AMAG Pharmaceuticals, Inc. Annual Report 2014

Plain-text annual report

Use these links to rapidly review the documentTABLE OF CONTENTS ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATATable of Contents UNITED 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.)1100 Winter StreetWaltham, Massachusetts(Address of Principal Executive Offices) 02451(Zip Code)(617) 498-3300(Registrant's Telephone Number, Including Area Code)Securities registered pursuant to Section 12(b) of the Act:Securities 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 ýý No oo 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 ýý 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 1934during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filingrequirements for the past 90 days. Yes ýý 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 the registrant wasrequired to submit and post such files). Yes ýý 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, tothe best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment(MarkOne) ý ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACTOF 1934For the Fiscal Year Ended December 31, 2014oro TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACTOF 1934For the transition period from to Title of each class Name of each exchange on which registeredCommon Stock, par value $0.01 per share NASDAQ Global Select MarketPreferred Share Purchase Rights to this Form 10-K. ý Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. Seedefinition of "accelerated filer," "large accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one): Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes oo No ýý The aggregate market value of the registrant's voting stock held by non-affiliates as of June 30, 2014 was approximately $453,000,000 based on theclosing price of $20.72 of the Common Stock of the registrant as reported on the NASDAQ Global Select Market on such date. As of February 4, 2015, therewere 25,615,978 shares of the registrant's Common Stock, par value $0.01 per share, outstanding.DOCUMENTS INCORPORATED BY REFERENCE Portions of the Definitive Proxy Statement that the registrant intends to file in connection with the solicitation of proxies for the Annual Meeting ofStockholders within 120 days of the end of the fiscal year ended December 31, 2014 are incorporated by reference into Part III of this Annual Report onForm 10-K. Large accelerated filer o Accelerated filer ý Non-accelerated filer o(Do not check if asmaller reporting company) Smaller Reporting Company oTable of ContentsAMAG PHARMACEUTICALS, INC.FORM 10-KFOR THE YEAR ENDED DECEMBER 31, 2014TABLE OF CONTENTS PART I Item 1. Business 2Item 1A. Risk Factors 39Item 1B. Unresolved Staff Comments 72Item 2. Properties 72Item 3. Legal Proceedings 73Item 4. Mine Safety Disclosures 75 PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of EquitySecurities 76Item 6. Selected Financial Data 79Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 81Item 7A. Quantitative and Qualitative Disclosures About Market Risk 115Item 8. Financial Statements and Supplementary Data 117Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure 179Item 9A. Controls and Procedures 179Item 9B. Other Information 179 PART III Item 10. Directors, Executive Officers and Corporate Governance 180Item 11. Executive Compensation 180Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 180Item 13. Certain Relationships and Related Transactions, and Director Independence 180Item 14. Principal Accountant Fees and Services 180 PART IV Item 15. Exhibits and Financial Statement Schedules 181Table of Contents PART 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-lookingstatements that involve risks and uncertainties. We make such forward-looking statements pursuant to the safe harbor provisions of the Private SecuritiesLitigation Reform Act of 1995 and other federal securities laws. In this Annual Report on Form 10-K terminology such as "may," "will," "could," "should,""would," "expect," "anticipate," "continue," "believe," "plan," "estimate," "intend" or other similar words and expressions (as well as other words orexpressions referencing future events, conditions or circumstances) are intended to identify forward-looking statements. Unless the context suggests otherwise, references to "Feraheme" refer to both Feraheme (the trade name for ferumoxytol in the U.S. and Canada) andRienso (the trade name for ferumoxytol in the EU and Switzerland). Examples of forward-looking statements contained in this report include, without limitation, statements regarding the following: plans to pursueopportunities to make new advancements in patients' health and to enhance treatment accessibility; plans to diversify and grow our product portfolio;expectations and plans as to regulatory and commercial developments and activities, including with regard to label changes for Feraheme and our plan towork with the FDA to finalize the Feraheme label, the pursuit, if any, of a broader indication for Feraheme, commercialization efforts, if any, for Ferahemeoutside of the U.S., requirements and initiatives for clinical trials and studies, post-approval commitments for our products and the lifecycle managementprogram for Makena; expectations as to what impact recent regulatory developments will have on our business and competition, including recent changesto our product information and label, and other risk minimization measures in the EU; the market opportunities for each of our products; the amount ofresources that we intend to dedicate to the commercialization of Feraheme; expected transitioning activities with Takeda Pharmaceutical Company Limited("Takeda") and the impact of Takeda's withdrawal of the application for Type II Variation to vary the marketing authorization for Rienso in the EU or ourmutual decision with Takeda to initiate withdrawal of Rienso's current marketing authorizations in the EU and Switzerland; our expectations regarding theresults of discussions with Health Canada, including our belief that approval of the broader indication for Feraheme in such territory is unlikely withoutadditional clinical data and the possibility that Health Canada will impose additional restrictions on the current Feraheme CKD indication; beliefs aboutcompounding pharmacies and the impact of recent legislation focused on compounding pharmacies; beliefs regarding possible entry of genericcompetitors, including timing, for both Makena and Feraheme; plans regarding our sales and marketing initiatives, including our contracting strategy andefforts to increase patient compliance and access; the impact of government regulations on our business and the pricing and reimbursement for ourproducts, including the Branded Drug Fee under the Healthcare Reform Act and the Medicare reimbursement rate and estimates for Medicaid rebates; ourexpectations regarding the timing for enrollment in and commencement of our clinical trials and studies; our expectation of costs to be incurred inconnection with and revenue sources to fund our future operations; our expectation for the patient populations for Makena and Feraheme; ourexpectations regarding the contribution of Makena and Feraheme sales to the funding of our on-going operations; the magnitude of costs and timing ofintegrating Lumara Health into our current business; expectations regarding the manufacture of all drug substance and drug products at our third-partymanufacturers; plans to increase headcount; our expectations regarding customer returns and other revenue-related reserves and accruals; estimatesregarding our net operating loss carryforwards and other tax attributes; initiatives to improve the reputation of Makena and educate industry participantson the benefits of Makena; the impact of accounting pronouncements; the effect of product price increases; expected increases in research and developmentexpenses; expectations regarding our financial results, including revenues, cost of product sales, selling, general and administrative expenses, restructuringcosts and net income (expense); the impact on revenues from the termination of our license arrangement with Takeda; our investing activities; expectationsregarding our cash, cash equivalents and investments balances and capital needs; the impact and outcomes of our legal proceedings; our beliefs regardingthe validity of our1Table of Contentsferumoxytol patent portfolio; estimates and beliefs related to our debt, including our Convertible Notes and the Term Loan Facility; expected customer mixand utilization rates for our products; the impact of volume rebates and other incentives; provider purchase patterns and use of competitive products; thevaluation of certain intangible assets, goodwill, contingent consideration, debt and other assets and liabilities, including our methodology andassumptions regarding fair value measurements; our gross to net sales adjustments; our expectations regarding competitive pressures and the impact ongrowth on our product sales; our plans regarding manufacturing; the timing of our planned research and development projects; the manner in which weintend or are required to settle the conversion of our Convertible Notes; plans to submit the NOL Amendment to our Rights Plan to our shareholders forapproval; and our expectations for our cash, revenue, cash equivalents and investments balances and information with respect to any other plans andstrategies for our business. Our actual results and the timing of certain events may differ materially from the results discussed, projected, anticipated orindicated in any forward-looking statements. Any forward-looking statement should be considered in light of the factors discussed in Part I, Item 1A below under "Risk Factors" and elsewhere in thisAnnual Report on Form 10-K. We caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date theyare made. We disclaim any obligation, except as specifically required by law and the rules of the U.S. Securities and Exchange Commission, to publiclyupdate or revise any such statements to reflect any change in company expectations or in events, conditions or circumstances on which any such statementsmay be based, or that may affect the likelihood that actual results will differ from those set forth in the forward-looking statements. ITEM 1. BUSINESS: OverviewProduct Portfolio Overview AMAG Pharmaceuticals, Inc., a Delaware corporation, was founded in 1981. We are a specialty pharmaceutical company with a focus on maternal health,anemia and cancer supportive care. We currently market Makena® (hydroxyprogesterone caproate injection), Feraheme® (ferumoxytol) Injection forIntravenous ("IV") use and MuGard® Mucoadhesive Oral Wound Rinse. The primary goal of our company is to bring to market therapies that provide clearbenefits and improve patients' lives. Currently, our two primary sources of revenue are from the sale of Makena and Feraheme. On November 12, 2014, we acquired Lumara Health Inc.("Lumara Health"), a privately held pharmaceutical company specializing in women's health, for approximately $600.0 million in upfront cash consideration(subject to finalization of certain adjustments related to Lumara Health's financial position at the time of closing, including adjustments related to networking capital, net debt and transaction expenses as set forth in the definitive agreement with Lumara Health (the "Lumara Agreement")) and approximately3.2 million shares of our common stock having a fair value of approximately $112.0 million at the time of closing. The Lumara Agreement includes futurecontingent payments of up to $350.0 million in cash (or upon mutual agreement between us and the former Lumara Health security holders, future contingentpayments may also be made in common stock or some combination thereof) payable by us to the former Lumara Health security holders based upon theachievement of certain sales milestones through calendar year 2019. In connection with the acquisition of Lumara Health, we acquired Makena, a progestinindicated to reduce the risk of preterm birth in women with a singleton pregnancy who have a history of singleton spontaneous preterm birth. We sell Makenato specialty pharmacies and distributors, who, in turn sell Makena to healthcare providers, hospitals, government agencies and integrated delivery systems.Additional details regarding the Lumara Agreement can be found in Note C, "Business Combinations," to our consolidated financial statements included inthis Annual Report on Form 10-K.2Table of Contents Feraheme was approved for marketing in the U.S. in June 2009 by the U.S. Food and Drug Administration (the "FDA") for use as an IV iron replacementtherapy for the treatment of iron deficiency anemia ("IDA") in adult patients with chronic kidney disease ("CKD"). We began selling Feraheme in the U.S. inJuly 2009 through our commercial organization, including a specialty sales force. We sell Feraheme to authorized wholesalers and specialty distributors,who in turn, sell Feraheme to healthcare providers who administer Feraheme primarily within hospitals, hematology and oncology centers, and nephrologyclinics. In addition to continuing to pursue opportunities to make new advancements in patients' health and to enhance treatment accessibility, we intend tocontinue to expand and diversify our portfolio through the in-license or purchase of additional pharmaceutical products or companies. We are seekingcomplementary products that will leverage our corporate infrastructure, sales force call points and commercial expertise, with a particular focus on maternalhealth specialists, hematology and oncology centers, nephrology clinics and hospitals. We are evaluating and plan to pursue commercial products as well aslate-stage development assets. In addition, we are contemplating transactions that allow us to realize cost synergies to increase cash flows, as well astransactions that potentially optimize after-tax cash flows.Regulatory Developments Overview In June 2014, we proposed changes to the FDA related to our current U.S. label of Feraheme based on a review of global post-marketing data tostrengthen the warnings and precautions section of the label and mitigate the risk of serious hypersensitivity reactions, including anaphylaxis, in order toenhance patient safety. After considering our June 2014 submission and other information, in January 2015, the FDA notified us that it believes new safetyinformation should be included in the labeling for Feraheme, including, among other things, a boxed warning to highlight the risks of serioushypersensitivity/anaphylaxis reactions and revisions that Feraheme should only be administered through an IV infusion (i.e., not by IV injection) and shouldbe contraindicated for patients with any known history of drug allergy. The FDA's recommended label changes go beyond what we proposed in June 2014.We plan to work with the FDA to finalize an updated U.S. Feraheme label. In December 2012, we submitted a supplemental new drug application ("sNDA") to the FDA seeking approval for Feraheme for the treatment of IDA inadult patients who had failed or could not use oral iron. In January 2014, we received a complete response letter from the FDA for the sNDA informing us thatour sNDA could not be approved in its present form and stating that we have not provided sufficient information to permit labeling of Feraheme for safe andeffective use for the proposed broader indication. The FDA indicated that its decision was based on the cumulative ferumoxytol data, including the globalPhase III IDA program and global post-marketing safety reports for the currently indicated CKD patient population. The FDA suggested, among other things,that we submit additional clinical trial data in the proposed broad IDA patient population with a primary composite safety endpoint of serioushypersensitivity/anaphylaxis, cardiovascular events and death, events that are included in the labels of Feraheme and other IV irons and that have beenreported in the post-marketing environment for Feraheme. Additionally, the FDA proposed potentially evaluating alternative dosing and/or administration ofFeraheme as well as potential changes to labeling that would be intended to reduce the risk of serious hypersensitivity reactions associated with Feraheme.In June 2014, we met with the FDA to discuss our proposed approach to resolving the points that were raised in the complete response letter. Based on theFDA's feedback, we submitted a revised proposal that includes the design of a potential clinical trial, a safety endpoint for such trial and alternative methodsof administration of Feraheme. We expect to receive feedback from the FDA during 2015 and expect thereafter to be able to assess and determine the pathforward, if any, for Feraheme in the broad IDA patient population in the U.S., including the related timing and cost of any clinical trials.3Table of Contents Further, in October 2014, we filed with the FDA a prior approval supplement to the original Makena New Drug Application ("NDA") seeking approval ofa 1 mL preservative-free vial of Makena and we are seeking to expand Makena's formulations and drug delivery technologies as part of the product's lifecyclemanagement program. Outside of the U.S., ferumoxytol has been granted marketing approval in the European Union ("EU"), Canada and Switzerland for use as an IV ironreplacement therapy for the treatment of IDA in adult patients with CKD. In March 2010, we entered into a License, Development and CommercializationAgreement (the "Takeda Agreement"), which was amended in June 2012 (the "Amended Takeda Agreement") with Takeda. On December 29, 2014, weentered into an agreement with Takeda to terminate the Amended Takeda Agreement and we will regain all worldwide development and commercializationrights for Feraheme following the transfer of marketing authorizations from Takeda to us (the "Takeda Termination Agreement"). Under the Amended TakedaAgreement, Takeda had an exclusive license to market and sell ferumoxytol in the EU, Canada, and Switzerland, as well as certain other geographicterritories. The EU marketing authorization for Rienso is valid in the 28 EU Member States as well as in Iceland, Liechtenstein and Norway. The trade namefor ferumoxytol in Canada is Feraheme and outside of the U.S. and Canada the trade name is Rienso. Additional details regarding the Takeda TerminationAgreement can be found in Note R, "Collaborative Agreements," to our consolidated financial statements included in this Annual Report on Form 10-K. Sales of Feraheme/Rienso outside of the U.S. do not and are not expected to materially contribute to our revenues. As such, and in light of the TakedaTermination Agreement, we have been assessing various commercialization strategies for Rienso in the EU and Switzerland and Feraheme in Canada. Anumber of considerations influence our analysis of our commercialization opportunities outside of the U.S., including (i) regulatory developments and thepotential cost of post-approval clinical trial commitments and post-marketing obligations required by regulatory authorities outside of the U.S., (ii) theproduct's commercial viability (sales potential relative to the cost of maintaining the product on the market) in light of the current CKD label, the possibleimpact of future label changes, including any impact in the U.S., and the competitive landscape, and (iii) possible approaches in different geographies, whichmay include seeking a licensing or distribution partner or commercializing the product ourselves. Based on these considerations, we have come to a mutualdecision with Takeda to initiate withdrawal of the marketing authorization for Rienso in the EU and Switzerland. We are currently assessing the commercialopportunity for Feraheme in Canada. In the future, we may decide to seek to obtain a new marketing authorization for ferumoxytol in the EU, particularly if we generate additional clinicaldata to support potential approval in the broader IDA indication. There can be no assurance that we will be able to develop an approach that would beeconomically viable for us or a commercialization partner.Debt Obligations In February 2014, we issued $200.0 million of 2.5% convertible senior notes due February 15, 2019 (the "Convertible Notes"). Interest is payable semi-annually in arrears on February 15 and August 15 of each year, beginning on August 15, 2014. The initial conversion rate is 36.9079 shares of our commonstock per $1,000 principal amount of the Convertible Notes, which corresponds to an initial conversion price of approximately $27.09 per share of ourcommon stock and represents a conversion premium of approximately 35% based on the last reported sale price of our common stock of $20.07 onFebruary 11, 2014, the date the Convertible Notes offering was priced. In addition, in connection with the pricing of the Convertible Notes and in order toreduce the potential dilution to our common stock and/or offset cash payments due upon conversion of the Convertible Notes, we also entered intoconvertible bond hedge and warrant transactions in February 2014. The initial exercise price of the warrants is $34.12 per share, subject to adjustment uponcertain events, which is 70% above the last reported sale price of our common stock of $20.07 on February 11, 2014.4Table of Contents On November 12, 2014, in connection with the acquisition of Lumara Health, we entered into the Term Loan Facility, which provides for term loans inthe aggregate principal amount of $340.0 million (the "Term Loan Facility"). We used $327.5 million of the Term Loan Facility proceeds to partially financethe $600.0 million cash portion of the Lumara Health acquisition. The Term Loan Facility bears interest, at our option, at either the Eurodollar rate plus amargin of 6.25% or the prime rate plus a margin of 5.25%. The Eurodollar rate is subject to a 1.00% floor and the prime rate is subject to a 2.00% floor. As ofDecember 31, 2014, the stated interest rate was 7.25%. We must repay the Term Loan Facility in installments of (a) $8.5 million per quarter due on the lastday of each quarter beginning with the quarter ending March 31, 2015 through the quarter ending December 31, 2015, and (b) $12.8 million per quarter dueon the last day of each quarter beginning with the quarter ending March 31, 2016 through the quarter ending September 30, 2020, with the balance due in afinal installment on November 12, 2020. The Term Loan Facility matures on November 12, 2020, except that the Term Loan Facility will mature onSeptember 30, 2018 if:(a)more than $25.0 million in aggregate principal amount of our Convertible Notes remain outstanding and not converted to common stock orrefinanced and replaced with debt that matures following, and has no amortization prior to, the date that is six and one half years following theclosing date; and (b)the aggregate principal amount of the Term Loan Facility (including all undrawn incremental commitments) is greater than $50.0 million onand as of such date. See Note S, "Debt," to our consolidated financial statements included in this Annual Report on Form 10-K for additional information regarding theConvertible Notes, the bond hedge and warrant transactions, as well as the Term Loan Facility. Our common stock trades on the NASDAQ Global Select Market ("NASDAQ") under the trading symbol "AMAG."5 Table of ContentsProducts The following table summarizes the current uses and, subject to regulatory approval, potential uses of our products, 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" below.MakenaOverview On November 12, 2014, we acquired Lumara Health, a privately held pharmaceutical company specializing in women's health, including its marketeddrug product Makena, the only FDA-approved drug indicated to reduce the risk of preterm birth in women with a singleton pregnancy who have a history ofsingleton spontaneous preterm birth. Makena is administrated intramuscularly by a healthcare professional at a dose of 250 mg (1 mL) weekly with treatmentbeginning between 16 weeks and6Product Uses/Potential Uses U.S. Regulatory Status ForeignRegulatory StatusMakena® (hydroxyprogesteronecaproate injection) (5 mL multi-usevial) A progestin indicated to reduce the risk of pretermbirth in women with a singleton pregnancy who have ahistory of singleton spontaneous preterm birth. Approved and marketed. Not approved outside of the U.S.Makena® (hydroxyprogesteronecaproate injection) (1 mL vial,preservative-free, single dose) A progestin indicated to reduce the risk of pretermbirth in women with a singleton pregnancy who have ahistory of singleton spontaneous preterm birth. Prior approval supplement submitted to the FDA inOctober 2014.Decision from the FDA expected in the second quarter2015. Not approved outside of the U.S.Feraheme® (ferumoxytol) IV iron replacement therapeutic agent for the treatmentof IDA in adult patients with CKD. Approved and marketed. Approved and marketed as Feraheme in Canada.Approved and marketed as Rienso in the EU.*Approved in Switzerland and not currently marketed.*Feraheme® (ferumoxytol) IV iron replacement therapeutic agent for the treatmentof patients with a history of unsatisfactory oral irontherapy or in whom oral iron cannot be used. sNDA filed December 2012. Complete ResponseLetter received January 2014.Submitted proposal to FDA in 2014 that included thedesign of a potential clinical trial and we are awaitingfeedback. Application for Type II Variation filed with theEuropean Medicines Agency ("EMA") in 2013 andwithdrawn in January 2015.Decision from Health Canada on sNDS expected in thesecond half of 2015.MuGard® Mucoadhesive OralWound Rinse Management of oral mucocitis/stomatiits and all typesof oral wounds. Cleared and marketed. We license only the U.S. commercial rights fromPlasmaTech.*As discussed above, we have come to a mutual decision with Takeda to initiate withdrawal of the marketing authorization for Rienso in the EU and Switzerland. Our licensing arrangement with Takeda,and its termination, is discussed below under the heading "Collaboration, License and Other Material Agreements—Takeda."Table of Contents20 weeks and six days and continuing until 37 weeks (through 36 weeks and six days) of pregnancy or delivery, whichever happens first. Makena was approved by the FDA in February 2011 and was granted orphan drug exclusivity through February 3, 2018. Under the Orphan Drug Act, theFDA may designate a product as an orphan drug if it is a drug intended to treat a rare disease or condition, defined, in part, as a patient population of fewerthan 200,000 in the U.S. In the U.S., the company that first obtains FDA approval for a designated orphan drug for the specified rare disease or conditionreceives orphan drug marketing exclusivity for that drug for a period of seven years. This orphan drug exclusivity prevents the FDA from approving anotherapplication for the "same drug" for the same orphan indication during the exclusivity period, except in very limited circumstances. A designated orphan drugmay not receive orphan drug exclusivity for an approved indication if that indication is for the treatment of a condition broader than that for which itreceived orphan designation. In addition, orphan drug exclusivity marketing rights in the U.S. may be lost if the FDA later determines that the request fordesignation was materially defective or if the manufacturer is unable to assure sufficient quantity of the drug to meet the needs of patients with the raredisease or condition.Preterm Birth Preterm birth is defined as a birth prior to 37 weeks of pregnancy. According to the Centers for Disease Control and Prevention ("CDC"), in 2012, pretermbirths affected more than 450,000 babies, or one of every nine infants born in the U.S. Although, the causes of preterm births are not fully understood, certainwomen are at a greater risk for preterm birth, including those who have had a previous preterm birth, are pregnant with multiples or have certain uterine orcervical problems. Makena is indicated only for women with a history of spontaneous singleton preterm birth who are pregnant with a singleton, whichaccounts for approximately 140,000 pregnancies annually in the U.S. High blood pressure, pregnancy complications (such as placental problems) and certainother health or lifestyle factors may also be contributing factors. The last few weeks of a woman's pregnancy are important to the full development of manymajor organ systems, including the brain, lungs, and liver. Preterm births can increase the risk of infant death and can also result in serious long-term healthissues for the child, including respiratory problems, gastrointestinal conditions, cerebral palsy, developmental delays, and vision and hearing impairments.According to a 2007 report by the Institute of Medicine (US) Committee on Understanding Premature Birth and Assuring Healthy Outcome, the annualsocietal economic cost associated with preterm birth is at least $26.2 billion and includes medical and healthcare costs for the baby, labor and delivery costsfor the mother, early intervention and special education services, and costs associated with lost work and pay.Post-Approval Commitments for Makena Makena was approved under the provisions of the FDA's "Subpart H" Accelerated Approval regulations. The Subpart H regulations allow certain drugs,for serious or life-threatening conditions, to be approved on the basis of surrogate endpoints or clinical endpoints other than survival or irreversiblemorbidity. As a condition of approval under Subpart H, the FDA required that Makena's sponsor perform certain adequate and well-controlled post-marketingclinical studies to verify and describe clinical benefit of Makena as well as fulfill certain other post-approval commitments. We are currently conducting thefollowing clinical studies; (a) an ongoing efficacy and safety clinical study of Makena; (b) an ongoing follow-up study of the babies born to mothers from theefficacy and safety clinical study; and (c) a completed pharmacokinetic study of women taking Makena. Given the patient population (i.e., women pregnantwho are at an increased high risk for recurrent preterm delivery) and the informed risk of receiving a placebo instead of the active approved drug in the U.S.,the pool of prospective subjects for such clinical trials in the U.S. is small and we are therefore seeking enrollment on a global scale.7Table of ContentsLifecycle Management Program We are pursuing a lifecycle management program for Makena, some elements of which may provide new intellectual property or data exclusivity beyondFebruary 2018 by exploring new routes of administration and the use of new delivery technologies, as well as reformulation technologies. As part of thisprogram, in October 2014, a prior approval supplement for a preservative-free, single-dose (1 mL) vial for Makena was filed with and is under review by theFDA. We expect a decision in the second quarter of 2015. Makena is currently available in a 5-dose (5 mL) vial.Feraheme for the treatment of IDA in patients with CKDOverview In June 2009, Feraheme was approved for marketing in the U.S. by the FDA for use as an IV iron replacement therapy for the treatment of IDA in adultpatients with all stages of CKD, Stage 1 through Stage 5 (end-stage renal disease). In July 2009, we began to market and sell Feraheme in the U.S. WhileFeraheme is approved for IDA in all stages of CKD, beginning in 2010, due to changes in the way the federal government reimburses providers for the care ofdialysis patients, the utilization of Feraheme shifted to non-dialysis patients. The non-dialysis CKD IDA market is made up of a range of healthcare providerswho administer IV iron, including nephrologists, hematologists, oncologists, hospitals and other end-users who treat patients with CKD. We anticipate themajority of all Feraheme utilization in the U.S. will continue to be in the non-dialysis CKD patient population if and until Feraheme receives a broader labelto include non-CKD patients. In June 2014, we proposed changes to the FDA related to our current U.S. label of Feraheme based on a review of global post-marketing data tostrengthen the warnings and precautions section of the label and mitigate the risk of serious hypersensitivity reactions, including anaphylaxis, in order toenhance patient safety. After considering our June 2014 submission and other information, on January 7, 2015, the FDA notified us that it believes new safetyinformation should be included in the labeling for Feraheme, including, among other things, a boxed warning to highlight the risks of serioushypersensitivity/anaphylaxis reactions and revisions that Feraheme should only be administered through an IV infusion (i.e., not by IV injection) and shouldbe contraindicated for patients with any known history of drug allergy. The FDA's recommended label changes go beyond what we proposed in June 2014.We plan to work with the FDA to finalize an updated U.S. Feraheme label. In Europe, Takeda has been commercializing ferumoxytol since its approval in June 2012 under the trade name Rienso, currently in nine EU countries.Rienso is subject to periodic review by the EMA's Pharmacovigilance Risk Assessment Committee ("PRAC") and in February 2014 Takeda, as the marketingauthorization holder (the "MAH") for Rienso, submitted to PRAC a Periodic Safety Update Report ("PSUR") concerning Rienso as part of such review. APSUR is a pharmacovigilance document submitted by the MAH at defined intervals and is intended to provide a safety update permitting an evaluation ofthe risk-benefit balance of a medicinal product while it is commercialized. As part of its assessment of the PSUR, PRAC reviewed various data, including the rate of hypersensitivity reactions with fatal outcomes with Rienso.Following that assessment, and in agreement with the EMA, Takeda issued a Direct Healthcare Professional Communication ("DHPC") letter in May 2014 toremind physicians in the EU of the existing risk minimization measures for all IV iron products to manage and minimize the risk of serious hypersensitivityreactions that were included in the special warnings and precautions sections of the Rienso label. In July 2014 and again in January 2015, also in connection with the PSUR evaluation, PRAC confirmed that the benefit/risk balance of Rienso in thecurrently approved CKD indication remains favorable. These confirmations were subject to a number of proposed changes to the product information andlabel and other risk minimization measures, including, among others, that Rienso8Table of Contentsshould be administered to patients by infusion over at least 15 minutes (replacing injection) and that it should be contraindicated in patients with any knownhistory of drug allergy (the "July Recommendations"), that the label should caution that elderly patients or patients with multiple co-morbidities whoexperience a serious hypersensitivity reaction due to Rienso may have more severe outcomes (the "January Recommendations"), and related variations to theSummary of Product Characteristics ("SmPC"). The PRAC's recommendations were subsequently endorsed by the EMA's Committee for Medicinal Productsfor Human Use ("CHMP"). Takeda updated the product's label to reflect the July Recommendations and in August 2014 issued a DHPC letter informingphysicians of these changes. In December 2011, ferumoxytol was granted marketing approval in Canada, under the trade name Feraheme, for use as an IV iron replacement therapy forthe treatment of IDA in adult patients with CKD. In August 2012, ferumoxytol was granted marketing approval in Switzerland under the trade name Riensofor use as an IV iron replacement therapy for the treatment of IDA in adult patients with CKD, but has subsequently been withdrawn from the market. Asdiscussed above, we have come to a mutual decision with Takeda to initiate withdrawal of the marketing authorization for Rienso in the EU and Switzerland.We are currently assessing the commercial opportunity for Feraheme in Canada.Chronic kidney disease, anemia, and iron deficiency CKD is the gradual and permanent loss of kidney function. It is a progressive illness that contributes to the development of many complications,including anemia, hypertension, fluid and electrolyte imbalances, acid/base abnormalities, bone disease and cardiovascular disease. According to theNational Kidney Foundation, 26 million Americans are living with CKD and millions of others are at risk. Anemia, a common condition among CKDpatients, is associated with cardiovascular complications, decreased quality of life, hospitalizations, and increased mortality. Anemia develops early duringthe course of CKD and worsens with advancing kidney disease. Patients with anemia can look pale, feel fatigued, experience shortness of breath, low energy,headaches, palpitations or chest pains, and have a loss of appetite, trouble sleeping and trouble concentrating. Anemia in CKD patients is most oftenconsidered to be caused by an insufficient production of erythropoietin, a hormone made by the kidneys which tells the body to produce red blood cells, andiron deficiency, due to inadequate iron intake, blood loss or because the body cannot use iron stores. Regardless of the cause of the iron deficiency, ironreplacement therapy is essential to increase iron stores and raise hemoglobin levels. Iron is also essential for effective treatment with erythropoiesisstimulating agents ("ESAs"), which are commonly used in anemic patients to stimulate red blood cell production. Based on data contained in a 2009publication in the Journal of the American Society of Nephrology, we estimate that there are approximately 1.6 million adults in the U.S. diagnosed with IDAand stages 3 through 5 CKD, who are patients in the mid to later stages of CKD but not yet on dialysis 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. The National Kidney Foundation's Kidney DiseaseOutcomes Quality Initiative guidelines recommend either oral or IV iron for peritoneal dialysis patients and non-dialysis patients with stages 1 through 5CKD. Oral iron is currently the first-line iron replacement therapy of choice of most physicians in both the U.S. and abroad. However, oral iron supplementsare poorly absorbed by many patients, which may adversely impact their effectiveness, and are associated with certain side effects, such as constipation,diarrhea, and cramping, that may adversely affect patient compliance in using such products. In addition, it can take an extended time for hemoglobin levelsto improve following the initiation of oral iron treatment, and even then the targeted hemoglobin levels may not be reached. Conversely, iron givenintravenously allows larger amounts of iron to be provided to patients while avoiding many of the side effects and treatment compliance issues associatedwith oral iron, and can result in faster rises in hemoglobin levels. The administration of IV iron has been shown to be effective9Table of Contentsin treating 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. Iron supplementation is widely used in CKD patients to treat iron deficiency, prevent its development in ESA-treated patients, raise hemoglobin levels in the presence or absence of ESA treatment, and reduce ESA doses in patients receiving ESA treatment. We believethat a small fraction of non-dialysis CKD patients in the U.S. who are diagnosed with IDA are currently being treated with IV iron, and thus a significantopportunity remains to grow the market for IV iron in this patient population.Post-Marketing Commitments of Feraheme in CKD We have initiated a randomized, active-controlled pediatric study of Feraheme for the treatment of IDA in pediatric CKD patients to meet our FDA post-approval Pediatric Research Equity Act requirement to support pediatric labeling of Feraheme in the U.S. The study covers both dialysis-dependent and non-dialysis dependent CKD pediatric patients and will assess the safety and efficacy of Feraheme treatment as compared to oral iron in approximately 288pediatric patients. Our pediatric investigation plan, which was a requirement for submission of the marketing authorization application for ferumoxytol, was approved bythe EMA in December 2009 and amended in 2012 and 2014. It includes the pediatric study, as described above, and two additional pediatric studiesrequested by the EMA. These additional studies include a rollover extension study in pediatric CKD patients and a study in pediatric patients with IDAregardless of the underlying cause. The rollover study is open for enrollment. The pediatric IDA study will commence once the appropriate dose of Ferahemeis determined from the study data resulting from the pediatric study of Feraheme, described above. As part of our post-approval commitments to the EMA, we are conducting a global multi-center clinical trial to determine the safety and efficacy ofrepeat doses of ferumoxytol for the treatment of IDA in patients with hemodialysis-dependent CKD. As part of the commitment we made to the EMA as acondition of the approval of the marketing authorization for ferumoxytol in the EU, this study includes a treatment arm with iron sucrose using a magneticresonance imaging sub-analysis to evaluate the potential for iron to accumulate in the body following treatment with IV iron, specifically in the heart andliver, and, where possible, other major organs following repeated IV iron administration over a two year period (the "hd-CKD Study"). Enrollment has beencompleted. We have assumed any post-marketing obligations of Takeda as part of the Takeda Termination Agreement, including costs that otherwise would havebeen Takeda's obligation under the Amended Takeda Agreement for the ongoing pediatric studies and the ongoing multi-center clinical trial discussedabove. In connection with our decision to withdraw the marketing authorization for Rienso in the EU and Switzerland, we may modify or terminate clinicaltrials being conducted as part of our post-approval commitments to the EMA.Feraheme for the treatment of IDA in a broad range of patientsOverview IDA not associated with CKD is widely prevalent in many different patient populations. For many of these patients, treatment with oral iron isunsatisfactory. In the U.S., approximately 900,000 grams of IV iron were administered for the treatment of non-dialysis patients with IDA in 2014. We believethat approximately half, or 450,000 grams, of the IV iron administered in the U.S. was for the treatment of non-dialysis patients with CKD and the other halfwas for non-CKD patients with IDA due to other causes, including patients with gastrointestinal diseases or disorders, abnormal uterine bleeding,inflammatory diseases, and chemotherapy-induced anemia. It is estimated that more than 4.5 million patients in the U.S. have IDA (CKD and non-CKD). Weestimate that approximately 5% to 10% of these patients are currently treated with IV iron.10Table of Contents As discussed above, in December 2012, we submitted an sNDA to the FDA seeking approval for Feraheme for the treatment of IDA in adult patients whohad failed or could not use oral iron. The sNDA included data from two controlled, multi-center Phase III clinical trials ("IDA-301 and IDA-302"), includingmore than 1,400 patients, which evaluated the safety and efficacy of ferumoxytol for the treatment of IDA in this broader patient population. Both studies metthe primary efficacy endpoints related to improvements in hemoglobin. In these studies no new safety signals were observed with Feraheme treatment and thetypes of reported adverse events were consistent with those seen in previous studies and those contained in the approved U.S. package insert for Feraheme. Inaddition, patients from IDA-301 were eligible to enroll in an open-label extension study ("IDA-303") and receive treatment with Feraheme, as defined in theprotocol. In January 2014, we received a complete response letter from the FDA for the sNDA informing us that our sNDA could not be approved in its present formand stating that we have not provided sufficient information to permit labeling of Feraheme for safe and effective use for the proposed broader indication.The FDA indicated that its decision was based on the cumulative ferumoxytol data, including the global Phase III IDA program and global post-marketingsafety reports for the currently indicated CKD patient population. The FDA suggested, among other things, that we submit additional clinical trial data in theproposed broad IDA patient population with a primary composite safety endpoint of serious hypersensitivity/anaphylaxis, cardiovascular events and death,events that are included in the labels of Feraheme and other IV irons and that have been reported in the post-marketing environment for Feraheme.Additionally, the FDA proposed potentially evaluating alternative dosing and/or administration of Feraheme as well as potential changes to labeling thatwould be intended to reduce the risk of serious hypersensitivity reactions associated with Feraheme. In June 2014, we met with the FDA to discuss ourproposed approach to resolving the points that were raised in the complete response letter. Based on the FDA's feedback, we submitted a revised proposal thatincludes the design of a potential clinical trial, a safety endpoint for such trial and alternative methods of administration of Feraheme. We expect to receivefeedback from the FDA during 2015 and expect thereafter to be able to assess and determine the path forward, if any, for Feraheme in the broad IDA patientpopulation in the U.S., including the related timing and cost of any clinical trials. In June 2013, Takeda filed an application for Type II Variation to vary the marketing authorization for Rienso in the EU with the EMA to extend thetherapeutic indication from adult patients with IDA associated with CKD to adult patients with iron deficiency from any underlying cause. During the courseof CHMP's review of the Type II Variation, Takeda received inquiries and reports from regulators indicating that approval of the Type II Variation would beunlikely without additional confirmative clinical data. As a result, in January 2015, we and Takeda mutually agreed that Takeda withdraw the Type IIVariation. In addition, in October 2013, Takeda filed an sNDS with Health Canada seeking marketing approval for Feraheme for the treatment of IDA in a broadrange of patients. In October 2014, Takeda received inquiries from Health Canada and in January 2015, we submitted a response to these inquiries. Based onthese inquiries and interactions, we believe that approval in the broader indication is unlikely in Canada without additional clinical data. We believe that wewill receive Health Canada's final decision on the sNDS in the second half of 2015, however we cannot guarantee that Health Canada will issue a finaldecision on the expected timeline. In addition, until we have further conversations with Health Canada, we cannot predict whether their concerns with regardto approval of the broader IDA indication, including with regard to the need for additional clinical data, will cause Health Canada to impose additionalrestrictions on the current CKD indication. As discussed above, we are in the process of regaining all worldwide development and commercialization rights for Feraheme from Takeda and havecome to a mutual decision with Takeda to initiate withdrawal of the marketing authorization for Rienso in the EU and Switzerland. We are currently assessingthe commercial opportunity for Feraheme in Canada.11Table of ContentsMuGard In June 2013, we entered into the License Agreement with PlasmaTech Biopharmaceuticals, Inc. ("PlasmaTech") (formerly known as AccessPharmaceuticals, Inc.), under which we acquired the U.S. commercial rights to MuGard for the management of oral mucositis (the "MuGard LicenseAgreement"). MuGard was launched in the U.S. by PlasmaTech in 2010 after receiving 510(k) clearance from the FDA and is indicated for the management oforal mucositis/stomatitis (that may be caused by radiotherapy and/or chemotherapy) and all types of oral wounds (mouth sores and injuries), includingaphthous ulcers/canker sores and traumatic ulcers, such as those caused by oral surgery or ill-fitting dentures or braces. Mucositis is the painful inflammationand ulceration of the mucous membranes of the mouth and gastrointestinal tract that can be caused by high-dose chemotherapy and/or radiotherapy. Oralmucositis is a common and often debilitating complication of cancer treatment that may impair oral nutritional intake or result in delays, unplanned breaks ordecreases in dose for chemotherapy and/or radiation treatments, leading to sub-optimal cancer treatment results. In the U.S., there are approximately 400,000people per year who experience oral mucositis and approximately 80% of patients with mucositis experience severe oral pain. The incidence rate and severityof symptoms depends on the type of anti-cancer treatment and patient-related risk factors. For example, based on data reported in a 2001 article in CA: ACancer Journal for Clinicians, the incidence of oral mucositis for patients undergoing radiation for the treatment of head and neck cancer could approximate80%. The incidence of oral mucositis for bone marrow transplant patients undergoing high dose chemotherapy and/or radiation pre-conditioning andpatients undergoing conventional chemotherapy is approximately 70% and 40%, respectively. There are few effective treatments for oral mucositis and the products in this market remain mostly undifferentiated. There are a number of approachesused to treat or manage oral mucositis, including the use of ice chips during chemotherapy treatments, various medicinal mouthwashes, topical anestheticsand analgesics, and oral gel treatments. We sell MuGard through a distribution network of specialty pharmacies and wholesalers, who in turn supply it tohospitals or hematology/oncology clinics. Currently, MuGard is used by a small percentage of the oral mucositis patients in the U.S., which represents asignificant opportunity for us to address an unmet medical need and grow the sales of MuGard in the oral mucositis market.Our Core Proprietary Technology Our core proprietary technology for ferumoxytol is based on coated superparamagnetic iron oxide particles and their characteristic properties. Our corecompetencies for ferumoxytol include the ability to design such particles for particular applications and to manufacture the particles in controlled sizes. Ourtechnology and expertise enable us to synthesize, sterilize and stabilize these iron oxide particles in a manner necessary for use in pharmaceutical productssuch as IV iron replacement therapeutics. 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 a result, ourcore technology for ferumoxytol is well-suited for use as an IV iron replacement therapy product. Our rights to the technology are derived from and/or protected by license agreements, patents, patent applications and trade secret protections. See"Patents and Trade Secrets" below. There are no patents covering Makena. Our rights to MuGard are governed by the MuGard License Agreement. SeeNote C, "Business Combinations," to our consolidated financial statements included in this Annual Report on Form 10-K.12 Table of ContentsCollaboration, License and Other Material AgreementsTakeda In March 2010, we entered into the Takeda Agreement, as amended in June 2012, under which we granted exclusive rights to Takeda to develop andcommercialize Feraheme as a therapeutic agent in certain agreed-upon territories. In February 2014, we entered into the Supply Agreement with Takeda,which provides the terms under which we sell Feraheme to Takeda in order for Takeda to meet its requirements for commercial use of Feraheme in itslicensed territories. On December 29, 2014, we entered into the Takeda Termination Agreement, under which the Amended Takeda Agreement will beterminated and we will regain all worldwide development and commercialization rights for Feraheme following the transfer of the outstanding marketingauthorizations. Pursuant to the Takeda Termination Agreement, we and Takeda have agreed to effectuate the termination of the Amended Takeda Agreementon a rolling basis, whereby the termination will be effective for a particular geographic territory (e.g., countries under the regulatory jurisdictions of HealthCanada, the EMA and SwissMedic) upon the earlier of effectiveness of the transfer to us or a Withdrawal (as defined below) of the marketing authorization forsuch territory, with the final effective termination date to be on the third such effective date ("Termination Date"). In connection with each Termination Date and in accordance with the terms of the Takeda Termination Agreement, Takeda is obligated, with respect tothe applicable terminated territory, to transfer and assign to us all applicable regulatory materials and approvals and certain product data, unlabeledinventory, third party contracts intellectual property rights and know-how to us, and to grant us an exclusive license for certain Takeda technology used andapplied to commercialize Feraheme in the applicable territory. The Takeda Termination Agreement also details the regulatory activities each party isrequired to perform in connection with transferring the marketing authorization from Takeda to us in each of the territories and the allocation of the costs ofsuch activities. We and Takeda have agreed to use commercially reasonable efforts to transfer all required activities to us on a territory-by-territory basiswithin 60 days after the applicable Termination Date (subject to a 30-day extension upon our request and Takeda's consent). In addition, Takeda is obligatedpursuant to the Takeda Termination Agreement to provide transition assistance to us, at no cost to us, for up to 180 days after each Termination Date for theapplicable termination territory. With Takeda's consent (which shall not be unreasonably withheld or delayed), we may extend the transition services periodfor a terminated territory for a period of time reasonably necessary to complete any services that cannot be reasonably transitioned to us during the initial180-day period, which extension will not exceed an additional 180 days. If we request, and Takeda agrees to conduct, additional transition services after theend of the applicable transition services period, as may be extended, we will reimburse Takeda's fully burdened costs for such additional services plus 5%. The Takeda Termination Agreement also provides that if the marketing authorization for the product is suspended in a particular territory and the partiesare prevented from completing the transfer of such marketing authorization to us within 120 days after such suspension due to applicable laws or anyregulatory requirements or restrictions, or if we do not fulfill our obligations to initiate marketing authorization transfer by the agreed-upon, territory-specificdeadline, Takeda will have the right, in Takeda's sole discretion, to withdraw such marketing authorization (a "Withdrawal"). In consideration for the early termination of the Amended Takeda Agreement and the activities to be performed by us earlier than contemplated underthe Amended Takeda Agreement, and in lieu of any future cost-sharing and milestone payments contemplated by the Amended Takeda Agreement, Takedaagreed to make certain payments to us, subject to certain terms and conditions, including up to approximately $6.7 million in connection with clinical studyobligations, pharmacovigilance activities, regulatory filings and support, commercialization and back-office support and distribution expenditures and a$3.0 million milestone payment payable subject to certain regulatory conditions.13Table of Contents Additionally, the Supply Agreement, which continues in effect until the expiration or termination of the Amended Takeda Agreement, will alsoterminate as of the respective Termination Date in the applicable geographic territory. We have assumed any post-marketing obligations of Takeda as part of the Takeda Termination Agreement, including costs that otherwise would havebeen Takeda's obligation under the Amended Takeda Agreement for the ongoing pediatric studies, and the hd-CKD Study. As discussed above, we havecome to a mutual decision with Takeda to initiate withdrawal of the marketing authorization for Rienso in the EU and Switzerland. We are currently assessingthe commercial opportunity for Feraheme in Canada. In connection with our decision to withdraw the marketing authorization for Rienso in the EU andSwitzerland, we may modify or terminate clinical trials being conducted as part of our post-approval commitments to the EMA. Additional details regarding the Takeda Termination Agreement and related revenue can be found in Note R, "Collaborative Agreements," to ourconsolidated financial statements included in this Annual Report on Form 10-K.PlasmaTech In June 2013, we entered into the MuGard License Agreement under which PlasmaTech granted us an exclusive, royalty-bearing license, with the right togrant sublicenses, to certain intellectual property rights, including know-how, patents and trademarks, to use, import, offer for sale, sell, manufacture andcommercialize MuGard in the U.S. and its territories (the "U.S. Territory") for the management of all diseases or conditions of the oropharyngeal cavity,including mucositis. In consideration for the license, we paid PlasmaTech an upfront license fee of $3.3 million in June 2013. We are required to pay royalties to PlasmaTechon net sales of MuGard until the later of (a) the expiration of the licensed patents or (b) the tenth anniversary of the first commercial sale of MuGard in theU.S. Territory (the "Royalty Term"). These tiered, double-digit royalty rates decrease after the expiration of the licensed patents and are subject to off-setagainst certain of our expenses. After the expiration of the Royalty Term, the license shall become a fully paid-up, royalty-free and perpetual license in theU.S. Territory. PlasmaTech remains responsible for the manufacture of MuGard and we have entered into a quality agreement and a supply agreement with PlasmaTechunder which we purchase MuGard inventory from PlasmaTech. Our inventory purchases are at the price actually paid by PlasmaTech to purchase it from athird-party plus a mark-up to cover administration, handling and overhead. PlasmaTech is responsible for maintenance of the licensed patents at its own expense, and we retain the first right to enforce any licensed patent againstthird party infringement. The MuGard License Agreement terminates at the end of the Royalty Term, but is subject to early termination by us for convenienceand by either party upon an uncured breach by or bankruptcy of the other party.3SBio In 2008, we entered into the 3SBio License Agreement and the 3SBio Supply Agreement with 3SBio Inc. ("3SBio") for the development andcommercialization of Feraheme as an IV iron replacement therapeutic agent in China. In consideration of the grant of the license, we received an upfrontpayment of $1.0 million. In late January 2014, we mutually terminated the agreement with 3SBio, effective immediately, due to the fact that, despite the bestefforts of the parties, regulatory approval in China could not be obtained within the agreed upon time period.14Table of ContentsManufacturing We currently rely solely on third parties for the manufacture of Feraheme and Makena for our commercial and clinical use. Our third-party contractmanufacturing facilities for Feraheme and Makena are subject to current good manufacturing practices ("cGMP"), regulations enforced by the FDA andequivalent foreign regulatory agencies through periodic inspections to confirm such compliance. Although we are currently working to establish and qualifyalternative manufacturing facilities for both drug substance and drug product of Feraheme and drug product for Makena, we do not currently have alternativemanufacturers for our Feraheme and Makena drug substance and drug product, as applicable. In addition, we currently do not have a supply agreement forMakena drug substance and, until we do, we plan to obtain Makena drug substance on a purchase order basis. We target to maintain sufficient inventorylevels throughout our supply chain to meet our projected U.S. near-term demand of Feraheme and Makena drug product in order to minimize risks of supplydisruption at points in our single source supply chain. We intend to continue to outsource the manufacture and distribution of Feraheme and Makena for theforeseeable future, and we believe this manufacturing strategy will enable us to direct more of our financial resources to the commercialization of ourproducts. Under the terms of the MuGard License Agreement, PlasmaTech is responsible for all aspects of manufacturing MuGard. We have entered into aquality agreement and a supply agreement with PlasmaTech under which we purchase MuGard inventory from PlasmaTech. To support the commercialization of our products, we have developed a fully integrated manufacturing support system, including quality assurance,quality control, regulatory affairs and inventory control policies and procedures. These support systems are intended to enable us to maintain high standardsof quality for our products. We have also established certain testing and release specifications with the FDA and other foreign regulatory agencies. This release testing must beperformed in order to allow the finished product to be used for commercial sale.Makena The Makena drug product for our commercial and clinical use is currently manufactured by Hospira Worldwide, Inc. ("Hospira") under a Developmentand Supply Agreement, originally dated September 17, 2009, by and between Hologic, Inc. (from whom Lumara Health, then-named K-V PharmaceuticalCompany ("K-V Pharmaceutical") originally purchased the worldwide rights to Makena) and Hospira, which was fully assigned to K-V Pharmaceutical inDecember 2012, and was amended on March 28, 2014 (as amended, the "Hospira Agreement"). Under the terms of the Hospira Agreement, Hospira wasmanufacturing Makena at certain agreed-upon pricing through December 31, 2014 and currently Hospira can increase the price (subject to certainlimitations) of Makena for both commercial and clinical uses, upon advance written notice to us. In addition, under the terms of the Hospira Agreement weare obligated to make certain minimum purchase requirements. The term of the Hospira Agreement applies to the manufacture of certain dosage forms andprovides for an option to extend the term based on the occurrence, timing and amount of certain forecasts and purchase orders related to other dosage forms.We cannot make any guarantees that we will be able to extend the term of the Hospira Agreement on favorable terms, if at all. Lumara Health, as our wholly owned subsidiary following consummation of the acquisition, is subject to certain continuing obligations under a ConsentDecree of Permanent Injunction (the "Consent Decree") among the FDA, Lumara Health's predecessor company, K-V Pharmaceutical and certain formerofficers and affiliates of K-V Pharmaceutical. In particular, Lumara Health is bound by a number of provisions and requirements in the Consent Decreeincluding, but not limited to, inspection of Lumara Health's places of business by the FDA without prior notice, and notification of FDA of particular actionsand events. If Lumara Health fails to comply with applicable provisions in the15Table of ContentsConsent Decree, the Federal Food, Drug, and Cosmetic Act (the "FDC Act") or the FDC Act's implementing regulations, the FDA may impose specificsanctions including, but not limited to, the requirement to cease any of Lumara Health's manufacturing operations, the imposition of substantial financialpenalties, and the requirement to implement additional corrective actions.Feraheme We currently have the following contracts in place related to the manufacture of Feraheme:Sigma-Aldrich, Inc. In August 2012, we entered into a Commercial Supply Agreement, as amended in October 2013 and December 2014, with Sigma-Aldrich, Inc. ("SAFC")pursuant to which SAFC agreed to manufacture and we agreed to purchase from SAFC, the active pharmaceutical ingredient ("API") or the drug productintermediate ("DPI") for use in the finished product of ferumoxytol for U.S. commercial sale, for sale outside of the U.S., as well as for use in clinical trials (asamended, the "SAFC Agreement"). Subject to certain conditions, the SAFC Agreement provides that we purchase from SAFC certain minimum quantities ofAPI or DPI each year, but we are not obligated to use SAFC as our sole supplier of API or DPI. In addition, the prices for each batch will decline as batches areproduced in greater quantities throughout each year of the agreement. The SAFC Agreement has an initial term that ends December 31, 2020, which may beautomatically extended thereafter for additional two year periods, unless cancelled by us or SAFC within an agreed-upon notice period. The amendments to the SAFC Agreement provide updated pricing terms beginning on a certain date in the future, which are based on the amount ofproduct produced by SAFC in a given calendar year. If SAFC is unable to offer these agreed-upon prices, we may terminate our minimum purchasecommitments. In addition, if SAFC is unable to meet our actual demand requirements other than due to our acts, omissions or default, our minimum purchasecommitment will be suspended for such period. Further, if after a certain date in the future, SAFC is unable to match a bona fide offer from a third party tomanufacture and supply product to us on better terms than provided by SAFC pursuant to the SAFC Agreement then a reduced minimum purchasecommitment will apply. We have the right to terminate the SAFC Agreement and any purchase orders under certain conditions and subject to certain noticerequirements. The SAFC Agreement also specifies cost-sharing arrangements relating to future process changes or capital improvements to the manufacturingprocess for Feraheme under the SAFC Agreement.Patheon, Inc. (formerly DSM Pharmaceuticals, Inc.) In January 2010, we entered into a Pharmaceutical Manufacturing and Supply Agreement, as amended in July 2014, with Patheon, Inc. (formerly DSMPharmaceuticals, Inc.) ("Patheon") pursuant to which Patheon agreed to manufacture ferumoxytol finished drug product for U.S. commercial sale, for saleoutside of the U.S., as well as for use in clinical trials at a fixed price per vial (as amended, the "Patheon Agreement"). The Patheon Agreement will continuein force until December 31, 2015. The Patheon Agreement may be terminated at any time upon mutual written agreement by us and Patheon or at any time byus subject to certain notice requirements and early termination fees. In addition, the Patheon Agreement may be terminated by either us or Patheon in theevent of a material breach of the agreement by the other party provided that the breaching party fails to cure such breach within an agreed-upon noticeperiod.Raw Materials We and our third-party manufacturers currently purchase certain raw and other materials used to manufacture Feraheme and Makena from third-partysuppliers and, at present, do not have long-term16Table of Contentssupply contracts with most of these third parties. Although certain of our raw or other materials are readily available, others may be obtained only fromqualified suppliers. Certain materials used in Feraheme and Makena may from time to time be procured from a single source without a qualified alternativesupplier of the high-quality standards imposed on our raw and other materials used to manufacture Feraheme, we may not be able to obtain such materials ofthe quality required to manufacture Feraheme or Makena. The qualification of an alternative source may require repeated testing of the new materials andgenerate greater expenses to us if materials that we test do not perform in an acceptable manner. In addition, we or our third-party manufacturers sometimesobtain raw or other materials from one vendor only, even where multiple sources are available, to maintain quality control and enhance working relationshipswith suppliers, which could make us susceptible to price inflation by the sole supplier, thereby increasing our production costs. As a result of the high-qualitystandards imposed on our raw or other materials, we or our third-party manufacturers may not be able to obtain such materials of the quality required tomanufacture Feraheme or Makena from an alternative source on commercially reasonable terms, or in a timely manner, if at all.Patents 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 2023. One of our U.S. Ferahemepatents is subject to a patent term extension under U.S. patent law and FDA regulations and will expire in June 2023. There are no patents covering Makena.We have a license to two U.S. patents relating to MuGard, that each expire in 2022. Our foreign patents may also be eligible for extension in accordance withapplicable law in certain countries. We also have patent applications pending in the U.S. and have filed counterpart patent applications in certain foreign countries directed to Feraheme.Although further patents 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 issued patents may not provide us with competitive advantages or may be challenged by others, and the existing or future patents of third parties maylimit our ability to commercialize Feraheme. For example, in July 2010, Sandoz GmbH ("Sandoz") filed with the European Patent Office (the "EPO") anopposition to a previously issued patent which covers ferumoxytol in EU jurisdictions. In October 2012, at an oral hearing, the Opposition Division of theEPO revoked this patent. In December 2012, our notice of appeal of that decision was recorded with the EPO, which suspended the revocation of our patent.On May 13, 2013, we filed a statement of grounds of appeal and on September 27, 2013, Sandoz filed a response to that statement. We filed a reply to thatresponse on March 17, 2014 and oral proceedings for the appeal are scheduled for June 16, 2015. We continue to defend the validity of this patentthroughout the appeals process, which we expect to take two to three years. However, in the event that we do not experience a successful outcome from theappeals process, under EU regulations ferumoxytol would still be entitled to eight years of data protection and ten years of market exclusivity from the dateof approval, which we believe would create barriers to entry for any generic version of ferumoxytol into the EU market until sometime between 2020 and2022.17Table of Contents Our licensed patent rights to MuGard may not prevent competitors from independently developing and marketing a competing product that does notinfringe our licensed patents or other intellectual property. Further, there are no patents covering Makena and thus the successful commercialization ofMakena is significantly reliant on our ability to take advantage of its orphan drug exclusivity. Frequently, the unpredictable nature and significant costs of patent litigation leads the parties to settle to remove any uncertainty related to the status oftheir patents. Settlement agreements between branded companies and generic applicants may allow, among other things, a generic product to enter the marketprior to the expiration of any or all of the applicable patents covering the branded product, either through the introduction of an authorized generic or byproviding a license to the applicant for the patents in suit.Competition The pharmaceutical and biopharmaceutical industries are intensely competitive and subject to rapid technological change. Many of our competitors forFeraheme are large, well-known pharmaceutical companies and may benefit from significantly greater financial, sales and marketing capabilities, greatertechnological or competitive advantages, and other resources. For Makena, most of our competition comes from pharmacies that compound non-FDAapproved formulations of HPC (defined below), which are sold at a lower cost than Makena. In addition, generic Feraheme and Makena competitors couldenter the market through approval of abbreviated new drug applications ("ANDAs") that use Feraheme or Makena as a reference listed drug, which wouldallow generic competitors to rely on Feraheme's or Makena's safety and efficacy trials instead of conducting their own studies. Because entry into the marketcan occur upon the expiration of the reference listed drug's exclusivity, we could face such competition in the near-term as Feraheme's U.S. marketexclusivity expired in June 2014 and Makena's orphan drug exclusivity expires in February 2018. Our existing or potential new competitors for Ferahemeand Makena may develop products that are more widely accepted than ours and may receive patent protection that dominates, blocks or adversely affects ourproduct development or business.Makena Although Makena is the only FDA-approved drug indicated to reduce the risk of preterm birth in women with a singleton pregnancy who have a historyof singleton spontaneous preterm birth, it competes for market share with compounding pharmacies. Hydroxyprogesterone caproate ("HPC") is the activeingredient in Makena. Compounding pharmacies have been manufacturing formulations of HPC (which compounded formulations we refer to as "c17P") formany years and c17P formulations will likely remain available even though Makena has been granted orphan drug exclusivity until February 2018. Weestimate that between approximately 40% and 50% of the at-risk patient population is treated with c17P. Makena currently has between approximately 20%and 30% of the market share of the at-risk patient population with at least 30% of the at-risk patient population being treated either with other therapies thatare not approved for women pregnant with a singleton with a prior history of spontaneous preterm birth of a singleton, or not treated at all. In March 2011, the FDA issued a press release announcing that, in order to ensure continued access for patients, the FDA intended to refrain from takingenforcement action with respect to compounding pharmacies producing c17P in response to individual prescriptions for individual patients, resulting in areduction in commercial value of Makena's orphan exclusivity protection and in the loss of substantial market share to compounding pharmacies. In June2012, the FDA recommended using FDA-approved Makena instead of a compounded drug except when there is a specific medical need (e.g., an allergy) thatcannot be met by the approved drug. In July 2014, the FDA issued another public statement affirming the position it took in its June 2012 press releaserecommending use of FDA-approved Makena, except when there is a specific need for a compounded drug. The FDA also18Table of Contentsstated that when it identifies a pharmacist that compounds regularly or in inordinate amounts of any drug products that are essentially copies of Makena, theFDA intends to take enforcement action as it deems appropriate. Despite recent negative publicity regarding compounding pharmacies, including the 2012meningitis outbreak involving compounded drugs, the November 2013 enactment of the federal Drug Quality and Security Act ("DQSA") and recentenforcement actions against compounders violating the FDC Act, Makena will likely continue to face competition from c17P, especially in light of the long-standing availability of such compounded products, their lower cost and the criticism Lumara Health received in the past in connection with the pricing ofMakena, as discussed below. Lumara Health was criticized for the initial list pricing of Makena in numerous news articles and internet postings following the FDA's February 2011approval of Makena. Although the list price of Makena was subsequently reduced in March 2011, Makena is still priced at a premium to c17P, which hasnegatively impacted coverage of Makena by some state Medicaid programs and by certain commercial payers. Although we are undertaking efforts toeducate physicians and patients about progress made toward expanding coverage of Makena and about the benefits of FDA-approved Makena, certaindoctors continue to choose to prescribe non-FDA approved purported substitute products made by pharmaceutical compounders in lieu of prescribingMakena. In addition, efforts to appropriately respond to future concerns raised by media, professional societies, advocacy groups, policymakers or regulatoryagencies regarding patient access to Makena are costly and may not be successful. Additionally, in 1956, the FDA-approved the drug Delalutin, which contained the same active ingredient as Makena. Delalutin was approved forconditions other than reducing the risk of preterm birth and was marketed by Bristol-Myers Squibb ("BMS"). BMS stopped marketing and manufacturing theFDA-approved product and it was withdrawn from the market in 1999. In 2010, in response to a citizen petition, the FDA determined that Delalutin was notwithdrawn from sale for reasons of safety or effectiveness. As such, generic drug applications may reference the withdrawn Delalutin NDA. Thus, before the expiration of Makena's orphan exclusivity, the FDA could determine that it has the authority to approve ANDAs that reference Delalutinso long as the ANDAs meet all relevant legal and regulatory requirements for approval and are labeled for the same indications as Delalutin (i.e., not for therisk of preterm birth). If such an approval is granted, doctors may elect to prescribe such approved drug off-label (i.e., outside of FDA-approved indications)for Makena's orphan-protected indication, which could have an adverse impact on our business and results of operations. Moreover, if one or more generic applicants were to receive approval to sell a generic or follow-on version of Makena for the orphan-protectedindication, those generic products could potentially be approved as early as February 3, 2018 (the date on which Makena's orphan exclusivity ends) and wewould become subject to increased competition at that time. For a detailed discussions regarding the risks and uncertainties related to competition for Makena, please refer to our Risk Factor, "Our ability tosuccessfully commercialize Makena is dependent upon a number of factors, including maintaining the benefits of Makena's orphan drug exclusivity and thelength of time before competitors begin selling generic versions of Makena."Feraheme Although 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,our U.S. commercial strategy is entirely focused on growing the utilization of Feraheme in non-dialysis dependent adult CKD patients who are diagnosedwith 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: hospitals, hematology andoncology centers, and nephrology clinics.19 Table of Contents Feraheme currently competes with the following IV iron replacement therapies in the U.S. for the treatment of IDA in CKD patients:•Venofer®, an iron sucrose complex, which is approved for use in hemodialysis, peritoneal dialysis, non-dialysis dependent CKD patients andpediatric CKD patients and is marketed in the U.S. by Fresenius Medical Care North America and American Regent Laboratories, Inc.("American Regent") a subsidiary of Luitpold Pharmaceuticals, Inc. Venofer® is typically administered as a slow intravenous injection overtwo to five minutes in doses of 100 to 200 milligrams, thus requiring five to ten physician visits to reach a standard one gram therapeuticcourse; •Injectafer®, a ferric carboxymaltose injection, which is known as Ferinject® in Europe, was approved in the U.S. in July 2013 to treat IDA inadult patients who have intolerance to oral iron or have had an unsatisfactory response to oral iron. Injectafer® is also indicated for IDA inadult patients with non-dialysis dependent CKD. Injectafer® is marketed in the U.S. by American Regent, the same distributor of Venofer®.The labeled administration of Injectafer® is two slow injections or infusion of 750 milligrams each separated by at least seven days for a totalcumulative dose of 1,500 milligrams, or one and a half grams per therapeutic course; •Ferrlecit®, a sodium ferric gluconate, which is marketed by Sanofi-Aventis U.S. LLC, is approved for use only in hemodialysis patients. Therecommended dose of Ferrlecit® and the generic version of Ferrlecit® is 125 milligrams administered by intravenous infusion over one hourper dialysis session or undiluted as a slow intravenous injection per dialysis session, thus requiring eight physician visits to reach a standardone gram therapeutic course; •A generic version of Ferrlecit® marketed by Watson Pharmaceuticals, Inc. ("Watson"); •INFeD®, an iron dextran product marketed by Watson, which is approved in the U.S. for the treatment of patients with documented irondeficiency in whom oral iron administration is unsatisfactory or impossible. The recommended dose of INFeD® is a slow push in 100milligram doses, which would require up to ten physician visits to receive a standard one gram therapeutic course; and •Dexferrum®, an iron dextran product marketed by American Regent, which is approved in the U.S. for the treatment of patients withdocumented iron deficiency in whom oral iron administration is unsatisfactory or impossible. The recommended dose of INFeD® andDexferrum® is a slow push in 100 milligram doses, which would require up to ten physician visits to receive a standard one gram therapeuticcourse. As compared to the dosing regimens described above for Feraheme's U.S. competitors, Feraheme is currently administered as a 510 milligram injectionor infusion followed by a second 510 milligram injection or infusion three to eight days later. In June 2014, we proposed changes to the FDA related to ourcurrent U.S. label of Feraheme based on a review of global post-marketing data to strengthen the warnings and precautions section of the label and mitigatethe risk of serious hypersensitivity reactions, including anaphylaxis, in order to enhance patient safety. After considering our June 2014 submission and otherinformation, in January 2015, the FDA notified us that it believes new safety information should be included in the labeling for Feraheme, including, amongother things, a boxed warning to highlight the risks of serious hypersensitivity/anaphylaxis reactions and revisions that Feraheme should only beadministered through an IV infusion (i.e., not by IV injection) and should be contraindicated for patients with any known history of drug allergy. These orany future changes to the label/package could adversely impact our ability to successfully compete in the U.S. IV iron market. Pharmacosmos A/S ("Pharmacosmos") the producer of another IV iron, Monofer® (iron isomaltoside 1000), which is approved and marketed in Europe, isalso conducting clinical trials in the U.S. and may try to gain regulatory approval in the U.S. for Monofer®. In January 2015, the Helsinn20Table of ContentsGroup and Pharmacosmos announced that they entered into an agreement for the exclusive U.S. commercialization rights to Monofer®. Outside of the U.S., Feraheme also competes with a number of branded IV iron replacement products, including Venofer®, Ferrlecit®, Monofer®,Ferinject® (ferric carboxymaltose injection) (the brand name for Injectafer® outside the U.S.) and certain other iron dextran and iron sucrose products.Venofer® and Ferrlecit®, described above, have been marketed in many countries throughout the world, including most of Europe and Canada, for manyyears. Monofer® is an injectable iron preparation developed by Pharmacosmos, which is currently approved for marketing in approximately 30 countries,primarily in Europe, for the treatment of IDA. Ferinject® is an IV iron replacement therapy developed by Vifor Pharma, the pharmaceuticals business unit ofthe Galenica Group, and is currently approved for marketing in approximately 62 countries worldwide, for the treatment of iron deficiency where oral iron isineffective or cannot be used. Currently, all other IV iron products approved and marketed in the EU are approved for marketing to a broader group of patients with IDA. Rienso wasapproved only for use in CKD patients. In January 2015, we and Takeda mutually agreed to withdraw the application of Type II Variation for Rienso in theEU to extend the therapeutic indication from adult patients with IDA associated with CKD to adult patients with iron deficiency from any underlying cause.The limitation of Rienso's approved indication to CKD patients may put Feraheme at a competitive disadvantage if we were to pursue commercializationefforts in the EU with the product's currently labelled indicated patient population. In addition, based on PRAC's July and January Recommendations,Takeda issued a DHPC letter providing that, among other measures, Riesno be administered to patients by infusion over at least 15 minutes (replacinginjection) and that it be contraindicated in patients with any known history of drug allergy, and we and Takeda are in the process of updating the label tocaution that elderly patients or patients with multiple co-morbidities who experience a serious hypersensitivity reaction due to Rienso may have more severeoutcomes, and related variations to the Summary of Product Characteristics ("SmPC"). These or any future changes to Feraheme's current indication couldfurther put it at a disadvantage to its competitors. As discussed above, we have come to a mutual decision with Takeda to initiate withdrawal of the marketingauthorization for Rienso in the EU and Switzerland. We are currently assessing the commercial opportunity for Feraheme in Canada. Feraheme may also face competition from generic IV iron replacement therapy products that achieve commercial success. For example, in 2011, Watsonlaunched a generic version of Ferrlecit® in the U.S. which is approved for marketing in the U.S. for the treatment of IDA in adult patients and in pediatricpatients age six years and older undergoing chronic hemodialysis who are receiving supplemental epoetin therapy. Sagent Pharmaceuticals, Inc. has alsoindicated its intention to introduce a generic iron sucrose in the U.S. in the future. Outside the U.S., there is currently a generic version of Venofer®. The Drug Price Competition and Patent Term Restoration Act of 1984, as amended (the "Hatch-Waxman Act") requires an applicant whose subject drugis a drug listed in the FDA publication, "Approved Drug Products with Therapeutic Equivalence Evaluations," also known as the "Orange Book," to notifythe patent-holder of their application and potential infringement of their patent rights. If an applicant for ferumoxytol notifies us of such application, wewould have 45 days upon receipt of that notice to bring a patent infringement suit in federal district court against the applicant seeking approval of aproduct. If such a suit is commenced, the FDA is generally prohibited from granting approval of an application until the earliest of 30 months from the datethe FDA accepted the application for filing, the conclusion of litigation in the generic's favor, or expiration of the patent(s). If the litigation is resolved infavor of the applicant or the challenged patent expires during the 30-month stay period, the stay is lifted and the FDA may thereafter approve the applicationbased on the applicable standards for approval.21Table of Contents A generic version of Feraheme can be marketed only with the approval of the FDA of the respective application for such generic version. In December2012, the FDA issued draft guidance making recommendations regarding establishing bioequivalence with Feraheme, pursuant to which a party could seekapproval of a generic version of Feraheme through an ANDA. The FDA generally publishes product-specific bioequivalence guidance after it has received aninquiry from a generic drug manufacturer about submitting an ANDA for the product in question; thus, it is possible that a generic drug manufacturer hasapproached the FDA requesting guidance about submitting an ANDA for ferumoxytol, the active ingredient in Feraheme, and that such an ANDA may befiled in the near future. The ANDA process is discussed in more detail below under the heading "U.S. Approval Process—Abbreviated New DrugApplication." Companies that manufacture generic products typically invest far fewer resources in research and development than the manufacturers of brandedproducts and can therefore price their products significantly lower than those branded products already on the market. Therefore, competition from generic IViron products could limit our sales. We believe that our ability to successfully compete with other IV iron products depends on a number of factors, including the actual or perceived safetyand efficacy profile of Feraheme as compared to alternative iron replacement therapeutics, current and future limitations on Feraheme's approved indicationsand patient populations, our ability to obtain and maintain favorable pricing, insurance coverage and reimbursement rates and terms for Feraheme, ourability to implement effective marketing programs, the effectiveness of our sales force, our ability to maintain favorable patent protection for Feraheme,market acceptance of Feraheme, and our ability to manufacture sufficient quantities of Feraheme at commercially acceptable costs. For additional details onthe risks and uncertainties regarding Feraheme's competition, see our Risk Factor, "Market acceptance of Feraheme may suffer as a result of the widespreaduse of competing iron replacement therapy products, including Injectafer®, and as a result of the approval of generic drug products in the near-term, whichwould have a material adverse effect on our operations and our profitability." Based on sales data provided to us in January 2015 by IMS Health Incorporated ("IMS"), we estimate that the size of the total 2014 U.S. non-dialysis IViron replacement therapy market was approximately 900,000 grams, which represents an increase of approximately 6% over 2013. Based on this IMS data,the following represents the 2014 and 2013 U.S. market share allocation of the total non-dialysis IV iron market based on the volume of IV iron administered: The market share data listed in the table above is not necessarily indicative of the market shares in dollars due to the variations in selling prices amongthe IV iron products.MuGard Up to 50% of certain new cancer patients develop oral mucositis each year for which there are currently few effective treatments. The market for treatingoral mucositis is driven primarily by convenience, price and reimbursement and the products in this market remain mostly undifferentiated.22 2014 U.S. Non-dialysisIV Iron Market(900,000 grams) 2013 U.S. Non-dialysisIV Iron Market(851,000 grams) Venofer® 43% 46%INFeD® 20% 22%Feraheme 16% 15%Generic sodium ferric gluconate 10% 10%Injectafer® 6% <1%Ferrlecit® 5% 6%Dexferrum® <1% <1%Table of ContentsThere are a number of approaches used to treat or manage oral mucositis, including the use of ice chips during chemotherapy treatments, various medicinalmouthwashes, topical anesthetics and analgesics, and oral gel treatments. For example, many physicians use what is commonly known as "magicmouthwash", which may currently be the most commonly prescribed medication to manage oral mucositis or treat the pain associated with mucositis causedby radiation therapy or chemotherapy. Magic mouthwash is a combination of generic ingredients which are typically compounded in a pharmacy and ispreferred by many physicians because of the availability of less expensive generic ingredients used to formulate the mouthwash. However, there is no clinicaltrial data to support the efficacy or safety of magic mouthwash. The efficacy of MuGard has been supported by a randomized, Phase IV multicenter, double-blind, sham-controlled trial. There are a number of companies in the U.S. commercializing products for the management or treatment of oral mucositis that may compete withMuGard, including the following marketed products:•NeutraSal® (supersaturated calcium phosphate rinse), a prescription mouth rinse marketed by Invado Pharmaceuticals, LLC and indicated totreat the painful symptoms associated with oral mucositis; •Caphosol®, a supersaturated calcium phosphate artificial saliva marketed by Jazz Pharmaceuticals, PLC, which is indicated as an adjunct tostandard oral care in treating oral mucositis caused by radiation or high dose chemotherapy; and •Kepivance® (palifermin), an IV human growth factor manufactured by Amgen and marketed by Swedish Orphan Biovitrum AB, which is usedto reduce the chances of developing severe mucositis and to shorten the time with severe mucositis in patients with cancer who receive highdoses of chemotherapy and radiation therapy. Further, there are several marketed products available which are indicated for the management of pain associated with oral mucositis including thefollowing products:•Episil®, marketed by Cangene BioPharma, Inc., is indicated for the management of pain and relief from pain, by adhering to the mucosalsurface of the mouth, soothing oral lesions of various etiologies, including oral mucositis/stomatitis that may be caused by chemotherapy orradio therapy; •Gelclair®, marketed by DARA BioSciences, Inc., is a viscous, concentrated, bio adherent oral gel, indicated for the management of painfulsymptoms of mucositis of the oropharyngeal cavity caused by chemo-radiotherapy; and •GelX® Oral Gel, marketed by Praelia Pharmaceuticals, Inc., is an oral gel indicated for the relief and management of pain by adhering to themucosal surface of the mouth and soothing oral lesions of various etiologies, including oral mucositis/stomatitis (may be caused bychemotherapy or radiotherapy), irritation due to oral surgery, aging, and traumatic ulcers caused by braces or ill-fitting dentures, medication,or disease. Based on data provided to us in January 2015 by IMS we estimate that the total number of prescriptions ("TRx's") filled in the U.S. in 2014 for thetreatment or management of oral mucositis was approximately 16,500. The following represents the 2014 market share allocation based on TRx data to treator manage oral mucositis, which accounts for approximately 75% of the total oral23Table of Contentsmucositis business. These figures do not include products purchased by hospitals or outpatient clinics, such as Kepivance®: The market share data listed in the table above is not necessarily indicative of the market shares in dollars due to the variations in selling prices amongthe oral mucositis products.Sales, Marketing and DistributionMakena In November 2014, we completed our acquisition of Lumara Health, including its commercialized drug Makena, a progestin indicated to reduce the riskof preterm birth in women with a singleton pregnancy who have a history of singleton spontaneous preterm birth. In connection with the acquisition, weretained the Makena commercial team, including 88 members of the Lumara Health sales team dedicated exclusively to the OB/GYN subspecialty. We sellMakena to specialty pharmacies and distributors, who, in turn sell Makena to healthcare providers, hospitals, government agencies and integrated deliverysystems. We estimate that Makena is currently used to treat between 20% and 30% of the at-risk patient population, allowing for significant potential to increaseits market share. Our sales and marketing teams use a variety of common pharmaceutical marketing strategies and methods to promote Makena, includingdedicating a separate reimbursement team to focus on health plans, both commercial and managed Medicaid as well as fee-for-service Medicaid programs. In addition, we offer customer support through the Makena Care Connection, a support program for patients and healthcare providers that providesadministrative, financial assistance and treatment support for Makena. Administrative and treatment support includes insurance benefit investigation,reimbursement and patient assistance programs. Because specialty injectable products like Makena are not typically carried by retail pharmacies, the processfor facilitating prescriptions for Makena is managed by this dedicated customer support center. In December 2013, the Makena Care Connection initiated apilot program in California designed to improve overall customer satisfaction by reducing the time from the prescription to the initiation of therapy,increasing the average number of injections per patient and increasing the number of paying patients. Favorable results from the pilot project led to anational roll out of the customer service initiative in 2014. We also operate a patient assistance program for Makena that provides co-pay assistance (for insured patients), and financial assistance (for uninsuredpatients). Under the program, patients with a household income of $120,000 or less pay $20 or less per injection of Makena. This encompasses 85% of theU.S. based on 2009 U.S. census data. Clinically eligible patients who are uninsured and whose financial need is greatest will receive Makena at no cost. Thereare no upper-level income caps to qualify for the patient assistance program. In early 2015, we plan to launch a telephonic 24/7 nursing services program to increase patient compliance (i.e., following a weekly injection regime)via education and awareness of preterm birth and Makena's benefits. The program will provide a registered nurse to each expectant mother who will be24 2014 Oral Mucositis Market(16,500 TRx) 2013 Oral Mucositis Market(14,900 TRx) Neutrasal® 49% 46%Caphosol® 16% 23%Gelclair® 14% 3%MuGard 12% 13%Episil® 7% 11%GelX® 2% 4%Table of Contentsavailable to answer patient questions and guide the patient to her provider for necessary care ensuring all the patient's questions and concerns are addressed.Feraheme In July 2009, we began U.S. commercial sale of Feraheme, which is being marketed and sold in the U.S. through our commercial organization, includinga specialty sales force. We sell Feraheme to authorized wholesalers and specialty distributors who, in turn, sell Feraheme to healthcare providers whoadminister Feraheme primarily within hospitals, hematology and oncology centers and nephrology clinics. Since many hospitals and hematology, oncologyand nephrology practices are members of group purchasing organizations ("GPOs"), which leverage the purchasing power of a group of entities to obtaindiscounts based on the collective bargaining power of the group, we also routinely enter into pricing agreements with GPOs in these markets so the membersof the GPOs have access to Feraheme and to the related discounts or rebates. Our sales and marketing organization uses a variety of common pharmaceutical marketing strategies and methods to promote Feraheme including salescalls to purchasing entities, such as hospitals, hematology and oncology centers and nephrology practices in addition to individual physicians or otherhealthcare professionals, medical education symposia, personal and non-personal promotional materials, local and national educational programs, scientificmeetings and conferences and informational and disease state awareness websites. In addition, we provide customer service and other related programs forFeraheme including physician reimbursement support services, a patient assistance program for uninsured or under-insured patients and a customer servicecall center. Our commercial strategy currently focuses on the non-dialysis dependent CKD market in the U.S. We believe there is a significant opportunity in thismarket to provide IV iron to non-dialysis CKD patients, and our sales team has been working to educate physicians who treat CKD patients on the benefits ofIV iron and the dosing profile of Feraheme in order to change existing treatment paradigms and expand the IV iron use in physicians' offices, clinics, andhospitals where CKD patients are treated for IDA. Feraheme has been granted marketing approval in the EU, Canada, Iceland, Liechtenstein, Norway and Switzerland for use as an IV iron replacementtherapy for the treatment of IDA in adult patients with CKD and was commercially launched in the EU, Canada, and Switzerland in 2012. In December 2014,we entered into the Takeda Termination Agreement with Takeda, under which we are in the process of regaining all worldwide development andcommercialization rights for Feraheme. Prior to the Takeda Termination Agreement, Takeda was solely responsible for Feraheme commercialization effortsin these areas, including the deployment of a specialized sales force, pricing and reimbursement negotiations with national, provincial or local healthauthorities and customers, and development of market access strategies. Sales of Feraheme outside of the U.S. do not and are not expected to materiallycontribute to our revenues. As such, and in light of the Takeda Termination Agreement, we and Takeda have come to the mutual decision to initiatewithdrawal of the marketing authorization for Rienso in the EU and Switzerland. We are currently assessing the commercial opportunity for Feraheme inCanada.MuGard In June 2013, we acquired the U.S. rights to MuGard from PlasmaTech. We began comprehensive promotional activities related to MuGard in the thirdquarter of 2013, including training our sales force and developing new marketing materials, such as healthcare provider brochures, patient materials,reimbursement information and starter kits. To optimize the sales potential of both of our commercial products, our initial call targets for MuGard includedcurrent Feraheme prescribers as well as other high prescribing clinicians, including radiation oncologists who manage head and neck cancer patientsundergoing radiation therapy where the incidence of oral mucositis could approximate 80%. Our current commercial strategy for MuGard includesdifferentiating MuGard from other currently used approaches for treating and managing oral mucositis, targeting oral mucositis prescribers and expandingreimbursement coverage for MuGard.25 Table of Contents Our sales and marketing teams use a variety of common pharmaceutical marketing strategies and methods to promote MuGard, including sales calls toproviding entities, such as hospitals and hematology and oncology centers. In addition, other tactical programs may include personal and non-personalpromotional materials to individual physicians or other healthcare professionals, sponsoring local and national educational programs, participation inscientific meetings and conferences and implementing informational product specific websites. We market and sell MuGard to wholesalers and specialty pharmacies. Patients primarily receive MuGard through specialty pharmacies, which receiveprescriptions from either our MuGard patient reimbursement and support center (the "HUB") or from physicians directly. We utilize the HUB as a centralizedpatient intake and referral management center to process insurance coverage issues and administer our patient assistance and copayment programs. In order toprovide MuGard to patients as soon as possible, we have implemented a robust program that delivers a starter kit to clinicians, including a sample bottle andall pertinent information that the patient or caregiver needs to immediately begin MuGard therapy.Product Supply Chain We outsource a number of our product supply chain services for our products to third-party logistics providers, including services related to warehousingand inventory management, distribution, chargeback processing, accounts receivable management, sample distribution to our sales force, and customerservice call center management.Major Customers The following table sets forth customers who represented 10% or more of our total revenues for 2014, 2013, and 2012. Revenues from Takeda includeFeraheme collaboration revenue, milestone payments, revenues from product sales to Takeda and royalty payments, in each case in connection with theAmended Takeda Agreement. In addition, approximately 26%, 30% and 32% of our Feraheme end-user demand in 2014, 2013 and 2012, respectively, was generated by members of asingle GPO with which we have contracted. The loss of any of these customers would have a material adverse effect on our business.Government RegulationOverview Our activities are subject to extensive regulation by numerous governmental authorities in the U.S. and abroad. In the U.S., the FDC Act and other federaland state statutes and regulations govern, among other things, the research and development, manufacturing, quality control, labeling, recordkeeping,approval, storage, distribution, and advertising and promotion of pharmaceutical products and medical devices. Our activities outside of the U.S. are alsosubject to regulatory requirements governing the testing, approval, safety, effectiveness, manufacturing, labeling, and marketing of Feraheme. 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 regulatory26 Years Ended December 31, 2014 2013 2012 AmerisourceBergen Drug Corporation 34% 41% 34% McKesson Corporation 21% 24% 17% Cardinal Health, Inc. 15% 16% 12% Takeda Pharmaceuticals Company Limited 11% 11% 31% Table of Contentsagency's refusal to approve pending applications, suspension, variations or withdrawals of approval, clinical holds, warning letters, product recalls, productseizures, total or partial suspension of operations, injunctions, fines, civil penalties, or criminal prosecution.U.S. Approval ProcessClinical Development Before we may market a new human drug product in the U.S., we must obtain FDA approval of a NDA for that product. The FDA may approve an NDA ifthe safety and effectiveness of the drug candidate can be established based on the results of clinical trials. Clinical testing proceeds in three phases. Phase I trials seek to establish initial data about safety, tolerability, and optimal dosing of the drug candidate inhumans. The goal of Phase II trials is to provide evidence about the desired therapeutic efficacy of the product candidate in limited studies with smallnumbers of carefully selected subjects. Phase III trials generally consist of expanded, large-scale, randomized, double-blind, multi-center studies of the safetyand effectiveness of the product in the target patient population. Although we currently have no new unapproved drugs in development and our intention is to expand our portfolio with additional commercial-stagespecialty products, we would be required to comply with the requirements for drug approval if we develop new or acquire earlier-stage products.Submission and FDA Review of NDAs/sNDAs Following the successful completion of clinical trials, the sponsor submits the results to the FDA as part of an NDA. The NDA must also include theresults of pre-clinical tests and studies, information related to the preparation and manufacturing of the drug candidate, analytical methods, and proposedpackaging and labeling. Pursuant to the Prescription Drug User Fee Act ("PDUFA"), the FDA has a goal of acting on most original NDAs within six months orten months of the application filing date, depending on the nature of the drug. For drugs candidates intended to treat serious and life-threatening conditions,the FDA has a number of programs intended to help expedite testing, review, and approval. For example, under the provisions of the FDA's Subpart Haccelerated approval is permitted for a new drug that is intended to treat a serious or life-threatening disease or condition and that fills an unmet medical needbased on a surrogate endpoint. If the FDA's evaluations of the NDA and of the sponsor's manufacturing facilities are favorable, the FDA will issue an approval letter, and the sponsormay begin marketing the drug in the U.S. for the approved indications, subject to any post-approval requirements described further below. If the FDAdetermines it cannot approve the NDA in its current form, it will issue a complete response letter indicating that the application will not be approved in itscurrent form. The complete response letter usually describes the specific deficiencies that the FDA identified in the application and may require additionalclinical or other data or impose other conditions that must be met in order to obtain approval of the NDA. Addressing the deficiencies noted by the FDAcould be impractical and it is possible that approval may not be obtained, or may be costly and may result in significant delays prior to approval. Where a sponsor wishes to expand the originally approved prescribing information, such as adding a new indication, it must submit and obtain approvalof an sNDA. Changes to an indication generally require additional clinical studies, which can be time-consuming and require the expenditure of substantialadditional resources. Under PDUFA, the target timeframe for the review of an sNDA to add a new clinical indication is ten months from the date of filing. Aswith an NDA, if the FDA determines that it cannot approve an sNDA in its current form, it will issue a complete response letter as discussed above. See thediscussion above under "Feraheme for the treatment of IDA in a broad range of patients" for our ongoing post-marketing activities for Feraheme.27Table of ContentsAbbreviated New Drug Application An ANDA is filed when approval is sought to market a generic equivalent of a drug product previously approved under an NDA and listed in the OrangeBook. Rather than directly demonstrating the product's safety and effectiveness, as is required of an NDA, an ANDA must show that the proposed genericproduct is the same as the previously approved product in terms of active ingredient(s), strength, dosage form, route of administration and bioavailability. Inaddition, with certain exceptions, the generic product must have the same labeling as the product to which it refers. NDA applicants and NDA holders must provide certain information about patents related to the branded drug for listing in the Orange Book. When anANDA application is submitted, it must contain one of several possible certifications regarding each of the patents listed in the Orange Book for the brandedproduct that is the reference listed drug. A certification that a listed patent is invalid or will not be infringed by the sale of the proposed product is called aParagraph IV Certification.Adverse Event Reporting The FDA requires a sponsor to submit reports of certain information on side effects and adverse events ("AEs") 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 AEs, as well as regular periodic reports summarizing adverse drug experiences. Failure to comply with these FDA safety reporting requirements mayresult in FDA regulatory action that may include civil action or criminal penalties. In addition, as a result of these reports, the FDA could create a TrackedSafety Issue for a product in the FDA's Document Archiving, Reporting and Regulatory Tracking System, place additional limitations on an approvedproduct's use, such as through labeling changes, or, potentially, could require withdrawal or suspension of the product from the market.FDA Post-Approval Requirements Even if initial approval of an NDA or sNDA is granted, such approval may be subject to post-market regulatory requirements, any or all of which mayadversely impact a sponsor's ability to effectively market and sell the approved product. The FDA may require the sponsor to conduct Phase IV clinical trials,also known as post-marketing requirements or post-marketing commitments, to provide additional information on safety and efficacy. The results of suchpost-market studies may be negative and could lead to limitations on the further marketing of a product. Also, under the Pediatric Research Equity Act, theFDA may require pediatric assessment of certain drugs unless waived or deferred due to the fact that necessary studies are impossible or highly impractical toconduct or where the drug is not likely to be used in a substantial number of pediatric patients, for example. In addition, the FDA may require a sponsor toimplement a Risk Evaluation Mitigation Strategy ("REMS"), a strategy to manage a known or potential serious risk associated with the product. Failure tocomply with REMS requirements may result in civil penalties. Further, if an approved product encounters any safety or efficacy issues, including druginteraction problems, the FDA has broad authority to force the sponsor to take any number of actions, including but not limited to, undertaking post-approvalclinical studies, implementing labeling changes, adopting a REMS, issuing DHPC letters, or removing the product from the market.FDA Regulation of Product Marketing and Promotion The FDA also regulates all advertising and promotional activities for prescription drugs, both prior to and after approval. Approved drug products mustbe promoted in a manner consistent with their terms and conditions of approval, including the scope of their approved use. The FDA may take enforcementaction against a company for promoting unapproved uses of a product, or off-label promotion, or for other violations of its advertising and labeling laws andregulations. Failure to comply with these requirements could lead to, among other things, adverse publicity, product seizures, civil or28Table of Contentscriminal penalties, or regulatory letters, which may include warnings and require corrective advertising or other corrective communications to healthcareprofessionals. Under the Subpart H regulations, until the Makena confirmatory post-marketing clinical trial is completed, we are subject to a special 30-daypromotional material review by the FDA's Office of Promotional Drug Products ("OPDP"). This extra requirement means that there is a longer lead time beforewe are able to introduce new promotional material to the market for Makena and we are subject to increased scrutiny prior to using promotional pieces toensure fair balance.FDA Regulation of Manufacturing Facilities Manufacturing procedures and quality control for approved drugs must conform to cGMP. Domestic manufacturing establishments must follow cGMP atall times, and are subject to periodic inspections by the FDA in order to assess, among other things, cGMP compliance. In addition, prior to approval of anNDA or sNDA, the FDA will perform a pre-approval inspection of the sponsor's manufacturing facility, including its equipment, facilities, laboratories andprocesses, to determine the facility's compliance with cGMP and other rules and regulations. Vendors that supply finished products or components to thesponsor that are used to manufacture, package, and label products are subject to similar regulation and periodic inspections. If the FDA identifies deficienciesduring an inspection, it may issue a formal notice, which may be followed by a warning letter if observations are not addressed satisfactorily. FDA guidelinesspecify that a warning letter be issued only for violations of "regulatory significance" for which the failure to adequately and promptly achieve correctionmay be expected to result in an enforcement action. For example, as discussed above, Lumara Health is subject to certain continuing obligations under theConsent Decree, including, but not limited to, inspection of Lumara Health's places of business by the FDA without prior notice, and notification of FDA ofparticular actions and events. If Lumara Health fails to comply with applicable provisions in the Consent Decree, the FDC Act, or the FDC Act'simplementing regulations, the FDA may impose specific sanctions including, but not limited to, the requirement to cease any of Lumara Health'smanufacturing operations, the imposition of substantial financial penalties, and the requirement to implement additional corrective actions. Product approval may be delayed or denied due to cGMP non-compliance or other issues at the sponsor's manufacturing facilities or contractor sites orsuppliers included in the NDA or sNDA, and the complete resolution of these inspectional findings may be beyond the sponsor's control. If the FDAdetermines that the sponsor's equipment, facilities, laboratories or processes do not comply with applicable FDA regulations and conditions of productapproval, the FDA may seek civil, criminal or administrative sanctions and/or remedies against the sponsor, including suspension of its manufacturingoperations. To supply products for use outside of the U.S., our third-party manufacturers must comply with cGMP and are subject to periodic inspection by the FDAor by regulatory authorities in certain other countries. In complying with these requirements, manufacturers, including a drug sponsor's third-party contractmanufacturers, must continue to expend time, money, and effort in the area of production and quality to ensure compliance. Failure to maintain compliancewith cGMP regulations and other applicable manufacturing requirements of various regulatory agencies could result in fines, unanticipated complianceexpenditures, recall, total or partial suspension of production, suspension, variation or withdrawal of the marketing authorization for the product, suspensionof the FDA's review of future sNDAs, enforcement actions, injunctions, or criminal prosecution.Orphan Drug Exclusivity Under the Orphan Drug Act, the FDA may designate a product as an orphan drug if it is a drug intended to treat a rare disease or condition, defined, inpart, as a patient population of fewer than 200,000 in the U.S. In the U.S., the company that first obtains FDA approval for a designated orphan drug for thespecified rare disease or condition receives orphan drug marketing exclusivity for that drug29Table of Contentsfor a period of seven years. This orphan drug exclusivity prevents the FDA from approving another application for the "same drug" for the same orphanindication during the exclusivity period, except in very limited circumstances. In addition, orphan drug exclusivity marketing rights in the U.S. may be lost ifthe FDA later determines that the request for designation was materially defective or if the manufacturer is unable to assure sufficient quantity of the drug tomeet the needs of patients with the rare disease or condition.Drug Quality and Security Act In November 2013, the DQSA legislation was implemented to amend the FDC Act with respect to the regulation and monitoring of the manufacturing ofcompounding drugs. Among other provisions of the DQSA, compounding pharmacies may now elect to register as an "outsourcing facility" under FDC Act503B. Registration as an outsourcing facility requires that drugs be compounded according to cGMP standards; that facilities report adverse events to theFDA; and that facilities be subject to a risk-based inspection schedule, among other requirements. Additionally, FDC Act 503A describes the conditions thatmust be satisfied for drug products compounded by a licensed pharmacist or licensed physician to be exempt from approval, labeling, and cGMPrequirements. To qualify for these exemptions, a compounded drug product must, among other things, be compounded for an identified patient based on avalid prescription or in limited quantities before the receipt of a prescription for such individual patient in certain circumstances. Under both 503A and 503Bof the FDC Act, compounding pharmacies may not compound regularly or in inordinate amounts any drug products that are "essentially copies ofcommercially available drug products." Depending on how aggressively the FDA enforces this provision of the statute, pharmacy compounders may besignificantly restricted in their future ability to make drug products that are copies or near-copies of FDA approved drugs.