro-rated forthe portion of the fiscal year elapsed as of the time of your death. b) Termination Without Cause or for Good Reason. In addition to the payments provided for in Section 5(a), in the event that (i) theCompany terminates your employment other than for death, disability or Cause pursuant to Section 4(d) or you terminate your employment for Good Reasonpursuant to Section 4(e); (ii) you comply fully with all of your obligations under all agreements between the Company and you; and (iii) you execute, deliver tothe Company, within 60 days of the termination of your employment, and do not revoke a general release (in a form acceptable to the Company) releasing andwaiving any and all claims that you have or may have against the Company, its directors, officers, employees, agents, successors and assigns with respect toyour employment (other than any obligation of the Company set forth herein which specifically survives the termination of your employment), then theCompany will provide you with twelve (12) months of severance pay based on your then current Base Salary. The foregoing severance shall be paid in equalinstallments over the severance period in accordance with the Company’s usual payroll schedule, commencing on the date that the release referred to abovemay no longer be revoked. This Section 5(b) shall not apply during the one year period following a Change of Control (as defined below), in which caseSection 5(c) shall apply. c) Change of Control. Upon a Change of Control, subject to the terms of any other agreements that exist between you and theCompany, fifty percent (50%) of the unvested portion of any options to purchase common stock, restricted stock units and other equity incentives then heldby you shall become immediately vested and the remaining unvested amount shall continue to vest after the closing of the Change of Control on the samevesting schedule but at 50% of the number of shares that were to vest on each vesting date prior to the Change of Control. Further, in the event that (i) withinone year from the date a Change of Control (as defined below) of the Company occurs, the Company (for purposes of this section, such term to include itssuccessor) terminates your employment other than for Cause pursuant to Section 4(c), death or disability or you terminate your employment with GoodReason; (ii) you comply fully with all of your obligations under all agreements between the Company and you; and (iii) within 60 days of termination of youremployment you execute and deliver to the Company and do not revoke a general release (in a form acceptable to the Company) releasing and waiving any andall claims that you have or may have against the Company and its directors, officers, employees, agents, successors and assigns with respect to youremployment (other than any obligation of the Company set forth herein which specifically survives the termination of your employment), then: · the Company will pay you twelve (12) months of severance pay based on your then current Base Salary, with such severance to be paid in equalinstallments over the 4 severance period in accordance with the Company’s usual payroll schedule, commencing on the date that the release referred to above may no longerbe revoked; · the Company will pay you, promptly after the revocation period of the release set forth above expires, in a lump sum, one times your target annualbonus amount for the year in which the Change of Control occurs; · the Company will pay or reimburse you for the premiums for continued coverage for you and your eligible dependents in the same amounts and forthe same coverage in effect immediately prior to your termination from employment, under the Company’s group health and dental plans until theearlier of: (i) twenty four (24) months from the date of termination of your employment; or (ii) the date you are provided with health and dentalcoverage by another employer’s health and dental plan (and, for purposes of clarity, if the Company is unable to extend coverage to you under itsgroup health and dental plans due to your termination from active employment status, then, to receive this benefit, you must elect continuationcoverage under COBRA and/or purchase an individual insurance policy, and the Company shall have no obligation to pay or reimburse insurancepremiums or otherwise provide coverage if you fail to elect COBRA or obtain an individual policy); and · all unvested outstanding stock options, restricted stock units and other equity incentives that were granted to you before the Change of Controloccurred shall immediately without further action become vested in full. For purposes of this Agreement, “Change of Control” shall mean the first to occur of any of the following: (a) any “person” or “group” (as defined in theSecurities Exchange Act of 1934, as amended) becomes the beneficial owner of a majority of the combined voting power of the then outstanding votingsecurities with respect to the election of the Board of Directors of the Company; (b) any merger, consolidation or similar transaction involving the Company,other than a transaction in which the stockholders of the Company immediately prior to the transaction hold immediately thereafter in the same proportion asimmediately prior to the transaction not less than 50% of the combined voting power of the then voting securities with respect to the election of the Board ofDirectors of the resulting entity; (c) any sale of all or substantially all of the assets of the Company; or (d) any other acquisition by a third party of all orsubstantially all of the business or assets of the Company, as determined by the Board of Directors, in its sole discretion. The payments, benefits andacceleration of vesting of stock options, restricted stock units and other equity incentives provided in this Section 5(c) shall override and replace with respectto you any Company wide policy with respect to payments, benefits and/or acceleration of vesting upon a Change of Control. After the one year periodfollowing a Change of Control, this Section 5(c) shall no longer apply, and Section 5(b) shall continue to apply. In the event that upon a Change of Control,the Company or the successor to or acquiror of the Company’s business (whether by sale of outstanding stock, merger, sale of substantially all the assets orotherwise) elects not to assume all the then unvested outstanding stock options, restricted stock units and other equity incentives that were granted to youbefore the Change of Control occurred, such securities shall immediately without further action become vested in full effective no later than the effective date ofthe Change of Control and you shall receive the value of such stock options, restricted stock units and other equity incentives as provided in the applicableacquisition agreement (or if no such provision is made, in the applicable equity incentive plan). 5 d) Death/Disability. In addition to the payments provided for in Section 5(a), in the event of your death or the termination of youremployment due to your disability in accordance with Section 4(b) above, all unvested outstanding stock options, restricted stock units and other equityincentives that were held by you at the time of your death or termination of employment due to disability shall immediately become fully vested and exercisableby you or your personal representatives, heirs or legatees, as the case may be, at any time prior to the expiration of one (1) year from the date of your death ordisability, but in no event after the expiration of the term of the applicable equity award agreement. 6. Nonsolicitation Covenant. In exchange for the consideration provided by this Agreement, you shall not, for a period of one year followingthe termination of your employment with the Company for any reason, directly or indirectly, whether through your own efforts, or in any way assisting oremploying the assistance of any other person or entity (including, without limitation, any consultant or any person employed by or associated with any entitywith which you are employed or associated), recruit, solicit or induce (or in any way assist another in recruiting, soliciting or inducing) any employee orconsultant of the Company to terminate his or her employment or other relationship with the Company. 