AMAG Pharmaceuticals, Inc.
Annual Report 2017

Plain-text annual report

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549____________________ ______FORM 10-K(Mark One) xANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the Fiscal Year Ended December 31, 2017or¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACTOF 1934For the transition period from toCommission 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: Title of each class Name of each exchange on which registeredCommon Stock, par value $0.01 per sharePreferred Share Purchase Rights NASDAQ Global Select MarketSecurities registered pursuant to Section 12(g) of the Act: NoneIndicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x No ¨ Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No xIndicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨ Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted andposted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorterperiod that the registrant was required to submit and post such files). Yes x No ¨ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’sknowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or emerging growth company.See definition of “accelerated filer,” “large accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):Large accelerated filer xAccelerated filer ¨Non-accelerated filer ¨(Do not check if a smaller reporting company)Smaller reporting company ¨Emerging growth company¨If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financialaccounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No x The aggregate market value of the registrant’s voting stock held by non-affiliates as of June 30, 2017 was approximately $644.7 million based on the closing price of $18.40 ofthe Common Stock of the registrant as reported on the NASDAQ Global Select Market on such date. As of February 27, 2018, there were 34,088,933 shares of the registrant’sCommon Stock, par value $0.01 per share, outstanding.DOCUMENTS INCORPORATED BY REFERENCEPortions of the Proxy Statement to be filed in connection with the solicitation of proxies for the Annual Meeting of Stockholders are incorporated by reference into Part III ofthis Annual Report on Form 10-K.AMAG PHARMACEUTICALS, INC.FORM 10-KFOR THE YEAR ENDED DECEMBER 31, 2017TABLE OF CONTENTS PART I Item 1.Business2Item 1A.Risk Factors32Item 1B.Unresolved Staff Comments59Item 2.Properties60Item 3.Legal Proceedings60Item 4.Mine Safety Disclosures60 PART II Item 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities61Item 6.Selected Financial Data64Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations66Item 7A.Quantitative and Qualitative Disclosures About Market Risk92Item 8.Financial Statements and Supplementary Data94Item 9.Changes in and Disagreements With Accountants on Accounting and Financial Disclosure148Item 9A.Controls and Procedures148Item 9B.Other Information148 PART III Item 10.Directors, Executive Officers and Corporate Governance149Item 11.Executive Compensation149Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters149Item 13.Certain Relationships and Related Transactions, and Director Independence149Item 14.Principal Accountant Fees and Services149 PART IV Item 15.Exhibits and Financial Statement Schedules150Item 16.Form 10-K Summary151 Signatures156Table of ContentsPART IExcept 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.Examples of forward-looking statements contained in this report include, without limitation, statements regarding the following: beliefs that newbornstem cells have the potential to play a valuable role in the development of regenerative medicine, our plans to continue to expand the impact of ourportfolio by delivering on our growth strategy; beliefs that healthcare professionals and patients will prefer the Makena auto-injector over theintramuscular administration; expectations of the timing of entry of a Makena generic to the market; expected timing of submission of the bremelanotideNDA; expectations regarding the IDA patient population; beliefs regarding the growth opportunities for Feraheme in the IV iron market; our expectedinvestment in label expansion for Intrarosa and plans to raise awareness and education of dyspareunia and VVA and the results of such efforts; the timingand amounts of milestone and royalty payments; plans to grow our portfolio; expectations and plans as to regulatory and commercial developments andactivities, including requirements and initiatives for clinical trials, post-approval commitments for our products; expected results of our strategiccommercialization efforts; the market for our maternal health portfolio; expectations as to what impact recent and upcoming regulatory developments willhave on our business and competition; expectations regarding our intellectual property, including