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 ("AKS"), the Federal False Claims Act ("FCA"), and the ForeignCorrupt Practices Act, and their state analogues, and similar laws in countries outside of the U.S., laws governing sampling and distribution of products andgovernment price reporting laws.•The AKS makes it illegal to knowingly and willfully solicit, offer, receive, or pay any remuneration, directly or indirectly, in cash or in kind, inexchange for, or to induce, purchasing, ordering, arranging for, or recommending the purchase or order of any item or service, including thepurchase or prescription of a particular drug, that is reimbursed by a federal healthcare program. Liability may be established without provingactual knowledge of the statute or specific intent to violate it. In addition, federal law now provides that the government may assert that aclaim including items or services resulting from a violation of the AKS constitutes a false or fraudulent claim for purposes of the FCA,described below. Violations of the AKS carry potentially significant civil and criminal penalties, including imprisonment, fines, and exclusionfrom participation in federal healthcare programs. Many states have enacted similar anti-kickback laws, including in some cases laws thatprohibit paying or receiving remuneration to induce a referral or recommendation of an item or service reimbursed by any payer, includingprivate payers. •The FCA prohibits, among other things, anyone from knowingly presenting, or causing to be presented, claims for reimbursement of drugs orservices to third-party payers such as Medicare or Medicaid, or other claims for payment of government funds, where those claims are false orfraudulent. The FCA also prohibits knowingly making, using, or causing to be made or used a false record or statement material to anobligation to pay money to the government or knowingly concealing or knowingly and improperly avoiding, decreasing, or concealing anobligation to pay money to the federal government. The FCA permits a private individual acting30Table of Contentsas a "whistleblower" to bring an action on behalf of the federal government alleging violations of the FCA and to share in any monetaryrecovery. Government enforcement agencies and private whistleblowers have asserted liability under the FCA for, among other things, claimsfor items or services not provided as claimed or for medically unnecessary items or services, kickbacks, promotion of off-label uses, andmisreporting of drug prices to federal agencies. Many states have enacted similar false claims laws, including in some cases laws that applywhere a claim is submitted to any third-party payer, not just government programs.•The Foreign Corrupt Practices Act prohibits companies and their intermediaries from making, or offering or promising to make improperpayments to non-U.S. officials for the purpose of obtaining or retaining business or otherwise seeking favorable treatment. Similar anti-briberylaws exist in other countries where we intend to commercialize Feraheme. For example, the U.K. Bribery Act imposes significant potentialfines and other penalties for, among other things, giving, offering, or promising bribes in the public and private sectors, and bribing a foreignpublic official or private person. Our activities relating to the sale and marketing of our products may be subject to scrutiny under these laws. Federal and state authorities continue todevote significant attention and resources to enforcement of these laws within the pharmaceutical industry, and private individuals have been active inbringing lawsuits on behalf of the government under the FCA. We have developed and implemented a corporate compliance program based on what webelieve are current best practices in the pharmaceutical industry. However, these laws are broad in scope and there may not be regulations, guidance, or courtdecisions that definitively interpret these laws in the context of particular industry practices. We cannot guarantee that we, our employees, our consultants, orour contractors are or will be in compliance will all federal, state, and foreign regulations. If we or our representatives fail to comply with any of these laws orregulations, a range of fines, penalties, and/or other sanctions could be imposed on us, including, but not limited to, restrictions on how we market and sellour products, significant fines, exclusions from government healthcare programs, including Medicare and Medicaid, litigation, or other sanctions. Even if weare not determined 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. Such investigations orsuits may also result in related shareholder lawsuits, which can also have an adverse effect on our business. In the EU, the advertising and promotion of our products are subject to EU level and EU Member States' national laws governing promotion of medicinalproducts, interactions with physicians, misleading and comparative advertising and unfair commercial practices. These laws require that promotionalmaterials and advertising in relation to medicinal products comply with the product's SmPC. The SmPC is the document that provides information tophysicians concerning the safe and effective use of the medicinal product. It forms an intrinsic and integral part of the marketing authorization granted for themedicinal product. Promotion of a medicinal product that does not comply with the SmPC is considered to constitute off-label promotion. The off-labelpromotion of medicinal products is prohibited in the EU. The applicable laws at EU level and in the individual EU Member States also prohibit the direct-to-consumer advertising of prescription-only medicinal products. Violations of the rules governing the promotion of medicinal products in the EU could bepenalized by administrative measures, fines and imprisonment. These laws may further limit or restrict the advertising and promotion of our products to thegeneral public and may also impose limitations on our promotional activities with healthcare professionals.Other U.S. Regulatory Requirements 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,31Table of Contentsmarketing, pricing, clinical trials and other activities. In addition, as part of the Patient Protection and Affordable Care Act, as amended by the Health Careand Education Reconciliation Act of 2010 (the "Health Care Reform Act") manufacturers of drugs are required to publicly report gifts and other payments ortransfers of value made to U.S. physicians and teaching hospitals. Several states have also adopted laws that prohibit certain marketing-related activities,including the provision of gifts, meals or other items to certain healthcare providers. Many of these requirements are new and uncertain, and the likely extentof future enforcement for failure to comply with these requirements is unclear. However, compliance with these laws is difficult, time-consuming, and costly,and if we are found not to be in full compliance with these laws, we may face enforcement actions, fines, and other penalties, and we could receive adversepublicity which could have an adverse effect on our business, financial condition, and results of operations. We are also subject to laws and regulations covering data privacy and the protection of health-related and other personal information. We obtain patienthealth information from most healthcare providers who prescribe our products and research institutions we collaborate with, and they are subject to privacyand security requirements that may affect us. Claims that we have violated individuals' privacy rights or breached our contractual obligations, even if we arenot found liable, could be expensive and time-consuming to defend and could result in adverse publicity that could harm our business.Foreign Regulatory Process In our efforts to market and sell Feraheme outside of the U.S., we are subject to foreign regulatory requirements. Approval of a drug by applicableregulatory agencies of foreign countries must be secured prior to the marketing of such drug in those countries. The regulatory approval process in countriesoutside of the U.S. vary widely from country to country and may in some cases be more rigorous than requirements in the U.S. Certain foreign regulatoryauthorities may require additional studies or studies designed with different clinical endpoints and/or comparators than those which we are conducting orhave already completed. In addition, any adverse regulatory action taken by the FDA with respect to an approved product, or a product under review, in theU.S. may affect the regulatory requirements or decisions made by certain foreign regulatory bodies with regard to the regulatory approval of products outsideof the U.S. To obtain regulatory approval of a drug in the EU, marketing authorizations may be submitted through a centralized, mutual recognition ordecentralized procedure or national procedure (single country). The legislators, policymakers and healthcare insurance funds in the EU Member Statescontinue to propose and implement cost-containing measures to keep healthcare costs down, due in part to the attention being paid to healthcare costcontainment and other austerity measures in the EU. Certain of these changes could impose limitations on the prices pharmaceutical companies are able tocharge for their products. The amounts of reimbursement available from governmental agencies or third-party payers for these products may increase the taxobligations on pharmaceutical companies such as ours, or may facilitate the introduction of generic competition with respect to our products. Furthermore, anincreasing number of EU Member States and other foreign countries use prices for medicinal products established in other countries as "reference prices" tohelp determine the price of the product in their own territory. Consequently, a downward trend in prices of medicinal products in some countries couldcontribute to similar downward trends elsewhere. In addition, the ongoing budgetary difficulties faced by a number of EU Member States have led and maycontinue to lead to substantial delays in payment and payment partially with government bonds rather than cash for medicinal products. Moreover, in orderto obtain reimbursement of our medicinal products in some countries, including some EU Member States, sponsors may be required to conduct HealthTechnology Assessments ("HTAs") that compare the cost-effectiveness of the sponsors' products to other available therapies.32Table of Contents The Canadian pharmaceutical industry is subject to federal regulation by Health Canada, the public health department of the Canadian governmentcharged with overseeing healthcare-related regulatory matters, pursuant to the Canadian federal Food and Drugs Act. Health Canada's criteria for obtainingand maintaining marketing approval is generally similar to that of the FDA. Health Canada is also empowered to compel information, recall unsafetherapeutic products, disclose confidential business information and direct label change/package modification to address safety issues. In December 2011,Feraheme was granted marketing approval by Health Canada for use as an IV iron replacement therapy for the treatment of IDA in adult patients with CKDand commercially launched in late 2012. The pharmaceutical industry in Switzerland is subject to federal regulation by Swissmedic. In August 2012, Rienso was granted marketing approval bySwissmedic and commercially launched in late 2012. Rienso is not currently being marketed in Switzerland. We are currently unable to predict when or ifRienso will be reintroduced into the Swiss market.Medical Device Regulation Medical devices, such as MuGard, are similarly subject to FDA approval and extensive post-approval regulation under the FDC Act. Authorization tocommercially distribute a new medical device in the U.S. is generally received in one of two ways. The first, known as premarket notification, or the 510(k)process, requires a sponsor to demonstrate that the new medical device is substantially equivalent to a legally marketed medical device that is not subject topremarket approval. The second, more rigorous process, known as premarket approval, requires a sponsor to independently demonstrate that the new medicaldevice is safe and effective. Both before and after a device is commercially released, there are ongoing responsibilities under FDA regulations. The FDA reviews design andmanufacturing practices, labeling and record keeping, and manufacturers' required reports of adverse experiences and other information to identify potentialproblems with marketed medical devices, similar to the reviews conducted in connection with drug product discussed above. If the FDA were to concludethat we are not in compliance with applicable laws or regulations, or that any of our medical devices are ineffective or pose an unreasonable health risk, theFDA could require us to notify health professionals and others that the devices present unreasonable risks of substantial harm to the public health, order arecall, repair, replacement, or refund of such devices, detain or seize adulterated or misbranded medical devices, or ban such medical devices. The FDA mayalso impose operating restrictions, enjoin and/or restrain certain conduct resulting in violations of applicable law pertaining to medical devices and assesscivil or criminal penalties against our officers, employees, or us. MuGard was launched in the U.S. by PlasmaTech in 2010 after receiving 510(k) clearance from the FDA. Under the terms of the MuGard LicenseAgreement, PlasmaTech continues to hold the 510(k). MuGard is categorized as a pre-amendments device. This type of device has not been classified per se,but continues to be subject to regulatory review under the 510(k) premarket clearance process.Pharmaceutical Pricing and Reimbursement In both the U.S. and foreign markets, our ability to successfully commercialize our products is dependent, in significant part, on the availability andextent of reimbursement to end-users from third-party payers for the use of our products, including governmental payers, health maintenance organizations("HMOs"), managed care organizations, and private health insurers. In the U.S., the federal government provides health insurance for people who are 65 orolder, certain younger people with disabilities, and people with End-Stage Renal Disease through the Medicare program, and certain prescription drugs,including Feraheme and Makena, are covered under Medicare Part B. Medicaid, another program in the U.S., is a health insurance program for low-incomechildren, families, pregnant women, and people with disabilities that is jointly funded by the federal and state governments, but administered by the states. Ingeneral, state Medicaid programs are required to cover drugs and biologicals of manufacturers that have entered into a Medicaid Drug Rebate Agreement,although such products and biologicals may be subject to prior authorization or other utilization controls. Both Medicare and Medicaid are administered bythe Centers for Medicare and Medicaid Services ("CMS").33Table of Contents We participate in and have certain price reporting obligations to the Medicaid Drug Rebate program, and we have obligations to report Average SalesPrice ("ASP") for the Medicare program. Under the Medicaid Drug Rebate program, we are required to pay a rebate to each state Medicaid program for ourcovered outpatient drugs that are dispensed to Medicaid beneficiaries and paid for by a state Medicaid program as a condition of having federal funds beingmade available to the states for our drugs under Medicaid and Medicare Part B. Those rebates are based on pricing data reported by us on a monthly andquarterly basis to CMS. These data include the average manufacturer price and, in the case of innovator products such as Feraheme and Makena, the bestprice for each drug. Federal law also requires that a company that participates in the Medicaid program report ASP information to CMS for certain categories of drugs that arepaid under Part B of the Medicare program, such as Feraheme and Makena. This ASP information forms the basis for reimbursement for the majority of ourcurrent Feraheme business, and to a lesser extent, for our Makena business. Manufacturers calculate ASP based on a statutorily defined formula andinterpretations of the statute by CMS as to what should or should not be considered in computing ASP. An ASP for each National Drug Code for a productthat is subject to the ASP reporting requirement must be submitted to CMS no later than 30 days after the end of each calendar quarter. CMS uses thesesubmissions to determine payment rates for drugs under Medicare Part B. Changes affecting the calculation of ASP could affect the ASP calculations for ourproducts and the resulting Medicare payment rate, and could negatively impact our results of operations. Federal law requires that any company that participates in the Medicaid rebate program also participate in the Public Health Service's 340B drug pricingdiscount program in order for federal funds to be available for the manufacturer's drugs under Medicaid and Medicare Part B. The 340B pricing programrequires participating manufacturers to agree to charge statutorily defined covered entities no more than the 340B "ceiling price" for the manufacturer'scovered outpatient drugs. These 340B covered entities include a variety of community health clinics and other entities that receive health services grantsfrom the Public Health Service, as well as hospitals that serve a disproportionate share of low-income patients. The 340B ceiling price is calculated using astatutory formula, which is based on the average manufacturer price and rebate amount for the covered outpatient drug as calculated under the Medicaidrebate program. Changes to the definition of average manufacturer price and the Medicaid rebate amount under the Healthcare Reform Act, as discussedbelow, and CMS's issuance of final regulations implementing those changes also could affect our 340B ceiling price calculations and negatively impact ourresults of operations. The Healthcare Reform Act also expanded the Public Health Service's 340B drug pricing program to include additional types of covered entities: certainfree-standing cancer hospitals, critical access hospitals, rural referral centers and sole community hospitals, each as defined by the Healthcare Reform Act. Forexample, the percentage of Feraheme sold to 340B institutions has grown from 11% in 2011 to 17% in 2014. Since these institutions are granted lower pricesthan those offered to our other customers, any further growth in our 340B business may have a negative impact on our sales price per gram and operatingmargins. The Healthcare Reform Act exempts "orphan drugs," such as Makena, from the ceiling price requirements for the covered entity types newly added to theprogram by the Healthcare Reform Act. On July 21, 2014, the Health Resources and Services Administration ("HRSA"), which administers the 340B program,issued an interpretive rule to implement the orphan drug exception which interprets the orphan drug exception narrowly. It exempts orphan drugs from theceiling price requirements for the newly eligible entities only when the orphan drug is used for its orphan indication. The newly eligible entities are entitledto purchase orphan drugs at the ceiling price when the orphan drug is not used for its orphan indication. A manufacturer trade group has filed a lawsuitchallenging the interpretive rule as inconsistent with the statutory language. That challenge remains ongoing. The uncertainty regarding how the statutoryorphan drug exception will be applied will increase the complexity of compliance, will34Table of Contentsmake compliance more time-consuming, and could negatively impact our results of operations. If HRSA's narrow interpretation of the scope of the orphandrug exemption prevails, it could potentially negatively impact the price we are paid for Makena by certain entities and increase the complexity ofcompliance with the 340B program. In order to be eligible to have our products paid for with federal funds under the Medicaid program and purchased by certain federal agencies andgrantees, we participate in the Department of Veterans Affairs ("VA") Federal Supply Schedule ("FSS") pricing program. To participate, we are required toenter into an FSS contract with the VA, under which we must make our innovator "covered drugs" available to the "Big Four" federal agencies, including theVA, the Department of Defense ("DoD"), the Public Health Service, and the Coast Guard, at pricing that is capped pursuant to a statutory federal ceiling price("FCP") formula set forth in Section 603 of the Veterans Health Care Act of 1992 ("VHCA"). The FCP is based on a weighted average non-federal averagemanufacturer price ("Non-FAMP"), which manufacturers are required to report on a quarterly and annual basis to the VA. If a company misstates Non-FAMPsor FCPs it must restate these figures. Pursuant to the VHCA, knowing provision of false information in connection with a Non-FAMP filing can subject amanufacturer to penalties of $100,000 for each item of false information. FSS contracts are federal procurement contracts that include standard government terms and conditions, separate pricing for each product, and extensivedisclosure and certification requirements. All items on FSS contracts are subject to a standard FSS contract clause that requires FSS contract price reductionsunder certain circumstances where pricing is reduced to an agreed "tracking customer." Further, in addition to the "Big Four" agencies, all other federalagencies and some non-federal entities are authorized to access FSS contracts. FSS contractors are permitted to charge FSS purchasers other than the Big Fouragencies "negotiated pricing" for covered drugs that is not capped by the FCP; instead, such pricing is negotiated based on a mandatory disclosure of thecontractor's commercial "most favored customer" pricing. We offer single pricing on our FSS contract. In addition, pursuant to regulations issued by the DoD TRICARE Management Activity, now the Defense Health Agency, to implement Section 703 ofthe National Defense Authorization Act for Fiscal Year 2008, each of our covered drugs is listed on a Section 703 Agreement under which we have agreed topay rebates on covered drug prescriptions dispensed to TRICARE beneficiaries by TRICARE network retail pharmacies. Companies are required to list theirinnovator products on Section 703 Agreements in order for those products to be eligible for DoD formulary inclusion. The formula for determining the rebateis established in the regulations and our Section 703 Agreement and is based on the difference between the annual Non-FAMP and the FCP (as describedabove, these price points are required to be calculated by us under the VHCA). Reimbursement by third-party payers 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 payers are increasingly challenging the prices charged forpharmaceutical products and have instituted and continue to institute cost containment measures to control or significantly influence the purchase ofpharmaceutical products. For example, to reduce expenditures associated with pharmaceutical products, many third-party payers use cost containmentmethods, including: (a) formularies, which limit coverage for drugs not included on a predetermined list; (b) variable co-payments, which may make a certaindrug more expensive for patients as compared with a competing drug; (c) utilization management controls, such as requirements for prior authorization beforethe payer will cover the drug; and (d) other coverage policies that limit access to certain drugs for certain uses based on the payer-specific coverage policy. For example, prior to the implementation of the DQSA, as discussed above, the reimbursement of Makena was often difficult to obtain in light of the lessexpensive compounding products. As a result of the provisions under the DQSA and efforts by Lumara Health to work with individual states, including35Table of Contentsentering into supplement rebate agreements, access to Makena has since expanded. However, Lumara Health has had to use the legal system to defendreimbursement practices related to Lumara Health. For example, in 2012, Lumara Health sued the Georgia Department of Community Health ("DCH") becausethey were requiring patients to provide documentation of medical necessity to approve Makena in favor of compounded versions of the active ingredient ofMakena. During 2014, a permanent order was issued stating that DCH and their managed Medicaid plans must reimburse for Makena when prescribed byphysicians for an on-label patient. Although, this case remains in the appeals process, this ruling would aid as precedent for other states to comply withcurrent Medicaid laws. In addition, U.S. and many foreign governments continue to attempt to curb healthcare costs through legislation, including legislation aimed at reducingthe pricing and reimbursement of pharmaceutical products. The Healthcare Reform Act was enacted in the U.S. in March 2010 and includes certain costcontainment measures including an increase to the minimum rebates for products covered by Medicaid programs from 15.1% to 23.1% of the averagemanufacturer price for most innovator products, and the expansion of the 340B Drug Discount Program under the Public Health Service Act. Effective March2010, the Healthcare Reform Act expanded manufacturer rebate liability under the Medicaid program from fee-for-service Medicaid utilization to include theutilization of Medicaid managed care organizations as well. In addition, the Healthcare Reform Act and subsequent legislation changed the definition ofaverage manufacturer price. Further, federal budgetary concerns could result in the implementation of significant federal spending cuts, including cuts inMedicare and other health related spending in the near-term. For example, recent legislative enactments have resulted in Medicare payments being subject toa two percent reduction, referred to as sequestration, until 2024. Finally, the Healthcare Reform Act required pharmaceutical manufacturers of brandedprescription drugs to pay a branded prescription drug fee to the federal government. Each individual pharmaceutical manufacturer pays a prorated share ofthe branded prescription drug fee of $3.0 billion in 2015, based on the dollar value of its branded prescription drug sales to certain federal programsidentified in the law. Sales of orphan drugs, such as Makena are excluded from the determination. Some of the Healthcare Reform Act's significant reforms do not take effect until 2015. In 2012, CMS, issued proposed regulations to implement thechanges to the drug rebate components of the Medicaid program under the Healthcare Reform Act but has not yet issued final regulations. CMS is currentlyexpected to release the final regulations in 2015. In addition, the heightened focus on the healthcare industry by the federal government could result in the implementation of significant federal spendingcuts including cuts in Medicare and other health related spending in the near-term. In recent years, some states have also passed legislation to control theprices of drugs as well as begun a move toward managed care to relieve some of their Medicaid cost burden. These and any future changes in governmentregulation or private third-party payers' reimbursement policies may reduce the extent of reimbursement for our products and adversely affect our futureoperating results. For example, since almost half of Makena patients are Medicaid beneficiaries, the impact of future legislative changes may have asignificant impact on Makena sales. Payers also are increasingly considering new metrics as the basis for reimbursement rates, such as average sales price,average manufacturer price and actual acquisition cost. The existing data for reimbursement based on these metrics is relatively limited, although certainstates have begun to survey acquisition cost data for the purpose of setting Medicaid reimbursement rates. CMS has begun posting drafts of this retail surveyprice information on at least a monthly basis in the form of draft National Average Drug Acquisition Cost ("NADAC") files, which reflect retail communitypharmacy invoice costs, and National Average Retail Price ("NARP") files, which reflect retail community pharmacy prices to consumers. In July 2013, CMSsuspended the publication of draft NARP data, pending funding decisions. In November 2013, CMS moved to publishing final rather than draft NADAC dataand has since made updated NADAC data publicly available on a weekly basis. Therefore, it may be difficult to project the impact of these evolvingreimbursement mechanics on the willingness of payers36Table of Contentsto cover our products. Any failure to cover our products appropriately, in addition to legislative and regulatory changes and others that may occur in thefuture, could impact our ability to maximize revenues in the federal marketplace. Currently, in U.S. physician clinic and hospital settings, Medicare Part B generally reimburses for physician-administered drugs at a rate of 106% of thedrug's ASP. ASP is defined by statute based on sales and price concession data, including rebates and chargebacks, for a defined period of time. As notedabove, we submit the required information to CMS on a quarterly basis. In advance of the quarter in which the payment limit for drugs reimbursed underMedicare Part B program will go into effect, CMS calculates and publishes the payment limit. Under this methodology, payment rates change on a quarterlybasis, and significant downward fluctuations in ASP, and therefore reimbursement rates, could negatively impact sales of a product. Because the ASP-basedpayment rate is defined by statute, and changes to Medicare payment methodologies require legislative change, it is unclear if and when ASP reimbursementmethodology will change for the physician office setting. While the statute requires Medicare Part B payments for most drugs furnished in the physicianoffice setting to be at 106% of ASP, the statute does not have a similar requirement for hospital outpatient departments. For that setting, the Medicarepayment for many covered Part B drugs also is at 106% of ASP, but CMS could change that through regulations, without any intervening legislation. WhileMedicare is the predominant payer for Makena and Feraheme for treatment of patients with CKD, Medicare payment policy, in time, can also influencepricing and reimbursement in the non-Medicare markets, as private third-party payers and state Medicaid plans frequently adopt Medicare principles insetting reimbursement methodologies. We cannot predict the impact that any changes in reimbursement policies may have on our ability to competeeffectively. For example, in the U.S. hospital inpatient setting, most drugs are not reimbursed separately within the Medicare prospective payment system, basedlargely on the drug costs, but are bundled as a per discharge reimbursement based on the diagnosis and/or procedure rather than actual costs incurred inpatient treatments, thereby increasing the incentive for a hospital to limit or control expenditures. As a result, we do not expect premium priced products,such as Feraheme, to be broadly used in the hospital inpatient setting. In countries outside of the U.S., market acceptance may also depend, in part, upon the availability of reimbursement within existing healthcare paymentsystems. Generally, in the EU and other countries outside of the U.S., the government sponsored healthcare system is the primary payer of healthcare costs ofpatients and therefore enjoys significant market power. Some foreign countries also set prices for pharmaceutical products as part of the regulatory process,and we cannot guarantee that the prices set by such governments will be sufficient to generate substantial revenues or allow sales of Feraheme to beprofitable in those countries. Moreover, in order to obtain reimbursement of our medicinal products in some countries, including some EU Member States, wemay be required to conduct HTAs that compare the cost-effectiveness of our products to other available therapies. In addition, we may be unable to obtainfavorable pricing and reimbursement approvals in certain EU Member States. The legislators, policymakers and healthcare insurance funds in the EU Member States continue to propose and implement cost-containing measures tokeep healthcare costs down, due in part to the attention being paid to healthcare cost containment and other austerity measures in the EU. Certain of thesechanges could impose limitations on the prices pharmaceutical companies are able to charge for their products. The amounts of reimbursement available forthese products from governmental agencies or third-party payers, may increase the tax obligations on pharmaceutical companies such as ours, or mayfacilitate the introduction of generic competition with respect to our products. Furthermore, an increasing number of EU Member States and other foreigncountries use prices for medicinal products established in other countries as "reference prices" to help determine the price of the product in their own territory.Consequently, a downward trend in prices of medicinal products in some countries could contribute to similar downward trends elsewhere. In addition, theongoing budgetary difficulties faced37Table of Contentsby a number of EU Member States have led and may continue to lead to substantial delays in payment and payment partially with government bonds ratherthan cash for medicinal drug products, which could negatively impact our revenues and profitability. Moreover, in order to obtain reimbursement of ourmedicinal products in some countries, including some EU Member States, we may be required to conduct HTAs that compare the cost-effectiveness of ourproducts to other available therapies. There can be no assurance that our medicinal products will obtain favorable reimbursement status in any country. If adequate reimbursement levels are not maintained by government and other third-party payers for our products, our ability to sell our products may belimited and/or our ability to establish acceptable pricing levels for our products may be impaired, thereby reducing anticipated revenues and ourprofitability.Backlog We had a $4.3 million and $0.9 million product sales backlog as of December 31, 2014 and 2013, respectively. We expect to recognize the $4.3 millionin 2015. These backlogs were largely due to timing of orders received from our third-party logistics providers. Generally, product orders from our customersare fulfilled within a relatively short time of receipt of a customer order.Employees As of February 4, 2015, we had 257 employees, including 108 employees of Lumara Health who accepted employment with us following our November2014 acquisition of Lumara Health. We also utilize consultants and independent contractors on a regular basis to assist in the development andcommercialization of our products. Our success depends to a significant extent on our ability to continue to attract, retain and motivate qualified sales,technical operations, managerial, scientific and medical personnel of all levels. Although we believe we have been relatively successful to date in obtainingand retaining such personnel, we may not be successful in the future. During 2014 and 2013, we expanded our leadership team and strengthened ourcommercial organization and medical affairs teams. We expect to continue these efforts in 2015 in support of the growth in our business. 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 12%, 11% and 32% of our total revenues for2014, 2013 and 2012, respectively, and were principally related to collaboration revenues recognized in connection with our agreement with Takeda, whichis headquartered in Japan. During 2012, our revenues from customers outside of the U.S included approximately $20.0 million related to the recognition ofupfront payments and milestones achieved under the Amended Takeda Agreement, which we entered into the Takeda Termination Agreement to terminate.Sales of Feraheme outside of the U.S. do not and are not expected to materially contribute to our revenues. As such, and in light of the Takeda TerminationAgreement, we and Takeda have come to the mutual decision to initiate withdrawal of the marketing authorization for Rienso in the EU and Switzerland. Weare currently assessing the commercial opportunity for Feraheme in Canada. We have no plans to commercialize Makena outside of the U.S.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 $24.2 million, $20.6 million, and $33.3 million during 2014, 2013 and 2012, respectively. We expect our38Table of Contentsresearch and development expenses to increase in 2015 due to the timing of expenses related to our pediatric clinical studies and our hd-CKD Study as wellas current clinical trials related to Makena's post approval commitments and its lifecycle management program. In addition, research and developmentexpenses could increase further and significantly depending on the outcome of discussions with the FDA on the regulatory path forward for Feraheme in thebroad indication and any resulting clinical trials or development efforts that we may undertake.Segment Reporting We conduct our operations in one business segment as further described in Note P, "Business Segments," to our consolidated financial statementsincluded in this Annual Report on Form 10-K.Code of Ethics Our Board of Directors has adopted a code of ethics that applies to our officers, directors and employees. We have posted the text of our code of ethics onour website at http://www.amagpharma.com in the "Investors" section. We will provide to any person without charge a copy of such code of ethics, uponrequest in writing to Investor Relations, AMAG Pharmaceuticals, Inc., 1100 Winter Street, Waltham, MA 02451. In addition, should any changes be made toour code of ethics, we intend to disclose within four business days, on our website (or in any other medium required by law or the NASDAQ): (a) the date andnature of any amendment to our code of ethics that applies to our principal executive officer, principal financial officer, principal accounting officer orcontroller, or persons performing similar functions and (b) the nature of any waiver, including an implicit waiver, from a provision of our code of ethics that isgranted to one of these specified officers, the name of such person who is granted the waiver, and the date of the waiver.Available Information Our internet website address is http://www.amagpharma.com. Through our website, we make available, free of charge, our annual reports on Form 10-K,quarterly reports on Form 10-Q, current reports on Form 8-K, proxy and registration statements, and all of our insider Section 16 reports (and any amendmentsto such filings), as soon as reasonably practicable after such material is electronically filed with, or furnished to, the U.S. Securities and ExchangeCommission (the "SEC"). These SEC reports can be accessed through the "Investors" section of our website. The information found on our website is not partof this or any other report we file with, or furnish to, the SEC. Paper copies of our SEC reports are available free of charge upon request in writing to InvestorRelations, AMAG Pharmaceuticals, Inc., 1100 Winter Street, Waltham, MA 02451. The content on any website referred to in this Form 10-K is notincorporated by reference into this Form 10-K unless expressly noted. ITEM 1A. RISK FACTORS: The following information sets forth material risks and uncertainties that may affect our business, including our future financial and operationalresults and could cause our actual results to differ materially from those contained in forward-looking statements we have made in this Annual Report onForm 10-K and elsewhere as discussed in the introduction to Part I above. You should carefully consider the risks described below, in addition to the otherinformation in this Annual Report on Form 10-K, before making an investment decision. The risks and uncertainties described below are not the only oneswe face. Additional risks not presently known to us or other factors not perceived by us to present material risks to our business at this time also may impairour business operations. Unless the context suggests otherwise, references to "Feraheme" refer to both Feraheme (the trade name for ferumoxytol in the U.S. and Canada) andRienso (the trade name for ferumoxytol in the EU and Switzerland).39 Table of ContentsRisks Related to Our ProductsWe are primarily dependent on revenues from our two principal products. We currently derive substantially all of our revenue from sales of Makena and Feraheme. Although we may introduce additional products forcommercialization to our product portfolio, we may be substantially dependent on sales of Makena and Feraheme for many years. Our financial conditionwill be materially adversely affected, we may have to restructure our current operations, and our business prospects will be limited if we experience anynegative developments relating to Makena or Feraheme, including the following:•Actual or perceived safety or efficacy issues; •Restrictions on current or future labels; •The introduction or greater acceptance of competing products, including generic products, products that may be prescribed off-label andproducts made by compounding pharmacies; •Constraints on product pricing or price increases; and •Changes in reimbursement policies or adverse regulatory or legislative developments. In the U.S., if Makena or Feraheme face any safety or efficacy issues, including drug interaction problems, under the Federal Food, Drug and CosmeticAct (the "FDC Act"), the U.S. Food and Drug Administration ("FDA") has broad authority to force us to take any number of actions, including, but not limitedto the following:•Requiring us to conduct post-approval clinical studies to assess known risks or signals of serious risks, or to identify unexpected serious risks; •Mandating labeling changes to a product; •Requiring us to implement a risk evaluation and mitigation strategy ("REMS") where necessary to assure safe use of the drug; or •Removing an already approved product from the market. Similar laws and regulations exist in countries outside of the U.S. In addition, actual or perceived safety or drug interaction problems could result inproduct recalls, restrictions on the product's permissible uses, changes to the product label, a negative impact on regulatory applications (includingsupplemental new drug applications ("sNDAs") and applications for variations to the marketing authorization), suspension, variation or withdrawal of themarketing authorization for the product, or withdrawal of the product from the U.S. and/or foreign markets. Any such actions would adversely affect ourresults of operations. The commercial success of our products depends upon the level of market adoption and continued use by physicians, hospitals, patients, and healthcarepayers, including government payers, health maintenance organizations ("HMOs"), managed care organizations, group purchasing organizations ("GPOs")and specialty pharmacies. Our products might not be adopted if perceived to be no safer, less safe, no more effective, less effective, no more convenient, orless convenient than currently available products. In addition, the pricing and/or reimbursement rates and terms of our products may not be viewed asadvantageous to potential prescribers and payers as the pricing and/or reimbursement rates and terms of other available products, including, in the case ofMakena, compounded products. If our products do not achieve or maintain an adequate level of market adoption for any reason, our profitability and ourfuture business prospects will be adversely impacted.40Table of ContentsCompetition in the pharmaceutical and biopharmaceutical industries, including from companies marketing generic products, is intense. If we fail tocompete effectively, our business and market position will suffer. The pharmaceutical and biopharmaceutical industries are intensely competitive and subject to rapid technological change. Many of our competitors forFeraheme are large, well-known pharmaceutical companies and may benefit from significantly greater financial, sales and marketing capabilities, greatertechnological or competitive advantages, and other resources. For Makena, most of our competition comes from pharmacies that compound a non-FDAapproved version of Makena, which is sold at a much lower cost than Makena. Our existing or potential new competitors for Feraheme and Makena maydevelop products that are more widely accepted than ours and may receive patent protection that dominates, blocks or adversely affects our productdevelopment or business. In addition, generic versions of Feraheme and Makena could enter the market through approval of abbreviated new drug applications ("ANDAs") thatuse Feraheme or Makena as a reference listed drug, which would allow generic competitors to rely on Feraheme's or Makena's safety and efficacy trialsinstead of conducting their own studies. Further, there are no patents covering Makena. For example, in December 2012, the FDA published a draft guidance containing product-specific bioequivalence recommendations for drug productscontaining ferumoxytol. The FDA generally publishes product-specific bioequivalence guidance after it has received an inquiry from a generic drugmanufacturer about submitting an ANDA for the product in question; thus, it is possible that a generic drug manufacturer has approached the FDA requestingguidance about submitting an ANDA for ferumoxytol, the active ingredient in Feraheme, and that such an ANDA may be filed in the near future. Thepublished bioequivalence guidance could encourage a generic entrant seeking a path to approval of a generic ferumoxytol to file an ANDA. As a result, wecould face generic competition in the near-term or have to engage in extensive litigation with a generic competitor to protect our patent rights, either ofwhich could adversely affect our business and results of operations. Companies that manufacture generic products typically invest far fewer resources inresearch and development and marketing efforts than the manufacturers or marketers of branded products and can therefore price their products significantlylower than those branded products already on the market. As a result, competition from generic IV iron products could limit our sales, which would have anadverse impact on our business and results of operations. The introduction by our competitors of alternatives to Feraheme or Makena that would be, or are perceived to be, more efficacious, safer, less expensive,easier to administer, available for a broader patient population, or provide more favorable insurance coverage or reimbursement, could reduce our revenuesand the value of our product development efforts. For more information on Feraheme and Makena specific competition risks, please see Risk Factors "Marketacceptance of Feraheme may suffer as a result of the widespread use of competing iron replacement therapy products, including Injectafer®, and as a resultof the approval of generic drug products in the near-term, which would have a material adverse effect on our operations and our profitability" and "Ourability to successfully commercialize Makena is dependent upon a number of factors, including maintaining the benefits of Makena's orphan drugexclusivity and the length of time before competitors begin selling generic versions of Makena."The success of our products depends on our ability to maintain the proprietary nature of our technology. We rely on a combination of patents, trademarks and copyrights in the conduct of our business. The patent positions of pharmaceutical andbiopharmaceutical firms are generally uncertain and involve complex legal and factual questions. We may not be successful or timely in obtaining anypatents for which we submit applications. The breadth of the claims obtained in our patents may not provide sufficient protection for our technology. Thedegree of protection afforded by patents for proprietary or licensed technologies or for future discoveries may not be adequate to preserve our ability toprotect or commercially exploit those technologies or discoveries. The patents issued to us may provide us with41Table of Contentslittle or no competitive advantage. In addition, there is a risk that others will independently develop or duplicate similar technology or products orcircumvent the patents issued to us. One of our U.S. Feraheme patents is subject to a patent term extension under U.S. patent law and FDA regulations and will expire in June 2023. Our otherU.S. patents relating to Feraheme expire in 2020. These and any other patents issued to or acquired by us may be contested or invalidated. There has beensubstantial litigation and other proceedings regarding patent and other intellectual property rights in the pharmaceutical and biotechnology industries. Wemay become a party to patent litigation and other proceedings, including interference and reexamination proceedings declared by the United States Patentand Trademark Office. There are no patents covering Makena and thus the successful commercialization of Makena is significantly reliant on our ability totake advantage of its orphan drug exclusivity, which risks are described in the Risk Factor "Our ability to successfully commercialize Makena is dependentupon a number of factors, including maintaining the benefits of Makena's orphan drug exclusivity and the length of time before competitors begin sellinggeneric versions of Makena." In addition, claims of infringement or violation of the proprietary rights of others may be asserted against us. If we are required to defend against suchclaims or to protect our own proprietary rights against others, it could result in substantial financial and business costs, including the distraction of ourmanagement. An adverse ruling in any litigation or administrative proceeding could result in monetary damages, injunctive relief or otherwise harm ourcompetitive position, including by limiting our marketing and selling activities, increasing the risk for generic competition, limiting our development andcommercialization activities or requiring us to obtain licenses to use the relevant technology (which licenses may not be available on commerciallyreasonable terms, if at all). We also rely upon unpatented trade secrets and improvements, unpatented know-how and continuing technological innovation to develop and maintainour competitive position, which we seek to protect, in part, by confidentiality agreements with our corporate licensees, collaborators, contract manufacturers,employees and consultants. These agreements, however, may be breached. We may not have adequate remedies for any such breaches, and our trade secretsmight otherwise become known or might be independently discovered by our competitors. In addition, we cannot be certain that others will notindependently develop substantially equivalent or superseding proprietary technology, or that an equivalent product will not be marketed in competitionwith our products, thereby substantially reducing the value of our proprietary rights. Further, the laws of foreign countries may not protect our intellectual property rights to the same extent as do the laws of the U.S. and therefore ourintellectual property rights may be subject to increased risk abroad, including opposition proceedings before the patent offices for other countries, such as theEuropean Patent Office, or similar adversarial proceedings, regarding intellectual property rights with respect to Rienso.We may not be able to further expand our product portfolio by entering into additional business development transactions, such as in-licensingarrangements, acquisitions, or collaborations or, if such arrangements are entered into, we may not realize the anticipated benefits and they could disruptour business, decrease our profitability, result in dilution to our stockholders or cause us to incur significant additional debt or expense. As part of our business strategy to expand our product portfolio, we are seeking to in-license or acquire additional pharmaceutical products or companiesthat leverage our corporate infrastructure and commercial expertise, such as our recent acquisition of Lumara Health Inc. ("Lumara Health"). We have limitedexperience with respect to these business development activities and there can be no assurance that we will be able to identify or complete any additionaltransactions in a timely manner, on a cost-effective basis, or at all. Further, the valuation methods that we use for any acquired product or business requires significant judgment and assumptions. Actual results andperformance of the products or businesses42Table of Contentsthat we may acquire, including anticipated synergies and other financial benefits, could differ significantly from our original assumptions, especially duringthe periods immediately following the closing of the transaction. In addition, acquisitions may cause significant changes to our current organization andoperations, may subject us to more rigid or constraining regulations or government oversight and may have negative tax and accounting consequences.These results could have a negative impact on our financial position or results of operations and result in significant charges in future periods. In addition, proposing, negotiating and implementing collaborations, in-licensing arrangements or acquisition agreements is a lengthy and complexprocess. Other companies, including those with substantially greater financial, marketing and sales resources, may compete with us for these arrangements,and we may not be able to enter into such arrangements on acceptable terms or at all. Further, any such strategic transactions by us could result in large andimmediate write-offs or the incurrence of additional debt and contingent liabilities, each of which may contain restrictive covenants that could adverselyimpact or limit our ability to grow our business, enter into new agreements, and adversely affect our operating results. Management of a license arrangement,collaboration, or other strategic arrangement and/or integration of an acquired asset or company may also disrupt our ongoing business, require managementresources that otherwise would be available for ongoing development of our existing business, including our commercialization of Feraheme and Makena. In addition, our cash, cash equivalents and investments may not be sufficient to finance any additional strategic transactions, and 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 us to raiseadditional funds through public or private financings, and such additional funds may not be available on terms that are favorable to us, if at all, and ourstockholders may experience significant dilution. Our Term Loan Facility, which provided us with $340.0 million to finance our acquisition of LumaraHealth (the "Term Loan Facility") contains restrictions on our ability to acquire additional pharmaceutical products and companies, to enter into exclusivelicensing arrangements, to incur additional indebtedness and will require us to use a portion of our free cash flow to repay indebtedness on an annual basis.These provisions may limit our ability to pursue attractive business development opportunities. If we are unable to successfully obtain rights to suitableproducts or if any acquisition or in-license arrangement we make is not successful, our business, financial condition and prospects for growth could suffer. Further, even if we do acquire additional products or businesses, the integration of the operations of such acquired products or businesses requiressignificant efforts, including the coordination of information technologies, sales and marketing, operations, manufacturing, safety and pharmacovigilance,medical and finance. These efforts result in additional expenses and involve significant amounts of management's time. In addition, we may have to rely onthe other parties with whom we may enter into a future agreement to perform certain regulatory filings, oversee certain functions, such as pharmacovigilanceor the manufacture of the product we license from them, and any failure of such party to perform these functions for any reason, including ceasing doingbusiness, could have a material effect on our ability to commercialize the licensed product. Similarly, we are relying on the Makena commercial team andother key Lumara Health personnel to assist with the integration and operations of Lumara Health and the commercialization of Makena. We may not realizethe anticipated benefits of Lumara Health or any future acquisition, license or collaboration, any of which involves numerous risks including those discussedabove and the following:•Entry into markets in which we have no or limited direct prior experience, such as markets where we compete with non-traditional drugmanufacturers, such as compounding pharmacies, and where competitors in such markets have stronger market positions;43Table of Contents•Our ability to train our sales force, and the ability of our sales force, to successfully incorporate new products into their call points, or tosuccessfully integrate and leverage sales forces that we retain, such as the Makena commercial team; •Additional legal, compliance and/or accounting risks associated with such acquisitions, including liabilities assumed as part of theacquisition, which may be unknown or contingent; and •The introduction or wider acceptance of competitive products. If we cannot successfully integrate the Lumara Health business, or other businesses or products we may acquire or in-license, into our company, we mayexperience material negative consequences to our business, financial condition or results of operations. We cannot be certain that, following any suchacquisitions or in-licenses, including Lumara Health, we will achieve the expected synergies and other benefits that justify the purchase price of suchtransaction.We are completely dependent on third parties to manufacture our commercial products and any difficulties, disruptions or delays, or the need to findalternative sources, could adversely affect our profitability and future business prospects. We do not currently own or operate, and currently do not plan to own or operate, facilities for the manufacture of our products, and we do not plan to ownor operate facilities for the manufacture of any commercial products we may acquire or in-license. We currently rely solely on third-party contractmanufacturers to manufacture Feraheme and Makena for our commercial and clinical use. We do not currently have an alternative manufacturer for ourFeraheme drug substance and finished drug product nor do we have an alternative manufacturer for Makena drug substance or drug product, and we may notbe able to enter into agreements with second source manufacturers whose facilities and procedures comply with current good manufacturing practices("cGMP") regulations and other regulatory requirements on a timely basis and with terms that are favorable to us, if at all. Our ability to have our products manufactured in sufficient quantities and at acceptable costs to meet our commercial demand and clinical developmentneeds is dependent on the uninterrupted and efficient operation of our third-party contract manufacturing facilities. Any difficulties, disruptions or delays inthe manufacturing process could result in product defects or shipment delays, suspension of manufacturing or sale of the product, recall or withdrawal ofproduct previously shipped for commercial or clinical purposes, inventory write-offs or the inability to meet commercial demand in a timely and cost-effective manner. Furthermore, our current third-party manufacturers do not manufacture for us exclusively and may exhaust some or all of their resourcesmeeting the demand of other customers. In addition, securing additional third-party contract manufacturers for Feraheme or Makena will require significanttime for transitioning the necessary manufacturing processes, gaining regulatory approval, and for having the appropriate oversight and may increase the riskof certain problems, including cost overruns, process reproducibility, stability issues, the inability to deliver required quantities of product that conform tospecifications in a timely manner, or the inability to manufacture Feraheme or Makena in accordance with cGMP. Further, we and our third-party manufacturers currently purchase certain raw and other materials used to manufacture Feraheme and Makena from third-party suppliers and, at present, do not have long-term supply contracts with most of these third parties. These third-party suppliers may cease to produce theraw or other materials used in Feraheme and Makena or otherwise fail to supply these materials to us or our third-party manufacturers or fail to supplysufficient quantities of these materials to us or our third-party manufacturers in a timely manner for a number of reasons, including but not limited to thefollowing:•Unexpected demand for or shortage of raw or other materials; •Adverse financial developments at or affecting the supplier;44Table of Contents•Regulatory requirements or action; •An inability to provide timely scheduling and/or sufficient capacity; •Manufacturing difficulties; •Changes to the specifications of the raw materials such that they no longer meet our standards; •Lack of sufficient quantities or profit on the production of raw materials to interest suppliers; •Labor disputes or shortages; or •Import or export problems. Any other interruption in our third-party supply chain could adversely affect our ability to satisfy commercial demand and our clinical developmentneeds for Feraheme. In addition, there is only one FDA-approved supplier of the drug substance for Makena and, currently, we do not have a long-termsupply agreement with that supplier. The supplier of drug substance may determine that it is not financially attractive for them to continue to supply drugsubstance for Makena at current prices, or at all, based on our expected purchasing volumes. The qualification of an alternative source may require repeatedtesting of the new materials and generate greater expenses to us if materials that we test do not perform in an acceptable manner. In addition, we or our third-party manufacturers sometimes obtain raw or other materials from one vendor only, even where multiple sources are available, to maintain quality control andenhance working relationships with suppliers, which could make us susceptible to price inflation by the sole supplier, thereby increasing our productioncosts. As a result of the high-quality standards imposed on our raw or other materials, we or our third-party manufacturers may not be able to obtain suchmaterials of the quality required to manufacture Feraheme or Makena from an alternative source on commercially reasonable terms, or in a timely manner, ifat all. If we are unable to have Feraheme or Makena manufactured on a timely or sufficient basis because of the factors discussed above, we may not be able tomeet commercial demand or our clinical development needs for Feraheme or Makena, or may not be able to manufacture Makena or Feraheme in a cost-effective manner. As a result, we may lose sales, fail to generate increased revenues or suffer regulatory setbacks, any of which could have an adverse impacton our profitability and future business prospects.We rely on third parties in the conduct of our business, including our clinical trials and product distribution, and if they fail to fulfill their obligations, ourcommercialization and development plans may be adversely affected. We rely on and intend to continue to rely on third parties, including clinical research organizations ("CROs"), third-party logistics providers, packaging,storage and labeling providers, wholesale distributors and certain other important vendors and consultants in the conduct of our business. In addition, wehave contracted and plan to continue to contract with certain third parties to provide certain services, including site selection, enrollment, monitoring, datamanagement and other services, in connection with the conduct of our clinical trials and the preparation and filing of our regulatory applications. We havelimited experience conducting clinical trials outside the U.S., and, therefore, we are also largely relying on third parties such as CROs to manage, monitor andcarry out these clinical trials. Although we depend heavily on these parties, we do not control them and, therefore, we cannot be assured that these thirdparties will adequately and timely perform all of their contractual obligations to us. If our third-party service providers cannot adequately fulfill theirobligations to us in a timely and satisfactory manner, if the quality and accuracy of our clinical trial data or our regulatory submissions are compromised dueto poor quality or failure to adhere to our protocols or regulatory requirements or if such third parties otherwise fail to adequately discharge theirresponsibilities or meet45Table of Contentsdeadlines, our current and future development plans and regulatory submissions, or our commercialization efforts in current indications, may be delayed,terminated, limited or subject to additional expense, which would adversely impact our ability to generate revenues. Further, in most cases, we do not currently have back-up suppliers or service providers to perform these tasks. If any of these third parties experiencesignificant difficulties in their respective processes, fail to maintain compliance with applicable legal or regulatory requirements, fail to meet expecteddeadlines or otherwise do not carry out their contractual duties to us, or encounter physical or natural damages at their facilities, our ability to deliver ourproducts to meet commercial demand could be significantly impaired. The loss of any of our third-party providers, together with a delay or inability to securean alternate distribution source for end-users in a timely manner, could cause the distribution of our products to be delayed or interrupted, which would havean adverse effect on our business, financial condition and results of operations. Additionally, we have limited experience independently commercializing multiple pharmaceutical products, including managing and maintaining asupply chain and distribution network for multiple products, and we are placing substantial reliance on third parties to perform this expanded network ofproduct supply chain and distribution services for us. Any failure on our part to effectively execute on our multi-product commercial plans or to effectivelymanage our supply chain and distribution network would have an adverse impact on our business.We depend, to a significant degree, on the availability and extent of reimbursement from third-party payers for the use of our products, and a reduction inthe availability or extent of reimbursement could adversely affect our sales revenues and results of operations. Our ability to successfully commercialize our products is dependent, in significant part, on the availability and extent of reimbursement to end-usersfrom third-party payers for the use of our products, including governmental payers, HMOs, managed care organizations and private health insurers.Reimbursement by third-party payers depends on a number of factors, including the third-party's determination that the product is competitively priced, safeand effective, appropriate for the specific patient, and cost-effective. Third-party payers are increasingly challenging the prices charged for pharmaceuticalproducts and have instituted and continue to institute cost containment measures to control or significantly influence the purchase of pharmaceuticalproducts, such as through the use of prior authorizations and step therapy. If these entities do not provide coverage and reimbursement for our products orprovide an insufficient level of coverage and reimbursement, physicians and other healthcare providers may choose to use alternative products, which wouldhave an adverse effect on our ability to generate revenues. In addition, U.S. and many foreign governments continue to propose and pass legislation designed to reduce the cost of healthcare for patients. ThePatient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (the "Healthcare Reform Act") includescertain cost containment measures including an increase to the minimum rebates for products covered by Medicaid programs, the extension of such rebates todrugs dispensed to Medicaid beneficiaries enrolled in Medicaid managed care organizations and the expansion of the 340B Drug Discount Program underthe Public Health Service Act. In addition, federal budgetary concerns could result in the implementation of significant federal spending cuts, including cutsin Medicare and other health related spending in the near-term. Please see our discussion above under the heading, "Pharmaceutical Pricing andReimbursement" in Item 1. Business for a more detailed discussion of such changes. The magnitude of the impact of these laws on our business is uncertain.Further, in recent years, some states have also passed legislation to control the prices of drugs as well as begun a move toward managed care to relieve someof their Medicaid cost burden. Given that almost half of Makena patients are Medicaid beneficiaries, the impact of future legislative changes may have asignificant and adverse impact on Makena sales. Further, while Medicare is the predominant payer for Feraheme,46Table of ContentsMedicare payment policy, in time, can also influence pricing and reimbursement in the non-Medicare markets, as private third-party payers and stateMedicaid plans frequently adopt Medicare principles in setting reimbursement methodologies. These and any future changes in government regulation orprivate third-party payers' reimbursement policies may reduce the extent of reimbursement for our products and adversely affect our future operating results.Risks Related to MakenaOur ability to successfully commercialize Makena is dependent upon a number of factors, including maintaining the benefits of Makena's orphan drugexclusivity and the length of time before competitors begin selling generic versions of Makena. Makena has been granted orphan drug exclusivity in the U.S. until February 3, 2018 for prevention of recurrent preterm birth in singleton pregnancies.Under the Orphan Drug Act, the FDA may designate a product as an orphan drug if it is a drug intended to treat a rare disease or condition, defined, in part, asa patient population of fewer than 200,000 in the U.S. In the U.S., the company that first obtains FDA approval for a designated orphan drug for the specifiedrare disease or condition receives orphan drug marketing exclusivity for that drug for a period of seven years. This orphan drug exclusivity prevents the FDAfrom approving another application for the "same drug" for the same orphan indication during the exclusivity period, except in very limited circumstances. Inaddition, orphan drug exclusivity marketing rights in the U.S. may be lost if the FDA later determines that the request for designation was materiallydefective or if the manufacturer is unable to assure sufficient quantity of the drug to meet the needs of patients with the rare disease or condition. Finally,FDA may approve a subsequent drug that is the same as a currently approved orphan drug for the same orphan indication during the exclusivity period if thesponsor of the subsequent drug can demonstrate that the drug is clinically superior to the already approved drug. According to the FDA, clinical superioritymay be demonstrated by showing that a drug is significantly more effective in a clinical trial, safer in a substantial portion of the target population, orprovides a major contribution to patient care relative to the currently approved drug. Additionally, in 1956, the FDA-approved the drug Delalutin, which contained the same active ingredient as Makena. Delalutin was approved forconditions other than reducing the risk of preterm birth and was marketed by Bristol-Myers Squibb ("BMS"). BMS stopped marketing and manufacturing theFDA-approved product and it was withdrawn from the market in 1999. In 2010, in response to a citizen petition, the FDA determined that Delalutin was notwithdrawn from sale for reasons of safety or effectiveness. As such, generic drug applications may reference the withdrawn Delalutin New Drug Application("NDA"). Thus, before the expiration of Makena's orphan exclusivity, the FDA could determine that it has the authority to approve ANDAs that referenceDelalutin so long as the ANDAs meet all relevant legal and regulatory requirements for approval and are labeled for the same indications as Delalutin. If suchan approval is granted, doctors may elect to prescribe such approved drug off-label (i.e., outside of FDA-approved indications) for Makena's orphan-protectedindication, which could have an adverse impact on our business and results of operations. Moreover, if one or more ANDA filers or a generic manufacturer were to receive approval to sell a generic or follow-on version of Makena for the orphanindication, those generic products could potentially be approved as early as February 3, 2018 (the date on which Makena's orphan exclusivity ends) and wewould become subject to increased competition at that time.47 Table of Contents Further, our ability to successfully commercialize Makena depends on a number of additional factors, including but not limited to the following:•The possibility that the benefit of the remaining exclusivity period resulting from the designation of Makena as an orphan drug may not berealized as a result of off-label use by physicians of current or future FDA-approved drugs in the market where Makena competes; •The level of enforcement by the FDA to ensure compounded copies of commercially available FDA-approved products manufactured bycompounding pharmacies, including compounded copies of hydroxyprogesterone caproate ("HPC") that are in violation of the federal DrugQuality and Security Act ("DQSA"), as well as other relevant provisions of the FDC Act, are not distributed to patients; •The size of the pool of patients who may be eligible to receive Makena; •Actual or perceived safety and efficacy of Makena; •Our ability to increase patient compliance in line with the current label; •The successful integration and retention of the Makena commercial sales team and any other key employees into our business structure; and •Our ability to successfully leverage Lumara Health's commercial organizations and distribution networks in marketing, selling and supplyingMakena. Failure to achieve any or all of these commercial objectives could have an adverse material effect on the growth of Makena and our ability to achieve ourrevenue forecasts which could impact our financial condition or results of operations.We have no experience facing competition from compounded products and if we are unsuccessful in differentiating Makena from compounded HPCproducts, sales of Makena, and thus our profitability, could be materially adversely affected. We are aware that formulations of HPC have been available from compounding pharmacies for many years (which compounded formulations of HPC werefer to as "c17P") and will likely remain available even though Makena has been granted orphan drug exclusivity until February 3, 2018, and we have noprior experience with facing such competition. In March 2011, the FDA communicated to Lumara Health and also separately issued a press release that, inorder to ensure continued access for patients, the FDA intended to refrain from taking enforcement action with respect to compounding pharmacies producingc17P in response to individual prescriptions for individual patients. The FDA's statement had an adverse effect on Lumara Health's ability to realize thebenefit of orphan drug exclusivity and its ability to grow sales of Makena following the launch of the product in March 2011. The failure by the FDA to takeenforcement action against compounding pharmacies resulted in substantial sales of compounded copies of Makena and the effective loss of the value ofmarketing exclusivity for the affected period of time. In June 2012, the FDA recommended using an FDA-approved drug product, such as Makena, instead ofa compounded drug except when there is a specific medical need (e.g., an allergy) that cannot be met by the approved drug. In July 2014, the FDA issuedanother public statement affirming the position it took in its June 2012 press release recommending use of FDA-approved Makena except when there is aspecific need for a compounded drug. The FDA also stated that when it identifies a pharmacist that compounds regularly or in inordinate amounts of any drugproducts that are essentially copies of Makena, the FDA intends to take enforcement action as it deems appropriate. Despite recent negative publicityregarding compounding pharmacies, including the 2012 meningitis outbreak involving compounded drugs, the November 2013 enactment of the DQSA andrecent enforcement actions against compounders violating the FDC Act, Makena may continue to face competition from c17P, especially in light of the48Table of Contentslong-standing availability of such compounded products, their lower cost and the criticism Lumara Health received in the past in connection with the pricingof Makena, as discussed below. Further, if any safety or efficacy concerns arise with respect to the c17P products, it may negatively impact sales of Makena ifhealthcare providers and patients do not distinguish between the compounded product and the FDA-approved Makena.We may not be successful in implementing Makena's lifecycle management program, which could have a negative impact on our business. In October 2014, we filed with the FDA a prior approval supplement to the original Makena NDA seeking approval of a 1 mL preservative-free vial ofMakena (the "Single Dose Vial") and we are seeking to expand Makena's formulations and drug delivery technologies as part of the product's lifecyclemanagement program. The lifecycle management program for Makena is an important strategy for our maternal health business, especially in light of theexpiration of Makena's orphan drug exclusivity in February 2018. We have limited experience in the development of alternative formulations for Makenaand in developing and implementing lifecycle management programs. We can make no assurance that our prior approval supplement for the Single Dose Vialwill be approved on the expected timeline, or at all, or that our other lifecycle management activities will be successful in supporting our maternal healthbusiness. Further, the Single Dose Vial will not, and future activities may not, extend or grant exclusivity or provide patent protection, which will likelyincrease competition. If we are not successful in implementing Makena's lifecycle management program, or if such activities cannot be completed onanticipated timelines, our business will suffer.The commercial success and growth prospects for Makena will be dependent upon perceptions related to pricing and access. Lumara Health was criticized for the initial list pricing of Makena in numerous news articles and internet postings following the FDA's February 2011approval of Makena for the prevention of recurrent preterm birth in certain at-risk women. Although the list price of Makena was subsequently reduced inMarch 2011, Makena is still priced at a premium to c17P, which has negatively impacted coverage of Makena by some state Medicaid programs and bycertain commercial payers. Although we are undertaking efforts to educate physicians and patients about progress made toward expanding coverage ofMakena and about the benefits of FDA-approved Makena, certain doctors continue to prescribe non-FDA approved purported substitute products made bypharmaceutical compounders in lieu of prescribing Makena. In addition, efforts to appropriately respond to future concerns about pricing and access raisedby media, professional societies, advocacy groups, policymakers or regulatory agencies regarding patient access to Makena, are costly and may not besuccessful. If we are unable to increase usage of Makena by physicians and strengthen relationships with professional societies, advocacy groups,policymakers and regulatory agencies, some of whom have been previously critical of Lumara Health, our sales of Makena may suffer, which would have amaterially adverse impact on revenues and our results of operations.The FDA has required post-marketing studies to verify and describe the clinical benefit of Makena, and the FDA may limit further marketing of theproduct based on the results of these post-marketing studies, failure to complete these trials in a timely manner or evidence of safety risks or lack ofeffectiveness. Makena was approved by the FDA in February 2011 under the provisions of the FDA's "Subpart H" Accelerated Approval regulations. The Subpart Hregulations allow certain drugs, for serious or life-threatening conditions, to be approved on the basis of surrogate endpoints or clinical endpoints other thansurvival or irreversible morbidity. As a condition of approval under Subpart H, the FDA required that Makena's sponsor perform certain adequate and well-controlled post-marketing clinical studies to verify and describe the clinical benefit of Makena as well as fulfill certain other49Table of Contentspost-marketing commitments. Given the patient population (i.e., women pregnant and at an increased high risk for recurrent preterm delivery) and theinformed risk of receiving a placebo instead of the active approved drug in the U.S., the pool of prospective subjects for such clinical trials in the U.S. issmall, and we have therefore sought enrollment on a global scale. These factors make the enrollment process slow, difficult, time-consuming and costly. If therequired post-marketing studies fail to verify the clinical benefit of the drug, if a sufficient number of participants cannot be enrolled, or if the applicant failsto perform the required post-marketing studies with due diligence, the FDA has the authority to withdraw approval of the drug following a hearing conductedunder the FDA's regulations, which would have a materially adverse impact on our business. We cannot be certain of the results of the confirmatory clinicalstudies or what action the FDA may take if the results of those studies are not as expected based on clinical data that FDA has already reviewed or if suchstudies are not completed in a timely manner.Risks Related to FerahemeThe market for Feraheme is limited because Feraheme is only indicated for the treatment of IDA in adult patients with CKD. Significant safety or druginteraction problems, or the evaluation or reevaluation of existing or future data by the FDA or other regulators, could have an adverse impact onFeraheme in this indication, which would adversely impact our future business prospects. The market for Feraheme is limited because Feraheme is only indicated for the treatment of iron deficiency anemia ("IDA") in adult patients with chronickidney disease ("CKD"). Although we intend to continue to dedicate significant resources to the commercialization of Feraheme, it may never receiveapproval for a broader indication and we may not be successful in our efforts to continue to successfully commercialize Feraheme in its current market, whichwould have a materially adverse effect on our results of operations and future business prospects. Sales in the current indication may be limited or may decrease if label changes require us to provide additional warnings and/or restrictions related toFeraheme's current or future indications or impose limitations or changes to the method of administering the drug, thereby giving rise to increasedcompetitive pressures if Feraheme is viewed as less safe than other IV iron products. Significant safety or drug interaction problems with respect to Feraheme,including an increase in the severity or frequency of known adverse events or the discovery of previously unknown adverse events, or the evaluation orreevaluation of data, including pharmacovigilance data, by the FDA, the European Medicines Agency ("EMA"), the competent authorities of the EuropeanUnion ("EU") Member States or other regulators, could result in lawsuits and increased regulatory scrutiny or a variety of adverse regulatory actions,including changes to the product label, the implementation of a REMS or any other enforcement actions. For example, the Committee for Medicinal Productsfor Human Use ("CHMP") recently issued opinions that, among other measures, Rienso be administered to patients by infusion over at least 15 minutes(replacing injection), that it be contraindicated in patients with any known history of drug allergy, that the label caution that elderly patients or patients withmultiple co-morbidities who experience a serious hypersensitivity reaction due to Rienso may have more severe outcomes, and that related variations to theSummary of Product Characteristics ("SmPC") be implemented. Similarly, in June 2014, we proposed changes to FDA related to our current U.S. label ofFeraheme based on a review of global post-marketing data to strengthen the warnings and precautions section of the label and mitigate the risk of serioushypersensitivity reactions, including anaphylaxis, in order to enhance patient safety. After considering our June 2014 submission and other information, inJanuary 2015, the FDA notified us that it believes new safety information should be included in the labeling for Feraheme, including, among other things, aboxed warning to highlight the risks of serious hypersensitivity/anaphylaxis reactions and revisions that Feraheme should only be administered through anIV infusion (i.e., not by IV injection) and should be contraindicated for patients with any known history of drug allergy. We plan to work with the FDA tofinalize an updated U.S. Feraheme label.50Table of ContentsThese or any future changes to the label/package could adversely impact our ability to successfully compete in the IV iron market and could have an adverseimpact on potential sales of Feraheme and our future business prospects. In addition, regulators may require us to conduct additional post-approval clinical trials or undertake other activities in order to maintain Feraheme'scurrent indication. For example, CHMP recommended that amendments be made to the Risk Management Plan, including a Post Authorization Safety Studyto be conducted to further characterize the risk of hypersensitivity with Rienso in patients with CKD and a non-clinical mechanistic study of hypersensitivityreactions. Pursuit of these or other studies are time-consuming and costly and the resulting data might not be as desired or expected, which could further limitthe market for Feraheme. Non-compliance with any recommendations or requirements from regulators could result in product recalls, restrictions on the product's permissible uses,changes to the product label, a negative impact on regulatory applications, suspension, variation or withdrawal of the marketing authorization for theproduct, or withdrawal of the product from the U.S. and/or foreign markets. Our business could be adversely affected if any such results occur. Moreover, 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 whommay be taking other medicines or have additional underlying health problems, which may require us to, among other things, provide additional warningsand/or restrictions on the label/package insert, including a boxed warning in the U.S. or similar warnings outside of the U.S., notify healthcare providers ofnew safety information, narrow our approved indications, change the rate or method of administration, alter or terminate current or future trials for additionaluses of Feraheme, or even remove Feraheme from the market, any of which could have a significant adverse impact on potential sales of Feraheme or requireus to expend significant additional funds. In the EU, Rienso is subject to additional monitoring by the EMA and the competent authorities of the EU MemberStates. In addition, if and as we conduct and complete other clinical trials for Feraheme, new safety issues may be identified, which could negatively impactour ability to successfully complete these studies and which could also negatively impact the use and/or regulatory status of Feraheme for the treatment ofIDA in patients with CKD. For additional details regarding these and other regulatory developments for Feraheme's current indication, please see the discussion under the heading"Feraheme for the treatment of IDA in patients with CKD—Overview" in Item 1. Business.We may never receive regulatory approval to market and sell Feraheme to the broader IDA patient population. As discussed above in Item 1. Business under the heading "Feraheme for the treatment of IDA in a broad range of patients—Overview", in January 2014,we received a complete response letter from the FDA informing us that our sNDA for the broad IDA indication could not be approved in its present form. Inthe letter, the FDA stated that we have not provided sufficient information to permit labeling of Feraheme for safe and effective use for the proposedindication. This decision by the FDA represents a significant set-back in our efforts to obtain U.S. approval for Feraheme for a broader indication as the issuesraised and information requested by the FDA may be costly and time-consuming to address and generate. Further, there is no guarantee that any efforts thatwe decide to undertake will meet the FDA's requirements, and we may not receive approval at all for Feraheme in a broader indication despite such efforts. Although we are continuing to work with the FDA, we may decide not to pursue regulatory approval for the broader indication. If we continue to pursueapproval in the U.S. for the commercial marketing and sale of Feraheme for the broad IDA indication, we will have to demonstrate, through the submission ofclinical study reports and data sets from one or more controlled clinical trials, that the benefit of Feraheme use in the proposed population would warrant therisks associated with Feraheme,51Table of Contentsincluding the potential for adverse events, including anaphylaxis, cardiovascular events, and death. The FDA has substantial discretion in the approvalprocess and may decide that the results of any such additional trials and the information we submit seeking approval in the broader patient population orother information reviewed, such as post-marketing safety data, including reports of serious anaphylaxis, cardiovascular events, and death, or any informationwe provide in response to FDA requests, are insufficient for approval or that Feraheme is not effective or safe for the proposed broader indication. We havesubmitted proposed protocols for a clinical study to the FDA for potential pursuit of the broader indication and are awaiting the FDA's feedback. There is noguarantee that the FDA will support any protocols we propose or determine that the results of any clinical trials we undertake of Feraheme for the treatment ofIDA in adult patients who have failed or could not tolerate oral iron will adequately support approval of Feraheme in this broader patient population, or anyof the individual subpopulations of IDA patients. If we do not obtain U.S. approval to market and sell Feraheme for the treatment of IDA in a broad range of patients, or if we experience additionalsignificant delays or setbacks in obtaining approval, or if we receive approval with significant restrictions, or are required to incur significant costs as post-marketing commitments, our cash position, our ability to increase revenues, our ability to leverage our product portfolio, our profitability, and the futureprospects of our business could be materially adversely affected. Efforts to pursue a broader indication could also have a negative impact on the commercialization of Feraheme in its current indication if informationsubmitted for purposes of the broader indication and any reevaluation of existing data, such as reports of serious anaphylaxis, cardiovascular events, anddeath, results in requirements to provide additional warnings and/or restrictions on our Feraheme label/package insert, change the rate or method ofadministration of Feraheme, notify healthcare providers of changes to the label/package insert, narrow the current indication, alter or terminate current orfuture trials for Feraheme or incur significant costs related to post-marketing requirements/commitments. Such adverse developments could put us at adisadvantage to our competitors and cause healthcare providers to choose to treat all of their IDA patients with competing IV irons based on the actual orperceived safety and efficacy of Feraheme in light of such activities.Market acceptance of Feraheme may suffer as a result of the widespread use of competing iron replacement therapy products, including Injectafer®, andas a result of the approval of generic drug products in the near-term, which would have a material adverse effect on our operations and our profitability. Market acceptance of Feraheme may suffer as a result of competing iron replacement therapy products, in part because most of these products have beenon the market longer and are currently widely used by physicians in the U.S. and abroad, and because certain of these products are approved for the treatmentof IDA in a broader group of patients. For example, in July 2013, Injectafer® was approved by the FDA for the treatment of IDA in adult patients who have anunsatisfactory response to oral iron or who have intolerance to oral iron, which is a broader indication than our current Feraheme indication. Injectafer® isapproved in the U.S. with a recommended dose of two slow injections or infusions of 750 milligrams each separated by at least seven days apart for a total of1,500 milligrams. Given potential label changes in the U.S., which could provide, among other changes, that Feraheme be administered to patients byinfusion over at least 15 minutes (replacing injection), Feraheme could lose a competitive advantage to Injectafer® and other IV irons. Further, we may notbe able to offer discounts, incentives or rebates to new or existing customers on terms as appealing as Injectafer® or other IV irons. Even if we continue toseek and eventually obtain labeling of Feraheme in a broader population, Injectafer® will have already been available for a considerable period of time.During this period, physicians may continue to increase their use of Injectafer®, new physicians may begin to use Injectafer®, and physicians will gainincreased familiarity with the product, making it more difficult for us to cause these physicians to use Feraheme in the future. In addition, manufacturers of52Table of ContentsInjectafer® may enter into commercial contracts with key customers or GPOs during this period, which could prevent or make it more difficult for Ferahemeto retain its existing customers, gain sales to new customers and gain market share in its existing indication with customers or GPOs, and may make entry intothe non-CKD market difficult if we were to continue to seek and receive approval for the broader patient population in the future. We face similar challengesoutside of the U.S., where our recent SmPC and label changes in the EU and Canada could cause Feraheme to lose market share to competitors such asFerinjectTM (the trade name of Injectafer® in the EU), causing Feraheme to be commercially unviable for us outside of the U.S. If we are not able todifferentiate Feraheme from other marketed IV iron products, including Injectafer®, or convince physicians and other customers of Feraheme's safe andeffective use, our ability to maintain a premium price, our ability to generate revenues and maintain profitability, our ability to pursue and support anycommercialization efforts outside the U.S., and our long-term business prospects could be adversely affected. Feraheme's ability to maintain its current market share, or gain wider market acceptance in the future, depends on a number of other factors, includingbut not limited to the following:•Our ability to demonstrate to healthcare providers, particularly hematologists, oncologists, hospitals, nephrologists, and others who maypurchase or prescribe Feraheme, the clinical efficacy and safety of Feraheme as an alternative to currently marketed IV iron products whichtreat IDA in CKD patients; •Our ability to convince physicians and other healthcare providers to use IV iron, and Feraheme in particular, rather than oral iron, which is thecurrent treatment of choice of most physicians for treating IDA in CKD patients; •The actual or perceived safety and efficacy profile of Feraheme as compared to alternative iron replacement therapeutic agents; •The relative price and level of reimbursement for Feraheme from payers, including government payers, such as Medicare and Medicaid, andprivate payers as compared to the price and level of reimbursement for alternative IV iron products; •The actual or perceived convenience and ease of administration of Feraheme as compared to alternative iron replacement therapeutic agents,including iron administered orally, in light of recent or potential changes to the methods of administration; •Our ability to execute on our contracting strategy and offer competitive discounts, rebates and other incentives, which can result in increasingthe rebates we are required to pay under the Medicaid Drug Rebate program and the discounts we are required to offer under the 340B drugpricing program; •Current and future limitations on the approved indications and patient populations for Feraheme; •The introduction of generic versions of ferumoxytol, which may occur in the near-term given the FDA's December 2012 draft guidancecontaining product-specific bioequivalence recommendations for drug products containing ferumoxytol; and •The effectiveness of our commercial organization and distribution networks in marketing, selling and supplying Feraheme.53 Table of Contents The key component of our U.S. commercialization strategy for Feraheme is to market and sell Feraheme for use in non-dialysis adult CKD patients. Thecurrent U.S. non-dialysis CKD market is comprised primarily of three sites of care where a substantial number of CKD patients are treated: hospitals,hematology and oncology centers, and nephrology clinics. Competition in these practices is intense and competitors such as Injectafer® are gaining marketshare, particularly in hematology practices. IV iron therapeutic products are not currently widely used by certain physicians who treat non-dialysis CKDpatients in the U.S., particularly nephrologists, due to safety concerns and the inconvenience and often impracticability of administering IV iron therapeuticproducts in their offices. It is often difficult to change physicians' existing treatment paradigms even when supportive clinical data are available. In addition,our ability to effectively market and sell Feraheme in the U.S. hospital market depends in part upon our ability to achieve acceptance of Feraheme ontohospital formularies. Since many hospitals and hematology, oncology and nephrology practices are members of GPOs, which leverage the purchasing powerof a group of entities to obtain discounts based on the collective bargaining power of the group, our ability to attract customers in these sites of care alsodepends in part on our ability to effectively promote Feraheme to and enter into pricing agreements with GPOs. The GPOs can also offer opportunities forcompetitors to Feraheme that provide the ability to quickly gain market share by offering a more attractive price or contracts and incentives that encouragethe members of the GPO to use or switch to the competing product. If we are not successful in capturing a significant share of the U.S. non-dialysis CKDmarket or if we are not successful in securing and maintaining formulary coverage for Feraheme, or if we cannot maintain strong relationships and offercompetitive contracts to key customers and GPOs, our profitability as well as our long-term business prospects could be adversely affected.We derive a substantial amount of our Feraheme revenue from a limited number of customers and the loss of one or more of these customers, a change intheir fee structure, or a decline in revenue from one or more of these customers could have an adverse impact on our results of operations and financialcondition. In the U.S., we sell Feraheme primarily to wholesalers and specialty distributors and therefore a significant portion of our revenues is generated by asmall number of customers. The loss of any of our customers, including if a customer views Feraheme as having a higher risk profile as compared to other IViron products, especially in light of recent regulatory developments, could have a materially adverse impact on our results of operations. Four customersaccounted for 81% of our total Feraheme revenues during the year ended December 31, 2014, and two customers accounted for 57% of our Ferahemeaccounts receivable balance as of December 31, 2014. We pay these wholesalers and specialty distributors a fee for the services that they provide to us.Because our business is concentrated with such a small number of wholesalers and specialty distributors, we could be forced to accept increases in their feesin order to maintain the current distribution networks through which Feraheme is sold. Any increase in fees could have a negative impact on our current andfuture sales of Feraheme in the U.S. and could have a negative impact on the reimbursement rate an individual physician, hospital or clinic would realizeupon using Feraheme. In addition, a significant portion of our U.S. Feraheme sales are generated through a small number of contracts with GPOs. For example, approximately26% of our Feraheme end-user demand during the year ended December 31, 2014 was generated by members of a single GPO with which we have contracted.As a result of the significant percentage of our end-user demand being generated by a single GPO, we may be at a disadvantage in future contract or pricenegotiations with such GPO and that GPO may be able to influence the demand for Feraheme from its members in a particular quarter throughcommunications they make to their customers. In addition, competitors of Feraheme may be able to quickly gain market share if they are able to offer GPOs amore attractive price or contracts and incentives that encourage the members of the GPO to use or switch to the competing product, especially if suchcompeting drug can be administered to a broader patient population. The loss of some or all of this demand to a competitor, a material reduction in salesvolume, or a significant54Table of Contentsadverse change in our relationship with any of our key wholesalers, distributors or GPOs could have a material adverse effect on our revenue and results ofoperations.We have no experience commercializing Feraheme outside of the U.S. and we may be unable to undertake such efforts or find a collaboration partner toundertake such efforts, and we may be unsuccessful even if such efforts are undertaken. Historically, Takeda Pharmaceutical Company Limited ("Takeda") had commercialized Feraheme in the EU, Canada and Switzerland (Feraheme ismarketed as Rienso outside of the U.S. and Canada), but we have agreed to terminate our license arrangement with Takeda and are in the process oftransitioning the product rights back to us, including the marketing authorizations for the EU and Canada. Sales of Feraheme outside of the U.S. do not andare not expected to materially contribute to our revenues even after we regain worldwide rights. For example, net sales of Rienso by Takeda in the EU wereless than $0.5 million in 2014. A number of considerations influence our analysis of our commercialization opportunities outside of the U.S., including(i) regulatory developments and the potential cost of post-approval clinical trial commitments and post-marketing obligations required by regulatoryauthorities outside of the U.S., (ii) the product's commercial viability (sales potential relative to the cost of maintaining the product on the market) in light ofthe current CKD label, the possible impact of future label changes, including any impact in the U.S., and the competitive landscape, and (iii) possibleapproaches in different geographies, which may include seeking a licensing or distribution partner or commercializing the product ourselves. Based on theseconsiderations, we have come to a mutual decision with Takeda to initiate withdrawal of the marketing authorization for Rienso in the EU and Switzerland.We are currently assessing the commercial opportunity for Feraheme in Canada. In order to continue commercialization efforts, we would have to assume thefull cost of any post-marketing obligations required by the ex-U.S. regulatory authorities, both currently and in the future, some of which might have beenTakeda's responsibility under a cost-sharing arrangement. Our U.S. sales could be negatively affected if patients or health-care providers in the U.S. perceivewithdrawal from other markets as being the result of safety or efficacy, rather than commercial, reasons. In the future, we may decide to seek to obtain a new marketing authorization for ferumoxytol in the EU, particularly if we generate additional clinicaldata to support potential approval in the broader IDA indication and we may decide to continue to pursue commercial efforts in Canada. If we do pursuecommercialization efforts outside of the U.S., we may not have the resources, or be able to find a suitable collaboration partner, to undertake such activitieson our behalf. If we choose to commercialize Feraheme outside of the U.S. ourselves, building the internal infrastructure would be costly and time-consuming, and may be distracting to management, and we may not be successful in our efforts. Our ability to commercialize Feraheme outside of the U.S. isalso dependent upon the successful transition of the product and related materials back to us and we are relying on Takeda to perform certain services andmake certain payments for our benefit in connection with such transition. If Takeda, for any reason, fails to provide such transition services or does not makethe expected payments, our ability to commercialize Feraheme outside of the U.S. will be significantly handicapped. In addition, and in light of thetermination of the Takeda licensing arrangement, recent or future changes to Feraheme's product label or product insert, withdrawal of the marketingauthorization and the Type II Variation for Rienso and the fact that Rienso is approved for a narrower patient population than many of its competitors in theEU, could negatively impact the product's commercial potential outside of the U.S., and may lead us to withdraw the product or marketing authorization inadditional geographics because it is not commercially viable. If we are not successful in commercializing or partnering, or choose not to commercialize,Feraheme outside of the U.S., our business may suffer, especially if we expend significant time and money pursuing such activities.55Table of ContentsRegulatory RisksIn the U.S. there have been, and we expect there will continue to be, a number of federal and state legislative initiatives implemented to reform thehealthcare system in ways that could adversely impact our business and our ability to sell our products 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 Healthcare Reform Act contains a number of provisions that significantly impact the pharmaceutical industry and maynegatively affect our business, including potential revenues. Changes that may affect our business include those governing enrollment in federal healthcareprograms, reimbursement changes, rules regarding prescription drug benefits under the health insurance exchanges, expansion of the 340B program, andfraud and abuse enforcement. For example, the percentage of Feraheme sold to 340B institutions has grown from 11% in 2011 to 17% in 2014. Since theseinstitutions are granted lower prices than those offered to our other customers, any further growth in our 340B business may have a negative impact on oursales price per gram and operating margins. These changes will impact existing government healthcare programs and will result in the development of newprograms, including Medicare payment for performance initiatives and improvements to the physician quality reporting system and feedback program.Substantial new provisions affecting compliance have also been added, which may require us to modify our business practices with healthcare providers andpotentially incur additional costs. While we are continuing to evaluate this legislation and its potential impact on our business, this legislation mayadversely affect the demand for Feraheme and Makena in the U.S. or cause us to incur additional expenses and therefore adversely affect our financialposition and results of operations. Please see our discussion above under the heading, "Pharmaceutical Pricing and Reimbursement" in Item 1. Business for amore detailed discussion of such changes. Further, although the Healthcare Reform Act exempts "orphan drugs," such as Makena, from 340B ceiling price requirements for the covered entity typesadded to the program by the Healthcare Reform Act, on July 21, 2014, the Health Resources and Services Administration ("HRSA"), which administers the340B program, issued an interpretive rule to implement the orphan drug exception which interprets the orphan drug exception narrowly. It exempts orphandrugs from the ceiling price requirements for the newly added covered entity types, namely certain free-standing cancer hospitals, critical access hospitals,rural referral centers and sole community hospitals, only when the orphan drug is used for its orphan indication. The newly added entities are entitled topurchase orphan drugs at the ceiling price when the orphan drug is not used for its orphan indication. A manufacturer trade group has filed a lawsuitchallenging the interpretive rule as inconsistent with the statutory language. That challenge remains ongoing. The uncertainty regarding how the statutoryorphan drug exception will be applied will increase the complexity of compliance, will make compliance more time-consuming, and could negatively impactour results of operations. If HRSA's narrow interpretation of the scope of the orphan drug exemption prevails, it could potentially negatively impact the pricewe are paid for our Makena product by certain entities and increase the complexity of compliance with the 340B program. In order to be eligible to have our products paid for with federal funds under the Medicaid and Medicare Part B programs and purchased by certainfederal agencies and grantees, we participate in the Department of Veterans Affairs ("VA") Federal Supply Schedule ("FSS") pricing program. To participate,we are required to enter into an FSS contract with the VA, under which we must make our innovator "covered drugs" available to the "Big Four" federalagencies—the VA, the Department of Defense, or DoD, the Public Health Service, and the Coast Guard—at pricing that is capped pursuant to a statutoryfederal ceiling price ("FCP") formula set forth in Section 603 of the Veterans Health Care Act of 1992 ("VHCA"). The FCP is based on a weighted non-federalaverage manufacturer price, or Non-FAMP, which manufacturers are required to report on a quarterly and annual basis to the VA. In addition, pursuant toregulations issued by the DoD TRICARE Management Activity, now the Defense Health Agency, to implement Section 703 of the National DefenseAuthorization Act for56Table of ContentsFiscal Year 2008, we are required to pay quarterly rebates on covered drug prescriptions dispensed to TRICARE beneficiaries by TRICARE network retailpharmacies. The formula for determining the rebate is established in the regulations and is based on the difference between the annual Non-FAMP and theFCP (as described above, these price points are required to be calculated by us under the VHCA). If we overcharge the government in connection with our FSS contract or underpay our TRICARE rebates, whether due to a misstated FCP or otherwise,we are required to refund the difference to the government. Failure to make necessary disclosures and/or to identify contract overcharges can result inallegations against us under the False Claims Act ("FCA") and other laws and regulations. Unexpected refunds to the government, and responding to agovernment investigation or enforcement action, would be expensive and time-consuming, and could have a material adverse effect on our business,financial condition, results of operations and growth prospects. We expect that the Healthcare Reform Act, as currently enacted or as it may be amended in the future, and other healthcare reform measures that may beadopted in the future, could have a material adverse effect on our industry generally and on our ability to maintain or increase our product sales. 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 or any future legislationor regulation will have on us. We expect that there will continue to be a number of U.S. federal and state proposals to implement governmental pricingcontrols and limit the growth of healthcare costs. These efforts could adversely affect our business by, among other things, limiting the prices that can becharged for our products or the amount of reimbursement rates and terms available from governmental agencies or third-party payers, limiting theprofitability of our products, increasing our rebate liability or limiting the commercial opportunities for our products, including its acceptance by healthcarepayers.If our products are marketed or distributed in a manner that violates federal, state or foreign healthcare fraud and abuse laws, marketing disclosure lawsor 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, our general operations, and the research, development, manufacture, saleand marketing of our products, are subject to extensive additional federal, state and foreign healthcare regulation, including the FCA, the Federal Anti-Kickback Statute, the Foreign Corrupt Practices Act, and their state analogues, and similar laws in countries outside of the U.S., laws, such as the U.K. BriberyAct of 2010 and governing sampling and distribution of products, and government price reporting laws as discussed above in Item 1. Business under theheading "Government Regulation—Fraud and Abuse Regulation." Our activities relating to the sale and marketing of our products may be subject to scrutiny under these laws and private individuals have been active inbringing lawsuits on behalf of the government under the FCA and similar regulations in other countries. We have developed and implemented a corporatecompliance program based on what we believe are current best practices in the pharmaceutical industry; however, these laws are broad in scope and there maynot be regulations, guidance or court decisions that definitively interpret these laws in the context of particular industry practices. We cannot guarantee thatwe, our employees, our consultants or our contractors are or will be in compliance with all federal, state and foreign regulations. If we or our representativesfail to comply with any of these laws or regulations, a range of fines, penalties and/or other sanctions could be imposed on us, including, but not limited to,restrictions on how we market and sell our products, significant fines, exclusions from government healthcare programs, including Medicare and Medicaid,litigation, or other sanctions. Even if we are not determined to have violated these laws, government investigations into these issues typically require theexpenditure of significant resources and generate negative publicity, which could also have an adverse effect on our business, financial condition and57Table of Contentsresults of operations. Such investigations or suits may also result in related shareholder lawsuits, which can also have an adverse effect on our business. Further, the FDA and other regulatory agencies strictly regulate the promotional claims that may be made about prescription products. In particular, aproduct may not be promoted for uses that are not approved by the FDA as reflected in the product's approved labeling. For drug products like Makena thatare approved by the FDA under the FDA's accelerated approval regulations, unless otherwise informed by the FDA, the sponsor must submit promotionalmaterials at least 30 days prior to the intended time of initial dissemination of the promotional materials, which delays and may negatively impact ourcommercial team's ability to implement changes to Makena's marketing materials, thereby negatively impacting revenues. Moreover, under Subpart H, theFDA may also withdraw approval of Makena if, among other things, the promotional materials are false or misleading, or other evidence demonstrates thatMakena is not shown to be safe or effective under its conditions of use. The U.S. government has levied large civil and criminal fines against companies for alleged improper promotion and has enjoined several companiesfrom engaging in off-label promotion. The government has also required companies to enter into complex corporate integrity agreements and/or non-prosecution agreements that can impose significant restrictions and other burdens on the affected companies. If we are found to have promoted such off-labeluses, we may become subject to similar consequences. 