7. Assignment. This Agreement and the rights and obligations of the parties hereto shall bind and inure to the benefit of any successor of theCompany by reorganization, merger or consolidation and any assignee of all or substantially all of its business and properties. Neither this Agreement nor anyrights or benefits hereunder may be assigned by you, except that, upon your death, your earned and unpaid economic benefits will be paid to your heirs orbeneficiaries. 8. Interpretation and Severability. It is the express intent of the parties that (a) in case any one or more of the provisions contained in thisAgreement shall for any reason be held to be excessively broad as to duration, geographical scope, activity or subject, such provision shall be construed bylimiting and reducing it as determined by a court of competent jurisdiction, so as to be enforceable to the fullest extent compatible with applicable law; and(b) in case any one or more of the provisions contained in this Agreement cannot be so limited and reduced and for any reason is held to be invalid, illegal orunenforceable, such invalidity, illegality or unenforceability shall not affect the other provisions of this Agreement, and this Agreement shall be construed as ifsuch invalid, illegal or unenforceable provision had never been contained herein. 9. Notices. Any notice that you or the Company are required to give the other under this Agreement shall be given by personal delivery,recognized overnight courier service, or registered or certified mail, return receipt requested, addressed in your case to you at your last address of record withthe Company, or at such other place as you may from time to time designate in writing, and, in the case of the Company, to the Company at its principaloffice, or at such other office as the Company may from time to time designate in writing. The date of actual delivery of any notice under this Section 9 shallbe deemed to be the date of receipt thereof. 10. Waiver. No consent to or waiver of any breach or default in the performance of any obligation hereunder shall be deemed or construed to bea consent to or waiver of any other 6 breach or default in the performance of any of the same or any other obligations hereunder. No waiver hereunder shall be effective unless it is in writing andsigned by the waiving party. 11. Complete Agreement; Modification. This Agreement sets forth the entire agreement of the parties with respect to the subject matter hereof,and supersedes any previous oral or written communications, negotiations, representations, understandings, or agreements between them. Any modification ofthis Agreement shall be effective only if set forth in a written document signed by you and a duly authorized officer of the Company. 12. Headings. The headings of the Sections hereof are inserted for convenience only and shall not be deemed to constitute a part, or affect themeaning, of this Agreement. 13. Counterparts. This Agreement may be signed in two (2) counterparts, each of which shall be deemed an original and both of which shalltogether constitute one agreement. 14. Choice of Law; Jurisdiction. This Agreement shall be deemed to have been made in the Commonwealth of Massachusetts, and the validity,interpretation and performance of this Agreement shall be governed by, and construed in accordance with, the laws of Massachusetts, without regard toconflict of law principles. You hereby consent and submit without limitation to the jurisdiction of courts in Massachusetts in connection with any actionarising out of this Agreement, and waive any right to object to any such forum as inconvenient or to object to venue in Massachusetts. You agree that, in anyaction arising out of this Agreement, you will accept service of process by registered mail or the equivalent directed to your last known address or by suchother means permitted by such court. 15. Advice of Counsel; No Representations. You acknowledge that you have been advised to review this Agreement with your own legalcounsel, that prior to entering into this Agreement, you have had the opportunity to review this Agreement with your attorney, and that the Company has notmade any representations, warranties, promises or inducements to you concerning the terms, enforceability or implications of this Agreement other than as arecontained in this Agreement. 16. I.R.C. § 409A. Notwithstanding anything to the contrary set forth herein, any payments and benefits provided under this Agreement thatconstitute “deferred compensation” within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) and the regulationsand other guidance thereunder and any state law of similar effect (collectively, the “Section 409A”) shall not commence in connection with your termination ofemployment unless and until you have also incurred a “separation from service” (as such term is defined in Treasury Regulation Section 1.409A-1(h) (the“Separation From Service”), unless the Company reasonably determines that such amounts may be provided to you without causing you to incur theadditional 20% tax under Section 409A. It is intended that each installment of severance pay provided for in this Agreement is a separate “payment” for purposes of Treasury RegulationSection 1.409A-2(b)(2)(i). For the avoidance of doubt, it is intended that severance payments set forth in this Agreement satisfy, to the greatest extent possible,the exceptions from the application of Section 409A provided under Treasury Regulation Sections 1.409A-1(b)(4), 1.409A-1(b)(5), and 1.409A-1(b)(9). 7 If the Company (or, if applicable, the successor entity thereto) determines that any payments or benefits constitute “deferred compensation” underSection 409A and you are, on the termination of service, a “specified employee” of the Company or any successor entity thereto, as such term is defined inSection 409A(a)(2)(B)(i) of the Code, then, solely to the extent necessary to avoid the incurrence of the adverse personal tax consequences under Section 409A,the timing of the payments and benefits shall be delayed until the earlier to occur of: (a) the date that is six months and one day after your Separation FromService, or (b) the date of your death (such applicable date, the “Specified Employee Initial Payment Date”). On the Specified Employee Initial Payment Date,the Company (or the successor entity thereto, as applicable) shall (i) pay to you a lump sum amount equal to the sum of the payments and benefits that youwould otherwise have received through the Specified Employee Initial Payment Date if the commencement of the payment of such amounts had not been sodelayed pursuant to this Section and (ii) commence paying the balance of the payments and benefits in accordance with the applicable payment schedules setforth in this Agreement. 17. Survival. Provisions of this Agreement which by their terms must survive the termination of this Agreement in order to effectuate the intentof the parties will survive any such termination, whether by expiration of the Term, termination of your employment, or otherwise, for such period as may beappropriate under the circumstances. Such provisions include, without limitation, Sections 5 and 6 of this Agreement. 