patent protection, and the impact generics and othercompetition could have on each of our products and our business generally, including the timing and number of generic entrants; the market opportunitiesfor each of our products and services; expectations regarding third-party reimbursement and the behaviors of payers, healthcare providers and otherindustry participants; plans regarding our sales and marketing initiatives, including our contracting, pricing and discounting strategies and efforts toincrease patient compliance and access; our expectation of costs to be incurred in connection with revenue sources to fund our future operations; ourexpectations regarding the contribution of revenues from our products or services to the funding of our on-going operations; expectations regarding themanufacture of all drug substances, drug products and key materials at our third-party manufacturers or suppliers; our inventory levels and the availabilityof raw materials; the strategic fit of Intrarosa and bremelanotide in our product portfolio; our expectations regarding customer returns and other revenue-related reserves and accruals; the impact of recent tax reform legislation; estimates regarding our effective tax rate and our ability to realize our netoperating loss carryforwards and other tax attributes; the impact of accounting pronouncements; the effect of product price increases; expected expenses,efforts and challenges in research and development and the timing of our planned research and development projects; expectations regarding our financialresults, including revenues, cost of product sales and services, selling, general and administrative expenses, goodwill; impairment; amortization and otherincome (expense); estimates, beliefs and judgments related to our impairment analysis; our investing activities; estimates and beliefs related to our debt,including our 2023 Senior Notes and the Convertible Notes; the impact of volume-based and other rebates and incentives; the valuation of certainintangible assets, goodwill, contingent consideration, debt and other assets and liabilities, including our methodology and assumptions regarding fairvalue measurements; our expectations regarding competitive pressures and the impact on growth of our product revenues; the manner in which we intend orare required to settle the conversion of our Convertible Notes; and our expectations for our revenue, cash, cash equivalents, investments balances, capitalneeds and information with respect to any other plans and strategies for our business. Our actual results and the timing of certain events may differmaterially from the results discussed, projected, anticipated or indicated in any forward-looking statements.Any forward-looking statement should be considered in light of the factors discussed in Part I, Item 1A below under “Risk Factors” and elsewhere inthis Annual 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 datethey are 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.1Table of ContentsITEM 1. BUSINESS:OverviewAMAG Pharmaceuticals, Inc., a Delaware corporation, was founded in 1981. We are a biopharmaceutical company focused on developing and deliveringimportant therapeutics, conducting clinical research in areas of unmet need and creating education and support programs for the patients and families weserve. Our currently marketed products support the health of patients in the areas of maternal and women’s health, anemia management and cancer supportivecare, including Makena® (hydroxyprogesterone caproate injection), Intrarosa® (prasterone) vaginal inserts, Feraheme® (ferumoxytol injection) forintravenous (“IV”) use, and MuGard® Mucoadhesive Oral Wound Rinse. In addition, in February 2017, we acquired the rights to research, develop andcommercialize bremelanotide in North America. Through services related to the preservation of umbilical cord blood stem cell and cord tissue units operatedthrough Cord Blood Registry® (“CBR”), we also help families to preserve newborn stem cells, which are used today in transplant medicine for certain cancersand blood, immune and metabolic disorders, and which we believe have the potential to play a valuable role in the ongoing development of regenerativemedicine.We intend to expand the impact of these and future products and services for patients by delivering on our growth strategy, which includes organicgrowth, as well as the pursuit of additional products and companies that align with our existing therapeutic areas or that could benefit from our proven corecompetencies. Currently, our primary sources of revenue are from product sales of Makena and Feraheme and service revenue from the CBR Services.Our common stock trades on the NASDAQ Global Select Market (“NASDAQ”) under the trading symbol “AMAG.”Products and ServicesThe