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, andother activities. In addition, as part of the Healthcare Reform Act, manufacturers of drugs are required to publicly report gifts and other payments or transfersof value made to U.S. physicians and teaching hospitals. Several states have also adopted laws that prohibit certain marketing-related activities, including theprovision of gifts, meals or other items to certain healthcare providers. Many of these requirements are new and uncertain, and the likely extent of penaltiesfor failure to comply with these requirements is unclear; however, compliance with these laws is difficult, time consuming and costly, and if we are found tonot be in full compliance with these laws, we may face enforcement actions, fines and other penalties, and we could receive adverse publicity which couldhave 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 regulatory actions thatcould adversely affect our ability to commercialize our products, harm or prevent sales of our products, or substantially increase the costs and expenses ofcommercializing and marketing our products, all of which could have a material adverse effect on our business, financial condition and results of operations. In addition, incentives exist under applicable U.S. law that encourage employees and physicians to report violations of rules governing promotionalactivities for pharmaceutical products. These incentives could lead to so-called whistleblower lawsuits as part of which such persons seek to collect a portionof moneys allegedly overbilled to government agencies as a result of, for example, promotion of pharmaceutical products beyond labeled claims. Suchlawsuits, whether with or without merit, are typically time-consuming and costly to defend. Such suits may also result in related shareholder lawsuits, whichare also costly to defend.58Table of ContentsIf we fail to comply with our reporting and payment obligations under U.S. governmental pricing programs, we could be required to reimburse governmentprograms for underpayments and could pay penalties, sanctions and fines which could have a material adverse effect on our business, financial conditionand results of operations. As a condition of reimbursement by various U.S. federal and state healthcare programs, we are required to calculate and report certain pricing informationto U.S. federal and state healthcare agencies. For example, we participate in and have certain price reporting obligations to the Medicaid Drug Rebateprogram, and we have obligations to report average sales price ("ASP") for the Medicare program. Under the Medicaid Drug Rebate program, we are requiredto pay a rebate to each state Medicaid program for our covered outpatient drugs that are dispensed to Medicaid beneficiaries and paid for by a state Medicaidprogram as a condition of having federal funds being made available to the states for our drugs under Medicaid and Medicare Part B. Those rebates are basedon pricing data reported by us on a monthly and quarterly basis to the Centers for Medicare and Medicaid Services ("CMS"), the federal agency thatadministers the Medicare and Medicaid programs. These data include the average manufacturer price and, in the case of innovator products such as Ferahemeand Makena, the best price for each drug. The Medicaid rebate amount is computed each quarter based on our submission to CMS of our current average manufacturer prices and best prices for thequarter. If we become aware that our reporting for a prior quarter was incorrect, or has changed as a result of recalculation of the pricing data, we are obligatedto resubmit the corrected data for a period not to exceed 12 quarters from the quarter in which the data originally were due. Such restatements andrecalculations increase our costs for complying with the laws and regulations governing the Medicaid program. Any corrections to our rebate calculationscould result in an overage or underage in our rebate liability for past quarters, depending on the nature of the correction. Price recalculations also may affectthe 340B "ceiling price." The 340B pricing program requires participating manufacturers to agree to charge statutorily defined covered entities, such assafety-net providers, no more than the 340B ceiling price for the manufacturer's covered outpatient drugs. The 340B ceiling price is calculated using astatutory formula, which is based on the average manufacturer price and rebate amount for the covered outpatient drug as calculated under the Medicaid DrugRebate program. Federal law also requires that a company that participates in the Medicaid program report ASP information to CMS for certain categories of drugs that arepaid under Part B of the Medicare program, such as Feraheme and Makena. This ASP information forms the basis for reimbursement for the majority of ourcurrent Feraheme business, and to a lesser extent, for the Makena business. Manufacturers calculate ASP based on a statutorily defined formula andinterpretations of the statute by CMS as to what should or should not be considered in computing ASP. An ASP for each National Drug Code for a productthat is subject to the ASP reporting requirement must be submitted to CMS no later than 30 days after the end of each calendar quarter. CMS uses thesesubmissions to determine payment rates for drugs under Medicare Part B. Changes affecting the calculation of ASP could affect the ASP calculations for ourproducts and the resulting Medicare payment rate, and could negatively impact our results of operations. Price reporting and payment obligations are highly complex and vary among products and programs. The calculations are complex and are often subjectto interpretation by us, governmental or regulatory agencies and the courts. The calculations of average manufacturer price, best price, and ASP include anumber of inputs from our contracts with wholesalers, specialty distributors, GPOs and other customers. The calculations also require us to make anassessment of whether these agreements are deemed to be for bona fide services and whether the fees we pay for any bona fide services represent fair marketvalue in our industry and for our products. These calculations are very complex and could involve the need for us to unbundle or reallocate discounts orrebates offered over multiple quarters or across multiple products. Our processes for estimating amounts due under these governmental pricing59Table of Contentsprograms involve subjective decisions and estimates. For example, almost half of Makena sales are reimbursed through state Medicaid programs and aresubject to the statutory Medicaid rebate, and in some cases, supplemental rebates offered by us. Often, state Medicaid programs may be slow to invoicepharmaceutical companies for these rebates resulting in a significant lag between the time a sale is recorded and the time the rebate is paid. This results in ushaving to carry a significant liability on our balance sheet for the estimate of rebate claims expected for Medicaid patients. If actual claims are higher thancurrent estimates, our financial position and results of operations could be adversely affected. The unbundling of discounts and rebates across multiplereporting periods can also result in a restatement of government price reports and changes to the reimbursement rates for various customers covered underfederal programs, such as Medicare, Medicaid or the 340B program. If we have to restate our calculation of government price reports, we may be forced to refund certain monies back to payers to comply with federal pricingagreements. Such a restatement of our government price reports would also adversely impact our reported financial results of operations in the period of suchrestatement. As a result, our price reporting calculations remain subject to the risk of errors and our methodologies for calculating these prices could bechallenged under the FCA or other laws. In addition, the Healthcare Reform Act modified the rules related to certain price reports, among other things.Presently, uncertainty exists as many of the specific determinations necessary to implement this new legislation have yet to be decided and communicated toindustry participants. This uncertainty in the interpretation of the legislation increases the chances of an error in price reporting, which could in turn lead to alegal challenge, restatement or investigation. If we become subject to investigations, restatements, or other inquiries concerning our compliance with pricereporting laws and regulations, we could be required to pay or be subject to additional reimbursements, penalties, sanctions or fines, which could have amaterial adverse effect on our business, financial condition and results of operations. We are liable for errors associated with our submission of pricing data. In addition to retroactive adjustments to rebate amounts and the potential for340B program refunds, if we are found to have knowingly submitted false average manufacturer price, average sales price, or best price information to thegovernment, we may be liable for civil monetary penalties in the amount of $100,000 per item of false information. If we are found to have made amisrepresentation in the reporting of our ASP, the Medicare statute provides for civil monetary penalties of up to $10,000 for each misrepresentation for eachday in which the misrepresentation was applied. Our failure to submit monthly/quarterly average manufacturer price, average sales price, and best price dataon a timely basis could result in a civil monetary penalty of $10,000 per day for each day the information is late beyond the due date. Such failure also couldbe grounds for CMS to terminate our Medicaid drug rebate agreement, pursuant to which we participate in the Medicaid Drug Rebate program. In the eventthat CMS terminates our rebate agreement, federal payments may not be available under Medicaid or Medicare Part B for our covered outpatient drugs. If we overcharge the government, we are required to refund the difference to the government. Failure to make necessary disclosures and/or to identifycontract overcharges can result in allegations against us under the FCA and other laws and regulations. Unexpected refunds to the government, andresponding to a government investigation or enforcement action, would be expensive and time-consuming, and could have a material adverse effect on ourbusiness, financial condition, results of operations and growth prospects.60 Table of ContentsWe are subject to ongoing U.S. and foreign regulatory obligations and oversight of our products, 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 of our respectiveproducts, the incurrence of significant additional expense and other limitations on our ability to commercialize our respective products. We are subject to ongoing regulatory requirements and review, including by periodic audits, both in the U.S. and in foreign jurisdictions pertaining tothe development, manufacture, labeling, packaging, adverse event reporting, distribution, storage, marketing, promotion, record keeping and export of ourrespective products. Failure to comply with such regulatory requirements or the later discovery of previously unknown problems with our products or ourthird-party contract manufacturing facilities or processes by which we manufacture our products may result in restrictions on our ability to manufacture,market, distribute or sell our products, including potential withdrawal from the market. Any such restrictions could result in a decrease in our product sales,damage to our reputation or the initiation of lawsuits against us and/or our third-party contract manufacturers. We may also be subject to additionalsanctions, including but not limited to:•Warning letters; •Civil or criminal penalties; •Variation, suspension or withdrawal of regulatory approvals; •Changes to the package insert of our products, such as additional warnings regarding potential side effects or potential limitations on thecurrent dosage and administration; •Requirements to communicate with physicians and other customers about concerns related to actual or potential safety, efficacy, or otherissues involving our products; •Implementation of risk mitigation programs and post-marketing obligations; •Restrictions on our continued manufacturing, marketing, distribution or sale of our products; •Temporary or permanent closing of the facilities of our third-party contract manufacturers; •Interruption of clinical trials; 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 revenue generation and profitability and cause us to incur significant additionalexpenses. Additionally, Lumara Health, as our wholly owned subsidiary following consummation of the acquisition, is subject to certain continuing obligationsunder a Consent Decree of Permanent Injunction ("Consent Decree") between the FDA, Lumara Health's predecessor company, K-V Pharmaceutical Company("K-V Pharmaceutical") and certain former officers and affiliates of K-V Pharmaceutical. In particular, Lumara Health is bound by a number of provisions andrequirements in the Consent Decree including, but not limited to, inspection of Lumara Health's places of business by the FDA without prior notice, andnotification of FDA of particular actions and events. If Lumara Health fails to comply with applicable provisions in the Consent Decree, the FDC, or theFDC's implementing regulations, the FDA may impose specific sanctions including, but not limited to, the requirement to cease any of Lumara Health'smanufacturing operations, the imposition of substantial financial penalties and the requirement to implement additional corrective actions.61Table of ContentsRegulators could determine that our clinical trials and/or our manufacturing processes, or those of our third parties, were not properly designed or are notproperly operated, which could cause significant costs or setbacks for our commercialization activities. We are obligated to conduct, and are in the process of conducting, certain post-approval clinical trials, and we may be required to conduct additionalclinical trials, including if we pursue approval of additional indications, seek commercialization in other jurisdictions, or in support of our currentindications. We may also determine to conduct additional clinical trials, including if we pursue new formulations or methods of administration for ourproducts. The FDA could determine that our clinical trials and/or our manufacturing processes were not properly designed, did not include enough patients orappropriate administration, were not conducted in accordance with applicable laws and regulations, or were otherwise not properly managed. In addition,according to current good clinical practices regulations ("cGCP") we are responsible for conducting, recording and reporting the results of clinical trials toensure that the data and results are credible and accurate and that the trial participants are adequately protected. The FDA may conduct inspections of clinicalinvestigator sites which are involved in our clinical development programs to ensure their compliance with cGCP regulations. If the FDA determines that we,our CROs or our study sites fail to comply with applicable cGCP regulations, the clinical data generated in our clinical trials may be deemed unreliable andthe FDA may disqualify certain data generated from those sites or require us to perform additional clinical trials. Our clinical trials and manufacturingprocesses are subject to similar risks and uncertainties outside of the U.S. Any such deficiency in the design, implementation or oversight of our clinicaldevelopment programs or post-approval clinical studies could cause us to incur significant additional costs, experience further delays or prevent us fromcommercializing Makena and Feraheme in their current indications, or obtaining marketing approval for additional indications, including the approval foruse of Feraheme for the broad IDA indication, if such approval is pursued. Further, our third-party contract manufacturing facilities are subject to cGMP regulations enforced by the FDA and equivalent foreign regulations andregulatory agencies through periodic inspections to confirm such compliance. Contract manufacturers must continually expend time, money and effort inproduction, record-keeping and quality assurance and control to ensure that these manufacturing facilities meet applicable regulatory requirements. Failureto maintain ongoing compliance with cGMP or similar foreign regulations and other applicable manufacturing requirements of various U.S. or foreignregulatory agencies could result in, among other things, the issuance of warning letters, fines, the withdrawal or recall of our products from the marketplace,total or partial suspension of product production, the loss of inventory, suspension of the review of our current or future sNDAs or equivalent foreign filings,enforcement actions, injunctions or criminal prosecution and suspension of manufacturing authorizations. A government-mandated recall or a voluntaryrecall could divert managerial and financial resources, could be difficult and costly to correct, could result in the suspension of sales of our products andcould have a severe adverse impact on our profitability and the future prospects of our business. If any regulatory agency inspects any of these manufacturingfacilities and determines that they are not in compliance with cGMP or similar regulations or our contract manufacturers otherwise determine that they are notin compliance with these regulations, as applicable, such contract manufacturers could experience an inability to manufacture sufficient quantities of productto meet demand or incur unanticipated compliance expenditures. We have also established certain testing and release specifications with the FDA and other foreign regulatory agencies. This release testing must beperformed in order to allow finished product to be used for commercial sale. If a finished product does not meet these release specifications or if the releasetesting is variable, we may not be able to supply product to meet our projected demand. We monitor annual batches of our finished product for ongoingstability after it has been released for commercial sale. If a particular batch of finished drug product exhibits variations in its stability or begins to generatetest results that demonstrate an adverse trend against our specifications, we may62Table of Contentsneed to conduct an investigation into the test results, quarantine the product to prevent further use, destroy existing inventory no longer acceptable forcommercial sale, or recall the batch or batches. If we are unable to develop, validate, transfer or gain regulatory approval for the new release test, our ability tosupply product to the EU will be adversely affected. Such setbacks could have an adverse impact on our revenues, our profitability and the future prospects ofour business.Risks Related to Our Business GenerallyWith our acquisition of Lumara Health we have significantly expanded the size of our organization and we may experience difficulties in managing this orfuture expansion. With the acquisition of Lumara Health, we increased our headcount by 108 full time employees. Management, personnel, systems and facilities that wecurrently have in place may not be adequate to support this recent growth, and we may not be able to retain or recruit qualified personnel in the future in thiscompetitive environment to adequately support our new organization. To manage any future growth effectively, we may be required to continue to manageand expand the sales and marketing efforts for our existing products while continuing to identify and acquire attractive additions to our product portfolio,enhance our operational, financial and management controls, reporting systems and procedures and establish and increase our access to commercial suppliesof our products, which will be challenging and for which we might not be successful, especially given our newly-expanded organization. We will be requiredto expand and maintain our facilities and equipment and manage our internal development efforts effectively while complying with our contractualobligations to licensors, licensees, contractors, collaborators, distributors and other third parties. In addition, management may have to divert adisproportionate amount of its attention away from day-to-day activities and towards managing these growth activities, which could be disruptive to ourbusiness. Our future financial performance and our ability to execute on our business plan will depend, in part, on our ability to effectively manage our recentand any future growth. If we experience difficulties or are unsuccessful in managing our expansion, our results of operations and business prospects will benegatively impacted.Our level of indebtedness and the terms of the Term Loan Facility (including the financial covenants) and Convertible Notes could adversely affect ouroperations and limit our ability to plan for or respond to changes in our business or acquire additional products for our portfolio. If we are unable tocomply with restrictions in the Term Loan Facility or cannot repay or refinance the Convertible Notes, the indebtedness under the Term Loan Facilitycould be accelerated. We entered into the Term Loan Facility, which provided us with $340.0 million to finance our acquisition of Lumara Health. We also incurredsignificant indebtedness in the amount of $200.0 million in aggregate principal with additional accrued interest under our Convertible Notes (as definedbelow). Our level of indebtedness could adversely affect our business by, among other things:•requiring us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing theavailability of our cash flow for other purposes, including further diversification of our product portfolio and expansion of sales of Ferahemein the current or broader indications; •limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate, thereby placing us at acompetitive disadvantage compared to our competitors that may have less debt; and •increasing our vulnerability to adverse economic and industry conditions. Our ability to make scheduled payments of the principal of, to pay interest on or to refinance our indebtedness, including the Term Loan Facility and theConvertible Notes, depends on our future63Table of Contentsperformance, which is subject to economic, financial, competitive and other factors that may be beyond our control. Our business may not generate cash flowfrom operations in the future sufficient to service our debt and support our growth strategies. If we are unable to generate such cash flow, we may be requiredto adopt one or more alternatives, such as selling assets, restructuring debt or obtaining additional equity capital on terms that may be onerous or highlydilutive. Our ability to refinance our indebtedness will depend on the capital markets and our financial condition at such time. We may not be able to engagein any of these activities or engage in these activities on desirable terms, which could result in a default on our debt obligations, including under the TermLoan Facility or the Convertible Notes. The Term Loan Facility requires us to make certain payments of principal and interest over time and contains a number of other restrictive covenants,including a financial covenant based on the total amount of debt we have as a multiple of our cash flow, as defined in the Facility, and a requirement that wereduce our indebtedness over time. The Term Loan Facility also contains covenants and terms limiting our ability to enter into new acquisitions, licenses,mergers, foreign investments, to take on new debt and sell assets, and requiring us to pay penalties in the event we want to prepay the Term Loan Facilityearly. The maturity date of the Term Loan Facility could also be accelerated in certain circumstances, including if we are not able to repay or refinance ourConvertible Notes or in the event of an uncured event of default as outlined in the Term Loan Facility. The Term Loan Facility has a floating interest ratebased on the prevailing London Interbank Offered Rate ("LIBOR") rate, making interest payments subject to adjustment depending on the interest rateenvironment. These and other terms in the Term Loan Facility have to be monitored closely for compliance and could restrict our ability to grow our businessor enter into transactions that we believe will be beneficial to our business. Further, holders of the Convertible Notes have the right to require us to repurchase their notes upon the occurrence of a fundamental change at arepurchase price equal to 100% of the principal amount of the notes to be repurchased, plus accrued and unpaid interest. Upon conversion of the ConvertibleNotes (which are currently convertible), unless we elect to deliver solely shares of our common stock to settle such conversion (other than paying cash in lieuof delivering any fractional share), we will be required to make cash payments in respect of the notes being converted. We may not have enough availablecash or be able to obtain financing at the time we are required to make repurchases of Convertible Notes surrendered therefor or at the time Convertible Notesare being converted. Our failure to repurchase Convertible Notes at a time when the repurchase is required by the indenture or to pay any cash payable onfuture conversions of the Convertible Notes would constitute an event of default. If the repayment of any indebtedness were to be accelerated because of suchevent of default (whether under the Convertible Notes, our Term Loan Facility or otherwise), we may not have sufficient funds to repay the indebtedness andrepurchase the Convertible Notes or make cash payments upon conversions thereof. Moreover, if our stock price increases, the parties with whom we enteredinto warrant transactions in connection with the pricing of the Convertible Notes (the "Warrants") could exercise such warrants, thereby causing substantialdilution to our stockholders. We cannot make any assurances that our future operating results will be sufficient to ensure compliance with the covenants in these arrangements or toremedy any such default. In the event of an acceleration of this indebtedness, we may not have or be able to obtain sufficient funds to make any acceleratedpayments. Any of the factors discussed above could materially and adversely affect our business, financial condition and results of operations. In addition, ifwe incur additional indebtedness, the risks related to our business and our ability to service or repay our indebtedness would increase.64Table of ContentsWe may need additional capital to achieve our business objectives and to service our debt obligations, including the Term Loan Facility, our ConvertibleNotes and contingent payments that may become due under the Lumara Agreement, which could cause significant dilution to our stockholders. We estimate that our cash resources as of December 31, 2014, combined with cash we currently expect to receive from product sales and earnings on ourinvestments will be sufficient to finance our currently planned operations for at least the next 12 months. We may require additional funds or need toestablish additional alternative strategic arrangements to execute a business development transaction. We may at any time seek funding through additionalarrangements with collaborators through public or private equity or debt financings, subject to the covenants in our Term Loan Facility. We may not be ableto obtain financing or to secure alternative strategic arrangements on acceptable terms or within an acceptable timeframe, if at all, which would limit ourability to execute on our strategic plan. Moreover, the condition of the credit markets can be unpredictable and we may experience a reduction in value orloss of liquidity with respect to our investments, which would put further strain on our cash resources. Further, in November 2014, we completed the acquisition of Lumara Health, which required us to pay $600.0 in upfront cash consideration andapproximately 3.2 million shares of newly issued common stock. We used a combination of cash on hand and the $340.0 million Term Loan Facility to paythe upfront cash consideration. In addition to the consideration paid at closing, our definitive merger agreement with Lumara Health (the "LumaraAgreement") provides for contingent consideration of up to an additional $350.0 million based on the achievement of various sales milestones for Makena,which could be paid in all cash. We also incurred substantial costs and expenses associated with the transaction. As a result, our current level of cash on handmay limit our ability to take advantage of attractive business development opportunities and execute on our strategic plan. In addition, our cash on hand maynot be sufficient to service the principal and interest payments under the Term Loan Facility, our existing Convertible Notes or any cash milestone paymentsto the former Lumara Health security holders upon the achievement of sales milestones. Our ability to make these required payments could be adverselyaffected if we do not achieve expected revenue and cash flow forecasts or if we are unable to find other sources of cash in the future. If we therefore need topay the former Lumara Health security holders in stock upon the achievement of sales milestones, it will result in dilution to our stockholders. Our long-term capital requirements will depend on many other factors, including, but not limited to the commercial success of our products and effortswe make in connection with commercialization and development, our ability to realize synergies and opportunities in connection with our acquisitions andportfolio expansion, the outcome of and costs associated with any material litigation or patent challenges to which we are or may become a party, the timingand magnitude of costs associated with qualifying additional manufacturing capacities and alternative suppliers, and our ability to raise additional capital onterms and within a timeframe acceptable to us, if necessary. The $200.0 million of 2.5% convertible senior notes due February 15, 2019 (the "Convertible Notes") are, the Warrants may be, and any additionalequity or equity-linked financings or alternative strategic arrangements would be, dilutive to our stockholders. In addition, the terms of our current debtinstruments or any additional debt financing could greatly restrict our ability to raise additional capital and may provide rights and preferences to theinvestors in any such financing which are senior to those of, and not available to, current stockholders, impose restrictions on our day-to-day operations orplace limitations on our ability to enter into combination transactions with other entities. Our inability to raise additional capital on terms and within atimeframe acceptable to us when needed could force us to dramatically reduce our expenses and delay, scale back or eliminate certain of our activities andoperations, including our commercialization and development activities, any of which would have a material adverse effect on our business, financialcondition and future business prospects.65Table of ContentsOur ability to use net operating loss carryforwards and tax credit carryforwards is dependent on generating future taxable income and may be limited,including as a result of future 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 operating lossand tax credit carryforwards for taxable years including or following such "ownership change" by allowing us to utilize only a portion of the net operatinglosses and tax credits that would otherwise be available but for such ownership change. Limitations imposed on the ability to use net operating losses and taxcredits to offset future taxable income or the failure to generate sufficient taxable income could require us to pay more U.S. federal income taxes than we haveestimated and could cause such net operating losses and tax credits to expire unused, in each case reducing or eliminating the benefit of such net operatinglosses and tax credits and potentially adversely affecting our financial position, including our after-tax net income. Similar rules and limitations may applyfor state income tax purposes. In September 2014, we adopted an amendment to our shareholder rights plan to help preserve our tax assets by deterring certain stockholders fromincreasing their percentage ownership in our stock; however, such amendment is merely a deterrent that does not actually prevent Section 382 ownershiplimitations and there can be no assurance that we will not undergo an ownership change. Even minor accumulations by certain of our stockholders couldresult in triggering an ownership change under Section 382. If such an ownership change were to occur, we expect that our net operating losses could becomelimited; however, the amount of the limitation would depend on a number of factors including our market value at the time of the ownership change. For adiscussion of the amendment to our shareholder rights plan, see the discussion in Note O, "Stockholders' Equity," to our consolidated financial statementsincluded in this Annual Report on Form 10-K. In addition, we have recorded deferred tax assets based on our assessment that we will be able to realize the benefits of our net operating losses and otherfavorable tax attributes. Realization of deferred tax assets involve significant judgments and estimates which are subject to change and ultimately dependson generating sufficient taxable income of the appropriate character during the appropriate periods. Changes in circumstances may affect the likelihood ofsuch realization, which in turn may trigger a write-down of our deferred tax assets, the amount of which would depend on a number of factors. A write-downwould reduce our reported net income, which may adversely impact our financial condition or results of operations or cash flows. In addition, we arepotentially subject to ongoing and periodic tax examinations and audits in various jurisdictions, including with respect to the amount of our net operatinglosses and any limitation thereon. An adjustment to such net operating loss carryforwards, including an adjustment from a taxing authority, could result inhigher tax costs, penalties and interest, thereby adversely impacting our financial condition, results of operations or cash flows.An adverse determination in any current or future lawsuits in which we are a defendant could have a material adverse effect on us. The administration of our products to, or the use of our products by, humans may expose us to liability claims, whether or not our products are actually atfault for causing an injury. As Feraheme is used over longer periods of time by a wider group of patients taking numerous other medicines or by patients withadditional underlying health problems, the likelihood of adverse drug reactions or unintended side effects, including death, may increase. While theseadverse events are rare, all66Table of ContentsIV irons, including Feraheme, can cause patients to experience serious hypersensitivity reactions, including anaphylactic-type reactions, some of which havebeen life-threatening and/or fatal. Makena is a prescription hormone medicine (progestin) used to lower the risk of preterm birth in women who are pregnantand who have previously delivered preterm in the past. It is not known if Makena is safe and effective in women who have other risk factors for preterm birth.In one clinical study, certain complications or events associated with pregnancy occurred more often in women who received Makena. These includedmiscarriage (pregnancy loss before 20 weeks of pregnancy), hospital admission for preterm labor, preeclampsia, gestational hypertension and gestationaldiabetes. In addition, other hormones administered during pregnancy have in the past been shown to cross the placenta and have negative effects on theoffspring. Although we maintain product liability insurance coverage for claims arising from the use of our products in clinical trials and commercial use,coverage is expensive, and we may not be able to maintain sufficient insurance at a reasonable cost, if at all. Product liability claims, whether or not theyhave merit, could also decrease demand for our products, subject us to product recalls or harm our reputation, cause us to incur substantial costs, and divertmanagement's time and attention. As discussed below in Item 3. Legal Proceedings, we were the target of a purported class action complaint filed in March 2010 entitled SilverstrandInvestments et. al. v. AMAG Pharm., Inc., et. al., which alleged certain securities laws violations. Although we settled the Silverstrand case in January 2015,we may also be the target of claims asserting violations of securities and fraud and abuse laws and derivative actions or other litigation in the future. Anyfuture litigation could result in substantial costs and divert our management's attention and resources, which could cause serious harm to our business,operating results and financial condition. Further, we may not be successful in defending ourselves in the litigation and, as a result, our business could bematerially harmed. These lawsuits may result in large judgments or settlements against us, any of which could have a negative effect on our financialcondition and business if in excess of our insurance coverage. Though we maintain liability insurance, if any costs or expenses associated with litigationexceed our insurance coverage, we may be forced to bear some or all of these costs and expenses directly, which could be substantial.Our success depends on our ability to attract and retain key employees, and any failure to do so may be disruptive to our operations. We are a pharmaceutical company focused on marketing commercial products and we plan to expand our product portfolio with additional commercial-stage products through acquisitions and in-licensing; thus, the range of skills of our executive officers needs to be broad and deep. If we are not able to hireand retain talent to drive commercialization and expansion of our product portfolio, we will be unlikely to be profitable. For example, in October 2014, ourSenior Vice President and Chief Development and Regulatory Officer resigned from the Company to pursue other opportunities, which may be disruptive toour regulatory discussions with the FDA or other regulators. Further, because of the specialized nature of our business, our success depends to a significantextent on our ability to continue to attract, retain and motivate qualified sales, technical operations, managerial, scientific, regulatory compliance andmedical personnel of all levels. The loss of key personnel or our inability to hire and retain personnel who have such sales, technical operations, managerial,scientific, regulatory compliance and medical backgrounds could materially adversely affect our research and development efforts and our business.Our operating results will likely fluctuate, including as a result of wholesaler, distributor and customer buying patterns, so you should not rely on theresults 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, including the factors described in these RiskFactors, many of which we cannot control, as well as the timing and magnitude of:•The timing and magnitude of product revenues; •The loss of a key customer or GPO;67Table of Contents•Costs and liabilities incurred in connection with business development activities or business development transactions into which we mayenter; •Costs associated with the commercialization of our products in the U.S., including costs associated with pursuing a broader indication ofFeraheme or the Makena lifecycle management program; •Makena milestone payments we may be required to pay to the former shareholders of Lumara Health pursuant to the Lumara Agreement; •The timing and magnitude of tax payments and of principal and interest payments in connection with the Term Loan Facility and ourConvertible Notes; •Costs associated with the manufacture of our products, including costs of raw and other materials and costs associated with maintainingcommercial inventory and qualifying additional manufacturing capacities and alternative suppliers; •The recognition of deferred tax assets during periods in which we generate taxable income and our ability to preserve our net operating losscarryforwards and other tax assets; •Costs associated with our ongoing and planned clinical studies of Feraheme in connection with our pediatric program, our current or futurepost-marketing commitments for the EMA and other regulatory agencies, our pursuit, if any, of additional indications and our development ofFeraheme in countries outside of the U.S; •Costs associated with the ongoing and planned clinical studies of Makena in connection with current or future post-marketing commitments,and our pursuit, if any, of additional indications or lifecycle management program; •Any changes to the mix of our business; •Costs associated with manufacturing batch failures or inventory write-offs due to out-of-specification release testing or ongoing stabilitytesting that results in a batch no longer meeting specifications; •Changes in accounting estimates related to reserves on revenue, returns, contingent consideration, impairment of long-lived or intangibleassets or other accruals or changes in the timing and availability of government or customer discounts, rebates and incentives; •The implementation of new or revised accounting or tax rules or policies; and •Costs associated with the implementation of new or revised regulations of the Public Company Accounting Oversight Board, NASDAQ GlobalSelect Market ("NASDAQ"), the U.S. Securities and Exchange Commission ("SEC") and similar entities. Our results of operations, including, in particular, product sales, may also vary from period to period due to the buying patterns of our wholesalers,distributors, pharmacies, clinics or hospitals and specialty pharmacies. Further, our contracts with GPOs often require certain performance from the membersof the GPOs on an individual account level or group level such as growth over prior periods or certain market share attainment goals in order to qualify fordiscounts off the list price of our products, and a GPO may be able to influence the demand for our products from its members in a particular quarter throughcommunications they make to their members. In the event wholesalers, distributors, pharmacies, clinics or hospitals with whom we do business determine tolimit their purchases of our products, our product sales could be adversely affected. Also, in the event wholesalers, distributors, pharmacies, clinics orhospitals purchase increased quantities of our products to take advantage of volume discounts or similar benefits, our quarterly results will fluctuate as re-orders become less frequent, and our overall net pricing may decrease as a result of such discounts and similar68Table of Contentsbenefits. In addition, these contracts are often cancellable at any time by our customers, often without notice, and are non-exclusive agreements within theFeraheme or Makena markets. While these contracts are intended to support the use of our products, our competitors could offer better pricing, incentives,higher rebates or exclusive relationships. Because Feraheme is not indicated for the broad IDA population, the incentives in our contracts for a particular siteof care are capped based on our estimate of their patients covered by our current CKD label. Because some of our competitors' products have the broad IDAlabel, they may provide additional incentives for all of a customer's IV iron usage, essentially becoming an exclusive provider to that particular customer. Our contracting strategy can also have an impact on the timing of certain purchases causing product sales to vary from quarter to quarter. For example, inadvance of an anticipated price increase, following the publication of our quarterly ASP, which affects the rate at which Feraheme is reimbursed, or areduction in expected rebates or discounts for Feraheme, customers may order Feraheme in larger than normal quantities which could cause Feraheme salesto be lower in subsequent quarters than they would have been otherwise. Further, any changes in purchasing patterns or inventory levels, changes to ourcontracting strategy, increases in product returns, delays in purchasing products or delays in payment for products by one of our distributors or GPOs couldalso have a negative impact on our revenue and results of operations. As a result of these and other factors, our quarterly operating results could fluctuate, and this fluctuation could cause the market price of our commonstock to decline. Results from one quarter should not be used as an indication of future performance.If the estimates we make, or the assumptions on which we rely, in preparing our consolidated financial statements and/or our projected guidance proveinaccurate, our actual results may vary from those reflected in our projections and accruals. Our consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of theseconsolidated financial statements requires us to make estimates and judgments that affect the reported amounts of our assets, liabilities, revenues andexpenses, the amounts of charges accrued by us, and the related disclosure of contingent assets and liabilities. On an ongoing basis, our managementevaluates our critical and other significant estimates and judgments, including among others those associated with revenue recognition related to productsales and collaboration agreements, product sales allowances and accruals, assessing investments for potential other-than-temporary impairment anddetermining the fair values of our investments, the fair value of our debt obligations, the fair value of assets acquired in a business combination, contingentconsideration, the impairment of long-lived assets, including intangible assets, accrued expenses, income tax and equity-based compensation expense. Webase our estimates on market data, our observance of trends in our industry, and various other assumptions that we believe to be reasonable under thecircumstances. If actual results differ from these estimates, there could be a material adverse effect on our financial results and the performance of our stock. Further, in January 2015, we issued financial guidance, including expected 2015 total revenues and Feraheme and Makena net sales, which is likewisebased on estimates and the judgment of management. If, for any reason, we are unable to realize our projected 2015 revenue, we may not realize our publiclyannounced financial guidance. If we fail to realize or if we change or update any element of our publicly disclosed financial guidance or other expectationsabout our business, our stock price could decline in value. As part of our revenue recognition policy, our estimates of product returns, rebates and chargebacks, fees and other discounts require subjective andcomplex judgments due to the need to make estimates about matters that are inherently uncertain. The same estimates will need to be made for Makena salessince much of Lumara Health's business provides for discounts, fees, rebates and69Table of Contentschargebacks, in particular, since a significant amount of Makena sales are to Medicaid patients. Any significant differences between our actual results and ourestimates could materially affect our financial position and results of operations. In addition, to determine the required quantities of Feraheme and Makena and their related manufacturing schedules, we also need to make significantjudgments and estimates based on inventory levels, current market trends, anticipated sales, forecasts and other factors. Because of the inherent nature ofestimates, there could be significant differences between our estimates and the actual amount of product need. For example, the level of our access towholesaler and distributor inventory levels and sales data in the U.S., which varies based on the wholesaler, distributor, clinic or hospital, affects our abilityto accurately estimate certain reserves included in our financial statements. Any difference between our estimates and the actual amount of product demandcould result in unmet demand or excess inventory, each of which would adversely impact our financial results and results of operations.Our stock price has been and may continue to be volatile, and your investment in our stock could decline in value or fluctuate significantly, including as aresult of analysts' activities. 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 or fluctuatesignificantly. Our stock price has ranged between $16.49 and $48.50 in the fifty-two week period through February 4, 2015. The stock market has from timeto time experienced extreme price and volume fluctuations, particularly in the biotechnology and pharmaceuticals sectors, which have often been unrelatedto the operating performance of particular companies. Various factors and events, including the factors and events described in these Risk Factors, many ofwhich are beyond our control, may have a significant impact on the market price of our common stock. Our stock price could also be subject to fluctuationsas a result of general market conditions, shareholder activism and attempts to disrupt our strategy by activist investors or sales of large blocks of our commonstock or the dilutive effect of our Convertible Notes or any other equity or equity-linked financings or alternative strategic arrangements. In addition, 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. As of February 4, 2015, five financial analysts publish reports about us and our business. We do not control these or any other analysts.Furthermore, there are many large, well-established, publicly traded companies active in our industry and market, which may mean that it is less likely thatwe will receive widespread 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, lower their price targetor issue commentary or observations about us or our stock that are perceived by the market as negative, our stock price would likely decline rapidly. Inaddition, 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.There is a potential market overhang that could depress the value of our common stock, and future sales of our common stock could put a downwardpressure on the price of our shares and could have a material adverse effect on the price of our shares. In connection with the Lumara Agreement, we issued approximately 3.2 million shares of newly issued common stock to former Lumara Health securityholders. Upon the demand of a certain number or percentage of such former Lumara Health security holders, we have agreed to file a registration statement toregister the disposition of the shares of our common stock issued to such shareholders. In accordance with the Lumara Agreement, on February 10, 2015, wefiled a registration statement on Form S-3 to register the resale of approximately 1.6 million shares of such common stock. Furthermore, upon the expirationof a contractual lock-up period, the remainder (approximately 1.6 million shares) of the common stock issued to former Lumara Health security holders canbe sold.70Table of ContentsIf these shares are sold, or if other existing stockholders or our officers or directors sell, or indicate an intention to sell (which may include sales pursuant towritten plans for trading shares in reliance on Rule 10b5-1 under the Securities Act of 1933), substantial amounts of our common stock in the public market,the market price of our common stock could decline.If we identify a material weakness in our internal controls over financial reporting, our ability to meet our reporting obligations and the trading price ofour 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 are requiredunder the Sarbanes-Oxley Act of 2002 to report annually on our internal control over financial reporting. Any system of internal controls, however welldesigned and operated, is based in part on certain assumptions and can provide only reasonable, not absolute, assurances that the objectives of the system aremet. If we, or our independent registered public accounting firm, determine that our internal controls over our financial reporting are not effective, or wediscover areas that need improvement in the future, or we experience high turnover of our personnel in our financial reporting functions, these shortcomingscould have an adverse effect on our business and 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 in thereliability of our financial statements, which could lead to a decline in our stock price. Because Lumara Health had been a private company, it has not beenrequired to comply with the Sarbanes-Oxley Act of 2002. As such, we are in the process of integrating Lumara Health related controls into our current controlenvironment. However, our 2014 assessment did not include evaluating the effectiveness of internal control over financial reporting of Lumara Health itssubsidiaries, the consolidated results of which are included in our fiscal year 2014 consolidated financial statements. Failure to comply with reportingrequirements could subject us to sanctions and/or investigations by the SEC, NASDAQ or other regulatory authorities.Our shareholder rights plan, certain provisions in our charter and by-laws, certain provisions of our Convertible Notes, certain contractual relationshipsand certain Delaware law provisions could discourage an acquisition of us by others, even if an acquisition would be beneficial to our stockholders, andmay prevent attempts by our stockholders to replace or remove the current members of our Board. We have a shareholder rights plan, the provisions of which are intended to protect our net operating loss and tax credit carryforwards and could functionto deter a hostile takeover by making any proposed hostile acquisition of us more expensive and less desirable to a potential acquirer by enabling ourstockholders (other than the potential hostile acquiror) to purchase significant amounts of additional shares of our common stock at dilutive prices. Therights issued pursuant to our shareholder rights plan, as amended in September 2014, become exercisable generally upon the earlier of 10 days after a personor group acquires 4.99% or more of our outstanding common stock or 10 business days after the announcement by a person or group of an intention toacquire 4.99% of our outstanding common stock via tender offer or similar transaction. The shareholder rights plan could delay or discourage transactionsinvolving an actual or potential change in control of us or our management, including transactions in which stockholders might otherwise receive a premiumfor their shares over then-current prices.71Table of Contents 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 a changein management and our Board. These provisions include:•the ability of our Board to increase or decrease the size of the Board without stockholder approval; •advance notice requirements for the nomination of candidates for election to our Board and for proposals to be brought before our annualmeeting 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 ("Section 203"), which prevents usfrom engaging in any business combination with any "interested stockholder," which is defined generally as a person that acquires 15% or more of acorporation's outstanding voting stock, for a period of three years after the date of the transaction in which the person became an interested stockholder,unless the business combination is approved in the manner prescribed in Section 203. These provisions could have the effect of delaying or preventing achange of control, whether or not it is desired by, or beneficial to, our stockholders. 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 of anyoutstanding options or restricted stock units in the event of a change of control and subsequent termination of employment. Further, our Third Amended andRestated 2007 Equity Incentive Plan generally permits our Board to provide for the acceleration of vesting of options granted under that plan in the event ofcertain transactions that result in a change of control. Furthermore, holders of the Convertible Notes have the right to require us to repurchase their notes at a price equal to 100% of the principal amountthereof and the conversion rate for the Convertible Notes may be increased as described in the indenture, in each case, upon the occurrence of certain changeof control transactions. Additionally, upon certain change of control transactions, the offsetting convertible bond hedge and warrant transactions that weentered into at the time we issued the Convertible Notes may be exercised and/or terminated early. Upon any such exercise and/or early termination, theproceeds we receive upon the exercise of the convertible bond hedge transactions may prove to be significantly lower than the amounts we would be requiredto pay upon termination of the warrant transactions. These features of the Convertible Notes and the convertible bond hedge and warrants, including thefinancial implications of any renegotiation of the above-mentioned provisions, could have the effect of preventing a change of control, whether or not it isdesired by, or beneficial to, our stockholders, or may result in the acquisition of us being on terms less favorable to our stockholders than it would otherwisebe. ITEM 1B. UNRESOLVED STAFF COMMENTS: None. ITEM 2. PROPERTIES: In June 2013, we entered into a lease agreement with BP Bay Colony LLC (the "Waltham Landlord") for the lease of certain real property located at 1100Winter Street, Waltham,72Table of ContentsMassachusetts (the "Waltham Premises") for use as our principal executive offices. Beginning in September 2013, the initial term of the lease is five years andtwo months with one five-year extension term at our option. During the extension period, the base rent will be an amount agreed upon by us and the WalthamLandlord. In addition to base rent, we are also required to pay a proportionate share of the Waltham Landlord's operating costs. The Waltham Landlord agreed to pay for certain agreed-upon improvements and we agreed to pay for any increased costs due to changes by us to theagreed-upon plans. We record all tenant improvements paid by us as leasehold improvements and amortize these improvements over the shorter of theestimated useful life of the improvement or the remaining life of the initial lease term. Amortization of leasehold improvements is included in depreciationexpense. In addition, in connection with our lease for the Waltham Premises, in June 2013 we delivered to the Waltham Landlord a security deposit of$0.4 million in the form of an irrevocable letter of credit. This security deposit will be reduced to $0.3 million on the second anniversary of the date the leasecommenced. The cash securing this letter of credit is classified on our balance sheet as of December 31, 2014 as a long-term asset and is restricted in its use. In June 2013, we also entered into an Assignment and Assumption of Lease (the "Assignment Agreement") with Shire Human Genetic Therapies, Inc.("Shire") effecting the assignment to Shire of the right to occupy our former office space located at 100 Hayden Avenue, Lexington, Massachusetts (the "PriorSpace"). Under the Assignment Agreement, the assignment to Shire became effective on September 21, 2013, the date of our departure from the Prior Space,and Shire assumed all of our obligations as the tenant of the Prior Space. The Assignment Agreement also provided for the conveyance of furniture and otherpersonal property by us to Shire. In connection with our acquisition of Lumara Health, we have assumed the lease of certain real property located at 16640 Chesterfield Grove Road,Chesterfield, Missouri (the "St. Louis Premises"), which we are currently using as temporary office space for Lumara Health employees as they relocate to theWaltham Premises. Beginning in September 2013, the initial term of the lease is five years and two months. In addition to base rent, we are also required topay a proportionate share of the Chesterfield Landlord's operating costs. We are attempting to sublease the St. Louis Premises and if successful, futureoperating lease commitments will be partially offset by proceeds received from the sublease. The above leases for the Waltham, Massachusetts and Chesterfield, Missouri properties requires us to pay base rent during the initial term as follows (inthousands): ITEM 3. LEGAL PROCEEDINGS: We accrue a liability for legal contingencies when we believe that it is both probable that a liability has been incurred and that we can reasonablyestimate the amount of the loss. We review these accruals and adjust them to reflect ongoing negotiations, settlements, rulings, advice of legal counsel andother relevant information. To the extent new information is obtained and our views on the probable outcomes of claims, suits, assessments, investigations orlegal proceedings change, changes in73Period Minimum LeasePayments Year Ended December 31, 2015 $1,451 Year Ended December 31, 2016 1,456 Year Ended December 31, 2017 1,462 Year Ended December 31, 2018 1,174 Total $5,543 Table of Contentsour accrued liabilities would be recorded in the period in which such determination is made. For the matters referenced below, the liability is not probable orthe amount cannot be reasonably estimated and, therefore, accruals have not been made. In addition, in accordance with the relevant authoritative guidance,for any matters in which the likelihood of material loss is at least reasonably possible, we will provide disclosure of the possible loss or range of loss. If areasonable estimate cannot be made, however, we will provide disclosure to that effect.Silverstrand Class Action A purported class action complaint was originally filed on March 18, 2010 in the U.S. District Court for the District of Massachusetts, entitledSilverstrand 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 onDecember 17, 2010. The second amended complaint, filed on December 17, 2010 alleged that we and our former President and Chief Executive Officer,former Chief Financial Officer, the then-members of our Board, and certain underwriters in our January 2010 offering of common stock violated certainfederal securities laws, specifically Sections 11 and 12(a)(2) of the Securities Act of 1933, as amended, and that our former President and Chief ExecutiveOfficer and former Chief Financial Officer violated Section 15 of such Act, respectively, by making certain alleged omissions in a registration statement filedin January 2010. The plaintiffs sought unspecified damages on behalf of a purported class of purchasers of our common stock pursuant to our common stockoffering on or about January 21, 2010. After litigating the class action lawsuit for several years, on September 12, 2014, we and the other defendants enteredinto a stipulation of settlement with the lead plaintiffs (on behalf of themselves and each of the class members) to resolve the class action securities lawsuit.Pursuant to the stipulation of settlement, and in exchange for a release of all claims by the class members and certain other persons, and dismissal of thelawsuit with prejudice, we agreed to cause our insurer to pay eligible class members and their attorneys a total of $3.75 million. On October 2, 2014, the U.S.District Court preliminarily approved the settlement, and potential class members were notified of the proposed settlement and the procedures by which theycould seek to recover from the settlement fund, object to the settlement or request to be excluded from the settlement class and on January 30, 2015, thestipulation of settlement was approved by the U.S. District Court. The U.S. District Court entered final judgment on February 2, 2015. Any appeals of thesettlement are due by March 4, 2015. We have recorded the $3.75 million settlement amount in prepaid and other current assets and a corresponding amountin accrued expenses on our consolidated balance sheet as of December 31, 2014, as the settlement amount will be fully covered by our insurance carrier.There was no impact to our consolidated statement of operations for the year ended December 31, 2014.Makena Securities Litigation On October 19, 2011, plaintiff Frank Julianello filed a complaint against Lumara Health (then-named K-V Pharmaceutical Company ("K-V Pharmaceutical")) and certain individual defendants, in the United States District Court for the Eastern District of Missouri (the "Court"), allegingviolations of the anti-fraud provisions of the federal securities laws on behalf of all purchasers of the publicly traded securities of Lumara Health betweenFebruary 14, 2011 and April 4, 2011. The complaint alleges class members were damaged by paying artificially inflated stock prices due to Lumara Health'spurportedly misleading statements regarding Makena related to access and exclusivity. On October 31, 2011, plaintiff Ramakrishna Mukku filed a complaintagainst Lumara Health, in the United States District Court for the Eastern District of Missouri, alleging violations of the anti-fraud provisions of the federalsecurities laws on behalf of all purchasers of the publicly traded securities of Lumara Health between February 14, 2011 and April 4, 2011. The complaintalleges class members were damaged by paying artificially inflated stock prices due to Lumara Health's purportedly misleading statements regarding Makenarelated to access and exclusivity. On November 2, 2011, plaintiff Hoichi Cheong filed a complaint against Lumara Health, in the United States District Courtfor the Eastern District of74Table of ContentsMissouri, on behalf of purchasers of the securities of Lumara Health, who purchased or otherwise acquired K-V Pharmaceutical securities betweenFebruary 14, 2011 and April 4, 2011, seeking to pursue remedies under the Exchange Act. The complaint alleges class members were damaged by purchasingartificially inflated stock prices due to Lumara Health's purportedly misleading statements regarding Makena related to access and exclusivity. On March 8,2012, the Julianello, Mukku and Cheong cases were consolidated and the consolidated action is now styled In Re K-V Pharmaceutical Company SecuritiesLitigation, Case No. 4:11-CV-1816. On May 4, 2012, the Court appointed Lori Anderson as Lead Plaintiff in the matter. On April 22, 2013, the individualdefendants moved to dismiss the complaint and oral argument was held before the Court on November 26, 2013. Lumara Health joined in the motion todismiss on February 10, 2014. On March 27, 2014, the Court entered an order granting Lumara Health's motion to dismiss the class action complaint withoutprejudice to the Plaintiffs' ability to file a second amended complaint with respect to a limited issue of whether Lumara Health's statements about LumaraHealth's financial assistance program for Makena were materially false or misleading. On April 16, 2014, the Plaintiff's filed a motion to reconsider asking theCourt to reconsider its order restricting the scope of Plaintiff's ability to amend its complaint. The Court denied Plaintiff's motion to reconsider and entered ajudgment granting Lumara Health's motion to dismiss on June 6, 2014. On July 1, 2014, Plaintiffs filed a Notice of Appeal with the Eighth Circuit Court ofAppeals and briefs have been submitted to the Court. The Court of Appeals has set March 12, 2015 as the date for oral argument.European Patent Organization Appeal In July 2010, Sandoz GmbH ("Sandoz") filed with the European Patent Office ("EPO") an opposition to a previously issued patent which coversferumoxytol in EU jurisdictions. In October 2012, at an oral hearing, the Opposition Division of the EPO revoked this patent. In December 2012, our noticeof appeal of that decision was recorded with the EPO, which also suspended the revocation of our patent. On May 13, 2013, we filed a statement of grounds ofappeal and on September 27, 2013, Sandoz filed a response to that statement. In the event that we withdraw our appeal or we do not experience a successfuloutcome from the appeals process, under EU regulations ferumoxytol would still be entitled to eight years of data protection and ten years of marketexclusivity from the date of approval, which we believe would create barriers to entry for any generic version of ferumoxytol into the EU market untilsometime between 2020 and 2022. This decision had no impact on our revenues for the year ended December 31, 2014. However, any future unfavorableoutcome in this matter could negatively affect the magnitude and timing of future revenues. We do not expect to incur any related liability regardless of theoutcome of the appeal and therefore have not recorded any liability as of December 31, 2014. We continue to believe the patent is valid and intend tovigorously appeal the decision. 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, we are notaware of any material claims against us as of December 31, 2014. ITEM 4. MINE SAFETY DISCLOSURES Not Applicable.75Table of Contents PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITYSECURITIES: Market Information Our common stock trades on the NASDAQ Global Select Market ("NASDAQ") under the trading symbol "AMAG." On February 4, 2015, the closing priceof our common stock, as reported on the NASDAQ, was $41.50 per share. The following table sets forth, for the periods indicated, the high and low sale pricesper share for our common stock as reported on the NASDAQ.Stockholders On February 4, 2015, we had approximately 156 stockholders of record of our common stock, and we believe that the number of beneficial holders of ourcommon stock was approximately 8,776 based on responses from brokers to a search conducted by Broadridge Financial Solutions, 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.76 High Low Year Ended December 31, 2014 First quarter $24.93 $18.52 Second quarter $20.88 $16.49 Third quarter $33.57 $17.79 Fourth quarter $44.81 $29.76 Year Ended December 31, 2013 First quarter $23.98 $15.00 Second quarter $25.67 $18.46 Third quarter $27.00 $20.35 Fourth quarter $28.42 $18.94 Table of ContentsRepurchases of Equity Securities The following table provides certain information with respect to our purchases of shares of our stock during the fourth quarter of 2014.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 is incorporatedby reference to our definitive proxy statement pursuant to Regulation 14A, which we intend to file with the U.S. Securities and Exchange Commission (the"SEC") not later than 120 days after the close of our year ended December 31, 2014.77Period Total Numberof SharesPurchased(1) Average PricePaid perShare Total Number ofShares Purchasedas Part of PubliclyAnnouncedPlans or Programs(2) Maximum Number ofShares that May YetBePurchased Under thePlans or Programs(2) October 1, 2014throughOctober 31,2014 — — — — November 1,2014 throughNovember 30,2014 — — — — December 1,2014 throughDecember 31,2014 25,498 $40.31 — — Total 25,498 $40.31 — — (1)Represents shares of our common stock withheld by us to satisfy the minimum tax withholding obligations in connection with thevesting of restricted stock units held by our employees. (2)We do not currently have any publicly announced repurchase programs or plans.Table of ContentsFive-Year Comparative Stock Performance The following graph compares the yearly percentage change in the cumulative total stockholder return on our common stock with the cumulative totalreturn on the NASDAQ Global Market Composite Index and NASDAQ Biotechnology Index over the past five years. The comparisons assume $100 wasinvested on December 31, 2009 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 the graph wasobtained from Zach's Investment Research, Inc., a source we believe is reliable. However, we are not responsible for any errors or omissions in suchinformation. The material in this section captioned Five-Year Comparative and Stock Performance is being furnished and shall not be deemed "filed" with the SECfor purposes of Section 18 of the Exchange Act or otherwise subject to the liability of that section, nor shall the material in this section be deemed to beincorporated by reference in any registration statement or other document filed with the SEC under the Securities Act of 1933, except to the extent wespecifically and expressly incorporate it by reference into such filing.78 12/31/2009 12/31/2010 12/31/2011 12/31/2012 12/31/2013 12/31/2014 AMAGPharmaceuticals, Inc. 100.00 47.59 49.72 38.68 63.84 112.07 NASDAQ GlobalMarket CompositeIndex 100.00 119.59 103.67 119.76 199.82 211.84 NASDAQBiotechnology Index 100.00 116.06 130.08 172.67 286.67 385.29 Table of Contents ITEM 6. SELECTED FINANCIAL DATA: The following table sets forth selected financial data as of and for the years ended December 31, 2014, 2013, 2012, 2011 and 2010. 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 and 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. 79 Years Ended December 31, 2014(1) 2013 2012 2011 2010 (in thousands, except per share data) Statement of Operations Data Revenues: U.S. product sales, net $108,795 $71,362 $58,287 $52,097 $59,339 License fee and other collaboration revenues 10,886 8,385 26,475 8,321 6,132 Other product sales and royalties 4,703 1,109 616 831 774 Total revenues 124,384 80,856 85,378 61,249 66,245 Costs and expenses: Cost of product sales(2) 20,306 11,960 14,220 10,531 7,606 Research and development expenses 24,160 20,564 33,296 58,140 54,462 Selling, general and administrative expenses 72,254 59,167 53,071 68,863 84,939 Acquisition-related costs 9,478 782 — — — Restructuring expenses 2,023 — 2,215 3,508 2,224 Total costs and expenses 128,221 92,473 102,802 141,042 149,231 Operating loss (3,837) (11,617) (17,424) (79,793) (82,986)Other income (expense): Interest expense (14,697) — — — — Interest and dividend income, net 975 1,051 1,286 1,747 1,741 Gains on sales of assets 103 924 — — — Gains (losses) on investments, net 114 40 (1,466) (193) 408 Fair value adjustment of settlement rights — — — — (788)Total other income (expense) (13,505) 2,015 (180) 1,554 1,361 Net income (loss) before income taxes (17,342) (9,602) (17,604) (78,239) (81,625)Income tax benefit(3) 153,159 — 854 1,170 472 Net income (loss) $135,817 $(9,602)$(16,750)$(77,069)$(81,153)Net income (loss) per share: Basic $6.06 $(0.44)$(0.78)$(3.64)$(3.90)Diluted $5.45 $(0.44)$(0.78)$(3.64)$(3.90)Weighted average shares outstanding used to compute net income (loss) per share: Basic 22,416 21,703 21,392 21,189 20,806 Diluted 25,225 21,703 21,392 21,189 20,806 December 31, 2014 2013 2012 2011 2010 (in thousands) Balance Sheet Data Working capital (current assets less current liabilities) $107,548 $211,284 $221,423 $201,037 $254,073 Total assets $1,388,933 $265,459 $258,137 $267,224 $336,076 Long-term liabilities $762,492 $59,930 $52,383 $47,634 $54,079 Stockholders' equity $459,953 $172,408 $172,797 $180,596 $245,286 (1)Includes the results of operations of Lumara Health during the post-acquisition period from November 12, 2014 through December 31, 2014. See Note C, "BusinessCombinations," to our consolidated financial statements included in this Annual Report on Form 10-K for additional information regarding the November 2014 acquisition ofLumara Health. (2)Cost of product sales in 2014 includes approximately $6.1 million of non-cash expense related to the amortization of the step-up of Lumara's inventories and intangible assets tofair value at the acquisition date. See Note C, "BusinessTable of Contents80Combinations," and Note I, "Goodwill and Intangible Assets, Net," to our consolidated financial statements included in this Annual Report on Form 10-K for additionalinformation.(3)The $153.2 million income tax benefit in 2014 reflects a $132.3 million decrease in our valuation allowance due to taxable temporary differences available as a source of income torealize the benefit of certain of our pre-existing deferred tax assets as a result of the acquisition of Lumara Health. See Note K, "Income Taxes," to our consolidated financialstatements included in this Annual Report on Form 10-K for additional information.Table of Contents ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS: OverviewProduct Portfolio Overview AMAG Pharmaceuticals, Inc., a Delaware corporation, was founded in 1981. We are a specialty pharmaceutical company with a focus on maternal health,anemia and cancer supportive care. We currently market Makena® (hydroxyprogesterone caproate injection), Feraheme® (ferumoxytol) Injection forIntravenous ("IV") use and MuGard® Mucoadhesive Oral Wound Rinse. The primary goal of our company is to bring to market therapies that provide clearbenefits and improve patients' lives. Currently, our two primary sources of revenue are from the sale of Makena and Feraheme. On November 12, 2014, we acquired Lumara Health Inc.("Lumara Health"), a privately held pharmaceutical company specializing in women's health, for approximately $600.0 million in upfront cash consideration(subject to finalization of certain adjustments related to Lumara Health's financial position at the time of closing, including adjustments related to workingcapital, net debt and transaction expenses as set forth in the definitive agreement with Lumara Health (the "Lumara Agreement")) and approximately3.2 million shares of our common stock having a fair value of approximately $112.0 million at the time of closing. The Lumara Agreement includes futurecontingent payments of up to $350.0 million in cash (or upon mutual agreement between us and the former Lumara Health security holders, future contingentpayments may also be made in common stock or some combination thereof) payable by us to the former Lumara Health security holders based upon theachievement of certain sales milestones through calendar year 2019. In connection with the acquisition of Lumara Health, we acquired Makena, a progestinindicated to reduce the risk of preterm birth in women with a singleton pregnancy who have a history of singleton spontaneous preterm birth. We sell Makenato specialty pharmacies and distributors, who, in turn sell Makena to healthcare providers, hospitals, government agencies and integrated delivery systems.Additional details regarding the Lumara Agreement can be found in Note C, "Business Combinations," to our consolidated financial statements included inthis Annual Report on Form 10-K. Feraheme was approved for marketing in the U.S. in June 2009 by the U.S. Food and Drug Administration (the "FDA") for use as an IV iron replacementtherapy for the treatment of iron deficiency anemia ("IDA") in adult patients with chronic kidney disease ("CKD"). We began selling Feraheme in the U.S. inJuly 2009 through our commercial organization, including a specialty sales force. We sell Feraheme to authorized wholesalers and specialty distributors,who in turn, sell Feraheme to healthcare providers who administer Feraheme primarily within hospitals, hematology and oncology centers, and nephrologyclinics. In addition to continuing to pursue opportunities to make new advancements in patients' health and to enhance treatment accessibility, we intend tocontinue to expand and diversify our portfolio through the in-license or purchase of additional pharmaceutical products or companies. We are seekingcomplementary products that will leverage our corporate infrastructure, sales force call points and commercial expertise, with a particular focus on maternalhealth specialists, hematology and oncology centers, nephrology clinics and hospitals. We are evaluating and plan to pursue commercial products as well aslate-stage development assets. In addition, we are contemplating transactions that allow us to realize cost synergies to increase cash flows, as well astransactions that potentially optimize after-tax cash flows. In June 2013, we entered into the License Agreement with PlasmaTech Biopharmaceuticals, Inc. (formerly known as Access Pharmaceuticals, Inc.), underwhich we acquired the U.S. commercial rights to MuGard for the management of oral mucositis (the "MuGard License Agreement"). Under the81Table of ContentsMuGard License Agreement, we obtained an exclusive, royalty-bearing license, with the right to grant sublicenses, to certain intellectual property rights,including know-how, patents and trademarks, to use, import, offer for sale, sell, manufacture and commercialize MuGard in the U.S. and its territories for themanagement of all diseases or conditions of the oropharyngeal cavity, including mucositis ("the "MuGard Rights"). See Note C, "Business Combinations," toour consolidated financial statements included in this Annual Report on Form 10-K for additional information on the MuGard License Agreement.Regulatory Developments Overview In June 2014, we proposed changes to the FDA related to our current U.S. label of Feraheme based on a review of global post-marketing data tostrengthen the warnings and precautions section of the label and mitigate the risk of serious hypersensitivity reactions, including anaphylaxis, in order toenhance patient safety. After considering our June 2014 submission and other information, in January 2015, the FDA notified us that it believes new safetyinformation should be included in the labeling for Feraheme, including, among other things, a boxed warning to highlight the risks of serioushypersensitivity/anaphylaxis reactions and revisions that Feraheme should only be administered through an IV infusion (i.e., not by IV injection) and shouldbe contraindicated for patients with any known history of drug allergy. The FDA's recommended label changes go beyond what we proposed in June 2014.We plan to work with the FDA to finalize an updated U.S. Feraheme label. In December 2012, we submitted a supplemental new drug application ("sNDA") to the FDA seeking approval for Feraheme for the treatment of IDA inadult patients who had failed or could not use oral iron. In January 2014, we received a complete response letter from the FDA for the sNDA informing us thatour sNDA could not be approved in its present form and stating that we have not provided sufficient information to permit labeling of Feraheme for safe andeffective use for the proposed broader indication. The FDA indicated that its decision was based on the cumulative ferumoxytol data, including the globalPhase III IDA program and global post-marketing safety reports for the currently indicated CKD patient population. The FDA suggested, among other things,that we submit additional clinical trial data in the proposed broad IDA patient population with a primary composite safety endpoint of serioushypersensitivity/anaphylaxis, cardiovascular events and death, events that are included in the labels of Feraheme and other IV irons and that have beenreported in the post-marketing environment for Feraheme. Additionally, the FDA proposed potentially evaluating alternative dosing and/or administration ofFeraheme as well as potential changes to labeling that would be intended to reduce the risk of serious hypersensitivity reactions associated with Feraheme.In June 2014, we met with the FDA to discuss our proposed approach to resolving the points that were raised in the complete response letter. Based on theFDA's feedback, we submitted a revised proposal that includes the design of a potential clinical trial, a safety endpoint for such trial and alternative methodsof administration of Feraheme. We expect to receive feedback from the FDA during 2015 and expect thereafter to be able to assess and determine the pathforward, if any, for Feraheme in the broad IDA patient population in the U.S., including the related timing and cost of any clinical trials. Further, in October 2014, we filed with the FDA a prior approval supplement to the original Makena New Drug Application seeking approval of a 1 mLpreservative-free vial of Makena and we are seeking to expand Makena's formulations and drug delivery technologies as part of the product's lifecyclemanagement program. We expect a decision in the second quarter of 2015. Outside of the U.S., ferumoxytol has been granted marketing approval in the European Union ("EU"), Canada and Switzerland for use as an IV ironreplacement therapy for the treatment of IDA in adult patients with CKD. In March 2010, we entered into a License, Development and CommercializationAgreement (the "Takeda Agreement"), which was amended in June 2012 (the "Amended Takeda Agreement") with Takeda Pharmaceutical Company Limited("Takeda"). On December 29, 2014, we entered into an agreement with Takeda to terminate the Amended Takeda82Table of ContentsAgreement and we will regain all worldwide development and commercialization rights for Feraheme following the transfer of marketing authorizations fromTakeda to us (the "Takeda Termination Agreement"). Under the Amended Takeda Agreement, Takeda had an exclusive license to market and sellferumoxytol in the EU, Canada, and Switzerland, as well as certain other geographic territories. The EU marketing authorization for Rienso is valid in the 28EU Member States as well as in Iceland, Liechtenstein and Norway. The trade name for ferumoxytol in Canada is Feraheme and outside of the U.S. andCanada the trade name is Rienso. Additional details regarding the Takeda Termination Agreement can be found in Note R, "Collaborative Agreements," toour consolidated financial statements included in this Annual Report on Form 10-K. Sales of Feraheme/Rienso outside of the U.S. do not and are not expected to materially contribute to our revenues. As such, and in light of the TakedaTermination Agreement, we have been assessing various commercialization strategies for Rienso in the EU and Switzerland and Feraheme in Canada. Anumber of considerations influence our analysis of our commercialization opportunities outside of the U.S., including (i) regulatory developments and thepotential cost of post-approval clinical trial commitments and post-marketing obligations required by regulatory authorities outside of the U.S., (ii) theproduct's commercial viability (sales potential relative to the cost of maintaining the product on the market) in light of the current CKD label, the possibleimpact of future label changes, including any impact in the U.S., and the competitive landscape, and (iii) possible approaches in different geographies, whichmay include seeking a licensing or distribution partner or commercializing the product ourselves. Based on these considerations, we have come to a mutualdecision with Takeda to initiate withdrawal of the marketing authorization for Rienso in the EU and Switzerland. We are currently assessing the commercialopportunity for Feraheme in Canada. In the future, we may decide to seek to obtain a new marketing authorization for ferumoxytol in the EU, particularly if we generate additional clinicaldata to support potential approval in the broader IDA indication. There can be no assurance that we will be able to develop an approach that would beeconomically viable for us or a commercialization partner.Debt Obligations In February 2014 we issued $200.0 million of 2.5% convertible senior notes due February 15, 2019 (the "Convertible Notes"). Interest is payable semi-annually in arrears on February 15 and August 15 of each year, beginning on August 15, 2014. The initial conversion rate is 36.9079 shares of our commonstock per $1,000 principal amount of the Convertible Notes, which corresponds to an initial conversion price of approximately $27.09 per share of ourcommon stock and represents a conversion premium of approximately 35% based on the last reported sale price of our common stock of $20.07 onFebruary 11, 2014, the date the Convertible Notes offering was priced. In addition, in connection with the pricing of the Convertible Notes and in order toreduce the potential dilution to our common stock and/or offset cash payments due upon conversion of the Convertible Notes, we also entered intoconvertible bond hedge and warrant transactions in February 2014. The initial exercise price of the warrants is $34.12 per share, subject to adjustment uponcertain events, which is 70% above the last reported sale price of our common stock of $20.07 on February 11, 2014. On November 12, 2014, in connection with the acquisition of Lumara Health, we entered into the Term Loan Facility, which provides for term loans inthe aggregate principal amount of $340.0 million (the "Term Loan Facility"). We used $327.5 million of the Term Loan Facility proceeds to partially financethe $600.0 million cash portion of the Lumara Health acquisition. The Term Loan Facility bears interest, at our option, at either the Eurodollar rate plus amargin of 6.25% or the prime rate plus a margin of 5.25%. The Eurodollar rate is subject to a 1.00% floor and the prime rate is subject to a 2.00% floor. As ofDecember 31, 2014 the stated interest rate was 7.25%. We must repay the Term Loan Facility in installments of (a) $8.5 million per quarter due on the last dayof each quarter beginning with the quarter ending March 31, 2015 through the quarter ending December 31, 2015, and83Table of Contents(b) $12.8 million per quarter due on the last day of each quarter beginning with the quarter ending March 31, 2016 through the quarter ending September 30,2020, with the balance due in a final installment on November 12, 2020. The Term Loan Facility matures on November 12, 2020, except that the Term LoanFacility will mature on September 30, 2018 if:(a)more than $25.0 million in aggregate principal amount of our Convertible Notes remain outstanding and not converted to common stock orrefinanced and replaced with debt that matures following, and has no amortization prior to, the date that is six and one half years following theclosing date; and (b)the aggregate principal amount of the Term Loan Facility (including all undrawn incremental commitments) is greater than $50.0 million onand as of such date. See Note S, "Debt," to our consolidated financial statements included in this Annual Report on Form 10-K for additional information regarding theConvertible Notes, the bond hedge and warrant transactions, as well as the Term Loan Facility. Our common stock trades on the NASDAQ Global Select Market ("NASDAQ") under the trading symbol "AMAG."Critical Accounting Policies Our management's discussion and analysis of our financial condition and results of operations is based on our financial statements, which have beenprepared in accordance with accounting principles generally accepted in the U.S. The preparation of these financial statements requires management to makecertain estimates and assumptions that affect the reported amount of assets, liabilities, revenues and expenses, and the related disclosure of contingent assetsand liabilities. The most significant estimates and assumptions are used to determine amounts and values of, but are not limited to:, revenue related toproduct sales and collaboration agreements, product sales allowances and accruals, potential other-than-temporary impairment of investments; acquisitiondate fair value and subsequent fair value estimates used to assess impairment of long-lived assets, including goodwill, in-process research and development("IPR&D") and other intangible assets; contingent consideration; debt obligations; accrued expenses, income taxes and equity-based compensation expense.Actual results could differ materially from those estimates. In making these estimates and assumptions, management employs critical accounting policies. Ourcritical accounting policies include revenue recognition and related sales allowances and accruals, valuation of investments, equity-based compensation,business combinations, including goodwill, intangible assets and acquisition-related contingent consideration, and income taxes.1. Revenue Recognition and Related Sales Allowances and Accruals We recognize revenue from the sale of our products as well as license fee and other collaboration revenues, including milestone payments, other productsale revenues, and royalties we receive from our licensees. We recognize revenue in accordance with current accounting guidance related to the recognition,presentation and disclosure of revenue in financial statements, which outlines the basic criteria that must be met to recognize revenue and provides guidancefor 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.84 Table of ContentsU.S. Product Sales, Net We record product sales allowances and accruals related to prompt payment discounts, chargebacks, government and other rebates, distributor,wholesaler and group purchasing organization ("GPO") fees, and product returns as a reduction of revenue in our consolidated statement of operations at thetime product sales are recorded. Calculating these gross to net sales adjustments involves estimates and judgments based primarily on actual product salesdata, forecasted customer buying patterns, and market research data related to utilization rates by various end-users. In addition, we also monitor ourdistribution channel to determine whether additional allowances or accruals are required based on inventory in our sales channel.Classification of U.S. Product Sales Allowances and Accruals 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 providers andorganizations, such as certain physicians, clinics, hospitals, GPOs, and dialysis organizations that typically do not purchase products directly from us butrather from wholesalers and specialty distributors. In accordance with guidance related to accounting for fees and consideration given by a vendor to acustomer, including a reseller of a vendor's products, these fees, discounts and rebates are presumed to be a reduction of the selling price. Product salesallowances and accruals are based on definitive contractual agreements or legal requirements (such as Medicaid laws and regulations) related to the purchaseand/or utilization of the product by these entities and are recorded in the same period that the related revenue is recognized. We estimate product salesallowances and accruals using either historical, actual and/or other data, including estimated patient usage, applicable contractual rebate rates, contractperformance by the benefit providers, other current contractual and statutory requirements, historical market data based upon experience of our products andother products similar to them, specific known market events and trends such as competitive pricing and new product introductions, current and forecastedcustomer buying patterns and inventory levels, and the shelf life of our products. As part of this evaluation, we also review changes to federal and otherlegislation, changes to rebate contracts, changes in the level of discounts, and changes in product sales trends. Although allowances and accruals are recordedat the time of product sale, certain rebates are typically paid out, on average, up to three months or longer after the sale. Allowances against receivable balances primarily relate to prompt payment discounts, provider chargebacks and certain government agency rebates andare recorded at the time of sale, resulting in a reduction in product sales revenue and the reporting of product sales receivables net of allowances. Accrualsrelated to Medicaid and provider volume rebates, wholesaler and distributor fees, GPO fees, other discounts to healthcare providers and product returns arerecorded at the time of sale, resulting in a reduction in product sales revenue and the recording of an increase 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 the invoice,generally thirty days. Because we anticipate that those customers who are offered this discount will take advantage of the discount, we accrue 100% of theprompt payment discount, at the time of sale, based on the gross amount of each invoice. We adjust the accrual quarterly to reflect actual experience.85Table of ContentsChargebacks Chargeback reserves represent our estimated obligations resulting from the difference between the prices at which we sell our products to wholesalers andthe sales price ultimately paid to wholesalers under fixed price contracts by third-party payers, including governmental agencies. We determine ourchargeback estimates based on actual product sales data and forecasted customer buying patterns. Actual chargeback amounts are determined at the time ofresale to the qualified healthcare provider, and we generally issue credits for such amounts within several weeks of receiving notification from the wholesaler.Estimated chargeback amounts are recorded at the time of sale, and we adjust the allowance quarterly to reflect actual experience.Government and Other Rebates Government and other rebate reserves relate to our reimbursement arrangements with state Medicaid programs, and contractual or performance rebateagreements with certain classes of trade. We determine our estimates for Medicaid rebates, if applicable, based on actual product sales data and our historicalproduct claims experience. In estimating these reserves, we provide for a Medicaid rebate associated with both those expected instances where Medicaid willact as the primary insurer as well as in those instances where we expect Medicaid will act as the secondary insurer. For rebates associated with reachingdefined performance goals, we determine our estimates using actual product sales data and forecasted customer buying and utilization patterns. Rebateamounts generally are invoiced quarterly and are paid in arrears, and we expect to pay such amounts within several weeks of notification by the Medicaid orprovider entity. Estimated government and other rebates are recorded at the time of sale and, with the exception of Medicaid as discussed below, we adjustthe accrual quarterly to reflect actual experience. During 2013 and 2012, we revised our estimated Feraheme Medicaid reserve rate based on actual product-specific rebate claims received since the 2009launch of Feraheme, our expectations of state level activities, and estimated rebate claims not yet submitted, which resulted in a reduction of our thenestimated Medicaid rebate reserve related to prior period Feraheme sales of $0.6 million in each of the respective years. These changes in estimates werereflected as an increase in our net product sales for 2013 and 2012 and resulted in reductions to our gross to net percentages in those periods. The reductionof our estimated Medicaid rebate reserve had an impact of $0.03 per basic and diluted share for each of the respective years. We regularly assess our Medicaidreserve balance and the rate at which we accrue for claims against product sales. If we determine in future periods that our actual rebate experience is notindicative of expected claims, or if actual claims experience changes, or if other factors affect estimated claims rates, we may be required to adjust our currentMedicaid accumulated reserve estimate, which would affect net product sales in the period of the adjustment and could be significant. A 1% increase in our estimate of our Medicaid utilization rate for 2014 would have resulted in approximately a $0.4 million decrease in net productsales.Distributor/Wholesaler and Group Purchasing Organization Fees Fees under our arrangements with distributors and wholesalers are usually based upon units of product purchased during the prior month or quarter andare usually paid by us within several weeks of our receipt of an invoice from the wholesaler or distributor, as the case may be. Fees under our arrangementswith GPOs are usually based upon member purchases during the prior quarter and are generally billed by the GPO within 30 days after period end. Currentaccounting standards related to consideration given by a vendor to a customer, including a reseller of a vendor's products, specify that cash considerationgiven by a vendor to a customer is presumed to be a reduction of the selling price of the vendor's products or services and therefore should be characterized asa reduction of revenue.86Table of ContentsConsideration should be characterized as a cost incurred if we receive, or will receive, an identifiable benefit (goods or services) in exchange for theconsideration and we can reasonably estimate the fair value of the benefit received. Because the fees we pay to wholesalers do not meet the foregoingconditions to be characterized as a cost, we have characterized these fees as a reduction of revenue. We generally pay such amounts within several weeks ofour receipt of an invoice from the distributor, wholesaler GPO. Accordingly, we accrue the estimated fee due at the time of sale, based on the contracted priceinvoiced to the customer. We adjust the accrual quarterly to reflect actual experience.Product Returns Consistent with industry practice, we generally offer our wholesalers, specialty distributors and other customers a limited right to return our productsbased on the product's expiration date. Currently, the expiration dates for Feraheme in the U.S., Makena and MuGard are five years, three years and threeyears, respectively. We estimate product returns based on the historical return patterns and known or expected changes in the marketplace. We track actualreturns by individual production lots. Returns on lots eligible for credits under our returned goods policy are monitored and compared with historical returntrends and rates. We expect that wholesalers and healthcare providers will not stock significant inventory due to the cost of the product, the expense to store our productsand/or that our products are readily available for distribution. We record an estimate of returns at the time of sale. If necessary, our estimated rate of returnsmay be adjusted for actual return experience as it becomes available and for known or expected changes in the marketplace. During 2014, we reduced ourreserve for Feraheme product returns by approximately $1.8 million, primarily as a result of a lower than expected rate of product returns. We did notsignificantly adjust our reserve for product returns during 2013. During 2012, we reduced our reserve for Feraheme product returns by approximately$2.2 million, primarily as a result of a lower than expected rate of product returns as well as the lapse of the product return period on certain manufacturedFeraheme lots. The reduction of our estimated product returns reserve had a positive impact of $0.12 and $0.14 per basic and diluted share, respectively, in2014 and $0.10 per basic and diluted share in 2012. To date, returns of Feraheme have been relatively limited; however, returns experience may change overtime. As we continue to gain more historical experience with actual returns for Feraheme and gain additional experience with return rates for Makena, wemay be required to make a future adjustment to our product returns estimate, which would result in a corresponding change to our net product sales in theperiod of adjustment and could be significant. A 1% increase in our returns as a percentage of gross sales for the year ended December 31, 2014, would haveresulted in approximately a $1.8 million decrease in net product sales.Other Product Sales and Royalties Other product sales and royalties primarily included Feraheme product sales to Takeda and royalties from Takeda as well as net product sales ofMuGard. Prior to the Takeda Termination Agreement, as discussed and defined below, we recorded all product sales of Feraheme sold to Takeda in deferredrevenues in our consolidated balance sheet. We recognized these deferred product revenues, and the associated cost of product sales, in our consolidatedstatement of operations at the time Takeda reported to us that sales had been made to its customers. At December 31, 2014, as the result of the termination ofthe Amended Takeda Agreement, we recognized these remaining balances of deferred product revenues and associated cost of 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. The terms of the agreements may include non-refundable license fees, payments based on the87Table of Contentsachievement of certain milestones and performance goals, reimbursement of certain out-of-pocket costs, payments for manufacturing services, and royaltieson product sales. We evaluate revenue from arrangements that have multiple elements to determine whether the components of the arrangement represent separate units ofaccounting as defined in the accounting guidance related to revenue arrangements with multiple deliverables. Under current accounting guidance, whichgoverns any agreements that contain multiple elements that are either entered into or materially modified subsequent to January 1, 2011, companies arerequired to establish the fair value of undelivered products and services based on a separate revenue recognition process using management's best estimate ofthe selling price for an undelivered item when there is no vendor-specific objective evidence or third-party evidence to determine the fair value of thatundelivered item. Agreements entered into prior to January 1, 2011, that have not been materially modified are accounted for under previous accountingguidance, which provides that an element of a contract can be accounted for separately if the delivered elements have standalone value and the fair value ofall undelivered elements is determinable. If an element is considered to have standalone value but the fair value of any of the undelivered items cannot bedetermined, all elements of the arrangement are recognized as revenue as a single unit of accounting over the period of performance for such undelivereditems or services. Significant management judgment is required in determining what elements constitute deliverables and what deliverables or combinationof deliverables should be considered units of accounting. 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 reasonably estimatethe level of effort required to complete our performance obligations under an arrangement and whether such performance obligations are provided on a best-efforts basis. To the extent we cannot reasonably estimate our performance obligations, we recognize revenue on a straight-line basis over the period weexpect to complete our performance obligations. Significant management judgment is required in determining the level of effort required under anarrangement and the period over which we are expected to complete our performance obligations under an arrangement. We may have to revise our estimatesbased 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 milestone considerationas revenue in the period in which the milestone is achieved only if it meets the following additional criteria:•The milestone consideration received is commensurate with either the level of effort required to achieve the milestone or the enhancement ofthe value of the item delivered as a result of a specific outcome resulting from our performance to achieve the milestone; •The milestone is related solely to our past performance; and •The milestone consideration is reasonable relative to all deliverables and payment terms in the arrangement.There is significant judgment involved in determining whether a milestone meets all of these criteria. For milestones that do not meet the above criteria andare therefore not considered substantive milestones, we recognize that portion of the milestone payment equal to the percentage of the performance periodcompleted at the time the milestone is achieved and the above conditions are met. The remaining portion of the milestone will be recognized over theremaining performance period using a proportional performance or straight-line method.88Table of Contents Amounts received prior to satisfying the above revenue recognition criteria are recorded as deferred revenue in our consolidated balance sheets. Amountsnot expected to be recognized within the next 12 months are classified as long-term deferred revenue. See Note R, "Collaborative Agreements" to our consolidated financial statements included in this Annual Report on Form 10-K for additionalinformation regarding our prior collaboration agreement with Takeda.2. Valuation of investments We account for and classify our investments as either "available-for-sale," "trading," or "held-to-maturity," in accordance with current guidance related tothe accounting and classification of certain investments in debt and equity securities. The determination of the appropriate classification by us is based on avariety of factors, including management's intent at the time of purchase. As of December 31, 2014 and 2013, all of our investments were classified asavailable-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 our available-for-sale securities as short-term investments, even though the stated maturity date may be one year or more beyond the current balance sheet date. 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. We recognize and report other-than-temporary impairments of our debt securities in accordance with current accounting guidance, which requires that fordebt securities with a decline in fair value below amortized cost basis, an other-than-temporary impairment exists if (a) we have the intent to sell the securityor (b) 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 these conditions is met, werecognize the difference between the amortized cost of the security and its fair value at the impairment measurement date in our consolidated statement ofoperations. If neither of these conditions is met, we must perform additional analyses to evaluate whether the unrealized loss is associated with thecreditworthiness of the security rather than other factors, such as interest rates or market factors. These factors include evaluation of the security, issuer andother factors such as the duration of the period that, and extent to which, the fair value was less than cost basis, the financial health of and business outlookfor the issuer, including industry and sector performance, operational and financing cash flow factors, overall market conditions and trends, underlyingcollateral, whether we have a favorable history in redeeming similar securities at prices at or above fair value, and credit ratings with respect to ourinvestments provided by investments ratings agencies. If we determine from this analysis that we do not expect to receive cash flows sufficient to recover theentire amortized cost of the security, a credit loss exists. In this situation, the impairment is considered other-than-temporary and is recognized in ourconsolidated statement of operations. 