18. Excise Tax-Related Provisions. If any payment or benefit you would receive pursuant to this Agreement or any other agreement (“Payment”)would (a) constitute a “parachute payment” within the meaning of Section 280G of the Code, and (b) but for this sentence, be subject to the excise tax imposedby Section 4999 of the Code (the “Excise Tax”), then such Payment shall be adjusted so that it would equal the Reduced Amount. The “Reduced Amount”shall be either (i) the largest portion of the Payment that would result in no portion of the Payment being subject to the Excise Tax or (ii) the total Payment,whichever amount of (i) or (ii), after taking into account all applicable federal, state and local employment taxes, income taxes, and the Excise Tax (allcomputed at the highest applicable marginal rate), results in your receipt, on an after-tax basis, of the greater amount of the Payment notwithstanding that all orsome portion of the Payment may be subject to the Excise Tax. If a reduction in payments or benefits constituting “parachute payments” is necessary so thatthe Payment equals the Reduced Amount, any such reduction will occur in a manner necessary to provide you with the greatest post-reduction economicbenefit. If more than one manner of reduction of Payments necessary to arrive at the Reduced Amount yields the greatest economic benefit to you, the Paymentswill be reduced pro rata. [Remainder of Page Intentionally Left Blank] 8 IN WITNESS WHEREOF, the Company and you have executed this Agreement as of the day and year first set forth above. AMAG Pharmaceuticals, Inc. By:/s/ Brian J.G. PereiraName: Brian J.G. PereiraTitle: President and CEO /s/ Frank ThomasFrank Thomas Exhibit 10.11 December 2, 2011 PERSONAL AND CONFIDENTIAL By Hand Delivery Scott Holmes[Address] Re: Retention Letter Dear Scott, As you know, AMAG Pharmaceuticals, Inc. (“AMAG” or the “Company”) recently found it necessary to conduct a reduction in its workforce inorder to bring expenses in line and position the organization for the future. The Company recognizes that this is a difficult time and wants to extend a sincerethank you for all of the hard work that you have contributed to this point. You are a highly valued and key employee, and going forward, AMAG needs yourcontinued hard work and focus to help the Company realize its potential. To that end, we are pleased to provide you with incentive — in the form of aretention bonus — to remain employed with the Company through at least the end of January 2013 as further described in this letter, subject to the terms andconditions outlined below. 1. Retention Bonus Amount and Conditions: If you fully perform your obligations under this Agreement (as described in detail below), theCompany achieves or beats its aggregate operating expense target as set forth in the Board-approved 2012 Company operating Budget as of each of the six andtwelve month periods ending June 30, 2012 and December 31, 2012, and you remain continuously employed by AMAG through each Payment Date describedin this letter, the Company will pay you a retention bonus in the gross amount of eighteen thousand seven hundred and fifty dollars ($18,750.00) (the“Retention Bonus Amount”) on each Payment Date, for a total potential Retention Bonus Amount equal to thirty seven thousand five hundred dollars($37,500.00). If the Company does not achieve its aggregate operating expense targets as of either or both of the six and twelve month periods ending June 30 orDecember 31, 2012, but the Company is within twenty percent (20%) of such targets as of either such date, the Retention Bonus Amount applicable to suchperiod will be reduced by the percentage by which the Company’s aggregate operating expenses exceed the Board-approved budget for such period, asdetermined by the Company’s Chief Executive Officer in his sole discretion. Any Retention Bonus Amount will be paid to you within thirty (30) daysfollowing June 30 and December 31, 2012, respectively (each payment date is referred to herein as a “Payment Date”). If the Company misses its aggregateoperating expense target by more than twenty percent (20%) as of either the six or twelve-month periods ended June 30 or December 31, 2012, you will not bepaid any portion of the Retention Bonus Amount for such period. Like your salary, any Retention Bonus Amount paid to you will be subject to all applicabletaxes. 2. Other Terms of Retention Bonus: In order to be eligible for any Retention Bonus, in addition to achieving the 2012 operating expensetargets described in paragraph 1 above, you must: (a) satisfactorily perform (as determined by AMAG) your job, as well as satisfactorily perform (asdetermined by AMAG) additional responsibilities that AMAG reasonably requests at all times up to and including each Payment Date; (b) continue in goodstanding and remain employed in the performance of your role (as determined by AMAG) at all times up to and including each Payment Date; (c) fully complywith the terms of this Agreement and all other agreements between you and the Company; and (d) keep the terms and existence of this letter strictlyconfidential. . 3. Termination by You or Termination for “Cause”: In the event that you terminate your employment for any reason or the Companyterminates your employment for “cause” (as determined by AMAG in its sole discretion) on or before any Payment Date, you agree that you will not be eligiblefor the Retention Bonus Amount with respect to each such subsequent Payment Date following the date of such termination. 4. Termination by the Company Without “Cause”: In the event that the Company terminates your employment without “cause” (asdetermined by AMAG in its sole discretion) prior to any Payment Date (including in connection with or following a change of control of the Company), theCompany will provide you with (a) one hundred percent (100%) of the Retention Bonus Amounts payable to you on any Payment Date scheduled to occur afterthe date of such termination and (b) nine (9) months of severance pay based on your then current base salary (paid in equal installments in accordance with theCompany’s normal payroll practices and commencing on the date the release referred to herein can no longer be revoked ), subject to the terms and conditionsoutlined in Section 2 and provided that you execute a release of claims satisfactory to the Company at the time of termination. The Retention Bonus Amountdescribed in this Section 4 shall be paid to you within seven (7) days of the date that the release of claims becomes effective in accordance with its terms. 5. No Modification of At-Will Relationship: Please note that this letter does not in any way modify or limit the at-will nature of youremployment by the Company. Nothing in this letter should be taken as a guarantee of continued employment, a specific term of employment and/or a contractemployment by the Company. Nothing in this letter should be taken as a guarantee of continued employment, a specific term of employment and/or a contractof employment, and at all times you will be expected to meet the Company’s performance standards. 6. Confidentiality: The terms and conditions of this letter are strictly confidential. You agree to not discuss or reveal any informationconcerning this letter to any past or present employee of the Company or any third person or entity other than your counsel, accountant and members of yourfamily. In the event you breach this provision, you agree that you will forfeit any rights you have to any Retention Bonus Amounts and/or repay to theCompany any Retention Bonus Amounts already paid to you. 7. General: This letter sets forth the complete agreement between you and the Company with respect to the payment to you of any RetentionBonus Amounts or severance amount. This letter agreement shall be governed by, and all disputes arising hereunder shall be resolved in accordance with, thelaw of the Commonwealth of Massachusetts, without regard to the conflicts of law principles thereof. This letter agreement may be executed by facsimile andin counterparts, each of which shall be considered an original, but all of which together shall constitute the same instrument. In addition, the agreement setforth herein can only be modified or changed in writing signed by both parties hereto. Any waiver of any provision of this letter agreement by the Companyshall not constitute a waiver of any other provision of this letter agreement unless the Company expressly so indicates otherwise. If any provision, section,subsection or other portion of this letter agreement shall be determined by any court of competent jurisdiction to be invalid, illegal or unenforceable in whole orin part, and such determination shall become final, such provision or portion shall be deemed to be severed or limited, but only to the extent required to renderthe remaining provisions and portions of this letter agreement enforceable. If you agree with the terms of this letter, please sign the acknowledgement below. Upon receipt of a signed letter, AMAG will return a copy to you for yourfiles. On behalf of the AMAG’s management team, I thank you for the contributions that you have made to the Company thus far. We look forward to continuing towork with you. Sincerely, /s/ Stephen Andre Stephen