following table summarizes the current uses and, subject to regulatory approval, potential uses of the products and services we own or to which wehave rights, their current regulatory status and the nature of our rights. Currently, we market and sell our pharmaceutical products solely in the U.S. andmarket and sell the CBR Services primarily in the U.S.Product, Product Candidateor Service Uses/Potential Uses Regulatory Status Nature of RightsMakena®(hydroxyprogesteronecaproate injection) (5 mLmulti-dose vial and 1 mLsingle-dose preservative-freevial) A progestin indicated to reduce the riskof preterm birth in women pregnantwith a single baby who have a historyof singleton spontaneous preterm birth. Approved and marketed. Own worldwide rights. Makena®(hydroxyprogesteronecaproate injection) (Auto-injector device) A progestin indicated to reduce the riskof preterm birth in women pregnantwith a single baby who have a historyof singleton spontaneous preterm birth. Approved in February 2018.Launch expected March 2018. Own worldwide rights to drug product;exclusively license rights to auto-injector device from Antares Pharma,Inc. (“Antares”). Cord Blood Registry® Services related to the collection,processing and storage of umbilicalcord blood and cord tissue units. Privately banked umbilical cordblood stem cells and cord tissueare regulated by the FDA in theU.S. (no prior approval needed).Facilities are inspected by theFDA. Services are marketed and soldprimarily in the U.S. and we havecertain commercial agreements incertain countries in South America. Feraheme®(ferumoxytol injection) IV iron replacement therapeutic agentfor the treatment of iron deficiencyanemia (“IDA”) in adult patients whohave intolerance to oral iron or havehad unsatisfactory response to oral ironas well as patients who have CKD. Approved and marketed. Own worldwide rights.2Table of ContentsProduct, Product Candidateor Service Uses/Potential Uses Regulatory Status Nature of RightsIntrarosa®(prasterone)vaginal inserts A steroid indicated for the treatment ofmoderate to severe dyspareunia, asymptom of vulvar and vaginal atrophy(“VVA”), due to menopause. Approved and marketed. Exclusively license rights to developand commercialize Intrarosa in the U.S.for the treatment of VVA and femalesexual dysfunction (“FSD”) fromEndoceutics, Inc. (“Endoceutics”),subject to certain rights retained byEndoceutics. Intrarosa is also under investigation forthe treatment of hypoactive sexualdesire disorder (“HSDD”), a type of FSDin post-menopausal women. Phase 3 trial initiated byEndoceutics in the third quarterof 2017. MuGard®Mucoadhesive OralWound Rinse Management of oralmucositis/stomatitis and all types oforal wounds. Cleared and marketed. Exclusively license rights to developand sell MuGard in the U.S. fromAbeona Therapeutics, Inc. (“Abeona”). Bremelanotide (Auto-injectordevice) An investigational product designed tobe an as desired therapy for thetreatment of HSDD in pre-menopausalwomen. New Drug Application (“NDA”)expected to be filed in the firstquarter of 2018. Exclusively license rights to research,develop and sell bremelanotide inNorth America from PalatinTechnologies, Inc. (“Palatin”). Digoxin immune fab (“DIF”) A polyclonal antibody for the treatmentof severe preeclampsia in pregnantwomen. Phase 2b/3a trial initiated in thesecond quarter of 2017. Own option to obtain exclusive licensefrom Velo Bio LLC (“Velo”) to U.S.rights upon completion of Phase 2b/3adevelopment.MakenaOverviewMakena is currently the only FDA-approved drug indicated to reduce the risk of preterm birth in women pregnant with a single baby who have a historyof singleton spontaneous preterm birth. We acquired the rights to Makena in connection with our acquisition of Lumara Health Inc. (“Lumara Health”) inNovember 2014.Makena was approved by the U.S. Food and Drug Administration (the “FDA”) in February 2011 as an intramuscular (“IM”) injection (the “Makena IMproduct”) packaged in a multi-dose vial and as of February 2016 was also available in a single-dose preservative-free vial. In February 2018, Makena wasalso approved by the FDA for administration via a pre-filled subcutaneous auto-injector (the “Makena auto-injector”), a drug-device combination product.Makena is administered weekly by a healthcare professional with treatment beginning between 16 weeks and 20 weeks and six days of gestation andcontinuing until 36 weeks and six days of gestation or delivery, whichever happens first. We currently sell Makena (and expect to sell the auto-injector)primarily to specialty pharmacies, specialty distributors, and pharmacies which, in turn, sell Makena to healthcare providers, hospitals, government agenciesand integrated delivery systems. In 2017, sales of Makena accounted for approximately 63% of our total net revenues.The