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, tradingfrequency, the levels at which market participants indicate their willingness to buy and sell our securities, as reported by market participants, and currentmarket conditions. Using professional judgment and experience, we evaluate and weigh the relevance and significance of all applicable factors to determineif there has been a significant decrease in the volume and level of activity for an asset, group of similar assets or liabilities. Similarly, in order to identifytransactions that are not orderly, we take into consideration the activity in the market which can influence the determination and occurrence of an orderlytransaction. Also, we inquire as to89Table of Contentswhether there may have been restrictions on the marketing of the security to a single or limited number of participants. Where possible, we assess thefinancial condition of the seller to determine whether observed transactions may have been forced. If there is a significant disparity between the trading pricefor a security held by us as compared to the trading prices of similar recent transactions, we consider whether this disparity is an indicator of a disorderlytrade. Using professional judgment and experience, we evaluate and weigh the relevance and significance of all applicable factors to determine if theevidence suggests that a transaction or group of similar transactions is not orderly. Based upon these procedures, we determined that market activity for ourassets appeared normal and that transactions did not appear disorderly as of December 31, 2014 and 2013. Please see Note D, "Investments," to ourconsolidated financial statements included in this Annual Report on Form 10-K for additional information regarding our investments.3. Equity-Based Compensation Under the fair value recognition guidance of equity-based compensation accounting rules, equity-based compensation cost is generally required to bemeasured at the grant date (based upon an estimate of the fair value of the compensation granted) and recorded to expense over the requisite service period,which generally is the vesting period. Because equity-based compensation expense is based on awards ultimately expected to vest, we must make certainjudgments about whether employees and directors will complete the requisite service period. Accordingly, we have reduced the compensation expense beingrecognized for estimated forfeitures. Under current accounting guidance, forfeitures are estimated at the time of grant and revised, if necessary, in subsequentperiods if actual forfeitures differ from those estimates. Forfeitures are estimated based upon historical experience, adjusted for unusual events such ascorporate restructurings, which can result in higher than expected turnover and forfeitures. If factors change and we employ different assumptions in futureperiods, the compensation expense that we record 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 the fairvalue of our restricted stock units ("RSUs") 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 expected volatilityof our stock price over the expected option term, and the expected dividend yield over the expected option term and are subject to various assumptions. Thefair value of awards whose fair values are calculated using the Black-Scholes option pricing model is generally being amortized on a straight-line basis overthe requisite service period and is recognized based on the proportionate amount of the requisite service period that has been rendered during each reportingperiod. The fair value of awards with market conditions is being amortized based upon the estimated derived service period. We believe our valuationmethodologies are appropriate for estimating the fair value of the equity awards we grant to our employees and directors. Our equity award valuations areestimates and thus may not be reflective of actual future results or amounts ultimately realized by recipients of these grants. These amounts, and the amountsapplicable to future quarters, are also subject to future quarterly adjustments based upon a variety of factors, which include, but are not limited to, changes inestimated forfeiture rates and the issuance of new equity-based awards. The fair value of RSUs granted to our employees and directors is determined basedupon the quoted closing market price per share on the date of grant, adjusted for estimated forfeitures.4. Business Combinations We account for acquired businesses using the acquisition method of accounting, under which the total purchase price of an acquisition is allocated to thenet tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values as of the date of acquisition.90Table of ContentsAcquisition-related costs are expensed as incurred. Any excess of the consideration transferred over the estimated fair values of the net assets acquired isrecorded as goodwill. See Note C, "Business Combinations," and Note I, "Goodwill and Intangible Assets, Net," to our consolidated financial statementsincluded in this Annual Report on Form 10-K for additional information. The purchase price allocations are initially prepared on a preliminary basis and are subject to change as additional information becomes availableconcerning the fair value and tax basis of the assets acquired and liabilities assumed. Any adjustments to the purchase price allocations are made as soon aspracticable but no later than one year from the acquisition date. Acquired inventory is recorded at its fair value, which generally requires a step-up adjustment to recognize the inventory at its expected net realizablevalue. The inventory step-up is recorded to cost of sales in our consolidated statements of operations as the related inventory is sold.Goodwill and Intangible Assets Goodwill represents the excess purchase price paid in a business combination over the fair value of identifiable net assets acquired. Goodwill is notamortized, but is reviewed for impairment on an annual basis or more frequently if indicators of impairment are present. We determine whether goodwill maybe impaired by comparing the carrying value of the reporting unit, including goodwill, to the fair value of the reporting unit. If the fair value is less than thecarrying amount, a more detailed analysis is performed to determine whether goodwill is impaired. The impairment loss, if any, is measured as the excess ofthe carrying value of the goodwill over the implied value of the goodwill and is recorded in our consolidated statements of operations. Finite-lived intangible assets are amortized to their estimated residual values over their estimated useful lives and reviewed for impairment if certainevents or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. When such facts and circumstances exist,management compares the projected undiscounted future cash flows associated with the asset over its estimated useful life against the carrying amount. Theimpairment loss, if any, is measured as the excess of the carrying amount of the asset over its fair value. Acquired IPR&D represents the fair value assigned to research and development assets that we acquire that have not been completed at the date ofacquisition. The fair value of IPR&D acquired in a business combination is capitalized on our consolidated balance sheets at the acquisition-date fair valueand is determined by estimating the costs to develop the technology into commercially viable products, estimating the resulting revenue from the projects,and discounting the net cash flows to present value. IPR&D is not amortized, but is reviewed for impairment on an annual basis or more frequently ifindicators of impairment are present, until completion or abandonment of the projects. If we determine that IPR&D becomes impaired or is abandoned, thecarrying value of the IPR&D is written down to its fair value with the related impairment charge recognized in our consolidated statement of operations in theperiod in which the impairment occurs. Upon successful completion of each project and launch of the product, we will make a separate determination of theestimated useful life of the IPR&D intangible asset and the related amortization will be recorded as an expense prospectively over its estimated useful life. The projected discounted cash flow models used to estimate our IPR&D reflect significant assumptions regarding the estimates a market participantwould make in order to evaluate a drug development asset including the following:•Probability of successfully completing clinical trials and obtaining regulatory approval; •Market size, market growth projections, and market share;91 Table of Contents•Estimates regarding the timing of and the expected costs to advance our clinical programs to commercialization; •Estimates of future cash flows from potential product sales; and •A discount rate.Acquisition-related Contingent Consideration Contingent consideration arising from a business combination is included as part of the purchase price and is recognized at fair value as of theacquisition date. Subsequent to the acquisition date, we measure contingent consideration arrangements at fair value for each period until the contingency isresolved. These changes in fair value are recognized in our consolidated statements of operations. Changes in fair values reflect new information about thelikelihood of the payment of the contingent consideration and the passage of time.5. Income Taxes We use the asset and liability method of accounting for deferred income taxes. Under this method, deferred tax assets and liabilities are recognized forthe estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and theirrespective tax bases. A deferred tax asset is established for the expected future benefit of net operating loss ("NOL") and credit carryforwards. Deferred taxassets and liabilities are measured using enacted rates in effect for the year in which those temporary differences are expected to be recovered or settled. Avaluation allowance against net deferred tax assets is required if, based on available evidence, it is more likely than not that some or all of the deferred taxassets will not be realized. Significant judgments, estimates and assumptions regarding future events, such as the amount, timing and character of income,deductions and tax credits, are required in the determination of our provision for income taxes and whether valuation allowances are required against deferredtax assets. In evaluating our ability to recover our deferred tax assets, we consider all available evidence, both positive and negative, including the existenceof taxable temporary differences, our past operating results, the existence of cumulative income in the most recent fiscal years, changes in the business inwhich we operate and our forecast of future taxable income. In determining future taxable income, we are responsible for assumptions utilized including theamount of state and federal operating income, the reversal of temporary differences and the implementation of feasible and prudent tax planning strategies.These assumptions require significant judgment about the forecasts of future taxable income and are consistent with the plans and estimates that we are usingto manage the underlying businesses. As of December 31, 2014, we maintained a partial valuation allowance on the net deferred tax assets as we benefittedonly those deferred tax assets to the extent we had existing taxable temporary differences of the appropriate character turning within the carryforward periodof the existing deferred tax assets. We account for uncertain tax positions using a "more-likely-than-not" threshold for recognizing and resolving uncertain tax positions. The evaluation ofuncertain tax positions is based on factors that include, but are not limited to, changes in tax law, the measurement of tax positions taken or expected to betaken in tax returns, the effective settlement of matters subject to audit, new audit activity and changes in facts or circumstances related to a tax position. Weevaluate uncertain tax positions on a quarterly basis and adjust the level of the liability to reflect any subsequent changes in the relevant facts surroundingthe uncertain positions. Any changes to these estimates, based on the actual results obtained and/or a change in assumptions, could impact our income taxprovision in future periods. Interest and penalty charges, if any, related to unrecognized tax benefits would be classified as a provision for income tax in ourconsolidated statement of operations. See Note K, "Income Taxes," to our consolidated financial statements included in this Annual Report on Form 10-K foradditional information.92Table of ContentsImpact of Recently Issued and Proposed Accounting Pronouncements From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board or other standard setting bodies that areadopted by us as of the specified effective date. Unless otherwise discussed, we believe that the impact of recently issued standards that are not yet effectivewill not have a material impact on our financial position or results of operations upon adoption.Results of Operations—2014 as compared to 2013Revenues Total revenues for 2014 and 2013 consisted of the following (in thousands): Our total revenues in 2014 increased by $43.5 million, or 54%, as compared to 2013, primarily as the result of $22.5 million of Makena net product salesfollowing our November 2014 acquisition of Lumara Health, as discussed above, and a $14.9 million increase in U.S. Feraheme net product sales. In additionand as discussed below, included in our net product sales for 2014 and 2013 was a $1.8 million reduction in our reserves for Feraheme product returns and a$0.6 million reduction of our estimated Medicaid rebate reserve related to prior Feraheme sales, respectively. The following table sets forth customers who represented 10% or more of our total revenues for 2014 and 2013:93 Years Ended December 31, 2014 to 2013 change 2014 2013 $ Change % Change Makena sales, net $22,513 $— $22,513 N/A U.S. Feraheme sales, net 86,282 71,362 14,920 21% License fee and other collaboration revenues 10,886 8,385 2,501 30% Other product sales and royalties 4,703 1,109 3,594 >100% Total $124,384 $80,856 $43,528 54% Years EndedDecember 31, 2014 2013 AmerisourceBergen Drug Corporation 34% 41% McKesson Corporation 21% 24% Cardinal Health, Inc. 15% 16% Takeda Pharmaceuticals Company Limited 11% 11% Table of ContentsMakena Product Sales, Net Makena product sales and product sales allowances and accruals from November 12, 2014 through December 31, 2014 consisted of the following (inthousands):U.S. Feraheme Product Sales, Net U.S. Feraheme product sales and product sales allowances and accruals for 2014 and 2013 consisted of the following (in thousands): Our gross Feraheme U.S. product sales increased by $32.7 million, or 27%, during 2014 as compared to 2013. Of the $32.7 million increase in gross U.S.Feraheme sales, $17.4 million was due to price increases and $15.3 million was due to increased units sold. This increase was partially offset by$19.0 million of additional allowances and accruals in 2014, excluding a $1.8 million reduction in our reserves for Feraheme product returns in 2014 and a$0.6 million reduction of our estimated Medicaid rebate reserve related to prior Feraheme sales in 2013. As a result, total net U.S. Feraheme product salesincreased by $14.9 million, or 21%, during 2014 as compared to 2013.94 Year EndedDecember 31, 2014 Percent of grossMakenaproduct sales Gross Makena product sales $35,718 Less provision for product sales allowances and accruals: Discounts and chargebacks 3,451 10% Government and other rebates 9,665 27% Returns 89 0% Total 13,205 37% Net Makena product sales $22,513 Years Ended December 31, 2014 Percent ofgross U.S.Ferahemeproductsales 2013 Percent ofgross U.S.Ferahemeproduct sales $ Change % Change Gross U.S.Ferahemeproduct sales $152,428 $119,712 $32,716 27% Less provisionfor productsalesallowancesand accruals: Discounts andchargebacks 51,969 34% 37,098 31% Governmentand otherrebates andother fees 15,426 10% 10,868 9% Medicaidrebatereserveadjustment — 0% (568) 0% Returns (1,249) –1% 952 1% Total 66,146 43% 48,350 40% Net U.S. Ferahemeproduct sales $86,282 $71,362 $14,920 21% Table of ContentsProduct Sales Allowances and Accruals Total Feraheme discounts and chargebacks for 2014 were $52.0 million, or 34% of total gross U.S. Feraheme product sales, as compared to$37.1 million, or 31%, in 2013. The increase in total discounts and chargebacks as a percentage of total gross U.S. Feraheme product sales was relatedprimarily to a change in our customer mix. Total Feraheme government and other rebates (excluding any changes in estimates related to Medicaid rebate reserves) were $15.4 million, or 10% oftotal gross U.S. Feraheme product sales, in 2014 as compared to $10.9 million, or 9%, in 2013. The increase in total government and other rebates as apercentage of gross U.S. Feraheme product sales was related primarily to increased sales to clinics and hospitals that had volume or market share contractswith us during 2014 as compared to 2013 and changes in the structure of our performance-based rebate programs. We are subject to reimbursement arrangements with state Medicaid programs for which we estimate and record rebate reserves. We determine ourestimates from Medicaid rebates based on actual product sales data and our historical product claims experience. During 2013, we reduced our estimatedMedicaid rebate reserve related to prior Feraheme sales by approximately $0.6 million based on actual product-specific rebate claims received since the July2009 launch of Feraheme, our expectations of state level activity, and estimated rebate claims not yet submitted. The $0.6 million Medicaid rebate reservesadjustment resulted in an increase to product sales during that period. We generally offer our wholesalers, specialty distributors and other customers a limited right to return our products purchased directly from us,principally based on the product's expiration date which, once packaged is currently five years in the U.S for Feraheme and three years for Makena. Reservesfor product returns are recorded in the period the related revenue is recognized, resulting in a reduction to product sales. We evaluate our estimated productreturns rate each period based on the historical return patterns and known or expected changes in the marketplace. During 2014, we reduced our reserve forFeraheme product returns by approximately $1.8 million, primarily as the result of a lower than expected rate of product returns. As a result, the productreturns provision applied to gross product sales for 2014 was a credit of $1.2 million, resulting in an increase to product sales. There were no significantadjustments to our reserve for product returns in 2013. We regularly assess our Medicaid and product return reserve balances and accrual rates. If we determine in future periods that our actual rebate or returnsexperience is not indicative of expected claims or returns, if our actual claims or returns experience changes, or if other factors affect estimated claims orreturns rates, we may be required to change our reserve or reserve estimates and/or the current rates at which we estimate Medicaid reserves or returns, whichwould affect our earnings in the period of the change and could be significant.95Table of Contents An analysis of the amount of Makena product reserves for 2014 and the amount and change in Feraheme product reserves for 2014 and 2013 is asfollows (in thousands): During 2014 and 2013, we implemented gross price increases for Feraheme, some portion of which were discounted back to customers under volume ormarket share based contracts. When portions of price increases are discounted back to customers, it can have the effect of widening the gross to netadjustment percentage while still resulting in a greater net price per gram. In 2015, we expect discounts, chargebacks and government and other rebates to continue to increase as a percentage of gross sales due to our contractingand discounting strategy and the mix of business for our products and increasing competitive pressure for Feraheme.Healthcare Reform Legislation The Health Care and Education Reconciliation Act of 2010 (the "Healthcare Reform Act") was enacted in the U.S. in March 2010 and includes certaincost containment measures including an increase to the minimum rebates for products covered by Medicaid programs and the extension of such rebates todrugs dispensed to Medicaid beneficiaries enrolled in Medicaid managed care organizations as well as the expansion of the 340B Drug Discount Programunder the Public Health Service Act. This legislation contains provisions that can affect the operational results of companies in the pharmaceutical industryand healthcare related industries, including us, by imposing on them additional costs. The Healthcare Reform Act also requires pharmaceutical manufacturers to pay a prorated share of the overall Branded Drug Fee, based on the dollar valueof its branded prescription drug sales to certain federal programs identified in the legislation. The amount of our annual share of the Branded Drug Fee foreach of the 2014 and 2013 annual periods was less than $0.1 million and these payments were non-deductible for income tax purposes. We have includedthese amounts in selling, general and administrative expense in our consolidated statements of operations. The amount of this annual payment could increasein future years due to both higher eligible Feraheme sales and the increasing amount of the overall fee assessed across manufacturers, but any such increasesare not expected to be material to our results of operations or financial condition. In addition, although the Healthcare Reform Act exempts "orphan drugs"such as Makena from 340B ceiling price requirements, on July 21, 2014, the Health Resources and Services Administration, which administers the 340Bprogram, issued an interpretive rule to implement the orphan drug exception which interprets the orphan drug exception narrowly. It exempts orphan drugsfrom the ceiling price requirements for certain free-standing cancer hospitals, critical access hospitals, rural referral centers and sole community96 Discounts andChargebacks Governmentand OtherRebates Returns Total Balance at January 1, 2013 $1,771 $2,430 $1,018 $5,219 Current provisions relating to sales in current year 37,098 10,868 952 48,918 Adjustments relating to sales in prior years — (568) — (568)Payments/returns relating to sales in current year (34,538) (8,194) — (42,732)Payments/returns relating to sales in prior years (1,648) (1,699) (8) (3,355)Balance at December 31, 2013 $2,683 $2,837 $1,962 $7,482 Current provisions relating to sales in current year 59,372 52,468 1,391 113,231 Adjustments relating to sales in prior years — — (1,780) (1,780)Payments/returns relating to sales in current year (47,729) (10,771) — (58,500)Payments/returns relating to sales in prior years (2,851) (2,126) (229) (5,206)Balance at December 31, 2014 $11,475 $42,408 $1,344 $55,227 Table of Contentshospitals only when the orphan drug is used for its orphan indication. The entities are entitled to purchase orphan drugs at the ceiling price when the orphandrug is not used for its orphan indication. There is ongoing litigation challenging the interpretive rule as inconsistent with the statutory language and it isunclear at this time what, if any, impact the final outcome will have on our future Makena sales. In addition, the number of 340B institutions, which provide drugs at reduced rates, was expanded by the Healthcare Reform Act to include additionalhospitals. As a result, the volume of Feraheme business sold to 340B eligible entities has increased since the implementation of the Healthcare Reform Act.Feraheme sold to 340B eligible entities comprised approximately 17% and 15% of our total Feraheme sales in grams for 2014 and 2013, respectively.Because these institutions are eligible for federal pricing discounts, the revenue realized per unit of Feraheme sold to 340B institutions is lower than fromsome of our other customers. Further, under the sequestration required by the Budget Control Act of 2011, as amended by the American Taxpayer Relief Act of 2012, Medicarepayments for all items and services under Parts A and B incurred on or after April 1, 2013 have been reduced by up to 2%. Therefore, after adjustment fordeductible and co-insurance, the reimbursement rate for physician-administered drugs, including Feraheme, under Medicare Part B has been reduced fromaverage selling price ("ASP") plus 6% to ASP plus 4.3%. Beginning in April 2013, we amended certain of our Feraheme customer contracts to try to partiallyaddress the impact of sequestration on our customers and their patients. These amendments have led to increased discounts and rebates in 2014 as comparedto 2013. We were not materially impacted by healthcare reform legislation during 2014 or 2013. Presently, we have not identified any provisions that couldmaterially impact our business but we continue to monitor ongoing legislative developments and we are assessing what impact recent healthcare reformlegislation will have on our business following the consummation of our acquisition of Lumara Health.License Fee and Other Collaboration Revenues License fee and other collaboration revenues for the 2014 and 2013 consisted of the following (in thousands): Our license fee and other collaboration revenues in 2014 increased by $2.5 million as compared to 2013 primarily as the result of the reimbursement of$1.2 million of certain out-of pocket development costs received from Takeda in connection with the Takeda Termination Agreement and the acceleratedrecognition of $0.3 million of deferred revenues associated with upfront and milestone payments received to date from Takeda and previously deferred. Weexpect to recognize the remaining $44.4 million balance of the deferred revenue within the next twelve months. In addition, during 2014 we recognized$1.0 million of previously deferred revenue from our former partnership with 3SBio, Inc. ("3SBio") as the result of the termination of our license agreement inJanuary 2014. We have no further obligations under the agreement with 3SBio. We expect that our license fee and other collaborative revenues will increase in 2015 as compared to 2014 due to the recognition of the remaining$44.4 million of deferred revenues as a result of the December 2014 termination of the Amended Takeda Agreement.97 Years EndedDecember 31, 2014 to 2013 change 2014 2013 $ Change % ChangeDeferred license fee revenues recognized from Takeda $8,217 $7,896 $321 4%Reimbursement revenues from Takeda 1,669 489 1,180 >100%Deferred revenues recognized from 3SBio termination 1,000 — 1,000 N/ATotal $10,886 $8,385 $2,501 30% Table of ContentsOther Product Sales and Royalties Other product sales and royalties primarily included Feraheme product sales to Takeda and royalties from Takeda as well as net product sales ofMuGard. Other product sales and royalties increased by $3.6 million for 2014 as compared to 2013 due primarily to $3.0 million related to the termination ofthe Amended Takeda Agreement, including the recognition of the remaining $2.5 million balance of previously deferred product sales to Takeda. Inaddition, the increase in other product sales and royalties reflects a $0.9 million increase in MuGard sales. We expect other product sales and royalties to decrease in 2015 as compared to 2014 due to the absence of Feraheme product sales to Takeda in 2015 asa result of the December 2014 termination of the Amended Takeda Agreement.Costs and ExpensesCost of Product Sales Cost of product sales for 2014 and 2013 were as follows (in thousands): Our cost of product sales are primarily comprised of manufacturing costs, costs of managing our contract manufacturers, and costs for quality assuranceand quality control associated with our U.S. product sales, sales of Feraheme to Takeda and the amortization of product related intangible assets andinventory step-up related to the November 2014 acquisition of Lumara Health. The $8.3 million increase in our cost of product sales for 2014 as compared to2013 was attributable to the following factors:•$6.1 million increase related to the amortization of the Lumara Health intangible asset and Makena inventory step-up; •$2.6 million increase in costs related to sales of Feraheme to Takeda, including the accelerated recognition of product costs previouslydeferred as a result of the Takeda Termination Agreement; and •$2.2 million decrease due to a lower average cost per vial of Feraheme sold, partially offset by a $1.7 million increase due to a higher volumeof Feraheme vials sold in 2014. We expect our cost of product sales as a percentage of net product sales and royalties, excluding any impact from the amortization of intangible assets onthe Makena marketed product and MuGard Rights and the amortization of inventory step-up on Makena inventory, to decrease in 2015 as compared to 2014due to the addition of Makena sales to our product portfolio and the resulting lower blended cost to produce our products.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 ascompensation of employees engaged in research and development activities, the manufacture of product needed to support research and development efforts,related costs of facilities, and other general costs related to research and development. Where possible, we track our external costs by98 Years EndedDecember 31, 2014 to 2013 change 2014 2013 $ Change % Change Cost of Product Sales $20,306 $11,960 $8,346 70%Percentage of Net Product Sales and Royalties 18% 17% Table of Contentsmajor project. 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 2014 and 2013 consisted of the following (in thousands): Total research and development expenses incurred in 2014 increased by $3.6 million, or 17%, as compared to 2013. The increase was primarily due to a$4.3 million increase in external research and development costs pertaining to our CKD-related trials during 2014 as well as new costs related to Makenaclinical trials and related manufacturing costs. This increase was partially offset by reduced internal research and development costs of $0.7 million. We expect research and development expenses to increase in 2015 due to the timing of expenses related to our pediatric clinical studies and clinical trialto determine the safety and efficacy of repeat doses of Feraheme for the treatment of IDA in patients with hemodialysis dependent CKD as well as currentclinical trials related to Makena's post approval commitments and its lifecycle management program. In addition, research and development expenses couldincrease further and significantly depending on the outcome of discussions with the FDA on the regulatory path forward for Feraheme in the broad indicationand any resulting clinical trials or development efforts that we may undertake.Research and Development Activities We track our external costs on a major project basis, in most cases through the later of the completion of the last trial in the project or the last submissionof a regulatory filing to the FDA or applicable foreign regulatory body. We do not track our internal costs by project since our research and developmentpersonnel work on a number of projects concurrently and much of our fixed costs benefit multiple projects or our operations in general. The following majorresearch and development projects were ongoing as of December 31, 2014:•Feraheme to treat IDA in CKD patients. This project currently includes the following (a) a completed clinical study evaluating Ferahemetreatment as compared to treatment to another IV iron to support the 2010 marketing authorization application ("MAA") submission; (b) apediatric study that is being conducted as part of our post-approval Pediatric Research Equity99 Years EndedDecember 31, 2014 to 2013 change 2014 2013 $ Change % ChangeExternal Research and Development Expenses Feraheme to treat IDA in CKD patients $8,374 $4,280 $4,094 96%Feraheme manufacturing process development and materials 2,214 2,690 (476) –18%Makenaclinical trial costs 775 — 775 N/AMakena manufacturing process development and materials 928 — 928 N/AOther external costs 980 2,026 (1,046) –52%Total $13,271 $8,996 $4,275 48%Internal Research and Development Expenses Compensation, payroll taxes, benefits and other 9,293 9,419 (126) –1%Equity-based compensation 1,596 2,149 (553) –26%Total $10,889 $11,568 $(679) –6%Total Research and Development Expenses $24,160 $20,564 $3,596 17%Table of ContentsAct requirement to support pediatric CKD labeling of Feraheme; (c) two additional pediatric studies to be completed in accordance with ourapproved pediatric investigation plan to support the MAA submission; and (d) an ongoing multi-center clinical trial to be conducted todetermine the safety and efficacy of repeat doses of Feraheme for the treatment of IDA in patients with hemodialysis dependent CKD,including a treatment arm with iron sucrose using an magnetic resonance imaging sub-analysis to evaluate the potential for iron to accumulatein the body following repeated IV iron administration.•Makena: This project currently includes studies conducted as part of the post-approval commitments under the provisions of the FDA's"Subpart H" Accelerated Approval regulations, including (a) an ongoing efficacy and safety clinical study of Makena; (b) an ongoing follow-up study of the babies born to mothers from the efficacy and safety clinical study; and (c) a completed pharmacokinetic trial of women takingMakena. Through December 31, 2014, we have incurred aggregate external research and development expenses of approximately $36.6 million related to ourcurrent program for the development of Feraheme to treat IDA in CKD patients, described above. We currently estimate that the total remaining external costsassociated with this development project will be in the range of approximately $20.0 million to $30.0 million over the next several years, not including anypotential costs related to any clinical trials or development efforts that we may undertake as an outcome of discussions with the FDA on the regulatory pathforward for Feraheme in the broad indication. From November 12, 2014 through December 31, 2014, we have incurred aggregate external research and development expenses of approximately$0.8 million related to our current program for Makena, described above. We currently estimate that the total remaining external costs associated with thisdevelopment project will be in the range of approximately $20.0 million to $30.0 million over the next several years. In accordance with our policy of tracking external research and development costs through the later of the completion of the last trial in a project or thelast submission of a regulatory filing to the FDA, we discontinued tracking our expenses related to Feraheme to treat IDA regardless of the underlying causein the third quarter of 2013, at which point we had incurred $57.8 million of external research and development expenses. In January 2014, we received acomplete response letter from the FDA in response to our sNDA submission for Feraheme for the treatment of IDA in adult patients who had failed or couldnot use oral iron. We are currently unable to estimate with any certainty the future costs we will incur, if any, related to our project for Feraheme to treat IDAregardless of the cause. In future periods, we may resume the disclosure of such expected future costs as the facts and circumstances warrant.Selling, General and Administrative Expenses Our selling, general and administrative expenses include costs related to our commercial personnel, including our specialty sales force, medicaleducation professionals, pharmacovigilance and safety monitoring and commercial support personnel, costs related to our administrative personnel,including our legal, finance, business development and executive personnel, external and facilities costs required to support the marketing and sale of ourproducts and other costs associated with our corporate activities.100Table of Contents Selling, general and administrative expenses for 2014 and 2013 consisted of the following (in thousands): Total selling, general and administrative expenses incurred in 2014 increased by $12.3 million, or 21%, as compared to 2013 for the following reasons:•$8.4 million increase in compensation, payroll taxes and benefits primarily due to increased costs associated with additional personnel in ourcommercial functions, including the Lumara Health sales force acquired in connection with the November 2014 acquisition of Lumara Health,and increased costs associated with certain of our general and administrative functions, including the addition of Lumara Health employees; •$3.3 million increase in sales and marketing consulting, professional fees, and other expenses primarily due to costs related to Makenamarketing activities since the November 2014 acquisition and increased consulting costs related to the commercialization of MuGard; •$1.9 increase in general and administrative consulting, professional fees and other expenses primarily due to increased costs associated withbusiness development, consulting and other legal-related activities in support of our product portfolio expansion as well as costs associatedwith Lumara Health after the November 2014 acquisition. These increased costs were offset by a number of non-recurring costs in 2013,including $1.9 million of accelerated depreciation expense recognized related to our prior corporate headquarters, $0.6 million of costs relatedto the closure of our Cambridge, Massachusetts manufacturing facility and $0.6 million of costs associated with the relocation of our corporateheadquarters; •$1.8 million decrease to the contingent consideration liability due to a $3.4 million reduction of the MuGard-related contingent considerationprimarily resulting from a 2014 revision of our total projected MuGard sales, partially offset by a $1.6 million increase to the Lumara Health-related contingent consideration; and •$1.2 million increase in equity-based compensation expense due primarily to one-time charges associated with the departure of our formerSenior Vice President of Business Development and Chief Business Officer in June 2014 as well as the expense associated with equity awardsto new and existing employees. We expect that total selling, general and administrative expenses will increase in 2015 as compared to 2014 as a result of the increased headcountfollowing the November 2014 acquisition of Lumara Health and other costs associated with Makena related commercial activities.Acquisition-related costs We incurred approximately $9.5 million of acquisition-related costs in 2014 related to our acquisition of Lumara Health, which primarily representedfinancial advisory fees, legal fees, due diligence and other costs and expenses. During 2013, in connection with the acquisition of the MuGard Rights weincurred approximately $0.8 million of expenses primarily related to professional and legal fees.101 Years EndedDecember 31, 2014 to 2013 change 2014 2013 $ Change % ChangeCompensation, payroll taxes and benefits $31,261 $22,819 $8,442 37%Sales and marketing consulting, professional fees, and other 16,702 13,407 3,295 25%General and administrative consulting, professional fees and other expenses 18,065 16,133 1,932 12%Fair value of contingent consideration liability (681) 1,074 (1,755) –163%Equity-based compensation expense 6,907 5,734 1,173 20%Total $72,254 $59,167 $13,087 22% Table of ContentsRestructuring Expense In connection with the November 2014 Lumara Health acquisition, we initiated a restructuring program in the fourth quarter of 2014, which includedseverance benefits primarily related to former Lumara Health employees. As a result of the restructuring, we recorded charges of approximately $2.0 millionin 2014. We expect to pay substantially all of these restructuring costs during 2015.Other Income (Expense) Other income (expense) for 2014 and 2013 consisted of the following (in thousands): Other income (expense) for 2014 decreased by $15.5 million as compared to 2013 primarily as the result of the recognition of $14.7 million of interestexpense, which was comprised of the amortization of debt discount, contractual interest expense and amortization of debt issuance costs in connection withthe issuance of the $200.0 million of 2.5% convertible senior notes due February 15, 2019 (the "Convertible Notes") and our November 2014 $340.0 millionTerm Loan Facility. In addition, the decrease in other income (expense) reflects 2013 non-recurring gains of $0.5 million in connection with the sale ofCombidex®, a legacy product of the Company, and $0.4 million in connection with the sale of fixed assets related to our previously owned Cambridge,Massachusetts manufacturing facility. We expect our net expense to increase in 2015 as compared to 2014 as a result of recording a full year of interest expense related to our debt obligationsin 2015.Income Tax Benefit The $153.2 million income tax benefit for 2014 reflects a $132.9 million decrease in our valuation allowance due to taxable temporary differencesavailable as a source of income to realize the benefit of certain of our pre-existing deferred tax assets as a result of the November 2014 acquisition of LumaraHealth. As of December 31, 2014, we had approximately $542.3 million of federal NOL carryforwards and up to $242.2 million of state operating losscarryforwards, which expire on various dates through the year 2034. These loss carryforwards may be available to reduce future taxable income, if any, andare subject to review and possible adjustment by the applicable taxing authorities. The available loss carryforwards that may be utilized in any future periodmay be subject to limitation based on historical changes in the ownership of our stock. We have a remaining valuation allowance of $33.6 million on certainof our deferred tax assets, which was recorded based on the uncertainty surrounding utilization of these deferred tax assets. It should be noted that theallocation of the purchase price related to the Lumara Health transaction is subject to adjustment upon finalization of fair valuation procedures and thereforethe impact of the tax benefit associated with the valuation allowance release and deferred tax assets and liabilities (including uncertain tax positions) aresubject to change.Net Income (Loss) For the reasons stated above, we have earned net income of $135.8 million, or $6.06 per basic share and $5.45 per diluted share, for 2014 as compared toa net loss of $9.6 million, or $0.44 per basic102 Years EndedDecember 31, 2014 to 2013 change 2014 2013 $ Change % ChangeInterest expense $(14,697)$— (14,697) N/AInterest and dividend income, net 975 1,051 (76) –7%Gains on sale of asset 103 924 (821) N/AGains (losses) on investments, net 114 40 74 >100%Total $(13,505)$2,015 $(15,520) <(100%)Table of Contentsand diluted share for 2013. Included in the $135.8 million net income during 2014, is a tax benefit of $153.2 million reflecting a $132.9 million decrease inour valuation allowance due to taxable temporary differences related to the acquisition of Lumara Health, as discussed above.Results of Operations—2013 as compared to 2012Revenues Our total revenues for 2013 and 2012 consisted of the following (in thousands): Our total revenues in 2013 decreased by $4.5 million as compared to 2012, primarily as the result of our recognition of approximately $20.0 million in2012 related to milestone payments we received from Takeda in 2012 as compared to $1.8 million recognized in 2013. The net decrease was partially offsetby a $13.1 million increase in U.S. net Feraheme product sales and a $0.5 million increase in other product sales and royalties. Our net product sales for eachof 2013 and 2012 included a $0.6 million reduction of our estimated Medicaid rebate reserve related to prior Feraheme sales, as discussed below. In addition,our net product sales for 2012 included a $2.2 million reduction of our estimated product return reserve, as discussed below. The following table sets forth customers who represented 10% or more of our total revenues for 2013 and 2012:103 Years EndedDecember 31, 2013 to 2012 change 2013 2012 $ Change % ChangeU.S. Feraheme product sales, net $71,362 $58,287 $13,075 22%License fee and other collaboration revenues 8,385 26,475 (18,090) –68%Other product sales and royalties 1,109 616 493 80%Total $80,856 $85,378 $(4,522) –5% Years EndedDecember 31, 2013 2012 AmerisourceBergen Drug Corporation 41% 34% McKesson Corporation 24% 17% Cardinal Health, Inc. 16% 12% Takeda Pharmaceuticals Company Limited 11% 31% Table of ContentsU.S. Feraheme Product Sales, Net U.S. Feraheme product sales and product sales allowances and accruals for 2013 and 2012 consisted of the following (in thousands): Our gross U.S. Feraheme product sales increased by $31.0 million, or 35%, during 2013 as compared to 2012. Of the $31.0 million increase,$21.5 million was due to increased units sold and $9.5 million was due to price increases. This increase was partially offset by $15.7 million of additionalallowances and accruals in 2013, excluding a $2.2 million reduction of our estimated product return reserves in 2012 and a $0.6 million reduction of ourestimated Medicaid rebate reserve related to prior Feraheme sales for each of 2013 and 2012, as described below. As a result of these factors, total net U.S.Feraheme product sales increased by $13.1 million, or 22%, during 2013 as compared to 2012. Total discounts and chargebacks for 2013 were $37.1 million, or 31% of total gross product sales, as compared to $26.5 million, or 30%, in 2012. The1% increase in total discounts and chargebacks as a percentage of total gross U.S. Feraheme product sales was related primarily to a change in our customermix. Total government and other rebates (excluding any changes in estimates related to Medicaid rebate reserves) were $10.9 million, or 9% of total grossU.S. Feraheme product sales, in 2013 as compared to $6.1 million, or 7%, in 2012. The 2% increase in total government and other rebates as a percentage ofgross U.S. Feraheme product sales was related primarily to higher prices charged for Feraheme in 2013 as compared to 2012 and increased sales to clinics andhospitals that had volume or market share contracts with us during 2013 as compared to 2012. During each of 2013 and 2012, we reduced our estimated Medicaid reserve related to prior Feraheme sales by approximately $0.6 million based onactual product-specific rebate claims received since the 2009 launch of Feraheme, our expectations of state level activity, and estimated rebate claims not yetsubmitted. These changes in estimates were reflected as an increase of $0.6 million in our net product sales for 2013 and 2012 and resulted in reductions toour gross to net percentage in these respective periods. During 2012, we reduced our reserve for product returns by approximately $2.2 million, primarily as a result of a lower than expected rate of productreturns as well as the lapse of the product return period on certain manufactured Feraheme lots that carried a two year expiration. As a result, the productreturns provision applied to gross product sales for 2012 was a credit of $1.5 million, resulting104 Years Ended December 31, 2013 Percent ofgross U.S.Ferahemeproductsales 2012 Percent ofgross U.S.Ferahemeproductsales $ Change % Change Gross U.S. Ferahemeproduct sales $119,712 $88,725 $30,987 35% Less provision forproduct salesallowances andaccruals: Discounts andchargebacks 37,098 31% 26,517 30% Governmentand otherrebates 10,868 9% 6,058 7% Medicaidrebatereserveadjustment (568) 0% (621) –1% Returns 952 1% (1,516) –2% Total 48,350 40% 30,438 34% Net U.S. Ferahemeproduct sales $71,362 $58,287 $13,075 22% Table of Contentsin an increase to product sales, as compared to a $1.0 million charge in 2013, resulting in a decrease to product sales. There was no significant adjustment ofour reserve for product returns in 2013. An analysis of the amount of, and change in, reserves for 2013 and 2012 is as follows (in thousands): During 2013 and 2012, we decreased our product sales allowances and accruals by approximately $0.6 million and $2.8 million, respectively, forchanges in estimates relating to sales in prior years, as discussed above.License Fee and Other Collaboration Revenues License fee and other collaboration revenues for 2013 and 2012 consisted of the following (in thousands): Our license fee and other collaboration revenues in 2013 decreased by $18.1 million as compared to 2012 primarily due to milestones received in 2012.Our milestone revenues in 2012 included a $15.0 million milestone payment from Takeda associated with the regulatory approval of Rienso in the EU, whichwe deemed a substantive milestone and recorded in its entirety. In addition, our 2012 milestone revenues included the recognition of a portion of anaggregate of $18.0 million of milestone payments related to the commercial launches of Feraheme/Rienso in the EU and Canada, which we deemed non-substantive milestones and are amortizing into revenue on a cumulative catch up basis using the proportional performance method extended over theoriginal life of the Takeda Agreement. We did not receive any milestone payments in 2013. In 2013 and 2012, we also recorded $7.9 million and$26.1 million, respectively, of revenues associated with the amortization of the upfront payments and the milestone payments we have received since theinception of our agreement with Takeda. As of December 31, 2013, we had approximately $49.3 million remaining in deferred revenues related to the105 Discounts andChargebacks Governmentand OtherRebates Returns Total Balance at January 1, 2012 $1,822 $3,101 $2,842 $7,765 Current provisions relating to sales in current year 26,517 6,152 577 33,246 Adjustments relating to sales in prior years — (715) (2,093) (2,808)Payments/returns relating to sales in current year (24,709) (4,511) — (29,220)Payments/returns relating to sales in prior years (1,859) (1,597) (308) (3,764)Balance at December 31, 2012 $1,771 $2,430 $1,018 $5,219 Current provisions relating to sales in current year 37,098 10,868 952 48,918 Adjustments relating to sales in prior years — (568) — (568)Payments/returns relating to sales in current year (34,538) (8,194) — (42,732)Payments/returns relating to sales in prior years (1,648) (1,699) (8) (3,355)Balance at December 31, 2013 $2,683 $2,837 $1,962 $7,482 Years EndedDecember 31, 2013 to 2012 change 2013 2012 $ Change % ChangeMilestone revenues recognized from Takeda $1,800 $19,950 $(18,150) –91%Deferred license fee revenues recognized from Takeda 6,096 6,096 — 0%Reimbursement revenues from Takeda 489 429 60 14%Total $8,385 $26,475 $(18,090) –68%Table of Contents$61.0 million in upfront payments and the $18.0 million in non-substantive milestone payments received from Takeda. During 2013 and 2012, we recorded $0.5 million and $0.4 million, respectively, of revenues associated with certain out-of pocket development costs inconnection with the Amended Takeda Agreement.Other Product Sales and Royalties As of December 31, 2013, we had approximately $2.4 million in deferred revenue related to product shipped to Takeda, but not yet sold through toTakeda's customers, of which $0.3 million was classified as short-term and $2.1 million was classified as long-term. In addition, we had $2.3 million indeferred cost of product sales, of which $0.3 million was classified as short-term and $2.0 million was classified as long-term. These deferred revenue anddeferred cost of product sales are recorded in our consolidated balance sheet as of December 31, 2013.Costs and ExpensesCost of Product Sales Cost of product sales for 2013 and 2012 were as follows (in thousands): The $2.3 million decrease in our cost of product sales for 2013 as compared to 2012 was attributable to the following factors:•$3.6 million decrease due to costs related to the 2012 closure of our Cambridge, Massachusetts manufacturing facility, including $2.3 millionin accelerated depreciation and impairment costs related to the 2012 impairment of our manufacturing facility and other related productioncosts; •$1.5 million decrease due to a lower average cost per vial sold, partially offset by $1.2 million increase due to a higher volume of Ferahemevials sold in 2013; •$0.8 million increase due to the sale of pre-approval validation lots in 2012, which in accordance with our capitalization policy, excludedcosts that had been expensed prior to FDA approval of the manufacturing process; •$0.5 million increase due to a write-off of inventory that was affected by a voluntary recall of a specific batch of Rienso from the Swiss marketin May 2013; and •$0.3 million increase related to sales of MuGard and sales to our partners.106 Years EndedDecember 31, 2013 to 2012 change 2013 2012 $ Change % Change Cost of Product Sales $11,960 $14,220 $(2,260) –16%Percentage of Net Product Sales and Royalties 17% 24% Table of ContentsResearch and Development Expenses Research and development expenses for 2013 and 2012 consisted of the following (in thousands): Total research and development expenses incurred in 2013 decreased by $12.7 million, or 38%, as compared to 2012. The decrease was primarily due toreduced external research and development costs of $10.1 million in 2013. In addition, 2013 internal research and development costs decreased by$2.7 million as compared to 2012. The $10.1 million, or 53%, decrease in our external research and development expenses was due to a $12.3 million decrease in costs incurred inconnection with our Phase III clinical development program for Feraheme to treat IDA regardless of the underlying cause, which was completed in 2012,partially offset by a $1.1 million increase in our costs associated with our CKD-related trials and a $0.4 million increase in manufacturing processdevelopment and materials-related costs. The $2.7 million, or 19%, decrease in our internal research and development expenses was primarily attributable to the decrease in compensation andrelated benefit costs in 2013 following our 2012 and 2011 corporate restructurings, which resulted in lower headcount in our research and developmentdepartments.107 Years EndedDecember 31, 2013 to 2012 change 2013 2012 $ Change % Change External Research and Development Expenses Feraheme to treat IDA in CKD patients $4,280 $3,226 $1,054 33% Feraheme to treat IDA regardless of the underlying cause 86 12,357 (12,271) –99% Feraheme as a therapeutic agent, general 1,615 1,033 582 56% Feraheme manufacturing process development and materials 2,690 2,297 393 17% Other external costs 325 152 173 >100% Total $8,996 $19,065 $(10,069) –53% Internal Research and Development Expenses Compensation, payroll taxes, benefits and other expenses 9,419 12,237 (2,818) –23% Equity-based compensation expense 2,149 1,994 155 8% Total $11,568 $14,231 $(2,663) –19% Total Research and Development Expenses $20,564 $33,296 $(12,732) –38% Table of ContentsSelling, General and Administrative Expenses Selling, general and administrative expenses for 2013 and 2012 consisted of the following (in thousands): Total selling, general and administrative expenses incurred in 2013 increased by $6.9 million, or 13%, as compared to 2012 for the following reasons:•$0.5 million decrease in compensation, payroll taxes and benefits due to a $0.9 million decrease in one-time retention payments made in2012, partially offset by an increase of $0.4 million in 2013 due to increased headcount; •$1.3 million increase in sales and marketing consulting, professional fees, and other expenses primarily due to increased consulting costsrelated to the acquisition and commercialization of MuGard; •$5.1 million increase in general and administrative consulting, professional fees and other expenses primarily due to $1.9 million ofaccelerated depreciation expense related to certain leasehold improvements and furniture and fixtures associated with our prior office facility,$1.4 million of increased costs associated with consulting, business development and other legal-related activities, $1.1 million adjustment tothe fair value of our contingent consideration liability related to the MuGard Rights, $0.8 million of transaction and other costs related to theacquisition of the MuGard Rights (these $0.8 million costs have been reclassified to acquisition-related costs in our 2014 financialstatements), $0.4 million of costs associated with the relocation of our corporate headquarters, and $0.3 million of costs related to the closureof our Cambridge, Massachusetts manufacturing facility. These increased costs in 2013 were partially offset by $1.6 million in terminationfees which we paid in 2012 to our GastroMARK licensees in connection with the termination our license agreements with them; and •$0.9 million increase in equity-based compensation expense due primarily to the expense associated with equity awards to new and existingemployees.Restructuring Expense During 2012, we initiated corporate restructurings including a workforce reduction plan. The majority of the workforce reduction plan was associatedwith our manufacturing and development infrastructure, including our decision to divest our Cambridge, Massachusetts manufacturing facility. Theworkforce reduction was substantially completed by the end of 2012, and the majority of the related expenses were paid by the end of 2012.108 Years EndedDecember 31, 2013 to 2012 change 2013 2012 $ Change % Change Compensation, payroll taxes and benefits $22,819 $23,273 $(454) –2% Sales and marketing consulting, professional fees, and other expenses 13,407 12,133 1,274 11% General and administrative consulting, professional fees and otherexpenses expenses 17,989 12,860 5,129 40% Equity-based compensation expense 5,734 4,805 929 19% Total $59,949 $53,071 $6,878 13% Table of ContentsOther Income (Expense) Other income (expense) for 2013 and 2012 consisted of the following (in thousands): Other income (expense) for 2013 increased by $2.2 million as compared to 2012 primarily as the result of the non-recurring nature of the June 2012$1.5 million loss realized on the sale of our then-remaining auction rate securities. Additionally, during 2013, we recognized $0.5 million of gains inconnection with the sale of Combidex®, a molecular imaging agent which we were not actively pursuing development, and a $0.4 million gains on the saleof fixed assets related to our Cambridge, Massachusetts manufacturing facility. These increases were partially offset by a decrease in interest and dividendincome as the result of lower average cash balances during 2013 as compared to 2012.Income Tax Benefit We did not recognize any income tax benefit during 2013. We recognized an income tax benefit of $0.9 million during 2012 as the result of ourrecognition of a corresponding income tax expense associated with the increase in value of certain securities as a result of their redemption at prices higherthan the fair market value at which they were recorded. This income tax expense was recorded in other comprehensive loss.Net Loss For the reasons stated above, we incurred a net loss of $9.6 million and $16.8 million, or $0.44 and $0.78 per basic and diluted share, for 2013 and 2012,respectively.Liquidity and Capital ResourcesGeneral We currently finance our operations primarily from the sale of our products, cash generated from our investing activities and the sale of our securities. Weexpect to continue to incur significant expenses as we continue to market, sell and contract for the manufacture of Makena and Feraheme and as we marketand sell MuGard, and as and if we further develop and seek regulatory approval for Feraheme for the treatment of IDA in a broad range of patients in the U.S.For a detailed discussion regarding the risks and uncertainties related to our liquidity and capital resources, please refer to our Risk Factor, "We may needadditional capital to achieve our business objectives and to service our debt obligations, including the Term Loan Facility, our Convertible Notes andcontingent payments that may become due under the Lumara Agreement, which could cause significant dilution to our stockholders."109 Years EndedDecember 31, 2013 to 2012 change 2013 2012 $ Change % ChangeInterest and dividend income, net $1,051 $1,286 $(235) –18%Gains on sale of asset 924 — 924 N/AGains (losses) on investments, net 40 (1,466) 1,506 <(100%)Total $2,015 $(180)$2,195 <(100%)Table of Contents Cash, cash equivalents, investments and certain financial obligations as of December 31, 2014 and 2013 consisted of the following (in thousands): As of December 31, 2014, our investments consisted solely of corporate debt securities. We place our cash in instruments that meet high credit qualityand diversification standards, as specified in our investment policy. Our investment policy also limits the amount of our credit exposure to any one issue orissuer, excluding U.S. government entities and money market funds, and seeks to manage these assets to achieve our goals of preserving principal,maintaining adequate liquidity at all times, and maximizing returns. The $69.6 million decrease in cash, cash equivalents and investments as of December 31, 2014, as compared to December 31, 2013, was primarily due tothe $272.5 million cash payment used to partially fund the acquisition of Lumara Health in November 2014, including the liquidation of approximately$170.4 million of our investments, partially offset by net proceeds of $179.1 million received during 2014 in connection with the issuance of $200.0 millionaggregate principal amount of the Convertible Notes. We issued the Convertible Notes to help facilitate our corporate, clinical and commercial activities, andwhich, along with the convertible bond hedge transactions, are discussed in greater detail in Note S, "Debt," to our consolidated financial statementsincluding in this Annual Report on Form 10-K. In addition, the increase in cash was partially offset by net cash expended to fund our operations and workingcapital.Business Developments In November 2014, we completed our acquisition of Lumara Health for approximately $600.0 million in upfront cash consideration (subject tofinalization of certain adjustments related to Lumara Health's financial position at the time of closing, including adjustments related to working capital, netdebt and transaction expenses as set forth in the Lumara Agreement) and approximately 3.2 million shares of our common stock having a fair value ofapproximately $112.0 million at the time of closing. The Lumara Agreement includes future contingent payments of up to $350.0 million in cash (or uponmutual agreement between us and the former Lumara Health security holders, future contingent payments may also be made in common stock or somecombination thereof) payable by us to the former Lumara Health security holders based upon the achievement of certain sales milestones through calendaryear 2019. See Note C, "Business Combinations," to our consolidated financial statements included in this Annual Report on Form 10-K for additionalinformation.Borrowings and Other Liabilities In November 2014, we financed the $600.0 million cash portion of the Lumara Health acquisition through $327.5 million of net proceeds fromborrowings under a new $340.0 million term loan (the "Term Loan Facility"), as discussed in more detail in Note S, "Debt," to our consolidated financialstatements included in this Annual Report on Form 10-K, and $272.50 million of existing cash on hand.110 December 31, 2014 2013 $ Change % Change Cash and cash equivalents $119,296 $26,986 $92,310 >100% Investments 24,890 186,803 (161,913) –87% Total $144,186 $213,789 $(69,603) –33% Outstanding principal on convertible notes $200,000 $— $200,000 N/A Outstanding principal on term loan 340,000 — 340,000 N/A $540,000 $— $540,000 N/A Table of ContentsThe Term Loan Facility imposes restrictive covenants on us, including a requirement that we reduce our leverage over time, and obligates us to make certainpayments of principal and interest over time. In addition, on February 14, 2014, we issued $200.0 million aggregate principal amount of Convertible Notes, as discussed in more detail in Note S,"Debt," to our consolidated financial statements included in this Annual Report on Form 10-K. We received net proceeds of $193.3 million from the sale ofthe Convertible Notes, after deducting fees and expenses of $6.7 million. We used $14.1 million of the net proceeds from the sale of the Convertible Notes topay the cost of the convertible bond hedges (after such cost was partially offset by the proceeds to us from the sale of warrants in the warrant transactions). Inconnection with the issuance of the Convertible Notes, we incurred approximately $6.7 million of debt issuance costs, which primarily consisted ofunderwriting, legal and other professional fees, and allocated these costs to the liability and equity components based on the allocation of the proceeds. The Convertible Notes are senior unsecured obligations and bear interest at a rate of 2.5% per year, payable semi-annually in arrears on February 15 andAugust 15 of each year, beginning on August 15, 2014. The Convertible Notes will mature on February 15, 2019, unless earlier repurchased or converted.The Convertible Notes will be convertible into cash, shares of our common stock, or a combination thereof, at our election (subject to certain limitations inthe Term Loan Facility), at an initial conversion rate of approximately 36.9079 shares of common stock per $1,000 principal amount of the ConvertibleNotes, which corresponds to an initial conversion price of approximately $27.09 per share of our common stock and represents a conversion premium ofapproximately 35% based on the last reported sale price of our common stock of $20.07 on February 11, 2014, the date the notes offering was priced. We expect that our cash, cash equivalents and investments balances, in the aggregate, will increase due to increased sales from Makena and Ferahemeduring 2015, partially offset by debt-related payments. Our expectation assumes our continued investment in the development and commercialization of ourproducts and the continued pursuit of business development transactions. We believe that our cash, cash equivalents and investments as of December 31,2014, and the cash we currently expect to receive from sales of our products, earnings on our investments, will be sufficient to satisfy our cash flow needs forat least the next twelve months.Year Ended December 31, 2014Cash flows from operating activities During 2014, our $11.4 million of cash provided by operations was attributable principally to our net operating income of approximately$135.8 million, adjusted for the following:•Non-cash operating items of ($128.2) million, including deferred income taxes, equity-based compensation expense, a write-down ofinventory, amortization of debt discount and debt issuance costs, amortization of premium/discount on purchased securities, change in fairvalue of contingent consideration, depreciation and amortization, and other non-cash items; •$0.3 million of cash provided by operating activities due to increases in accounts receivable, inventories and prepaid assets; •$10.7 million of cash provided by operating activities due to increases in accounts payable and accrued expenses; •$9.2 million of cash used in operating activities due to decreases in deferred revenues and other long-term liabilities; and •$2.0 million of cash provided by operating activities due to decreases in other long-term assets.111Table of Contents Our net income of $135.8 million was primarily the result of the recognition of a $153.2 million income tax benefit resulting from our merger withLumara Health, partially offset by our costs to operate our business, including compensation to employees, commercialization expenses, such as marketingand promotion costs, costs to manufacture our products, research and development costs, including costs associated with our clinical trials, general andadministrative costs, and interest from our debt obligations, partially offset by net product sales and collaboration revenues.Cash flows from investing activities Cash used in investing activities in 2014 was $432.9 million and was primarily attributable to the $595.6 million net cash used to fund the acquisition ofLumara Health, partially offset by proceeds from the sales and maturities of our investments, including the liquidation of $170.4 million to partially fund theacquisition of Lumara Health as well as a $2.9 million change in restricted cash following the return of escrowed funds related to a 2013 businessdevelopment transaction that we did not complete.Cash flows from financing activities Cash provided by financing activities in 2014 was $513.5 million and was primarily attributable to the $327.5 million proceeds from the Term LoanFacility, which were used to partially fund the acquisition of Lumara Health and $177.8 million in net proceeds received from the issuance of the ConvertibleNotes in February 2014. In addition, we received $8.5 million in proceeds from the exercise of stock options.Year Ended December 31, 2013Cash flows from operating activities During 2013 our use of $6.8 million of cash in operations was attributable principally to our net loss of approximately $9.6 million, adjusted for thefollowing:•Non-cash operating items of $15.9 million including equity-based compensation expense, depreciation and amortization, amortization ofpremium/discount on purchased securities, change in fair value of contingent consideration, gains on the sale of assets, a write-down ofinventory, and other non-cash items; •An aggregate decrease in deferred revenues and other long-term liabilities of $6.9 million; •An aggregate decrease of $5.7 million in accounts payable and accrued expenses; •An aggregate decrease of $1.5 million in accounts receivable, prepaid assets and inventories; and •An increase of $2.0 million in other long-term assets. Our net loss of $9.6 million was primarily the result of compensation to employees, commercialization expenses, including marketing and promotioncosts, research and development costs, including costs associated with our clinical trials, and general and administrative costs, partially offset by net productsales and collaboration revenues.Cash flows from investing activities Cash used in investing activities in 2013 was $13.9 million and was primarily attributable to the purchases of investments, partially offset by proceedsfrom the sales and maturities of our investments. In addition, we used $3.4 million of available cash and cash equivalents to purchase the MuGard Rights andrelated inventory, $2.9 million was held in an escrow account related to a business development transaction that we did not complete, and approximately$1.6 million to purchase leasehold improvements and furniture and fixtures for our new corporate headquarters. We also112Table of Contentsreceived $2.5 million from the sale of our Cambridge, Massachusetts manufacturing facility and related fixtures and equipment and $0.5 million from the saleof Combidex®, a molecular imaging agent which we were not actively pursuing development.Cash flows from financing activities Cash provided by financing activities in 2013 was $1.4 million and was primarily attributable to the proceeds from the exercise of stock options.Contractual Obligations Our long-term contractual obligations include commitments and estimated purchase obligations entered into in the normal course of business. Theseinclude commitments related to our facility leases, purchases of inventory and other purchases related to our products, debt obligations, non-cancellableoperating leases, and other purchase obligations. Future lease obligations and purchase commitments, as of December 31, 2014, are as follows (in thousands):Operating and Facility Lease Obligations We have entered into certain operating leases, including certain office equipment and automobile leases, which expire through 2017. In June 2013, we entered into a lease agreement with BP Bay Colony LLC (the "Landlord") for the lease of certain real property located at 1100 WinterStreet, Waltham, Massachusetts (the "Waltham Premises") for use as our principal executive offices. Beginning in September 2013, the initial term of the leaseis five years and two months with one five-year extension term at our option. In June 2013, we also entered into an Assignment and Assumption of Lease (the "Assignment Agreement") with Shire Human Genetic Therapies, Inc.("Shire") effecting the assignment to Shire of the right to occupy our former office space located at 100 Hayden Avenue, Lexington, Massachusetts (the "PriorSpace"). Under the Assignment Agreement, the assignment to Shire became effective on September 21, 2013, the date of our departure from the Prior Space,and Shire assumed all of our obligations as the tenant of the Prior Space. The Assignment Agreement also provided for the conveyance of furniture and otherpersonal property by us to Shire. As a result, our former lease obligations related to our prior office space are no longer shown in the table above. In connection with our acquisition of Lumara Health, we have assumed the lease of certain real property located at 16640 Chesterfield Grove Road,Chesterfield, Missouri (the "St. Louis Premises"), which we are currently using as temporary office space for Lumara Health employees as they relocate to theWaltham premises. Beginning in September 2013, the initial term of the lease is five years and two months. In addition to base rent, we are also required topay a proportionate share of the Landlord's operating costs. We are attempting to sublease the St. Louis Premises and if successful, future operating leasecommitments will be partially offset by proceeds received from the sublease.113 Payment due by period Total Less than 1 year 1-3 years 3-5 years More than 5 years Facility leaseobligations $5,543 $1,451 $2,918 $1,174 $— Purchasecommitments 4,780 4,780 — — — Term loan 433,973 61,213 140,110 125,238 107,413 Convertible 2.5%senior notes 222,500 5,000 10,000 207,500 — Operating leaseobligations,excludingfacility lease 1,514 642 872 — — Total $668,308 $73,085 $153,899 $333,912 $107,413 Table of ContentsPurchase Commitments During 2014, we entered into various agreements with third parties for which we had remaining purchase commitments of approximately $4.8 million asof December 31, 2014. These agreements principally related to certain purchase orders for the production of Feraheme, certain outsourced commercialactivities, manufacturing commitments, our information technology infrastructure and other operational activities.Debt Obligations Our long-term debt obligations reflect our obligations under the Convertible Notes and Term Loan Facility to pay interest on the $540.0 millionaggregate principal amount and to make scheduled principal payments on the Term Loan Facility and principal payments at maturity or upon conversion, inthe case of the Convertible Notes.Contingent Consideration Related to Business Combinations In connection with our acquisition of Lumara Health, we agreed to pay up to an additional $350.0 million to the former Lumara Health security holdersbased on the achievement of certain sales milestones. Due to the contingent nature of these milestone payments, we cannot predict the amount or timing ofsuch payments and have therefore not included them in the table above. See Note C, "Business Combinations," for more information on the Lumara Healthacquisition and related milestone payments.Other Funding Commitments As of December 31, 2014, we had several ongoing clinical studies in various clinical trial stages. Our most significant clinical trial expenditures were toclinical research organizations ("CROs"). The contracts with CROs are generally cancellable, with notice, at our option. We have recorded accrued expensesin our consolidated balance sheet of approximately $1.9 million representing expenses incurred with these organizations as of December 31, 2014, net of anyamounts prepaid to these CROs. As 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 our executive officers and certain other employees, which provide for salarycontinuation payments and, in certain instances, the acceleration of the vesting of certain equity awards to such individuals in the event that the individual isterminated other than for cause, as defined in the applicable employment agreements or arrangements.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 whom weenter into agreements. For further discussion of how this may affect our business, see Note Q, "Commitments and Contingencies," to our consolidatedfinancial statements included in this Annual Report on Form 10-K.114Table of ContentsLegal Proceedings For detailed information on our legal proceedings, see Note Q, "Commitments and Contingencies," to our consolidated financial statements included inthis Annual Report on Form 10-K.Off-Balance Sheet Arrangements As of December 31, 2014, 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: Interest Rate Risk As of December 31, 2014 and 2013, our investments equaled $24.9 million and $186.8 million, respectively, and were invested in corporate debtsecurities, commercial paper and U.S. treasury and government agency securities. Our investments meet high credit quality and diversification standards, asspecified in our investment policy. Our investment policy also limits the amount of our credit exposure to any one issue or issuer, excluding U.S. governmententities, and seeks to manage these assets to achieve our goals of preserving principal, maintaining adequate liquidity at all times, and maximizing returns.These investments are subject to interest rate risk. The modeling technique used measures the change in fair values arising from an immediate hypotheticalshift in market interest rates and assumes that ending fair values include principal plus accrued interest. If market interest rates for comparable investmentswere to increase immediately and uniformly by 50 basis points, or one-half of a percentage point, from levels as of December 31, 2014 and 2013, this wouldhave resulted in a hypothetical decline in fair value of our investments of approximately $0.1 million and $1.3 million, respectively, and if market interestrates for comparable investments were to decrease immediately and uniformly by 50 basis points, or one-half of a percentage point, from levels as ofDecember 31, 2014 and 2013, this would have resulted in a hypothetical increase in fair value of our investments of approximately $0.1 million and$1.2 million, respectively. These amounts are determined by considering the impact of the hypothetical interest rate movements on our available-for-saleinvestment portfolios. This analysis does not consider the effect of credit risk as a result of the changes in overall economic activity that could exist in suchan environment.Equity Price RiskConvertible Notes Our Convertible Notes include conversion and settlement provisions that are based on the price of our common stock at conversion or at maturity of thenotes. The amount of cash we may be required to pay is determined by the price of our common stock. The fair values of our Convertible Notes are dependenton the price and volatility of our common stock and will generally increase or decrease as the market price of our common stock changes. On February 14, 2014, we issued $200.0 million aggregate principal amount of Convertible Notes. The Convertible Notes are senior unsecuredobligations and bear interest at a rate of 2.5% per year, payable semi-annually in arrears on February 15 and August 15 of each year, beginning on August 15,2014. The Convertible Notes will mature on February 15, 2019, unless earlier repurchased or converted. The Convertible Notes (which are currentlyconvertible) will be convertible into cash, shares of our common stock, or a combination thereof, at our election (subject to certain limitations in the TermLoan Facility), at an initial conversion rate of approximately 36.9079 shares of common stock per $1,000 principal amount of the Convertible Notes, whichcorresponds to an initial conversion price of approximately $27.09 per share of our common stock and represents a conversion premium of approximately35% based on the last reported sale price of our common stock of $20.07 on115Table of ContentsFebruary 11, 2014, the date the notes offering was priced. As of December 31, 2014, the fair value of the Convertible Notes was $332.0 million.Convertible Bond Hedge and Warrant Transactions In order to reduce the potential dilution to our common stock and/or offset cash payments due upon conversion of the Convertible Notes, in February2014 we entered into convertible bond hedge transactions covering approximately 7.4 million shares of our common stock underlying the $200.0 millionaggregate principal amount of the Convertible Notes. The convertible bond hedges have an exercise price of approximately $27.09 per share, subject toadjustment upon certain events, and are exercisable when and if the Convertible Notes are converted. If upon conversion of the Convertible Notes, the priceof our common stock is above the exercise price of the convertible bond hedges, each of JPMorgan Chase Bank, National Association, London Branch,Morgan Stanley & Co. International plc and Royal Bank of Canada will deliver shares of our common stock and/or cash with an aggregate valueapproximately equal to the difference between the price of our common stock at the conversion date and the exercise price, multiplied by the number ofshares of our common stock related to the convertible bond hedges being exercised. In February 2014, we also entered into separate warrant transactions relating to, in the aggregate, approximately 7.4 million shares of our common stockunderlying the $200.0 million aggregate principal amount of the Convertible Notes. The initial exercise price of the warrants is $34.12 per share, subject toadjustment upon certain events, which is 70% above the last reported sale price of our common stock of $20.07 on February 11, 2014. The warrants wouldseparately have a dilutive effect to the extent that the market value per share of our common stock, as measured under the terms of the warrants, exceeds theapplicable exercise price of the warrants.116Table of Contents ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA: Index To Consolidated Financial Statements117Management's Annual Report on Internal Control over Financial Reporting 118 Report of Independent Registered Public Accounting Firm 119 Consolidated Balance Sheets—as of December 31, 2014 and 2013 121 Consolidated Statements of Operations—for the years ended December 31, 2014, 2013 and 2012 122 Consolidated Statements of Comprehensive Income (Loss)—for the years ended December 31, 2014, 2013 and 2012 123 Consolidated Statements of Stockholders' Equity—as of December 31, 2014, 2013 and 2012 124 Consolidated Statements of Cash Flows—for the years ended December 31, 2014, 2013 and 2012 125 Notes to Consolidated Financial Statements 126 Table 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 in Rule 13a-15(f)under the Securities and Exchange Act of 1934, as amended. Our internal control over financial reporting is a process designed under the supervision of ourprincipal executive officer and principal financial officer to provide reasonable assurance regarding the reliability of financial reporting and the preparationof our financial statements for external reporting purposes in accordance with U.S. generally accepted accounting principles. Because of its inherentlimitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to futureperiods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies orprocedures may deteriorate. Our management, including our principal executive officer and principal financial officer, assessed the effectiveness of our internal control over financialreporting as of December 31, 2014 based on the framework in Internal Control—Integrated Framework issued by the Committee of SponsoringOrganizations of the Treadway Commission (COSO) in 2013. Our assessment did not include evaluating the effectiveness of internal control over financialreporting of recently acquired Lumara Health Inc. or Lumara Health Inc.'s subsidiaries, the consolidated results of which are included in our fiscal year 2014consolidated financial statements and constituted 7% of total assets as of December 31, 2014 and 18% of total revenue for the year then ended. Based on thisassessment, management concluded that our internal control over financial reporting was effective as of December 31, 2014. The effectiveness of our internal control over financial reporting as of December 31, 2014, has been audited by PricewaterhouseCoopers LLP, anindependent registered public accounting firm, as stated in their report which is included below.118Table of Contents REPORT 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 at December 31, 2014,and 2013, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2014 in conformity withaccounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedules listed in theaccompanying index present fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financialstatements. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2014,based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission(COSO) in 2013. The Company's management is responsible for these financial statements and financial statement schedules, for maintaining effectiveinternal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanyingManagement's Annual Report on Internal Control over Financial Reporting. Our responsibility is to express opinions on these financial statements, on thefinancial statement schedules, and on the Company's internal control over financial reporting based on our integrated audits. We conducted our audits inaccordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform theaudits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control overfinancial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting theamounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluatingthe overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal controlover financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internalcontrol based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believethat 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's internalcontrol over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately andfairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary topermit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the companyare being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regardingprevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financialstatements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluationof effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree ofcompliance with the policies or procedures may deteriorate. As described in Management's Annual Report on Internal Control over Financial Reporting, management has excluded Lumara Health Inc. from itsassessment of internal control over financial119Table of Contentsreporting as of December 31, 2014 because it was acquired by the Company in a purchase business combination during 2014. We have also excluded LumaraHealth Inc. from our audit of internal control over financial reporting. Lumara Health Inc. is a wholly-owned subsidiary whose total assets and total revenuesrepresent 7% and 18%, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2014.Boston, MassachusettsFebruary 17, 2015120Table of Contents AMAG 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.121 As of December 31, 2014 2013 ASSETS Current assets: Cash and cash equivalents $119,296 $26,986 Investments 24,890 186,803 Accounts receivable, net 38,172 6,842 Inventories 40,610 17,217 Receivable from collaboration 4,518 278 Deferred tax assets 32,094 — Prepaid and other current assets 14,456 3,396 Restricted cash — 2,883 Total current assets 274,036 244,405 Property and equipment, net 1,519 1,846 Goodwill 205,824 — Intangible assets, net 887,908 16,844 Restricted cash 2,397 400 Other long-term assets 17,249 1,964 Total assets $1,388,933 $265,459 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $7,301 $2,629 Accrued expenses 80,811 22,266 Current portion of long-term debt 34,000 — Deferred revenues 44,376 8,226 Total current liabilities 166,488 33,121 Long-term liabilities: Long-term debt, net 293,905 — Convertible 2.5% senior notes, net 167,441 — Acquisition-related contingent consideration 217,984 13,609 Deferred income tax liability 77,619 — Deferred revenues — 44,534 Other long-term liabilities 5,543 1,787 Total liabilities 928,980 93,051 Commitments and contingencies 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; 25,599,550 and21,772,571 shares issued and outstanding at December 31, 2014 and 2013, respectively 256 218 Additional paid-in capital 793,757 641,941 Accumulated other comprehensive loss (3,617) (3,491)Accumulated deficit (330,443) (466,260)Total stockholders' equity 459,953 172,408 Total liabilities and stockholders' equity $1,388,933 $265,459 Table of Contents AMAG PHARMACEUTICALS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE DATA) The accompanying notes are an integral part of these consolidated financial statements.122 Years Ended December 31, 2014 2013 2012 Revenues: U.S. product sales, net $108,795 $71,362 $58,287 License fee and other collaboration revenues 10,886 8,385 26,475 Other product sales and royalties 4,703 1,109 616 Total revenues 124,384 80,856 85,378 Costs and expenses: Cost of product sales 20,306 11,960 14,220 Research and development expenses 24,160 20,564 33,296 Selling, general and administrative expenses 72,254 59,167 53,071 Acquistion-related costs 9,478 782 — Restructuring expenses 2,023 — 2,215 Total costs and expenses 128,221 92,473 102,802 Operating loss (3,837) (11,617) (17,424)Other income (expense): Interest expense (14,697) — — Interest and dividend income, net 975 1,051 1,286 Gains on sale of assets 103 924 — Gains (losses) on investments, net 114 40 (1,466)Total other income (expense) (13,505) 2,015 (180)Net income (loss) before income taxes (17,342) (9,602) (17,604)Income tax benefit 153,159 — 854 Net income (loss) $135,817 $(9,602)$(16,750)Net income (loss) per share: Basic $6.06 $(0.44)$(0.78)Diluted $5.45 $(0.44)$(0.78)Weighted average shares outstanding used to compute net income (loss) per share: Basic 22,416 21,703 21,392 Diluted 25,225 21,703 21,392 Table of Contents AMAG PHARMACEUTICALS, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (IN THOUSANDS) The accompanying notes are an integral part of these consolidated financial statements.123 Years Ended December 31, 2014 2013 2012 Net income (loss) $135,817 $(9,602)$(16,750)Other comprehensive income (loss): Unrealized gains (losses) on securities: Holding gains (losses) arising during period, net of tax (191) (268) 129 Reclassification adjustment for (gains) losses included in net income (loss) 65 24 1,466 Net unrealized gains (losses) on securities (126) (244) 1,595 Total comprehensive income (loss) $135,691 $(9,846)$(15,155)Table of Contents AMAG PHARMACEUTICALS, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (IN THOUSANDS) Common Stock AccumulatedOtherComprehensiveIncome (Loss) AdditionalPaid-inCapital AccumulatedDeficit TotalStockholders'Equity Shares Amount Balance atDecember 31,2011 21,306 213 625,133 (4,842) (439,908) 180,596 Net sharesissued inconnectionwith theexercise ofstock optionsand restrictedstock units 178 2 98 — — 100 Shares issued inconnectionwithemployeestockpurchase plan 23 — 270 — — 270 Non-cashequity-basedcompensation — — 6,986 — — 6,986 Unrealizedgains onsecurities, netof tax of$0.9 million — — — 1,595 — 1,595 Net loss — — — — (16,750) (16,750)Balance atDecember 31,2012 21,507 215 632,487 (3,247) (456,658) 172,797 Net sharesissued inconnectionwith theexercise ofstock optionsand restrictedstock units 252 3 1,274 — — 1,277 Shares issued inconnectionwithemployeestockpurchase plan 14 — 176 — — 176 Non-cashequity-basedcompensation — — 8,004 — — 8,004 Unrealizedlosses onsecurities — — — (244) — (244)Net loss — — — — (9,602) (9,602)Balance atDecember 31,2013 21,773 218 641,941 (3,491) (466,260) 172,408 Equitycomponent ofConvertibleNotes, net ofissuancecosts — — 36,907 — — 36,907 Purchase ofconvertiblebond hedges,net of tax — — (39,760) — — (39,760)Sale of warrants — — 25,620 — — 25,620 Net sharesissued inconnectionwith theacquisition ofLumaraHealth 3,210 32 111,932 — — 111,964 The accompanying notes are an integral part of these consolidated financial statements.124Net sharesissued inconnectionwith theexercise ofstock optionsand vestingof restrictedstock units 617 6 8,492 — — 8,498 Non-cashequity-basedcompensation — — 8,625 — — 8,625 Unrealizedlosses onsecurities — — — (126) — (126)Net income — — — — 135,817 135,817 Balance atDecember 31,2014 25,600 $256 $793,757 $(3,617)$(330,443)$459,953 Table of Contents AMAG PHARMACEUTICALS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) The accompanying notes are an integral part of these consolidated financial statements.125 Years Ended December 31, 2014 2013 2012 Cash flows from operating activities: Net income (loss) $135,817 $(9,602)$(16,750)Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 6,984 3,085 3,084 Impairment loss on assets held for sale — — 1,100 Amortization of premium/discount on purchased securities 2,080 2,758 2,808 Write-down of inventory to net realizable value 1,309 2,175 1,822 Non-cash equity-based compensation expense 8,625 8,004 7,024 Amortization of debt discount and debt issuance costs 6,870 — — Non-cash income tax benefit — — (854)Gains on sale of assets (103) (924) — (Gains) losses on investments, net (114) (40) 1,466 Change in fair value of contingent consideration (681) 1,074 — Deferred income taxes (153,159) — — Changes in operating assets and liabilities: Accounts receivable, net 3,588 (432) (478)Inventories (1,360) (1,040) 4,069 Receivable from collaboration (4,239) (15) 165 Prepaid and other current assets 2,331 2,817 75 Other long-term assets 1,964 (1,964) — Accounts payable and accrued expenses 10,694 (5,730) (12,195)Deferred revenues (8,384) (6,694) 7,912 Other long-term liabilities (808) (246) (405)Total adjustments (124,403) 2,828 15,593 Net cash provided by (used in) operating activities 11,414 (6,774) (1,157)Cash flows from investing activities: Acquisition of Lumara Health, net of acquired cash (595,602) — — Proceeds from sales or maturities of investments 223,568 106,030 133,061 Purchase of investments (63,747) (115,046) (149,406)Acquisition of MuGard Rights and inventory — (3,434) — Proceeds from sale of assets 103 2,970 — Change in restricted cash 2,883 (2,823) — Capital expenditures (147) (1,632) (47)Net cash (used in) investing activities (432,942) (13,935) (16,392)Cash flows from financing activities: Payment of contingent consideration (270) (51) — Proceeds from term loan 327,509 — — Proceeds from issuance of convertible 2.5% senior notes 200,000 — — Payment of debt issuance costs (7,760) — — Proceeds from issuance of warrants 25,620 — — Purchase of convertible bond hedges (39,760) — — Proceeds from the exercise of stock options 8,499 1,277 98 Proceeds from the issuance of common stock under ESPP — 176 270 Net cash provided by financing activities 513,838 1,402 368 Net increase (decrease) in cash and cash equivalents 92,310 (19,307) (17,181)Cash and cash equivalents at beginning of the year 26,986 46,293 63,474 Cash and cash equivalents at end of the year $119,296 $26,986 $46,293 Supplemental data of cash flow information: Interest paid on convertible 2.5% senior notes $2,500 $— $— Non-cash investing activities: Accrued construction in progress $— $— $228 Fair value of acquisition-related contingent consideration $205,000 $13,700 $— Fair value of common stock issued in connection with the Lumara Health acquisition $111,964 $— $— Table of Contents AMAG PHARMACEUTICALS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS A. DESCRIPTION OF BUSINESS AMAG Pharmaceuticals, Inc., a Delaware corporation, was founded in 1981. We are a specialty pharmaceutical company that markets Makena®(hydroxyprogesterone caproate injection), Feraheme® (ferumoxytol) Injection for Intravenous ("IV") use and MuGard® Mucoadhesive Oral Wound Rinse. On November 12, 2014, we acquired Lumara Health Inc. ("Lumara Health"), a privately held pharmaceutical company specializing in women's health, forapproximately $600.0 million in upfront cash consideration (subject to finalization of certain adjustments related to Lumara Health's financial position at thetime of closing, including adjustments related to net working capital, net debt and transaction expenses) and approximately 3.2 million shares of ourcommon stock having a fair value of approximately $112.0 million at the time of closing (the "Lumara Agreement"). The Lumara Agreement includes futurecontingent payments of up to $350.0 million in cash (or upon mutual agreement between us and the former Lumara Health security holders, future contingentpayments may also be made in common stock or some combination thereof) payable by us to the former Lumara Health security holders based upon theachievement of certain sales milestones through calendar year 2019. In connection with the acquisition of Lumara Health, we acquired Makena, a progestinindicated to reduce the risk of preterm birth in women with a singleton pregnancy who have a history of singleton spontaneous preterm birth. We sell Makenato specialty pharmacies and distributors, who, in turn sell Makena to healthcare providers, hospitals, government agencies and integrated delivery systems.Additional details regarding the acquisition of Lumara Health can be found in Note C, "Business Combinations," to our consolidated financial statementsincluded in this Annual Report on Form 10-K. We also market and sell Feraheme, which was approved for marketing in the U.S. in June 2009 by the U.S. Food and Drug Administration ("FDA") for useas an IV iron replacement therapy for the treatment of iron deficiency anemia ("IDA") in adult patients with chronic kidney disease ("CKD"). We began sellingFeraheme in the U.S. in July 2009 through our commercial organization, including a specialty sales force. We sell Feraheme to authorized wholesalers andspecialty distributors, who in turn, sell Feraheme to healthcare providers who administer Feraheme primarily within hospitals, hematology and oncologycenters, and nephrology clinics. Outside of the U.S., ferumoxytol has been granted marketing approval in the European Union ("EU"), Canada and Switzerland for use as an IV ironreplacement therapy for the treatment of IDA in adult patients with CKD. In March 2010, we entered into a License, Development and CommercializationAgreement (the "Takeda Agreement"), which was amended in June 2012 (the "Amended Takeda Agreement") with Takeda Pharmaceutical Company Limited("Takeda"). On December 29, 2014, we entered into an agreement with Takeda to terminate the Amended Takeda Agreement and we will regain all worldwidedevelopment and commercialization rights for Feraheme following the transfer of marketing authorizations (the "Takeda Termination Agreement").Additional details regarding the Takeda Termination Agreement can be found in Note R, "Collaborative Agreements". Under the Amended TakedaAgreement, Takeda had an exclusive license to market and sell ferumoxytol in the EU, Canada and Switzerland, as well as certain other geographic territories.The EU marketing authorization for Rienso is valid in the 28 EU Member States as well as in Iceland, Liechtenstein and Norway. We have recently come to amutual decision with Takeda to initiate withdrawal of the marketing authorization for Rienso in the EU and Switzerland. We are currently assessing thecommercial opportunity for Feraheme in Canada. The trade name for ferumoxytol in Canada is Feraheme and outside of the U.S. and Canada the trade nameis Rienso. We are subject to risks common to companies in the pharmaceutical industry including, but not limited to (as such risks pertain to our business) ourdependence on the success of our product126Table of Contentsportfolio and maintaining commercialization of our products, including Makena and Feraheme; intense competition, including from generic products;maintaining the proprietary nature of our technology; our dependence upon third party manufacturers; our reliance on other third parties in our business,including to conduct our clinical trials and undertake our product distribution; our reliance on and the extent of reimbursement from third parties for the useof our products, including Makena's high Medicaid reimbursement concentration; the impact of Makena's loss of orphan drug exclusivity in February 2018;competition from compounded pharmacies; our ability to implement Makena's lifecycle management program; perceptions related to pricing and access forMakena; post-marketing commitments for Makena; limitations on Feraheme sales given its narrow CKD indication and the potential impact on sales of anyactual or perceived safety problems; our ability to receive regulatory approval for Feraheme in the broader IDA indication and Feraheme's ability to competein such market even if regulatory approval is pursued and received; our customer concentration, especially with regard to Feraheme; the impact of thetermination of our license arrangement with Takeda and our commercialization efforts, if any and including cessation thereof, for Feraheme outside of theU.S., including the impact on U.S. sales; uncertainties regarding federal and state legislative initiatives; potential inability to obtain raw or other materials;our potential inadvertent failure to comply with federal, state or foreign healthcare fraud and abuse laws, marketing disclosure laws or other federal, state orforeign laws and regulations; uncertainties regarding reporting and payment obligations under government pricing programs and our level of indebtedness,our access to sufficient capital, the availability of net operating loss carryforwards and other tax assets, employee retention, our ability to be profitable in thefuture, the potential fluctuation of our operating results, potential differences between actual future results and the estimates or assumptions used by us inpreparation of our consolidated financial statements, the volatility of our stock price, potential litigation, including securities and product liability suits andthe impact of market overhang on our stock price. Throughout this Annual Report on Form 10-K, AMAG Pharmaceuticals, Inc. and our consolidated subsidiaries are collectively referred to as "theCompany," "AMAG," "we," "us," or "our." Unless the context suggests otherwise, references to "Feraheme" refer to both Feraheme (the trade name forferumoxytol in the U.S. and Canada) and Rienso (the trade name for ferumoxytol in the EU and Switzerland).B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESUse of Estimates and Assumptions The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the U.S. ("GAAP") requiresmanagement to make certain estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and the relateddisclosure of contingent assets and liabilities. The most significant estimates and assumptions are used to determine amounts and values of, but are notlimited to: revenue related to product sales and collaboration agreements; product sales allowances and accruals; potential other-than-temporary impairmentof investments; acquisition date fair value and subsequent fair value estimates used to assess impairment of long-lived assets, including goodwill, in-processresearch and development ("IPR&D") and other intangible assets; contingent consideration; debt obligations; accrued expenses; income taxes and equity-based compensation expense. Actual results could differ materially from those estimates.Basis of Presentation and Principles of Consolidation The accompanying consolidated financial statements have been prepared in conformity with GAAP and include the accounts of our wholly ownedsubsidiaries. All intercompany balances and transactions have been eliminated in consolidation. As of November 12, 2014 (the "Lumara Acquisition Date"),the127Table of Contentsoperating results of Lumara Health have been consolidated with ours. See Note C, "Business Combinations," for additional information.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 having anoriginal maturity of less than three months. We consider all highly liquid investments with a maturity of three months or less as of the acquisition date to becash equivalents. At December 31, 2014, substantially all of our cash and cash equivalents were held in either commercial bank accounts or money marketfunds.Investments We account for and classify our investments as either "available-for-sale," "trading," or "held-to-maturity," in accordance with current guidance related tothe accounting and classification of certain investments in debt and equity securities. The determination of the appropriate classification by us is based on avariety of factors, including management's intent at the time of purchase. As of December 31, 2014 and 2013, all of our investments were classified asavailable-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 our available-for-sale securities as short-term investments, even though the stated maturity date may be one year or more beyond the current balance sheet date. 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. We recognize and report other-than-temporary impairments of our debt securities in accordance with current accounting guidance, which requires that fordebt securities with a decline in fair value below amortized cost basis, an other-than-temporary impairment exists if (a) we have the intent to sell the securityor (b) 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 these conditions is met, werecognize the difference between the amortized cost of the security and its fair value at the impairment measurement date in our consolidated statement ofoperations. If neither of these conditions is met, we must perform additional analyses to evaluate whether the unrealized loss is associated with thecreditworthiness of the security rather than other factors, such as interest rates or market factors. These factors include evaluation of the security, issuer andother factors such as the duration of the period that, and extent to which, the fair value was less than cost basis, the financial health of and business outlookfor the issuer, including industry and sector performance, operational and financing cash flow factors, overall market conditions and trends, underlyingcollateral, whether we have a favorable history in redeeming similar securities at prices at or above fair value, and credit ratings with respect to ourinvestments provided by investments ratings agencies. If we determine from this analysis that we do not expect to receive cash flows sufficient to recover theentire amortized cost of the security, a credit loss exists. In this situation, the impairment is considered other-than-temporary and is recognized in ourconsolidated statement of operations.Fair Value Measurements 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 (an exitprice) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs.128Table of Contents Current accounting guidance establishes a hierarchy used to categorize how fair value is measured and which is based on three levels of inputs, of whichthe 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, quoted pricesin markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of theassets 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 and liabilities that are required to be measured at fair value on a recurring basis, including our cash equivalents, investments, andacquisition-related contingent consideration. 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, tradingfrequency, the levels at which market participants indicate their willingness to buy and sell our securities, as reported by market participants, and currentmarket conditions. Using professional judgment and experience, we evaluate and weigh the relevance and significance of all applicable factors to determineif there has been a significant decrease in the volume and level of activity for an asset, group of similar assets or liabilities. Similarly, in order to identifytransactions that are not orderly, we take into consideration the activity in the market which can influence the determination and occurrence of an orderlytransaction. Also, we inquire as to whether there may have been restrictions on the marketing of the security to a single or limited number of participants.Where possible, we assess the financial condition of the seller to determine whether observed transactions may have been forced. If there is a significantdisparity between the trading price for a security held by us as compared to the trading prices of similar recent transactions, we consider whether this disparityis an indicator of a disorderly trade. Using professional judgment and experience, we evaluate and weigh the relevance and significance of all applicablefactors to determine if the evidence suggests that a transaction or group of similar transactions is not orderly. Based upon these procedures, we determinedthat market activity for our assets appeared normal and that transactions did not appear disorderly as of December 31, 2014 and 2013.Inventory Inventory is 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 initialapproval from the FDA or other regulatory agencies, we expense costs relating to the production of inventory in the period incurred. After such time as theproduct receives initial regulatory approval, we begin to capitalize the inventory costs related to the product. We continue to expense costs associated withclinical trial material as research and development expense. 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 product sales. Thedetermination of whether inventory costs will be realizable requires estimates by management of future expected inventory requirements, based on salesforecasts. Once packaged, Feraheme currently has a shelf-life of five years in the U.S. and between two129Table of Contentsand three years outside of the U.S. and Makena has a shelf-life of three years. As a result of comparison to internal sales forecasts, we expect to fully realizethe carrying value of our current Feraheme and Makena finished goods inventory. If actual market conditions are less favorable than those projected bymanagement, inventory write-downs may be required. Charges for inventory write-downs are not reversed if it is later determined that the product is saleable.Restricted Cash As of December 31, 2014 and 2013, we classified $2.4 million and $3.3 million as restricted cash, respectively. The $2.4 million in our December 31,2014 restricted cash balances includes $2.0 million held in a restricted fund previously established by Lumara Health in connection with its Chapter 11 planof reorganization to pay potential claims against its former directors and officers and a $0.4 million security deposit delivered to the landlord of our Waltham,Massachusetts headquarters in the form of an irrevocable letter of credit. Included in the $3.3 million restricted cash balance as of December 31, 2013 was a$2.9 million escrow payment related to a business development transaction that we did not complete as well as the $0.4 million security deposit related toour Waltham, Massachusetts headquarters described above. The escrow payment was returned to us in January 2014 and as such was classified as short-termas of December 31, 2013.Property and Equipment Property and equipment are recorded at cost and depreciated when placed into service using the straight-line method based on their estimated usefullives. Our laboratory and production equipment and furniture and fixtures are being depreciated over five years. Furniture, fixtures, and leaseholdimprovements associated with our facility lease are being depreciated over the shorter of their useful lives or the remaining life of the original lease(excluding optional lease renewal terms). Costs for capital assets not yet placed in service are capitalized on our balance sheets and will be depreciated in accordance with the above guidelinesonce placed into service. Costs for maintenance and repairs are expensed as incurred. Upon sale or other disposition of property and equipment, the cost andrelated depreciation are removed from the accounts and any resulting gain or loss is charged to our consolidated statement of operations. Long-lived assets tobe held and used are evaluated for impairment whenever events or changes in circumstances indicate that the carrying value of the asset may not berecoverable. Determination of recoverability is based on an estimate of undiscounted future cash flows resulting from the use of the asset (asset group) and itseventual disposition. In the event such cash flows are not expected to be sufficient to recover the carrying amount of the assets, the assets are written down totheir estimated fair values. Assets classified as held for sale are no longer subject to depreciation and are recorded at the lower of carrying value or estimatednet realizable value.Business Combinations We account for acquired businesses using the acquisition method of accounting, which requires that assets acquired and liabilities assumed berecognized at their estimated fair values as of the acquisition date. Acquisition-related costs are expensed as incurred. Any excess of the considerationtransferred over the estimated fair values of the net assets acquired is recorded as goodwill.Acquisition-Related Contingent Consideration Contingent consideration arising from a business combination is included as part of the purchase price and is recognized at fair value as of theacquisition date. Subsequent to the acquisition date, we measure contingent consideration arrangements at fair value for each period until the contingency isresolved. These changes in fair value are recognized in our consolidated statements of operations.130Table of ContentsChanges in fair values reflect new information about the likelihood of the payment of the contingent consideration and the passage of time.Goodwill and Intangible Assets Goodwill represents the excess purchase price paid in a business combination over the fair value of identifiable net assets acquired. Goodwill is notamortized, but is reviewed for impairment on an annual basis or more frequently if indicators of impairment are present. We determine whether goodwill maybe impaired by comparing the carrying value of the reporting unit, including goodwill, to the fair value of the reporting unit. If the fair value is less than thecarrying amount, a more detailed analysis is performed to determine whether goodwill is impaired. The impairment loss, if any, is measured as the excess ofthe carrying value of the goodwill over the implied value of the goodwill and is recorded in our consolidated statements of operations. Finite-lived intangible assets are amortized to their estimated residual values over their estimated useful lives and reviewed for impairment if certainevents or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. When such facts and circumstances exist,management compares the projected undiscounted future cash flows associated with the asset over its estimated useful life against the carrying amount. Theimpairment loss, if any, is measured as the excess of the carrying amount of the asset over its fair value. Acquired IPR&D represents the fair value assigned to research and development assets that we acquire that have not been completed at the date ofacquisition. The fair value of IPR&D acquired in a business combination is capitalized on our consolidated balance sheet at the acquisition-date fair value.IPR&D is not amortized, but is reviewed for impairment on an annual basis or more frequently if indicators of impairment are present, until completion orabandonment of the projects. If we determine that IPR&D becomes impaired or is abandoned, the carrying value of the IPR&D is written down to its fair valuewith the related impairment charge recognized in our consolidated statement of operations in the period in which the impairment occurs. Upon successfulcompletion of each project and launch of the product, we will make a separate determination of the estimated useful life of the IPR&D intangible asset andthe related amortization will be recorded as an expense prospectively over its estimated useful life. The projected discounted cash flow models used to estimate our IPR&D reflect significant assumptions regarding the estimates a market participantwould make in order to evaluate a drug development asset including the following:•Probability of successfully completing clinical trials and obtaining regulatory approval; •Market size, market growth projections, and market share; •Estimates regarding the timing of and the expected costs to advance our clinical programs to commercialization; •Estimates of future cash flows from potential product sales; and •a discount rate.Patents We expense all patent-related costs as incurred.Revenue Recognition and Related Sales Allowances and Accruals We recognize revenue from the sale of our products as well as license fee and other collaboration revenues, including milestone payments, other productsale revenues, and royalties we receive from our131Table of Contentslicensees. We recognize revenue 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.U.S. Product Sales, Net We record product sales allowances and accruals related to prompt payment discounts, chargebacks, government and other rebates, distributor,wholesaler and group purchasing organization ("GPO") fees, and product returns as a reduction of revenue in our consolidated statement of operations at thetime product sales are recorded. Calculating these gross to net sales adjustments involves estimates and judgments based primarily on actual product salesdata, forecasted customer buying patterns, and market research data related to utilization rates by various end-users. In addition, we also monitor ourdistribution channel to determine whether additional allowances or accruals are required based on inventory in our sales channel. An analysis of our U.S. product sales allowances and accruals for the years ended December 31, 2014, 2013 and 2012 is as follows (in thousands): The increases in discounts and chargebacks and government and other rebates primarily reflects the addition of the Makena product to our portfolio as aresult of the November 2014 acquisition of Lumara Health. In addition, as discussed below, we reduced our reserve for Feraheme product returns byapproximately $1.8 million and $2.2 million during 2014 and 2012, respectively.Classification of U.S. Product Sales Allowances and Accruals Product sales allowances and accruals are primarily comprised of both direct and indirect fees, discounts and rebates and provisions for estimated productreturns. Direct fees, discounts and rebates are contractual fees and price adjustments payable to wholesalers, specialty distributors and other customers thatpurchase products directly from us. Indirect fees, discounts and rebates are contractual price adjustments payable to healthcare providers and organizations,such as certain physicians, clinics, hospitals, GPOs, and dialysis organizations that typically do not purchase products directly from us but rather fromwholesalers and specialty distributors. In accordance with guidance related to accounting for fees and consideration given by a vendor to a customer,including a reseller of a vendor's products,132 Years Ended December 31, 2014 2013 2012 Provision for U.S. product sales allowances and accruals Discounts and chargebacks $55,420 $37,098 $26,517 Government and other rebates 25,091 10,868 6,058 Medicaid rebate reserve adjustment — (568) (621)Returns (1,160) 952 (1,516)Total provision for U.S. product sales allowances and accruals $79,351 $48,350 $30,438 Total gross U.S. product sales $188,146 $119,712 $88,725 Total provision for U.S. product sales allowances and accruals as a percent of totalgross U.S. product sales 42% 40% 34% Table of Contentsthese fees, discounts and rebates are presumed to be a reduction of the selling price. Product sales allowances and accruals are based on definitive contractualagreements or legal requirements (such as Medicaid laws and regulations) related to the purchase and/or utilization of the product by these entities and arerecorded in the same period that the related revenue is recognized. We estimate product sales allowances and accruals using either historical, actual and/orother data, including estimated patient usage, applicable contractual rebate rates, contract performance by the benefit providers, other current contractual andstatutory requirements, historical market data based upon experience of our products and other products similar to them, specific known market events andtrends such as competitive pricing and new product introductions, current and forecasted customer buying patterns and inventory levels, and the shelf life ofour products. As part of this evaluation, we also review changes to federal and other legislation, changes to rebate contracts, changes in the level of discounts,and changes in product sales trends. Although allowances and accruals are recorded at the time of product sale, certain rebates are typically paid out, onaverage, up to three months or longer after the sale. Allowances against receivable balances primarily relate to prompt payment discounts, provider chargebacks and certain government agency rebates andare recorded at the time of sale, resulting in a reduction in product sales revenue and the reporting of product sales receivables net of allowances. Accrualsrelated to Medicaid and provider volume rebates, wholesaler and distributor fees, GPO fees, other discounts to healthcare providers and product returns arerecorded at the time of sale, resulting in a reduction in product sales revenue and the recording of an increase 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 the invoice,generally thirty days. Because we anticipate that those customers who are offered this discount will take advantage of the discount, we accrue 100% of theprompt payment discount, at the time of sale, based on the gross amount of each invoice. 