AndreSenior Vice President of Human Resources Agreed to and acknowledged as of December 7, 2011: By:/s/ Scott HolmesScott Holmes Confidential Document100 Hayden Avenue, Lexington, MA 02140 | Tel: 617.498.3382 | Fax: 617.812.8268 Exhibit 10.21 AMAG PHARMACEUTICALS, INC. Restricted Stock Unit Agreement AMAG Pharmaceuticals, Inc. (the “Company”) hereby enters into this Restricted Stock Unit Agreement, dated as of the date set forth below, with theRecipient named herein (the “Agreement”) and grants to the Recipient the Restricted Stock Units (“RSUs”) specified herein pursuant to its Second Amendedand Restated 2007 Equity Incentive Plan, as amended and in effect from time to time. The Terms and Conditions attached hereto are also a part hereof. Name of recipient (the “Recipient”):[Name of Recipient] Date of this RSU grant (“Grant Date”):[Date of Grant] Number of shares of the Company’s Common Stock (the “Underlying Shares”) underlyingthe equivalent number of restricted stock units (the “RSUs”) granted pursuant to thisAgreement:[Number] Number of RSUs that are vested on the Grant Date:- 0 - Number of RSUs that are unvested on the Grant Date:[Number] Vesting Schedule: 50% of the RSUs shall vest on the first anniversary of the Grant Date, 25% of the RSUs shall vest on the second anniversary of the Grant Date, andthe remaining 25% of the RSUs shall vest on the third anniversary of the Grant Date. AMAG PHARMACEUTICALS, INC.Signature of Recipient [Name]By:[Address]Name:Title: AMAG PHARMACEUTICALS, INC. Restricted Stock Unit Agreement — Terms and Conditions AMAG Pharmaceuticals, Inc. (the “Company”) agrees to award to the recipient specified on the cover page hereof (the “Recipient”), and the Recipientagrees to accept from the Company, the number of restricted stock units (the “RSUs”) specified on the cover page hereof representing an equivalent number ofshares of the Company’s Common Stock (the “Underlying Shares”), on the following terms: 1. Grant Under Plan. This Restricted Stock Unit Agreement (the “Agreement”) is made pursuant to and is governed by the Company’sSecond Amended and Restated 2007 Equity Incentive Plan, as amended and in effect from time to time (the “Plan”), and, unless the context otherwise requiresor except as defined herein, capitalized terms used herein shall have the same meanings as in the Plan. 2. Vesting if Business Relationship Continues. (a) Vesting Schedule. (1) If the Recipient has maintained continuously a Business Relationship with the Company through each date specified on thecover page hereof, a portion of the RSUs shall vest on such date in such amounts as are set forth opposite such date on thecover page hereof. (2) In the event that (i) the Company terminates the Recipient’s Business Relationship other than for death, disability or Cause orthe Recipient terminates its Business Relationship for Good Reason; (ii) the Recipient complies fully with all of his or herobligations under all agreements between the Company and the Recipient; and (iii) the Recipient executes, delivers to theCompany, within 60 days of the termination of the Recipient’s Business Relationship, and does not revoke a general release(in a form acceptable to the Company) releasing and waiving any and all claims that the Recipient has or may have againstthe Company, its directors, officers, employees, agents, successors and assigns with respect to the Recipient’s BusinessRelationship (other than any obligation of the Company set forth herein or the Employment Agreement which specificallysurvives the termination of the Recipient’s Business Relationship or employment, as applicable), then the next regularlyscheduled vesting date after the termination of the Recipient’s Business Relationship (the “Upcoming Vesting Date”) shallimmediately be accelerated and the RSUs scheduled to vest on the Upcoming Vesting Date shall immediately become vested;provided, that no additional RSUs scheduled to vest after such Upcoming Vesting Date shall become vested RSUs underany circumstances with respect to the Recipient and any such unvested RSUs shall be forfeited. Notwithstanding anything to the contrary herein, if the RSUs constitute deferred compensationsubject to Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), and the regulations and otherguidance thereunder and any state law of similar effect (collectively, “Section 409A”), and the sixty (60) day period in whichthe Recipient must execute the release begins in one calendar year and ends in another, the Underlying Shares shall be issuedin the later calendar year. Nothing contained in this Section 2(a)(2) shall override any provisions in the Recipient’sEmployment Agreement with respect to the acceleration of vesting of any equity incentives upon a Change of Control (asdefined in the Employment Agreement) or upon a termination of the Recipient’s employment following a Change of Control,which shall continue to apply. (3) If the Recipient’s Business Relationship is terminated by the Company for death, disability or Cause, or by the Recipient forany reason other than Good Reason, no additional RSUs shall become vested RSUs under any circumstances with respect tothe Recipient and any unvested RSUs shall be forfeited. (4) Any determination under this Agreement as to Business Relationship status or other matters referred to above shall be madein good faith by the Board, whose decision shall be final and binding on all parties. “Business Relationship” means service to the Company or its successor in the capacity of an employee, officer, director, consultant, oradvisor. “Cause” shall have the meaning set forth in the Recipient’s Employment Agreement. “Employment Agreement” shall mean the Employment Agreement, dated as of August 1, 2011, as amended from time to time, by andbetween the Company and the Recipient. “Good Reason” shall have the meaning set forth in the Recipient’s Employment Agreement. (b) Termination of Business Relationship. For purposes hereof, a Business Relationship shall not be considered as havingterminated during any military leave, sick leave, or other leave of absence if approved in writing by the Company and if such written approval, orapplicable law, contractually obligates the Company to continue the Business Relationship of the Recipient after the approved period of absence (an“Approved Leave of Absence”). In the event of an Approved Leave of Absence, vesting of RSUs shall be suspended (and all subsequent vestingdates shall be postponed by the length of the period of the Approved Leave of Absence) unless otherwise provided in the Company’s written approvalof the leave of absence that specifically refers to this Agreement. For purposes hereof, a Business Relationship shall include a consulting 2 arrangement between the Recipient and the Company that immediately follows termination of employment, but only if so stated in a writtenconsulting agreement executed by the Company that specifically refers to this Agreement. (c) Acceleration. The Board may at any time provide that the RSUs awarded pursuant to this Agreement shall become immediatelyexercisable in full or in part, shall be free of some or all restrictions, or otherwise realizable in full or in part, as the case may be, despite the fact thatthe foregoing actions may cause the application of Sections 280G and 4999 of the Code if a change in control of the Company occurs. 3. Issuance of Underlying Shares. With respect to any RSUs that become vested RSUs pursuant to Section 2, subject to Sections 5, 6 and8, the Company shall issue to the Recipient, as soon as practicable following the applicable vesting date (as specified on the cover page hereof with respect toany RSUs that become vested pursuant to Section 2(a)(1) and as specified in Section 2(a)(2) with respect to any RSUs that become vested pursuant toSection 2(a)(2), if applicable), the number of Underlying Shares equal to the number of RSUs vesting on such vesting date, provided that, if the vesting dateof any portion of the RSUs shall occur during either a regularly scheduled or special “blackout period” of the Company wherein Recipient is precluded fromselling shares of the Company’s Common Stock, the receipt of the corresponding Underlying Shares issuable with respect to such vesting date pursuant tothis Agreement shall be deferred until after the expiration of such blackout period, unless such Underlying Shares are covered by a previously establishedCompany-approved 10b5-1 plan of the Recipient, in which case the Underlying Shares shall be issued in accordance with the terms of such 10b5-1 plan. The Underlying Shares the receipt of which was deferred as provided above shall be issued to Recipient as soon as practicable after the expiration of theblackout period. Notwithstanding the above, subject to Section 8, (i) in no event may the Underlying Shares with respect to any RSUs that become vestedpursuant to Section 2(a)(1) be issued to the Recipient later than the later of: (a) December 31st of the calendar year in which vesting occurs, or (b) the fifteenth(15th) day of the third calendar month following such vesting date, and (ii) in no event may the Underlying Shares with respect to any RSUs that becomevested pursuant to Section 2(a)(2) be issued to the Recipient later than the 90 day following the Recipient’s Separation from Service; provided that theRecipient acknowledges and agrees that if the Underlying Shares are issued to the Recipient pursuant to this sentence while either a regularly scheduled orspecial “blackout period” is still in effect with respect to the Company or the Recipient, neither the Company nor the Recipient may sell any shares of theCompany’s Common Stock to satisfy any Tax Obligations except in compliance with the Company’s insider trading policies and requirements and applicablelaws. The form of such issuance (e.g., a stock certificate or electronic entry evidencing such Underlying Shares) shall be determined by the Company. th4. Restrictions on Transfer. The Recipient shall not sell, assign, transfer, pledge, encumber or dispose of all or any of his or her RSUs. Notwithstanding the foregoing, by delivering written notice to the Company, in a form satisfactory to the Company, the Recipient may designate a third partywho, in the event of the Recipient’s death, shall thereafter be entitled to receive any distributions of Underlying Shares to which the Recipient is entitled at thetime of his or her death pursuant to this Agreement. 3 5. Compliance with Law. The Recipient’s Award, and the issuance of the Underlying Shares pursuant to the Award, must comply with allapplicable laws and regulations governing the Award, and with the applicable regulations of any stock exchange on which the Underlying Shares may be listedfor trading at the time of issuance. The Company shall not issue the Underlying Shares to the Recipient if the Company determines that such issuance wouldnot be in material compliance with all applicable laws and regulations (in which case issuance of the Underlying Shares shall occur at the earliest date atwhich the Company determines that delivery of the Underlying Shares will not cause any such violation or non-compliance). 6. Withholding Taxes. All grants made pursuant to this Agreement shall be subject to withholding of all applicable federal, state, local andforeign income, employment, payroll, social insurance or other taxes resulting from the issuance or vesting of the RSUs or the delivery of the UnderlyingShares (the “Tax Obligations”). The Recipient agrees to pay to the Company, or otherwise make adequate provisions satisfactory to the Company for thepayment of, any sums required to satisfy the Tax Obligations at the time such Tax Obligations arise. The Company may, in its discretion, and the Recipienthereby agrees that and authorizes the Company on its behalf to, withhold, sell, and/or arrange for the sale of such number of Underlying Shares otherwiseissuable to the Recipient pursuant to this Agreement as deemed necessary by the Company, in its sole discretion, to ensure that the Tax Obligations can besatisfied, including the right to sell shares having a fair market value greater than the Tax Obligations; provided, however, that for this purpose the TaxObligations shall be computed based on the minimum statutory withholding rates for federal, state, local, and foreign income and employment tax purposes;provided, further, however, that if the Company decides to satisfy the Tax Obligations by withholding shares otherwise issuable hereunder (rather than byselling or arranging for the sale of shares on behalf of the Recipient), the Company shall not withhold shares having a fair market value greater than the TaxObligations. The Recipient further agrees that, if the Company elects not to withhold, sell, or arrange for the sale of the amount of Underlying Sharessufficient to satisfy the full amount of the Tax Obligations, the Company may withhold such shortfall in cash from wages or other remuneration or theRecipient will deliver to the Company, in cash, the amount of such shortfall. The Recipient further agrees that the Recipient shall not sell any of theUnderlying Shares during the period of time that the Company is acting on the Recipient’s behalf to withhold, sell, and/or arrange for the sale of the number ofUnderlying Shares necessary to satisfy the Recipient’s Tax Obligations. Notwithstanding the preceding sentences, the Recipient may, by written notice to theCompany at least ten business days before the applicable vesting date specified on the cover page hereof, elect to pay in cash the applicable Tax Obligations, ormake other appropriate provisions acceptable to the Company for the payment of the applicable Tax Obligations, including the withholding from any payrollor other amounts due to the Recipient. The Company may refuse to issue the Underlying Shares if the Recipient fails to comply with his or her obligations inconnection with the Tax Obligations as described in this Section. Recipient further agrees to take any further actions and execute any additional documents as may be necessary to effectuate the provisions of thisSection 6 and the Recipient hereby grants the Company a irrevocable power of attorney to sign such additional documents on the Recipient’s behalf if theCompany is unable after reasonable efforts to obtain Recipient’s 4 signature on such additional documents. This power of attorney is coupled with an interest and is irrevocable by the Recipient. 7. Provision of Documentation to Recipient. By signing the cover page of this Agreement, the Recipient acknowledges receipt of a copy of thisentire Agreement, a copy of the Plan, and a copy of the Plan’s related prospectus. 8. Section 409A of the Internal Revenue Code. The RSUs granted hereunder are intended to avoid the potential adverse tax consequences tothe Recipient of Section 409A, and the Board may make such modifications to this Agreement as it deems necessary or advisable to avoid such adverse taxconsequences. If the RSUs constitute deferred compensation subject to Section 409A, any issuance of Underlying Shares under this Agreement because of atermination of the Business Relationship (i) will only occur if such termination is also a “separation from service” (as such term is defined in TreasuryRegulation Section 1.409A-1(h)) under Section 409A (“Separation from Service”), and (ii) will be delayed until the earlier of (a) the date that is six months andone day after the Recipient’s Separation from Service or (b) the date of the Recipient’s death if the Recipient is, upon such Separation from Service, a“specified employee” of the Company or any successor entity thereto, as such term is defined in Section 409A(a)(2)(B)(i) of the Code. 9. Rights as Stockholder. The Recipient shall have no voting or any other rights as a stockholder of the Company with respect to any RSUscovered by this Agreement until the issuance of the Underlying Shares. 10. Miscellaneous. (a) Notices. All notices hereunder shall be in writing and shall be deemed given when sent by certified or registered mail, postageprepaid, return receipt requested, if to the Recipient, to the address set forth on the cover page hereof or at the address shown on the records of theCompany, and if to the Company, to the Company’s principal executive offices, attention of the Corporate Secretary. (b) Entire Agreement; Modification. This Agreement constitutes the entire agreement between the parties relative to the subject matterhereof, and supersedes all proposals, written or oral, and all other communications between the parties relating to the subject matter of thisAgreement. This Agreement may be modified, amended or rescinded only by a written agreement executed by both parties signatories to thisAgreement. In the event of a conflict between the terms of this Agreement and the Plan, the terms of the Plan shall control. (c) Fractional RSUs or Underlying Shares. All fractional RSUs or Underlying Shares resulting from the adjustment provisionscontained in the Plan shall be rounded down to the nearest whole unit or share. 