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 our products to wholesalers andthe sales price ultimately paid to wholesalers under fixed price contracts by third-party payers, including governmental agencies. We determine ourchargeback estimates based on actual product sales data and forecasted customer buying patterns. Actual chargeback amounts are determined at the time ofresale to the qualified healthcare provider, and we generally issue credits for such amounts within several weeks of receiving notification from the wholesaler.Estimated chargeback amounts are recorded at the time of sale, and we adjust the allowance quarterly to reflect actual experience.Government and Other Rebates Government and other rebate reserves relate to our reimbursement arrangements with state Medicaid programs, and contractual or performance rebateagreements with certain classes of trade. We determine our estimates for Medicaid rebates, if applicable, based on actual product sales data and our historicalproduct claims experience. In estimating these reserves, we provide for a Medicaid rebate associated with both those expected instances where Medicaid willact as the primary insurer as well as in those instances where we expect Medicaid will act as the secondary insurer. For rebates associated with reachingdefined performance goals, we determine our estimates using actual product sales data and forecasted customer buying and utilization patterns. Rebateamounts generally are invoiced quarterly and are paid in arrears, and we expect to pay such amounts within several weeks of notification by the Medicaid orprovider entity. Estimated government and other rebates are recorded at the time of sale and, with the exception of Medicaid as discussed below, we adjustthe accrual quarterly to reflect actual experience.133 Table of Contents During 2013 and 2012, we revised our estimated Feraheme Medicaid reserve rate based on actual product-specific rebate claims received since the 2009launch of Feraheme, our expectations of state level activities, and estimated rebate claims not yet submitted, which resulted in a reduction of our thenestimated Medicaid rebate reserve related to prior period Feraheme sales of $0.6 million in each of the respective years. These changes in estimates werereflected as an increase in our net product sales for 2013 and 2012 and resulted in reductions to our gross to net percentages in those periods. The reductionof our estimated Medicaid rebate reserve had an impact of $0.03 per basic and diluted share for each of the respective years. We regularly assess our Medicaidreserve balance and the rate at which we accrue for claims against product sales. If we determine in future periods that our actual rebate experience is notindicative of expected claims, or if actual claims experience changes, or if other factors affect estimated claims rates, we may be required to adjust our currentMedicaid accumulated reserve estimate, which would affect net product sales in the period of the adjustment 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 product purchased during the prior month or quarter andare usually paid by us within several weeks of our receipt of an invoice from the wholesaler or distributor, as the case may be. Fees under our arrangementswith GPOs are usually based upon member purchases during the prior quarter and are generally billed by the GPO within 30 days after period end. Currentaccounting standards related to consideration given by a vendor to a customer, including a reseller of a vendor's products, specify that cash considerationgiven by a vendor to a customer is presumed to be a reduction of the selling price of the vendor's products or services and therefore should be characterized asa reduction of revenue. Consideration should be characterized as a cost incurred if we receive, or will receive, an identifiable benefit (goods or services) inexchange 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 theforegoing conditions to be characterized as a cost, we have characterized these fees as a reduction of revenue and have included them in government andother rebates in the table above. 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 at the time of sale, based on the contracted price invoiced to the customer. We adjust the accrual quarterly toreflect actual experience.Product Returns Consistent with industry practice, we generally offer our wholesalers, specialty distributors and other customers a limited right to return our productsbased on the product's expiration date. Currently the expiration dates for Feraheme in the U.S., Makena and MuGard are five years, three years and threeyears, respectively. We estimate product returns based on the historical return patterns and known or expected changes in the marketplace. We track actualreturns by individual production lots. Returns on lots eligible for credits under our returned goods policy are monitored and compared with historical returntrends and rates. We expect that wholesalers and healthcare providers will not stock significant inventory due to the cost of the product, the expense to store our products,and/or that our products are readily available for distribution. We record an estimate of returns at the time of sale. If necessary, our estimated rate of returnsmay be adjusted for actual return experience as it becomes available and for known or expected changes in the marketplace. During 2014, we reduced ourreserve for Feraheme product returns by approximately $1.8 million, primarily as a result of a lower than expected rate of product returns. We did notsignificantly adjust our reserve for product returns during 2013. During 2012, we reduced our reserve for Feraheme product returns by approximately$2.2 million, primarily as a result of a lower than expected rate of product returns as well as the lapse of the product return period on134Table of Contentscertain manufactured Feraheme lots. The reduction of our reserve had an impact of increasing our 2014 net income by $0.12 and $0.14 per basic and dilutedshare, respectively, and by $0.10 per basic and diluted share in 2012. To date, returns of Feraheme have been relatively limited; however, returns experiencemay change over time. As we continue to gain more historical experience with actual returns and continue to gain additional experience with return rates forMakena, we may be required to make a future adjustment to our product returns estimate, which would result in a corresponding change to our net productsales in the period of adjustment and could be significant.Other Product Sales and Royalties Other product sales and royalties primarily included Feraheme product sales to Takeda and royalties from Takeda as well as net product sales ofMuGard. Prior to the Takeda Termination Agreement, we recorded all product sales of Feraheme sold to Takeda in deferred revenues in our consolidatedbalance sheet. We recognized these deferred revenues, and the associated cost of product sales, in our consolidated statement of operations at the time Takedareported to us that sales had been made to its customers. At December 31, 2014, as the result of terminating the Amended Takeda Agreement, we recognizedthese remaining balances of deferred revenues and associated cost of product sales.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 on astraight-line basis. Under this model, revenue is generally recognized in an amount equal to the lesser of the amount due under the agreements or an amountbased on the proportional performance to date. In cases where project costs or other performance metrics are not estimable but there is an established contractperiod, revenues are recognized on a straight-line basis over the term of the relevant agreement. In cases where we are reimbursed for certain research anddevelopment costs associated with our collaboration agreements and where we are acting as the principal in carrying out these services, any reimbursementpayments are recorded in license fee and other collaboration revenues in our consolidated statement of operations to match the costs that we incur during theperiod in which we perform those services. Nonrefundable payments and fees are recorded as deferred revenue upon receipt and may require deferral ofrevenue recognition to future periods.Multiple Element Arrangements and Milestone Payments We evaluate revenue from arrangements that have multiple elements to determine whether the components of the arrangement represent separate units ofaccounting as defined in the accounting guidance related to revenue arrangements with multiple deliverables. Under current accounting guidance, whichgoverns any agreements that contain multiple elements that are either entered into or materially modified subsequent to January 1, 2011, companies arerequired to establish the fair value of undelivered products and services based on a separate revenue recognition process using management's best estimate ofthe selling price for an undelivered item when there is no vendor-specific objective evidence or third-party evidence to determine the fair value of thatundelivered item. Agreements entered into prior to January 1, 2011, that have not been materially modified are accounted for under previous accountingguidance, which provides that an element of a contract can be accounted for separately if the delivered elements have standalone value and the fair value ofall undelivered elements is determinable. If an element is considered to have standalone value but the fair value of any135Table of Contentsof the undelivered 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. Significant management judgment is required in determining what elements constitute deliverables andwhat deliverables or combination of deliverables should be considered units of accounting. 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 reasonably estimatethe level of effort required to complete our performance obligations under an arrangement and whether such performance obligations are provided on a best-efforts basis. To the extent we cannot reasonably estimate our performance obligations, we recognize revenue on a straight-line basis over the period weexpect to complete our performance obligations. Significant management judgment is required in determining the level of effort required under anarrangement and the period over which we are expected to complete our performance obligations under an arrangement. We may have to revise our estimatesbased 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 milestone considerationas revenue in the period in which the milestone is achieved only if it meets the following additional criteria:•The milestone consideration received is commensurate with either the level of effort required to achieve the milestone or the enhancement ofthe value of the item delivered as a result of a specific outcome resulting from our performance to achieve the milestone; •The milestone is related solely to our past performance; and •The milestone consideration is reasonable relative to all deliverables and payment terms in the arrangement.There is significant judgment involved in determining whether a milestone meets all of these criteria. For milestones that do not meet the above criteria andare therefore not considered substantive milestones, we recognize that portion of the milestone payment equal to the percentage of the performance periodcompleted at the time the milestone is achieved and the above conditions are met. The remaining portion of the milestone will be recognized over theremaining performance period 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. Amountsnot expected to be recognized within the next 12 months are classified as long-term deferred revenue.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 ascompensation of employees engaged in research and development activities, the manufacture of product needed to support research and development efforts,related costs of facilities, and other general costs related to research and development. Manufacturing costs are generally expensed as incurred until a producthas received the necessary initial regulatory approval.136Table of ContentsAdvertising Costs Advertising costs are expensed as incurred and are included in selling, general and administrative expenses in our consolidated statements of operations.Advertising costs, including promotional expenses and costs related to trade shows were $2.1 million, $1.9 million and $1.8 million for the years endedDecember 31, 2014, 2013 and 2012, respectively.Shipping and Handling Costs We utilize two third-party logistics providers, both of which are subsidiaries of one of our distribution customers, to provide us with various shippingand handling services related to sales of our products. As we receive an identifiable benefit and we can reasonably estimate the fair value of this benefit, wehave recorded $0.3 million, $0.3 million and $0.2 million as a selling, general and administrative expense during 2014, 2013 and 2012, respectively.Equity-Based Compensation Under the fair value recognition guidance of equity-based compensation accounting rules, equity-based compensation cost is generally required to bemeasured at the grant date (based upon an estimate of the fair value of the compensation granted) and recorded to expense over the requisite service period,which generally is the vesting period. Because equity-based compensation expense is based on awards ultimately expected to vest, we must make certainjudgments about whether employees and directors will complete the requisite service period. Accordingly, we have reduced the compensation expense beingrecognized for estimated forfeitures. Under current accounting guidance, forfeitures are estimated at the time of grant and revised, if necessary, in subsequentperiods if actual forfeitures differ from those estimates. Forfeitures are estimated based upon historical experience and adjusted for unusual events such ascorporate restructurings, which can result in higher than expected turnover and forfeitures. If factors change and we employ different forfeiture rateassumptions in future periods, the compensation expense that we record in the future may differ significantly from what we have recorded in the currentperiod. We estimate the fair value of equity-based compensation involving stock options based on the Black-Scholes option pricing model. We estimate the fairvalue of our restricted stock units ("RSUs") 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 expected volatilityof our stock price over the expected option term, and the expected dividend yield over the expected option term and are subject to various assumptions. Thefair value of awards whose fair values are calculated using the Black-Scholes option pricing model is generally being amortized on a straight-line basis overthe requisite service period and is recognized based on the proportionate amount of the requisite service period that has been rendered during each reportingperiod. The fair value of awards with market conditions is being amortized based upon the estimated derived service period, even if the market condition isnever achieved. The fair value of awards with performance conditions is being amortized over the requisite service period if we determine that it is probablethat the performance condition will be achieved. We believe our valuation methodologies are appropriate for estimating the fair value of the equity awardswe grant to our employees and directors. Our equity award valuations are estimates and thus may not be reflective of actual future results or amountsultimately realized by recipients of these grants. These amounts, and the amounts applicable to future quarters, are also subject to future quarterlyadjustments based upon a variety of factors, which include, but are not limited to, changes in estimated forfeiture rates and the issuance of new equity-basedawards. The fair value of service-based RSUs granted to our employees and directors is determined based upon the quoted closing market price per share onthe date of grant, adjusted for estimated forfeitures.137Table of ContentsIncome Taxes Deferred tax assets and deferred tax liabilities are recognized based on temporary differences between the financial reporting and tax basis of assets andliabilities using future enacted rates. A valuation allowance is recorded against deferred tax assets if it is more likely than not that some or all of our deferredtax assets will not be realized. We account for uncertain tax positions using a "more-likely-than-not" threshold for recognizing and resolving uncertain tax positions. The evaluation ofuncertain tax positions is based on factors that include, but are not limited to, changes in tax law, the measurement of tax positions taken or expected to betaken in tax returns, the effective settlement of matters subject to audit, new audit activity and changes in facts or circumstances related to a tax position. Weevaluate uncertain tax positions on a quarterly basis and adjust the level of the liability to reflect any subsequent changes in the relevant facts surroundingthe uncertain positions. Any changes to these estimates, based on the actual results obtained and/or a change in assumptions, could impact our income taxprovision in future periods. Interest and penalty charges, if any, related to unrecognized tax benefits would be classified as a provision for income tax in ourconsolidated statement of operations.Concentrations and Significant Customer Information Financial instruments which potentially subject us to concentrations of credit risk consist principally of cash and cash equivalents, investments, andaccounts receivable. As of December 31, 2014, our cash, cash equivalents and investments amounted to approximately $144.2 million. We currently investour excess cash primarily in corporate debt securities. As of December 31, 2014, we had approximately $77.3 million of our total $119.3 million cash andcash equivalents balance invested in institutional money market funds, of which $60.3 million was invested in a single fund. Our operations are located solely within the U.S. We are focused principally on developing, manufacturing, and commercializing Makena and Ferahemeand commercializing MuGard. We perform ongoing credit evaluations of our customers and generally do not require collateral. The following table sets forthcustomers who represented 10% or more of our total revenues for 2014, 2013 and 2012: In addition, approximately 26%, 30% and 32% of our Feraheme end-user demand in 2014, 2013 and 2012, respectively, was generated by members of asingle GPO with which we have contracted. Revenues from customers outside of the U.S. amounted to approximately 12%, 11% and 32% of our totalrevenues for 2014, 2013 and 2012, respectively, and were principally related to collaboration revenue recognized in connection with the Amended TakedaAgreement with Takeda, which is headquartered in Japan. We are currently solely dependent on a single supply chain for Feraheme drug substance and drug product and a single supply chain for Makena drugproduct. We are exposed to a significant loss of revenue from the sale of Feraheme and Makena if our suppliers and/or manufacturers cannot fulfill demandfor any reason.138 Years EndedDecember 31, 2014 2013 2012 AmerisourceBergen Drug Corporation 34% 41% 34% McKesson Corporation 21% 24% 17% Cardinal Health, Inc. 15% 16% 12% Takeda Pharmaceuticals Company Limited 11% 11% 31% Table of ContentsComprehensive Income (Loss) The current accounting guidance related to comprehensive income (loss) requires us to display comprehensive income (loss) and its components as partof our consolidated financial statements. Our comprehensive income (loss) consists of net income (loss) and other comprehensive income (loss). Othercomprehensive income (loss) includes changes in equity that are excluded from net income (loss), which for all periods presented in these financialstatements related to unrealized holding gains and losses on available-for-sale investments, net of tax.Basic and Diluted Net Income (Loss) per Share We compute basic net income (loss) per share by dividing net income (loss) by the weighted average number of common shares outstanding during therelevant period. Diluted net income (loss) per common share has been computed by dividing net income (loss) by the diluted number of shares outstandingduring the period. Except where the result would be antidilutive to net income (loss), diluted net income (loss) per common share would be computedassuming the impact of the conversion of the $200.0 million of 2.5% convertible senior notes due February 15, 2019 (the "Convertible Notes"), the exerciseof outstanding stock options, and the vesting of RSUs. We have a choice to settle the conversion obligation under the Convertible Notes in cash, shares or any combination of the two. Pursuant to certaincovenants in our Term Loan Facility (as defined in Note S, "Debt" below), which we entered into to partially fund the acquisition of Lumara Health, we maybe restricted from settling conversion in whole or in part with cash unless certain conditions in the Term Loan Facility are satisfied, including a first lienleverage ratio. Therefore, after November 12, 2014 we utilized the if-converted method, which assumes the conversion of the Convertible Notes and reflectsthe elimination of the interest expense recorded from November 12, 2014 through December 31, 2014. The conversion premium is reflected in the calculationof diluted earnings per share as if it were a freestanding written call option on our shares. The impact of the conversion premium has been considered in thecalculation of diluted net income per share by applying the weighted average of the closing price of our common stock, over a certain number of dayspursuant to the terms of the Convertible Notes, to calculate the number of shares issuable under the conversion premium. In addition, in February 2014, inconnection with the issuance of the Convertible Notes, we entered into convertible bond hedges. The convertible bond hedges are not included for purposesof calculating the number of diluted shares outstanding, as their effect would be anti-dilutive. The convertible bond hedges are generally expected, but notguaranteed, to reduce the potential dilution and/or offset the cash payments we are required to make upon conversion of the Convertible Notes. See Note S,"Debt," for additional information. The dilutive effect of the stock options and RSUs has been calculated using the treasury stock method. The components of basic and diluted net income (loss) per share were as follows (in thousands, except per share data):139 Years Ended December 31, 2014 2013 2012 Net income (loss) $135,817 $(9,602)$(16,750)Weighted average common shares outstanding (basic) 22,416 21,703 21,392 Effect of dilutive securities (in shares): Stock options and restricted stock units 520 — — Convertible 2.5% senior notes 2,289 — — Shares used in calculating dilutive net income (loss) per share 25,225 21,703 21,392 Net income (loss) per share: Basic $6.06 $(0.44)$(0.78)Diluted $5.45 $(0.44)$(0.78)Table of Contents The following table sets forth the potential common shares issuable upon the exercise of outstanding options, the vesting of RSUs and warrants (prior toconsideration of the treasury stock method), which were excluded from our computation of diluted net income (loss) per share because their inclusion wouldhave been anti-dilutive (in thousands): During 2014, the average common stock price was below the exercise price of the warrants.Reclassifications Certain amounts in prior periods have been reclassified in order to conform to the current period presentation.C. BUSINESS COMBINATIONS As part of our strategy to expand our portfolio with additional commercial-stage products, in November 2014, we acquired Lumara Health and itsproduct Makena. In addition, in June 2013, we entered into the MuGard License Agreement pursuant to which we obtained an exclusive, royalty-bearinglicense, with the right to grant sublicenses, to certain intellectual property rights, including know-how, patents and trademarks, to use, import, offer for sale,sell, manufacture and commercialize MuGard in the U.S. and its territories (the "U.S. Territory") for the management of all diseases or conditions of theoropharyngeal cavity, including mucositis.Lumara Health On the Lumara Acquisition Date, we completed our acquisition of 100% of the equity ownership of Lumara Health, excluding the assets and liabilities ofthe Women's Health Division and certain other assets and liabilities, pursuant to the Lumara Agreement upon which time Lumara Health became our whollyowned subsidiary. In connection with the acquisition of Lumara Health, we acquired Makena, a progestin indicated to reduce the risk of preterm birth inwomen with a singleton pregnancy who have a history of singleton spontaneous preterm birth. Upon the closing of the Lumara Health acquisition (the "Closing"), we paid approximately $600.0 million in cash (subject to finalization of certainadjustments related to Lumara Health's financial position at the time of closing, including adjustments related to net working capital, net debt and transactionexpenses) (the "Cash Consideration") and issued approximately 3.2 million shares of our common stock, par value $0.01, having a value of approximately$112.0 million at the time of the Closing, to the holders of Lumara Health common stock, stock options, and RSUs. We have agreed to pay additional merger consideration, up to a maximum of $350.0 million, based on the achievement of certain net sales milestones ofMakena for the period from December 1, 2014 through December 19, 2019 as follows:•A one-time payment of $100.0 million payable upon achievement of $300.0 million in aggregate net sales in any consecutive 12-monthperiod commencing in the month following the Lumara Acquisition Date ("the First Milestone"); plus140 Years Ended December 31, 2014 2013 2012 Options to purchase shares of common stock 2,708 2,820 2,190 Shares of common stock issuable upon the vesting of restricted stock units 322 465 374 Warrants 7,382 — — Total 10,412 3,285 2,564 Table of Contents•A one-time payment of $100.0 million payable upon achievement of $400.0 million in aggregate net sales in any consecutive 12-monthperiod commencing in the month following the last month in the First Milestone period (the "Second Milestone"); if the Third Milestonepayment (described below) has been or is required to be made prior to achieving the Second Milestone, the Second Milestone payment shallbe reduced from $100.0 million to $50.0 million; plus •A one-time payment of $50.0 million payable if aggregate net sales equal or exceed $700.0 million in any consecutive 24-calendar monthperiod (which may include the First Milestone period) (the "Third Milestone"); however, no Third Milestone payment will be made if theSecond Milestone payment has been or is required to be made in the full amount of $100.0 million; plus •A one-time payment of $100.0 million payable upon achievement of $500.0 million in aggregate net sales in any consecutive 12-monthperiod commencing in the month following the last month in the Second Milestone period (the "Fourth Milestone"); plus •A one-time payment of $50.0 million payable upon achievement of $200.0 million in aggregate net sales in each of the five consecutivecalendar years from and including the 2015 calendar year to the 2019 calendar year (the "Fifth Milestone"). In the event that the conditions to more than one contingent payment are met in any calendar year, any portion of the total amount of contingentpayment due in such calendar year in excess of $100.0 million shall be deferred until the next calendar year in which less than $100.0 million in contingentpayments is due. The following table summarizes the components of the estimated total purchase price at fair value, subject to adjustment upon finalization of LumaraHealth's net working capital, net debt and transaction expenses as of the Lumara Acquisition Date (in thousands): We financed the $600.0 million upfront cash portion of the acquisition through $327.5 million of net proceeds from borrowings under a new$340.0 million term loan (the "Term Loan Facility"), as discussed in more detail in Note S, "Debt", and $272.5 million of existing cash on hand. The fair value of the 3.2 million shares of AMAG common stock was determined based on the closing price of our common stock on the NASDAQ GlobalSelect Market of $34.88 per share on November 11, 2014, the closing price immediately prior to the closing of the transaction. The fair value of the contingent milestone payments was determined based on our probability-adjusted discounted cash flows estimated to be realizedfrom the net sales of Makena from December 1, 2014 through December 31, 2019. The cash flows were discounted at a rate of 5%, which we believe isreasonable given the level of certainty of the pay-out.141 Total Acquisition DateFair Value Cash consideration $600,000 Fair value of 3.2 million shares of AMAG common stock 111,964 Fair value of contingent milestone payments 205,000 Estimated working capital and other adjustments 821 Purchase price paid at closing 917,785 Less: Due from sellers (5,119)Cash acquired from Lumara Health (5,219)Total purchase price $907,447 Table of Contents The net working capital and other adjustments were estimated to be $0.8 million which we paid at the Closing. Subsequent to the Closing, we estimatethat the net working capital and other adjustments will result in a reduction to the cash consideration of approximately $5.1 million. Accordingly, werecorded a $5.1 million receivable in prepaid and other current assets in the consolidated balance sheet at December 31, 2014. The net working capital andother adjustments are subject to change upon finalization of certain adjustments related to Lumara Health's financial position at the time of closing. At the Closing, $7.0 million of the Cash Consideration was contributed into an escrow fund to secure any Lumara Health security holders' paymentobligations with respect to the working capital, net debt and transaction expenses adjustments, which escrow will be released upon the final determination ofthe Cash Consideration. Also at the Closing, $35.0 million of the Cash Consideration was contributed to a separate escrow fund (the "IndemnificationEscrow") to secure the former Lumara Health security holders' obligations to indemnify us for certain matters, including breaches of representations andwarranties, covenants included in the Lumara Agreement, payments made by us to dissenting stockholders, specified tax claims, excess parachute claims, andcertain claims related to the Women's Health division of Lumara Health, which was divested by Lumara Health prior to the Closing. The portion of theIndemnification Escrow that has not been reduced by any claims by us and is not subject to any unresolved claims will be released to the former LumaraHealth security holders at the earlier of (a) March 15, 2016 and (b) five days after the date on which our audited financial statements for our fiscal year endingDecember 31, 2015 are filed with the Securities and Exchange Commission. We accounted for the acquisition of Lumara Health as a business combination using the acquisition method of accounting. Under the acquisition methodof accounting, the total purchase price of an acquisition is allocated to the net tangible and identifiable intangible assets acquired and liabilities assumedbased on their estimated fair values as of the date of acquisition. We have made a preliminary allocation of the purchase price to the net tangible andintangible assets acquired and liabilities assumed, based on available information and various assumptions we believe are reasonable, with the remainingpurchase price recorded as goodwill. Due to the close proximity of the Lumara Acquisition Date to the fiscal 2014 year-end, we were unable to complete ouranalysis of fair value. The following table summarizes the preliminary fair values assigned to the assets acquired and the liabilities assumed by us at the Lumara AcquisitionDate (in thousands):142Accounts receivable $34,918 Inventories 30,300 Prepaid and other current assets 3,322 Deferred income tax assets 94,965 Property and equipment 60 Makena marketed product 797,100 IPR&D 79,100 Restricted cash 1,997 Other long-term assets 3,412 Accounts payable (3,807)Accrued expenses (41,532)Deferred income tax liabilities (293,649)Other long-term liabilities (4,563)Total estimated identifiable net assets 701,623 Goodwill 205,824 Total $907,447 Table of Contents The preliminary values assigned to accounts receivable, prepaid and other current assets, other long-term assets, accounts payable, accrued expenses,deferred income taxes, other long-term liabilities and goodwill presented in the table above are subject to change as additional information becomesavailable concerning the fair value and tax basis of the assets acquired and liabilities assumed. Any adjustments to the preliminary fair value of theseacquired assets and liabilities assumed will be made as soon as practicable but not later than one year from the Lumara Acquisition Date. The gross contractual amount of accounts receivable at the Lumara Acquisition Date was $40.5 million. The $30.3 million fair value of inventoriesincluded a fair value step-up adjustment of $26.1 million, which will be amortized and recognized as cost of product sales in our consolidated statements ofoperations as the related inventories are sold. We recognized $1.3 million of the fair value adjustment as cost of product sales during the year endedDecember 31, 2014. The remaining $24.8 million is estimated to be recognized as follows: $11.1 million in fiscal 2015, $3.5 million in fiscal 2016,$4.0 million in fiscal 2017, $3.5 million in fiscal 2018 and $2.7 million in fiscal 2019. The fair value amounts for the Makena marketed product (the "Marketed Product") and IPR&D were determined based on assumptions that marketparticipants would use in pricing an asset, based on the most advantageous market for the assets (i.e., its highest and best use). We determined the fair value ofthe Marketed Product and the IPR&D using the income approach, which is a valuation technique that provides an estimate of the fair value of an asset basedon market participant expectations of the cash flows an asset would generate over its remaining useful life. Some of the more significant assumptions used inthe income approach from the perspective of a market participant include the estimated net cash flows for each year for each project or product (including netrevenues, cost of product sales, research and development costs, selling and marketing costs and working capital/asset contributory asset charges), thediscount rate that measures the risk inherent in each future cash flow stream, the assessment of each asset's life cycle, competitive trends impacting the assetand each cash flow stream as well as other factors, including the major risks and uncertainties associated with the timely and successful completion of theIPR&D projects, such as legal risk and regulatory risk. The fair value of the acquired IPR&D asset represents the value assigned to acquired research and development projects that, as of the LumaraAcquisition Date, had not established technological feasibility and had no alternative future use, including certain programs associated with the Makenalifecycle management program to extend the brand franchise beyond the February 2018 exclusivity date, such as new routes of administration, the use of newdelivery technologies, as well as reformulation technologies. We believe the fair values assigned to the Marketed Product and IPR&D assets are based uponreasonable estimates and assumptions given available facts and circumstances as of the Lumara Acquisition Date. If these assets are not successful orsuccessfully developed, sales and profitability may be adversely affected in future periods, and as a result, the value of the assets may become impaired. The acquisition of Lumara Health is expected to result in carryover basis for all tax attributes. Both AMAG and Lumara Health have deferred tax assetsfor which full valuation allowances were provided in the pre-acquisition financial statements. However, we have considered certain of the deferred taxliabilities recorded in acquisition accounting as sources of income to support realization of Lumara Health's deferred tax assets at December 31, 2014. Basedon the preliminary fair value adjustments primarily related to inventories and identifiable intangible assets acquired, we recorded a net deferred tax liabilityof $198.7 million in our consolidated balance sheet as of December 31, 2014 using a combined federal and state statutory income tax rate of 38.8%. The netdeferred tax liability represents the $293.7 million of deferred tax liabilities recorded in acquisition accounting (primarily related to the fair valueadjustments to Lumara Health's inventories and identifiable intangible assets) offset by $95.0 million of deferred tax assets acquired from Lumara Healthwhich we have determined, on a preliminary basis, are 'more likely than not' to be realized. See Note K, "Income Taxes," for additional information.143Table of Contents These tax estimates are preliminary and subject to change based on, among other things, management's final determination of the fair values of thetangible and identifiable intangible assets acquired and liabilities assumed by jurisdiction, the deductibility of acquisition-related costs and other costsdeducted by Lumara pre-acquisition, and management's assessment of the combined company's ability to utilize the future benefits from acquired and legacydeferred tax assets. Goodwill is calculated as the difference between the acquisition date fair value of the consideration transferred and the fair values of the net assetsacquired and liabilities assumed. The $205.8 million of goodwill resulting from the acquisition was primarily due to the net deferred tax liabilities recordedon the fair value adjustments to Lumara Health's inventories and identifiable intangible assets. The goodwill is not deductible for income tax purposes. Acquisition-related costs are not included as a component of consideration transferred and are expensed as incurred. We incurred approximately$9.5 million of acquisition-related costs in 2014 related to the merger with Lumara Health. These costs primarily represented financial advisory fees, legalfees, due diligence and other costs and expenses. During the post-acquisition period in fiscal 2014, Lumara Health generated $22.5 million of revenue from sales of Makena. We determined that separatedisclosure of Lumara Health's earnings for the post-acquisition period in fiscal 2014 is not practicable due to the integration of Lumara Health's operationsinto our business upon acquisition. The following table presents our revenue and net income (loss) on a pro forma combined basis, assuming that the merger occurred on January 1, 2013and does not include any expected cost savings or restructuring actions which may be achievable or which may occur subsequent to the acquisition ofLumara Health or the impact of any non-recurring activity. For purposes of preparing the following pro forma information, certain items recorded in 2014,such as the $153.2 million tax benefit and the $9.5 million of acquisition-related costs are reflected in 2013 as if the acquisition occurred on January 1, 2013.In addition, the pro forma combined net income (loss) in fiscal 2013 does not give effect to the elimination of approximately $385.9 million of non-recurringreorganization gains, net of losses and expenses, realized in connection with Lumara Health's exit from bankruptcy in September 2013 as such amounts arenot directly related to the acquisition of Lumara Health (in thousands): This pro forma financial information is not necessarily indicative of our consolidated operating results that would have been reported had thetransactions been completed as described herein, nor is such information necessarily indicative of our consolidated results for any future period.MuGard MuGard was launched in the U.S. by PlasmaTech Biopharmaceuticals, Inc. (formerly known as Access Pharmaceuticals, Inc. ("PlasmaTech") in 2010 afterreceiving 510(k) clearance from the FDA and is indicated for the management of oral mucositis/stomatitis (that may be caused by radiotherapy and/orchemotherapy) and all types of oral wounds (mouth sores and injuries), including aphthous ulcers/canker sores and traumatic ulcers, such as those caused byoral surgery or ill-fitting dentures or braces. PlasmaTech remains responsible for the manufacture of MuGard and we have entered into a quality agreement and a supply agreement with PlasmaTechunder which we purchase MuGard inventory from PlasmaTech. Our inventory purchases are at the price actually paid by PlasmaTech to purchase it from athird-party plus a mark-up to cover administration, handling and overhead.144 Year EndedDecember 31, 2014 2013 Pro forma combined revenues $267,705 $179,561 Pro forma combined net income (loss) $(23,942)$463,522 Table of Contents In consideration for the license, we paid PlasmaTech an upfront payment of $3.3 million on June 6, 2013 (the "MuGard License Date"). We are requiredto pay royalties to PlasmaTech on future net sales of MuGard until the later of (a) the expiration of the licensed patents or (b) the tenth anniversary of the firstcommercial sale of MuGard under the MuGard License Agreement in the U.S. Territory ("the "Royalty Term"). These tiered, double-digit royalty ratesdecrease for any part of the Royalty Term occurring after the expiration of the licensed patents and are subject to off-set against certain of our expenses. Afterthe expiration of the Royalty Term, the license shall become a fully paid-up, royalty-free and perpetual license in the U.S. Territory. In addition to making anupfront payment of $3.3 million, we also acquired $0.2 million of existing MuGard inventory from PlasmaTech, which was included in our consolidatedbalance sheet as of the MuGard License Date. We did not assume any pre-existing liabilities related to the MuGard business, contingent or otherwise, arising prior to the MuGard License Date. We areaccounting for the acquisition of the MuGard Rights as a business combination under the acquisition method of accounting since we acquired the U.S.commercial rights for MuGard and inventory, and obtained access to certain related regulatory assets and product supply, employees and other assets,including certain patent and trademark rights, contracts, and related books and records, held by PlasmaTech which are exclusively related to MuGard(inputs), including the infrastructure to sell, distribute and market MuGard (processes) and net sales of MuGard (outputs). In addition, during the term of theMuGard License Agreement, we will have control over sales, distribution and marketing of MuGard in the U.S. as PlasmaTech has assigned to us all of itsright, title and interest in MuGard-related internet and social media outlets and other sales, marketing and promotional materials currently owned orcontrolled by PlasmaTech. PlasmaTech will no longer commercialize, market, promote, sell or make public communications relating to MuGard in the U.STerritory, except as may be agreed to by us. PlasmaTech has also agreed to not, directly or indirectly, research, develop, market, sell or commercialize anymedical devices that directly compete with MuGard for the treatment of any diseases or conditions of the oropharyngeal cavity in the U.S. Territory. We estimated the fair value of the acquired MuGard Rights using the income approach, which is a valuation technique to convert future amounts to asingle present amount (discounted) and is described above. The following table summarizes the total consideration for the MuGard Rights (in thousands): The $17.1 million total consideration includes the estimated fair value of the contingent consideration at the MuGard License Date. During 2013, wecompleted the valuation for the acquisition of the MuGard Rights and determined the fair value of the contingent consideration to be $13.7 million as of theMuGard License Date, and the fair value of the intangible asset was determined to be $16.9 million as of the MuGard License Date. The acquisition date fairvalue of the contingent consideration was determined based on various market factors, including an analysis of estimated sales using a discount rate ofapproximately 15%. As of December 31, 2014, we estimated that the undiscounted royalty amounts we could pay under the MuGard License Agreement mayrange from $20.0 million to $28.0 million over a ten year period, which is our best estimate of the period over which we expect the majority of the asset's cashflows to be derived.145 TotalAcquisitionDate FairValue Cash $3,434 Acquisition-related contingent consideration 13,700 Total consideration $17,134 Table of Contents The following table summarizes the fair values of the assets acquired related to the business combination as of the MuGard License Date (in thousands): The acquisition date fair value of the intangible asset was determined based on various market factors, including an analysis of estimated sales using adiscount rate of 19%. This measure is based on significant Level 3 inputs not observable in the market. Such valuations require significant estimates andassumptions including but not limited to: estimating future cash flows from product sales and developing appropriate discount and probability rates. Webelieve the estimated fair values of the MuGard Rights are based on reasonable assumptions, however, we cannot provide assurance that the underlyingassumptions used to forecast the cash flows will materialize as we estimated and thus, our actual results may vary significantly from the estimated results. Acquisition-related costs are not included as a component of consideration transferred and are expensed as incurred. We incurred approximately$0.8 million of acquisition-related costs in 2013, which were primarily related to professional and legal fees. Pro forma results of operations would not be materially different as a result of the acquisition of the MuGard Rights and therefore are not presented.D. INVESTMENTS As of December 31, 2014 and 2013, our investments equaled $24.9 million and $186.8 million, respectively, and consisted of securities classified asavailable-for-sale in accordance with accounting standards which provide guidance related to accounting and classification of certain investments in debtand equity securities. The following is a summary of our investments as of December 31, 2014 and 2013 (in thousands):146Assets Acquired: MuGard intangible asset $16,893 Inventory 241 Net identifiable assets acquired $17,134 December 31, 2014 AmortizedCost GrossUnrealizedGains GrossUnrealizedLosses EstimatedFairValue Corporate debt securities Due in one year or less $11,656 $3 $(4)$11,655 Due in one to three years 13,258 10 (33) 13,235 Total investments $24,914 $13 $(37)$24,890 Table of Contents During the year ended December 31, 2014, we liquidated $170.4 million of our investments in order to partially fund the acquisition of Lumara Health inNovember 2014.Impairments and Unrealized Gains and Losses on Investments We did not recognize any other-than-temporary impairment losses in our consolidated statements of operations related to our securities during either2014, 2013 or 2012. We considered various factors, including the length of time that each security was in an unrealized loss position and our ability andintent to hold these securities until the recovery of their amortized cost basis occurs. As of December 31, 2014, none of our investments has been in anunrealized loss position for more than one year. Future events may occur, or additional information may become available, which may cause us to identifycredit losses where we do not expect to receive cash flows sufficient to recover the entire amortized cost basis of a security and which may necessitate therecording of future realized losses on securities in our portfolio. Significant losses in the estimated fair values of our investments could have a materialadverse effect on our earnings in future periods.Realized Gains and Losses on Investments Gains and losses are determined on the specific identification method. Net realized gains were $0.1 million during 2014 and insignificant during 2013.During 2012, we recorded realized losses of $1.5 million to our consolidated statement of operations related to the sale of our then-remaining auction ratesecurities portfolio.147 December 31, 2013 AmortizedCost GrossUnrealizedGains GrossUnrealizedLosses EstimatedFairValue Corporate debt securities Due in one year or less $42,609 $44 $(4)$42,649 Due in one to three years 91,443 137 (106) 91,474 U.S. treasury and government agency securities Due in one year or less 18,526 19 — 18,545 Due in one to three years 34,123 37 (25) 34,135 Total investments $186,701 $237 $(135)$186,803 Table of ContentsE. FAIR VALUE MEASUREMENTS The following tables represent the fair value hierarchy as of December 31, 2014 and 2013, for those assets and liabilities that we measure at fair value ona recurring basis (in thousands): With the exception of our money market funds and our acquisition-related contingent consideration, the fair value of our investments is primarilydetermined from independent pricing services. Independent pricing services normally derive security prices from recently reported trades for identical orsimilar securities, making adjustments based upon other significant observable market transactions. At the end of each reporting period, we performquantitative and qualitative analyses of prices received from third parties to determine whether prices are reasonable estimates of fair value. After completingour analyses, we did not adjust or override any fair value measurements provided by our pricing services as of either December 31, 2014 or 2013. In addition,there were no transfers or reclassifications of any securities between Level 1 and Level 2 during either 2014 or 2013.Contingent consideration We accounted for the acquisitions of Lumara Health and the MuGard Rights as business combinations under the acquisition method of accounting.Additional details regarding the Lumara Health acquisition and the MuGard License Agreement can be found in Note C, "Business Combinations." The fairvalue measurements of contingent consideration obligations and the related intangible assets arising from business combinations are determined usingunobservable ("Level 3")148 Fair Value Measurements at December 31, 2014 Using: Total Quoted Prices inActive Markets forIdentical Assets(Level 1) Significant OtherObservable Inputs(Level 2) SignificantUnobservableInputs(Level 3) Assets: Money market funds $77,254 $77,254 $— $— Corporate debt securities 24,890 — 24,890 — Total Assets $102,144 $77,254 $24,890 $— Liabilities: Contingent consideration—LumaraHealth $206,600 $— $— $206,600 Contingent consideration—MuGard 12,102 — — 12,102 Total Liabilities $218,702 $— $— $218,702 Fair Value Measurements at December 31, 2013 Using: Total Quoted Prices inActive Markets forIdentical Assets(Level 1) Significant OtherObservable Inputs(Level 2) SignificantUnobservableInputs(Level 3) Assets: Money market funds $18,767 $18,767 $— $— Corporate debt securities 134,123 — 134,123 — U.S. treasury and government agencysecurities 52,680 — 52,680 — Total Assets $205,570 $18,767 $186,803 $— Liabilities: Contingent consideration—MuGard $14,550 $— $— $14,550 Total Liabilities $14,550 $— $— $14,550 Table of Contentsinputs. These inputs include (a) the estimated amount and timing of projected cash flows; (b) the probability of the achievement of the factors on which thecontingency is based; and (c) the risk-adjusted discount rate used to present value the probability-weighted cash flows. Significant increases (decreases) inany of those inputs in isolation could result in a significantly lower or higher fair value measurement.Lumara Health The following table presents a reconciliation of contingent consideration obligations related to the acquisition of Lumara Health measured on arecurring basis using Level 3 inputs as of December 31, 2014 (in thousands): The $1.6 million increase of the contingent consideration related to Lumara Health was due to the time value of money. This adjustment to ourcontingent consideration liability is included in selling, general and administrative expenses in our consolidated statements of operations. We haveclassified all of the Lumara Health contingent consideration as a long-term liability in our consolidated balance sheet as of December 31, 2014.MuGard The following table presents a reconciliation of contingent consideration obligations related to our acquisition of the MuGard Rights measured on arecurring basis using Level 3 inputs as of December 31, 2014 and 2013 (in thousands): During 2014, we revised our forecast of total projected net sales for MuGard and reassessed the fair value of the contingent consideration liability relatedto the MuGard Rights. As a result, we reduced our contingent consideration liability by $2.3 million for year ended December 31, 2014. During the yearended December 31, 2013, we increased our MuGard related contingent consideration liability by $1.1 million. These adjustments to contingentconsideration liability are included in selling, general and administrative expenses in our consolidated statements of operations. As of December 31, 2014, we estimate that the undiscounted royalty amounts we could pay under the MuGard License Agreement may range from$20.0 million to $28.0 million over a ten year period beginning on the MuGard License Date, which is our best estimate of the period over which we expectthe majority of the asset's cash flows to be derived. This measure is based on significant Level 3 inputs not observable in the market. Key assumptions includea discount rate of approximately 15%. We have149Balance as of November 12, 2014 $— Acquisition date fair value of contingent consideration 205,000 Adjustments to fair value of contingent consideration 1,600 Balance as of December 31, 2014 $206,600 Balance as of June 6, 2013 $— Acquisition date fair value of contingent consideration 13,700 Payments made (51)Adjustments to fair value of contingent consideration 1,074 Other adjustments (173)Balance as of December 31, 2013 $14,550 Payments made (270)Adjustments to fair value of contingent consideration (2,281)Other adjustments 103 Balance as of December 31, 2014 $12,102 Table of Contentsclassified $0.8 million of the MuGard contingent consideration as a short-term liability, which was included in accrued expenses in our consolidated balancesheet as of December 31, 2014. In addition, in connection with the acquisition of the MuGard Rights, we acquired an intangible asset of $16.9 million, which was originally determinedbased on fair value measurements. These measures were based on significant Level 3 inputs not observable in the market. Key assumptions include a discountrate of 19%. We believe the estimated fair values of the MuGard Rights are based on reasonable assumptions, however, we cannot provide assurance that theunderlying assumptions used to forecast the cash flows will materialize as we estimated and thus, our actual results may vary significantly from the estimatedresults.Debt In February 2014, we issued the Convertible Notes. As of December 31, 2014, the fair value of our Convertible Notes was $332.0 million, which differsfrom their carrying values. The fair value of our Convertible Notes is influenced by interest rates and our stock price and stock price volatility and isdetermined by prices for the Convertible Notes observed in market trading, which are Level 2 inputs. In November 2014, in connection with the acquisition of Lumara Health, we entered into the Term Loan Facility. The fair value of our outstandingborrowings under the Term Loan Facility was approximately $342.0 million at December 31, 2014, which differs from their carrying values. The fair value ofour Term Loan debt is influenced by interest rates and are Level 2 inputs. See Note S, "Debt," for additional information on our debt obligations.F. ACCOUNTS RECEIVABLE, NET Our net accounts receivable were $38.2 million and $6.8 million as of December 31, 2014 and 2013, respectively, and primarily represented amounts duefrom wholesalers, distributors and specialty pharmacies to whom we sell our products directly. The increase in accounts receivable in 2014 is due primarily tothe inclusion of Lumara Health. Accounts receivable are recorded net of reserves for estimated chargeback obligations, prompt payment discounts and anyallowance for doubtful accounts. As part of our credit management policy, we perform ongoing credit evaluations of our customers, and we have not required collateral from any customer.To date, we have not experienced significant bad debts. Accordingly, we have not established an allowance for doubtful accounts at either December 31,2014 or 2013. If the financial condition of any of our significant customers was to deteriorate and result in an impairment of its ability to make paymentsowed to us, an allowance for doubtful accounts may be required which could have a material effect on earnings in the period of any such adjustment. Customers which represented greater than 10% of our accounts receivable balances as of December 31, 2014 and 2013 were as follows:150 December 31, 2014 2013 AmerisourceBergen Drug Corporation 45% 43% McKesson Corporation 12% 29% Cardinal Health, Inc. <10% 19% Table of ContentsG. INVENTORIES Our major classes of inventories were as follows as of December 31, 2014 and 2013 (in thousands): During 2014 and 2013, we expensed $0.7 million and $1.1 million of Feraheme commercial inventory, respectively, which we determined would besolely used in development activities at our third-party suppliers and which we recorded in research and development expenses. In addition, during 2014 and2013, we expensed $0.6 million and $1.1 million of Feraheme commercial inventory deemed no longer saleable, which we recorded in cost of product sales. The increase in total raw materials and finished goods for the year ended December 31, 2014 is primarily due to the inclusion of Makena inventoryacquired in connection with the merger with Lumara Health. We recorded the acquired Makena inventory at fair value, which required a step-up adjustmentto recognize the inventory at its expected net realizable value. The $30.3 million fair value of Makena inventories included a fair value step-up adjustment of$26.1 million, which will be amortized and recognized as cost of product sales in our consolidated statements of operations as the related inventories aresold. We recognized $1.3 million of the fair value adjustment as cost of product sales during the year ended December 31, 2014. The remaining $24.8 millionis estimated to be recognized as follows: $11.1 million in fiscal 2015, $3.5 million in fiscal 2016, $4.0 million in fiscal 2017, $3.5 million in fiscal 2018 and$2.7 million in fiscal 2019. In connection with the fair value step-up adjustment of Makena inventory, we have recorded a portion of the associated rawmaterial inventory and associated step-up adjustment in other long-term assets as we believe that the amount of inventory purchased in the acquisitionexceeds our normal inventory cycle. See Note C, "Business Combinations," for additional information.H. PROPERTY AND EQUIPMENT, NET Property and equipment consisted of the following as of December 31, 2014 and 2013 respectively (in thousands):151 December 31, 2014 2013 Raw materials $14,188 $3,157 Work in process 5,965 8,322 Finished goods 20,457 5,738 Total 40,610 17,217 Included in other long-term assets: Raw materials 7,798 — Total inventories $48,408 $17,217 December 31, 2014 2013 Furniture and fixtures $1,574 $1,536 Leasehold improvements 430 430 Laboratory and production equipment 493 376 2,497 2,342 Less—accumulated depreciation (978) (496)Property and equipment, net $1,519 $1,846 Table of Contents In September 2013, we relocated our corporate offices from Lexington, Massachusetts to Waltham, Massachusetts and recorded $1.6 million of newleasehold improvements and furniture and fixtures related to our new location. During 2014, 2013 and 2012, we incurred $0.5 million, $3.0 million and $4.2 million of depreciation expense, respectively. The $3.0 million ofdepreciation expense in 2013 included $1.9 million of accelerated depreciation expense related to fixed assets at our prior office facility. The $4.2 million ofdepreciation expense in 2012 included $1.4 million of accelerated depreciation related to our former Cambridge, Massachusetts manufacturing facility andrelated assets and a $1.1 million impairment loss to decrease the carrying value of these assets to our best estimate of fair value.I. GOODWILL AND INTANGIBLE ASSETS, NETGoodwill In connection with our November 2014 acquisition of Lumara Health, we recognized $205.8 million of goodwill as of December 31, 2014. See Note C,"Business Combinations," for additional information. There has been no change in the goodwill balance since the acquisition.Intangible Assets, Net Our identifiable intangible assets consist of license agreements, product rights and other identifiable intangible assets, which result from product andbusiness acquisitions. As of December 31, 2014 and 2013, our identifiable intangible assets consisted of the following (in thousands): The Marketed Product and IPR&D intangible assets were acquired in connection with our acquisition of Lumara Health in November 2014. Amortizationof the Marketed Product asset is being recognized using an economic consumption model over twenty years, which we believe is an appropriate amortizationperiod due to the estimated economic lives of the product rights and related intangibles. See Note C, "Business Combinations," for additional information. The MuGard Rights were acquired from PlasmaTech in June 2013. Amortization of the MuGard Rights is being recognized using an economicconsumption model over ten years, which represents our best estimate of the period over which we expect the majority of the asset's cash flows to be derived.We believe this is the best approximation of the period over which we will derive the majority of value of the MuGard Rights. See Note C, "BusinessCombinations," for additional information. We recorded $5.1 million, less than $0.1 million and no amortization expense for the years ended December 31, 2014, 2013 and 2012, respectively.Amortization expense is recorded in cost of product152 December 31, 2014 December 31, 2013 Cost AccumulatedAmortization Net Cost AccumulatedAmortization Net Amortizableintangibleassets: MakenaMarketedProduct $797,100 $4,834 $792,266 $— $— $— MuGardRights 16,893 351 16,542 16,893 49 16,844 813,993 5,185 808,808 16,893 49 16,844 Indefinite-livedintangibleassets: IPR&D 79,100 — 79,100 — — — Totalintangibleassets $893,093 $5,185 $887,908 $16,893 $49 $16,844 Table of Contentssales in our consolidated statements of operations. We expect amortization expense related to our finite-lived intangible assets for the next five fiscal years tobe as follows (in thousands):J. CURRENT AND LONG-TERM LIABILITIESAccrued Expenses Accrued expenses consisted of the following as of December 31, 2014 and 2013 (in thousands):Deferred Revenues Deferred revenues consisted of the following as of December 31, 2014 and 2013 (in thousands): Our deferred revenues related to Takeda were recorded in our consolidated balance sheets and include the following as of December 31, 2014:•$41.2 million related to the amortization of upfront payments and milestone payments recognized under the Amended Takeda Agreement.Included in the $41.2 million was the153Period EstimatedAmortizationExpense Year Ended December 31, 2015 51,886 Year Ended December 31, 2016 64,977 Year Ended December 31, 2017 76,679 Year Ended December 31, 2018 84,359 Year Ended December 31, 2019 55,746 Total $333,647 December 31, 2014 2013 Commercial rebates, fees and returns $44,807 $4,839 Professional, license, and other fees and expenses 14,888 1,932 Salaries, bonuses, and other compensation 10,176 5,419 Clinical, manufacturing and regulatory consulting fees and expenses 7,181 7,834 Restructuring expense 1,952 — Commercial consulting fees and expenses 1,089 1,301 Short-term contingent consideration 718 941 Total accrued expenses $80,811 $22,266 December 31, 2014 2013 Short-term deferred revenues: Takeda $44,376 $8,226 Total $44,376 $8,226 Long-term deferred revenues: Takeda $— $43,534 3SBio — 1,000 Total $— $44,534 Table of Contentsamortization of upfront payments we received from Takeda in 2010, which we were recognizing on a straight-line basis over a period of10 years, which represented the then current patent life of Feraheme and our best estimate of the period over which we were to substantiallyperform our obligations. In addition, included in the $41.2 million was the amortization of an aggregate of $18.0 million in milestonepayments we received from Takeda in 2012 associated with the commercial launches of Feraheme in the EU and Canada, which we wereamortizing over the original life of the Takeda Agreement. During 2014 and 2013, we recorded $8.2 million and $7.9 million to license feeand other collaboration revenues in our consolidated statements of operations, including, as a result of the Takeda Termination Agreement, theaccelerated recognition of $0.3 million of the remaining deferred revenue associated with upfront and milestone payments received to datefrom Takeda and previously deferred; and•$3.2 million related to certain agreed upon costs under the terms of the Takeda Termination Agreement. We expect to recognize the remaining balance of the deferred revenue related to Takeda within the next 12 months. Further, as of December 31, 2014, werecognized the $2.5 million remaining balance of previously deferred product sales to Takeda and the related cost of product sales. See Note R,"Collaborative Agreements," for further information. In consideration of the grant of the license to 3SBio Inc. ("3SBio") in 2008, we received an upfront payment of $1.0 million, the recognition of whichhad been deferred. In January 2014, we mutually terminated the agreement with 3SBio, effective immediately, due to the fact that, despite the best efforts ofthe parties, regulatory approval in China could not be obtained within the agreed upon time period, at which time we recognized the $1.0 million to incomein our consolidated statement of operations.Other Long-Term Liabilities Other long-term liabilities at December 31, 2014 consisted of deferred rent related to the lease of our principal executive offices in Lexington,Massachusetts and after September 2013, Waltham, Massachusetts, as well as our lease obligations assumed under the lease of Lumara Health's formerprincipal executive offices in St. Louis, Missouri. In addition, other long-term liabilities include future payments to be made to certain states in compliancewith a 2011 Lumara Health Settlement Agreement with the Department of Justice, which resolved certain claims under the qui tam provisions of the FalseClaims Act. Other long-term liabilities at December 31, 2013 consisted solely of deferred rent related to the lease of our principal executive offices.K. INCOME TAXES The income tax benefit consisted of the following (in thousands):154 Years Ended December 31, 2014 2013 2012 Current: Federal $— $— $— State — — — Total current $— $— $— Deferred: Federal $(142,884)$— $(833)State (10,275) — (21)Total deferred $(153,159)$— $(854)Total income tax benefit $(153,159)$— $(854)Table of Contents The reconciliation of the statutory U.S. federal income tax rate to our effective income tax rate is as follows: For the year ended December 31, 2014, we recognized an income tax benefit of $153.2 million, representing an effective tax rate of (883.2%). Thedifference between the statutory tax rate and the effective tax rate was attributable to a non-recurring benefit of $153.2 million for the release of a portion ofthe valuation allowance due to taxable temporary differences available as a source of income to realize the benefit of certain pre-existing AMAG deferred taxassets as a result of the Lumara Health acquisition. Excluding the impact of this item, our overall tax provision and effective tax rate would have been zero.Other factors resulting in a difference between the statutory tax rate and the effective tax rate included certain non-deductible stock compensation expenses,certain non-deductible expenses for tax purposes and tax credits. See Note C, "Business Combinations," for more information on the Lumara Healthacquisition. We did not recognize any current federal or state income tax benefit for the year ended December 31, 2013 as we were subject to a full valuationallowance. For the year ended December 31, 2012, we recognized a $0.9 million deferred tax benefit, as the result of the recognition of corresponding incometax expense associated with the decrease in the unrealized loss on our investments, primarily related to auction rate securities, which we carried at fair marketvalue during 2012. The corresponding income tax expense was recorded in other comprehensive loss. Deferred tax assets and deferred tax liabilities are recognized based on temporary differences between the financial reporting and tax basis of assets andliabilities using future enacted rates. A valuation allowance is recorded against deferred tax assets if it is more likely than not that some or all155 Years Ended December 31, 2014 2013 2012Statutory U.S. federal tax rate (34.0)% (34.0)% (34.0)%State taxes, net of federal benefit (7.9)% 2.4% 4.2%Equity-based compensation expense 10.6% 9.4% 42.4%Permanent items, net 16.0% 5.3% 1.2%Tax credits (3.0)% 0.5% 0.8%Valuation allowance (864.9)% 16.4% (19.5)%Total tax benefit (883.2)% 0.0% (4.9)%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): The valuation allowance decreased by approximately $132.9 million for the year ended December 31, 2014 primarily due to taxable temporarydifferences available as a source of income to realize the benefit of certain pre-existing AMAG deferred tax assets as a result of the Lumara Health acquisition,which provided a tax benefit of $153.2 million offset by an increase in the valuation allowance of $20.3 million primarily related to certain Lumara deferredtax assets established in purchase accounting. In determining the amount of valuation allowance release, we considered the relevant tax law ordering rules forutilization of tax assets to determine whether the acquired Lumara Health or the pre-existing AMAG deferred tax assets were realizable. As of December 31,2014, we maintained a partial valuation allowance on the net deferred tax assets as we benefitted only those deferred tax assets to the extent that existingtaxable temporary differences could be used as a source of future income. At December 31, 2014, we had federal net operating loss ("NOL") carryforwards of approximately $542.3 million and state NOL carryforwards of up to$242.2 million of which $254.1 million and $124.7 million were acquired as part of the Lumara Health transaction. We also had federal capital losscarryforwards of $2.1 million to offset future capital gains. At December 31, 2014, $30.6 million and $5.4 million of federal and state NOLs, respectively,related to excess equity-based compensation tax deductions the benefits for which will be recorded to additional paid-in capital when recognized through areduction of cash taxes paid. The federal NOLs and the most significant state NOLs expire at various dates through 2034. The capital loss carryforwards willexpire through 2017. We have federal tax credits of approximately $21.6 million, to offset future tax liabilities of which $12.0 million were acquired as partof the Lumara Health transaction. We have state tax credits of $4.5 million to offset future tax liabilities. These federal and state tax credits will expireperiodically through 2034 if not utilized. Utilization of our NOLs and research and development ("R&D") credit carryforwards may be subject to a substantial annual limitation due to ownershipchange limitations that have occurred156 December 31, 2014 2013 Assets Net operating loss carryforwards $188,873 $85,269 Tax credit carryforwards 24,574 12,396 Deferred revenue 17,216 20,368 Equity-based compensation expense 3,436 4,176 Capitalized research & development 32,359 39,214 Intangibles 272 680 Debt instruments 731 — Reserves 7,782 — Property, plant and equipment 61 — Other 5,014 4,371 Liabilities Property, Plant, and Equipment Depreciation — (58)Intangible Assets and Inventory Amortization (290,491) — Other (1,795) — (11,968) 166,416 Valuation allowance (33,557) (166,416)Net deferred taxes $(45,525)$— Table of Contentspreviously or that could occur in the future in accordance with Section 382 of the Internal Revenue Code of 1986 ("Section 382") as well as similar stateprovisions. These ownership changes may limit the amount of NOL and R&D credit carryforwards that can be utilized annually to offset future taxableincome and taxes, respectively. In general, an ownership change as defined by Section 382 results from transactions increasing the ownership of certainshareholders or public groups in the stock of a corporation by more than 50 percentage points over a three-year period. Since our formation, we have raisedcapital through the issuance of capital stock on several occasions. These financings, combined with the purchasing shareholders' subsequent disposition ofthose shares, may have resulted in a change of control as defined by Section 382 or could result in a change of control in the future upon subsequentdisposition. We conducted an analysis under Section 382 to determine if historical changes in ownership through December 31, 2012 would limit orotherwise restrict our ability to utilize these NOL and R&D credit carryforwards. As a result of this analysis, we do not believe there are any significantlimitations on our ability to utilize these carryforwards. However, future changes in ownership after December 31, 2012 could affect the limitation in futureyears. Any limitation may result in expiration of a portion of the NOL or R&D credit carryforwards before utilization. At December 31, 2014 and 2013, we had no unrecognized tax benefits. We have not, as yet, conducted a study of our R&D credit carryforwards. Such astudy could result in an adjustment to our R&D credit carryforwards; however, until a study is completed and any adjustment is known, no amounts are beingpresented as an uncertain tax position. We would recognize both accrued interest and penalties related to unrecognized benefits in income tax expense. We have not recorded any interest orpenalties on any unrecognized benefits since inception. The statute of limitations for assessment by the Internal Revenue Service (the "IRS") and state tax authorities is closed for tax years prior to December 31,2011, although carryforward attributes that were generated prior to tax year 2011 may still be adjusted upon examination by the IRS or state tax authorities ifthey either have been or will be used in a future period. We file income tax returns in the U.S. federal and various state jurisdictions. There are currently nofederal or state audits in progress. It should be noted that the allocation of the purchase price related to the Lumara Health transaction is subject to adjustment upon finalization of fairvaluation procedures and therefore the impact of the tax benefit associated with the valuation allowance release and deferred tax assets and liabilities(including uncertain tax positions) are subject to change.L. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) The table below presents information about the effects of net income (loss) of significant amounts reclassified out of accumulated other comprehensiveloss ("AOCI"), net of tax, during 2014 and 2013 (in thousands): The amounts reclassified from other comprehensive loss for 2014 and 2013 primarily represented realized gains on investments, which are included inour consolidated statement of operations under "Gains (losses) on investments, net."157 December 31, 2014 2013 Beginning Balance $(3,491)$(3,247)Other comprehensive income (loss) before reclassifications (191) (268)Gain (loss) reclassified from other accumulated comprehensive loss 65 24 Ending Balance $(3,617)$(3,491)Table of ContentsM. EQUITY-BASED COMPENSATION We currently maintain three equity compensation plans, including our Third Amended and Restated 2007 Equity Incentive Plan (the "2007 Plan"), ourAmended and Restated 2000 Stock Plan (the "2000 Plan") (under which we no longer grant awards) and the Lumara Health Inc. Amended and Restated 2013Incentive Compensation Plan (the "Lumara Health 2013 Plan"). During 2014, 2013 and 2012, we also granted equity through inducement grants outside ofthese plans to certain newly hired executive officers and certain employees, including in connection with the Lumara Health acquisition.Third Amended and Restated 2007 Equity Incentive Plan Our 2007 Plan was originally approved by our stockholders in November 2007. In each of May 2009, May 2010, and May 2013 our stockholdersapproved proposals to amend and restate our 2007 Plan to, among other things, increase the number of shares authorized for issuance thereunder by 600,000,800,000 and 1,100,000 shares, respectively. In addition, the amendment approved by our stockholders in May 2009 replaced a limitation on the number ofshares in the aggregate which could be issued under the 2007 Plan with respect to RSUs, restricted stock, stock and similar equity interests in our companywith a fungible share reserve whereby the number of shares available for issuance under the 2007 Plan is reduced by one share of our common stock issuedpursuant to an option or stock appreciation right and by 1.5 shares for each share of our common stock issued pursuant to a RSU award or other similarequity-based award. The 2007 Plan provides for the grant of stock options, RSUs, restricted stock, stock, and other equity interests in our company to employees, officers,directors, consultants, and advisors of our company and our subsidiaries. We generally issue common stock from previously authorized but unissued shares tosatisfy option exercises and restricted stock awards. The terms and conditions of each such grant, including, but not limited to, the number of shares, theexercise price, term of the option/award and vesting requirements, are determined by our Board of Directors (the "Board") or the Compensation Committee ofour Board. Our Board may award stock options in the form of nonqualified stock options or incentive stock options ("ISOs"). Stock options may be granted atan exercise price no less than fair market value of a share of our common stock on the date of grant, as determined by our Board or the CompensationCommittee of our Board, subject to certain limitations. As of December 31, 2014, we have granted options and RSUs covering 7,414,752 shares of common stock under our 2007 Plan, of which 3,112,356stock options and 703,124 RSUs have expired or terminated, and of which 610,297 options have been exercised and 577,132 shares of common stock havebeen issued pursuant to RSUs that became fully vested. The number of options and RSUs outstanding under this plan as of December 31, 2014, was2,051,017 and 360,826, respectively. The remaining number of shares available for future grants as of December 31, 2014 was 1,707,989, not includingshares subject to outstanding awards under the 2000 Plan, which will be added to the total number of shares available for issuance under the 2007 Plan to theextent that such awards expire or terminate for any reason prior to exercise. All outstanding stock options granted under our 2007 Plan have an exercise priceequal to the closing price of a share of our common stock on the grant date and have either a seven or 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 terms andconditions of each such grant, including, but not limited to, the number of shares, the exercise price, term of the option/award and vesting requirements, weredetermined by our Board or the Compensation Committee of our Board. As of December 31, 2014, we have granted stock options and RSUs covering2,182,700 shares of common stock under the 2000 Plan, of which 1,049,339 stock options and 1,500 RSUs have expired or terminated, and of which158Table of Contents1,054,095 stock options have been exercised and 42,500 shares of common stock have been issued pursuant to RSUs that became fully vested. Theremaining number of shares underlying outstanding stock options which were issued pursuant to our 2000 Plan as of December 31, 2014, was 35,266. Therewere no remaining RSUs which were issued pursuant to our 2000 Plan as of December 31, 2014. All outstanding stock options granted under the 2000 Planhave an exercise price equal to the closing price of our common stock on the grant date and have a ten year term. In November 2007, the 2000 Plan wassucceeded by our 2007 Plan and, accordingly, no further grants may be made under this plan. Any shares that remained available for issuance under the 2000Plan as of the date of adoption of the 2007 Plan are included in the number of shares that may be issued under the 2007 Plan. Any shares subject tooutstanding awards granted under the 2000 Plan that expire or terminate for any reason prior to exercise will be added to the total number of shares availablefor issuance under the 2007 Plan.Lumara Health Inc. Amended and Restated 2013 Incentive Compensation Plan On November 12, 2014, we assumed the Lumara Health 2013 Plan in connection with the acquisition of Lumara Health. The total number of sharesissuable pursuant to awards under this plan as of the effective date of the acquisition and after taking into account any adjustments as a result of theacquisition, was 200,000 shares. The Lumara Health 2013 Plan provides for the grant of stock options, RSUs, restricted stock, stock, stock appreciation rights and other equity interests inour company to certain of our employees, officers, directors, consultants, and advisors of our company and our subsidiaries that are newly-hired or thatpreviously performed services for Lumara Health. We generally issue common stock from previously authorized but unissued shares to satisfy optionexercises and restricted stock awards. The terms and conditions of each award assumed in the acquisition of Lumara Health were previously determined byLumara Health prior to being assumed in connection with the acquisition, subject to applicable adjustments made in connection with such acquisition. Theterms and conditions of each award made after the acquisition of Lumara Health, including, but not limited to, the number of shares, the exercise price, termof the option/award and vesting requirements, are determined by our Board or the Compensation Committee of our Board. Our Board may award stockoptions in the form of nonqualified stock options or ISOs. Stock options may be granted at an exercise price no less than fair market value of a share of ourcommon stock on the date of grant, as determined by our Board or the Compensation Committee of our Board, subject to certain limitations. As of December 31, 2014, we have granted new options and RSUs covering 64,000 shares of common stock under the Lumara Health 2013 Plan. Thenumber of options and RSUs outstanding under this plan as of December 31, 2014, was 44,000 and 20,000, respectively. The remaining number of sharesavailable for future grants as of December 31, 2014 was 136,000. All outstanding stock options granted under the Lumara Health 2013 Plan have an exerciseprice equal to the closing price of a share of our common stock on the grant date and have either a seven or ten-year term.Other Equity Compensation Grants In August 2014, we granted certain members of our senior management performance-based RSUs under our 2007 Plan covering a maximum of 195,000shares of common stock, which will be earned, if at all, based on the achievement of certain (a) targets based upon the calculated value expected to berealized with respect to certain business and corporate development transactions and (b) stock price minimums, during the 30-month period endingJanuary 2, 2017, measured as of January 4, 2016 and January 2, 2017. Fifty percent of the RSU grant that is earned through January 4, 2016 shall vest as ofsuch date, and 100% of the RSU grant that is earned through January 2, 2017 (less the portion previously vested) shall vest as of January 2, 2017, subject tothe continued employment of the grantee through each such date. In the event that the minimum conditions of these RSUs are not met as of the measurementdates, none of the RSUs will vest. The maximum total fair value of these RSUs is $6.3 million, which will be recognized to expense over a period ofapproximately three years from the date the vesting conditions outlined in these grants are deemed probable, net of any estimated and actual forfeitures. Werecognized $0.1 million of expense related to these awards during December 31, 2014.159 Table of Contents In February 2013, we granted RSUs under our 2007 Plan to certain members of our senior management covering a maximum of 82,500 shares of commonstock, which are subject to a performance condition tied to the price of our common stock. These RSUs vest, if at all, at the end of the three-year periodending December 31, 2015 based on the achievement of a minimum, target or maximum stock price range. In the event that the minimum stock price range isnot achieved at the measurement date, none of the RSUs will vest. The maximum total fair value of these RSUs is $0.7 million, which is being recognized toexpense over a period of three years from the date of grant, net of any estimated and actual forfeitures. During 2014, 2013 and 2012, our Board granted options to purchase 165,000, 270,000 and 300,000 shares of our common stock, respectively, and87,900, 115,000 and 100,000 RSUs, respectively, to certain new-hire employees, including members of our senior management, to induce them to acceptemployment with us. In addition to these inducement grants, during December 2014, we issued options covering 304,600 shares of our common stock and22,600 RSUs to certain employees of Lumara Health in order to induce them to accept employment with us following our acquisition of Lumara Health. Theoptions were granted at an exercise price equal to the fair market value of a share of our common stock on the respective grant dates and will be exercisable infour equal annual installments beginning on the first anniversary of the respective grant dates. The RSU grants will vest in four equal annual installmentsbeginning on the first anniversary of the respective grant dates. The foregoing grants were made pursuant to inducement grants outside of our 2007 Plan andthe Lumara Health 2013 Plan as permitted under the NASDAQ Stock Market listing rules. We assessed the terms of these awards and determined there was nopossibility that we would have to settle these awards in cash and therefore, equity accounting was applied. Since we first began issuing inducement grants outside of our plans in 2012 as permitted under the NASDAQ Stock Market listing rules, we have issued atotal of 1,344,000 shares of common stock pursuant to inducement grants, of which 146,250 stock options and 67,500 RSUs have been expired or terminatedand of which 28,750 options have been exercised and 75,000 shares of common stock have been issued pursuant to RSUs that became fully vested.Equity-based compensation expense Equity-based compensation expense for 2014, 2013 and 2012 consisted of the following (in thousands): We reduce the compensation expense being recognized to account for estimated forfeitures, which we estimate based primarily on historical experience,adjusted for unusual events such as corporate restructurings, which may result in higher than expected turnover and forfeitures. Under current accountingguidance, forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Due to the uncertainty surrounding the realization of the favorable tax attributes in future tax returns associated with operating losses we incurred in thepast, we have not recognized any excess tax benefits from the exercise of options. Accordingly, there was no impact recorded in cash flows from financingactivities or cash flows from operating activities as reported in the accompanying consolidated statements of cash flows.160 Years Ended December 31, 2014 2013 2012 Cost of product sales $122 $121 $225 Research and development 1,596 2,149 1,994 Selling, general and administrative 6,907 5,734 4,805 Total equity-based compensation expense $8,625 $8,004 $7,024 Table of Contents The following table summarizes the weighted average assumptions we utilized for purposes of valuing grants of options to our employees and non-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. During 2014 and2013, we estimated our expected stock price volatility by basing it on the historical volatility of our own common stock price over the prior periodequivalent to our expected option term to better reflect expected future volatility. During 2012, we estimated our expected stock price volatility by basing iton a blend of our own common stock price and the historical volatility of other similar companies over the prior period equivalent to our expected optionterm to better reflect expected future volatility. To compute the expected option term, we analyze historical exercise experience as well as expected stockoption exercise patterns. The following table summarizes details regarding stock options granted under our equity incentive plans for the year ended December 31, 2014: The weighted average grant date fair value of stock options granted during 2014, 2013 and 2012 was $10.63, $8.60 and $6.90, respectively. A total of668,321 stock options vested during 2014. The total grant date fair value of options that vested during 2014, 2013 and 2012 was $5.7 million, $4.5 millionand $5.5 million, respectively. The aggregate intrinsic value of options exercised during 2014, 2013 and 2012, excluding purchases made pursuant to ouremployee stock purchase plans, measured as of the exercise date, was approximately $5.9 million, $1.0 million and $0.1 million, respectively. The intrinsicvalue of a stock option is the amount by which the fair market value of the underlying stock on a specific date exceeds the exercise price of the commonstock option. In 2014, we issued an aggregate of 356,626 RSUs to our employees and directors (including inducement grants). In general, these grants vest on anannual basis over a four year period. The estimated fair value of RSUs granted was determined at the grant date based upon the quoted market price per shareon the date of the grant.161 Years Ended December 31, 2014 2013 2012 Employees Non-EmployeeDirectors Employees Non-EmployeeDirectors Employees Non-EmployeeDirectors Risk freeinterestrate (%) 1.56 1.28 0.95 0.85 0.66 0.68 Expectedvolatility(%) 47 46 59 46 57 56 Expectedoptionterm(years) 5.00 4.00 5.00 4.00 4.66 4.00 Dividendyield none none none none none none December 31, 2014 Options WeightedAverageExercise Price WeightedAverageRemainingContractualTerm AggregateIntrinsic Value($ in millions) Outstanding at beginning of year 2,819,676 $21.31 Granted 1,391,776 25.75 Exercised (494,576) 19.43 Expired and/or forfeited (720,493) 25.81 Outstanding at end of year 2,996,383 $22.60 7.7 $60,546 Outstanding at end of year—vested and unvested expected tovest 2,688,944 $22.60 7.6 $54,410 Exercisable at end of year 946,787 $22.47 6.0 $60,459 Table of Contents The following table summarizes details regarding RSUs granted under our equity incentive plans for the year ended December 31, 2014: The weighted average grant date fair value of RSUs granted during 2014, 2013 and 2012 was $22.88, $16.31 and $15.64, respectively. The total grantdate fair of RSUs that vested during 2014, 2013 and 2012 was $2.7 million, $2.8 million and $3.5 million, respectively. At December 31, 2014, the amount of unrecorded equity-based compensation expense for both option and RSU awards, net of forfeitures, attributable tofuture periods was approximately $24.0 million. Of this amount, $15.9 million was associated with stock options and is expected to be amortized on astraight-line basis to expense over a weighted average period of approximately two years, and $8.1 million was associated with RSUs and is expected to beamortized to on a straight-line basis to expense over a weighted average period of approximately two years. Such amounts will be amortized primarily toresearch and development or selling, general and administrative expense. These future estimates are subject to change based upon a variety of future events,which include, but are not limited to, changes in estimated forfeiture rates, employee turnover, and the issuance of new stock options and other equity-basedawards.N. 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 other things,for a company contribution of 3% of each employee's combined salary and certain other compensation for the plan year. Salary deferred by employees andcontributions by us to the 401(k) Plan are not taxable to employees until withdrawn from the 401(k) Plan and contributions are deductible by us when made.The amount of our company contribution for the 401(k) Plan was $0.8 million, $0.7 million, and $0.8 million for 2014, 2013 and 2012, respectively.O. STOCKHOLDERS' EQUITY 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 (the "RightsAgreement"). On February 11, 2014, in connection with the pricing of the Convertible Notes, we and American Stock Transfer & Trust Company, LLC (the "RightsAgent") entered into an amendment (the "Convertible Notes Amendment") to the Rights Agreement. The Convertible Notes Amendment, among other things,provides that, notwithstanding anything in the Rights Agreement to the contrary, each of JPMorgan Chase Bank, National Association, London Branch,Morgan Stanley & Co. International plc and Royal Bank of Canada (together the "Call Spread Counterparties") shall be162 December 31, 2014 UnvestedRestrictedStock Units WeightedAverage GrantDate Fair Value Outstanding at beginning of year 465,394 $17.28 Granted 356,626 22.88 Vested (151,518) 17.71 Forfeited (129,276) 18.25 Outstanding at end of year 541,226 $20.62 Outstanding at end of year and expected to vest 465,686 $20.59 Table of Contentsdeemed not to beneficially own any common shares underlying, or synthetically owned pursuant to, any warrant held by such Call Spread Counterparty, anycommon shares held by such Call Spread Counterparty (or any affiliate thereof) to hedge its exposure with respect to the convertible bond hedges andwarrants, any common shares underlying, or synthetically owned pursuant to, any Derivative Securities (as such term is defined in the Rights Agreement),including the Convertible Notes, held, or entered into, by such Call Spread Counterparty (or any affiliate thereof) to hedge its exposure with respect to theconvertible bond hedges and warrants or any Convertible Notes held by such Call Spread Counterparty (or any affiliate thereof) in its capacity as underwriterin the notes offering. On September 26, 2014, we adopted another amendment to our Rights Agreement to help preserve our substantial tax assets associated with NOLs andother tax benefits by deterring certain stockholders from increasing their percentage ownership in our stock (the "NOL Amendment"). The NOL Amendmentshortens the expiration date of the Rights Agreement from September 17, 2019 to March 31, 2017, decreases the exercise price of the rights from $250.0 to$80.0 in connection therewith, and makes changes to the definition of "beneficial ownership," as used in the Rights Agreement, as amended, to make itconsistent with how ownership is defined under Section 382 of the Internal Revenue Code of 1986, as amended. The original Rights Agreement provided fora dividend distribution of one preferred share purchase right (a "Right") for each outstanding share of our common stock, which dividend was paid onSeptember 17, 2009. Rights will separate from the common stock and will become exercisable upon the earlier of (a) the close of business on the10th calendar day following the first public announcement that a person or group of affiliated or associated persons has acquired beneficial ownership of4.99% or more (which percentage had been 20% before the NOL Amendment) of the outstanding shares of common stock, other than as a result ofrepurchases of stock by us or certain inadvertent actions by a stockholder or (b) the close of business on the 10th business day (or such later day as the Boardmay determine) following the commencement of a tender offer or exchange offer that could result, upon its consummation, in a person or group becoming thebeneficial owner of 4.99% or more (which percentage had been 20% before the NOL Amendment) of the outstanding shares of common stock (the earlier ofsuch dates being herein referred to as the "Distribution Date"). The NOL Amendment provides that the Rights are not exercisable until the Distribution Date and will expire at the earliest of (a) March 31, 2017, (b) thetime at which the Rights are redeemed or exchanged, (c) the effective date of the repeal of Section 382 or any successor statute if the Board determines thatthe NOL Rights Plan is no longer necessary or desirable for the preservation of our tax benefits, (d) the first day of our taxable year to which the Boarddetermines that no tax benefits may be carried forward or (e) September 26, 2015 if stockholder approval of the NOL Amendment has not been obtained by oron such date. We expect to submit the NOL Amendment to a vote of our stockholders at our 2015 annual meeting of stockholders. There can be no assurance that theNOL Amendment will result in us being able to preserve all or any of the substantial tax assets associated with NOLs and other tax benefits.P. BUSINESS SEGMENTS We have determined that we conduct our operations in one business segment: the manufacture, development and commercialization of products for usein treating various conditions. Long-lived assets consist entirely of property and equipment and are located in the U.S. for all periods presented.Q. COMMITMENTS AND CONTINGENCIESCommitments Our long-term contractual obligations include commitments and estimated purchase obligations entered into in the normal course of business. Theseinclude commitments related to purchases of inventory of our products, research and development service agreements, operating leases and selling,163Table of Contentsgeneral and administrative obligations, and milestone payments due under our licensing and acquisition agreements.Operating and Facility Lease Obligations We have entered into certain operating leases, including certain office equipment and automobiles, which expire through 2017. Expense associated withthese operating leases, including previous leases of certain automobiles, amounted to approximately $0.2 million, $(0.3) million and, $0.9 million for 2014,2013 and 2012, respectively. The net credit for operating lease expense in 2013 is due to the excess of the sales value of certain automobiles we previouslyleased over the contracted value in connection with the 2013 termination of the automobile leases and the subsequent sales of the automobiles by the leasingcompanies. Future minimum lease payments associated with all non-cancellable equipment, service and lease agreements, excluding facility-related leasesare approximately $0.6 million for 2015. In June 2013, we entered into a lease agreement with BP Bay Colony LLC (the "Landlord") for the lease of certain real property located at 1100 WinterStreet, Waltham, Massachusetts (the "Waltham Premises") for use as our principal executive offices. Beginning in September 2013, the initial term of the leaseis five years and two months with one five-year extension term at our option. During the extension period, the base rent will be an amount agreed upon by usand the Landlord. In addition to base rent, we are also required to pay a proportionate share of the Landlord's operating costs. The Landlord agreed to pay for certain agreed-upon improvements to the Waltham Premises and we agreed to pay for any increased costs due to changesby us to the agreed-upon plans. We record all tenant improvements paid by us as leasehold improvements and amortize these improvements over the shorterof the estimated useful life of the improvement or the remaining life of the initial lease term. Amortization of leasehold improvements is included indepreciation expense. In addition, in connection with our facility lease for the Waltham Premises, in June 2013 we delivered to the Landlord a security deposit of $0.4 millionin the form of an irrevocable letter of credit. This security deposit will be reduced to $0.3 million on the second anniversary of the date the lease commenced.The cash securing this letter of credit is classified on our balance sheet as of December 31, 2014 and 2013 as a long-term asset and is restricted in its use. In June 2013, we also entered into an Assignment and Assumption of Lease (the "Assignment Agreement") with Shire Human Genetic Therapies, Inc.