5 (d) Severability. The invalidity, illegality or unenforceability of any provision of this Agreement shall in no way affect the validity,legality or enforceability of any other provision. (e) Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respectivesuccessors and assigns, subject to the limitations set forth herein. (f) Governing Law. This Agreement shall be governed by and interpreted in accordance with the laws of Delaware without givingeffect to the principles of the conflicts of laws thereof. (g) No Obligation to Continue Business Relationship. Neither the Plan, nor this Agreement, nor any provision hereof imposes anyobligation on the Company to continue a Business Relationship with the Recipient. (h) For purposes of Sections 2, 6 and 10(g), the “Company” shall mean the Company as defined in Section 9(a) of the Plan. 6Exhibit 10.22 AMAG PHARMACEUTICALS, INC. Restricted Stock Unit Agreement AMAG Pharmaceuticals, Inc. (the “Company”) hereby enters into this Restricted Stock Unit Agreement, dated as of the date set forth below, with theRecipient named herein (the “Agreement”) and grants to the Recipient the Restricted Stock Units (“RSUs”) specified herein pursuant to its Second Amendedand Restated 2007 Equity Incentive Plan, as amended and in effect from time to time. The Terms and Conditions attached hereto are also a part hereof. Name of recipient (the “Recipient”):[Name of Recipient] Date of this RSU grant (“Grant Date”):[Date of Grant] Number of shares of the Company’s Common Stock (the “Underlying Shares”) underlying theequivalent number of restricted stock units (the “RSUs”) granted pursuant to this Agreement:[Number] Number of RSUs that are vested on the Grant Date:- 0 - Number of RSUs that are unvested on the Grant Date:[Number] Vesting Schedule: 50% of the RSUs shall vest on the first anniversary of the Grant Date, 25% of the RSUs shall vest on the second anniversary of the Grant Date, andthe remaining 25% of the RSUs shall vest on the third anniversary of the Grant Date as follows: XXXX shares will vest on XXXXXX, 2012XXXX shares will vest on XXXXXX, 2013XXXX shares will vest on XXXXXX, 2014 AMAG PHARMACEUTICALS, INC.Signature of Recipient [Name]By:[Address]Name:Title: AMAG PHARMACEUTICALS, INC. Restricted Stock Unit Agreement — Terms and Conditions AMAG Pharmaceuticals, Inc. (the “Company”) agrees to award to the recipient specified on the cover page hereof (the “Recipient”), and the Recipientagrees to accept from the Company, the number of restricted stock units (the “RSUs”) specified on the cover page hereof representing an equivalent number ofshares of the Company’s Common Stock (the “Underlying Shares”), on the following terms: 1. Grant Under Plan. This Restricted Stock Unit Agreement (the “Agreement”) is made pursuant to and is governed by the Company’sSecond Amended and Restated 2007 Equity Incentive Plan, as amended and in effect from time to time (the “Plan”), and, unless the context otherwise requiresor except as defined herein, capitalized terms used herein shall have the same meanings as in the Plan. 2. Vesting if Business Relationship Continues. (a) Vesting Schedule. (1) If the Recipient has maintained continuously a Business Relationship with the Company through each date specified on thecover page hereof, a portion of the RSUs shall vest on such date in such amounts as are set forth opposite such date on thecover page hereof. (2) In the event that (i) the Company terminates the Recipient’s Business Relationship other than for death, disability or Cause;(ii) the Recipient complies fully with all of his or her obligations under all agreements between the Company and theRecipient; and (iii) the Recipient executes, delivers to the Company, within 60 days of the termination of the Recipient’sBusiness Relationship, and does not revoke a general release (in a form acceptable to the Company) releasing and waivingany and all claims that the Recipient has or may have against the Company, its directors, officers, employees, agents,successors and assigns with respect to the Recipient’s Business Relationship (other than any obligation of the Company setforth herein or the Employment Agreement which specifically survives the termination of the Recipient’s BusinessRelationship or employment, as applicable), then the next regularly scheduled vesting date after the termination of theRecipient’s Business Relationship (the “Upcoming Vesting Date”) shall immediately be accelerated and the RSUs scheduledto vest on the Upcoming Vesting Date shall immediately become vested; provided, that no additional RSUs scheduled to vestafter such Upcoming Vesting Date shall become vested RSUs under any circumstances with respect to the Recipient and anysuch unvested RSUs shall be forfeited. Notwithstanding anything to the contrary herein, if the RSUs constitute deferred compensation subject to Section 409A of the Internal Revenue Code of 1986, asamended (the “Code”), and the regulations and other guidance thereunder and any state law of similar effect (collectively,“Section 409A”), and the sixty (60) day period in which the Recipient must execute the release begins in one calendar yearand ends in another, the Underlying Shares shall be issued in the later calendar year. Nothing contained in thisSection 2(a)(2) shall override any provisions in the Recipient’s Employment Agreement, if any, of any Company policy withrespect to the acceleration of vesting of any equity incentives upon a Change of Control or upon a termination of theRecipient’s employment following a Change of Control, which shall continue to apply. (3) If the Recipient’s Business Relationship is terminated by the Company for death, disability or Cause, no additional RSUsshall become vested RSUs under any circumstances with respect to the Recipient and any unvested RSUs shall be forfeited. (4) Any determination under this Agreement as to Business Relationship status or other matters referred to above shall be madein good faith by the Board, whose decision shall be final and binding on all parties. “Business Relationship” means service to the Company or its successor in the capacity of an employee, officer, or director. “Cause” shall mean any of: (i) fraud, embezzlement or theft against the Company or any of its affiliates; (ii) conviction of, or a plea ofguilty or no contest to, a felony; (iii) willful nonperformance (other than by reason of illness) of the material duties of Recipient; or (iv) commissionof an act of gross negligence, willful misconduct or any other act with willful disregard for the Company’s best interests. “Change of Control” shall mean the first to occur of any of the following: (a) any “person” or “group” (as defined in the SecuritiesExchange Act of 1934, as amended) becomes the beneficial owner of a majority of the combined voting power of the then outstanding votingsecurities with respect to the election of the Board of Directors of the Company; (b) any merger, consolidation or similar transaction involving theCompany, other than a transaction in which the stockholders of the Company immediately prior to the transaction hold immediately thereafter in thesame proportion as immediately prior to the transaction not less than 50% of the combined voting power of the then voting securities with respect tothe election of the Board of Directors of the resulting entity; (c) any sale of all or substantially all of the assets of the Company; or (d) any otheracquisition by a third party of all or substantially all of the business or assets of the Company, as determined by the Board of Directors, in its solediscretion (b) Termination of Business Relationship. For purposes hereof, a Business Relationship shall not be considered as havingterminated during any military leave, sick leave, or other leave of absence if approved in writing by the Company and if such 2 written approval, or applicable law, contractually obligates the Company to continue the Business Relationship of the Recipient after the approvedperiod of absence (an “Approved Leave of Absence”). In the event of an Approved Leave of Absence, vesting of RSUs shall be suspended (and allsubsequent vesting dates shall be postponed by the length of the period of the Approved Leave of Absence) unless otherwise provided in theCompany’s written approval of the leave of absence that specifically refers to this Agreement. For purposes hereof, a Business Relationship shallinclude a consulting arrangement between the Recipient and the Company that immediately follows termination of employment, but only if so statedin a written consulting agreement executed by the Company that specifically refers to this Agreement. (c) Acceleration. The Board may at any time provide that the RSUs awarded pursuant to this Agreement shall become immediatelyexercisable in full or in part, shall be free of some or all restrictions, or otherwise realizable in full or in part, as the case may be, despite the fact thatthe foregoing actions may cause the application of Sections 280G and 4999 of the Code if a change in control of the Company occurs. 3. Issuance of Underlying Shares. With respect to any RSUs that become vested RSUs pursuant to Section 2, subject to Sections 5, 6 and8, the Company shall issue to the Recipient, as soon as practicable following the applicable vesting date (as specified on the cover page hereof with respect toany RSUs that become vested pursuant to Section 2(a)(1) and as specified in Section 2(a)(2) with respect to any RSUs that become vested pursuant toSection 2(a)(2), if applicable), the number of Underlying Shares equal to the number of RSUs vesting on such vesting date, provided that, if the vesting dateof any portion of the RSUs shall occur during either a regularly scheduled or special “blackout period” of the Company wherein Recipient is precluded fromselling shares of the Company’s Common Stock, the receipt of the corresponding Underlying Shares issuable with respect to such vesting date pursuant tothis Agreement shall be deferred until after the expiration of such blackout period, unless such Underlying Shares are covered by a previously establishedCompany-approved 10b5-1 plan of the Recipient, in which case the Underlying Shares shall be issued in accordance with the terms of such 10b5-1 plan. The Underlying Shares the receipt of which was deferred as provided above shall be issued to Recipient as soon as practicable after the expiration of theblackout period. Notwithstanding the above, subject to Section 8, (i) in no event may the Underlying Shares with respect to any RSUs that become vestedpursuant to Section 2(a)(1) be issued to the Recipient later than the later of: (a) December 31st of the calendar year in which vesting occurs, or (b) the fifteenth(15th) day of the third calendar month following such vesting date, and (ii) in no event may the Underlying Shares with respect to any RSUs that becomevested pursuant to Section 2(a)(2) be issued to the Recipient later than the 90 day following the Recipient’s Separation from Service; provided that theRecipient acknowledges and agrees that if the Underlying Shares are issued to the Recipient pursuant to this sentence while either a regularly scheduled orspecial “blackout period” is still in effect with respect to the Company or the Recipient, neither the Company nor the Recipient may sell any shares of theCompany’s Common Stock to satisfy any Tax Obligations except in compliance with the Company’s insider trading policies and requirements and applicablelaws. The form of such issuance (e.g., a stock certificate or electronic entry evidencing such Underlying Shares) shall be determined by the Company. 3 4. Restrictions on Transfer. The Recipient shall not sell, assign, transfer, pledge, encumber or dispose of all or any of his or her RSUs. Notwithstanding the foregoing, by delivering written notice to the Company, in a form satisfactory to the Company, the Recipient may designate a third partywho, in the event of the Recipient’s death, shall thereafter be entitled to receive any distributions of Underlying Shares to which the Recipient is entitled at thetime of his or her death pursuant to this Agreement. 5. Compliance with Law. The Recipient’s Award, and the issuance of the Underlying Shares pursuant to the Award, must comply with allapplicable laws and regulations governing the Award, and with the applicable regulations of any stock exchange on which the Underlying Shares may be listedfor trading at the time of issuance. The Company shall not issue the Underlying Shares to the Recipient if the Company determines that such issuance wouldnot be in material compliance with all applicable laws and regulations (in which case issuance of the Underlying Shares shall occur at the earliest date atwhich the Company determines that delivery of the Underlying Shares will not cause any such violation or non-compliance). 6. Withholding Taxes. All grants made pursuant to this Agreement shall be subject to withholding of all applicable federal, state, local andforeign income, employment, payroll, social insurance or other taxes resulting from the issuance or vesting of the RSUs or the delivery of the UnderlyingShares (the “Tax Obligations”). The Recipient agrees to pay to the Company, or otherwise make adequate provisions satisfactory to the Company for thepayment of, any sums required to satisfy the Tax Obligations at the time such Tax Obligations arise. The Company may, in its discretion, and the Recipienthereby agrees that and authorizes the Company on its behalf to, withhold, sell, and/or arrange for the sale of such number of Underlying Shares otherwiseissuable to the Recipient pursuant to this Agreement as deemed necessary by the Company, in its sole discretion, to ensure that the Tax Obligations can besatisfied, including the right to sell shares having a fair market value greater than the Tax Obligations; provided, however, that for this purpose the TaxObligations shall be computed based on the minimum statutory withholding rates for federal, state, local, and foreign income and employment tax purposes;provided, further, however, that if the Company decides to satisfy the Tax Obligations by withholding shares otherwise issuable hereunder (rather than byselling or arranging for the sale of shares on behalf of the Recipient), the Company shall not withhold shares having a fair market value greater than the TaxObligations. The Recipient further agrees that, if the Company elects not to withhold, sell, or arrange for the sale of the amount of Underlying Sharessufficient to satisfy the full amount of the Tax Obligations, the Company may withhold such shortfall in cash from wages or other remuneration or theRecipient will deliver to the Company, in cash, the amount of such shortfall. The Recipient further agrees that the Recipient shall not sell any of theUnderlying Shares during the period of time that the Company is acting on the Recipient’s behalf to withhold, sell, and/or arrange for the sale of the number ofUnderlying Shares necessary to satisfy the Recipient’s Tax Obligations. Notwithstanding the preceding sentences, the Recipient may, by written notice to theCompany at least ten business days before the applicable vesting date specified on the cover page hereof, elect to pay in cash the applicable Tax Obligations, ormake other appropriate provisions acceptable to the Company for the payment of the applicable Tax Obligations, including the withholding from any payrollor other amounts due to the Recipient. The Company may refuse to issue the Underlying Shares if 4 the Recipient fails to comply with his or her obligations in connection with the Tax Obligations as described in this Section. Recipient further agrees to take any further actions and execute any additional documents as may be necessary to effectuate the provisions of thisSection 6 and the Recipient hereby grants the Company a irrevocable power of attorney to sign such additional documents on the Recipient’s behalf if theCompany is unable after reasonable efforts to obtain Recipient’s signature on such additional documents. This power of attorney is coupled with an interestand is irrevocable by the Recipient. 