("Shire") effecting the assignment to Shire of the right to occupy our former office space located at 100 Hayden Avenue, Lexington, Massachusetts (the "PriorSpace"). Under the Assignment Agreement, the assignment to Shire became effective on September 21, 2013, the date of our departure from the Prior Space,and Shire assumed all of our obligations as the tenant of the Prior Space. The Assignment Agreement also provided for the conveyance of furniture and otherpersonal property by us to Shire. In connection with our acquisition of Lumara Health, we have assumed the lease of certain real property located at 16640 Chesterfield Grove Road,Chesterfield, Missouri (the "St. Louis Premises"), which we are currently using as temporary office space for Lumara Health employees as they relocate to theWaltham Premises. Beginning in September 2013, the initial term of the lease is five years and two months. In addition to base rent, we are also required topay a proportionate share of the Landlord's operating costs. We are attempting to sublease the St. Louis Premises and if successful, future operating leasecommitments will be partially offset by proceeds received from the sublease.164Table of Contents Future minimum payments under our non-cancelable facility-related leases as of December 31, 2014 are as follows (in thousands): Facility-related rent expense, net of deferred rent amortization, for the Waltham Premises and the Prior Space, as applicable, was $0.8 million,$1.5 million and $1.7 million for 2014, 2013, and 2012. Facility-related rent expense for the St. Louis Premises was less than $0.1 million from November 12,2014 through December 31, 2014.Debt Obligations Our long-term debt obligations reflect our obligations under the Convertible Notes and Term Loan Facility to pay interest on the $540.0 millionaggregate principal amount and to make scheduled principal payments on the Term Loan Facility and principal payments at maturity or upon conversion, inthe case of the Convertible Notes.Purchase Commitments During 2014, we entered into various agreements with third parties for which we had remaining purchase commitments of approximately $4.8 million asof December 31, 2014. These agreements principally related to certain purchase orders for the production of our products, certain outsourced commercialactivities, manufacturing commitments, our information technology infrastructure, and other operational activities.Contingent Consideration Related to Business Combinations In connection with our acquisition of Lumara Health in November 2014, we agreed to pay up to an additional $350.0 million based on the achievementof certain sales milestones. Due to the contingent nature of these milestone payments, we cannot predict the amount or timing of such payments. See Note C,"Business Combinations," for more information on the Lumara Health acquisition and related milestone payments.Other Funding Commitments As of December 31, 2014, we had several ongoing clinical studies in various clinical trial stages. Our most significant clinical trial expenditures were toclinical research organizations ("CROs"). The contracts with CROs are generally cancellable, with notice, at our option. We have recorded accrued expensesin our consolidated balance sheet of approximately $1.9 million representing expenses incurred with these organizations as of December 31, 2014, net of anyamounts prepaid to these CROs.Severance Arrangements We have entered into employment agreements or other arrangements with most of our executive officers and certain other employees, which provide forthe continuation of salary and certain benefits and, in certain instances, the acceleration of the vesting of certain equity awards to such individuals in theevent that the individual is terminated other than for cause, as defined in the applicable employment agreements or arrangements.165Period Minimum LeasePayments Year Ended December 31, 2015 $1,451 Year Ended December 31, 2016 1,456 Year Ended December 31, 2017 1,462 Year Ended December 31, 2018 1,174 Total $5,543 Table of ContentsIndemnification Obligations As permitted under Delaware law, pursuant to our certificate of incorporation, by-laws and agreements with all of our current directors, executive officers,and certain of our employees, we are obligated to indemnify such individuals for certain events or occurrences while the officer, director or employee is, orwas, serving at our request in such capacity. The maximum potential amount of future payments we could be required to make under these indemnificationobligations is not capped. Our director and officer insurance policy limits our initial exposure to $1.0 million and our policy provides 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 which obligateus to indemnify the other parties to such agreements upon the occurrence of certain events. Such indemnification obligations are usually in effect from thedate of execution of the applicable agreement for a period equal to the applicable statute of limitations. Our aggregate maximum potential future liabilityunder such indemnification provisions is uncertain. Except for expenses we incurred related to the Silverstrand class action lawsuit, described below, filedagainst us in March 2010, we have not incurred any expenses as a result of such indemnification provisions. Accordingly, we have determined that theestimated aggregate fair value of our potential liabilities under such indemnification provisions is not significant, and we have not recorded any liabilityrelated to such indemnification.ContingenciesLegal Proceedings We accrue a liability for legal contingencies when we believe that it is both probable that a liability has been incurred and that we can reasonablyestimate the amount of the loss. We review these accruals and adjust them to reflect ongoing negotiations, settlements, rulings, advice of legal counsel andother relevant information. To the extent new information is obtained and our views on the probable outcomes of claims, suits, assessments, investigations orlegal proceedings change, changes in our accrued liabilities would be recorded in the period in which such determination is made. For the matters referencedbelow, the liability is not probable or the amount cannot be reasonably estimated and, therefore, accruals have not been made. In addition, in accordance withthe relevant authoritative guidance, for any matters in which the likelihood of material loss is at least reasonably possible, we will provide disclosure of thepossible loss or range of loss. If a reasonable estimate cannot be made, however, we will provide disclosure to that effect.Silverstrand Class Action A purported class action complaint was originally filed on March 18, 2010 in the U.S. District Court for the District of Massachusetts, entitledSilverstrand 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 onDecember 17, 2010. The second amended complaint, filed on December 17, 2010 alleged that we and our former President and Chief Executive Officer,former Chief Financial Officer, the then-members of our Board, and certain underwriters in our January 2010 offering of common stock violated certainfederal securities laws, specifically Sections 11 and 12(a)(2) of the Securities Act of 1933, as amended, and that our former President and Chief ExecutiveOfficer and former Chief Financial Officer violated Section 15 of such Act, respectively, by making certain alleged omissions in a registration statement filedin January 2010. The plaintiffs sought unspecified damages on behalf of a purported class of purchasers of our common stock pursuant to our common stockoffering on or about January 21, 2010. After litigating the class action lawsuit for several years, on September 12, 2014, we and the other defendants enteredinto a stipulation of settlement with the lead plaintiffs (on behalf of themselves and each of the class members) to resolve the class action securities lawsuit.Pursuant to the stipulation of settlement, and in exchange for a release of all claims by the class members and certain other persons,166Table of Contentsand dismissal of the lawsuit with prejudice, we agreed to cause our insurer to pay eligible class members and their attorneys a total of $3.75 million. OnOctober 2, 2014, the U.S. District Court preliminarily approved the settlement, and potential class members were notified of the proposed settlement and theprocedures by which they could seek to recover from the settlement fund, object to the settlement or request to be excluded from the settlement class and onJanuary 30, 2015, the stipulation of settlement was approved by the U.S. District Court. The U.S. District Court entered final judgment on February 2, 2015.Any appeals of the settlement are due by March 4, 2015. We have recorded the $3.75 million settlement amount in prepaid and other current assets and acorresponding amount in accrued expenses on our consolidated balance sheet as of December 31, 2014, as the settlement amount will be fully covered by ourinsurance carrier. There was no impact to our consolidated statement of operations for the year ended December 31, 2014.Makena Securities Litigation On October 19, 2011, plaintiff Frank Julianello filed a complaint against Lumara Health (then-named K-V Pharmaceutical Company ("K-V Pharmaceutical")) and certain individual defendants, in the United States District Court for the Eastern District of Missouri (the "Court"), allegingviolations of the anti-fraud provisions of the federal securities laws on behalf of all purchasers of the publicly traded securities of Lumara Health betweenFebruary 14, 2011 and April 4, 2011. The complaint alleges class members were damaged by paying artificially inflated stock prices due to Lumara Health'spurportedly misleading statements regarding Makena related to access and exclusivity. On October 31, 2011, plaintiff Ramakrishna Mukku filed a complaintagainst Lumara Health, in the United States District Court for the Eastern District of Missouri, alleging violations of the anti-fraud provisions of the federalsecurities laws on behalf of all purchasers of the publicly traded securities of Lumara Health between February 14, 2011 and April 4, 2011. The complaintalleges class members were damaged by paying artificially inflated stock prices due to Lumara Health's purportedly misleading statements regarding Makenarelated to access and exclusivity. On November 2, 2011, plaintiff Hoichi Cheong filed a complaint against Lumara Health, in the United States District Courtfor the Eastern District of Missouri, on behalf of purchasers of the securities of Lumara Health, who purchased or otherwise acquired K-V Pharmaceuticalsecurities between February 14, 2011 and April 4, 2011, seeking to pursue remedies under the Exchange Act. The complaint alleges class members weredamaged by purchasing artificially inflated stock prices due to Lumara Health's purportedly misleading statements regarding Makena related to access andexclusivity. On March 8, 2012, the Julianello, Mukku and Cheong cases were consolidated and the consolidated action is now styled In Re K-VPharmaceutical Company Securities Litigation, Case No. 4:11-CV-1816-AGF. On May 4, 2012, the Court appointed Lori Anderson as Lead Plaintiff in thematter. On April 22, 2013, the individual defendants moved to dismiss the complaint and oral argument was held before the Court on November 26, 2013.Lumara Health joined in the motion to dismiss on February 10, 2014. On March 27, 2014, the Court entered an order granting Lumara Health's motion todismiss the class action complaint without prejudice to the Plaintiffs' ability to file a second amended complaint with respect to a limited issue of whetherLumara Health's statements about Lumara Health's financial assistance program for Makena were materially false or misleading. On April 16, 2014, thePlaintiff's filed a motion to reconsider asking the Court to reconsider its order restricting the scope of Plaintiff's ability to amend its complaint. The Courtdenied Plaintiff's motion to reconsider and entered a judgment granting Lumara Health's motion to dismiss on June 6, 2014. On July 1, 2014, Plaintiffs filed aNotice of Appeal with the Eighth Circuit Court of Appeals and briefs have been submitted to the Court. The Court of Appeals has set March 12, 2015 as thedate for oral argument.European Patent Organization Appeal In July 2010, Sandoz GmbH ("Sandoz") filed with the European Patent Office (the "EPO") an opposition to a previously issued patent which coversferumoxytol in EU jurisdictions. In October 2012, at an oral hearing, the Opposition Division of the EPO revoked this patent. In December 2012, our167Table of Contentsnotice of appeal of that decision was recorded with the EPO, which also suspended the revocation of our patent. On May 13, 2013, we filed a statement ofgrounds of appeal and on September 27, 2013, Sandoz filed a response to that statement. We filed a reply to that response on March 17, 2014 and oralproceedings for the appeal is scheduled for June 16, 2015. In the event that we withdraw our appeal or that do not experience a successful outcome from theappeals process, under EU regulations ferumoxytol would still be entitled to eight years of data protection and ten years of market exclusivity from the dateof approval, which we believe would create barriers to entry for any generic version of ferumoxytol into the EU market until sometime between 2020 and2022. This decision had no impact on our revenues for the year ended December 31, 2014. However, any future unfavorable outcome in this matter couldnegatively affect the magnitude and timing of future revenues. We do not expect to incur any related liability regardless of the outcome of the appeal andtherefore have not recorded any liability as of December 31, 2014. We continue to believe the patent is valid and intend to vigorously appeal the decision. We may periodically become subject to other 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, we are notaware of any material claims against us at December 31, 2014. We expense legal costs as they are incurred.R. COLLABORATIVE AGREEMENTS Our commercial strategy includes the formation of collaborations with other pharmaceutical companies to facilitate the sale and distribution ofFeraheme, primarily outside of the U.S., as well as expanding our portfolio through the in-license or acquisition of additional pharmaceutical products orcompanies, including revenue-generating commercial products and late-state development assets.Takeda In March 2010, we entered into the Takeda Agreement, as amended in June 2012, under which we granted exclusive rights to Takeda to develop andcommercialize Feraheme as a therapeutic agent in certain agreed-upon territories. In February 2014, we entered into a supply agreement with Takeda, whichprovides the terms under which we sell Feraheme to Takeda in order for Takeda to meet its requirements for commercial use of Feraheme in its licensedterritories (the "Supply Agreement"). On December 29, 2014, we entered into the Takeda Termination Agreement to terminate the Amended TakedaAgreement and we will regain all worldwide development and commercialization rights for Feraheme following the transfer of the outstanding marketingauthorizations to us. Pursuant to the Takeda Termination Agreement, we and Takeda have agreed to effectuate the termination of the Amended TakedaAgreement on a rolling basis, whereby the termination will be effective for a particular geographic territory (e.g., countries under the regulatory jurisdictionsof Health Canada, the EMA and SwissMedic) upon the earlier of effectiveness of the transfer to us or a Withdrawal (as defined below) of the marketingauthorization for such territory, with the final effective termination date to be on the third such effective date ("Termination Date"). We have recently come toa mutual decision with Takeda to initiate withdrawal of the marketing authorization for Rienso in the EU and Switzerland. We are currently assessing thecommercial opportunity for Feraheme in Canada. Under the Amended Takeda Agreement, except under limited circumstances, we retained the right to manufacture Feraheme and, accordingly, wereresponsible for supply of Feraheme to Takeda at a fixed price per unit. We were also responsible for conducting, and bearing the costs related to, certain pre-defined clinical studies. We determined that our obligations under the Amended Takeda Agreement had not changed from those under the original TakedaAgreement and included the following four deliverables: the license, access to future know-how and improvements to the Feraheme technology, regulatoryand clinical research activities, and the manufacturing and supply of product. Pursuant to the accounting guidance in effect in March 2010, when we signedthe original Takeda Agreement and168Table of Contentswhich governed revenue recognition on multiple element arrangements, we evaluated the four deliverables under the original Takeda Agreement anddetermined that our obligation to provide manufacturing supply of product met the criteria for separation and was therefore treated as a single unit ofaccounting, which we refer to as the supply unit of accounting. Further, we concluded that the license was not separable from the undelivered future know-how and technological improvements or the undelivered regulatory and clinical research activities. Accordingly, these deliverables were being combinedand also treated as a single unit of accounting, which we refer to as the combined unit of accounting. With respect to the combined unit of accounting, ourthen obligation to provide access to our future know-how and technological improvements was the final deliverable and was an obligation which existedthroughout the term of the Amended Takeda Agreement. In connection with the execution of the original Takeda Agreement, we received a $60.0 million upfront payment from Takeda in April 2010, which werecorded as deferred revenue, as well as approximately $1.0 million reimbursed to us during 2010 for certain expenses incurred prior to entering theagreement, which we considered an additional upfront payment. Because we could not reasonably estimate the total level of effort required to complete theobligations under the combined deliverable, we were recognizing the entire $60.0 million upfront payment and the $1.0 million reimbursed to us in 2010,into revenues on a straight-line basis over a period of ten years from March 31, 2010, the date on which we originally entered the Takeda Agreement, whichrepresented the then current patent life of Feraheme and our best estimate of the period over which we were to substantively perform our obligations. In June 2012, we earned a $15.0 million milestone payment from Takeda based on the European Commission marketing authorization for ferumoxytol.We deemed the $15.0 million milestone payment as a substantive milestone and therefore recognized the full amount as revenue. During 2012, we receivedan aggregate of $18.0 million in milestone payments from Takeda associated with the commercial launches of Feraheme in the EU and Canada, which wedeemed to be non-substantive milestone payments. Revenues related to the combined unit of accounting are recorded in license fee and other collaborationrevenues in our consolidated statement of operations. In 2014, we recognized $8.2 million in revenues associated with the amortization of the upfront andmilestone payments in license fees and other collaboration revenues in our consolidated statement of operations, including the acceleration of $0.3 millionof upfront and milestone payments as a result of the termination of the Amended Takeda Agreement. We have classified all remaining upfront and milestonepayments received to date as short-term deferred revenues at December 31, 2014, and we expect to recognize the remaining balance of the deferred revenuerelated to Takeda within the next 12 months. In addition, we recorded $3.2 million related to the Takeda Termination Agreement as deferred revenue atDecember 31, 2014. Prior to entering into the December 2014 Takeda Termination Agreement, under the terms of the Amended Takeda Agreement, Takeda was responsiblefor reimbursing us for certain out-of-pocket regulatory and clinical trial supply costs associated with carrying out our regulatory and clinical researchactivities under the collaboration agreement. Because we were acting as the principal in carrying out these services, any reimbursement payments receivedfrom Takeda were recorded in license fee and other collaboration revenues in our consolidated statement of operations to match the costs that we incurredduring the period in which we performed those services. We recorded $1.7 million, $0.5 million and $0.4 million for 2014, 2013 and 2012, respectively,associated with other reimbursement revenues received from Takeda. We have assumed any post-marketing obligations of Takeda as part of the TakedaTermination Agreement, including costs that otherwise would have been Takeda's obligation under the Amended Takeda Agreement for the ongoingpediatric studies and the initiated multi-center clinical trial to be conducted to determine the safety and efficacy of repeat doses of Feraheme for the treatmentof IDA in patients with hemodialysis dependent CKD, including a treatment arm with iron sucrose using a magnetic resonance imaging sub-analysis. Inconnection with our decision to withdraw the marketing authorization for Rienso in the EU and Switzerland, we may modify or terminate clinical trials beingconducted as part of our post-approval commitments to the EMA.169 Table of Contents Prior to entering into the December 2014 Takeda Termination Agreement, at the time of shipment, we deferred recognition of all revenue for Ferahemesold to Takeda in our consolidated balance sheets. We recognized revenues from product sales to Takeda, the related cost of product sales, and any royaltyrevenues due from Takeda, in our consolidated statement of operations at the time Takeda reported to us that sales had been made to their customers. During2014, we recognized $3.5 million in product sales and royalty revenue and $2.8 million of cost of product sales related to the Amended Takeda Agreement,which included all amounts previously deferred prior to the termination of the Amended Takeda Agreement, and we have included in other product sales androyalties, and cost of product sales, respectively, in our consolidated statement of operations. In connection with each Termination Date and in accordance with the terms of the Takeda Termination Agreement, Takeda is obligated, with respect tothe applicable terminated territory, to transfer and assign to us all applicable regulatory materials and approvals and certain product data, unlabeledinventory, third party contracts intellectual property rights and know-how to us, and to grant us an exclusive license for certain Takeda technology used andapplied to commercialize Feraheme in the applicable territory. The Takeda Termination Agreement also details the regulatory activities each party isrequired to perform in connection with transferring the marketing authorization from Takeda to us in each of the territories and the allocation of the costs ofsuch activities. We and Takeda have agreed to use commercially reasonable efforts to transfer all required activities to us on a territory-by-territory basiswithin 60 days after the applicable Termination Date (subject to a 30-day extension upon our request and Takeda's consent). In addition, Takeda is obligatedpursuant to the Takeda Termination Agreement to provide transition assistance to us, at no cost to us, for up to 180 days after each Termination Date for theapplicable termination territory. With Takeda's consent (which shall not be unreasonably withheld or delayed), we may extend the transition services periodfor a terminated territory for a period of time reasonably necessary to complete any services that cannot be reasonably transitioned to us during the initial180-day period, which extension will not exceed an additional 180 days. If we request, and Takeda agrees to conduct, additional transition services after theend of the applicable transition services period, as may be extended, we will reimburse Takeda's fully burdened costs for such additional services plus 5%. The Takeda Termination Agreement also provides that if the marketing authorization for the product is suspended in a particular territory and the partiesare prevented from completing the transfer of such marketing authorization to us within 120 days after such suspension due to applicable laws or anyregulatory requirements or restrictions, or if we do not fulfill our obligations to initiate marketing authorization transfer by the agreed-upon, territory-specificdeadline, Takeda will have the right, in Takeda's sole discretion, to withdraw such marketing authorization (a "Withdrawal"). In consideration for the early termination of the Amended Takeda Agreement and the activities to be performed by us earlier than contemplated underthe Amended Takeda Agreement, and in lieu of any future cost-sharing and milestone payments contemplated by the Amended Takeda Agreement, Takedaagreed to make certain payments to us, subject to certain terms and conditions, including up to approximately $6.7 million in connection with clinical studyobligations, pharmacovigilance activities, regulatory filings and support, commercialization and back-office support and distribution expenditures and a$3.0 million milestone payment payable subject to certain regulatory conditions. Additionally, the supply agreement we entered into with Takeda in February 2014, together with the Amended Takeda Agreement, which continues ineffect until the expiration or termination of the Amended Takeda Agreement, will also terminate as of the respective Termination Date in the applicablegeographic territory.170Table of Contents3SBio In 2008, we entered into a Collaboration and Exclusive License Agreement (the "3SBio License Agreement") and a Supply Agreement with 3SBio Inc.for the development 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 had been deferred. In January 2014, we mutually terminated the agreement with 3SBio,effective immediately, due to the fact that, despite the best efforts of the parties, regulatory approval in China could not be obtained within the agreed upontime period.PlasmaTech Please refer to Note C, "Business Combinations," for a detailed description of the MuGard License Agreement.S. DEBT2.5% Convertible Notes On February 14, 2014, we issued $200.0 million aggregate principal amount of Convertible Notes, which includes $25.0 million principal amount ofConvertible Notes issued pursuant to the full exercise of an over-allotment option granted to the underwriters in the offering. We received net proceeds of$193.3 million from the sale of the Convertible Notes, after deducting fees and expenses of $6.7 million. We used $14.1 million of the net proceeds from thesale of the Convertible Notes to pay the cost of the convertible bond hedges, as described below (after such cost was partially offset by the proceeds to usfrom the sale of warrants in the warrant transactions described below). The Convertible Notes are governed by the terms of an indenture between us, as issuer, and Wilmington Trust, National Association, as the Trustee. TheConvertible Notes are senior unsecured obligations and bear interest at a rate of 2.5% per year, payable semi-annually in arrears on February 15 andAugust 15 of each year, beginning on August 15, 2014. The Convertible Notes will mature on February 15, 2019, unless earlier repurchased or converted.The Convertible Notes (which are currently convertible) will be convertible into cash, shares of our common stock, or a combination thereof, at our election(subject to certain limitations in the Term Loan Facility), at an initial conversion rate of approximately 36.9079 shares of common stock per $1,000 principalamount of the Convertible Notes, which corresponds to an initial conversion price of approximately $27.09 per share of our common stock and represents aconversion premium of approximately 35% based on the last reported sale price of our common stock of $20.07 on February 11, 2014, the date the notesoffering was priced. The conversion rate is subject to adjustment from time to time upon the occurrence of certain events, including, but not limited to, the issuance of stockdividends and payment of cash dividends. At any time prior to the close of business on the business day immediately preceding May 15, 2018, holders mayconvert their Convertible Notes at their option only under the following circumstances:(1)during any calendar quarter commencing after the calendar quarter ended on March 31, 2014 (and only during such calendar quarter), if thelast reported sale price of our common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive tradingdays ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price oneach applicable trading day; (2)during the five business day period after any five consecutive trading day period (the "measurement period") in which the trading price per$1,000 principal amount of the Convertible Notes for each trading day of the measurement period was less than 98% of the171Table of Contentsproduct of the last reported sale price of our common stock and the conversion rate on each such trading day; or(3)upon the occurrence of specified corporate events. On or after May 15, 2018 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convertall or any portion of their Convertible Notes, in multiples of $1,000 principal amount, at the option of the holder regardless of the foregoing circumstances. If a make-whole fundamental change, as described in the indenture, occurs and a holder elects to convert its Convertible Notes in connection with suchmake-whole fundamental change, such holder may be entitled to an increase in the conversion rate as described in the indenture. We may not redeem the Convertible Notes prior to the maturity date and no "sinking fund" is provided for the Convertible Notes, which means that weare not required to periodically redeem or retire the Convertible Notes. Upon the occurrence of certain fundamental changes involving us, holders of theConvertible Notes may require us to repurchase for cash all or part of their Convertible Notes at a repurchase price equal to 100% of the principal amount ofthe Convertible Notes to be repurchased, plus accrued and unpaid interest. The indenture does not contain any financial or maintenance covenants or restrictions on the payments of dividends, the incurrence of indebtedness orthe issuance or repurchase of securities by us or any of our subsidiaries. The indenture contains customary terms and covenants and events of default. If anevent of default (other than certain events of bankruptcy, insolvency or reorganization involving us) occurs and is continuing, the Trustee by notice to us, orthe holders of at least 25% in principal amount of the outstanding Convertible Notes by written notice to us and the Trustee, may declare 100% of theprincipal of and accrued and unpaid interest, if any, on all of the Convertible Notes to be due and payable. Upon such a declaration of acceleration, suchprincipal and accrued and unpaid interest, if any, will be due and payable immediately. Upon the occurrence of certain events of bankruptcy, insolvency orreorganization involving us, 100% of the principal of and accrued and unpaid interest, if any, on all of the Convertible Notes will become due and payableautomatically. Notwithstanding the foregoing, the indenture provides that, to the extent we elect and for up to 270 days, the sole remedy for an event ofdefault relating to certain failures by us to comply with certain reporting covenants in the indenture consists exclusively of the right to receive additionalinterest on the Convertible Notes. In accordance with accounting guidance for debt with conversion and other options, we separately account for the liability and equity components of theConvertible Notes by allocating the proceeds between the liability component and the embedded conversion option ("equity component") due to our abilityto settle the Convertible Notes in cash, common stock or a combination of cash and common stock, at our option (subject to certain limitations in the TermLoan Facility). The carrying amount of the liability component was calculated by measuring the fair value of a similar liability that does not have anassociated convertible feature. The allocation was performed in a manner that reflected our non-convertible debt borrowing rate for similar debt. The equitycomponent of the Convertible Notes was recognized as a debt discount and represents the difference between the proceeds from the issuance of theConvertible Notes and the fair value of the liability of the Convertible Notes on their respective dates of issuance. The excess of the principal amount of theliability component over its carrying amount ("debt discount") is amortized to interest expense using the effective interest method over five years (the "life ofthe Convertible Notes"). The equity component is not remeasured as long as it continues to meet the conditions for equity classification.172Table of Contents Our outstanding Convertible Note balances as December 31, 2014 consisted of the following (in thousands): In connection with the issuance of the Convertible Notes, we incurred approximately $6.7 million of debt issuance costs, which primarily consisted ofunderwriting, legal and other professional fees, and allocated these costs to the liability and equity components based on the allocation of the proceeds. Ofthe total $6.7 million of debt issuance costs, $1.3 million were allocated to the equity component and recorded as a reduction to additional paid-in capitaland $5.4 million were allocated to the liability component and recorded as assets on the balance sheet. The portion allocated to the liability component isamortized to interest expense over the expected life of the Convertible Notes using the effective interest method. We determined the expected life of the debt was equal to the five year term on the Convertible Notes. As of December 31, 2014, the carrying value of theConvertible Notes was $167.4 million and the fair value of the Convertible Notes was $332.0 million. The effective interest rate on the liability componentwas 7.23% for the period from the date of issuance through December 31, 2014. The following table sets forth total interest expense recognized related to theConvertible Notes during the year ended December 31, 2014 (in thousands):Convertible Bond Hedge and Warrant Transactions In connection with the pricing of the Convertible Notes and in order to reduce the potential dilution to our common stock and/or offset cash paymentsdue upon conversion of the Convertible Notes, on February 11, 2014 and February 13, 2014, we entered into convertible bond hedge transactions coveringapproximately 7.4 million shares of our common stock underlying the $200.0 million aggregate principal amount of the Convertible Notes, including theexercise of the over-allotment option, with the Call Spread Counterparties. The convertible bond hedges have an exercise price of approximately $27.09 pershare, subject to adjustment upon certain events, and are exercisable when and if the Convertible Notes are converted. If upon conversion of the ConvertibleNotes, the price of our common stock is above the exercise price of the convertible bond hedges, the Call Spread Counterparties will deliver shares of ourcommon stock and/or cash with an aggregate value approximately equal to the difference between the price of our common stock at the conversion date andthe exercise price, multiplied by the number of shares of our common stock related to the convertible bond hedges being exercised. The convertible bondhedges are separate transactions entered into by us and are not part of the terms of the Convertible Notes or the warrants, discussed below. Holders of theConvertible Notes will not have any rights with respect to the convertible bond173 December 31, 2014 Liability component: Principal $200,000 Less: debt discount, net (32,559)Net carrying amount $167,441 Equity component $38,188 Year EndedDecember 31, 2014 Contractual interest expense $4,375 Amortization of debt issuance costs 800 Amortization of debt discount 5,629 Total interest expense $10,804 Table of Contentshedges. We paid $39.8 million for these convertible bond hedges and recorded this amount as a reduction to additional paid-in capital, net of tax, in the firstquarter of 2014. In February 2014, we also entered into separate warrant transactions with each of the Call Spread Counterparties relating to, in the aggregate,approximately 7.4 million shares of our common stock underlying the $200.0 million aggregate principal amount of the Convertible Notes, including theexercise of the over-allotment option. The initial exercise price of the warrants is $34.12 per share, subject to adjustment upon certain events, which is 70%above the last reported sale price of our common stock of $20.07 on February 11, 2014. The warrants would separately have a dilutive effect to the extent thatthe market value per share of our common stock, as measured under the terms of the warrants, exceeds the applicable exercise price of the warrants. Thewarrants were issued to the Call Spread Counterparties pursuant to the exemption from registration set forth in Section 4(a)(2) of the Securities Act of 1933, asamended. We received $25.7 million for these warrants and recorded this amount to additional paid-in capital in the first quarter of 2014. Aside from the initial payment of a $39.8 million premium to the Call Spread Counterparties under the convertible bond hedges, which amount ispartially offset by the receipt of a $25.7 million premium under the warrants, we are not required to make any cash payments to the Call SpreadCounterparties under the convertible bond hedges and will not receive any proceeds if the warrants are exercised.Term Loan Facility On November 12, 2014 (the "Closing Date"), in connection with the acquisition of Lumara Health, we entered into the Term Loan Facility. The proceedsof the Term Loan Facility borrowed on the Closing Date were used to finance, in part, the Cash Consideration. We borrowed $340.0 million under the TermLoan Facility to fund a portion of the purchase price of Lumara Health. We realized net proceeds of $327.5 million after deducting $12.5 million of originalissue discount costs and other lender fees and expenses. At December 31, 2014, the carrying value of the outstanding borrowings, net of unamortized originalissue costs and other lender fees and expenses, was $327.9 million. The Term Loan Facility provides for the aggregate principal amount of $340.0 million and allows for the incurrence of incremental term loans in anamount up to $40.0 million on the terms and subject to the conditions set forth in the Term Loan Facility. The Term Loan Facility bears interest, at ouroption, at either the Eurodollar rate plus a margin of 6.25% or the prime rate plus a margin of 5.25%. The Eurodollar rate is subject to a 1.00% floor and theprime rate is subject to a 2.00% floor. As of December 31, 2014 the stated interest rate was 7.25% and the effective interest rate was 8.55%. We must repay the Term Loan Facility in installments of (a) $8.5 million per quarter due on the last day of each quarter beginning with the quarterending March 31, 2015 through the quarter ending December 31, 2015, and (b) $12.8 million per quarter due on the last day of each quarter beginning withthe quarter ending March 31, 2016 through the quarter ending September 30, 2020, with the balance due in a final installment on November 12, 2020. TheTerm Loan Facility matures on November 12, 2020, except that the Term Loan Facility will mature on September 30, 2018 if:(c)more than $25.0 million in aggregate principal amount of our Convertible Notes remain outstanding and not converted to common stock orrefinanced and replaced with debt that matures following, and has no amortization prior to, the date that is six and one half years following theClosing Date; and (b)the aggregate principal amount of all the Term Loan Facility (including all undrawn incremental commitments) is greater than $50.0 millionon and as of such date (the "Maturity Date").174Table of Contents Additionally, the Term Loan Facility includes an annual mandatory prepayment of the Term Loan Facility from 75% of our excess cash flow as measuredon an annual basis, with step-downs to 50%, 25% and 0% of our excess cash flow if our Total Net Leverage Ratio (as defined in the Term Loan Facility),tested as of the last day of our fiscal year, is less than or equal to 2.00 to 1.00, 1.00 to 1.00 and 0.50 to 1.00, respectively. Excess cash flow is generallydefined as our adjusted Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA") less debt service costs, unfinanced capital expenditures,unfinanced acquisition expenditures, and current income taxes paid, as adjusted for changes in our working capital. Additionally, the Term Loan Facilityrequires mandatory prepayment of the term loan from the net cash proceeds of (i) certain debt issuances and (ii) certain asset sales outside the ordinary courseof business and from proceeds of property insurance and condemnation events, in each case of this clause (ii) subject to our right to reinvest such proceeds inour business. Any voluntary prepayment or mandatory prepayment pursuant to the preceding sentence other than such prepayments not exceeding $50.0million in the aggregate, shall be accompanied by a prepayment premium equal to (a) 2.0% of the principal amount of such prepayment, if such prepaymentis made on or prior to the date that is twelve months after the Closing Date or (b) 1.0% of the principal amount of such prepayment, if such prepayment ismade after the date that is twelve months after the Closing Date and on or prior to the date that is twenty-four months after the Closing Date. The Term Loan Facility has a lien on substantially all of our assets, including a pledge of 100% of the equity interests in our domestic subsidiaries andan obligation to pledge 65% of the equity interests in our direct foreign subsidiaries. The Term Loan Facility contains customary affirmative covenants for transactions of this type and other affirmative covenants agreed to by the parties,including, among others, the provision of annual and quarterly financial statements and compliance certificates, maintenance of property, insurance,compliance with laws and environmental matters. The Term Loan Facility contains customary negative covenants for transactions of this type and othernegative covenants agreed to by the parties, including, among others, restrictions on the incurrence of indebtedness, granting of liens, making investmentsand acquisitions, paying dividends, repurchases of equity interests in the Company, entering into affiliate transactions and asset sales. The Term LoanFacility also provides for a number of customary events of default, including, among others, payment, bankruptcy, covenant, representation and warranty,change of control and judgment defaults. In addition, the Term Loan Facility contains certain restrictions regarding the use of our funds to pay certain debts. The Term Loan Facility requires that we comply with a Total Net Leverage Ratio. Under the terms of the Term Loan Facility, we must maintain a TotalNet Leverage Ratio that is less than or equal to 4.60 to 1.00 for the fiscal quarter ended March 31, 2015 and declining over time to a range of 1.00 to 1.00 forthe fiscal quarter ending September 30, 2017 through the Maturity Date. For purposes of testing our Total Net Leverage Ratio, we are permitted to net fromour outstanding total indebtedness up to $25.0 million of its domestic unrestricted cash and cash equivalents. As of December 31, 2014, we were incompliance with these covenants. All obligations under the Term Loan Facility are unconditionally guaranteed by substantially all of our direct and indirect domestic subsidiaries. Theseguarantees are secured by substantially all of the present and future property and assets of the guarantors.175Table of Contents Future annual principal payments on our long-term debt as of December 31, 2014 were as follows:T. RESTRUCTURING In connection with the Lumara Health acquisition, we initiated a restructuring program in the fourth quarter of 2014, which included severance benefitsprimarily related to certain former Lumara Health employees. As a result of the restructuring, we recorded charges of approximately $2.0 million in 2014. Weexpect to pay substantially all of these restructuring costs during 2015. The following table outlines the components of our restructuring expenses which were included in current liabilities for 2014 (in thousands):1762015 $34,000 2016 51,000 2017 51,000 2018 51,000 2019 51,000 Thereafter 102,000 Total $340,000 December 31, 2014 Accrued restructuring, beginning of period $— Employee severance, benefits and related costs 2,023 Payments (70)Accrued restructuring, end of period $1,953 Table of ContentsU. CONSOLIDATED QUARTERLY FINANCIAL DATA—UNAUDITED The following tables provide unaudited consolidated quarterly financial data for 2014 and 2013 (in thousands, except per share data): Quarterly loss per share totals differ from annual loss per share totals due to rounding. On November 12, 2014, we completed our acquisition of LumaraHealth and recorded $22.5 million in Makena sales in 2014 and additional operating costs incurred as a result of the acquisition.177 March 31, 2014 June 30, 2014 September 30, 2014 December 31, 2014 U.S. product sales, net $17,375 $22,225 $22,547 $46,648 License fee and othercollaboration revenues 3,120 2,122 2,182 3,462 Other product sales androyalties 340 455 765 3143 Total revenues 20,835 24,802 25,494 53,253 Cost of product sales 2,837 2,743 2,968 11,758 Gross margin 17,998 22,059 22,526 41,495 Operating expenses 23,989 20,824 18,233 44,869 Interest expense (1,476) (3,051) (3,129) (7,041)Interest and dividendincome, net 265 253 291 166 Gains on sale of assets 100 2 — 1 Gains on investments, net — 14 3 97 Net income (loss) beforeincome taxes (7,102) (1,547) 1,458 (10,151)Income tax benefit — — — 153,159 Net income (loss) $(7,102)$(1,547)$1,458 $143,008 Net income (loss) per share—basic $(0.33)$(0.07)$0.07 $5.98 Net income (loss) per share—diluted $(0.33)$(0.07)$0.07 $4.67 March 31, 2013 June 30, 2013 September 30, 2013 December 31, 2013 U.S. Feraheme productsales, net $15,578 $17,456 $19,347 $18,981 License fee and othercollaboration revenues 2,003 2,055 1,998 2,329 Other product sales androyalties 299 138 271 401 Total revenues 17,880 19,649 21,616 21,711 Cost of product sales 2,942 3,145 2,547 3,326 Gross margin 14,938 16,504 19,069 18,385 Operating expenses 19,409 19,260 19,464 22,380 Interest and dividendincome, net 271 256 246 278 Gains on assets held for sale 299 566 — 59 Gains on investments, net 6 26 4 4 Net loss $(3,895)$(1,908)$(145)$(3,654)Net loss per share—basic anddiluted $(0.18)$(0.09)$(0.01)$(0.17)Table of ContentsV. VALUATION AND QUALIFYING ACCOUNTS (IN THOUSANDS)W. RECENTLY ISSUED AND PROPOSED ACCOUNTING PRONOUNCEMENTS From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board ("FASB") or other standard setting bodiesthat are adopted by us as of the specified effective date. Unless otherwise discussed, we believe that the impact of recently issued standards that are not yeteffective will not have a material impact on our financial position or results of operations upon adoption. In May 2014, the FASB issued Accounting Standards Update ("ASU") 2014-09, Revenue from Contracts with Customers, as a new Topic, AccountingStandards Codification Topic 606. The new revenue recognition standard provides a five-step analysis of transactions to determine when and how revenue isrecognized. The core principle is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amountthat reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This ASU is effective for us on January 1,2017 and shall be applied retrospectively to each period presented or as a cumulative-effect adjustment as of the date of adoption. We are in the process ofevaluating the effect of adopting this new accounting guidance and are uncertain at this point of the impact on our results of operations, cash flows orfinancial position. In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements—Going Concern: Disclosure of Uncertainties about anEntity's Ability to Continue as a Going Concern. ASU No. 2014-15 is intended to define management's responsibility to evaluate whether there is substantialdoubt about an organization's ability to continue as a going concern and to provide related footnote disclosures, if required. ASU 2014-15 will be effectivefor annual reporting periods ending after December 15, 2016, which will be our fiscal year ending December 31, 2016, and to annual and interim periodsthereafter. We are in the process of evaluating the impact of adoption of ASU 2014-15 on our consolidated financial statements and related disclosures andcurrently do not expect it to have a material impact our results of operations, cash flows or financial position.178 Balance atBeginningof Period Additions(a) DeductionsCharged toReserves Balance atEnd ofPeriod Year ended December 31, 2014: Accounts receivable allowances(b) $2,683 $59,372 $(50,580)$11,475 Rebates, fees and returns reserves $4,799 $52,079 $(13,126)$43,752 Year ended December 31, 2013: Accounts receivable allowances(b) $1,771 $37,098 $(36,186)$5,850 Rebates, fees and returns reserves $3,448 $11,820 $(10,469)$4,799 Year ended December 31, 2012: Accounts receivable allowances(b) $1,822 $26,517 $(26,568)$1,771 Rebates, fees and returns reserves $5,943 $6,729 $(9,224)$3,448 (a)Additions to sales discounts, rebates, fees and returns reserves are recorded as a reduction of revenues. (b)We have not recorded an allowance for doubtful accounts in any of the years presented above. These accounts receivable allowancesrepresent discounts and other chargebacks related to the provision for our product sales.Table of Contents ITEM 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" (as defined inthe Exchange Act Rule 13a-15(e), or Rule 15d-15(e)), with the participation of our management, have each concluded that, as of December 31, 2014, the endof the period covered by this Annual Report on Form 10-K, our disclosure controls and procedures were designed and were effective to provide reasonableassurance that information we are required to disclose in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, isrecorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms and that suchinformation is accumulated and communicated to management, including our principal executive officer and principal financial officer, as appropriate toallow timely decisions regarding required disclosure. It should be noted that any system of controls is designed 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 Management's Report on Internal Control over Financial Reporting is contained in Part II, Item 8 "Financial Statements and Supplementary Data" of thisAnnual Report on Form 10-K for the year ended December 31, 2014 and is incorporated herein by reference.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, 2014 thatmaterially affected, or that are reasonably likely to materially affect, our internal control over financial reporting. ITEM 9B. OTHER INFORMATION: As noted elsewhere in this Annual Report on Form 10-K, sales of Rienso in the EU do not and are not expected to materially contribute to our revenues.As such, and considering our entry into the December 2014 Takeda Termination Agreement, we have been assessing the commercial opportunity for Riensoand have come to a mutual decision with Takeda to initiate withdrawal of Rienso's current marketing authorizations in the EU and Switzerland. The decisionto initiate withdrawal of the marketing authorizations was made solely for commercial reasons.179Table of Contents PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE: The information required under this item is incorporated herein by reference to our definitive proxy statement pursuant to Regulation 14A, which weplan to file with the Securities and Exchange Commission (the "SEC") not later than 120 days after the close of our year ended December 31, 2014. ITEM 11. EXECUTIVE COMPENSATION: The information required under this item is incorporated herein by reference to our definitive proxy statement pursuant to Regulation 14A, which weplan to file with the SEC not later than 120 days after the close of our year ended December 31, 2014. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS: The information required under this item is incorporated herein by reference to our definitive proxy statement pursuant to Regulation 14A, which weplan to file with the SEC not later than 120 days after the close of our year ended December 31, 2014. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE: The information required under this item is incorporated herein by reference to our definitive proxy statement pursuant to Regulation 14A, which weplan to file with the SEC not later than 120 days after the close of our year ended December 31, 2014. ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES: The information required under this item is incorporated herein by reference to our definitive proxy statement pursuant to Regulation 14A, which weplan to file with the SEC not later than 120 days after the close of our year ended December 31, 2014.180Table of Contents PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES: 181ExhibitNumber Description2.1 Agreement and Plan of Merger, dated as of September 28, 2014, by and among Lumara Health Inc., the Company,Snowbird, Inc., and Lunar Representative, LLC as the Stockholders' Representative (incorporated herein by referenceto Exhibit 2.1 to the Company's Current Report on Form 8-K filed September 29, 2014, File No. 001-10865)3.1,4.1 Certificate of Incorporation of the Company, as restated (incorporated herein by reference to Exhibit 3.1 to theCompany's Quarterly Report on Form 10-Q for the quarter ended March 31, 2010, File No. 0-14732)3.2,4.2 By-Laws of the Company, as amended (incorporated herein by reference to Exhibit 3.1 to the Company's CurrentReport on Form 8-K filed 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 toExhibit 3.1 to the Company'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 tothe Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2009, File No. 0-14732)4.5 Rights Agreement dated as of September 4, 2009 by and between the Company and American Stock Transfer & TrustCompany, LLC (incorporated herein by reference to Exhibit 4.2 to the Company's Current Report on Form 8-K filedSeptember 4, 2009, File No. 0-14732)4.6 Amendment to Rights Agreement, dated as of May 10, 2012, by and between the Company and American StockTransfer & Trust Company, LLC (incorporated herein by reference to Exhibit 4.1 to the Company's Current Report onForm 8-K filed May 10, 2012, File No. 001-10865)4.7 Amendment to Rights Agreement, dated as of February 11, 2014, by and between the Company and American StockTransfer & Trust Company, LLC (incorporated herein by reference to Exhibit 4.4 to the Company's Current Report onForm 8-K filed February 14, 2014, File No. 001-10865)4.8 NOL Amendment to Rights Agreement, dated as of September 26, 2014, by and between the Company and AmericanStock Transfer & Trust Company, LLC (incorporated herein by reference to Exhibit 4.1 to the Company's CurrentReport on Form 8-K filed September 29, 2014, File No. 001-10865)4.9 Form of Rights Certificate (incorporated herein by reference to Exhibit 4.3 to the Company's Current Report onForm 8-K filed September 4, 2009, File No. 0-14732)4.10 Base Indenture, dated as of February 14, 2014, by and between the Company and Wilmington Trust, NationalAssociation (incorporated herein by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K filedFebruary 14, 2014, File No. 001-10865)4.11 First Supplemental Indenture, dated as of February 14, 2014, by and between the Company and Wilmington Trust,National Association (incorporated herein by reference to Exhibit 4.2 to the Company's Current Report on Form 8-Kfiled February 14, 2014, File No. 001-10865)4.12 Form of 2.5% Convertible Senior Note due 2019 (incorporated herein by reference to Exhibit 4.3 to the Company'sCurrent Report on Form 8-K filed February 14, 2014, File No. 001-10865)Table of Contents182ExhibitNumber Description4.13 Form of Registration Rights and Lock-up Agreement, dated as of November 12, 2014, by and between the Companyand stockholders party thereto (incorporated herein by reference to Exhibit 4.9 to the Company's RegistrationStatement on Form S-3 filed February 10, 2015)10.1* Representative Form of Indemnification Agreement (incorporated herein by reference to Exhibit 10.2 to theCompany's Annual Report on Form 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 byreference to Exhibit 10.5 to the Company's Current Report on Form 8-K filed February 13, 2006, File No. 0-14732)10.3* The Company's Non-Employee Director Compensation Policy (incorporated herein by reference to Exhibit 10.4 tothe Company's Annual Report on Form 10-K for the year ended December 31, 2011, File No. 001-10865)10.4* The Company's Amended and Restated 2000 Stock Plan (incorporated herein by reference to Appendix A to theCompany's Definitive Proxy Statement on Schedule 14A filed December 14, 2005, File No. 0-14732)10.5* The Company's Third Amended and Restated 2007 Equity Incentive Plan (incorporated herein by reference toAppendix A to the Company's Definitive Proxy Statement on Schedule 14A filed April 19, 2013, File No. 001-10865)10.6*+ Lumara Health Inc. Amended and Restated 2013 Incentive Compensation Plan10.7* Form of Incentive Stock Option Agreement for Company Employees under the Company's Third Amended andRestated 2007 Equity Incentive Plan and Lumara Health Inc. Amended and Restated 2013 Incentive CompensationPlan (incorporated herein by reference to Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for thequarter ended June 30, 2013, File No. 001-10865)10.8* Form of Non-Qualified Stock Option Agreement for Company Employees under the Company's Third Amended andRestated 2017 Equity Incentive Plan and the Lumara Health Inc. Amended and Restated 2013 IncentiveCompensation Plan (incorporated herein by reference to Exhibit 10.4 to the Company's Quarterly Report onForm 10-Q for the quarter ended June 30, 2013, File No. 001-10865)10.9* Form of Restricted Stock Unit Agreement for Company Employees under the Company's Third Amended andRestated 2007 Equity Incentive Plan and the Lumara Health Inc. Amended and Restated 2013 IncentiveCompensation Plan (incorporated herein by reference to Exhibit 10.5 to the Company's Quarterly Report onForm 10-Q for the quarter ended June 30, 2013, File No. 001-10865)10.10* Form of Non-Qualified Stock Option Agreement for Non-Employee Directors under the Company's Third Amendedand Restated 2007 Equity Incentive Plan (incorporated herein by reference to Exhibit 10.10 to the Company'sQuarterly Report on Form 10-Q for the quarter ended June 30, 2013, File No. 001-10865)10.11* Form of Restricted Stock Unit Agreement for Non-Employee Directors under the Company's Third Amended andRestated 2007 Equity Incentive Plan (incorporated herein by reference to Exhibit 10.11 to the Company's QuarterlyReport on Form 10-Q for the quarter ended June 30, 2013, File No. 001-10865)10.12* Form of February 2013 Performance-based Restricted Stock Unit Agreement under the Company's Second Amendedand Restated 2007 Equity Incentive Plan between the Company and the Company's executive officers (incorporatedherein by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31,2013, File No. 001-10865)Table of Contents183ExhibitNumber Description10.13* Form of November 2011 Restricted Stock Unit Agreement under the Company's Second Amended and Restated2007 Equity Incentive Plan between the Company and the Company's executive officers (incorporated herein byreference to Exhibit 10.21 to the Company's Annual Report on Form 10-K for the year ended December 31, 2011,File No. 001-10865)10.14* Form of November 2011 Restricted Stock Unit Agreement under the Company's Second Amended and Restated2007 Equity Incentive Plan between the Company and each non-executive employee of the Company (incorporatedherein by reference to Exhibit 10.22 to the Company's Annual Report on Form 10-K for the year ended December 31,2011, File No. 001-10865)10.15* Form of Non-Plan Restricted Stock Unit Agreement, by and between the Company and William K. Heiden(incorporated herein by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed May 10, 2012,File No. 001-10865)10.16* Form of Non-Plan Stock Option Agreement, by and between the Company and William K. Heiden (incorporatedherein by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K filed May 10, 2012, File No. 001-10865)10.17* Form of Non-Qualified Stock Option Agreement—Non-Plan Inducement Grant (incorporated herein by reference toExhibit 4.3 to the Company's Registration Statement on Form S-8, filed August 7, 2013, File No. 333-190435)10.18* Form of Restricted Stock Unit Agreement—Non-Plan Inducement Grant (incorporated herein by reference toExhibit 4.4 to the Company's Registration Statement on Form S-8, filed August 7, 2013, File No. 333-190435)10.19+ Termination Agreement, dated December 29, 2014, by and between the Company and Takeda PharmaceuticalCompany Limited (Certain confidential information contained in this exhibit was omitted by means of redacting aportion of the text and replacing it with [***]. This exhibit has been filed separately with the SEC without anyredactions pursuant to a Confidential Treatment Request under Rule 24b-2 of the Securities and Exchange Act of1934, as amended)10.20 License, Development and Commercialization Agreement by and between the Company and Takeda PharmaceuticalCompany Limited, dated March 31, 2010 (incorporated herein by reference to Exhibit 10.1 to the Company'sQuarterly Report on Form 10-Q for the quarter ended March 31, 2010, File No. 001-10865) (confidential treatmentpreviously granted)10.21 Amendment to the License, Development and Commercialization Agreement, dated June 25, 2012, by and betweenthe Company and Takeda Pharmaceutical Company Limited (incorporated herein by reference to Exhibit 10.1 to theCompany's Current Report on Form 8-K filed June 29, 2012, File No. 001-10865) (confidential treatment previouslygranted)10.22 Supply Agreement, dated February 7, 2014, by and between the Company and Takeda PharmaceuticalsInternational, GMBH A/S, an affiliate of Takeda Pharmaceutical Company Limited (incorporated herein by referenceto Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2014 (confidentialtreatment previously granted)10.23 Lease Agreement, dated as of May 27, 2008, by and between the Company and Mortimer B. Zuckerman and EdwardH. Linde, trustees of 92 Hayden Avenue Trust under Declaration of Trust dated August 18, 1983 This LeaseAgreement was assigned in June 2013. (incorporated herein by reference to Exhibit 10.1 to the Company's CurrentReport on Form 8-K filed May 29, 2008, File No. 0-14732)Table of Contents184ExhibitNumber Description10.24 Assignment and Assumption of Lease, dated as of June 10, 2013, by and among the Company, Mortimer B.Zuckerman and Edward H. Linde, Trustees of 92 Hayden Avenue Trust under Declaration of Trust dated August 18,1983 and Shire Human Genetic Therapies, Inc. (incorporated herein by reference to Exhibit 10.2 to the Company'sCurrent Report on Form 8-K filed June 13, 2013, File No. 001-10865)10.25 Lease Agreement, dated as of June 10, 2013, by and between the Company and BP BAY COLONY LLC(incorporated herein by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed June 13, 2013,File No. 001-10865)10.26 License Agreement between the Company and Plasmatech Biopharmaceuticals Inc. (formerly AccessPharmaceuticals, Inc.) dated as of June 6, 2013 (incorporated herein by reference to Exhibit 10.1 to the Company'sQuarterly Report on Form 10-Q for the quarter ended June 30, 2013, File No. 001-10865) (confidential treatmentpreviously granted)10.27 Commercial Supply Agreement, dated effective as of August 29, 2012, by and between the Company and Sigma-Aldrich, Inc. (incorporated herein by reference to Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q forthe quarter ended September 30, 2012, File No. 001-10865) (confidential treatment previously granted)10.28 Amendment No.1 to Commercial Supply Agreement, dated October 3, 2013, by and between the Company andSigma-Aldrich, Inc. (incorporated herein by reference to Exhibit 10.54 to the Company's Annual Report on Form 10-K for the year ended December 31, 2013, File No. 001-10865) (confidential treatment previously granted)10.29 Pharmaceutical Manufacturing and Supply Agreement, dated January 8, 2010, by and between the Company andPatheon Manufacturing Services LLC (as assignee from DSM Pharmaceuticals, Inc.) (incorporated herein byreference to Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30,2012, File No. 001-10865) (confidential treatment previously granted)10.30 Amendment No. 1 to Pharmaceutical Manufacturing and Supply Agreement, dated July 5, 2014, by and between theCompany and Patheon Manufacturing Services LLC (as assignee from DSM Pharmaceuticals, Inc.) (incorporatedherein by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarter endedSeptember 30, 2014, File No. 001-10865)10.31+ Development and Supply Agreement, dated as of September 17, 2009, by and between Lumara Health Inc. (assuccessor in interest to Hologic, Inc.) and Hospira Worldwide, Inc. (Certain confidential information contained inthis exhibit was omitted by means of redacting a portion of the text and replacing it with [***]. This exhibit hasbeen filed separately with the SEC without any redactions pursuant to a Confidential Treatment Request underRule 24b-2 of the Securities and Exchange Act of 1934, as amended)10.32+ First Amendment to Development and Supply Agreement, dated as of March 28, 2014, by and between LumaraHealth Inc. and Hospira Worldwide, Inc. (Certain confidential information contained in this exhibit was omitted bymeans of redacting a portion of the text and replacing it with [***]. This exhibit has been filed separately with theSEC without any redactions pursuant to a Confidential Treatment Request under Rule 24b-2 of the Securities andExchange Act of 1934, as amended)10.33 Underwriting Agreement, dated as of February 11, 2014, among AMAG Pharmaceuticals, Inc. and J.P. MorganSecurities LLC, on its own behalf and as representative of the several underwriters named in Schedule 1 thereto(incorporated herein by reference to Exhibit 1.1 to the Company's Current Report on Form 8-K filed February 14,2014, File No. 001-10865)Table of Contents185ExhibitNumber Description10.34 Base Call Option Transaction Confirmation, dated as of February 11, 2014, between the Company and JPMorganChase Bank, National Association, London Branch (incorporated herein by reference to Exhibit 10.1 to theCompany's Current Report on Form 8-K filed February 14, 2014, File No. 001-10865)10.35 Base Call Option Transaction Confirmation, dated as of February 11, 2014, between the Company and Royal Bankof Canada (incorporated herein by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filedFebruary 14, 2014, File No. 001-10865)10.36 Base Call Option Transaction Confirmation, dated as of February 11, 2014, between the Company and MorganStanley & Co. International plc (incorporated herein by reference to Exhibit 10.3 to the Company's Current Reporton Form 8-K filed February 14, 2014, File No. 001-10865)10.37 Base Warrants Confirmation, dated as of February 11, 2014, between the Company and JPMorgan Chase Bank,National Association, London Branch (incorporated herein by reference to Exhibit 10.4 to the Company's CurrentReport on Form 8-K filed February 14, 2014, File No. 001-10865)10.38 Base Warrants Confirmation, dated as of February 11, 2014, between the Company and Royal Bank of Canada(incorporated herein by reference to Exhibit 10.5 to the Company's Current Report on Form 8-K filed February 14,2014, File No. 001-10865)10.39 Base Warrants Confirmation, dated as of February 11, 2014, between the Company and Morgan Stanley & Co.International plc (incorporated herein by reference to Exhibit 10.6 to the Company's Current Report on Form 8-Kfiled February 14, 2014, File No. 001-10865)10.40 Additional Call Option Transaction Confirmation, dated as of February 13, 2014, between the Company andJPMorgan Chase Bank, National Association, London Branch (incorporated herein by reference to Exhibit 10.7 tothe Company's Current Report on Form 8-K filed February 14, 2014, File No. 001-10865)10.41 Additional Call Option Transaction Confirmation, dated as of February 13, 2014, between the Company and RoyalBank of Canada (incorporated herein by reference to Exhibit 10.8 to the Company's Current Report on Form 8-Kfiled February 14, 2014, File No. 001-10865)10.42 Additional Call Option Transaction Confirmation, dated as of February 13, 2014, between the Company and MorganStanley & Co. International plc (incorporated herein by reference to Exhibit 10.9 to the Company's Current Reporton Form 8-K filed February 14, 2014, File No. 001-10865)10.43 Additional Warrants Confirmation, dated as of February 13, 2014, between the Company and JPMorgan Chase Bank,National Association, London Branch (incorporated herein by reference to Exhibit 10.10 to the Company's CurrentReport on Form 8-K filed February 14, 2014, File No. 001-10865)10.44 Additional Warrants Confirmation, dated as of February 13, 2014, between the Company and Royal Bank of Canada(incorporated herein by reference to Exhibit 10.11 to the Company's Current Report on Form 8-K filed February 14,2014, File No. 001-10865)10.45 Additional Warrants Confirmation, dated as of February 13, 2014, between the Company and Morgan Stanley & Co.International plc (incorporated herein by reference to Exhibit 10.12 to the Company's Current Report on Form 8-Kfiled February 14, 2014, File No. 001-10865)10.46 Credit Agreement, dated as of November 12, 2014, by and among the Company, the financial institutions and agentslisted therein, and Jefferies Finance LLC (incorporated herein by reference to Exhibit 10.1 to the Company's CurrentReport on Form 8-K filed November 12, 2014, File No. 001-10865)Table of Contents186ExhibitNumber Description10.47* Form of Employment Agreement between the Company and each of its executive officers (other than WilliamHeiden) (incorporated herein by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q forthe quarter ended March 31, 2014, File No. 001-10865)10.48* Employment Agreement dated as of February 7, 2014 between the Company and William Heiden (incorporatedherein by reference to Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for the quarter endedMarch 31, 2014, File No. 001-10865)21.1+ Subsidiaries of AMAG Pharmaceuticals, Inc.23.1+ Consent of PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm24.1 Power of Attorney (included on the signature page(s) hereto)31.1+ Certification Pursuant to Rule 13a-14(a)/15d-14(a) of the Exchange Act, as Adopted Pursuant to Section 302 ofthe Sarbanes-Oxley Act of 200231.2+ Certification Pursuant to Rule 13a-14(a)/15d-14(a) of the Exchange Act, as Adopted Pursuant to Section 302 ofthe Sarbanes-Oxley Act of 200232.1++ Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Actof 200232.2++ Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Actof 2002101.INS+ XBRL Instance Document101.SCH+ XBRL Taxonomy Extension Schema Document101.CAL+ XBRL Taxonomy Extension Calculation Linkbase Document101.DEF+ XBRL Taxonomy Extension Definition Linkbase Document101.LAB+ XBRL Taxonomy Extension Label Linkbase Document101.PRE+ XBRL Taxonomy Extension Presentation Linkbase Document+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 toItem 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 because the information required is included in the financial statements or the notes thereto.Table of Contents SIGNATURES 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 signed on itsbehalf by the undersigned, thereunto duly authorized. We, the undersigned officers and directors of AMAG Pharmaceuticals, Inc., hereby severally constitute and appoint William K. Heiden and Scott A.Holmes, and each of them singly, our true and lawful attorneys, with full power to them and each of them singly, to sign for us in our names in the capacitiesindicated below, all amendments to this report, and generally to do all things in our names and on our behalf in such capacities to enable AMAGPharmaceuticals, Inc. to comply with the provisions of the Securities Exchange Act of 1934, as amended, and all requirements of the Securities and ExchangeCommission. 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.187 AMAG PHARMACEUTICALS, INC. By: /s/ WILLIAM K. HEIDENWilliam K. HeidenPresident and Chief Executive Officer Date: February 17, 2015Name Title Date/s/ WILLIAM K. HEIDENWilliam K. Heiden President, Chief Executive Officer (Principal Executive Officer) and Director February 17, 2015/s/ SCOTT A. HOLMESScott A. Holmes Chief Accounting Officer, Treasurer and Senior Vice President, Finance and InvestorRelations (Principal Financial and Accounting Officer) February 17, 2015/s/ BARBARA DEPTULABarbara Deptula Director February 17, 2015/s/ JOHN FALLON, M.D.John Fallon, M.D. Director February 17, 2015Table of Contents188Name Title Date/s/ ROBERT J. PEREZRobert J. Perez Director February 17, 2015/s/ LESLEY RUSSELL, MB. CH.B., MRCPLesley Russell, MB. Ch.B., MRCP Director February 17, 2015/s/ GINO SANTINIGino Santini Director February 17, 2015/s/ DAVEY S. SCOONDavey S. Scoon Director February 17, 2015/s/ JAMES SULATJames Sulat Director February 17, 2015 Table of Contents189ExhibitNumber Description 2.1 Agreement and Plan of Merger, dated as of September 28, 2014, by and among Lumara Health Inc., theCompany, Snowbird, Inc., and Lunar Representative, LLC as the Stockholders' Representative (incorporatedherein by reference to Exhibit 2.1 to the Company's Current Report on Form 8-K filed September 29, 2014,File No. 001-10865) 3.1, 4.1 Certificate of Incorporation of the Company, as restated (incorporated herein by reference to Exhibit 3.1 to theCompany's Quarterly Report on Form 10-Q for the quarter ended March 31, 2010, File No. 0-14732) 3.2, 4.2 By-Laws of the Company, as amended (incorporated herein by reference to Exhibit 3.1 to the Company'sCurrent Report on Form 8-K filed 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 toExhibit 3.1 to the Company'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 toExhibit 4.3 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2009, FileNo. 0-14732) 4.5 Rights Agreement dated as of September 4, 2009 by and between the Company and American StockTransfer & Trust Company, LLC (incorporated herein by reference to Exhibit 4.2 to the Company's CurrentReport on Form 8-K filed September 4, 2009, File No. 0-14732) 4.6 Amendment to Rights Agreement, dated as of May 10, 2012, by and between the Company and AmericanStock Transfer & Trust Company, LLC (incorporated herein by reference to Exhibit 4.1 to the Company'sCurrent Report on Form 8-K filed May 10, 2012, File No. 001-10865) 4.7 Amendment to Rights Agreement, dated as of February 11, 2014, by and between the Company and AmericanStock Transfer & Trust Company, LLC (incorporated herein by reference to Exhibit 4.4 to the Company'sCurrent Report on Form 8-K filed February 14, 2014, File No. 001-10865) 4.8 NOL Amendment to Rights Agreement, dated as of September 26, 2014, by and between the Company andAmerican Stock Transfer & Trust Company, LLC (incorporated herein by reference to Exhibit 4.1 to theCompany's Current Report on Form 8-K filed September 29, 2014, File No. 001-10865) 4.9 Form of Rights Certificate (incorporated herein by reference to Exhibit 4.3 to the Company's Current Reporton Form 8-K filed September 4, 2009, File No. 0-14732) 4.10 Base Indenture, dated as of February 14, 2014, by and between the Company and Wilmington Trust, NationalAssociation (incorporated herein by reference to Exhibit 4.1 to the Company's Current Report on Form 8-Kfiled February 14, 2014, File No. 001-10865) 4.11 First Supplemental Indenture, dated as of February 14, 2014, by and between the Company and WilmingtonTrust, National Association (incorporated herein by reference to Exhibit 4.2 to the Company's Current Reporton Form 8-K filed February 14, 2014, File No. 001-10865) 4.12 Form of 2.5% Convertible Senior Note due 2019 (incorporated herein by reference to Exhibit 4.3 to theCompany's Current Report on Form 8-K filed February 14, 2014, File No. 001-10865) 4.13 Form of Registration Rights and Lock-up Agreement, dated as of November 12, 2014, by and between theCompany and stockholders party thereto (incorporated herein by reference to Exhibit 4.9 to the Company'sRegistration Statement on Form S-3 filed February 10, 2015)Table of Contents190ExhibitNumber Description 10.1* Representative Form of Indemnification Agreement (incorporated herein by reference to Exhibit 10.2 to theCompany's Annual Report on Form 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 byreference to Exhibit 10.5 to the Company's Current Report on Form 8-K filed February 13, 2006, File No. 0-14732) 10.3* The Company's Non-Employee Director Compensation Policy (incorporated herein by reference toExhibit 10.4 to the Company's Annual Report on Form 10-K for the year ended December 31, 2011, FileNo. 001-10865) 10.4* The Company's Amended and Restated 2000 Stock Plan (incorporated herein by reference to Appendix A tothe Company's Definitive Proxy Statement on Schedule 14A filed December 14, 2005, File No. 0-14732) 10.5* The Company's Third Amended and Restated 2007 Equity Incentive Plan (incorporated herein by reference toAppendix A to the Company's Definitive Proxy Statement on Schedule 14A filed April 19, 2013, File No. 001-10865) 10.6*+ Lumara Health Inc. Amended and Restated 2013 Incentive Compensation Plan 10.7* Form of Incentive Stock Option Agreement for Company Employees under the Company's Third Amendedand Restated 2007 Equity Incentive Plan and Lumara Health Inc. Amended and Restated 2013 IncentiveCompensation Plan (incorporated herein by reference to Exhibit 10.3 to the Company's Quarterly Report onForm 10-Q for the quarter ended June 30, 2013, File No. 001-10865) 10.8* Form of Non-Qualified Stock Option Agreement for Company Employees under the Company's ThirdAmended and Restated 2017 Equity Incentive Plan and the Lumara Health Inc. Amended and Restated 2013Incentive Compensation Plan (incorporated herein by reference to Exhibit 10.4 to the Company's QuarterlyReport on Form 10-Q for the quarter ended June 30, 2013, File No. 001-10865) 10.9* Form of Restricted Stock Unit Agreement for Company Employees under the Company's Third Amended andRestated 2007 Equity Incentive Plan and the Lumara Health Inc. Amended and Restated 2013 IncentiveCompensation Plan (incorporated herein by reference to Exhibit 10.5 to the Company's Quarterly Report onForm 10-Q for the quarter ended June 30, 2013, File No. 001-10865) 10.10* Form of Non-Qualified Stock Option Agreement for Non-Employee Directors under the Company's ThirdAmended and Restated 2007 Equity Incentive Plan (incorporated herein by reference to Exhibit 10.10 to theCompany's Quarterly Report on Form 10-Q for the quarter ended June 30, 2013, File No. 001-10865) 10.11* Form of Restricted Stock Unit Agreement for Non-Employee Directors under the Company's Third Amendedand Restated 2007 Equity Incentive Plan (incorporated herein by reference to Exhibit 10.11 to the Company'sQuarterly Report on Form 10-Q for the quarter ended June 30, 2013, File No. 001-10865) 10.12* Form of February 2013 Performance-based Restricted Stock Unit Agreement under the Company's SecondAmended and Restated 2007 Equity Incentive Plan between the Company and the Company's executiveofficers (incorporated herein by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q forthe quarter ended March 31, 2013, File No. 001-10865) 10.13* Form of November 2011 Restricted Stock Unit Agreement under the Company's Second Amended andRestated 2007 Equity Incentive Plan between the Company and the Company's executive officers(incorporated herein by reference to Exhibit 10.21 to the Company's Annual Report on Form 10-K for the yearended December 31, 2011, File No. 001-10865)Table of Contents191ExhibitNumber Description 10.14* Form of November 2011 Restricted Stock Unit Agreement under the Company's Second Amended andRestated 2007 Equity Incentive Plan between the Company and each non-executive employee of theCompany (incorporated herein by reference to Exhibit 10.22 to the Company's Annual Report on Form 10-Kfor the year ended December 31, 2011, File No. 001-10865) 10.15* Form of Non-Plan Restricted Stock Unit Agreement, by and between the Company and William K. Heiden(incorporated herein by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed May 10,2012, File No. 001-10865) 10.16* Form of Non-Plan Stock Option Agreement, by and between the Company and William K. Heiden(incorporated herein by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K filed May 10,2012, File No. 001-10865) 10.17* Form of Non-Qualified Stock Option Agreement—Non-Plan Inducement Grant (incorporated herein byreference to Exhibit 4.3 to the Company's Registration Statement on Form S-8, filed August 7, 2013, FileNo. 333-190435) 10.18* Form of Restricted Stock Unit Agreement—Non-Plan Inducement Grant (incorporated herein by reference toExhibit 4.4 to the Company's Registration Statement on Form S-8, filed August 7, 2013, File No. 333-190435) 10.19+ Termination Agreement, dated December 29, 2014, by and between the Company and Takeda PharmaceuticalCompany Limited (Certain confidential information contained in this exhibit was omitted by means ofredacting a portion of the text and replacing it with [***]. This exhibit has been filed separately with the SECwithout any redactions pursuant to a Confidential Treatment Request under Rule 24b-2 of the Securities andExchange Act of 1934, as amended) 10.20 License, Development and Commercialization Agreement by and between the Company and TakedaPharmaceutical Company Limited, dated March 31, 2010 (incorporated herein by reference to Exhibit 10.1 tothe Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2010, File No. 001-10865)(confidential treatment previously granted) 10.21 Amendment to the License, Development and Commercialization Agreement, dated June 25, 2012, by andbetween the Company and Takeda Pharmaceutical Company Limited (incorporated herein by reference toExhibit 10.1 to the Company's Current Report on Form 8-K filed June 29, 2012, File No. 001-10865)(confidential treatment previously granted) 10.22 Supply Agreement, dated February 7, 2014, by and between the Company and Takeda PharmaceuticalsInternational, GMBH A/S, an affiliate of Takeda Pharmaceutical Company Limited (incorporated herein byreference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31,2014 (confidential treatment previously granted) 10.23 Lease Agreement, dated as of May 27, 2008, by and between the Company and Mortimer B. Zuckerman andEdward H. Linde, trustees of 92 Hayden Avenue Trust under Declaration of Trust dated August 18, 1983 ThisLease Agreement was assigned in June 2013. (incorporated herein by reference to Exhibit 10.1 to theCompany's Current Report on Form 8-K filed May 29, 2008, File No. 0-14732) 10.24 Assignment and Assumption of Lease, dated as of June 10, 2013, by and among the Company, Mortimer B.Zuckerman and Edward H. Linde, Trustees of 92 Hayden Avenue Trust under Declaration of Trust datedAugust 18, 1983 and Shire Human Genetic Therapies, Inc. (incorporated herein by reference to Exhibit 10.2 tothe Company's Current Report on Form 8-K filed June 13, 2013, File No. 001-10865)Table of Contents192ExhibitNumber Description 10.25 Lease Agreement, dated as of June 10, 2013, by and between the Company and BP BAY COLONY LLC(incorporated herein by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed June 13,2013, File No. 001-10865) 10.26 License Agreement between the Company and Plasmatech Biopharmaceuticals Inc. (formerly AccessPharmaceuticals, Inc.) dated as of June 6, 2013 (incorporated herein by reference to Exhibit 10.1 to theCompany's Quarterly Report on Form 10-Q for the quarter ended June 30, 2013, File No. 001-10865)(confidential treatment previously granted) 10.27 Commercial Supply Agreement, dated effective as of August 29, 2012, by and between the Company andSigma-Aldrich, Inc. (incorporated herein by reference to Exhibit 10.3 to the Company's Quarterly Report onForm 10-Q for the quarter ended September 30, 2012, File No. 001-10865) (confidential treatment previouslygranted) 10.28 Amendment No.1 to Commercial Supply Agreement, dated October 3, 2013, by and between the Companyand Sigma-Aldrich, Inc. (incorporated herein by reference to Exhibit 10.54 to the Company's Annual Reporton Form 10-K for the year ended December 31, 2013, File No. 001-10865) (confidential treatment previouslygranted) 10.29 Pharmaceutical Manufacturing and Supply Agreement, dated January 8, 2010, by and between the Companyand Patheon Manufacturing Services LLC (as assignee from DSM Pharmaceuticals, Inc.) (incorporated hereinby reference to Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q for the quarter endedSeptember 30, 2012, File No. 001-10865) (confidential treatment previously granted) 10.30 Amendment No. 1 to Pharmaceutical Manufacturing and Supply Agreement, dated July 5, 2014, by andbetween the Company and Patheon Manufacturing Services LLC (as assignee from DSMPharmaceuticals, Inc.) (incorporated herein by reference to Exhibit 10.2 to the Company's Quarterly Report onForm 10-Q for the quarter ended September 30, 2014, File No. 001-10865) 10.31+ Development and Supply Agreement, dated as of September 17, 2009, by and between Lumara Health Inc. (assuccessor in interest to Hologic, Inc.) and Hospira Worldwide, Inc. (Certain confidential information containedin this exhibit was omitted by means of redacting a portion of the text and replacing it with [***]. This exhibithas been filed separately with the SEC without any redactions pursuant to a Confidential Treatment Requestunder Rule 24b-2 of the Securities and Exchange Act of 1934, as amended) 10.32+ First Amendment to Development and Supply Agreement, dated as of March 28, 2014, by and betweenLumara Health Inc. and Hospira Worldwide, Inc. (Certain confidential information contained in this exhibitwas omitted by means of redacting a portion of the text and replacing it with [***]. This exhibit has been filedseparately with the SEC without any redactions pursuant to a Confidential Treatment Request under Rule 24b-2 of the Securities and Exchange Act of 1934, as amended) 10.33 Underwriting Agreement, dated as of February 11, 2014, among AMAG Pharmaceuticals, Inc. and J.P. MorganSecurities LLC, on its own behalf and as representative of the several underwriters named in Schedule 1thereto (incorporated herein by reference to Exhibit 1.1 to the Company's Current Report on Form 8-K filedFebruary 14, 2014, File No. 001-10865) 10.34 Base Call Option Transaction Confirmation, dated as of February 11, 2014, between the Company andJPMorgan Chase Bank, National Association, London Branch (incorporated herein by reference toExhibit 10.1 to the Company's Current Report on Form 8-K filed February 14, 2014, File No. 001-10865)Table of Contents193ExhibitNumber Description 10.35 Base Call Option Transaction Confirmation, dated as of February 11, 2014, between the Company and RoyalBank of Canada (incorporated herein by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed February 14, 2014, File No. 001-10865) 10.36 Base Call Option Transaction Confirmation, dated as of February 11, 2014, between the Company andMorgan Stanley & Co. International plc (incorporated herein by reference to Exhibit 10.3 to the Company'sCurrent Report on Form 8-K filed February 14, 2014, File No. 001-10865) 10.37 Base Warrants Confirmation, dated as of February 11, 2014, between the Company and JPMorgan ChaseBank, National Association, London Branch (incorporated herein by reference to Exhibit 10.4 to theCompany's Current Report on Form 8-K filed February 14, 2014, File No. 001-10865) 10.38 Base Warrants Confirmation, dated as of February 11, 2014, between the Company and Royal Bank of Canada(incorporated herein by reference to Exhibit 10.5 to the Company's Current Report on Form 8-K filedFebruary 14, 2014, File No. 001-10865) 10.39 Base Warrants Confirmation, dated as of February 11, 2014, between the Company and Morgan Stanley & Co.International plc (incorporated herein by reference to Exhibit 10.6 to the Company's Current Report onForm 8-K filed February 14, 2014, File No. 001-10865) 10.40 Additional Call Option Transaction Confirmation, dated as of February 13, 2014, between the Company andJPMorgan Chase Bank, National Association, London Branch (incorporated herein by reference toExhibit 10.7 to the Company's Current Report on Form 8-K filed February 14, 2014, File No. 001-10865) 10.41 Additional Call Option Transaction Confirmation, dated as of February 13, 2014, between the Company andRoyal Bank of Canada (incorporated herein by reference to Exhibit 10.8 to the Company's Current Report onForm 8-K filed February 14, 2014, File No. 001-10865) 10.42 Additional Call Option Transaction Confirmation, dated as of February 13, 2014, between the Company andMorgan Stanley & Co. International plc (incorporated herein by reference to Exhibit 10.9 to the Company'sCurrent Report on Form 8-K filed February 14, 2014, File No. 001-10865) 10.43 Additional Warrants Confirmation, dated as of February 13, 2014, between the Company and JPMorgan ChaseBank, National Association, London Branch (incorporated herein by reference to Exhibit 10.10 to theCompany's Current Report on Form 8-K filed February 14, 2014, File No. 001-10865) 10.44 Additional Warrants Confirmation, dated as of February 13, 2014, between the Company and Royal Bank ofCanada (incorporated herein by reference to Exhibit 10.11 to the Company's Current Report on Form 8-K filedFebruary 14, 2014, File No. 001-10865) 10.45 Additional Warrants Confirmation, dated as of February 13, 2014, between the Company and MorganStanley & Co. International plc (incorporated herein by reference to Exhibit 10.12 to the Company's CurrentReport on Form 8-K filed February 14, 2014, File No. 001-10865) 10.46 Credit Agreement, dated as of November 12, 2014, by and among the Company, the financial institutions andagents listed therein, and Jefferies Finance LLC (incorporated herein by reference to Exhibit 10.1 to theCompany's Current Report on Form 8-K filed November 12, 2014, File No. 001-10865) 10.47* Form of Employment Agreement between the Company and each of its executive officers (other than WilliamHeiden) (incorporated herein by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q forthe quarter ended March 31, 2014, File No. 001-10865)Table of Contents194ExhibitNumber Description 10.48* Employment Agreement dated as of February 7, 2014 between the Company and William Heiden(incorporated herein by reference to Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for thequarter ended March 31, 2014, File No. 001-10865) 21.1+ Subsidiaries of AMAG Pharmaceuticals, Inc. 23.1+ Consent of PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm 24.1 Power of Attorney (included on the signature page(s) hereto) 31.1+ Certification Pursuant to Rule 13a-14(a)/15d-14(a) of the Exchange Act, as Adopted Pursuant to Section 302of the Sarbanes-Oxley Act of 2002 31.2+ Certification Pursuant to Rule 13a-14(a)/15d-14(a) of the Exchange Act, as Adopted Pursuant to Section 302of the Sarbanes-Oxley Act of 2002 32.1++ Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-OxleyAct of 2002 32.2++ Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-OxleyAct of 2002 101.INS+ XBRL Instance Document 101.SCH+ XBRL Taxonomy Extension Schema Document 101.CAL+ XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF+ XBRL Taxonomy Extension Definition Linkbase Document 101.LAB+ XBRL Taxonomy Extension Label Linkbase Document 101.PRE+ XBRL Taxonomy Extension Presentation Linkbase Document+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 toItem 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 10.6 LUMARA HEALTH INC. Amended and Restated 2013 Incentive Compensation Plan 1. Establishment; Effective Date; Purposes; and Duration. (a) Establishment of the Plan; Effective Date. Lumara Health Inc. (formerly known as K-V Pharmaceutical Company), a Delaware corporation(“Lumara Health”), previously established this incentive compensation plan to be known as the “K-V Pharmaceutical Company 2013 IncentiveCompensation Plan” (as subsequently amended and restated, the “Lumara Plan”). The Lumara Plan was effective as of the effective date of the SixthAmended Joint Chapter 11 Plan of Reorganization for K-V Discovery Solutions, Inc. and its Affiliated Debtors (“Plan of Reorganization”), filed on July 19,2013 with, and approved on August 29, 2013 by, the United States Bankruptcy Court for the Southern District of New York, as the same may be amended ormodified (“Effective Date”). The Lumara Plan was assumed by AMAG Pharmaceuticals, Inc. (the “Company”) on November 12, 2014, upon consummation of the transactionscontemplated by that Agreement and Plan of Merger dated September 28, 2014, by and among the Company, Lumara Health, Snowbird, Inc. and LunarRepresentative, LLC (the “Merger”). This version of the Lumara Plan, to be known as the “Lumara Health Inc. Amended and Restated 2013 IncentiveCompensation Plan” (hereinafter, referred to as the “Plan”) is an amendment and complete restatement of the Lumara Plan as assumed in the Merger. ThePlan permits the grant of Nonqualified Stock Options, Incentive Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, OtherStock-Based Awards, Dividend Equivalents and Cash-Based Awards. The Plan shall remain in effect as provided in Section 1(c). (b) Purposes of the Plan. The purposes of the Plan are: (i) to enhance the Company’s and the Affiliates’ ability to attract highly qualifiedpersonnel; (ii) to strengthen their retention capabilities; (iii) to enhance the long-term performance and competitiveness of the Company and the Affiliates;and (iv) to align the interests of Participants with those of the Company’s shareholders. To accomplish such purposes, the Plan provides that the Companymay grant Nonqualified Stock Options, Incentive Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Other Stock-BasedAwards, Dividend Equivalents and Cash- Based Awards. (c) Duration of the Plan. The Plan shall remain in effect, subject to the right of the Board of Directors to amend or terminate the Plan at any timepursuant to Section 15, until all Shares subject to it shall have been delivered, and any restrictions on such Shares have lapsed, pursuant to the Plan’sprovisions. However, in no event may an Award be granted under the Plan on or after ten years from the Effective Date. 2. Definitions. Certain terms used herein have the definitions given to them in the first instance in which they are used. In addition, for purposes of the Plan, thefollowing terms are defined as set forth below: (a) “Affiliate” means (i) any Subsidiary; and/or (ii) any Person that directly or indirectly controls, is controlled by or is under common controlwith the Company. The term “control” (including, with correlative meaning, the terms “controlled by” and “under common control with”), as applied toany Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting or other securities, by contract or otherwise. (b) “Applicable Exchange” means such securities exchange or inter-dealer quotation system as may at the applicable time be the principalmarket for the Common Stock. (c) “Award” means, individually or collectively, a grant under the Plan of Nonqualified Stock Options, Incentive Stock Options, StockAppreciation Rights, Restricted Stock Awards, Restricted Stock Units, Other Stock-Based Awards, Dividend Equivalents and Cash-Based Awards. (d) “Award Agreement” means either: (a) a written agreement entered into by the Company and a Participant setting forth the terms andprovisions applicable to an Award granted under the Plan, or (b) a written or electronic statement issued by the Company to a Participant describing the termsand provisions of such Award, including any amendment or modification thereof. The Committee may provide for the use of electronic, internet or othernon-paper Award Agreements, and the use of electronic, internet or other non-paper means for the acceptance thereof and actions thereunder by aParticipant. For the avoidance of doubt, the term “Award Agreement” includes any Individual Agreement setting forth the terms and provisions applicable toan Award. (e) “Board” or “Board of Directors” means the Board of Directors of the Company. (f) “Business Relationship” means service to the Company or any of its Affiliates, or its or their successors, in the capacity of an employee,officer, director, consultant or advisor. (g) “Cash-Based Award” means an Award, whose value is determined by the Committee, granted to a Participant, as described in Section 11. (h) “Change of Control” means (i) the sale of all or substantially all of the assets of the Company on a consolidated basis to an unrelated personor entity, (ii) a merger, reorganization or consolidation pursuant to which the holders of the Company’s outstanding voting power and outstanding stockimmediately prior to such transaction do not own a majority of the outstanding voting power and outstanding stock or other equity interests of the resultingor successor entity (or its ultimate parent, if applicable) immediately upon completion of such transaction, (iii) the sale of all of the Common Stock of theCompany to an unrelated person, entity or group thereof acting in concert, or (iv) any other transaction in which the owners of the Company’s outstandingvoting power immediately prior to such transaction do not own at least a majority of the outstanding voting power of the Company or any successor entityimmediately upon completion of the transaction other than as a result of the acquisition of securities directly from the Company. (i) “Change of Control Price” means the value as determined by the Committee of the consideration payable, or otherwise to be received bystockholders, per share of Common Stock pursuant to a Change of Control. (j) “Code” means the Internal Revenue Code of 1986, as it may be amended from time to time, including rules and regulations promulgatedthereunder and successor provisions and rules and regulations thereto. (k) “Committee” means either the Board or the Compensation Committee of the Board or a similar committee performing the functions of thecompensation committee and which is comprised of not less than two Non-Employee Directors who are independent. (l) “Common Stock” means common stock, par value $0.01 per share, of the Company. In the event of any adjustment pursuant toSection 4(c), the stock or security resulting from such adjustment shall be deemed to be Common Stock within the meaning of the Plan. (m) “Consultant” means a consultant, advisor or other independent contractor who is a natural person and performs services for the Company oran Affiliate in a capacity other than as an Employee or Non-Employee Director. (n) “Director” means any individual who is a member of the Board of Directors of the Company. (o) “Disaffiliation” means an Affiliate’s ceasing to be an Affiliate for any reason (including as a result of a public offering, or a spin-off or saleby the Company, of the stock of the Affiliate) or a sale of a division of the Company or an Affiliate. (p) “Dividend Equivalent” means a right to receive the equivalent value (in cash or Shares) of dividends that would otherwise be paid on theShares subject to an Award but that have not been issued or delivered, awarded under Section 10. (q) “Effective Date” shall have the meaning ascribed to such term in Section 1(a). (r) “Eligible Grantee” means any Employee, Non-Employee Director, or Consultant, and any prospective Employee and Consultant who hasaccepted an offer of employment or consultancy from the Company or any Affiliate, in each case, only to the extent eligible to receive an award under thePlan in accordance with NASDAQ Listing Rule 5635(c)(3) and the applicable guidance issued thereunder. (s) “Employee” means any person designated as an employee of the Company and/or an Affiliate on the payroll records thereof. An Employeeshall not include any individual during any period he or she is classified or treated by the Company or an Affiliate as an independent contractor, a consultant,or any employee of an employment, consulting, or temporary agency or any other entity other than the Company and/or an Affiliate without regard towhether such individual is subsequently determined to have been, or is subsequently retroactively reclassified as a common-law employee of the Companyand/or an Affiliate during such period. For the avoidance of doubt, a Director who would otherwise be an “Employee” within the meaning of thisSection 2(t) shall be considered an Employee for purposes of the Plan. (t) “Exchange Act” means the Securities Exchange Act of 1934, as it may be amended from time to time, including the rules and regulationspromulgated thereunder and successor provisions and rules and regulations thereto. (u) “Fair Market Value” means (i) “Fair Market Value” as defined in any Individual Agreement to which the applicable Participant is a party, or(ii) if there is no such Individual Agreement or if it does not define Fair Market Value: (A) if the Common Stock is listed on a national securities exchange, asof any given date, the closing price for the Common Stock on such date on the Applicable Exchange, or if Shares were not traded on the ApplicableExchange on such measurement date, then on the next preceding date on which Shares are traded, all as reported by such source as the Committee may select,or (B) if the Common Stock is not listed on a national securities exchange, Fair Market Value shall be determined by the Committee in good faith in a mannerthat complies with Sections 409A and 422 of the Code, to the extent applicable. (v) “Freestanding SAR” means an SAR that is granted independently of any Options, as described in Section 7. (w) “Grant Date” means the later of: (i) the date on which the Committee (or its designee) by resolution, written consent or other appropriateaction selects an Eligible Grantee to receive a grant of an Award, determines the number of Shares or other amount to be subject to such Award and, ifapplicable, determines the Option Price or Grant Price of such Award, provided that as soon reasonably practical thereafter the Committee (or its designee)both notifies the Eligible Grantee of the Award and enters into an Award Agreement with the Eligible Grantee, or (ii) the date designated as the “grant date”in an Award Agreement. (x) “Grant Price” means the price established as of the Grant Date of an SAR pursuant to Section 7 used to determine whether there is anypayment due upon exercise of the SAR. (y) “Incentive Stock Option” or “ISO” means a right to purchase Shares under the Plan in accordance with the terms and conditions set forth inSection 6 and which is designated as an Incentive Stock Option and which is intended to meet the requirements of Section 422 of the Code. (z) “Individual Agreement” means an employment, change of control, consulting or similar services agreement between a Participant and theCompany or an Affiliate that is in effect as of the Grant Date of an Award hereunder. (aa) “Non-Employee Director” means a Director who is not an Employee. (bb) “Nonqualified Stock Option” or “NQSO” means a right to purchase Shares under the Plan in accordance with the terms and conditions setforth in Section 6 and which is not intended to meet the requirements of Section 422 of the Code or otherwise does not meet such requirements. (cc) “Notice” means notice provided by a Participant to the Company in a manner prescribed by the Committee. (dd) “Option” or “Stock Option” means an Incentive Stock Option or a Nonqualified Stock Option, as described in Section 6. (ee) “Option Price” means the price at which a Share may be purchased by a Participant pursuant to an Option. (ff) “Other Stock-Based Award” means an equity-based or equity-related Award, other than an Option, SAR, Restricted Stock, Restricted StockUnit or Dividend Equivalent, granted in accordance with the terms and conditions set forth in Section 9. (gg) “Participant” means any Eligible Grantee who holds one or more outstanding Awards. (hh) “Period of Restriction” means the period of time during which Shares of Restricted Stock or Restricted Stock Units are subject to asubstantial risk of forfeiture and/or other restrictions, or, as applicable, the period of time within which performance is measured for purposes of determiningwhether such an Award has been earned, and, in the case of Restricted Stock, the transfer of Shares of Restricted Stock is limited in some way, in each case inaccordance with Section 8. (ii) “Restricted Stock” means an Award of Shares granted to a Participant, subject to the applicable Period of Restriction, pursuant to Section 8. (jj) “Restricted Stock Unit” means an unfunded and unsecured promise to deliver Shares or cash, subject to the applicable Period of Restriction,granted pursuant to Section 8. (kk) “Rule 16b-3” means Rule 16b-3 under the Exchange Act, or any successor rule, as the same may be amended from time to time. (ll) “SEC” means the Securities and Exchange Commission. (mm) “Securities Act” means the Securities Act of 1933, as it may be amended from time to time, including the rules and regulations promulgatedthereunder and successor provisions and rules and regulations thereto. (nn) “Share” means a share of Common Stock (including any new, additional or different stock or securities resulting from any change incorporate capitalization as listed in Section 4(c)). (oo) “Stock Appreciation Right” or “SAR” means an Award, granted alone (a “Freestanding SAR”) or in connection with a related Option (a“Tandem SAR”), designated as an SAR, pursuant to the terms of Section 7. (pp) “Subsidiary” means any present or future corporation which is or would be a “subsidiary corporation” of the Company as the term isdefined in Section 424(f) of the Code. (qq) “Substitute Awards” means Awards granted or Shares issued by the Company in assumption of, or in substitution or exchange for, optionsor other awards previously granted, or the right or obligation to grant future options or other awards, by a company acquired by the Company and/or anAffiliate or with which the Company and/or an Affiliate combines, or otherwise in connection with any merger, consolidation, acquisition of property orstock, or reorganization involving the Company or an Affiliate, including a transaction described in Code Section 424(a). (rr) “Termination of Service” means the termination of the applicable Participant’s Business Relationship. Unless otherwise determined by theCommittee (and subject to the limitations applicable to ISOs under the Code), a Termination of Service shall not be considered to have occurred in the caseof: (i) a transfer to the employment or service of the Company from an Affiliate or from the Company to an Affiliate, or from one Affiliate to another; or (ii) anapproved leave of absence for military service or sickness, or for any othe rpurpose approved by the Company, if the employee’s right to re-employment isguaranteed either by statute or by contract or under the policy pursuant to which the leave of absence was granted or if the Committee otherwise so providesin writing. The Committee may determine, in its sole discretion, that changes in status between service as an Employee, Non-Employee Director, and aConsultant will not constitute a Termination of Service if the individual continues to perform bona fide services for the Company or an Affiliate (subject tothe limitations applicable to ISOs under the Code). A Participant employed by, or performing services for, an Affiliate or a division of the Company or of anAffiliate shall be deemed to incur a Termination of Service if, as a result of a Disaffiliation, such Affiliate or division ceases to be an Affiliate or such adivision, as the case may be, and the Participant does not immediately thereafter become an employee of, or service provider for, the Company or anotherAffiliate. The Committee shall have the discretion to determine whether and to what extent the vesting of any Awards shall be tolled during any paid orunpaid leave of absence. 3. Administration. (a) General. The Plan shall be administered by the Committee, provided that the amount, timing and terms of the grants of Awards to Non-Employee Directors shall be determined by the compensation committee or similar committee comprised solely of Non-Employee Directors. The Committeeshall have exclusive authority to operate, manage and administer the Plan in accordance with its terms and conditions. Notwithstanding the foregoing, in itsabsolute discretion, the Board may at any time and from time to time exercise any and all rights, duties and responsibilities of the Committee under the Plan,including establishing procedures to be followed by the Committee, but excluding matters which under any applicable law, regulation or rule, including anyexemptive rule under Section 16 of the Exchange Act (including Rule 16b-3), are required to be determined in the sole discretion of the Committee. If and tothe extent that the Committee does not exist or cannot function, the Board may take any action under the Plan that would otherwise be the responsibility ofthe Committee, subject to the limitations set forth in the immediately preceding sentence. (b) Authority of the Committee. The Committee shall have full discretionary authority to grant, pursuant to the terms of the Plan, Awards tothose individuals who are eligible to receive Awards under the Plan. Except as limited by law or by the Certificate of Incorporation or By-Laws of theCompany, and subject to the provisions herein, the Committee shall have full power, in accordance with the other terms and provisions of the Plan, to: (i) select Eligible Grantees to whom Awards may from time to time be granted; (ii) determine the time or times of grant, and the extent, if any, of Incentive Stock Options, Nonqualified Stock Options, Stock AppreciationRights, Restricted Stock Awards, Restricted Stock Units, Other Stock-Based Awards, Dividend Equivalents and Cash-Based Awards, or anycombination of the foregoing, granted to any one or more grantees; (iii) determine the number of shares of Common Stock to be covered by any Award; (iv) determine and modify from time to time the terms and conditions, including restrictions, not inconsistent with the terms of the Plan, ofany Award, which terms and conditions may differ among individual Awards and Participants, and to approve the forms of Award Agreements; (v) accelerate at any time the exercisability or vesting of all or any portion of any Award, provided that the Committee generally shall notexercise such discretion to accelerate Awards subject to Section 8 except in the event of the Participant’s death, disability or retirement, or a changein control (including a Change of Control) (the “Vesting Acceleration Requirements”); (vi) subject to the provisions of Section 6(d), extend at any time the period in which Stock Options may be exercised; and (vii) at any time, adopt, alter and repeal such rules, guidelines and practices for administration of the Plan and for its own acts andproceedings as it shall deem advisable; to interpret the terms and provisions of the Plan and any Award (including related written instruments); tomake all determinations it deems advisable for the administration of the Plan; to decide all disputes arising in connection with the Plan; and tootherwise supervise the administration of the Plan. (c) Award Agreements. The Committee shall, subject to applicable laws and rules, determine the date an Award is granted. Each Award shall beevidenced by an Award Agreement; however, two or more Awards granted to a single Participant may be combined in a single Award Agreement. An AwardAgreement shall not be a precondition to the granting of an Award; provided, however, that (i) the Committee may, but need not, require as a condition toany Award Agreement’s effectiveness, that such Award Agreement be executed on behalf of the Company and/or by the Participant to whom the Awardevidenced thereby shall have been granted (including by electronic signature or other electronic indication of acceptance), and such executed AwardAgreement be delivered to the Company, and (ii) no person shall have any rights under any Award unless and until the Participant to whom such Award shallhave been granted has complied with the applicable terms and conditions of the Award. The Committee shall prescribe the form of all Award Agreements,and, subject to the terms and conditions of the Plan, shall determine the content of all Award Agreements. Subject to the other provisions of the Plan, anyAward Agreement may be supplemented or amended in writing from time to time as approved by the Committee; provided that the terms and conditions ofany such Award Agreement as supplemented or amended are not inconsistent with the provisions of the Plan. In the event of any dispute or discrepancyconcerning the terms of an Award, the records of the Committee or its designee shall be determinative. (d) Discretionary Authority; Decisions Binding. The Committee shall have full discretionary authority in all matters related to the discharge ofits responsibilities and the exercise of its authority under the Plan. All determinations, decisions, actions and interpretations by the Committee with respectto the Plan and any Award Agreement, and all related orders and resolutions of the Committee shall be final, conclusive and binding on all Participants, theCompany and its stockholders, any Affiliate and all persons having or claiming to have any right or interest in or under the Plan and/or any AwardAgreement. The Committee shall consider such factors as it deems relevant to making or taking such decisions, determinations, actions and interpretations,including the recommendations or advice of any Director or officer or employee of the Company, any director, officer or employee of an Affiliate and suchattorneys, consultants and accountants as the Committee may select. A Participant or other holder of an Award may contest a decision or action by theCommittee with respect to such person or Award only on the grounds that such decision or action was arbitrary or capricious or was unlawful, and any reviewof such decision or action shall be limited to determining whether the Committee’s decision or action was arbitrary or capricious or was unlawful. Notwithstanding anything herein to the contrary, in the event that an Award Agreement sets forth an alternative mechanism for resolving disputes or standardof review, the mechanisms and/or standard of review set forth in the Award Agreement shall control. (e) Attorneys; Consultants. The Committee may consult with counsel who may be counsel to the Company. The Committee may, with theapproval of the Board, employ such other attorneys and/or consultants, accountants, appraisers, brokers, agents and other persons, any of whom may be anEligible Grantee, as the Committee deems necessary or appropriate. The Committee, the Company and its officers and Directors shall be entitled to rely uponthe advice, opinions or valuations of any such persons. The Committee shall not incur any liability for any action taken in good faith in reliance upon theadvice of such counsel or other persons. (f) Delegation of Administration. Except to the extent prohibited by applicable law, or any applicable rules of a stock exchange, the Committeemay, in its discretion, allocate all or any portion of its responsibilities and powers under this Section 3 to any one or more of its members and/or delegate allor any part of its responsibilities and powers under this Section 3 to any person or persons selected by it; provided, however, that the Committee may not(i) delegate to any executive officer of the Company or an Affiliate, or a committee that includes any such executive officer, the Committee’s authority togrant Awards, or the Committee’s authority otherwise concerning Awards, awarded to executive officers of the Company or an Affiliate; (ii) delegate the Committee’s authority to grant Awards to consultants unless any such Award is subject to approval by theCommittee; or (iii) delegate its authority to correct defects, omissions or inconsistencies in the Plan. Any such authority delegated or allocated by theCommittee under this Section 3(f) shall be exercised in accordance with the terms and conditions of the Plan and any rules, regulations or administrativeguidelines that may from time to time be established by the Committee, and any such allocation or delegation may be revoked by the Committee at any time. (g) Full Value Award Minimum Vesting Requirements. Notwithstanding any other provision in the Plan to the contrary, the minimumrestriction or vesting period with respect to any Restricted Stock Award or Restricted Stock Unit Award granted to employees shall be no less than one year inthe case of a performance-based restriction or vesting period and no less than three years in the case of a time-based restriction or vesting period (the“Minimum Vesting Requirements”); provided, however, that an Award with a time-based restriction or vesting period may become unrestricted and vestedincrementally over such three year period; and provided further that, (i) the vesting of any such Award may accelerate (or be accelerated by the Committee) ifone or more of the Vesting Acceleration Requirements is met and (ii) notwithstanding the foregoing, Restricted Stock Awards and Restricted Stock UnitAwards that result in the issuance of up to 10% of the shares of Common Stock available for issuance under the Plan pursuant to Section 4(a) may be grantedin the aggregate to any one or more Eligible Grantees or may be accelerated without respect to such Minimum Vesting Requirements or Vesting AccelerationRequirements. 4. Shares Subject To The Plan. (a) Number of Shares Available for Issuance. The shares of stock subject to Awards granted under the Plan shall be Shares. Such Shares subject tothe Plan may be authorized and unissued shares (which will not be subject to preemptive rights), Shares held in treasury by the Company, Shares purchasedon the open market or by private purchase or any combination of the foregoing. Subject to adjustment as provided in Section 4(c), the total number of Sharesthat may be issued pursuant to Awards under the Plan as of the effective time of the Merger and after taking into account any adjustments as a result of theMerger, shall be 200,000 Shares. (b) Rules for Calculating Shares Issued. (i) The shares of Common Stock underlying any Awards under the Plan that are forfeited, canceled or otherwise terminated (other than byexercise) shall be added back to the shares of Common Stock available for issuance under the Plan. (ii) Notwithstanding the foregoing, the following shares shall not be added to the shares authorized for grant under the Plan: (i) sharestendered or held back upon exercise of an Option or settlement of an Award to cover the exercise price or tax withholding, and (ii) shares subject to aStock Appreciation Right that are not issued in connection with the stock settlement of the Stock Appreciation Right upon exercise thereof. In theevent the Company repurchases shares of Common Stock on the open market, such shares shall not be added to the shares of Common Stockavailable for issuance under the Plan. (iii) Any Shares delivered under the Plan upon exercise or satisfaction of Substitute Awards shall not reduce the Shares available forissuance under the Plan; provided, however, that the total number of Shares that may be issued pursuant to Incentive Stock Options granted underthe Plan shall be 200,000 Shares, as adjusted pursuant to paragraphs (i) and (ii) of this Section 4(b) and Section 4(c). (c) Adjustment Provisions. Subject to Section 14 hereof, if, as a result of any reorganization, recapitalization, reclassification, stock dividend,stock split, reverse stock split or other similar change in the Company’s capital stock, the outstanding shares of Common Stock are increased or decreased orare exchanged for a different number or kind of shares or other securities of the Company, or additional shares or new or different shares or other securities ofthe Company or other non-cash assets are distributed with respect to such shares of Common Stock or other securities, or, if, as a result of any merger orconsolidation, sale of all or substantially all of the assets of the Company, the outstanding shares of Common Stock are converted into or exchanged forsecurities of the Company or any successor entity (or a parent or subsidiary thereof), the Committee shall make an appropriate or proportionate adjustment in(i) the maximum number of shares reserved for issuance under the Plan, including the maximum number of shares that may be issued in the form of IncentiveStock Options, (ii) the number and kind of shares or other securities subject to any then outstanding Awards under the Plan, (iii) the repurchase price, if any,per share subject to each outstanding Restricted Stock Award, (iv) the Option Price for each share subject to any then outstanding Stock Options under thePlan, without changing the aggregate Option Price (i.e., the Option Price multiplied by the number of Stock Options) as to which such Stock Options remainexercisable and (v) the Grant Price for each share subject to any then outstanding Stock Appreciation Rights under the Plan, without changing the aggregateGrant Price (i.e., the Grant Price multiplied by the number of Stock Appreciation Rights) as to which such Stock Appreciation Rights remain exercisable. TheCommittee shall also make equitable or proportionate adjustments in the number of shares subject to outstanding Awards and the exercise price and the termsof outstanding Awards to take into consideration cash dividends paid other than in the ordinary course or any other extraordinary corporate event. Theadjustment by the Committee shall be final, binding and conclusive. No fractional shares of Stock shall be issued under the Plan resulting from any suchadjustment, but the Committee in its discretion may make a cash payment in lieu of fractional shares. (d) No Limitation on Corporate Actions. The existence of the Plan and any Awards granted hereunder shall not affect in any way the right orpower of the Company or any Affiliate to make or authorize any adjustment, recapitalization, reorganization or other change in its capital structure orbusiness structure, any merger or consolidation, any issuance of debt, preferred or prior preference stock ahead of or affecting the Shares, additional shares ofcapital stock or other securities or subscription rights thereto, any dissolution or liquidation, any sale or transfer of all or part of its assets or business or anyother corporate act or proceeding. 5. Eligibility and Participation. (a) Eligibility. Eligible Grantees shall be eligible to become Participants and receive Awards in accordance with the terms and conditions of thePlan, subject to the limitations on the granting of ISOs set forth in Section 6(i)(i). (b) Actual Participation. Subject to the provisions of the Plan, the Committee may, from time to time, select Participants from all EligibleGrantees and shall determine the nature and amount of each Award. 6. Stock Options. (a) Grant of Options. Subject to the terms and provisions of the Plan, Options may be granted to Participants in such number (subject toSection 4), and upon such terms, and at any time and from time to time as shall be determined by the Committee. The Committee may grant an Option orprovide for the grant of an Option, either from time to time in the discretion of the Committee or automatically upon the occurrence of specified events,including the achievement of performance goals, the satisfaction of an event or condition within the control of the recipient of the Option or within the control of others, in any event, as determined by theCommittee. (b) Award Agreement. Each Option grant shall be evidenced by an Award Agreement that shall specify the Option Price, the maximum durationof the Option, the number of Shares to which the Option pertains, the conditions upon which the Option shall become exercisable and such other provisionsas the Committee shall determine, which are not inconsistent with the terms of the Plan. The Award Agreement also shall specify whether the Option isintended to be an ISO or an NQSO. To the extent that any Option does not qualify as an ISO (whether because of its provisions or the time or manner of itsexercise or otherwise), such Option, or the portion thereof which does not so qualify, shall constitute a separate NQSO. (c) Option Price. The Option Price for each Option shall be determined by the Committee and set forth in the Award Agreement; provided that,subject to Section 6(i)(iii), the Option Price of an Option shall be not less than one hundred percent (100%) of the Fair Market Value of a Share on the GrantDate of such Option; provided further, that Substitute Awards or Awards granted in connection with an adjustment provided for in Section 4(c), in the form ofstock options, shall have an Option Price per Share that is intended to maintain the economic value of the Award that was replaced or adjusted, as determinedby the Committee. (d) Duration of Options. Each Option granted to a Participant shall expire at such time as the Committee shall determine as of the Grant Date andset forth in the Award Agreement; provided, however, that no Incentive Stock Option shall be exercisable later than the tenth (10) anniversary of its GrantDate. (e) Exercise of Options. Options shall be exercisable at such times and be subject to such restrictions and conditions as the Committee shall ineach instance determine and set forth in the Award Agreement, which need not be the same for each grant or for each Option or Participant. The Committee,in its sole discretion, may allow a Participant to exercise an Option that has not otherwise become exercisable pursuant to the applicable Award Agreement,in which case the Shares then issued shall be Shares of Restricted Stock having a Period of Restriction analogous to the exercisability provisions of theOption. (f) Payment. Options shall be exercised by the delivery of a written notice of exercise to the Company, in a form specified or accepted by theCommittee, or by complying with any alternative exercise procedures that may be authorized by the Committee, setting forth the number of Shares withrespect to which the Option is to be exercised, accompanied by full payment for such Shares, which shall include applicable taxes, if any, in accordancewith Section 16. The Option Price upon exercise of any Option shall be payable to the Company in full by cash, check or such cash equivalent as theCommittee may accept. If approved by the Committee and set forth in the Award Agreement, and subject to any such terms, conditions and limitations as theCommittee may prescribe and to the extent permitted by applicable law, payment of the Option Price, in full or in part, may also be made as follows: (i) Payment may be made in the form of unrestricted and unencumbered Shares (by actual delivery of such Shares or by attestation)already owned by the Participant exercising such Option, or by such Participant and his or her spouse jointly (based on the Fair Market Value of theCommon Stock on the date the Option is exercised); provided, however, that, in the case of an Incentive Stock Option, the right to make a paymentin the form of such already owned Shares may be authorized only as of the Grant Date of such Incentive Stock Option and provided further that suchalready owned Shares must meet any such requirements as the Committee may determine are necessary in order to avoid an accounting earnings charge on account of the use of such Shares to pay the Option Price). (ii) Payment may be made by means of a broker-assisted “cashless exercise” pursuant to which a Participant may elect to deliver aproperly executed exercise notice to the Company, together with a copy of irrevocable instructions to a broker to deliver promptly to the Companythe amount of Share sale or loan proceeds necessary to pay the Option Price, and, if requested, the amount of any federal, state, local or non-UnitedStates withholding taxes. (iii) Payment may be made by a “net exercise” pursuant to which the Participant instructs the Company to withhold a number of Sharesotherwise deliverable to the Participant upon such exercise of the Option having an aggregate Fair Market Value on the date of exercise equal to theproduct of: (i) the Option Price multiplied by (ii) the number of Shares in respect of which the Option shall have been exercised, increased by theamount of any applicable withholding taxes. (iv) Payment may be made by any other method approved or accepted by the Committee in its discretion. Subject to any governing rules or regulations, as soon as practicable after receipt of a written notification of exercise and full payment in accordance withthe preceding provisions of this Section 6(f) and satisfaction of tax obligations in accordance with Section 16, the Company shall deliver to the Participantexercising an Option, in the Participant’s name, evidence of book entry Shares, or, upon the Participant’s request, Share certificates, in an appropriateamount based upon the number of Shares purchased under the Option, subject to Section 20(i). Unless otherwise determined by the Committee, allpayments under all of the methods described above shall be paid in United States dollars. (g) Rights and Obligations as a Stockholder. No Participant or other person shall become the beneficial owner of any Shares subject to anOption, nor have any rights to dividends or other rights of a stockholder with respect to any such Shares, until the Participant has actually received suchShares following exercise of his or her Option in accordance with the provisions of the Plan and the applicable Award Agreement. (h) Termination of Service. Except as otherwise provided by Section 6(e) or in the applicable Award Agreement, an Option may be exercisedonly to the extent that it is then exercisable, and if at all times during the period beginning with the date of granting of such Option and ending on the date ofexercise of such Option the Participant is an Employee, Non- Employee Director, or Consultant, and shall terminate immediately upon a Termination ofService of the Participant. An Option shall cease to become exercisable upon a Termination of Service of the holder, except as otherwise set forth in anAward Agreement. Notwithstanding the foregoing provisions of this Section 6(h) to the contrary, the Committee may determine in its discretion that anOption may be exercised following any such Termination of Service, whether or not exercisable at the time of such Termination of Service; provided,however, that in no event may an Option be exercised after the expiration date of such Option and specified in the applicable Award Agreement. (i) Limitations on Incentive Stock Options.th (i) General. No ISO shall be granted to any Eligible Grantee who is not an Employee of the Company or a Subsidiary on the Grant Dateof such Option. Any ISO granted under the Plan shall contain such terms and conditions, consistent with the Plan, as the Committee may determine to be necessary to qualify suchOption as an “incentive stock option” under Section 422 of the Code. Any ISO granted under the Plan may be modified by the Committee todisqualify such Option from treatment as an “incentive stock option” under Section 422 of the Code. (ii) $100,000 Per Year Limitation. Notwithstanding any intent to grant ISOs, an Option granted under the Plan will not be considered anISO to the extent that it, together with any other “incentive stock options” (within the meaning of Section 422 of the Code, but without regard tosubsection (d) of such Section) under the Plan and any other “incentive stock option” plans of the Company, any Subsidiary and any “parentcorporation” of the Company within the meaning of Section 424(e) of the Code, are exercisable for the first time by any Participant during anycalendar year with respect to Shares having an aggregate Fair Market Value in excess of $100,000 (or such other limit as may be required by theCode) as of the Grant Date of the Option with respect to such Shares. The rule set forth in the preceding sentence shall be applied by taking Optionsinto account in the order in which they were granted. (iii) Options Granted to Certain Stockholders. No ISO shall be granted to an individual otherwise eligible to participate in the Plan whoowns (within the meaning of Section 424(d) of the Code), at the Grant Date of such Option, more than ten percent (10%) of the total combinedvoting power of all classes of stock of the Company or a Subsidiary or any “parent corporation” of the Company within the meaning ofSection 424(e) of the Code. This restriction does not apply if at the Grant Date of such ISO the Option Price of the ISO is at least one hundred andten percent (110)% of the Fair Market Value of a Share on the Grant Date of such ISO, and the ISO by its terms is not exercisable after the expirationof five years from such Grant Date. 7. Stock Appreciation Rights. (a) Grant of SARs. Subject to the terms and conditions of the Plan, SARs may be granted to Participants at any time and from time to time as shallbe determined by the Committee. The Committee may grant an SAR (i) in connection with, and at the Grant Date of, a related Option (a “Tandem SAR”), or(ii) independent of, and unrelated to, an Option (a “Freestanding SAR”). The Committee shall have complete discretion in determining the number of Sharesto which a SAR pertains (subject to Section 4) and, consistent with the provisions of the Plan, in determining the terms and conditions pertaining to any SAR. (b) Grant Price. The Grant Price for each SAR shall be determined by the Committee and set forth in the Award Agreement, subject to thelimitations of this Section 7(b). The Grant Price for each Freestanding SAR shall be not less than one hundred percent (100%) of the Fair Market Value of aShare on the Grant Date of such Freestanding SAR, except in the case of Substitute Awards or Awards granted in connection with an adjustment provided forin Section 4(c). The Grant Price of a Tandem SAR shall be equal to the Option Price of the related Option. (c) Exercise of Tandem SARs. Tandem SARs may be exercised for all or part of the Shares subject to the related Option upon the surrender of theright to exercise the equivalent portion of the related Option. A Tandem SAR shall be exercisable only when and to the extent the related Option isexercisable and may be exercised only with respect to the Shares for which the related Option is then exercisable. A Tandem SAR shall entitle a Participantto elect, in the manner set forth in the Plan and the applicable Award Agreement, in lieu of exercising his or her unexercised related Option for all or a portionof the Shares for which such Option is then exercisable pursuant to its terms, to surrender such Option to the Company with respect to any or all of such Shares and to receive from the Company in exchange therefor a payment described in Section 7(g). An Option with respect to which a Participant has elected to exercise a Tandem SAR shall, to the extent of the Shares covered by such exercise, be canceledautomatically and surrendered to the Company. Such Option shall thereafter remain exercisable according to its terms only with respect to the number ofShares as to which it would otherwise be exercisable, less the number of Shares with respect to which such Tandem SAR has been so exercised.Notwithstanding any other provision of the Plan to the contrary, with respect to a Tandem SAR granted in connection with an ISO: (i) the Tandem SAR willexpire no later than the expiration of the related ISO; (ii) the value of the payment with respect to the Tandem SAR may not exceed the difference betweenthe Fair Market Value of the Shares subject to the related ISO at the time the Tandem SAR is exercised and the Option Price of the related ISO; and (iii) theTandem SAR may be exercised only when the Fair Market Value of the Shares subject to the ISO exceeds the Option Price of the ISO. (d) Exercise of Freestanding SARs. Freestanding SARs may be exercised upon whatever terms and conditions the Committee, in its solediscretion, in accordance with the Plan, determines and sets forth in the Award Agreement. (e) Award Agreement. Each SAR grant shall be evidenced by an Award Agreement that shall specify the number of Shares to which the SARpertains, the Grant Price, the term of the SAR, and such other terms and conditions as the Committee shall determine in accordance with the Plan. (f) Term of SARs. The term of a SAR granted under the Plan shall be determined by the Committee, in its sole discretion, and set forth in theAward Agreement; provided, however, that the term of any Tandem SAR shall be the same as the related Option. (g) Payment of SAR Amount. An election to exercise SARs shall be deemed to have been made on the date of Notice of such election to theCompany. As soon as practicable following such Notice, the Participant shall be entitled to receive payment from the Company in an amount determined bymultiplying: (i) The excess of the Fair Market Value of a Share on the date of exercise over the Grant Price of the SAR; by (ii) The number of Shares with respect to which the SAR is exercised, after deduction of any tax withholding in accordance withSection 16. Notwithstanding the foregoing provisions of this Section 7(g) to the contrary, the Committee may establish and set forth in the applicable Award Agreementa maximum amount per Share that will be payable upon the exercise of a SAR. At the discretion of the Committee, such payment upon exercise of a SARshall be in cash, in Shares of equivalent Fair Market Value as of the date of such exercise, or in some combination thereof. (h) Rights and Obligations as a Stockholder. A Participant receiving a SAR shall have the rights of a stockholder only as to Shares, if any,actually issued to such Participant upon satisfaction or achievement of the terms and conditions of the Award, and in accordance with the provisions of thePlan and the applicable Award Agreement, and not with respect to Shares to which such Award relates but which are not actually issued to such Participant. (i) Termination of Service. Except as otherwise provided by Section 7(d) or in the applicable Award Agreement, a SAR may be exercised only tothe extent that it is then exercisable, and if at all times during the period beginning with the date of granting of such SAR and ending on the date of exercise of such SAR theParticipant is an Employee, Non-Employee Director, Eligible Shareholder or Consultant, and shall terminate immediately upon a Termination of Service ofthe Participant. A SAR shall cease to become exercisable upon a Termination of Service of the holder thereof, except as otherwise set forth in an AwardAgreement. Notwithstanding the foregoing provisions of this Section 7(i) to the contrary, the Committee may determine in its discretion that a SAR may beexercised following any such Termination of Service, whether or not exercisable at the time of such Termination of Service; provided, however, that in noevent may a SAR be exercised after the expiration date of such SAR specified in the applicable Award Agreement. 8. Restricted Stock and Restricted Stock Units. (a) Awards of Restricted Stock and Restricted Stock Units. Subject to the terms and provisions of the Plan, the Committee, at any time and from timeto time, may grant Shares of Restricted Stock and/or Restricted Stock Units to Participants in such amounts as the Committee shall determine. Awards ofRestricted Stock may be made with or without the requirement of a cash payment from the Participant to whom such Award is made in exchange for, or as acondition precedent to, the completion of such Award and the issuance of Shares of Restricted Stock, and any such required cash payment shall be set forth inthe applicable Award Agreement. Subject to the terms and conditions of this Section 8 and the Award Agreement, upon delivery of Shares of RestrictedStock to a Participant, or creation of a book entry evidencing a Participant’s ownership of Shares of Restricted Stock, pursuant to Section 8(f), the Participantshall have all of the rights of a stockholder with respect to such Shares, subject to the terms and restrictions set forth in this Section 8 or the applicable AwardAgreement or as determined by the Committee. (b) Award Agreement. Each Restricted Stock and/or Restricted Stock Unit Award shall be evidenced by an Award Agreement that shall specifythe Period of Restriction, the number of Shares of Restricted Stock or the number of Restricted Stock Units granted, and such other provisions as theCommittee shall determine in accordance with the Plan. (c) Nontransferability of Restricted Stock. Except as provided in this Section 8, Shares of Restricted Stock may not be sold, transferred, pledged,assigned, encumbered, alienated, hypothecated or otherwise disposed of until the end of the applicable Period of Restriction established by the Committeeand specified in the Restricted Stock Award Agreement. (d) Period of Restriction and Other Restrictions. The Period of Restriction applicable to an Award of Restricted Stock or Restricted Stock Unitsshall lapse based on a Participant’s continuing service or employment with the Company or an Affiliate, the achievement of performance goals, thesatisfaction of other conditions or restrictions or upon the occurrence of other events, in each case, as determined by the Committee, at its discretion, andstated in the Award Agreement. (e) Delivery of Shares and Settlement of Restricted Stock Units. Upon the expiration of the Period of Restriction with respect to any Shares ofRestricted Stock, the restrictions set forth in the applicable Award Agreement shall be of no further force or effect with respect to such Shares, except as setforth in such Award Agreement. If applicable stock certificates are held by the Secretary of the Company or an escrow holder, upon such expiration, theCompany shall deliver to the Participant, or his beneficiary, without charge, the stock certificate evidencing the Shares of Restricted Stock that have not thenbeen forfeited and with respect to which the Period of Restriction has expired. Unless otherwise provided by the Committee in an Award Agreement, uponthe expiration of the Period of Restriction with respect to any outstanding Restricted Stock Units, the Company shall deliver to the Participant, or hisbeneficiary, without charge, one Share for each such outstanding Restricted Stock Unit; provided, however, that the Committee may, in its discretion, elect to (i) pay cash or part cash and part Shares in lieu of delivering only Shares in respect of suchRestricted Stock Units, or (ii) in an Award Agreement, defer the delivery of Shares beyond the expiration of the Period of Restriction. If a cash payment ismade in lieu of delivering Shares, the amount of such payment shall be equal to the Fair Market Value of such Shares as of the date on which the Period ofRestriction lapsed (or, if the payment is deferred in accordance with clause (ii) of the previous sentence, on the date such Shares would have otherwise beendelivered) with respect to such Restricted Stock Units, less applicable tax withholdings in accordance with Section 16. (f) Forms of Restricted Stock Awards. Each Participant who receives an Award of Shares of Restricted Stock shall be issued a stock certificate orcertificates evidencing the Shares covered by such Award registered in the name of such Participant, which certificate or certificates shall bear an appropriatelegend, and, if the Committee determines that the Shares of Restricted Stock shall be held by the Company or in escrow rather than delivered to theParticipant pending expiration of the Period of Restriction, the Committee may require the Participant to additionally execute and deliver to the Company: (i) an escrow agreement satisfactory to the Committee, if applicable, and (ii) an appropriate stock power (endorsed in blank) with respect to such Shares ofRestricted Stock. The Committee may require a Participant who receives a certificate or certificates evidencing a Restricted Stock Award to immediatelydeposit such certificate or certificates, together with a stock power or other appropriate instrument of transfer, endorsed in blank by the Participant, withsignatures guaranteed in accordance with the Exchange Act if required by the Committee, with the Secretary of the Company or an escrow holder as providedin the immediately following sentence. The Secretary of the Company or such escrow holder as the Committee may appoint shall retain physical custody ofeach certificate representing a Restricted Stock Award until the Period of Restriction and any other restrictions imposed by the Committee or under the AwardAgreement with respect to the Shares evidenced by such certificate expire or shall have been removed. The foregoing to the contrary notwithstanding, theCommittee may, in its discretion, provide that a Participant’s ownership of Shares of Restricted Stock prior to the lapse of the Period of Restriction or anyother applicable restrictions shall, in lieu of such certificates, be evidenced by a “book entry” (i.e., a computerized or manual entry) in the records of theCompany or its designated agent in the name of the Participant who has received such Award. Such records of the Company or such agent shall, absentmanifest error, be binding on all Participants who receive Restricted Stock Awards evidenced in such manner. The holding of Shares of Restricted Stock bythe Company or such an escrow holder, or the use of book entries to evidence the ownership of Shares of Restricted Stock, in accordance with thisSection 8(f), shall not affect the rights of Participants as owners of the Shares of Restricted Stock awarded to them, nor affect the restrictions applicable tosuch shares under the Award Agreement or the Plan, including the Period of Restriction. (g) Rights and Obligations as a Stockholder. (i) Restricted Stock. Unless otherwise determined by the Committee and set forth in a Participant’s Award Agreement, to the extentpermitted or required by law, as determined by the Committee, Participants holding Shares of Restricted Stock shall have the right to exercise fullvoting rights with respect to those Shares during the Period of Restriction. During the Period of Restriction, Participants holding Shares ofRestricted Stock shall be credited with any cash dividends paid with respect to such Shares while they are so held, unless determined otherwise bythe Committee and set forth in the Award Agreement. In the Committee’s discretion, the Period of Restriction that is applicable to the RestrictedStock may also apply to any such dividends if the Award Agreement so provides. Except as set forth in the Award Agreement, in the event of(A) any adjustment as provided in Section 4(c), or (B) any shares or securities are received as a dividend, or an extraordinary dividend is paid incash, on Shares of Restricted Stock, any new or additional Shares or securities or any extraordinary dividends paid in cash received by a recipient of Restricted Stock shall be subject to the same terms and conditions, including the Period of Restriction, as relate tothe original Shares of Restricted Stock. (ii) Restricted Stock Units. A Participant receiving Restricted Stock Units shall have the rights of a stockholder only as to Shares, ifany, actually issued to such Participant upon expiration of the Period of Restriction and satisfaction or achievement of the terms and conditions ofthe Award, and in accordance with the provisions of the Plan and the applicable Award Agreement, and not with respect to Shares to which suchAward relates but which are not actually issued to such Participant. (h) Termination of Employment or Service. Except as otherwise provided in this Section 8(h), during the Period of Restriction, any RestrictedStock Units and/or Shares of Restricted Stock held by a Participant shall be forfeited and revert to the Company (or, if Shares of Restricted Stock were sold tothe Participant, the Participant shall be required to resell such Shares to the Company at cost) upon the Participant’s Termination of Service or the failure tomeet or satisfy any applicable performance goals or other terms, conditions and restrictions to the extent set forth in the applicable Award Agreement. Eachapplicable Award Agreement shall set forth the extent to which, if any, the Participant shall have the right to retain Restricted Stock Units and/or Shares ofRestricted Stock, then subject to the Period of Restriction, following such Participant’s Termination of Service. Such provisions shall be determined in thesole discretion of the Committee, shall be included in the applicable Award Agreement, need not be uniform among all such Awards issued pursuant to thePlan, and may reflect distinctions based on the reasons for, or circumstances of, such Termination of Service. 9. Other Stock-Based Awards. (a) Other Stock-Based Awards. The Committee may grant types of equity-based or equity-related Awards not otherwise described by the terms ofthe Plan (including the grant or offer for sale of unrestricted Shares), in such amounts and subject to such terms and conditions, as the Committee shalldetermine. Such Other Stock-Based Awards may involve the transfer of actual Shares to Participants, or payment in cash or otherwise of amounts based on thevalue of Shares. The terms and conditions of such Awards shall be consistent with the Plan and set forth in the Award Agreement and need not be uniformamong all such Awards or all Participants receiving such Awards. (b) Value of Other Stock-Based Awards. Each Other Stock-Based Award shall be expressed in terms of Shares or units based on Shares, asdetermined by the Committee. The Committee may establish performance goals in its discretion, and any such performance goals shall be set forth in theapplicable Award Agreement. If the Committee exercises its discretion to establish performance goals, the number and/or value of Other Stock-Based Awardsthat will be paid out to the Participant will depend on the extent to which such performance goals are met. (c) Payment of Other Stock-Based Awards. Payment, if any, with respect to an Other Stock-Based Award shall be made in accordance with theterms of the Award, as set forth in the Award Agreement, in cash, Shares or a combination of cash and Shares, as the Committee determines. (d) Rights and Obligations as a Stockholder. A Participant receiving an Other Stock- Based Award shall have the rights of a stockholder only asto Shares, if any, actually issued to such Participant upon satisfaction or achievement of the terms and conditions of the Award, and in accordance with theprovisions of the Plan and the applicable Award Agreement, and not with respect to Shares to which such Award relates but which are not actually issued tosuch Participant. (e) Termination of Service. The Committee shall determine the extent to which the Participant shall have the right, if any, to receive paymentswith respect to an Other Stock-Based Award following the Participant’s Termination of Service. Such provisions shall be determined in the sole discretion ofthe Committee, such provisions may be included in the applicable Award Agreement, but need not be uniform among all Other Stock-Based Awards issuedpursuant to the Plan, and may reflect distinctions based on the reasons for Termination of Service. 10. Dividend Equivalents. Unless otherwise provided by the Committee, no adjustment shall be made in the Shares issuable or taken intoaccount under Awards on account of cash dividends that may be paid or other rights that may be issued to the holders of Shares prior to issuance of suchShares under such Award. The Committee may grant Dividend Equivalents based on the dividends declared on Shares that are subject to any Award,including any Award the payment or settlement of which is deferred pursuant to Section 20(d). Any Award of Dividend Equivalents may be credited as of thedividend payment dates, during the period between the Grant Date of the Award and the date the Award becomes payable or terminates or expires, asdetermined by the Committee. Dividend Equivalents may be subject to any limitations and/or restrictions determined by the Committee. DividendEquivalents shall be converted to cash or additional Shares by such formula and at such time, and shall be paid at such times, as may be determined by theCommittee. 11. Cash-Based Awards. (a) Grant of Cash-Based Awards. Subject to the terms of the Plan, Cash-Based Awards may be granted to Participants in such amounts and uponsuch terms, and at any time and from time to time, as shall be determined by the Committee, in accordance with the Plan. A Cash-Based Award entitles theParticipant who receives such Award to receive a payment in cash upon the attainment of applicable performance goals for the applicable performanceperiod, and/or satisfaction of other terms and conditions, in each case determined by the Committee, and which shall be set forth in the Award Agreement. The terms and conditions of such Awards shall be consistent with the Plan and set forth in the Award Agreement and need not be uniform among all suchAwards or all Participants receiving such Awards. (b) Earning and Payment of Cash-Based Awards. Cash-Based Awards shall become earned, in whole or in part, based upon the attainment ofperformance goals specified by the Committee and/or the occurrence of any event or events and/or satisfaction of such terms and conditions, including aChange of Control, as the Committee shall determine, either at or after the Grant Date. The Committee shall determine the extent to which any applicableperformance goals and/or other terms and conditions of a Cash-Based Award are attained or not attained following conclusion of the applicable performanceperiod. The Committee may, in its discretion, waive any such performance goals and/or other terms and conditions relating to any such Award, subject toSection 12, if applicable. Payment of earned Cash-Based Awards shall be as determined by the Committee and set forth in the Award Agreement. (c) Termination of Employment or Service. Each Award Agreement shall set forth the extent to which the Participant shall have the right, if any,to retain Cash-Based Award following such Participant’s Termination of Service. Such provisions shall be determined in the sole discretion of theCommittee, shall be included in the applicable Award Agreement, need not be uniform among all such Awards issued pursuant to the Plan, and may reflectdistinctions based on the reasons for Termination of Service. 12. Transferability Of Awards; Beneficiary Designation. (a) Transferability of Incentive Stock Options. No ISO or Tandem SAR granted in connection with an ISO may be sold, transferred, pledged,assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution or in accordance with Section 12(c). Further, allISOs and Tandem SARs granted in connection with ISOs granted to a Participant shall be exercisable during his or her lifetime only by such Participant. (b) All Other Awards. Except as otherwise provided in Section 8(e) or Section 12(c) or a Participant’s Award Agreement or otherwise determinedat any time by the Committee, no Award granted under the Plan may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, otherthan by will or by the laws of descent and distribution; provided that the Committee may permit further transferability, on a general or a specific basis, andmay impose conditions and limitations on any permitted transferability, subject to Section 12(a) and any applicable Period of Restriction; provided further,however, that no Award may be transferred for value or other consideration without first obtaining approval thereof by the Board. Further, except asotherwise provided in a Participant’s Award Agreement or otherwise determined at any time by the Committee, or unless the Committee decides to permitfurther transferability, subject to Section 12(a) and any applicable Period of Restriction, all Awards granted to a Participant under the Plan, and all rights withrespect to such Awards, shall be exercisable or available during his or her lifetime only by or to such Participant. With respect to those Awards, if any, that arepermitted to be transferred to another individual, references in the Plan to exercise or payment related to such Awards by or to the Participant shall be deemedto include, as determined by the Committee, the Participant’s permitted transferee. In the event any Award is exercised by or otherwise paid to the executors,administrators, heirs or distributees of the estate of a deceased Participant, or such a Participant’s beneficiary, or the transferee of an Award, in any such case,pursuant to the terms and conditions of the Plan and the applicable Agreement and in accordance with such terms and conditions as may be specified fromtime to time by the Committee, the Company shall be under no obligation to issue Shares thereunder unless and until the Company is reasonably satisfiedthat the person or persons exercising such Award, or to receive such payment, are the duly appointed legal representative of the deceased Participant’s estateor the proper legatees or distributees thereof or the named beneficiary of such Participant, or the valid transferee of such Award, as applicable. Any purportedassignment, transfer or encumbrance of an Award that does not comply with this Section 12(b) shall be void and unenforceable against the Company. (c) Beneficiary Designation. Each Participant may, from time to time, name any beneficiary or beneficiaries who shall be permitted to exercisehis or her Option or SAR or to whom any benefit under the Plan is to be paid in case of the Participant’s death before he or she fully exercises his or herOption or SAR or receives any or all of such benefit. Each such designation shall revoke all prior designations by the same Participant, shall be in a formprescribed by the Company, and will be effective only when filed by the Participant in writing with the Company during the Participant’s lifetime. In theabsence of any such beneficiary designation, a Participant’s unexercised Option or SAR, or amounts due but remaining unpaid to such Participant, at theParticipant’s death, shall be exercised or paid as designated by the Participant by will or by the laws of descent and distribution. 13. Rights of Participants. (a) Rights or Claims. No person shall have any rights or claims under the Plan except in accordance with the provisions of the Plan and anyapplicable Award Agreement. The liability of the Company and any Affiliate under the Plan is limited to the obligations expressly set forth in the Plan or anAward Agreement, and no term or provision of the Plan or an Award Agreement may be construed to impose any further or additional duties, obligations, orcosts on the Company or any Affiliate thereof or the Board or the Committee not expressly set forth in the Plan or an Award Agreement. The grant of anAward under the Plan shall not confer any rights upon the Participant holding such Award other than such terms, and subject to such conditions, as are specified in the Plan as being applicable to such type of Award, or to allAwards, or as are expressly set forth in the Award Agreement evidencing such Award. Without limiting the generality of the foregoing, neither the existenceof the Plan nor anything contained in the Plan or in any Award Agreement (except if such Award Agreement is an Individual Agreement and as explicitly setsforth therein) shall be deemed to: (i) Give any Eligible Grantee the right to be retained in the employment or service of the Company and/or an Affiliate, whether in anyparticular position, at any particular rate of compensation, for any particular period of time or otherwise; (ii) Restrict in any way the right of the Company and/or an Affiliate to terminate, change or modify any Eligible Grantee’s employment orservice at any time with or without cause; (iii) Confer on any Eligible Grantee any right of continued relationship with the Company and/or an Affiliate, or alter any relationshipbetween them, including any right of the Company or an Affiliate to terminate, change or modify its relationship with an Eligible Grantee; (iv) Constitute a contract of employment or service between the Company or any Affiliate and any Eligible Grantee, nor shall it constitutea right to remain in the employ or service of the Company or any Affiliate; (v) Give any Eligible Grantee the right to receive any bonus, whether payable in cash or in Shares, or in any combination thereof, fromthe Company and/or an Affiliate, nor be construed as limiting in any way the right of the Company and/or an Affiliate to determine, in its solediscretion, whether or not it shall pay any Eligible Grantee bonuses, and, if so paid, the amount thereof and the manner of such payment; or (vi) Give any Participant any rights whatsoever with respect to an Award except as specifically provided in the Plan and the AwardAgreement or in an applicable Individual Agreement. (b) Adoption of the Plan. The adoption of the Plan shall not be deemed to give any Eligible Grantee or any other individual any right to beselected as a Participant or to be granted an Award (except as contemplated in the Plan of Reorganization or ancillary documents related thereto), or, havingbeen so selected, to be selected to receive a future Award. (c) Vesting. Notwithstanding any other provision of the Plan, a Participant’s right or entitlement to exercise or otherwise vest in any Award notexercisable or vested at the Grant Date thereof shall only result from continued services as a Non-Employee Director or Consultant, or continuedemployment, as the case may be, with the Company or any Affiliate, or satisfaction of any other performance goals or other conditions or restrictionsapplicable, by its terms, to such Award, except, in each such case, as the Committee may, in its discretion, expressly determine otherwise (in an AwardAgreement or otherwise). (d) No Effects on Benefits; No Damages. Payments and other compensation received by a Participant under an Award are not part of suchParticipant’s normal or expected compensation or salary for any purpose, including calculating termination, indemnity, severance, resignation, redundancy,end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments under any laws, plans, contracts, policies,programs, arrangements or otherwise. Except as set forth in an Award Agreement or Individual Agreement, a Participant shall, by participating in the Plan, waive any and all rights to compensation or damages in consequence of Termination of Service of such Participant for any reason whatsoever,whether lawfully or otherwise, insofar as those rights arise or may arise from such Participant ceasing to have rights under the Plan as a result of suchTermination of Service, or from the loss or diminution in value of such rights or entitlements, including by reason of the operation of the terms of the Plan orthe provisions of any statute or law relating to taxation. No claim or entitlement to compensation or damages arises from the termination of the Plan ordiminution in value of any Award or Shares purchased or otherwise received under the Plan, in all cases, provided that the Company has complied with theterms of the Plan and the applicable Award Agreement. (e) One or More Types of Awards. A particular type of Award may be granted to a Participant either alone or in addition to other Awards underthe Plan. 14. Change of Control. Except as the Committee may otherwise specify with respect to particular Awards in the relevant Award Agreement, inthe case of and subject to the consummation of a Change of Control, the parties thereto may cause the assumption or continuation of Awards theretoforegranted by the successor entity, or the substitution of such Awards with new Awards of the successor entity or parent thereof, with appropriate adjustment asto the number and kind of shares and, if appropriate, the per share exercise prices, as such parties shall agree. Upon the effective time of the Change ofControl, the Plan and all outstanding Awards granted hereunder shall terminate. In the event of such termination, (i) the Company shall have the option (inits sole discretion) to make or provide for a cash payment to the Participants holding Options and Stock Appreciation Rights, in exchange for thecancellation thereof, in an amount equal to the difference between (A) the Change of Control Price multiplied by the number of shares of Stock subject tooutstanding Options and Stock Appreciation Rights (to the extent then exercisable at prices not in excess of the Change of Control Price) and (B) theaggregate exercise price of all such outstanding Options and Stock Appreciation Rights; or (ii) each Participant shall be permitted, within a specified periodof time prior to the consummation of the Change of Control as determined by the Committee, to exercise all outstanding Options and Stock AppreciationRights (to the extent then exercisable) held by such Participant. 15. Amendment and Termination. (a) Amendment and Termination of the Plan. The Board may, at any time and with or without prior notice, amend, alter, suspend or terminate thePlan, retroactively or otherwise, but no such amendment, alteration, suspension or termination of the Plan shall be made which would adversely affect therights of any Participant with respect to a previously granted Award without such Participant’s written consent, except any such amendment made to complywith applicable law, tax rules, stock exchange rules or accounting rules. In addition, no such amendment shall be made without the approval of theCompany’s stockholders to the extent such approval is required by any applicable law, tax rules, stock exchange rules or accounting rules (including asnecessary to comply with any rules or requirements of any securities exchange or inter-dealer quotation system on which the Shares may be listed or quoted). Except as provided in Section 4(c) or 14, without prior stockholder approval, in no event may the Committee exercise its discretion to reduce the exerciseprice of outstanding Stock Options or Stock Appreciation Rights or effect repricing through cancellation and re-grants or cancellation of Stock Options orStock Appreciation Rights in exchange for cash. (b) Amendment of Awards. Subject to the immediately following sentence, the Committee may unilaterally amend or alter the terms of anyAward theretofore granted, including any Award Agreement, retroactively or otherwise, but no such amendment shall be inconsistent with the terms andconditions of the Plan or adversely affect the rights of the Participant to whom such Award was granted with respect to such Award without his or her writtenconsent, except such an amendment made to cause the Plan or such Award to comply with applicable law, tax rules, stock exchange rules or accounting rules. (c) Individual Agreements. The provisions of any Individual Agreement that make express reference to the Plan or any Awards, or otherwise toequity or equity-based awards made by the Company or an Affiliate, shall prevail over the provisions of the Plan and the applicable Award Agreement in thecase of a conflict between such provisions and the provisions of the Plan and the applicable Award Agreement; provided that an Award Agreement mayspecifically provide that all or a portion of the provisions of the Individual Agreement will not prevail, in which case, to that extent, the Plan and AwardAgreement will apply in accordance with their terms. 16. Tax Withholding and Other Tax Matters. (a) Tax Withholding. The Company and/or any Affiliate are authorized to withhold from any Award granted or payment due under the Plan theamount of all Federal, state, local and non-United States taxes due in respect of such Award or payment and take any such other action as may be necessary orappropriate, as determined by the Committee, to satisfy all obligations for the payment of such taxes. No later than the date as of which an amount firstbecomes includible in the gross income or wages of a Participant for federal, state, local, or non- U.S. tax purposes with respect to any Award, such Participantshall pay to the Company, or make arrangements satisfactory to the Committee regarding the payment of, any federal, state, local or non-U.S. taxes or socialsecurity (or similar) contributions of any kind required by law to be withheld with respect to such amount. The obligations of the Company under the Planshall be conditional on such payment or satisfactory arrangements (as determined by the Committee in its discretion), and the Company and the Subsidiariesand Affiliates shall, to the extent permitted by law, have the right to deduct any such taxes from any payment otherwise due to such Participant, whether ornot under the Plan. (b) Withholding or Tendering Shares. Without limiting the generality of Section 16(a), subject to any applicable laws, a Participant may(unless disallowed by the Committee to the extent not provided in an Award Agreement) elect to satisfy or arrange to satisfy, in whole or in part, the taxobligations incident to an Award by: (i) electing to have the Company withhold Shares or other property otherwise deliverable to such Participant pursuantto his or her Award (provided, however, that the amount of any Shares so withheld shall not exceed the amount necessary to satisfy required Federal, state,local and non-United States withholding obligations using the minimum statutory withholding rates for Federal, state, local and/or non- U.S. tax purposes,including payroll taxes, that are applicable to supplemental taxable income) and/or (ii) tendering to the Company Shares already owned by such Participant(or by such Participant and his or her spouse jointly) and which meet any such requirements as the Committee may determine are necessary in order to avoidan accounting earnings charge on account of the use of such Shares to satisfy such tax obligations), based, in each case, on the Fair Market Value of theCommon Stock on the payment date as determined by the Committee. All such elections shall be irrevocable, made in writing, signed by the Participant, andshall be subject to any restrictions or limitations that the Committee, in its sole discretion, deems appropriate (to the extent not explicitly permitted by anAward Agreement). The Committee may establish such procedures as it deems appropriate, including making irrevocable elections, for settlement ofwithholding obligations with Common Stock. (c) Restrictions. The satisfaction of tax obligations pursuant to this Section 16 shall be subject to such restrictions as the Committee may impose,including any restrictions required by applicable law or the rules and regulations of the SEC, and shall be construed consistent with an intent to comply withany such applicable laws, rule and regulations. (d) Special ISO Obligations. The Committee may require a Participant to give prompt written notice to the Company concerning anydisposition of Shares received upon the exercise of an ISO within: (i) two (2) years from the Grant Date such ISO to such Participant or (ii) one (1) year fromthe transfer of such Shares to such Participant or (iii) such other period as the Committee may from time to time determine. The Committee may direct that aParticipant with respect to an ISO undertake in the applicable Award Agreement to give such written notice described in the preceding sentence, at such timeand containing such information as the Committee may prescribe, and/or that the certificates evidencing Shares acquired by exercise of an ISO refer to suchrequirement to give such notice. (e) Section 83(b) Election. If a Participant makes an election under Section 83(b) of the Code to be taxed with respect to an Award as of the dateof transfer of Shares rather than as of the date or dates upon which the Participant would otherwise be taxable under Section 83(a) of the Code, suchParticipant shall deliver a copy of such election to the Company upon or prior to the filing such election with the Internal Revenue Service. Neither theCompany nor any Affiliate shall have any liability or responsibility relating to or arising out of the filing or not filing of any such election or any defects inits construction. (f) No Guarantee of Favorable Tax Treatment. Although the Company intends to administer the Plan so that Awards will be exempt from, or willcomply with, the requirements of Code Section 409A, the Company does not warrant that any Award under the Plan will qualify for favorable tax treatmentunder Code Section 409A or any other provision of federal, state, local, or non-United States law. The Company shall not be liable to any Participant or anyother person or entity for any tax, interest, or penalties the Participant might owe as a result of the grant, holding, vesting, exercise, or payment of any Awardunder the Plan. (g) Nonqualified Deferred Compensation. (i) It is the intention of the Company that no Award shall be deferred compensation subject to Code Section 409A unless and to theextent that the Committee specifically determines otherwise as provided in paragraph (ii) of this Section 16(g), and the Plan and the terms andconditions of all Awards shall be interpreted and administered accordingly. (ii) The terms and conditions governing any Awards that the Committee determines will be subject to Section 409A of the Code,including any rules for payment or elective or mandatory deferral of the payment or delivery of Shares or cash pursuant thereto, and anyrules regarding treatment of such Awards in the event of a Change of Control, shall be set forth in the applicable Award Agreement and shall beintended to comply in all respects with Section 409A of the Code, and the Plan and the terms and conditions of such Awards shall be interpreted andadministered accordingly. (iii) The Committee shall not extend the period to exercise an Option or Stock Appreciation Right to the extent that such extension wouldcause the Option or Stock Appreciation Right to become subject to Code Section 409A. (iv) No Dividend Equivalents shall relate to Shares underlying an Option or SAR unless such Dividend Equivalent rights are explicitly setforth as a separate arrangement and do not cause any such Option or SAR to be subject to Code Section 409A. (v) If for any reason, such as imprecision in drafting, any provision of the Plan and/or any Award Agreement does not accurately reflect its intended establishment of an exemption from (or compliance with) CodeSection 409A, as demonstrated by consistent interpretations or other evidence of intent, such provision shall be considered ambiguous as to itsexemption from (or compliance with) Code Section 409A and shall be interpreted by the Company in a manner consistent with such intent, asdetermined in the discretion of the Company. If, notwithstanding the foregoing provisions of this Section 16(g)(v), any provision of the Plan or anyAward Agreement would cause a Participant to incur any additional tax or interest under Code Section 409A, the Company shall reform suchprovision in a manner intended to avoid the incurrence by such Participant of any such additional tax or interest; provided that the Company shallmaintain, to the extent reasonably practicable, the original intent and economic benefit to the Participant of the applicable provision withoutviolating the provisions of Code Section 409A. (vi) Notwithstanding the provisions of Section 4(c) to the contrary, (1) any adjustments made pursuant to Section 4(c) to Awards that areconsidered “deferred compensation” subject to Section 409A of the Code shall be made in compliance with the requirements of Section 409A of theCode; (2) any adjustments made pursuant to Section 4(c) to Awards that are not considered “deferred compensation” subject to Section 409A of theCode shall be made in such a manner as to ensure that after such adjustment, the Awards either (A) continue not to be subject to Section 409A of theCode or (B) comply with the requirements of Section 409A of the Code; and (3) in any event, neither the Committee nor the Board shall have anyauthority to make any adjustments, substitutions or changes pursuant to Section 4(c) to the extent the existence of such authority would cause anAward that is not intended to be subject to Section 409A of the Code at the Grant Date thereof to be subject to Section 409A of the Code. (vii) If any Award is subject to Section 409A of the Code, the provisions of Section 14 shall be applicable to such Award only to the extentspecifically provided in the Award Agreement and permitted pursuant to paragraph (ii) of this Section 16(g). (viii) Notwithstanding any other provision in the Plan, any Award Agreement or any other written document establishing the terms andconditions of an Award, if any Participant is a “specified employee,” within the meaning of Section 409A of the Code, as of the date of his or her“separation from service” (as defined under Section 409A of the Code), then, to the extent required by Treasury Regulation Section 1.409A-3(i)(2) (or any successor provision), any payment made to such Participant on account of his or her separation from service shall not be made before adate that is six months after the date of his or her separation from service. The Committee may elect any of the methods of applying this rule that arepermitted under Treasury Regulation Section 1.409A-3(i)(2)(ii) (or any successor provision). 17. Limits Of Liability; Indemnification. (a) Limits of Liability. Any liability of the Company or an Affiliate to any Participant with respect to any Award shall be based solely uponcontractual obligations created by the Plan and the Award Agreement. (i) None of the Company, any Affiliate, any member of the Board or the Committee or any other person participating in anydetermination of any question under the Plan, or in the interpretation, administration or application of the Plan, shall have any liability, in theabsence of bad faith, to any party for any action taken or not taken in connection with the Plan, except as may expressly be provided by statute. (ii) Each member of the Committee, while serving as such, shall be considered to be acting in his or her capacity as a director of theCompany. Members of the Board of Directors and members of the Committee acting under the Plan shall be fully protected in relying in good faithupon the advice of counsel and shall incur no liability except for gross negligence or willful misconduct in the performance of their duties. (iii) The Company shall not be liable to a Participant or any other person as to: (i) the non-issuance of Shares as to which the Companyhas been unable to obtain (after use of commercially reasonable efforts) from any regulatory body having relevant jurisdiction the authorityreasonably deemed by the Committee or the Company’s counsel to be necessary to the lawful issuance and sale of any Shares hereunder, (ii) any taxconsequence expected, but not realized, by any Participant or other person due to the receipt, exercise or settlement of any Option or other Award, or(iii) any tax, interest, or penalties any Participant or other person might owe as a result of the grant, holding, vesting, exercise, or payment of anyAward under the Plan. (b) Indemnification. Subject to the requirements of Delaware law, each individual who is or shall have been a member of the Committee or of theBoard, or an officer of the Company to whom authority was delegated in accordance with Section 3, shall be indemnified and held harmless by the Companyagainst and from any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by him or her in connection with or resulting from anyclaim, action, suit, or proceeding to which he or she may be a party or in which he or she may be involved by reason of any action taken or failure to act underthe Plan and against and from any and all amounts paid by him or her in settlement thereof, with the Company’s approval, or paid by him or her insatisfaction of any judgment in any such action, suit, or proceeding against him or her, provided he or she shall give the Company an opportunity, at its ownexpense, to handle and defend the same before he or she undertakes to handle and defend it on his or her own behalf, unless such loss, cost, liability, orexpense is a result of the individual’s own willful misconduct or except as provided by statute. The foregoing right of indemnification shall not be exclusiveof any other rights of indemnification to which such individual may be entitled under the Company’s Certificate of Incorporation or By-Laws, as a matter oflaw, or otherwise, or any power that the Company may have to indemnify or hold harmless such individual. 18. Successors. All obligations of the Company under the Plan with respect to Awards granted hereunder shall be binding on any successor to theCompany, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially allof the business and/or assets of the Company. 19. Forfeiture / Clawback. The Committee may, in its discretion, specify in an Award Agreement or a policy that is incorporated into an AwardAgreement by reference, that a Participant’s rights, payments, and benefits with respect to an Award shall be subject to reduction, cancellation, forfeiture,rescission or recoupment upon the occurrence of certain specified events, in addition to any otherwise applicable vesting, restrictions or performanceconditions of an Award. Such events may include, but shall not be limited to, Termination of Service with or without cause, breach of noncompetition,confidentiality, or other restrictive covenants that may apply to the Participant, or restatement of the Company’s financial statements to reflect adverse resultsfrom those previously released financial statements, as a consequence of errors, omissions, fraud, or misconduct. 20. Miscellaneous. (a) Drafting Context; Captions. Except where otherwise indicated by the context, any masculine term used herein also shall include thefeminine; the plural shall include the singular and the singular shall include the plural. The words “Section” and “paragraph” herein shall refer to provisions of the Plan, unless expressly indicated otherwise. Thewords “include,” “includes,” and “including” herein shall be deemed to be followed by “without limitation” whether or not they are in fact followed by suchwords or words of similar import, unless the context otherwise requires. The headings and captions appearing herein are inserted only as a matter ofconvenience. They do not define, limit, construe, or describe the scope or intent of the provisions of the Plan. (b) Severability. In the event any provision of the Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affectthe remaining parts of the Plan, and the Plan shall be construed and enforced as if the illegal or invalid provision had not been included. (c) Exercise and Payment of Awards. An Award shall be deemed exercised or claimed when the Secretary of the Company or any other Companyofficial or other person designated by the Committee for such purpose receives appropriate Notice from a Participant, in form acceptable to the Committee,together with payment of the applicable Option Price, Grant Price or other purchase price, if any, in compliance with Section 16, in accordance with the Planand such Participant’s Award Agreement. (d) Deferrals. Subject to applicable law, the Committee may from time to time establish procedures pursuant to which a Participant may defer onan elective basis receipt of all or a portion of the cash or Shares subject to an Award on such terms and conditions as the Committee shall determine,including those of any deferred compensation plan of the Company or any Affiliate specified by the Committee for such purpose. (e) No Effect on Other Plans. Neither the adoption of the Plan nor anything contained herein shall affect any other compensation or incentiveplans or arrangements of the Company or any Affiliate, or prevent or limit the right of the Company or any Affiliate to establish any other forms of incentivesor compensation for their directors, officers, eligible employees or consultants or grant or assume options or other rights otherwise than under the Plan. (f) Requirements of Law; Limitations on Awards. (i) The granting of Awards and the issuance of Shares under the Plan shall be subject to all applicable laws, rules, and regulations, and tosuch approvals by any governmental agencies or national securities exchanges as may be required. (ii) If at any time the Committee shall determine, in its discretion, that the listing, registration and/or qualification of Shares upon anysecurities exchange or under any state, Federal or non-United States law, or the consent or approval of any governmental regulatory body, isnecessary or desirable as a condition of, or in connection with, the sale or purchase of Shares hereunder, the Company shall have no obligation toallow the grant, exercise or payment of any Award, or to issue or deliver evidence of title for Shares issued under the Plan, in whole or in part, unlessand until such listing, registration, qualification, consent and/or approval shall have been effected or obtained, or otherwise provided for, free of anyconditions not acceptable to the Committee. (iii) If at any time counsel to the Company shall be of the opinion that any sale or delivery of Shares pursuant to an Award is or may be inthe circumstances unlawful or result in the imposition of excise taxes on the Company or any Affiliate under the statutes, rules or regulations of anyapplicable jurisdiction, the Company shall have no obligation to make such sale or delivery, or to make any application or to effect or to maintainany qualification or registration under the Securities Act, or otherwise with respect to Shares or Awards and the right to exercise or payment of any Option or Award shallbe suspended until, in the opinion of such counsel, such sale or delivery shall be lawful or will not result in the imposition of excise taxes on theCompany or any Affiliate. (iv) Upon termination of any period of suspension under this Section 20(f), any Award affected by such suspension which shall not thenhave expired or terminated shall be reinstated as to all Shares available before such suspension and as to the Shares which would otherwise havebecome available during the period of such suspension, but no suspension shall extend the term of any Award. (v) The Committee may require each person receiving Shares in connection with any Award under the Plan to represent and agree withthe Company in writing that such person is acquiring such Shares for investment without a view to the distribution thereof, and/or provide suchother reasonable representations and agreements as the Committee may prescribe. The Committee, in its absolute discretion, may impose suchrestrictions on the ownership and transferability of the Shares purchasable or otherwise receivable by any person under any Award as it deemsappropriate. Any such restrictions shall be set forth in the applicable Award Agreement at the grant date, and the certificates evidencing such sharesmay include any legend that the Committee deems appropriate to reflect any such restrictions. (vi) An Award and any Shares received upon the exercise or payment of an Award shall be subject to such other transfer and/or ownershiprestrictions and/or legending requirements as the Committee may establish in its discretion and may be referred to on the certificates evidencingsuch Shares, including restrictions under applicable Federal securities laws, under the requirements of any stock exchange or market upon whichsuch Shares are then listed and/or traded, and under any blue sky or state securities laws applicable to such Shares. (g) Participants Deemed to Accept Plan. By accepting any benefit under the Plan, each Participant and each person claiming under or throughany such Participant shall be conclusively deemed to have indicated their acceptance and ratification of, and consent to, all of the terms and conditions of thePlan and any action taken under the Plan by the Board, the Committee or the Company, in any case in accordance with the terms and conditions of the Plan. (h) Governing Law. Except as to matters concerning the issuance of Shares or other matters of corporate governance, which shall be determined,and related Plan and Award provisions, which shall be construed, under the laws of the State of Delaware, the Plan and each Award Agreement shall begoverned by and construed in accordance with the laws of the State of Delaware, excluding any conflicts or choice of law rule or principle that mightotherwise refer construction or interpretation of the Plan to the substantive law of another jurisdiction. Unless otherwise provided in the Award Agreement,Participants are deemed to submit to the exclusive jurisdiction and venue of the federal or state courts of the State of Delaware, to resolve any and all issuesthat may arise out of or relate to the Plan or any related Award Agreement. (i) Plan Unfunded. The Plan shall be an unfunded plan for incentive compensation. The Company shall not be required to establish any specialor separate fund or to make any other segregation of assets to assure the issuance of Shares or the payment of cash upon exercise or payment of any Award. Proceeds from the sale of Shares pursuant to Options or other Awards granted under the Plan shall constitute general funds of the Company. With respect toany payments not yet made to any person pursuant to an Award, nothing contained in the Plan or any Award Agreement shall give such person any rights thatare greater than those of a general creditor of the Company or any Affiliate, and a Participant’s rights under the Plan at all times constitute an unsecured claim against the general assets of the Company for the payment any amounts as they come dueunder the Plan. Neither the Participant nor the Participant’s duly- authorized transferee or beneficiaries shall have any claim against or rights in any specificassets, Shares, or other funds of the Company or any Affiliate. (j) Administration Costs. The Company shall bear all costs and expenses incurred in administering the Plan, including expenses of issuingShares pursuant to any Options or other Awards granted hereunder. (k) Uncertificated Shares. To the extent that the Plan provides for issuance of certificates to reflect the transfer of Shares, the transfer of suchShares may nevertheless be effected on a noncertificated basis, to the extent not prohibited by applicable law or the rules of any stock exchange. (l) No Fractional Shares. An Option or other Award shall not be exercisable with respect to a fractional Share or the lesser of fifty (50) shares orthe full number of Shares then subject to the Option or other Award. No fractional Shares shall be issued upon the exercise or payment of an Option or otherAward. (m) Affiliate Eligible Grantees. In the case of a grant of an Award to any Eligible Grantee of an Affiliate, the Company may, if the Committee sodirects, issue or transfer the Shares, if any, covered by the Award to such Affiliate, for such lawful consideration as the Committee may specify, upon thecondition or understanding that such Affiliate will transfer such Shares to such Eligible Grantee in accordance with the terms and conditions of such Awardand those of the Plan. The Committee may also adopt procedures regarding treatment of any Shares so transferred to an Affiliate that are subsequentlyforfeited or canceled. (n) Data Protection. By participating in the Plan, each Participant consents to the collection, processing, transmission and storage by theCompany, in any form whatsoever, of any data of a professional or personal nature which is necessary for the purposes of administering the Plan. TheCompany may share such information with any Affiliate, any trustee, its registrars, brokers, other third-party administrator or any person who obtains controlof the Company or any Affiliate or any division respectively thereof. (o) Right of Offset. To the extent permitted by applicable law, the Company and the Affiliates shall have the right to offset against theobligations to make payment or issue any Shares to any Participant under the Plan, any outstanding amounts (including travel and entertainment advancebalances, loans, tax withholding amounts paid by the employer or amounts repayable to the Company or any Affiliate pursuant to tax equalization, housing,automobile or other employee programs) such Participant then owes to the Company or any Affiliate and any amounts the Committee otherwise reasonablydeems appropriate pursuant to any tax equalization policy or agreement, in each case to the extent permitted by applicable law and not in violation of CodeSection 409A. (p) Participants Based Outside of the United States. The Committee may grant awards to Eligible Grantees who are non-United States nationals,or who reside outside the United States or who are not compensated from a payroll maintained in the United States or who are otherwise subject to (or couldcause the Company to be subject to) legal or regulatory provisions of countries or jurisdictions outside the United States, on such terms and conditionsdifferent from those specified in the Plan as may, in the judgment of the Committee, be necessary or desirable to foster and promote achievement of thepurposes of the Plan and comply with such legal or regulatory provisions, and, in furtherance of such purposes, the Committee may make or establish suchmodifications, amendments, procedures or subplans as may be necessary or advisable to comply with such legal or regulatory requirements (including to maximize tax efficiency). * * * Exhibit 10.19 [***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCHOMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATEDUNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. TERMINATION AGREEMENT This Termination Agreement (“Termination Agreement”) is made and entered into as of December 29, 2014 (the “Termination Agreement Date”)by and between AMAG PHARMACEUTICALS, INC., a Delaware corporation with its principal place of business at 1100 Winter Street, Waltham, MA02451, USA (“AMAG”) and TAKEDA PHARMACEUTICAL COMPANY LIMITED, a company organized under the laws of Japan, with its principal placeof business at 1-1, Doshomachi 4-chome, Chuo-ku, Osaka, 540-8645, Japan (“Takeda”). AMAG and Takeda are sometimes referred to herein individually asa “Party” and collectively as the “Parties”. RECITALS WHEREAS, AMAG and Takeda are parties to that certain License, Development and Commercialization Agreement, dated as of March 31, 2010, asamended by that certain Amendment to the License, Development and Commercialization Agreement, dated June 22, 2012 (as amended, the “Agreement”),pursuant to which AMAG granted Takeda an exclusive license to develop and commercialize AMAG’s proprietary product ferumoxytol in Europe, Canadaand other countries; WHEREAS, pursuant to its rights under the Agreement, Takeda has been commercializing ferumoxytol in Canada, the European Union andSwitzerland; WHEREAS, the Parties have agreed to terminate the Agreement and that Takeda will transition the commercialization of the Product to AMAG,which termination will be effective in a particular territory upon effectiveness of the transfer of the marketing authorization for such territory to AMAG; WHEREAS, the Parties anticipate that AMAG will require certain services from Takeda, which services Takeda has agreed to conduct, for a periodof time following the termination of each territory to facilitate the transition of the Product to AMAG; and NOW, THEREFORE, in consideration of the foregoing premises, the mutual promises and covenants of the Parties contained herein and other goodand valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound, agree as follows: 1. DEFINITIONS 1.1 Capitalized terms used but not otherwise defined in this Termination Agreement have the meanings provided in the Agreement. 1 [***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCHOMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATEDUNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. 1.2 “CHMP” means the EMA Committee for Medicinal Products for Human Use. 1.3 “CHMP Opinion” means a decision by the CHMP on [***]. 1.4 “EMA” means the European Medicines Agency. 1.5 “EU” means the European Union as constituted as of the Termination Agreement Date. 1.6 “PRAC” means the Pharmacovigilance Risk Assessment Committee of the EMA. 1.7 “Terminated Territory” means one of the following: (a) Canada, (b) Switzerland, (c) those countries in the Licensed Territory under theregulatory jurisdiction of the European Commission, and (d) all countries in the Licensed Territory not included in the preceding clauses(a)-(c) (the “Non-Commercial Territory”). 1.8 “Territory Termination Effective Date” means, with respect to a Terminated Territory, the earlier of the following: (i) the date on whichTakeda’s Withdrawal of the marketing authorization for such Terminated Territory is effective pursuant to Section 5.6 or Exhibit A or(ii) the date on which the transfer of the marketing authorization for such Terminated Territory from Takeda or its Affiliate to AMAG, itsAffiliate or its designee is effective, except that the Territory Termination Effective Date for the Non-Commercial Territory is theTermination Agreement Date. 1.9 “Withdraw”, with a correlative meaning for “Withdrawal” means to permanently revoke the marketing authorization for the Product inthe Terminated Territory. 2. TERMINATION AND MARKETING AUTHORIZATION TRANSFER 2.1 The Parties hereby agree to terminate the Agreement, which termination will be effective with respect to each Terminated Territory upon theTerritory Termination Effective Date for such Terminated Territory. The Agreement will be terminated in its entirety upon the thirdTerritory Termination Effective Date (“Termination Date”). 2.2 As of the Termination Agreement Date, Takeda’s right to terminate the Agreement under Section 13.2(a) of the Agreement on [***] priorwritten notice for a good faith determination that the continued Development or Commercialization of Product is not in the best interest ofpatient welfare is terminated; provided, however, that notwithstanding any other provision of this Termination Agreement, Takeda retainsall rights under the Agreement, prior to 2 [***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCHOMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATEDUNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. the Territory Termination Effective Date for the applicable Terminated Territory, to take any actions it deems reasonably necessary orappropriate to avoid any human health or safety problems in such Terminated Territory. 2.3 From and after the Termination Agreement Date, each Party shall cooperate with the other Party in good faith to take all actions reasonablynecessary for AMAG to assume, as soon as reasonably practicable after the applicable Territory Termination Effective Date, all operationspertaining to the Product in each Terminated Territory; provided, however that nothing in this paragraph will be interpreted as requiringTakeda to take any actions or provide any support beyond the scope of its obligations under this Termination Agreement, including theTransition Services and other pre-termination activities set forth in Exhibit A. 2.4 Upon each Territory Termination Effective Date, all rights and licenses granted under the Agreement to Takeda for the applicableTerminated Territory will terminate, and Takeda shall cease all Development and Commercialization activities with respect to the Productin such Terminated Territory, including all investigator-sponsored research, and shall have no further obligations thereafter to Develop andCommercialize the Product in such Terminated Territory, except for the Transition Services set forth in Exhibit A. 2.5 The effects of termination set forth in Sections 13.2(b) and 13.6 of the Agreement are superseded by the terms of this TerminationAgreement. 2.6 Takeda shall not, prior to the termination of the Agreement in its entirety, take any action that could reasonably be expected to have amaterial adverse impact on the further Development and Commercialization of the Product in or outside the Licensed Territory; provided,however, that Takeda shall have the right to take any actions it deems reasonably necessary or appropriate to avoid any human health orsafety problems. For the avoidance of doubt, the preceding sentence will not be interpreted as restricting Takeda’s right to exerciseCommercially Reasonable Efforts with respect to Development and Commercialization of the Product in a Terminated Territory prior to theapplicable Territory Termination Effective Date. 3. TRANSFERS AND ASSIGNMENTS 3.1 Regulatory Matters. Promptly after the Termination Agreement Date, in accordance with the timelines set forth in Exhibit A, Takeda shall,in consultation with AMAG and as further described below, prepare all Regulatory Materials that are necessary to be filed with aRegulatory Authority to transfer (or Withdraw pursuant to Section 5.6 or Exhibit A) the marketing authorization in each TerminatedTerritory to AMAG. In connection with such activities, Takeda shall provide AMAG with draft submissions of Regulatory Materials,sufficiently in 3 [***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCHOMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATEDUNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. advance of filing to allow AMAG to review and comment on such drafts, and AMAG shall respond in a timely manner, and shall consider ingood faith all reasonable comments of AMAG prior to filing the applicable Regulatory Materials. Takeda shall promptly provide AMAGwith copies of all communications received from a Regulatory Authority in connection with such transfers, and will notify AMAG withinone (1) business day of receipt of approval and effectiveness of the transfer or Withdrawal of each marketing authorization. Takedaundertakes not to provide any response to communications from a Regulatory Authority in relation to transfer or Withdrawal of eachmarketing authorization without first consulting with AMAG for AMAG’s comments concerning such response. Each Party shall bear allexpenses it incurs to conduct its activities under this Section 3.1. a. EMA. AMAG shall provide Takeda with all information required and requested by Takeda to transfer the European Commission marketingauthorization to AMAG, including information regarding AMAG’s EU legal entity, Qualified Person for Pharmacovigilance,pharmacovigilance system, named person for scientific services, site of manufacture of Product for import and batch release in the EU andQualified Person for batch release of Product. Takeda shall notify the EMA product team leader prior to transfer, shall prepare and file withthe EMA the Letters of Transfer and shall file the Marketing Authorization Transfer Application with EMA. b. Canada. AMAG shall provide Takeda with all information required and requested by Takeda to transfer the Health Canada marketingauthorization to AMAG, including information regarding AMAG’s Canadian legal entity, establishment license, pharmacovigilance systemand letter of consent. Takeda shall prepare and file with Health Canada the Administrative New Drug Submission for the Product. c. Switzerland. AMAG shall provide Takeda with all information required and requested by Takeda to transfer the SwissMedic marketingauthorization to AMAG, including information regarding AMAG’s Swiss legal entity, wholesaler license, Qualified Person, qualitymanagement system, medical information, Qualified Person for Pharmacovigilance, pharmacovigilance system and legally signedstatements of transferee. Takeda shall prepare the application for marketing authorization transfer for filing by AMAG. d. CHMP Opinion. Notwithstanding anything in this Termination Agreement to the contrary, AMAG shall be obligated to conduct allreasonably necessary activities in connection with the transfer of the marketing authorization for the Product for the EU as providedhereunder, but shall not be obligated to incur any material third party costs unless and until the Parties receive the CHMP Opinion [***]. 4 [***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCHOMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATEDUNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. 3.2 New Product Marks and Intellectual Property Licenses. a. Effective upon each Territory Termination Date: (a) Takeda hereby assigns to AMAG all of Takeda’s right, title and interest in the NewProduct Marks for the applicable Terminated Territory, (b) Takeda hereby assigns to AMAG all of Takeda’s right, title and interest in allTakeda Know-How that is clinical data related to the Product, if any, and (c) Takeda hereby grants to AMAG an exclusive, irrevocable,transferable, royalty-free license, with the right to grant multiple tiers of sublicenses, under the Takeda Technology existing and actuallyused and applied as of the Territory Termination Effective Date, if any, to Develop, make, have made, use, sell, offer for sale, have sold,import and otherwise Commercialize the Product in the applicable Terminated Territory. b. AMAG hereby grants to Takeda a non-exclusive license under the AMAG Technology solely to the extent necessary for Takeda tocomplete the Transition Services and any other obligation for which it is responsible under this Termination Agreement or the Agreement. 3.3 Product Transfer. As soon as reasonably practicable, and in any event within [***], after each Territory Termination Effective Date,Takeda shall provide to AMAG or its designee and assign to AMAG, as applicable, each of the following with respect to the applicableTerminated Territory, in each case to the extent Controlled by Takeda and related to the Product as of such Territory Termination EffectiveDate and permitted under any applicable Third Party contract and applicable Laws: a. all Regulatory Materials for such Terminated Territory, including material regulatory documentation, filings, submissions and approvals,including pricing and reimbursement approvals; b. all unlabeled vial form of Product inventory then in Takeda’s possession for such Terminated Territory unless AMAG requests that Takedadestroy such Product inventory; provided, however that AMAG will be responsible for the cost of transporting such Product inventory andsamples to AMAG’s facility (if requested by AMAG) and for any subsequent destruction thereof, to the extent not included in theTransition Services; c. all material marketing and commercial materials for the Product for such Terminated Territory; d. all material medical affairs materials for such Terminated Territory; e. all drug safety information collected and maintained by Takeda or its Affiliates (e.g., safety and clinical databases) for such TerminatedTerritory; 5 [***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCHOMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATEDUNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. f. all material documentation regarding distribution and prescribing patterns in the Terminated Territory (e.g., shipments by wholesaler,distributor, and top prescribers by country); g. all material documentation pertaining to the foregoing in clauses (a)-(f), in each case to the extent pertaining to the Product existing as ofthe Territory Termination Effective Date and reasonably necessary for the continued Development and Commercialization of the Product. The foregoing information, documents and materials, along with the clinical data assigned pursuant to Section 3.2(a) (“Assigned Information”) will,upon assignment to AMAG, be deemed AMAG’s (and not Takeda’s) Confidential Information subject to the confidentiality provisions of theAgreement, and Takeda shall have the right to retain copies thereof for record retention purposes or to the extent required by applicable Laws.Notwithstanding the foregoing, any (i) personally identifiable information of the employees, agents, contractors or representatives of Takeda, itsAffiliates or their respective third party contractors or (ii) information related to the business operations of Takeda or its Takeda’s Affiliates, or(iii) information not specifically related to the Product contained in such Assigned Information shall continue to be the Confidential Information ofTakeda and will be subject to the confidentiality provisions of the Agreement. 3.4 Third Party Contracts. Upon AMAG’s written request within [***] after the applicable Territory Termination Effective Date and as agreedby the Parties, Takeda shall assign to AMAG any Third Party contracts that primarily relate to the Product in a Terminated Territory to theextent such Third Party contract is assignable by Takeda, provided that Takeda shall remain responsible for the performance of anyobligations or liabilities under such contract that accrued prior to such assignment. Takeda shall promptly terminate all Third Partycontracts that primarily relate to the Product in a Terminated Territory that AMAG has not requested to be assigned to AMAG pursuant tothis Section 3.4, provided that if such Third Party contracts involve ongoing services to Takeda that are unrelated to the Product, Takeda’sobligation to terminate such Third Party contracts will only extend to that portion of such contracts related to the Product. This Section 3.4sets forth Takeda’s entire obligation with respect to the assignment of any Third Party contracts to AMAG in connection with thetermination of the Agreement. 3.5 Costs for Regulatory Commitments. AMAG will be solely responsible for paying all costs associated with any commitments made byTakeda or its Affiliate in any submission to a Regulatory Authority related to the Product in a Terminated Territory provided that AMAGhas approved such commitments in writing before the submission is filed (“Future Costs”). 6 [***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCHOMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATEDUNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. 4. TRANSITION SERVICES 4.1 Takeda shall provide to AMAG the transition services set forth in the schedules attached as Exhibit A to assist AMAG with assumingresponsibility for all operations pertaining to the Product in each Terminated Territory (“Transition Services”). The Parties shall usecommercially reasonable efforts to transfer to AMAG responsibility for all operations pertaining to the Product in the Terminated Territorywithin sixty (60) days after the applicable Territory Termination Effective Date, extendable by thirty (30) days upon AMAG’s request andTakeda’s consent. Except as set forth herein, each Party shall bear its own costs in connection with performing its obligations to completethe transfer of Product operations to AMAG. 4.2 Takeda shall perform (and cause its Affiliates to perform) the Transition Services in a timely and professional manner and in accordancewith industry standards for services of the type performed. Takeda shall comply (and cause its Affiliates to comply) with all applicableLaws, and shall maintain all applicable permits and licenses, in connection with the Transition Services. At any time, AMAG may requestby written notice that Takeda cease conducting any particular Transition Services, and thereafter the Parties will cooperate to wind downsuch Transition Services as soon as reasonably practicable. Takeda may delegate or subcontract the provision of any Transition Services toany Third Party that Takeda employed to provide the same type of services in connection with its commercialization of the Product prior tothe Termination Agreement Date. Takeda shall provide AMAG with reasonable advance notice of any such delegation or subcontractingunless such Third Party is already providing such services to Takeda as of the Termination Agreement Date. Takeda shall remainresponsible for the performance of any Transition Services it delegates or subcontracts to a Third Party. 4.3 Takeda shall provide Transition Services to AMAG for each Terminated Territory for a period of up to one hundred eighty (180) days afterthe Territory Termination Effective Date for such Terminated Territory (the “Transition Services Period” for such Terminated Territory);provided that AMAG may extend the Transition Services Period for a Terminated Territory by written notice to Takeda (the “ExtensionNotice”) delivered no later than thirty (30) days before the expiration of such Transition Services Period, for the period of time reasonablynecessary to complete any services that cannot be reasonably transitioned to AMAG during the initial one hundred eighty (180)-dayperiod, which extension will not exceed an additional one hundred eighty (180) days, and provided that Takeda consents to such extensionin writing, which consent Takeda shall not unreasonably withhold or delay. AMAG shall specify in the Extension Notice the services thatwill be conducted during the extension and the duration of 7 [***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCHOMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATEDUNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. such services, on a per-country and per-function basis. AMAG shall use commercially reasonable efforts during the Transition ServicesPeriod and any extension thereof to complete the transition of all operations pertaining to the Product in the applicable TerminatedTerritory to AMAG as soon as practicable. 4.4 Takeda shall be solely responsible for all costs it incurs to provide the Transition Services during the Transition Services Periods (includingextensions thereof under Section 4.3). If AMAG requests and Takeda agrees, in its sole discretion, to conduct additional transition servicesfor any Terminated Territory after the end of the applicable Transition Services Period, as may be extended, (the “Reimbursed Services”)AMAG shall reimburse Takeda at Takeda’s fully-burdened cost for such Reimbursed Services plus five percent (5%) of such costs. 4.5 The transition services obligations set forth above in this Article 4 supersede the transition assistance set forth in Section 13.6(c) of theAgreement. 4.6 Unless agreed otherwise by the Parties in writing, Takeda will invoice AMAG on a monthly basis for the costs described in Section 4.4 forReimbursed Services conducted in the preceding month. AMAG shall pay each such invoice, unless subject to a bona fide dispute, within[***] after receipt thereof. All payments will be made in Dollars. Takeda will maintain (and, as applicable, cause its Affiliates to maintain)accurate and complete records regarding the Reimbursed Services in sufficient detail for AMAG to confirm the accuracy of payments underthis Section 4.6. Upon [***] notice to Takeda, AMAG will have the right, through an independent certified public accountant selected byAMAG and reasonably acceptable to Takeda, to inspect and audit such records of Takeda and its Affiliates for the sole purpose of verifyingthe accuracy of all payments made or to be made by AMAG under this Section 4.6. Any such audit will be conducted during regularbusiness hours at the facilities of Takeda or its Affiliates, and in a manner that does not unreasonably interfere with the normal businessactivities of Takeda or its Affiliates. The auditor shall execute a standard non-disclosure agreement with Takeda or its Affiliates, asapplicable, and shall not disclose Takeda’s Confidential Information to AMAG except to the extent such disclosure is necessary to verifythe accuracy of the payments made by AMAG. If any audit reveals an overpayment by AMAG, Takeda will promptly refund anyoverpayment. In addition, if any audit reveals an overpayment by AMAG exceeding [***] during the audited period, Takeda willreimburse AMAG for the reasonable out-of-pocket costs of conducting the audit. 5. FINANCIAL TERMS 5.1 All sales of the Product and receivables in a given Terminated Territory before the applicable Territory Termination Effective Date shallbelong to Takeda, subject to royalty payments to AMAG under Section 8.4 of the Agreement. 8 [***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCHOMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATEDUNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. Takeda shall be solely responsible for all costs, whether incurred before or after the applicable Territory Termination Effective Date, arisingout of the distribution of Product under Takeda’s label by or on behalf of Takeda (including samples and Product distributed by or onbehalf of Takeda in connection with investigator-sponsored trials) before the applicable Territory Termination Effective Date, includingcosts for recalls, refunds, rebates, chargebacks, return processing and destruction. 5.2 AMAG shall be responsible for any liabilities relating to Product distributed by or on behalf of AMAG in a Terminated Territory after theapplicable Territory Termination Effective Date, except to the extent resulting from Takeda’s breach of, or indemnity obligations under,this Termination Agreement. 5.3 In consideration for early termination of the Agreement and activities to be performed by AMAG earlier than contemplated under theAgreement, and in lieu of any future cost-sharing and future milestone payments contemplated by the Agreement, Takeda shall make thenon-refundable, non-creditable payments to AMAG set forth in Exhibit B, subject to the following terms and conditions: a. For item 5(a), Takeda shall pay such amount by wire transfer as soon as practicable, but by no later than [***] after the TerminationAgreement Date. b. For items 1, 2, 3 and 4, and 5(b), and except as provided in the last sentence of item 5(b) in Exhibit B, Takeda shall pay such amounts [***]after the Termination Date. c. For item 6, Takeda shall pay such amount [***] after the earlier of: (i) a CHMP Opinion [***], or (ii) the Termination Date if the CHMPOpinion has not yet been issued. 5.4 Notwithstanding the provisions of Section 5.3, in the event that Takeda or a Regulatory Authority recalls or suspends the Product in theinterest of patient welfare after this Termination Agreement is executed by the Parties but prior to the Termination Date (a “Recall”),Takeda’s obligation to make the payments set forth in Exhibit B will be limited to the payment of item 5(a) and the payment of thedocumented out-of-pocket costs incurred through the date of the Recall for items 1, 2, 3, 4 and 6. For the avoidance of doubt, in the eventof a Recall, Takeda will have no obligation to make the payment under item 5(b) in the amount of $3 million. 5.5 Except for the payments set forth in Exhibit B, Takeda has no liability for any expenses related to any past, pending or future clinical ornon-clinical studies related to the Product. 9 [***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCHOMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATEDUNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. 5.6 Notwithstanding any other provision of this Termination Agreement or Exhibit A, if the marketing authorization for the Product issuspended in a Terminated Territory and the Parties are prevented from completing the transfer of such marketing authorization to AMAGwithin one hundred twenty (120) days after such suspension due to applicable Laws or any requirements or restrictions imposed by aRegulatory Authority, Takeda will have the right, in Takeda’s sole discretion, to Withdraw such marketing authorization. 6. REPRESENTATIONS AND WARRANTIES 6.1 Mutual Representations and Warranties. Each Party hereby represents and warrants to the other Party as follows, as of the TerminationAgreement Date: a. it is a company or corporation duly organized, validly existing, and in good standing under the laws of the jurisdiction in which it isincorporated; b. it has the corporate power and authority and the legal right to enter into this Termination Agreement and perform its obligations hereunder; c. it has taken all necessary corporate action on its part required to authorize the execution and delivery of this Termination Agreement andthe performance of its obligations hereunder; and d. this Termination Agreement has been duly executed and delivered on behalf of such Party, and constitutes a legal, valid, and bindingobligation of such Party that is enforceable against it in accordance with its terms. 6.2 Additional Representations and Warranties of Takeda. Takeda hereby represents and warrants to AMAG as follows, as of theTermination Agreement Date: a. Takeda has the full legal right, power and authority to grant the rights and make the assignments as set forth in Article 3; and b. to Takeda’s Best Knowledge, Takeda has made available to AMAG all material written information in Takeda’s possession or Control as ofthe Termination Agreement Date relating to the safety or Commercialization of the Products in the Field in the Licensed Territory, and toTakeda’s Best Knowledge all such information is true and correct in all material respects. 6.3 DISCLAIMER OF WARRANTY. AMAG HEREBY ACKNOWLEDGES THAT TAKEDA AND ITS AFFILIATES DO NOT ORDINARILYPROVIDE THE TRANSITION SERVICES TO THIRD PARTIES AS PART OF THEIR BUSINESS ACTIVITIES. EXCEPT AS EXPRESSLYSTATED IN THIS 10 [***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCHOMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATEDUNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. TERMINATION AGREEMENT, NO REPRESENTATIONS OR WARRANTIES WHATSOEVER, WHETHER EXPRESS ORIMPLIED, INCLUDING WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NONINFRINGEMENT, ORNON-MISAPPROPRIATION OF THIRD PARTY INTELLECTUAL PROPERTY RIGHTS, ARE MADE OR GIVEN BY OR ON BEHALF OFA PARTY, AND ALL REPRESENTATIONS AND WARRANTIES, WHETHER ARISING BY OPERATION OF LAW OR OTHERWISE, AREHEREBY EXPRESSLY EXCLUDED. 6.4 EXCEPT FOR A PARTY’S OBLIGATIONS UNDER SECTION 7.2 (INDEMNIFICATION), AND ANY BREACH OF SECTION 8.1(CONFIDENTIALITY), IN NO EVENT WILL EITHER PARTY BE LIABLE TO THE OTHER PARTY (OR THE OTHER PARTY’SAFFILIATES) IN CONNECTION WITH THIS TERMINATION AGREEMENT FOR LOST REVENUE, LOST PROFITS, LOST SAVINGS,LOSS OF USE, DAMAGE TO GOODWILL, OR ANY CONSEQUENTIAL, INCIDENTAL, SPECIAL, EXEMPLARY, PUNITIVE ORINDIRECT DAMAGES UNDER ANY THEORY, INCLUDING CONTRACT, NEGLIGENCE, OR STRICT LIABILITY, EVEN IF THATPARTY HAS BEEN PLACED ON NOTICE OF THE POSSIBILITY OF SUCH DAMAGES. 7. MUTUAL RELEASES; INDEMNIFICATION 7.1 Mutual Releases. a. AMAG, for itself and on behalf of its Affiliates, and each of their respective current or past directors, officers, stockholders, employees,agents, and insurers and their respective successors, heirs, assigns and representatives, or anyone claiming through any of the foregoing (allof whom are hereinafter collectively called the “AMAG Releasors”), hereby completely, irrevocably, fully, finally, and forever release,relinquish, waive and discharge Takeda and its Affiliates, and each of them, including their present and former parents, subsidiaries,predecessors, successors, assigns, and any of their respective current or past officers, directors, employees, agents, insurers, and theirrespective successors, heirs, assigns and representatives (all of whom are hereinafter collectively called the “Takeda Releasees”), of andfrom (i) any and all losses, claims, actions, causes of action, liabilities, damages, judgments, demands, costs and expenses of any kind,whether known or unknown (collectively, “Losses”), that the AMAG Releasors, or any of them, had, has, may have or may ever claim tohave against the Takeda Releasees, or any of them, under or directly or indirectly related to the Agreement, based upon facts andcircumstances arising or existing on or before the Termination Agreement Date and (ii) any Losses the AMAG Releasors, or any of them,has, may have or may ever claim to have against the Takeda 11 [***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCHOMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATEDUNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. Releasees, or any of them, arising out of or related to (a) any response, filing or other submission related to the Product, whether oral or inwriting, and whether or not based upon, including or excluding any information, position, recommendation or request from either Party asto the content thereof, made by either Party to the PRAC or CHMP (the “Committees”) or (b) any opinion, ruling, recommendation, order,directive or decision made or issued by the Committees or EMA affecting the status of the marketing authorization or label for the Productwhile Takeda or its Affiliate is the holder of such marketing authorization in the EU, in each of (a) or (b), arising after the TerminationAgreement Date and (iii) any Losses the AMAG Releasors, or any of them, has, may have or may ever claim to have against the TakedaReleasees, or any of them, arising out of or related to Takeda’s Withdrawal of a marketing authorization in a Terminated Territory underSection 5.6 or Exhibit A; provided, however, that the foregoing release shall not extend to any royalties owing by Takeda to AMAGpursuant to Section 8.4(a) of the Agreement immediately prior to the effectiveness of this Termination Agreement and any survivingindemnity obligations under Article 11 of the Agreement. b. Takeda, for itself and on behalf of its Affiliates, and each of their respective current or past directors, officers, stockholders, employees,agents, and insurers and their respective successors, heirs, assigns and representatives, or anyone claiming through any of the foregoing (allof whom are hereinafter collectively called the “Takeda Releasors”), hereby completely, irrevocably, fully, finally, and forever release,relinquish, waive and discharge AMAG and its Affiliates, and each of them, including their present and former parents, subsidiaries,predecessors, successors, assigns, and any of their respective current or past officers, directors, employees, agents, insurers, licensors, andtheir respective successors, heirs, assigns and representatives (all of whom are hereinafter collectively called the “AMAG Releasees”), ofand from any (i) and all Losses that the Takeda Releasors, or any of them, had, has, may have or may ever claim to have against the AMAGReleasees, or any of them, under or directly or indirectly related to the Agreement, based upon facts and circumstances arising or existingon or before the Termination Agreement Date and (ii) any Losses the Takeda Releasors, or any of them, has, may have or may ever claim tohave against the AMAG Releasees, or any of them, arising out of or related to any response, filing or other submission related to theProduct, whether oral or in writing, and whether or not based upon, including or excluding any information, position, recommendation orrequest from either Party as to the content thereof, made by either Party to the Committees; provided, however, that the foregoing releaseshall not extend to any surviving indemnity obligations under Article 11 the Agreement. 12 [***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCHOMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATEDUNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. c. Notwithstanding any provision of this Termination Agreement to the contrary, nothing herein shall be deemed to release, acquit ordischarge any Takeda Releasee or any AMAG Releasee from its obligations (if any) under this Termination Agreement or any claim arisingfrom any breach of such obligations. 7.2 Indemnification. a. The Parties’ indemnification rights and obligations under the Agreement will remain in effect following termination of the Agreement, andare hereby amended as follows: AMAG’s obligations under Section 11.1(b) of the Agreement will expand to include (a) breaches of itsobligations, representations, warranties and covenants under this Termination Agreement, (b) Takeda’s Withdrawal of a marketingauthorization in a Terminated Territory pursuant to Section 5.6 or Exhibit A of this Termination Agreement, and (c) any distribution, sale orother use or disposal by or on behalf of AMAG of any unlabeled inventory or samples of the Product transferred by Takeda to AMAGpursuant to Section 3.3(b) of this Termination Agreement; and Takeda’s obligations under Section 11.2(b) of the Agreement will expand toinclude breaches of its obligations, representations, warranties and covenants under this Termination Agreement. b. In addition, AMAG’s obligations under Section 11.1 of the Agreement will expand to include any and all Claims to the extent that suchClaims arise out of, are based on, or result from the manufacture, use, handling, storage, sale or other disposition of Product by or on behalfof AMAG or its Affiliates, including their respective licensees and distributors, in or for any Terminated Territory after the applicableTerritory Termination Effective Date, but shall exclude any costs for which Takeda is responsible under Section 5.1. The provisions ofSections 11.3 of the Agreement shall apply to AMAG’s indemnification obligations under this Section 7.2. The foregoing indemnityobligation shall not apply to the extent that (i) the Takeda Indemnitees fail to comply with the indemnification procedures set forth inSection 11.3 of the Agreement and AMAG’s defense of the relevant Claims is materially prejudiced by such failure, or (ii) any Claim arisesfrom, is based on, or results from any activity for which Takeda is obligated to indemnify the AMAG Indemnitees under Section 11.2 of theAgreement, as amended by Section 7.2(a) above. 8. CONFIDENTIALITY 8.1 All information disclosed by one Party to another Party under this Termination Agreement will be deemed the disclosing Party’sConfidential Information under the Agreement and subject to Article 12 thereof, except as provided in the last sentence of Section 3.3. Inaddition, the terms of this Termination Agreement will be deemed the Confidential Information of each Party under the terms of Article 12of the Agreement. 13 [***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCHOMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATEDUNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. 8.2 The Parties shall make a joint public announcement of the execution of this Termination Agreement in the form attached as Exhibit C,which shall be issued at a time to be mutually agreed by the Parties. 8.3 Section 12.3(b) of the Agreement will apply to any press releases either Party desires to make related to the terms of this TerminationAgreement. After the Termination Date, AMAG will not be required to obtain Takeda’s approval or to notify Takeda of any press releaserelated to AMAG’s development or commercialization of Product that does not refer to this Termination Agreement or the Agreement ordirectly or indirectly to Takeda. 9. SURVIVING PROVISIONS 9.1 Except as expressly modified by the terms of this Termination Agreement, and subject to Section 7.1 above, all provisions identified inSection 13.8 of the Agreement as surviving the termination or expiration thereof will survive such termination pursuant to this TerminationAgreement. 10. MISCELLANEOUS 10.1 Dispute Resolution. All disputes arising under this Termination Agreement will be resolved in accordance with Article 14 of theAgreement. 10.2 Entire Agreement; Amendments. This Termination Agreement and the Agreement constitute the entire, final and exclusive agreementbetween the Parties with respect to the subject matter hereof and thereof. In the event of any conflict between the terms of this TerminationAgreement and the Agreement, the terms of this Termination Agreement will control. No amendment, modification, release or dischargewith respect to this Termination Agreement will be binding upon the Parties unless in writing and duly executed by authorizedrepresentatives of both Parties. 10.3 Notices. Any notice required or permitted to be given under this Termination Agreement shall be in writing, shall specifically refer to thisTermination Agreement, and shall be addressed to the appropriate Party at the address specified below or such other address as may bespecified by such Party in writing in accordance with this Section 10.3, and shall be deemed to have been given for all purposes (a) whenreceived, if hand-delivered or sent by a reputable courier service, or (b) five (5) business days after mailing, if mailed by first class certifiedor registered airmail, postage prepaid, return receipt requested. If to AMAG:AMAG Pharmaceuticals, Inc.100 Winter St.Waltham, MA 0245 14 [***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCHOMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATEDUNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. USAAttn: General Counsel With a copy to:Cooley LLPOne Freedom SquareReston Town Center11951 Freedom DriveReston, VA 201910-565Attn: Kenneth J. Krisko, Esq. If to Takeda:Takeda Pharmaceutical Company Limited1-1, Doshomachi 4-chome, Chuo-ku, Osaka, 540-8645,JapanAttn: Head, Global Licensing and Business Development Department With copies to:Takeda Pharmaceutical Company Limited1-1, Doshomachi 4-chome, Chuo-ku, Osaka, 540-8645,JapanAttn: Global General Counsel Takeda Pharmaceuticals International Inc.One Takeda ParkwayDeerfield, IL 60015Attn: Vice President, R&D Transactions Takeda Pharmaceuticals U.S.A., Inc.One Takeda ParkwayDeerfield, IL 60015Attention: General Counsel 10.4 No Strict Construction; Headings. This Termination Agreement has been prepared jointly by the Parties and shall not be strictly construedagainst either Party. Ambiguities, if any, in this Termination Agreement shall not be construed against any Party, irrespective of which Partymay be deemed to have authored the ambiguous provision. The headings of each Article and Section in this Termination Agreement havebeen inserted for convenience of reference only and are not intended to limit or expand on the meaning of the language contained in theparticular Article or Section. Except where the context otherwise requires, the use of any gender shall be applicable to all genders, and theword “or” is used in 15 [***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCHOMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATEDUNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. the inclusive sense (and/or). The term “including” as used herein means including, without limiting the generality of any descriptionpreceding such term. 10.5 Assignment. Neither Party may assign or transfer this Termination Agreement or any rights or obligations hereunder without the priorwritten consent of the other, except that a Party may make such an assignment without the other Party’s consent to its Affiliates or to a ThirdParty successor to substantially all of the business of such Party in connection with a Change of Control of such Party. Any successor orassignee of rights and/or obligations permitted hereunder shall, in writing to the other Party, expressly assume performance of such rightsand/or obligations. Any permitted assignment shall be binding on the successors of the assigning Party. Any assignment or attemptedassignment by either Party in violation of the terms of this Section 10.5 shall be null, void and of no legal effect. 10.6 Performance by Affiliates. Each Party may discharge any obligations and exercise any right hereunder through any of its Affiliates. EachParty hereby guarantees the performance by its Affiliates of such Party’s obligations under this Termination Agreement, and shall cause itsAffiliates to comply with the provisions of this Termination Agreement in connection with such performance. Any breach by a Party’sAffiliate of any of such Party’s obligations under this Termination Agreement shall be deemed a breach by such Party, and the other Partymay proceed directly against such Party without any obligation to first proceed against such Party’s Affiliate. 10.7 Further Actions. Each Party agrees to execute, acknowledge and deliver such further instruments, and to do all such other acts, as may benecessary or appropriate in order to carry out the purposes and intent of this Termination Agreement. 10.8 Severability. If any one or more of the provisions of this Termination Agreement is held to be invalid or unenforceable by any court ofcompetent jurisdiction from which no appeal can be or is taken, the provision shall be considered severed from this Termination Agreementand shall not serve to invalidate any remaining provisions hereof. The Parties shall make a good faith effort to replace any invalid orunenforceable provision with a valid and enforceable one such that the objectives contemplated by the Parties when entering thisTermination Agreement may be realized. 10.9 No Waiver. Any delay in enforcing a Party’s rights under this Termination Agreement or any waiver as to a particular default or othermatter shall not constitute a waiver of such Party’s rights to the future enforcement of its rights under this Termination Agreement, exceptwith respect to an express written and signed waiver relating to a particular matter for a particular period of time. 16 [***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCHOMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATEDUNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. 10.10 Independent Contractors. Each Party shall act solely as an independent contractor, and nothing in this Termination Agreement shall beconstrued to give either Party the power or authority to act for, bind, or commit the other Party in any way. Nothing herein shall beconstrued to create the relationship of partners, principal and agent, or joint-venture partners between the Parties. 10.11 English Language; Governing Law. This Termination Agreement was prepared in the English language, which language shall govern theinterpretation of, and any dispute regarding, the terms of this Termination Agreement. This Termination Agreement and all disputes arisingout of or related to this Termination Agreement or any breach hereof shall be governed by and construed under the laws of the State of NewYork, United States of America, without giving effect to any choice of law principles that would require the application of the laws of adifferent state. 10.12 Counterparts. This Termination Agreement may be executed in one (1) or more counterparts, each of which shall be deemed an original,but all of which together shall constitute one and the same instrument. [SIGNATURE PAGE FOLLOWS] 17 [***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCHOMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATEDUNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. IN WITNESS WHEREOF, the Parties have executed this Termination Agreement in duplicate originals by their duly authorized officers as of theEffective Date. TAKEDA PHARMACEUTICAL COMPANY LIMITEDAMAG PHARMACEUTICALS, INC. By: /s/Shinji HondaBy: /s/ Scott B. Townsend Name:Shinji HondaName:Scott B. Townsend Title:Senior Managing Director,Title:General CounselCorporate Strategy OfficerSenior Vice Presidentof Legal Affairsand Secretary [Signature Page to Termination Agreement] [***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCHOMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATEDUNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. Exhibit ATransition Services Europe This section outlines the activities agreed by AMAG and Takeda prior to and after the marketing authorization (MA) transfer, and the expected timelines, tooccur for the Europe territory. Prior to MA Transfer · Should the CHMP pass a positive opinion for the IDA Type II variation, the application to transfer MA will be submitted by Takeda withcooperation by AMAG immediately following the decision of the European Commission. The MA transfer from Takeda to AMAG would beeffective as soon all necessary regulatory approvals are obtained for the transfer.· Should the CHMP pass a negative opinion for the IDA Type II variation, the application to transfer MA will be submitted by Takeda withcooperation by AMAG no later than [***], with notification to EMA to occur 30 days prior to submission of the application. In this instance the MAtransfer from Takeda to AMAG would be effective as soon as all necessary regulatory approvals are obtained for the transfer.· Until the transfer of the MA by the European Commission is effective, Takeda will continue to perform its obligations as specified in the Agreementand the Termination Agreement. Subject to the terms of the Termination Agreement and during the Transition Services Period, Takeda agrees toprovide AMAG and its designated third parties with reasonable assistance for them to prepare for and assume as soon as reasonably possible allresponsibility for operational activities that will be required to be in place at the time of MA transfer effectiveness and thereafter.· Notwithstanding any of the above considerations, Takeda will have the right, in its sole discretion and without any liability to AMAG, to Withdrawthe MA should AMAG not fulfill all conditions required to initiate MA transfer by [***], provided that such deadline will be extended by one dayfor each day that AMAG is prevented from fulfilling such conditions as a result of Takeda’s action or inaction if AMAG notifies Takeda in writing(via email or fax to Takeda’s legal counsel and alliance manager) prior to such deadline of the reason(s) that AMAG is not able to fulfill suchconditions by such deadline. If Takeda Withdraws the MA in Europe in light of the preceding sentence or in accordance with the provisions ofSection 5.6 of the Termination Agreement, the date of such MA Withdrawal will be deemed to be the Territory Termination Effective Date forEurope. A-1 [***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCHOMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATEDUNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. After MA Transfer Once the MA has been transferred to AMAG, Takeda agrees to provide the following transition services for the periods as specified below. ActivityTakeda responsibility post-MAtransfer PeriodTechnical Operations and Quality1. Label and packaging2. Retain storage3. Release testing for new lots4. Recalls and returns for product sold into the channel byTakeda1. For 180 days2. For 180 days3. For 180 days4. For 180 days PharmacovigilanceTakeda to hold no responsibility in PV- related activities post-MA transfer (assumes all required information has beentransferred to AMAG or its third party vendor by time of MAtransfer)Not applicable Finance1. Billing and collections support for product sold into thechannel by Takeda2. Receivables and rebate services for product sold into thechannel by Takeda1. For 180 days2. For 180 days RegulatoryTakeda to hold no responsibility in regulatory-relatedactivities post-MA transfer except in relation to Product held inTakeda’s inventory prior to Termination Date.Not applicable Commercial1. Product returns for product sold into the channel byTakeda or held in Takeda’s inventory prior toTermination Date.1. For 180 days Medical AffairsTakeda to complete its commitments to Investigator-sponsored trialsThrough completion of trials A-2 [***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCHOMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATEDUNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. Canada This section outlines the activities agreed by AMAG and Takeda prior to and after the marketing authorization (MA) transfer, and the expected timelines, tooccur for the Canada territory. Prior to MA Transfer · AMAG and Takeda to jointly prepare the required materials for submission to Health Canada to request transfer of the MA to AMAG. This activitywill occur in [***]; and the materials will be submitted to Health Canada by no later than [***]. This step assumes that the MA transfer can occurprior to AMAG establishing its own Drug Establishment License (DEL) or via a third party with a valid DEL. Takeda will provide upon AMAG’srequest continued use of Takeda’s DEL for up to [***] following the transfer of the MA, as permissible under local laws and regulations.· A decision on the MA transfer request from Health Canada is expected within 90 days after the formal application is submitted.· Assuming the timelines as described here, the MA transfer from Takeda to AMAG may be effective in [***].· Until the MA transfer is effective, Takeda will continue to perform its obligations as specified in the Agreement and the Termination Agreement.Subject to the terms of the Termination Agreement and during the Transition Services Period, Takeda agrees to provide AMAG and its designatedthird parties with reasonable assistance for them to prepare for and assume as soon as possible all responsibility for operational activities that will berequired to be in place at the time of MA transfer effectiveness and thereafter.· Notwithstanding any of the above considerations, and assuming that the MA transfer can occur prior to AMAG establishing its own DEL, Takedawill have the right, in its sole discretion and without any liability to AMAG, to Withdraw the MA should AMAG not fulfill all conditions to initiateMA transfer by [***], provided that such deadline will be extended by one day for each day that AMAG is prevented from fulfilling such conditionsas a result of Takeda’s action or inaction if AMAG notifies Takeda in writing (via email or fax to Takeda’s legal counsel and alliance manager) priorto such deadline of the reason(s) that AMAG is not able to fulfill such conditions by such deadline. If Takeda Withdraws the MA in Canada inaccordance with the preceding sentence, the date of such MA Withdrawal will be deemed to be the Territory Termination Effective Date for Canada. After MA Transfer Once the MA has been transferred to AMAG, Takeda agrees to provide the following transition services for the periods as specified below. A-3 [***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCHOMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATEDUNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. ActivityTakeda responsibility post-MAtransfer PeriodTechnical Operations and Quality1. Label and packaging2. Import of product3. Storage and distribution4. Recalls1. For 180 days2. For 180 days3. For 180 days4. For 180 days PharmacovigilanceTakeda to hold no responsibility in PV- related activities post-MA transfer (assumes all required information has beentransferred to AMAG or its third party vendor by time of MAtransfer)Not applicable Finance1. Consultation regarding structuring Canada tax set up(informational only and may not be relied upon by AMAGor any third party) 2. Billing and collections support 3. Receivables and rebate services1. For 60 days 2. For 180 days 3. For 180 days RegulatoryTakeda to hold no responsibility in regulatory-relatedactivities post-MA transferNot applicable Commercial1. Product returns for product sold into the channel by Takeda1. For 180 days Medical AffairsTakeda to complete its commitments to Investigator-sponsoredtrialsThrough completion of trials Switzerland This section outlines the activities agreed by AMAG and Takeda prior to and after the marketing authorization (MA) transfer, and the expected timelines, tooccur for the Switzerland territory. Prior to MA Transfer · AMAG and Takeda to jointly prepare the required materials for submission to Swiss Medic to request transfer of the MA to AMAG. The materialswill be submitted to Swiss Medic by no later than [***].· A decision on the MA transfer request from Swiss Medic is expected within 90 days after the formal application is submitted. A-4 [***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCHOMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATEDUNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. · Assuming the timelines as described here, the MA transfer from Takeda to AMAG may be effective in [***].· Until the MA transfer is effective, Takeda will continue to perform its obligations as specified in the Agreement and the Termination Agreement.Subject to the terms of the Termination Agreement and during the Transition Services Period, Takeda agrees to provide AMAG and its designatedthird parties with reasonable assistance for them to prepare for and assume as soon as possible all responsibility for operational activities that will berequired to be in place at the time of MA transfer effectiveness and thereafter.· Notwithstanding any of the above considerations, Takeda will have the right, in its sole discretion and without any liability to AMAG, to Withdrawthe MA should AMAG not fulfill all conditions to initiate MA transfer by [***], provided that such deadline will be extended by one day for eachday that AMAG is prevented from fulfilling such conditions as a result of Takeda’s action or inaction if AMAG notifies Takeda in writing (via emailor fax to Takeda’s legal counsel and alliance manager) prior to such deadline of the reason(s) that AMAG is not able to fulfill such conditions bysuch deadline. If Takeda Withdraws the MA in Switzerland in accordance with the preceding sentence, the date of such Withdrawal will be deemedto be the Territory Termination Effective Date for Switzerland. · After MA Transfer Once the MA has been transferred to AMAG, Takeda agrees to provide the following transition services for the periods as specified below. ActivityTakeda responsibility post-MAtransfer PeriodTechnical Operations and Quality1. Label and packaging2. Distribution of product3. Retain storage4. Release testing for new lots5. Recalls1. For 180 days2. For 180 days3. For 180 days4. For 180 days5. For 180 days PharmacovigilanceTakeda to hold no responsibility in PV- related activities post-MA transfer (assumes all required information has beentransferred to AMAG or its third party vendor by time of MAtransfer)Not applicable Finance1. Consultation regarding structuring Swiss tax set up(informational only and may not be relied upon1. For 180 days2. For 180 days3. For 180 days A-5 [***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCHOMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATEDUNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. by AMAG or any third party)2. Billing and collections support3. Receivables and rebate services RegulatoryTakeda to hold no responsibility in regulatory-related activitiespost-MA transferNot applicable A-6 [***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCHOMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATEDUNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. MA Suspension The parties acknowledge that in the event of a voluntary recall or suspension of the MA in a Terminated Territory prior to MA transfer to AMAG, the typeand duration of transition services to be provided by Takeda under this Exhibit A will be reduced to reasonably required levels. A-7 Exhibit BTermination-Related Payments to AMAG 1. Takeda obligations for MRI associated with the FACT study: $[***] for projected costs for 2015 2. Expenditures associated with regulatory filings and variations in EU, Canada, and Switzerland, planned through October 2015: $[***] 3. Expenditures associated with analytical methods transfer, packaging, labeling, audit, drug establishment fees: $[***] 4. Takeda’s FTE Costs associated with Legal and Regulatory support planned through October 2015: $[***] 5. Consideration for Takeda’s planned commercialization and back office support of the Product in Canada: a) $[***] payable upon execution of theTermination Agreement; and b) $3,000,000 payable within [***]. 