7. Provision of Documentation to Recipient. By signing the cover page of this Agreement, the Recipient acknowledges receipt of a copy of thisentire Agreement, a copy of the Plan, and a copy of the Plan’s related prospectus. 8. Section 409A of the Internal Revenue Code. The RSUs granted hereunder are intended to avoid the potential adverse tax consequences tothe Recipient of Section 409A, and the Board may make such modifications to this Agreement as it deems necessary or advisable to avoid such adverse taxconsequences. If the RSUs constitute deferred compensation subject to Section 409A, any issuance of Underlying Shares under this Agreement because of atermination of the Business Relationship (i) will only occur if such termination is also a “separation from service” (as such term is defined in TreasuryRegulation Section 1.409A-1(h)) under Section 409A (“Separation from Service”), and (ii) will be delayed until the earlier of (a) the date that is six months andone day after the Recipient’s Separation from Service or (b) the date of the Recipient’s death if the Recipient is, upon such Separation from Service, a“specified employee” of the Company or any successor entity thereto, as such term is defined in Section 409A(a)(2)(B)(i) of the Code. 9. Rights as Stockholder. The Recipient shall have no voting or any other rights as a stockholder of the Company with respect to any RSUscovered by this Agreement until the issuance of the Underlying Shares. 10. Miscellaneous. th(a) Notices. All notices hereunder shall be in writing and shall be deemed given when sent by certified or registered mail, postageprepaid, return receipt requested, if to the Recipient, to the address set forth on the cover page hereof or at the address shown on the records of theCompany, and if to the Company, to the Company’s principal executive offices, attention of the Corporate Secretary. (b) Entire Agreement; Modification. This Agreement constitutes the entire agreement between the parties relative to the subject matterhereof, and supersedes all proposals, written or oral, and all other communications between the parties relating to the subject matter of thisAgreement. This Agreement may be modified, amended or rescinded only by a written agreement executed by both parties signatories to thisAgreement. In the event of a conflict between the terms of this Agreement and the Plan, the terms of the Plan shall control. 5 (c) Fractional RSUs or Underlying Shares. All fractional RSUs or Underlying Shares resulting from the adjustment provisionscontained in the Plan shall be rounded down to the nearest whole unit or share. (d) Severability. The invalidity, illegality or unenforceability of any provision of this Agreement shall in no way affect the validity,legality or enforceability of any other provision. (e) Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respectivesuccessors and assigns, subject to the limitations set forth herein. (f) Governing Law. This Agreement shall be governed by and interpreted in accordance with the laws of Delaware without givingeffect to the principles of the conflicts of laws thereof. (g) No Obligation to Continue Business Relationship. Neither the Plan, nor this Agreement, nor any provision hereof imposes anyobligation on the Company to continue a Business Relationship with the Recipient. (h) For purposes of Sections 2, 6 and 10(g), the “Company” shall mean the Company as defined in Section 9(a) of the Plan. 6Exhibit 21.1 Subsidiaries of AMAG Pharmaceuticals, Inc. Name of SubsidiaryJurisdiction of Formation AMAG Securities CorporationMassachusetts AMAG Europe LimitedUnited Kingdom Alamo Acquisition Sub, Inc.Delaware QuickLinks -- Click here to rapidly navigate through this documentExhibit 23.1 Consent of Independent Registered Public Accounting Firm We hereby consent to the incorporation by reference in the Registration Statement on Form S-3 (File No. 333-164400) and in the RegistrationStatements on Form S-8 (File Nos. 333-82292, 333-131656, 333-148682, 333-159938 and 333-168786) of AMAG Pharmaceuticals, Inc. of ourreport dated March 8, 2012 relating to the financial statements and the effectiveness of internal control over financial reporting, which appears in thisForm 10-K./s/ PRICEWATERHOUSECOOPERS LLPBoston, MassachusettsMarch 8, 2012 QuickLinksExhibit 23.1QuickLinks -- Click here to rapidly navigate through this documentExhibit 31.1 CERTIFICATIONSI, Frank E. Thomas, certify that: 1. I have reviewed this Annual Report on Form 10-K of AMAG 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 makethe statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respectsthe 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 definedin 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 oursupervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us byothers 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 oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal 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 theeffectiveness 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 mostrecent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonablylikely 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 arereasonably 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 internalcontrol over financial reporting.Date: March 8, 2012 /s/ FRANK E. THOMASFrank E. ThomasExecutive Vice President, Chief Operating Officer,and Interim President and Chief Executive Officer(Principal Executive Officer)QuickLinksExhibit 31.1QuickLinks -- Click here to rapidly navigate through this documentExhibit 31.2 CERTIFICATIONSI, Scott A. Holmes, certify that: 1. I have reviewed this Annual Report on Form 10-K of AMAG 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 makethe statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respectsthe 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 definedin 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 oursupervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us byothers 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 oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal 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 theeffectiveness 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 mostrecent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonablylikely 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 arereasonably 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 internalcontrol over financial reporting.Date: March 8, 2012 /s/ SCOTT A. HOLMESScott A. HolmesChief Accounting Officer, Vice President andController (principal financial officer)QuickLinksExhibit 31.2QuickLinks -- Click here to rapidly navigate through this documentExhibit 32.1 CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of AMAG Pharmaceuticals, Inc. (the "Company") on Form 10-K for the period ended December 31, 2011as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Frank E. Thomas, Executive Vice President, Chief OperatingOfficer, and Interim President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of theSarbanes-Oxley Act of 2002, that, to the best of my knowledge:(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 theCompany. /s/ FRANK E. THOMASFrank E. ThomasExecutive Vice President, Chief Operating Officer,and Interim President and Chief Executive Officer(principal executive officer) Dated: March 8, 2012QuickLinksExhibit 32.1QuickLinks -- Click here to rapidly navigate through this documentExhibit 32.2 CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of AMAG Pharmaceuticals, Inc. (the "Company") on Form 10-K for the period ended December 31, 2011as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Scott A. Holmes, Chief Accounting Officer, Vice Presidentand Controller of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the bestof my knowledge:(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 theCompany. /s/ SCOTT A. HOLMESScott A. HolmesChief Accounting Officer, Vice President andController (principal financial officer) Dated: March 8, 2012QuickLinksExhibit 32.2

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