6. Consideration for Pharmacovigilance activities in the Territory through October 2015: $[***] B-1 Exhibit CPress Release AMAG Pharmaceuticals and Takeda Announce Mutual Termination of Agreement to License, Develop and Commercialize Ferumoxytol in Ex-U.S.Territories, Including Europe WALTHAM, Mass. and OSAKA, Japan December 29, 2014 - AMAG Pharmaceuticals (NASDAQ: AMAG) and Takeda Pharmaceutical Company Limited(Takeda) announced today that they have entered into an agreement to mutually terminate the March 2010 license, development and commercializationagreement, which granted Takeda exclusive rights to market ferumoxytol in Canada, the European Union (EU) and Switzerland, as well as certain othergeographic territories (under the trade name Rienso outside of Canada where the product’s trade name is Feraheme). Under the terms of the termination agreement, AMAG will regain all worldwide development and commercialization rights for Feraheme/Rienso. Takeda willmake a payment to AMAG in connection with the termination and will provide certain transition services to AMAG for up to 180 days after the marketingauthorization transfer in each territory. In addition, both parties will undertake a transfer of the regulatory files for the product in each respective territory,and Takeda will not participate in any future development or commercialization activities. Takeda has been commercializing Feraheme in Canada and Rienso in the EU for the treatment of iron deficiency anemia (IDA) in patients with chronickidney disease (CKD). In both of these territories, Takeda has submitted applications to expand the product’s current label to include all patients with IDAregardless of underlying cause. AMAG will be assessing alternative commercialization strategies for Feraheme in Canada and Rienso in the EU based, in part,on the pending regulatory decisions which are expected in 2015. About Feraheme (ferumoxytol)/Rienso Feraheme received marketing approval from the FDA on June 30, 2009 for the treatment of IDA in adult CKD patients and was commercially launched byAMAG in the U.S. shortly thereafter. Ferumoxytol is protected in the U.S. by five issued patents covering the composition and dosage form of the product.Each issued patent is listed in the FDA’s Orange Book, the last of which expires in June 2023. Ferumoxytol received marketing approval in Canada in December 2012, where it has been marketed by Takeda as Feraheme, and in the European Union inJune 2013 where it has been marketed by Takeda as Rienso® Ferumoxytol received marketing approval in Switzerland in August 2013. Feraheme/Rienso is contraindicated in patients with known hypersensitivity to Feraheme/Rienso or any of its components. Serious hypersensitivityreactions, including anaphylactic-type reactions, have been C-1®®® reported in patients receiving Feraheme/Rienso. Serious adverse reactions of clinically significant hypotension have been reported in the post-marketingexperience of Feraheme/Rienso. For additional U.S. product information, including full prescribing information, please visit www.feraheme.com. About AMAG AMAG Pharmaceuticals, Inc. is a specialty pharmaceutical company with a focus on maternal health, anemia and cancer supportive care. The primary goal ofAMAG and its maternal health division, Lumara Health, is to bring to market therapies that provide clear benefits and improve patients’ lives. In additionto continuing to pursue opportunities to make new advancements in patients’ health and to enhance treatment accessibility, AMAG intends to continue toexpand and diversify its portfolio through the in-license or purchase of additional pharmaceutical products or companies. For additional companyinformation, please visit www.amagpharma.com. AMAG PHARMACEUTICALS is a registered trademark of AMAG Pharmaceuticals, Inc. LUMARA HEALTH™ is a trademark of Lumara Health Inc. AMAG Forward-Looking Statements This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (PSLRA) and other federalsecurities laws. Any statements contained herein which do not describe historical facts, including among others, statements regarding Takeda’s payments andservices to AMAG, worldwide development and commercialization rights for Feraheme/Rienso for IDA and/or CKD, the transfer of regulatory files by Takedain each respective territory and AMAG’s assessment of commercialization strategies for Feraheme/Rienso in Canada and the EU are forward-lookingstatements which involve risks and uncertainties that could cause actual results to differ materially from those discussed in such forward-looking statements. Such risks and uncertainties include, among others: (1) limitations on AMAG’s ability to invest in the development and commercialization ofFeraheme/Rienso outside the U.S., especially in light of AMAG’s being highly leveraged, (2) AMAG may not be able to successfully commercializeFeraheme/Rienso using alternate strategies in Canada and the EU, or may choose not to do so, (3) uncertainties regarding the likelihood and timing ofpotential approval of Feraheme/Rienso in the U.S., the EU and Canada in the broader IDA indication in light of the complete response letter AMAG receivedfrom the FDA informing AMAG that its supplemental new drug application (sNDA) for the broader indication could not be approved in its present form andstating that AMAG has not provided sufficient information to permit labeling of Feraheme/Rienso for safe and effective use for the proposed broaderindication and similar concerns raised by European and Canadian regulators, (4) the possibility that following review of post-marketing safety data,including reports of serious anaphylaxis, cardiovascular events, and death, and/or in light of the label changes requested by the European MedicinesAgency’s (EMA) Pharmacovigilance Risk Assessment Committee (PRAC) and confirmed by the Committee for Medicinal Products for Human Use (CHMP),the FDA, European or Canadian regulators will request additional technical or scientific information, new studies or reanalysis of existing data, on-labelwarnings, post-marketing requirements/commitments or risk evaluation and mitigation strategies (REMS) in the current CKD indication forFeraheme/Rienso, or cause Feraheme/Rienso to be withdrawn from the market, and the additional costs and expenses that will or may be incurred inconnection with such activities, (5) whether AMAG’s proposed label changes will be acceptable to the FDA or other regulatory authorities and what impactsuch changes, or such additional changes as U.S. and/or non-U.S. regulators may require, will have on sales of Feraheme/Rienso, (6) AMAG’s ability tosuccessfully compete in the IV iron replacement market both in the U.S. and outside the U.S. as a result of limitations, restrictions or warnings inFeraheme’s/Rienso’s current or future label, including the changes recommended by PRAC and confirmed by CHMP that Rienso be administered to patientsby infusion over at least 15-minutes C-2TM® (replacing injection) and that it be contraindicated for patients with any known history of drug allergy, (7) the possibility that significant safety or druginteraction problems could arise with respect to Feraheme/Rienso and in turn affect sales, or AMAG’s ability to market the product both in the U.S. andoutside of the U.S., (8) AMAG’s patents and proprietary rights both in the U.S. and outside the U.S., (9) the risk of an Abbreviated New Drug Application(ANDA) filing for Feraheme, especially following the FDA’s draft bioequivalence recommendation for ferumoxytol published in December 2012, (10) theimpact on sales if AMAG disseminates future Dear Healthcare Provider letters in the U.S., Europe, Canada or other markets, (11) AMAG’s ability to executeon its long-term strategic plan or to realize the expected results from its long-term strategic plan, (12) the possibility that AMAG will not realize expectedsynergies and other benefits from its acquisition of Lumara Health, as well as AMAG’s ability to pursue additional business development opportunities,especially in light of AMAG’s being highly leveraged and (13) other risks identified in AMAG’s filings with the U.S. Securities and Exchange Commission(SEC), including its Quarterly Report on Form 10-Q for the quarter ended September 30, 2014 and subsequent filings with the SEC. Any of the above risksand uncertainties could materially and adversely affect AMAG’s results of operations, its profitability and its cash flows, which would, in turn, have asignificant and adverse impact on AMAG’s stock price. Use of the term “including” in the two paragraphs above shall mean in each case “including, but notlimited to.” AMAG cautions you not to place undue reliance on any forward-looking statements, which speak only as of the date they are made. AMAG disclaims any obligation to publicly update or revise any such statements to reflect any change in expectations or in events, conditions orcircumstances on which any such statements may be based, or that may affect the likelihood that actual results will differ from those set forth in the forward-looking statements. About Takeda Pharmaceutical Company Limited Located in Osaka, Japan, Takeda is a research-based global company with its main focus on pharmaceuticals. As the largest pharmaceutical company in Japanand one of the global leaders of the industry, Takeda is committed to strive towards better health for people worldwide through leading innovation inmedicine. Additional information about Takeda is available through its corporate website, www.takeda.com. Takeda Forward-Looking Statements This press release contains forward-looking statements. Forward-looking statements include statements regarding Takeda’s plans, outlook, strategies, resultsfor the future, and other statements that are not descriptions of historical facts. Forward-looking statements may be identified by the use of forward-lookingwords such as “may,” “believe,” “will,” “expect,” “project,” “estimate,” “should,” “anticipate,” “plan,” “assume,” “continue,” “seek,” “pro forma,”“potential,” “target,” “forecast,” “guidance,” “outlook” or “intend” or other similar words or expressions of the negative thereof. Forward-looking statementsare based on estimates and assumptions made by management that are believed to be reasonable, though they are inherently uncertain and difficult to predict.Investors are cautioned not to unduly rely on such forward-looking statements. Forward-looking statements involve risks and uncertainties that could cause actual results or experience to differ materially from that expressed or implied bythe forward-looking statements. Some of these risks and uncertainties include, but are not limited to, (1) the economic circumstances surrounding Takeda’sbusiness, including general economic conditions in Japan, the United States and worldwide; (2) competitive pressures and developments; (3) applicable lawsand regulations; (4) the success or failure of product development programs; (5) actions of regulatory authorities and the timing thereof; (6) changes inexchange rates; (7) claims or concerns regarding the safety or efficacy of marketed products or product candidates in development; and (8) integrationactivities with acquired companies. C-3 The forward-looking statements contained in this press release speak only as of the date of this press release, and Takeda undertakes no obligation to revise orupdate any forward-looking statements to reflect new information, future events or circumstances after the date of the forward-looking statement. If Takedadoes update or correct one or more of these statements, investors and others should not conclude that Takeda will make additional updates or corrections. ### Contact:AMAG Pharmaceuticals, Inc.:Katie Payne, 617-498-3303 Takeda Pharmaceuticals Company Limited:Corporate Communications Dept.+81-3-3278-2037 C-4Exhibit 10.31 [***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCHOMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATEDUNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. DEVELOPMENT AND SUPPLY AGREEMENT THIS DEVELOPMENT AND SUPPLY AGREEMENT (this “Agreement”) is made as of this 17 day of September, 2009 (the “Effective Date”) by andbetween Hologic, Inc, having a principal place of business at 250 Campus Drive, Marlborough, MA 01752 (“Hologic”) and Hospira Worldwide, Inc., havinga principal place of business at 275 North Field Drive, Lake Forest, Illinois, 60045, (U.S.A.) (“Hospira”). WITNESSETH: WHEREAS, Hologic is pursuing FDA approval for Hydroxyprogesterone Caproate Injection, 250 mg/mL (“17P”, also referred to as “Gestiva”), andwishes to develop and market Gestiva in a standard flip top vial and/or [***] delivery system as defined by Hologic; WHEREAS, Hologic and Hospira desire that Hospira assist Hologic in the development and commercialization of Gestiva; and WHEREAS, after Hologic has received an approved NDA as Hospira as a manufacturer from the United States Food and Drug Administration (the“FDA”), the parties desire that Hospira manufacture and sell to Hologic [***] of Gestiva for the United States market, subject to Hologic’s obligations to[***]. NOW, THEREFORE, in consideration of the premises and the mutual promises and agreements contained herein, Hologic and Hospira agree asfollows: Article 1. DEFINITIONS The following words and phrases when used herein with capital letters shall have the meanings set forth or referenced below: 1.1 “Active Pharmaceutical Ingredient” or “API” shall mean the active pharmaceutical ingredient of the Drug (as hereinafter defined) in bulkform that Hologic shall deliver to Hospira for incorporation into Product (as hereinafter defined) and meeting the applicable Active PharmaceuticalIngredient Specifications (as hereinafter defined). 1.2 “Active Pharmaceutical Ingredient Specifications” shall mean the detailed description and parameters of the API set forth on Exhibit 1.2. 1.3 “Affiliate” shall mean any corporation or non-corporate business entity which controls, is controlled by, or is under common control with aparty to this Agreement. A corporation or non-corporate business entity shall be regarded as in control of another corporation or non-corporate businessentity if it owns, or directly or indirectly controls, in excess of fifty percent (50%) of the voting stock of the other corporation, or (a) in the absence of [***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCHOMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATEDUNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. the ownership of in excess of fifty percent (50%) of the voting stock of a corporation or (b) in the case of a non-corporate business entity, if it possesses,directly or indirectly, the power to direct or cause the direction of the management and policies of such corporation or non-corporate business entity, asapplicable. 1.4 “cGMP” shall mean the current good manufacturing practices as set forth in 21 C.F.R. Part 210 and Part 211, policies or guidelines then ineffect during the term of this Agreement for the manufacture and testing of pharmaceutical products as applied to the Products,. 1.5 “Confidential Information” shall mean all information disclosed hereunder in writing and identified as being confidential or, if disclosedorally, visually or through some other media, is identified as confidential at the time of disclosure and is summarized in writing within [***] days of suchdisclosure and identified as being confidential, except any portion thereof which: (a) is known to the recipient at the time of the disclosure, as evidenced by its written records or other competent evidence; (b) is disclosed to the recipient by a third person lawfully in possession of such information and not under an obligation ofnondisclosure; (c) is or becomes patented, published or otherwise part of the public domain through no fault of the recipient; (d) is developed by or for the recipient independently of Confidential Information disclosed hereunder as evidenced by the recipient’swritten records or other competent evidence; or (e) is required by law to be disclosed by the recipient, provided that the recipient gives the other party hereto prompt notice of suchlegal requirement such that such other party shall have the opportunity to apply for confidential treatment of such ConfidentialInformation. 1.6 “Contract Year” shall mean a period of twelve (12) consecutive months which, for the first Contract Year of this Agreement, shallcommence on the first day of the month after the month of Hologic’s first bona fide sale of Product to a non-Affiliate customer after Product has received anapproved NDA from the FDA and each Contract Year thereafter shall consist of twelve (12) consecutive months following the end of the preceding ContractYear. 1.7 “Drug” shall mean the human pharmaceutical Hydroxyprogesterone Caproate. 2 [***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCHOMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATEDUNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. 1.8 “Product” shall mean the Drug in final dosage form, filled in a vial and/or [***] to be determined by Hologic as set forth herein, includinglabeling, and secondary packaging meeting the Product Specifications. 1.9 “Product Specifications” shall mean those product, labeling and performance specifications for Product filed with the FDA includingProduct formula, labeling, and materials required for the manufacture of the Product that is to be purchased and supplied under this Agreement, as such are setforth on Exhibit 1.9, which specifications may be amended from time to time by the written agreement of the parties. 1.10 “Regulatory Authority” shall mean any federal, state or local regulatory agency, department, bureau or other governmental entity includingwithout limitation the FDA which is responsible for issuing approvals, licenses, registrations or authorizations necessary for the manufacture, use, storage,import, transport or sale of the Products in the United States. 1.11 “Third Party” shall mean a party other than Hospira or the Hologic and their respective Affiliates or assignees. 1.12 “Waste” shall mean all rejects, improper goods, garbage, refuse, remainder, residue, waste water or other discarded material, including solid,liquid, semisolid, or contained gaseous material that arises from the manufacture of Product, including but not limited to, rejected, excess or unsuitablematerials, API and Products. Article 2. PRODUCT DEVELOPMENT PROJECT 2.1 General. Promptly following the Effective Date, the parties shall undertake a product development project (the “Project”) consisting of thedevelopment activities set forth in Exhibit 2.1. The objective of the Project shall be for Hospira to assist in the development of the Product and to assistHologic in obtaining an approved FDA filing covering the Product. Hospira then shall manufacture and deliver Product to Hologic for sale by Hologic as ahuman pharmaceutical product, as herein provided. The current scope of the development project is limited to the flip top vial presentation. If requested byHologic, the Parties will mutually agree to amend Exhibit 2.1 to include the [***] presentation, clinical product, placebo product and clinical stabilitytesting and to amend Exhibit 3.1 to include the additional fees related thereto, and Exhibit 5.8 with respect to the price therefore. 2.2 Commercially Reasonable Efforts. Each party shall use its commercially reasonable efforts to successfully complete the Project. However,the parties agree and understand that neither party hereto guarantees that the Project will be successful, nor warrants or guarantees that a marketable productwill result from the Project. 3 [***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCHOMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATEDUNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. Article 3. PAYMENT FOR HOSPIRA’S DEVELOPMENT EFFORTS 3.1 Development Fee. To reimburse Hospira for its participation in the Project, Hologic shall pay to Hospira a nonrefundable development feeof [***] (the “Development Fee”) representing the sum of [***]. The Development Fee shall be paid to Hospira in accordance with the payment schedule setforth in Exhibit 3.1. 3.2 Changes in Project Scope. If Hologic elects to proceed with the [***] presentation, or if changes occur in the Project, API Specifications orProduct Specifications, or if technical difficulties require that Hospira perform either additional work or repeat work, and such additional work or repeat workis not required due to Hospira’s fault or negligence, Hospira shall provide Hologic with cost estimates for such work. If Hologic approves such costs, Hospirashall perform such work and Hologic shall pay Hospira’s costs for such work within [***] days of completion of such work. Reimbursement for suchadditional work or repeat work shall be at the rate of [***], plus out-of-pocket costs for reasonable travel and sustenance, materials and supplies. 3.3 Development Supplies. After the parties mutually agree to the final Product Specifications, Hospira shall provide to Hologic developmentsupplies at the prices set forth on Exhibit 5.8. Hologic shall issue a purchase order for any such development supplies at least [***] days before the requesteddelivery date. Hologic and Hospira shall jointly develop and agree mutually to the formulation, concentration, fill volume and the components for each lot ofdevelopment supplies. 3.4 Development Stability Studies. If Hologic chooses to have Hospira perform the registration stability studies, Hospira will complete theregistration stability studies for Product as outlined in Exhibit 2.1 and according to the Payment Schedule outlined in Exhibit 3.1. Hologic shall beresponsible for supplying to Hospira (from lots that Hologic purchases from Hospira under the terms of this Agreement at the applicable prices set forthherein) the number of units of Product(s) reasonably requested by Hospira to perform the stability studies. Hologic shall provide such units from stabilitysupplies that Hospira shall provide to Hologic. Article 4. HOLOGIC’S REGULATORY SUBMISSIONS 4.1 Hospira’s Right to Review. Hospira shall have the right to review and consult on those portions of Hologic’s proposed regulatorysubmissions relating to Hospira’s packaging or manufacturing procedures before the submissions are filed with the FDA. Hospira shall complete its review ofthe submissions as quickly as commercially reasonable but no later than [***] days after receipt of a proposed regulatory submission. Hospira shall consultwith and advise Hologic in responding to questions from Regulatory Authorities regarding Hologic’s submission(s) for Product. Hologic shall be the soleowner of any regulatory submission filed pursuant to this Agreement. Exhibit 3.1 includes Hospira’s costs of review for one FDA filing and associatedamendments. Hologic shall provide to Hospira for its files a final copy of the CMC section of any such regulatory submission(s). 4 [***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCHOMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATEDUNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. 4.2 Access to Drug Master Files. Hospira shall grant Hologic reference rights to all Drug Master Files (“DMFs”) necessary to support Hologic’sfilings of Product. To effect this, Hospira shall execute certain documentation (“Letters of Authorization”) which shall be delivered to the appropriateRegulatory Authorities permitting such Regulatory Authorities to consult Hospira’s DMFs in their review of Hologic’s Product marketing applications.Hospira shall send copies of such Authorization Letters to Hologic. Hospira shall update its DMFs annually and shall inform Hologic prior to anymodifications thereto in order to permit Hologic to amend or supplement any affected regulatory applications and filings for Product. 4.3 User Fees. Hologic shall pay any FDA (or foreign equivalent) user fees which may become payable for Product. Article 5. MANUFACTURE AND SUPPLY OF PRODUCT 5.1 Purchase and Sale of Product. [***]. 5.2 Government Approvals. Notwithstanding any other provision of this Agreement, Hospira shall have no obligation to manufacture, sell ordeliver Product to Hologic and Hologic shall have no obligation to purchase and take delivery of Product for commercial sale until Hologic has obtained allnecessary Regulatory Authorities’ approvals required to sell Product. However, Hospira agrees to manufacture and supply those quantities of Productrequested in firm purchase orders by Hologic that are necessary to build Hologic’s inventory in anticipation of commercial launch of the Product in theUnited States and Hologic shall be required to pay for such Products irrespective of whether the Product ultimately receives all necessary RegulatoryAuthorities’ approvals. 5.3 Active Pharmaceutical Ingredient (a) Supply. Hospira shall manufacture Product for Hologic from API that Hologic shall supply to Hospira [***]. Hologic shall supplyAPI to Hospira in quantities sufficient to satisfy Hospira’s gross manufacturing requirements of Product. Hospira’s use of APIreceived from Hologic shall be limited to development contemplated by this Agreement and the manufacture of Product for Hologic.Hologic shall deliver API FOB Destination for deliveries originating in the United States, and D.D.P. (Incoterms 2000) for deliveriesoriginating outside the United States, to Hospira’s manufacturing plant [***] pursuant to [***] purchase orders that Hospira issues toHologic. Within [***] days of Hospira’s receipt of any API supplied by Hologic hereunder, Hospira shall (i) perform all testingrequired to be performed by Hospira as specified in Exhibit 1.2 on the API and confirm the shipment quantity, and (ii) notify Hologicof any inaccuracies with respect to quantity or of any claim that any portion of the shipment fails any test required to be performedby Hospira specified in Exhibit 1.2. In the event Hospira notifies Hologic that an API shipment does 5 [***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCHOMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATEDUNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. not conform to the Active Pharmaceutical Ingredient Specifications, Hologic shall have the right to confirm such findings atHospira’s manufacturing location. If the findings are confirmed by Hologic, Hologic shall notify the API supplier and Hologic willwork to resolve the matter with the API supplier. Hospira will reasonably assist Hologic to resolve the discrepancies between theresults of the API supplier and Hospira. (b) Title. Hologic shall retain title to the API while it is in the Hospira facility. Subject to the limitation in Section 5.3(c), Hospira shallassume responsibility and risk for the safekeeping, storage and handling for all shipments of API delivered hereunder and acceptedby Hospira. (c) Replacement. In the event of any loss or damage of any API delivered hereunder or the failure of Product to meet ProductSpecifications, Hologic shall supply to Hospira at [***] API according to the terms set forth in Section 5.3(a). If any loss, damage orreplacement of such API results from a grossly negligent act or omission by Hospira in the manufacture, handling or storage of theAPI or the Product, Hospira shall reimburse Hologic for its cost of such API in [***]. In no event shall Hospira’s aggregate liabilityfor replacement of API exceed [***] per occurrence or [***] per calendar year. This section states Hologic’s sole remedy, andHospira’s sole liability, for any loss, damage, or misuse of API. (d) Storage. Hospira shall store at no charge the lesser of (i) [***] kgs or (ii) [***] pallets of API under controlled room temperature at the[***] manufacturing facility. 5.4 Dedicated Equipment Costs. If non-standard, specialized equipment is required to manufacture Product for Hologic, Hospira shall pay thecost of such equipment, subject to Hologic’s prior approval of such costs, which approval shall not be unreasonably withheld. Hospira shall advise Hologicof specialized equipment required and the estimated costs associated with the purchase, installation and validation of such equipment. After Hologicapproves such costs, Hospira shall install and validate the equipment and bill Hologic for the costs of purchasing, installing and validating the equipment.Hologic shall make payment to Hospira no later than [***] days after Hologic receives an invoice from Hospira. Title to the equipment shall be in Hologic’sname. If Hospira wishes to use the specialized equipment for manufacture of a product other than Product for Hologic, Hospira and Hologic shall meet anddiscuss the technical and practical ramifications of such use and appropriate compensation to Hologic. 5.5 Product Labeling. Hospira shall label Product in accordance with label copy that Hologic provides. Such copy may be modified from timeto time by agreement of the parties. Hologic shall reimburse Hospira for Hospira’s actual costs of making any label copy changes and for the cost of anylabeling that Hospira is unable to use due to such label copy changes not 6 [***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCHOMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATEDUNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. to exceed the amount of labels reasonably required by Hospira based on the first [***] months of the most recent [***] rolling forecast provided underSection 6.1 or such other amount as mutually agreed upon in writing. 5.6 Delivery. Hospira shall deliver Product to Hologic, FOB origin Hospira’s manufacturing plant at [***] or such other facility as may beagreed upon in writing by the parties. Title and risk of loss shall pass to Hologic at such point. Shipment shall be via a carrier designated by Hologic. Hospirashall make up to [***] shipments to Hologic of Product per batch at [***]. Any other shipments requested shall be at [***]. 5.7 Storage. Products generated from any engineering, registration or process validation or verification batches will be stored at no charge atHospira’s [***] facility at controlled room temperature until FDA Approval of the Product. 5.8 Price and Payment. (a) Price. [***]. (b) Payment. [***]. (c) Taxes. Any federal, state, county or municipal sales or use tax, excise, customs charges, duties or similar charge, or any other taxassessment (other than that assessed against income), license, fee or other charge lawfully assessed or charged on the manufacture,sale or transportation of Product sold pursuant to this Agreement, and all government license filing fees and Prescription Drug User(PDUFA) annual establishment fees with respect to all Product shall be paid by Hologic. (d) Process Rework. Process rework created as a result of Hologic’s changes shall be billed separately at a reasonable fee mutually agreedupon in writing. (e) Sub-lots. Should Hologic desire Hospira to split a manufacturing lot of Product into several sub-lots during packaging, there will bea split fee of [***] for each sub-lot packaged. 5.9 Annual Marketed Product(s) Stability Supplies and Studies: If Hologic requests, Hospira will perform Annual Marketed Product Stability(AMPS) studies (one lot per calendar year per Product configuration) at service prices set forth in Exhibit 5.8. AMPS studies will be based on the storageconditions specified in Exhibit 5.8. Billing for the service cost of each AMPS will be at the time each study commences. Hologic shall be responsible forsupplying to Hospira (from lots that Hologic purchases from Hospira under the terms of this Agreement at the prices set forth in Section 5.8) the number ofunits of Product reasonably requested by Hospira to perform the AMPS. 7 [***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCHOMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATEDUNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. 5.10 Replacement of Nonconforming Shipment. Hologic shall have a period of [***] days from the date of its receipt of a shipment of Product toinspect and reject such shipment for nonconformance with the Product Specifications. If Hologic rejects such shipment, it shall promptly so notify Hospiraand provide to Hospira samples of such shipment for testing. If Hospira tests such shipment and determines that it did conform to the Product Specifications,the parties shall submit samples of such shipment to a mutually acceptable independent laboratory for testing. If such independent laboratory determines thatthe shipment conformed to the Product Specifications, Hologic shall bear [***] expenses of shipping and testing such shipment samples. If Hospira or suchindependent laboratory confirms that such shipment did not meet the Product Specifications, Hospira shall replace, [***], that portion of the Productshipment which does not conform to the Product Specifications, and shall bear [***] expenses of shipping and testing the shipment samples. Anynonconforming portion of any shipment shall be disposed of as directed by Hospira, at Hospira’s expense. Any Product that Hologic does not reject pursuantto this Section 5.10 shall be deemed accepted, and all claims with respect to Product not conforming with Product Specifications shall be deemed waived byHologic, except as to latent defects which are not reasonably discoverable, render the Product not conforming to Product Specifications, and are solelycaused by Hospira. Article 6. COMMERCIAL ORDERS AND FORECASTS 6.1 Commercial Orders. For the sake of clarity, the provisions of the Article 6 apply only to commercial Products and not to Products to be usedin clinical trials (Development Supplies). (a) First Firm Order. Hologic shall place its first firm order approximately six (6) months in advance of the desired Product availabilitydate. At the same time, Hologic shall provide to Hospira Hologic’s estimate of its [***] requirements of Product to be supplied byHospira for the next succeeding [***] period. (b) Rolling Forecast. After issuing the first firm order in accordance with Section 6.1(a), Hologic shall be required to issue rollingforecast to Hospira in accordance with this Section. For the first [***] Contract Years, Hologic shall provide monthly to Hospira arolling [***] month forecast of requirements of Product to be supplied by Hospira. The first [***] months of such forecast shallconstitute a binding commitment upon Hologic to purchase such quantities and Hologic shall issue, concurrently with such forecast,a purchase order for the month of that forecast which was not included in the firm order period of the previous forecast. Theremaining [***] months of such forecast shall consist of Hologic’s best estimate projection of its Product requirements. After the first[***] Contract Years, Hologic shall provide quarterly to Hospira a rolling [***] month forecast of requirements of Product to besupplied by Hospira. The first [***]of such forecast shall constitute a binding commitment upon Hologic to purchase 8 [***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCHOMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATEDUNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. such quantities and Hologic shall issue, concurrently with such forecast, a purchase order for the quarter of that forecast which wasnot included in the firm order period of the previous forecast. The remaining [***] of such forecast shall consist of Hologic’s bestestimate projection of its Product requirements. (c) Purchase Order Acceptance. Within [***] days after receipt of Hologic’s firm purchase orders for Product issued in accordance withSection 6.1, Hospira shall accept or reject of the purchase order, delivery date and quantity of Product ordered by Hologic. (d) Firm Commercial Order Changes or Cancellations. If, due to significant unforeseen circumstances, Hologic requests changes to firmpurchase orders of Product within the firm purchase order timeframe, Hospira shall attempt to accommodate the changes withinreasonable manufacturing capabilities and efficiencies. If Hospira can accommodate such change, Hospira shall advise Hologic ofthe costs associated with making any such change and Hologic shall be deemed to have accepted the obligation to pay Hospira forsuch costs if Hologic indicates in writing to Hospira that Hospira should proceed to make the change. Hospira shall charge Hologicthe amount previously agreed upon in writing by Hologic for making any such change. If Hospira cannot accommodate such change,Hologic shall be bound to the original firm purchase order. If Hologic cancels a firm purchase order, Hospira shall be relieved of itsobligation relating to such order but Hologic will not be relieved of its obligation of payment unless Hospira agrees to waiveHologic’s obligation of payment in writing. If Hologic does not supply sufficient API to manufacture such order or acts in any othermanner to effectively interfere with Hospira’s ability to perform, which shall be deemed to be a breach of this Agreement, Hologicshall remain liable for the full amount of the firm purchase order regardless of whether such Product is manufactured by Hospira orwhether Hologic takes delivery of any such manufactured Product. Notwithstanding anything to the contrary contained herein, allProduct paid for by Hologic shall count toward the Minimum Commercial Purchase Requirement (as described in Section 6.3) ofProduct including, without limitation, any payments made in the event of a cancellation. (e) Purchase Order Terms. Each purchase order or any acknowledgment thereof, whether printed, stamped, typed, or written shall begoverned by the terms of this Agreement and none of the provisions of such purchase order or acknowledgment shall be applicableexcept those specifying Product and quantity ordered, delivery dates, special shipping instructions and invoice information. 9 [***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCHOMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATEDUNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. 6.2 [***] Year Product Supply Forecast. For capacity planning purposes, at the time of filing approval, Hologic shall provide Hospira with awritten forecast of Hologic’s annual requirements of Product for the first [***] calendar years. Thereafter, by September 1 of each calendar year Hologic shallupdate such rolling [***] forecast of its requirements of Product for the period commencing on January 1 of the next calendar year. 6.3 Minimum Purchase Requirement. [***]. 6.4 Best Efforts to Supply. Should Hologic order additional quantities of Product in excess of [***] over the previously forecasted amount forany month or quarter, as applicable, Hospira shall not be under any obligation to supply said additional quantities; provided, however, that Hospira shall, usereasonable commercial efforts to produce and deliver to Hologic said additional quantities within [***] of issuance of the purchase order for such additionalquantities. Article 7. QUALITY 7.1 Quality Control. Hospira shall apply its quality control procedures and in-plant quality control checks on the manufacture of Product forHologic in the same manner as Hospira applies such procedures and checks to products of similar nature manufactured for sale by Hospira. In addition,Hospira will test and release Product in accordance with the test methods described in Exhibit 7.1 to ensure that Product conforms to the ProductSpecifications. The parties may change the test methods from time to time by mutual agreement. 7.2 Quality Agreement. The parties shall enter into a quality agreement substantially in the form of the agreement attached hereto asExhibit 7.2 within [***] days following the Effective Date. 7.3 Audit Rights. (a) General. Hologic shall have the right, upon [***] days prior written notice to Hospira, to conduct, at its sole expense and duringnormal business hours, a quality assurance audit and inspection of Hospira’s records and production facilities relating to themanufacturing, assembly and/or packaging of Product. Such audits shall (a) be limited to not more than [***] auditors appointed orrepresenting Hologic, (b) last for not more than [***] days and (c) may be conducted not more than [***] per calendar year. Anyauditors that are not employees of Hologic shall be required to enter into confidentiality agreements with Hospira and Hologiccontaining terms of confidentiality at least as stringent as those set forth in Article 11 hereof. Visits by Hologic to Hospiraproduction facilities may involve the transfer of Confidential Information, and any such Confidential Information shall be subjectto the terms of Article 11 hereof. The results of such audits and inspections shall be considered Confidential Information 10 [***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCHOMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATEDUNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. under Article 11 and shall not be disclosed to Third Parties, [***] unless required by law and only then upon prior written notice toHospira. (b) Third Party. Hospira also agrees to allow the FDA to conduct any audit which they require and Hospira agrees to reasonablycooperate with the FDA authority in connection with such audit. (c) For-Cause Audits. Will be permitted as described in the Quality Agreement. 7.4 Customer Representative in Plant. (a) In addition to the audit rights stated in Section 7.3, Hospira shall also permit a representative of Hologic (“CustomerRepresentative”) to be present in the [***] production facilities to view certain Product manufacturing steps via closed circuittelevision during periods of time when the Product is being manufactured, provided that such Customer Representative complieswith: (i) all applicable state and federal laws prior to and during such visits; and (ii) generally, all applicable Hospira corporate andsecurity policies and procedures. While at the [***] facility, the Customer Representative shall have access solely to such areas ofthe facility that are: (i) reasonably related to view the manufacturing steps via closed circuit television; (ii) food-service areas; (iii)designated office space as may be allocated to the Customer Representative; (iv) public areas within the facility; or (v) as otherwiseauthorized by Hospira. Hologic acknowledges and agrees that such Customer Representative visiting the [***] facility shall bebound by terms of confidentiality no less restrictive than those set forth in Article 11. (b) With respect to any Customer Representative, Hospira shall provide at no cost to Hologic: (i) access to an on-site office; (ii) aconference room (if necessary for meetings), access to which shall be available per the scheduling process used by Hospiraemployees; (iii) parking facilities and toilet facilities; as well as (iv) reasonable access to and use of telephone, facsimile andphotocopying services as necessary. 7.5 Notification of Complaints. Hologic shall notify Hospira promptly of any Product complaints involving Hospira’s manufacture orpackaging in sufficient time to allow Hospira to evaluate the complaints and assist Hologic in responding to such complaints. 7.6 Product Recalls. In the event (a) any Regulatory Authority or other national government authority issues a request, directive or order thatProduct be recalled, (b) a court of competent jurisdiction orders such a recall, or (c) Hologic or Hospira reasonably determines that Product should be recalled,ststthe parties shall take all appropriate corrective actions, and shall cooperate in any governmental investigations surrounding the recall. In the event that suchrecall results from the breach of Hospira’s express warranties under Section 8.2(a) or (b) of this 11 [***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCHOMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATEDUNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. Agreement, Hospira shall be responsible for the expenses of the recall up to a maximum of [***]. In the event that the recall does not result from the breach ofHospira’s express warranties under this Agreement, Hologic shall be responsible for the expenses of the recall. For purposes of this Agreement, the expensesof the recall shall include, but not be limited to, the expenses of notification and destruction or return of the recalled Product, cost of the recalled Product, andany costs associated with the distribution of the replacement Product, but shall not include lost profits of either party. Article 8. WARRANTIES; COVENANTS AND INDEMNIFICATION 8.1 Hologic’s Warranties. (a) Hologic represents and warrants to Hospira that all API delivered to Hospira pursuant to this Agreement shall, at the time of delivery,not be adulterated or misbranded within the meaning of the Federal Food, Drug and Cosmetic Act, as amended, (the “Act”) or withinthe meaning of any applicable state or municipal law in which the definitions of adulteration and misbranding are substantially thesame as those contained in the Act, as the Act and such laws are constituted and effective at the time of delivery and will not be anarticle which may not under the provisions of Sections 404 and 505 of the Act be introduced into interstate commerce. (b) Hologic further warrants to Hospira that API supplied to Hospira hereunder shall meet the API Specifications set forth on Exhibit 1.2. (c) Hologic further warrants that all specifications including Active Pharmaceutical Ingredient Specifications and Product SpecificationsHologic provides to Hospira shall conform with the appropriate NDA Hologic files with the FDA. (d) Hologic further represents and warrants to Hospira that Hologic’s performance of its obligations under this Agreement will not resultin a material violation or breach of any agreement, contract, commitment or obligation to which Hologic is a party or by which it isbound and will not conflict with or constitute a default under its corporate charter or bylaws. (e) Hologic further represents and warrants that it will not sell Product into any jurisdiction unless and until it receives the necessaryRegulatory Authority approvals. For the sake of clarity, Hologic may not market, sell, or distribute any Product supplied by Hospiraunder this Agreement outside of the United States without Hospira’s prior written consent. 12 [***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCHOMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATEDUNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. 8.2 Hospira’s Warranties and Covenants. (a) Hospira represents and warrants to Hologic that Product Hospira delivers to Hologic pursuant to this Agreement shall, at the time ofdelivery, not be adulterated or misbranded within the meaning of the Act or within the meaning of any applicable state or municipallaw in which the definitions of adulteration and misbranding are substantially the same as those contained in the Act, as the Act andsuch laws are constituted and effective at the time of delivery and will not be an article which may not under the provisions ofSections 404 and 505 of the Act be introduced into interstate commerce. (b) Hospira further represents and warrants to Hologic that Product Hospira delivers to Hologic pursuant to this Agreement shall, at thetime of delivery, be free from defects in material and workmanship and shall be manufactured: (a) in accordance and conformity withthe Product Specifications; and (b) in compliance with all applicable statutes, laws, rules or regulations, including those relating tothe environment, food or drugs and occupational health and safety, including, without limitation, those enforced or promulgated bythe FDA (including, without limitation, compliance with cGMPs). (c) Hospira further represents and warrants to Hologic that Hospira’s performance of its obligations under this Agreement will not resultin a material violation or breach of any agreement, contract, commitment or obligation to which Hospira is a party or by which it isbound and will not conflict with or constitute a default under its Certificate of Incorporation or corporate bylaws. (d) The foregoing warranties shall not extend to any nonconformity or defect which relates to or is caused by API supplied by Hologic toHospira. Subject to Section 8.3, the replacement provisions of Sections 5.3(c) shall be Hologic’s sole and exclusive remedy fornonconforming or defective Product. (e) HOSPIRA MAKES NO OTHER WARRANTIES, EXPRESS OR IMPLIED, WITH RESPECT TO PRODUCT. ALL OTHERWARRANTIES, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION, THE IMPLIED WARRANTIES OFMERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE ARE HEREBY DISCLAIMED BY HOSPIRA. 8.3 Indemnification by Hospira. Hospira shall indemnify and hold harmless Hologic, its Affiliates, officers, directors and employees from andagainst all claims, causes of action, suits, costs and expenses (including reasonable attorney’s fees), losses or liabilities of any kind related to this Agreementand asserted by third parties to the extent such arise out of or are attributable to: (a) Hospira’s breach of any representation or warranty set forth in Section8.2(a) 13 [***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCHOMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATEDUNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. (b) or (c); (b) any violation of any proprietary right of any Third Party relating to Hospira’s manufacturing processes used in the manufacture of Productpursuant to this Agreement (excluding the Active Pharmaceutical Ingredient Specifications, Product Specifications, API, Drug or Product); or (c) anynegligent or wrongful act or omission on the part of Hospira, its employees, agents or representatives and which relate to Hospira’s performance hereunder. 8.4 Indemnification by Hologic. Hologic shall indemnify and hold harmless Hospira, its Affiliates, officers, directors and employees harmlessfrom and against all claims, causes of action, suits, costs and expenses (including reasonable attorney’s fees), losses or liabilities of any kind related to thisAgreement and asserted by third parties to the extent such arise out of or are attributable to (a) Hologic’s breach of any representation or warranty set forth inSection 8.1; (b) any violation of any proprietary right of any Third Party relating to the Active Pharmaceutical Ingredient Specifications, ProductSpecifications, API, Drug or Product, other than Hospira’s manufacturing processes used in the manufacture of Product pursuant to this Agreement; (c) the useof or lack of safety or efficacy of Drug or Product; and (d) any negligent or wrongful act or omission on the part of Hologic, its employees, agents orrepresentatives and which relate to Hologic’s performance hereunder. 8.5 Conditions of Indemnification. If either party seeks indemnification from the other hereunder, it shall promptly give notice to the otherparty of any such claim or suit threatened, made or filed against it which forms the basis for such claim of indemnification and shall cooperate fully with theother party in the investigation and defense of all such claims or suits. The indemnifying party shall have the option to assume the other party’s defense inany such claim or suit with counsel reasonably satisfactory to the other party. No settlement or compromise shall be binding on a party hereto without itsprior written consent, such consent not to be unreasonably withheld. 8.6 No Consequential Damages. NEITHER PARTY SHALL BE LIABLE TO THE OTHER FOR INDIRECT, INCIDENTAL, SPECIAL,PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES RESULTING FROM ANY BREACH OF THIS AGREEMENT EVEN IF THE PARTY HASBEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. Article 9. INTELLECTUAL PROPERTY RIGHTS 9.1 Hospira’s Proprietary Rights. Hospira has granted no license, express or implied, to Hologic to use Hospira proprietary technology, know-how or other proprietary rights (i) existing as of the Effective Date, or (ii) developed by or for Hospira on or after the Effective Date outside the scope of anyProject undertaken by Hospira pursuant to this Agreement. Hospira shall be the sole owner of any proprietary technology, know-how or other proprietaryrights developed by or for Hospira pursuant to any Project undertaken by Hospira (the “Project Inventions”). However, Hospira shall grant to Hologic, anddoes hereby grant to Hologic, an exclusive (even as to Hospira), royalty-free, paid up, worldwide, perpetual license under such Project Inventions to make,have made, use, offer for sale, sell, and/or import Drug and Product. 14 [***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCHOMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATEDUNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. 9.2 Hologic’s Proprietary Rights. Hologic has granted no license, express or implied, to Hospira to use Hologic’s proprietary technology, know-how or other proprietary rights other than for the purposes of this Agreement. Article 10. TERM AND TERMINATION 10.1 Term. [***]. 10.2 Termination of Product Development Project. [***]. 10.3 Failure to Obtain Regulatory Approval. Either party may terminate this Agreement by giving to the other party [***] months prior writtennotice if the Product has not received FDA regulatory approval by July 1, 2012. 10.4 General Termination Rights. Either party may terminate this Agreement as follows: (a) Immediately by providing written notice upon the bankruptcy or the insolvency of the other party; or (b) By giving to the other party [***] days’ prior written notice upon the breach of any warranty or any other material provision of thisAgreement by the other party if the breach is not cured within [***] days after written notice thereof to the party in default.Notwithstanding the previous sentence, Hospira shall not have the right to terminate this Agreement based on a breach of Hologic’srepresentations and warranties under Section 8.1(a) or (b) of this Agreement if (i) at the time of such breach Hospira still has asufficient amount of remaining inventory of API, which meets the warranties under Section 8.1(a) and (b), to satisfy Hospira’s grossmanufacturing requirements of Product under this Agreement or (ii) Hologic is using reasonable commercial efforts to cure the breachas soon as reasonably possible. 10.5 Accrued Payment Obligations. Upon termination pursuant to this Article 10, Hologic shall reimburse Hospira for Hospira’s cost of allsupplies purchased and on hand or on order, if such supplies were ordered by Hospira based on firm purchase orders or Hologic’s estimates of its requirementsof Product, and such supplies cannot be reasonably used by Hospira for other purposes. Hospira shall invoice Hologic for all amounts due hereunder.Payment shall be made pursuant to Section 5.8. 10.6 Return of Inventory. In the event of any termination, Hospira shall return any remaining inventory of API and Product to Hologic atHologic’s expense, unless such termination shall have been as a result of a breach of this Agreement by Hospira, in which case such inventory shall bereturned at Hospira’s expense. 15 [***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCHOMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATEDUNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. 10.7 Survival. Expiration or early termination of this Agreement shall not relieve either party of any obligations that it may have incurred priorto expiration or early termination and all covenants and agreements contained in this Agreement, which by their terms or context are intended to survive, willcontinue in full force and effect for a period of [***] years unless a different time period is indicated in this Agreement. Article 11. CONFIDENTIAL INFORMATION 11.1 Nondisclosure. It is contemplated that in the course of the performance of this Agreement each party may, from time to time, discloseConfidential Information to the other. Hospira agrees that, except as expressly provided herein, it shall not disclose Confidential Information received fromHologic, and shall not use Confidential Information disclosed to it by Hologic, for any purpose other than to fulfill Hospira’s obligations hereunder. Hologicagrees that, except as expressly provided herein, it shall not disclose Confidential Information received from Hospira, and shall not use ConfidentialInformation disclosed to it by Hospira, for any purpose other than to fulfill Hologic’s obligations hereunder. 11.2 Exceptions to Duty of Nondisclosure. Notwithstanding the above, nothing contained in this Agreement shall preclude Hologic or Hospirafrom utilizing Confidential Information as may be necessary in prosecuting patent rights of either party pursuant to Article 9, obtaining governmentalmarketing approvals, manufacturing Product pursuant to the terms and conditions of this Agreement, or complying with other governmental laws andregulations or court orders (provided that the party disclosing such information uses reasonable efforts to seek confidential treatment of such information,except as required to file and prosecute such patent applications). The obligations of the parties relating to Confidential Information shall expire [***] yearsafter the termination of this Agreement. 11.3 Public Announcements. Neither party shall make any public announcement concerning the transactions contemplated herein, or make anypublic statement which includes the name of the other party or any of its Affiliates, or otherwise use the name of the other party or any of its Affiliates in anypublic statement or document, except as may be required by law or judicial order, without the written consent of the other party, which consent shall not beunreasonably withheld. Subject to any legal or judicial disclosure obligation, any such public announcement proposed by a party that names the other partyshall first be provided in draft to the other party. 11.4 Injunctive Relief. The parties acknowledge that either party’s breach of this Article 11 may cause the other party irreparable injury forwhich it would not have an adequate remedy at law. In the event of a breach, the non-breaching party may be entitled to injunctive relief in addition to anyother remedies it may have at law or in equity 16 [***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCHOMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATEDUNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. Article 12. MISCELLANEOUS 12.1 Force Majeure and Failure of Suppliers. (a) Excusable Delay. Any delay in the performance of any of the duties or obligations of either party hereto (except the payment ofmoney) shall not be considered a breach of this Agreement and the time required for performance shall be extended for a period equalto the period of such delay, provided that such delay has been caused by or is the result of any acts of God, acts of the public enemy,insurrections, riots, embargoes, labor disputes, including strikes, lockouts, job actions, boycotts, fires, explosions, floods, shortagesof material or energy, or other unforeseeable causes beyond the control and without the fault or negligence of the party so affected.The affected party shall give prompt notice to the other party of such cause, and shall take promptly whatever reasonable steps arenecessary to relieve the effect of such cause. (b) Transfer of Production. If Hospira becomes subject to an event of force majeure which interferes with production of Product atHospira’s [***] plant, the parties shall mutually agree on implementation of an agreed-upon action plan to transfer production ofProduct to another Hospira plant. The parties shall, after the execution of this Agreement and at the request of either party, meet todiscuss and define such an action plan. (c) Failure of Suppliers. The parties understand and agree that Hologic has chosen the excipient and primary container packagingcomponent suppliers listed in the Product Specifications. Under no circumstances shall Hospira have any liability to Hologic, norshall Hospira be deemed to be in breach of this Agreement, if Hospira is unable to supply Product to Hologic due to a failure of suchsuppliers to provide such excipients and/or primary container packaging components to Hospira. 12.2 Notices. All notices hereunder shall be delivered as follows: (a) personally; (b) by registered or certified mail (postage prepaid); or (c) byovernight courier service, to the following addresses of the respective parties: If to Hologic:35 Crosby DriveBedford Massachusetts 01730Attention: General Counsel If to Hospira:Hospira, Inc.275 North Field DriveLake Forest, Illinois 60045Attn: VP & GM Contract Manufacturing Services 17 [***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCHOMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATEDUNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. With copy to:Hospira, Inc.Attention: General CounselBuilding HI; Department NLEG275 N. Field DriveLake Forest, IL 60045 Notices shall be effective upon receipt if personally delivered, on the third business day following the date of registered or certified mailing or onthe first business day following the date of or delivery to the overnight courier. A party may change its address listed above by written notice to the otherparty. 12.3 Choice of Law. This Agreement shall be construed, interpreted and governed by the laws of the State of New York, excluding its choice oflaw provisions. The United Nations Convention on the International Sale of Goods is hereby expressly excluded. 12.4 Dispute Resolution. The parties recognize that bona fide disputes may arise which relate to the parties’ rights and obligations under thisAgreement. In the event of a dispute, the parties mutually agree that except as provided in Section 5.10 and 11.4, any such dispute shall be resolved byalternative dispute resolution in accordance with the procedure set forth in Exhibit 12.4.. 12.5 Assignment. Neither party shall assign this Agreement nor any part thereof without the prior written consent of the other party; provided,however; (a) either party may assign this Agreement to one of its wholly-owned subsidiaries or its parent corporation without such consent; and (b) eitherparty, without such consent, may assign this Agreement in connection with the transfer, sale or divestiture of all or substantially all of its business to whichthis Agreement pertains or in the event of its merger or consolidation with another company. Any permitted assignee shall assume all obligations of itsassignor under this Agreement. No assignment shall relieve any party of responsibility for the performance of any accrued obligation which such party thenhas hereunder. Hologic shall ensure that any and all distributors and wholesalers who have the right to distribute and/or sell the Product in the United Statesshall acquire the Products from Hologic the Products supplied by Hospira under the terms of this Agreement and that in the event that Hologic, sells, assigns,licenses or otherwise conveys, in any manner, any of its rights or interests into Gestiva, Hologic will assign this Agreement as part of such transfer. 12.6 Entire Agreement. This Agreement, together with the Exhibits referenced and incorporated herein, constitute the entire agreement betweenthe parties concerning the subject matter hereof and supersede all written or oral prior agreements or understandings with respect thereto. 12.7 Severability. This Agreement is subject to the restrictions, limitations, terms and conditions of all applicable governmental regulations,approvals and clearances. If any term or 18 [***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCHOMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATEDUNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. provision of this Agreement shall for any reason be held invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shallnot affect any other term or provision hereof, and this Agreement shall be interpreted and construed as if such term or provision, to the extent the same shallhave been held to be invalid, illegal or unenforceable, had never been contained herein. 12.8 Waiver-Modification of Agreement. No waiver or modification of any of the terms of this Agreement shall be valid unless in writing andsigned by authorized representatives of both parties. Failure by either party to enforce any such rights under this Agreement shall not be construed as a waiverof such rights, nor shall a waiver by either party in one or more instances be construed as constituting a continuing waiver or as a waiver in other instances. 12.9 Insurance. Each party will procure and maintain, at its own expense, for the duration of the Agreement, and for [***] years thereafter ifwritten on a claims made or occurrence reported form, the types of insurance specified below with carriers rated A- VII or better with A. M. Best or like ratingagencies: a. Workers’ Compensation accordance with applicable statutory requirements and shall provide a waiver of subrogation in favor of theother party; b. Employer’s Liability with a limit of liability in an amount of not less than $[***]; c. Commercial General Liability including premises operations, products & completed operations, blanket contractual liability, personalinjury and advertising injury including fire legal liability for bodily injury and property damage in an amount not less than $[***] peroccurrence and $[***] in the aggregate; d. Commercial Automobile Liability for owned, hired and non-owned motor vehicles with a combined single limit in an amount not lessthan $[***] each occurrence; e. Excess Liability including products liability with a combined single limit in an amount of not less than $[***] per occurrence and inthe aggregate; Each party shall include the other party and its Affiliates, directors, officers, employees and agents as additional insureds with respect to Commercial GeneralLiability, Commercial Automobile Liability and Excess Liability but only as their interest may appear by written contract. Prior to commencement ofservices, and annually thereafter, each party shall furnish to the other party certificates of insurance evidencing the insurance coverages stated above andshall require at least [***] days written notice to the other party prior to any cancellation, non-renewal or material change in said coverage. In the case ofcancellation, non-renewal or material change in said coverage, each party shall promptly provide to the other party with a new 19 [***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCHOMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATEDUNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. certificate of insurance evidencing that the coverage meets the requirements in this Section. Each party agrees that its insurance shall act as primary andnoncontributory from any other valid and collectible insurance maintained by the other party. Each party may, at its option, satisfy, in whole or in part, itsobligation under this Section through its self- insurance program. 12.10 Exhibits. All Exhibits referred to herein are hereby incorporated by reference. 12.11 Debarment Warranty. Hospira and Hologic represent and warrant that neither party uses nor will use in the future use in any capacity theservices of any person debarred under Section (a) or (b) of 21 U.S.C. Section 335a. 20 [***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCHOMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATEDUNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. IN WITNESS WHEREOF, the parties intending to be bound by the terms and conditions hereof have caused this Agreement to be signed by theirduly authorized representatives as of the date first above written. HOSPIRA WORLDWIDE, INC.HOLOGIC, INC By:/s/ Tony CacichBy:/s/ Robert A. Cascella Name:Tony CacichName: Robert A. Cascella Title:VP & GM Contract Manufacturing ServicesTitle:President 21 [***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCHOMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATEDUNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. Exhibit 1.2 Active Pharmaceutical Ingredient, Hydroxyprogesterone Caproate [***], Specifications Test MethodAcceptanceCriteria Method ofAcceptanceAppearance (Visual)[***]Hospira to TestColor (Visual)[***]Hospira to TestVisible impurities (Visual)[***]Hospira to TestIdentification (USP 31 <197K>; FTIR, BPS SOP 303-08-03-001)[***]Hospira to TestAssay (USP 31 UV Spectroscopy)[***]Hospira to TestFree Caproic Acid (USP 31 Titrimetric Assay)[***]Hospira to TestMelting Point (USP 31 <741> Class Ia)[***]Hospira to TestRelated Substances (Ordinary Impurities)- total (USP 31 <466>TLC)[***]Hospira to TestResidual Solvents (Gas Chromatography)CyclohexaneHexaneMethanolMethylene chloride[***] Hospira to TestSpecific Rotation (USP 31 <781S>; 25°C/1% in chloroform/anhydrous substance)[***]Hospira to TestWater (USP 31 Method I <921>; KF)[***]Hospira to TestBioburden [EP 2.6.12; Microbial Examination of Non-Sterile Products (Total ViableAerobic Count)][***]Vendor CoAEndotoxin(USP 31 <85>; Gel-Clot Limit Test)[***]Vendor CoA 22 [***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCHOMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATEDUNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. Exhibit 1.9 17P Drug Product Specifications Finished Product TestSpecificationAssay (Hydroxyprogesterone Caproate content)*[***]Identification[***]Purity*Total1. 17 alpha-Hydroxyprogesterone (RRT: 0.35)2. Specified (RRTs: 0.49,0.76, 0.83 and 1.24)3. Unspecified[***]Benzyl Alcohol*[***]Water Content[***]Volume Recovery[***]Visual Inspection (Appearance)*[***]Particulate Matter*[***]Bacterial Endotoxin*[***]Sterility*[***] * [***] 23 [***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCHOMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATEDUNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. Exhibit 2.1 Project Development Activities Milestone I Not Responsibility Project Initiation Req. Req. N/A Hospira Client CommentProduct and process evaluationXXIdentify filling line requirementsXXInitiate technical transferXXXProject managementXXPrice:$[***]Payment:Following kick-offTiming:July 2009 Not Responsibility Equipment Req. Req. N/A Hospira Client CommentDedicated compounding tankX X[***]Dedicated solution path partsX XOther dedicated equipmentX XFilling needles, cams as determined fromfeasibility studyPrice:Approximately $[***] 24 [***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCHOMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATEDUNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. Milestone II Not Responsibility Project Development Req. Req. N/A Hospira Client CommentFormulation development X Lyophilization cycle development X Sterilization cycle development X Develop analytical methods(incoming API, excipients, in-process, release)X X[***]Validate analytical methodsX XHologic to provide [***] validationpackagesTransfer analytical methodsX X X$[***]Develop product cleaning methodX XProvide [***] validation packageValidate product cleaning methodX X [***]Material contact studyX X Review [***] study to determine if it’sacceptable for substitution $[***]Incoming API BET methoddevelopment/validationX XProvided on [***]Incoming API aerobic microbialcount methoddevelopment/validationX XProvided on [***]In-process bioburden methoddevelopment/validationX XFinished product BET methoddevelopment/validationX X $[***]Finished product sterility methoddevelopment/validationX X $[***]Perform, freeze/thaw study X Perform ad-mixture study X Perform stopper extractablestudiesX X XHospira to complete study for [***]-$[***]Perform stopper moisture studiesand drying process developmentX X $[***] 25 [***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCHOMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATEDUNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. Milestone II Not Responsibility Project Development Req. Req. N/A Hospira Client CommentGenerate test method andspecification documentationX X Hologic to provide [***] TM validationreports - $[***]Prepare batch recordsX X Hologic to provide copy of [***] MBR -$[***]Prepare new commodityspecifications (vial, stopper, seal)X X $[***]Price:$[***]Payment:On approved product monograph for Gestiva. Productmonograph consists of the [***].Timing:October 2009 26 [***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCHOMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATEDUNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. Milestone IIIEngineering andRegistration Batch Not Responsibility ProductionReq.Req. N/AHospira ClientPriceCommentR&D pilot plant batch X Engineering batchX X[***] L-$[***] [***] L-$[***][***] L completed prior to exhibitbatches, [***] L completed prior toPV batchesClinical batchX XPrice is batch size dependentPlacebo batchX XPrice is batch size dependentRegistration batchX X[***] L SplitFill - $[***] [***] LNo split -$[***]Split fill one registration batch with[***] and [***] stopper. Other tworegistration batches will be with[***] stopper. Analytical testing tobe completed by [***] if techtransfer not completed.Payment:Prior to each lot productionTiming:Engineering [***] L - September 2009 Exhibit Batch [***] L - October 2009 Engineering [***] L - Q2 2010 Process Validation/Commercial - Q2 2010 27 [***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCHOMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATEDUNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. Milestone IVProcess Validation Not Responsibility and Review Req. Req. N/A Hospira Client CommentDevelop product validation planX X $[***]Equipment cleaning validationX X $[***]Freezer validation X Tank validationX X Includes tank, dispenser, and all fill linecomponents - $[***]Lyophilization validation X D/z determination X Filter validationX XShipping validation studiesX XContainer closure study (3 runs)X X $[***]Media fill validation (3 runs) X Solution hold time validation (3runs)X X Hologic to provide [***] processvalidation package - $[***]Mix time/full uniformityvalidation (3 runs)X X Hologic to provide [***] processvalidation package - $[***]Stopper Drying ValidationX X Complete for the [***] and [***]stopper - $[***]Price:$[***]Payment:½ upon approval of protocols ½ upon approval of validation reportTiming:Q2 2010 Milestone VRegulatory FilingPreparation and Not Responsibility Submission Req. Req. N/A Hospira Client CommentPrepare and review regulatoryfilings (specify # of filings incomments)X XOriginal NDA CMC sections,amendments, including April,September 2008 and June 2009 INDPrepare/review deficiencyresponsesX X XUnited States OnlySupport quality assurance reviewsand auditsX X United States Only 28 [***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCHOMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATEDUNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. Milestone VRegulatory FilingPreparation and Not Responsibility Submission Req. Req. N/A Hospira Client CommentPerform readiness assessment priorto pre-approval inspectionX X United States OnlySupport regulatory agencyinspectionX X United States OnlyPost-approval support of filingsX X United States OnlyQuality agreement developmentX X United States OnlyPrice:$[***]If additional support required, Hospirawill bill at a rate of $[***].Payment:Upon submissionTiming:Q2 2010 29 [***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCHOMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATEDUNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. Milestone VI Not Responsibility Commercialization Req. Req. N/A Hospira Client CommentFinal product — primary labelingdevelopmentX X Final product - product insertdevelopmentX X Final product — unit cartondevelopmentX X Revise monographs,specifications, and batch recordsX X Price:$[***]Payment:Upon shipment of first commercial batchTiming:Q4 2010 Not Responsibility StabilityReq. Req. N/A Hospira Client PriceCommentEngineering stability X Clinical stabilitiesX X TBDTo be determinedonce conditions areknown.Registration batch stabilityX X X$[***]/ batch$[***] ([***]batches) $[***]([***] batches)If HSP does notcomplete tech transferprior to batchmanufacture, [***] tocomplete testing.Commercial product stabilityX X $[***]/ batchPhoto stabilityXPrice:$[***]Payment:Mutually agreed upon yearly scheduleTiming:As manufacture of batches require 30 [***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCHOMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATEDUNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. Stability Program for Gestiva Registration batches will be performed on 1) product utilizing [***] stopper, 2) product utilizing [***] stopper and 3)[***] filled product. The stability testing program consists of the following (reference Exhibit 1.9 for stability indicating test methods): [***] Developmental Stability Program Pricing - Gestiva [***] Vial Program CostRegistration Stability (per batch)$[***]Registration Stability ([***] batches simultaneously)$[***]Registration Stability ([***] batches simultaneously)$[***]Clinical StabilityTBDPlacebo StabilityTBD Developmental Stability Testing Pricing by Time Point - Gestiva [***] Vial [***][***][***][***][***][***][***][***][***][***][***][***][***][***][***][***][***][***][***][***][***][***][***][***][***][***][***][***][***][***][***][***][***][***][***][***][***][***][***][***][***][***][***][***] 31 [***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCHOMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATEDUNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. Exhibit 3.1 Payment Schedule Payment of the Development Fee shall be in accordance with the following schedule: (a) [***] upon execution of kickoff meeting and receipt of Hospira’s invoice for the amount due (Milestone I); (b) [***] within [***] days after Hospira has an approved product monograph for Gestiva. The Product monograph consists of the commodities,specifications, and methods used for the manufacture of Gestiva and the invoice for the amount due from Hospira (Milestone II); (c) [***] within [***] days of approval of validation protocols (Milestone IV); (d) [***] within [***] days of approval of validation reports (Milestone IV); (e) [***] within [***] days of submission of regulatory filing (Milestone V); and (f) [***] within [***] days of shipment of first commercial batch (Milestone VI). 32 [***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCHOMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATEDUNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. Exhibit 5.8 Product and Stability Testing Prices Developmental Product (Milestone III) [***] Vial [***][***][***][***][***][***][***][***][***][***][***][***][***][***] Commercial Product [***] Vial [***][***][***][***][***][***][***][***][***][***][***][***][***][***][***][***][***][***][***] * * Price is based on Hologic not purchasing [***] of its requirements of the Product from Hospira as may be permitted under Section 5.1 of theAgreement. [***] Total Annual VolumePrice per UnitTBDTBD 33 [***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCHOMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATEDUNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. Commercial Stability Testing Stability Program for Gestiva Commercial Product consists of the following (reference Exhibit 1.9 for stability indicating test methods): [***] Commercial Stability Program Pricing - Gestiva [***] Vial [***][***][***][***] Commercial Stability Testing Pricing by Time Point - Gestiva [***] Vial [***][***][***][***][***][***][***][***][***][***][***][***][***][***][***][***][***][***][***][***][***][***] 34 [***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCHOMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATEDUNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. Exhibit 7.1 Product Test Methods In consultation with Hologic, no later than [***] days after the Effective Date, Hospira will use all reasonable efforts to prepare and complete documentationdescribing the procedures, methods and protocols by which the Products will be tested and released, as specified in Section 7.1 of the Agreement. Uponcompletion, such documentation shall be attached to this Exhibit 7.1 and shall be made an integral part of this Agreement. 35 [***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCHOMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATEDUNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. Exhibit 7.2 Form of Quality Agreement [Omitted.] 36 [***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCHOMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATEDUNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. Exhibit 12.4 Alternative Dispute Resolution The parties recognize that bona fide disputes as to certain matters may arise from time to time during the term of this Agreement which relate to either party’srights and/or obligations. To have such a dispute resolved by this Alternative Dispute Resolution (“ADR”) provision, a party first must send written notice ofthe dispute to the other party for attempted resolution by good faith negotiations between their respective presidents (or their designees) of the affectedsubsidiaries, divisions, or business units within [***] days after such notice is received (all references to “days” in this ADR provision are to calendar days). If the matter has not been resolved within [***] days of the notice of dispute, or if the parties fail to meet within such [***] days, either party may initiate anADR proceeding as provided herein. The parties shall have the right to be represented by counsel in such a proceeding. 1. To begin an ADR proceeding, a party shall provide written notice to the other party of the issues to be resolved by ADR. Within [***] days after itsreceipt of such notice, the other party may, by written notice to the party initiating the ADR, add additional issues to be resolved within the same ADR. 2. Within [***] days following receipt of the original ADR notice, the parties shall select a mutually acceptable neutral to preside in the resolution ofany disputes in this ADR proceeding. If the parties are unable to agree on a mutually acceptable neutral within such period, either party may request thePresident of the CPR Institute for Dispute Resolution (“CPR”), 366 Madison Avenue, 14th Floor, New York, New York 10017, to select a neutral pursuant tothe following procedures: (a) The CPR shall submit to the parties a list of not less than [***] candidates within [***] days after receipt of the request, along with aCurriculum Vita for each candidate. No candidate shall be an employee, director, or shareholder of either party or any of their subsidiaries or Affiliates. (b) Such list shall include a statement of disclosure by each candidate of any circumstances likely to affect his or her impartiality. (c) Each party shall number the candidates in order of preference (with the number one (1) signifying the greatest preference) and shall deliverthe list to the CPR within [***] days following receipt of the list of candidates. If a party believes a conflict of interest exists regarding any of the candidates,that party shall provide a written explanation of the conflict to the CPR along with its list showing its order of preference for the candidates. Any party failingto return a list of preferences on time shall be deemed to have no order of preference. 37 [***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCHOMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATEDUNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. (d) If the parties collectively have identified fewer than [***] candidates deemed to have conflicts, the CPR immediately shall designate as theneutral the candidate for whom the parties collectively have indicated the greatest preference. If a tie should result between two candidates, the CPR maydesignate either candidate. If the parties collectively have identified three (3) or more candidates deemed to have conflicts, the CPR shall review theexplanations regarding conflicts and, in its sole discretion, may either (i) immediately designate as the neutral the candidate for whom the parties collectivelyhave indicated the greatest preference, or (ii) issue a new list of not less than five (5) candidates, in which case the procedures set forth in subparagraphs 2(a)-2(d) shall be repeated. 3. No earlier than [***] days or later than [***] days after selection, the neutral shall hold a hearing to resolve each of the issues identified by theparties. The ADR proceeding shall take place at a location agreed upon by the parties. If the parties cannot agree, the neutral shall designate a location otherthan the principal place of business of either party or any of their subsidiaries or Affiliates. 4. At least [***] days prior to the hearing, each party shall submit the following to the other party and the neutral: (a) a copy of all exhibits on which such party intends to rely in any oral or written presentation to the neutral; (b) a list of any witnesses such party intends to call at the hearing, and a short summary of the anticipated testimony of each witness; (c) a proposed ruling on each issue to be resolved, together with a request for a specific damage award or other remedy for each issue. Theproposed rulings and remedies shall not contain any recitation of the facts or any legal arguments and shall not exceed one (1) page per issue. (d) a brief in support of such party’s proposed rulings and remedies, provided that the brief shall not exceed twenty (20) pages. This page limitationshall apply regardless of the number of issues raised in the ADR proceeding. Except as expressly set forth in subparagraphs 4(a)-4(d), no discovery shall be required or permitted by any means, including depositions, interrogatories,requests for admissions, or production of documents. 5. The hearing shall be conducted on [***] consecutive days and shall be governed by the following rules: (a) Each party shall be entitled to [***] hours of hearing time to present its case. The neutral shall determine whether each party has had the[***] hours to which it is entitled. 38 [***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCHOMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATEDUNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. (b) Each party shall be entitled, but not required, to make an opening statement, to present regular and rebuttal testimony, documents or otherevidence, to cross-examine witnesses, and to make a closing argument. Cross-examination of witnesses shall occur immediately after their direct testimony,and cross-examination time shall be charged against the party conducting the cross-examination. (c) The party initiating the ADR shall begin the hearing and, if it chooses to make an opening statement, shall address not only issues it raisedbut also any issues raised by the responding party. The responding party, if it chooses to make an opening statement, also shall address all issues raised in theADR. Thereafter, the presentation of regular and rebuttal testimony and documents, other evidence, and closing arguments shall proceed in the samesequence. (d) Except when testifying, witnesses shall be excluded from the hearing until closing arguments. (e) Settlement negotiations, including any statements made therein, shall not be admissible under any circumstances. Affidavits prepared forpurposes of the ADR hearing also shall not be admissible. As to all other matters, the neutral shall have sole discretion regarding the admissibility of anyevidence. 6. Within [***] days following completion of the hearing, each party may submit to the other party and the neutral a post-hearing brief in support of itsproposed rulings and remedies, provided that such brief shall not contain or discuss any new evidence and shall not exceed [***] pages. This page limitationshall apply regardless of the number of issues raised in the ADR proceeding. 7. The neutral shall rule on each disputed issue within [***] days following completion of the hearing. Such ruling shall adopt in its entirety theproposed ruling and remedy of one of the parties on each disputed issue but may adopt one party’s proposed rulings and remedies on some issues and theother party’s proposed rulings and remedies on other issues. The neutral shall not issue any written opinion or otherwise explain the basis of the ruling. 8. The neutral shall be paid a reasonable fee plus expenses. These fees and expenses, along with the reasonable legal fees and expenses of theprevailing party (including all expert witness fees and expenses), the fees and expenses of a court reporter, and any expenses for a hearing room, shall be paidas follows: (a) If the neutral rules in favor of one party on all disputed issues in the ADR, the losing party shall pay [***] of such fees and expenses. (b) If the neutral rules in favor of one party on some issues and the other party on other issues, the neutral shall issue with the rulings a writtendetermination as to how such fees and expenses shall be allocated between the parties. The neutral shall allocate fees and expenses 39 [***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCHOMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATEDUNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. in a way that bears a reasonable relationship to the outcome of the ADR, with the party prevailing on more issues, or on issues of greater value or gravity,recovering a relatively larger share of its legal fees and expenses. 9. The rulings of the neutral and the allocation of fees and expenses shall be binding, non-reviewable, and non-appealable, and may be entered as afinal judgment in any court having jurisdiction. 10. Except as provided in paragraph 9 or as required by law, the existence of the dispute, any settlement negotiations, the ADR hearing, any submissions(including exhibits, testimony, proposed rulings, and briefs), and the rulings shall be deemed Confidential Information. The neutral shall have the authorityto impose sanctions for unauthorized disclosure of Confidential Information. 12. The neutral may not award punitive damages. The parties hereby waive the right to punitive damages. 13. The hearings shall be conducted in the English language. 40Exhibit 10.32 [***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCHOMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATEDUNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. FIRST AMENDMENT TO DEVELOPMENT AND SUPPLY AGREEMENT THIS FIRST AMENDMENT TO DEVELOPMENT AND SUPPLY AGREEMENT (this “First Amendment”“) is entered into as of the 28th day ofMarch, 2014 by and between K-V Pharmaceutical Company (“KV”) and Hospira Worldwide, Inc. (“Hospira”) to amend the terms of that certain Developmentand Supply Agreement between Hospira and Hologic, Inc. dated September 17, 2009 which was subsequently assigned to KV by Hologic (the “Agreement”‘). Whereas, KV and Cytyc Prenatal Products Corp., a wholly owned subsidiary of Hologic entered into an Asset Purchase Agreement dated January 16,2008, and as subsequently amended, (collectively, the “APA”) pursuant to which KV agreed to purchase the worldwide rights to the product Gestiva (nowknown as Makena) (hydroxyprogesterone caproate injection) and its related assets; and Whereas, In connection with the APA, KV agreed to assume the Agreement; and Whereas, Hologic notified Hospira of such assignment in accordance with Section 12.5 of the Agreement by letter dated February 10, 2011 fromMr. Robb Hesley, Vice President, Business Development, Hologic to Mr. Cacich, VP & GM Contract Manufacturing Services, Hospira; and Whereas, Hospira and KV have continued to perform their respective obligations under the Agreement since such assignment; and Whereas, KV assumed the Agreement in connection with its bankruptcy proceedings jointly administered under Case No. 12-13346 in the UnitedStates Bankruptcy Court for the Southern District of New York; and Whereas, Hospira has confirmed its intention to continue to perform under the Agreement by letter dated September 11, 2013 from Mr. Kevin Orfan,Vice President, One 2 One (Hospira) to Mr. Daniel Thompson, Chief Compliance Officer and Vice President Business Development, KV; and Whereas, Hospira and KV mutually desire to amend the terms of the Agreement to reflect, among other items, the development of a [***] Product (ashereinafter defined), the pricing for the [***] Product and the minimum purchase requirements with respect to the Product and the [***] Product. Now, therefore in consideration of the mutual promises and agreements contained herein, the parties agree to amend the Agreement as follows: 1. Incorporation of the Agreement. All capitalized terms which are not defined herein shall have the same meanings as set forth in the Agreement, andthe Agreement is incorporated herein by this reference as though the same was set forth in its entirety. Except as specifically set forth herein, theAgreement shall remain in full force and effect and its provisions shall be binding on the parties hereto. 2. Transfer of Agreement to KV. The parties hereby recognize the transfer of the Agreement from Hologic to KV. All references to Hologic shall nowrefer to KV. [***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCHOMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATEDUNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. 3. Definitions. 3.1 The definition of “Product” is revised as follows: · “Product” shall mean the Drug in final dosage form, filled in a [***] vial, including labeling and secondary packaging meeting the ProductSpecifications. 3.2 The following definitions are added to the Agreement: a. “[***] Product” shall mean the Drug in final dosage form, filled in a [***] vial, including labeling, and secondary packaging meeting the [***]Product Specifications. b. “[***] Product Specifications” shall mean the Product Specifications for the [***] Product. c. “Submission Batches” shall mean the manufacture of [***] registration batches of the [***] Product manufactured under GMP conditions thatmeet the [***] Product Specifications as demonstrated by internal testing and as set forth in Exhibits 3 and 4 to this First Amendment. d. “Target Date” is August 28, 2014, the date by which Hospira must complete the Submission Batches. The Parties shall revise the Target Date toreflect any additional time needed to address (i) any change in the assumptions set forth on Exhibit 3; (ii) any delay resulting from the action,inaction or negligence of KV; and/or or (iii) any delay due in no fault to either party. Notwithstanding the foregoing, the Target Date shall not berevised if such delay is caused by the actions, inaction or negligence of Hospira. 4. Addition of [***] Product to the Agreement. Except as otherwise set forth herein, the Agreement shall be amended to include the [***] Productwhen the term “Product” is referenced, including by way of example and not of exclusion: · Article 4 shall apply to the [***] Product and [***] Project;· Article 5 shall apply to the [***] Product and [***] Project except as amended below;· Article 6 shall apply to the [***] Product and [***] Project except as amended below;· Article 7 shall apply to the [***] Product and [***] Project;· Article 8 shall apply to the [***] Product and [***] Project;· Article 9 shall apply to the [***] Product and [***] Project;· Article 10 shall apply to the [***] Product and [***] Project except as amended below; and· Article 11 shall apply to the [***] Product and [***] Project;· Article 12 shall apply to the [***] Product and [***] Project. For purposes of the [***] Project, Articles 2 and 3 of the Agreement shall be deleted in their entirety and replaced as set forth in Sections 5 and 6below. 5. Article 2, Development Program. · [***] Project. The activities set forth in Article 2 of the Agreement regarding the Project have been completed. The parties agree promptly afterthe Effective Date of this First Amendment (as set forth in Section 11) to undertake a product development project to develop the [***] Productconsisting of the development activities set forth in Exhibits 3 and 4 attached hereto (the “[***] Project”). As set forth in the [***] Project,Hospira shall assist KV in the development of the [***] Product and in obtaining an approved FDA filing for the 2 [***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCHOMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATEDUNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. [***] Product. Subject to the approval of the applicable Regulatory Authorities, Hospira shall manufacture and deliver [***] Product to KV forsale by KV as a human pharmaceutical. The current scope of the [***] Project is a flip top vial presentation. Each party shall use itscommercially reasonable efforts to successfully complete the [***] Project. However, the parties agree and understand that neither party heretoguarantees that the [***] Project will be successful, nor warrants or guarantees that a marketable [***] Product will result from the [***] Project. · [***] Project. KV and Hospira agree that Hospira will not develop a [***] presentation of the Product. 6. Article 3, Payment for Hospira’s Development Efforts. To reimburse Hospira for its efforts in the [***] Project, KV shall pay to Hospira anonrefundable development fee of [***] (the “[***] Development Fee”); provided such amount shall adjust as set forth in the Agreement (asamended hereby) in the event of early termination in accordance with the terms and conditions of the Agreement (as amended hereby). The [***]Development Fee shall be paid to Hospira in accordance with the payment schedule set forth in Exhibit 4. KV has already paid [***] of the [***]Development Fee which is noted in Exhibit 4. In addition to the [***] Development Fee, KV shall pay to Hospira a development incentive fee as setforth in the schedule in Exhibit 4 (the [***] Development Incentive Fee”) in the event that Hospira completes the Submission Batches prior to theTarget Date. If earned by Hospira, KV shall pay the [***] Development Incentive Fee to Hospira in accordance with the payment schedule inExhibit 4. For the avoidance of doubt, Sections 3.2, 3.3 and 3.4 of the Agreement shall also apply to the [***] Project. 7. Article 5, Manufacture and Supply of Product. Article 5 shall apply to the Product and the [***] Product subject to the following revisions: · Section 5.1 Purchase and Sale of Product is hereby deleted in its entirety and replaced with the following: 5.1 Purchase and Sale of Product. Pursuant to the terms and conditions of this Agreement and for the duration of this Agreement, Hospirashall manufacture, sell and deliver Product and [***] Product to KV for sale in the United States. · Section 5.8(a) Price is hereby deleted in its entirety and replaced with the following: Hospira shall invoice KV for Product and [***] Product delivered by Hospira at the prices set forth below. These prices are for United Statesvial Product and [***] Product presentations only. Prices are firm through December 31, 2014. Beginning on January 1, 2015, and on eachsucceeding January 1 during the term hereof, Hospira may increase the prices of the Product and the [***] Product by giving KV no lessthan [***] days’ written notice of such price change. Price increases shall be effective for orders for Product and [***] Product filled afterJanuary 1 of each calendar year. Such increases shall not exceed the [***]. For the sake of clarity, the Product Price includes bulkpackaging (i.e. case and pallet) of the Product. 3 [***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCHOMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATEDUNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. Table 1 Year [***] Vial [***] Vial[***] [***] [***] · Section 5.8(b) Payment is hereby deleted in its entirety and replaced with the following: Hospira shall invoice KV upon shipment of Product and [***] Product. KV shall make payment net [***] days from the date of Hospira’sinvoice. 8. Section 6.3. Minimum Purchase Requirement. Section 6.3 is deleted in its entirety and replaced with the following: 6.3 Minimum Purchase Requirements. (a) Provided the following conditions have been met: a) KV obtains an approved FDA filing covering the [***] Product that allows itscommercial sale by KV; b) FDA has approved Hospira as a manufacturer of the [***] Product; and c) Hospira is able to manufacture andrelease the [***] Product for commercial sale by KV (collectively, the “[***] Product Approval”), the following minimum purchaserequirements shall apply: i. During the calendar year in which the [***] Product Approval takes place (the “Partial Time Period”), KV agrees to purchaseat least the pro rata amount of a minimum purchase requirement of [***] of Product and/or [***] Product (“Pro Rata Amount”)(as way of example only, if the [***] Product Approval occurs on July 1, 2015, the Pro Rata Amount that KV must make forthe Partial Time Period will be [***]. If KV has not purchased the Pro-Rata Amount during such Partial Time Period, thenwithin [***] days after the end of the Partial Time Period, Hospira shall invoice KV the difference between the Pro RataAmount and the amount of Product and [***] Product purchased for such time period (the “Pro-Rata Minimum Payment”),noting that KV’s purchases may be purchases of (i) all Product, (ii) all [***] Product; or (iii) a combination of both. Suchinvoice shall be payable within [***] days after issuance. ii. Provided the [***] Product Approval occurs before the end of calendar year 2015, KV agrees to purchase at least [***] ofProduct and/or [***] Product combined (“Annual Amount”) in calendar year 2016. If the [***] Product Approval does notoccur until calendar year 2016 then the Annual Amount shall be prorated as set forth in Section 6.3(a)(i) above. If KV has notpurchased the Annual Amount during the 2016 Calendar Year, then within [***] days following the end of the 2016 CalendarYear, Hospira shall invoice KV the difference between the Annual Amount and the amount of Product and [***] Productpurchased for such time period (the “Annual Minimum Payment”); noting that KV’s purchases may be purchases of (i) allProduct, (ii) all [***] Product; or (iii) a combination of both. Each such invoice shall be payable within [***] days afterissuance. iii. The Pro-Rata Minimum Payment and the Annual Minimum Payment described above shall be determined for such timeperiod by the amount of Product and [***] Product purchased by KV (meaning such Product and/or [***] Product has beenpaid for by KV to Hospira during the applicable time 4 [***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCHOMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATEDUNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. period). Provided however, in the event KV’s purchases are less than the Pro-Rata Minimum Payment or the Annual MinimumPayment as a result of a manufacturing yield causing the orders to be fulfilled at less than the amount ordered, the Pro-RataMinimum Amount and the Annual Minimum Amount shall be reduced accordingly. (b) KV will only be obligated to the minimum purchase requirements under Section 6(a) above as long as: (a) the FDA has notsuspended or revoked the NDA and/or orphan designation for the Product and/or [***] Product; (b) there has been no material change in thesafety or efficacy for the Product and/or [***] Product; (c) there has been no material change in KV’s ability to commercialize the Productor [***] Product as a result of an FDA action; (d) the Product and [***] Product conform in all respects to their respective specifications andare not otherwise adulterated; and (e) Hospira has not exercised its right to terminate the manufacture of the Product or [***] Product inaccordance with the terms specified in Section 10.2 of the Agreement (as amended hereby). 9. Product Take or Pay for Calendar Year [***]. For calendar year [***], Hospira shall manufacture the Product for KV only if KV submits a forecastand a purchase order to Hospira on or before [***] for [***] of the Product for delivery during calendar year [***]. 10. Section 10.1, Term. Section 10.1 is hereby deleted in its entirety and replaced with the following: 10.1 Term. This Agreement shall commence on the Effective Date and, unless earlier terminated as provided below, shall expire (i) withrespect to the manufacture of [***] Product on December 31, [***] (specifically, Hospira will not fill any [***] Product after December 31,[***], although labeling or other secondary packaging of vials filled near the end of [***] may extend into [***]); (ii) if KV has notsubmitted a forecast and purchase order for [***] of Product on or before September 30, [***] in accordance with Section 9 above, then onDecember 31, [***]; and (iii) if KV has exercised its option to purchase [***] of Product during calendar year [***] in accordance withSection 9 above, then on December 31, [***]. 11. Section 10.2, Termination of Product Development Project. Section 10.2 is hereby deleted in its entirety and replaced with the following: 10.2 Termination of [***] Project. Hospira may terminate the [***] Project upon [***] days prior written notice to KV if Hospiradetermines in good faith that the development of the [***] Product is not technically feasible. KV may terminate the [***] Project upon[***] days prior written notice to Hospira if KV determines in good faith that the development of the [***] Product is not commerciallyfeasible. If the [***] Project is terminated by either party, Hospira shall advise KV of Hospira’s actual development costs on the [***]Project incurred prior to such termination. KV shall pay Hospira for all reasonable and documented development costs incurred to the datethe termination notice is received. 12. Orphan Drug Status. KV represents, and Hospira recognizes, that (i) FDA approved the Product on February 3, 2011 for an orphan indication; and(ii) at the time of such approval, KV received seven years of exclusivity under the Orphan Drug Act for the Product. 5 [***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCHOMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATEDUNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. 13. Recitals. The third recital shall be deleted in its entirety to reflect the semi-exclusive relationship contemplated herein between the Parties forHospira to manufacture and supply and for KV to purchase and distribute the Product and [***] Product. 14. Effective Date. The amendment to the Agreement contemplated by this First Amendment shall be deemed effective as of the date first written aboveupon the full execution of this First Amendment and without any further action required by the parties hereto. There are no conditions precedent orsubsequent to the effectiveness of this First Amendment. 15. Counterparts. This First Amendment may be executed in two or more counterparts, each of which shall be deemed to be an original, but all of whichtogether shall constitute one and the same instrument. One or more counterparts of this First Amendment may be delivered by facsimile or by e-mailof a “.pdf” format data file, with the intention that delivery by such means shall have the same effect as delivery of an original counterpart thereof. [Signature page follows] 6 [***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCHOMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATEDUNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. IN WITNESS WHEREOF, the parties hereto have duly executed this First Amendment as of the date first above written. HOSPIRA WORLDWIDE, INCKV PHARMACEUTICAL CO. By/s/ Kevin OrfanBy /s/ Thomas McHugh NameKevin OrfanNameThomas McHugh(type or print)(type or print) TitleVice President, One 2 OneTitleCFO [***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCHOMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATEDUNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. Exhibit 3 [***] Project Development Activities Assumptions. In the event of any changes to any of the assumptions set forth below, the Target Date shall be revised according to the terms of the FirstAmendment. · Container/Closure. The container/closure for the [***] Product will be a [***]-[***] treated vial with a [***] finish. The stopper for the [***]Product will be made of the same material as is used with the Product. · [***] Line. Hospira will fill the [***] Product on Line [***] at [***] · Batch Runs. Hospira shall run the following batches: Item Description Batch Size1[***] - Engineering Batches[***]L per batch - only fill~ [***] unitsBulk Package2[***] - Submission Batches[***]L per batch - only fill~ [***] unitsBulk Package3[***] - Process Validation Batches[***]L per batch - only fill~ [***] unitsBulk Package4[***] - Engineering Package RunApproximately [***] units · Stability Testing. Hospira shall conduct [***] month stability testing on the [***] Submission Batches at [***] month time points ([***]orientation) and [***] month time points ([***] orientation) Hospira shall conduct the stability testing on the [***] Submission Batchesconcurrently. KV shall submit its regulatory submission based on [***] month stability data. · Commercial Packaging. Commercial packaging shall consist of [***] unit cartons per [***] shelf carton to be priced separately. Schedule - Project milestones, costs, durations, start dates and invoice amounts/dates are set forth on Exhibit 4. [***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCHOMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATEDUNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. Exhibit 4 Development Costs payable to Hospira Project milestones, costs, durations, start dates and invoice schedule and amounts DescriptionCost Target / CompletionDate Invoicing Schedule InvoiceAmountProject Initiation$ [***][***]$[***] will be paid specifically for theKickoff meeting on 15Jan14 per the9Jan14 Letter Agreement.$[***]*Upon execution of thisAmendmentThe remainder ($[***]) will be invoicedupon execution of this Amendment$[***] Analytical / MicrobialDevelopment$[***]Upon execution of thisAmendment50% upon execution of thisAmendment$[***][***]50% upon both parties’ approval of thecontrol monograph$[***] Engineering Batch ([***])$[***], $[***] has beenpaid for initial purchaseof Seals/Stoppers/ vials[***]100% upon fill$[***] Submission Batches ([***])**$[***]($[***]completion of eachSubmission Batch)Target Date (subject torevision as set forth inthe Agreement, asamended hereby)100% upon batch acceptance orcompletion of t=0 stability test$[***]Process Validation$[***][***]50% upon both parties’ approval ofprotocols (VPP)$[***][***]50% upon both parties’ approval ofreports (VPPR)$[***] Regulatory Filing$[***][***]100% upon submission by KV Pharmato the Regulatory Authority$[***] Packaging Engineering Run$ [***][***]100% upon completion$[***] Commercialization***$ [***][***]100% upon both parties’ approval ofFirst Lot to Stock andCommercialization achieved.$[***] Development Stability Testing([***] batches testedconcurrently)$[***] For the avoidanceof doubt, this payment isfor the stability testing ofall [***] batchescollectively, and not perbatch[***]Payment due upon each time pointduring the stability testing period: [***]months ([***] orientation) and [***]month time points ([***] orientation)$[***] (x[***]) +final payment of$[***] uponcompletion of [***]months stability Total$[***]$[***] [***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCHOMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATEDUNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. * Amount already paid per Letter Agreement dated January 9, 2014 **[***]. *** “Commercialization” shall be deemed achieved once KV has received [***] Product Approval (as that term is defined in the First Amendment) to sell the[***] Product in the United States. Development Incentive DescriptionIncentive Completion Date Invoicing Schedule Invoice amountSubmission Batches([***])$[***][***]50% upon the [***]batch acceptance; 50%uponCommercialization asdefined above$[***]; $[***]Submission Batches([***])$[***][***]50% upon the [***]batch acceptance; 50%uponCommercialization asdefined above$[***];$[***]Submission Batches([***])$[***][***]50% upon the [***]batch acceptance; 50%uponCommercialization asdefined above$[***];$[***]Submission Batches([***])$[***][***]50% upon the [***]batch acceptance; 50%uponCommercialization asdefined above$[***];$[***] 10Exhibit 21.1 AMAG Pharmaceuticals, Inc. Subsidiaries of the registrant AMAG Pharmaceuticals Canada Corporation, a Nova Scotia unlimited liability company AMAG Europe Limited, a UK private limited company AMAG Securities Corporation, a Massachusetts corporation Lumara Health Inc., a Delaware corporation FP1096, Inc., a Pennsylvania corporation Lumara Health IP Ltd., a Delaware corporation Drugtech Sárl, a Swiss company Lumara Health Services Ltd., a Missouri corporation K-V Pharmaceuticals Company Limited, a UK private limited company K-V Discovery Solutions, Inc., a New York corporation QuickLinks -- Click here to rapidly navigate through this document Exhibit 23.1 Consent of Independent Registered Public Accounting Firm We hereby consent to the incorporation by reference in the Registration Statement on Forms S-3 (File Nos. 333-192132 and 333-202009) and S-8 (FileNos. 333-82292, 333-131656, 333-148682, 333-159938, 333-168786, 333-182821, 333-190435 and 333-197873) of AMAG Pharmaceuticals, Inc. of ourreport dated February 17, 2015 relating to the financial statements and the effectiveness of internal control over financial reporting, which appears in thisForm 10-K./s/ PRICEWATERHOUSECOOPERS LLPBoston, MassachusettsFebruary 17, 2015 QuickLinksExhibit 23.1Consent of Independent Registered Public Accounting FirmQuickLinks -- Click here to rapidly navigate through this document Exhibit 31.1 CERTIFICATIONS I, William K. Heiden, 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 make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial 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(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange 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 theregistrant and have:a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within thoseentities, 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 most recentfiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely tomaterially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, tothe 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: February 17, 2015 /s/ WILLIAM K. HEIDENWilliam K. HeidenPresident and Chief Executive Officer(principal executive officer)QuickLinksExhibit 31.1CERTIFICATIONSQuickLinks -- Click here to rapidly navigate through this document Exhibit 31.2 CERTIFICATIONS I, 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 make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial 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(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange 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 theregistrant and have:a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within thoseentities, 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 most recentfiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely tomaterially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, tothe 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: February 17, 2015 /s/ SCOTT A. HOLMESScott A. HolmesChief Accounting Officer, Treasurer and SeniorVice President, Finance and Investor Relations(principal financial officer)QuickLinksExhibit 31.2CERTIFICATIONSQuickLinks -- Click here to rapidly navigate through this document Exhibit 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, 2014 as filedwith the Securities and Exchange Commission on the date hereof (the "Report"), I, William K. Heiden, President and Chief Executive Officer 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 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/ WILLIAM K. HEIDENWilliam K. HeidenPresident and Chief Executive Officer(principal executive officer) Dated: February 17, 2015QuickLinksExhibit 32.1CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002QuickLinks -- Click here to rapidly navigate through this document Exhibit 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, 2014 as filedwith the Securities and Exchange Commission on the date hereof (the "Report"), I, Scott A. Holmes, Chief Accounting Officer and Vice President of Financeof 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 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/ SCOTT A. HOLMESScott A. HolmesChief Accounting Officer, Treasurer and Senior VicePresident, Finance and Investor Relations (principalfinancial officer) Dated: February 17, 2015QuickLinksExhibit 32.2CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

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