approval of the auto-injector was based in part on data from a pharmacokinetic (“PK”) study, which demonstrated comparable bioavailabilitybetween the subcutaneous auto-injector product and the Makena IM product in 120 healthy post-menopausal women. No serious adverse events werereported in the PK study and the drug was generally well tolerated. The most common side effects of Makena include injection site reactions (pain, swelling,itching, bruising, or a hard bump), hives, itching, nausea, and diarrhea. The most common side effect reported with the Makena auto-injector (and higher thanwith the Makena IM product) was injection site pain.The Makena auto-injector was designed with features, such as a shorter, thinner, non-visible needle compared to the Makena IM product, to help addresssome of the known barriers to treatment of recurrent preterm birth, including the lack of patient acceptance and adherence. As such, based on market researchwe conducted, we believe that many healthcare professionals and patients will prefer the auto-injector over the IM administration. However, some healthcareprofessionals and/or patients may continue to employ the IM method of administration. The orphan drug exclusivity period that was granted to3Table of Contentsthe Makena product in 2011, expired on February 3, 2018 and accordingly, we expect to face generic competition to the Makena IM product in mid-2018,however generics could enter the market at any time. In anticipation of generic competition, we have entered into an agreement with a generic partner and areprepared to launch our own authorized generic upon the first entry of a generic Makena injection in order to participate in the expected generic market forMakena.Preterm BirthMakena is a progestin whose active ingredient is hydroxyprogesterone caproate (“HPC”), which is a synthetic chemical structurally related toprogesterone. Progestins, such as HPC, and progesterone belong to a class of drugs called progestogens. Progestogens have been studied to reduce pretermbirth and have shown varying results depending upon the subjects enrolled. The Society for Maternal Fetal Medicine (the “SMFM”) Publications Committeepublished clinical guidelines for the use of progestogens to reduce the risk of preterm birth in the American Journal of Obstetrics and Gynecology in May2012, and which were reaffirmed in January 2017. The SMFM Clinical Guidelines recommend the use of an IM HPC injection to reduce the risk of recurrentpreterm birth for clinically indicated patients. Further, in its January 2017 reaffirmation of the 2012 SMFM Clinical Guidelines, the SMFM stated thatvaginal progesterone should not be considered a substitute for HPC in women with a history of spontaneous preterm birth.Preterm birth is defined as a birth prior to 37 weeks of pregnancy. According to the Centers of Disease Control and Prevention (the “CDC”), preterm birthaffected nearly 400,000 babies born in the U.S. in 2016, or one of every ten infants, with approximately 70% considered late preterm births. In the CDC'sSeptember 2017 National Center for Health Statistics Report, it noted that the preterm birth rate rose in 2016 for the second straight year and attributed therise primarily to an increase in late preterm births, defined as a birth between 34 and 36 weeks of pregnancy. Although the causes of preterm birth are not fullyunderstood, certain women are at a greater risk for preterm birth, including those who have had a previous preterm birth, are pregnant with multiples or havecertain uterine or cervical problems. High blood pressure, pregnancy complications (such as placental problems) and certain other health or lifestyle factorsmay also be contributing factors. Makena is indicated only for use in women who have a history of singleton spontaneous preterm birth who are pregnantwith a single baby, which accounts for approximately 140,000 pregnancies annually in the U.S.Preterm birth can increase the risk of infant death and can also result in serious long-term health issues 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 ofMedicine (US) Committee on Understanding Premature Birth and Assuring Healthy Outcome, the annual societal economic cost associated with preterm birthis at least $26.2 billion and includes medical and healthcare costs for the baby, labor and delivery costs for the mother, early intervention and specialeducation services, and costs associated with lost work and pay.Post-Approval Commitments for MakenaMakena 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-approvalclinical studies to verify and describe the clinical benefit of Makena as well as fulfill certain other post-approval commitments. We have completed a PKstudy of women taking Makena. In addition, the following clinical studies for Makena are currently ongoing: (a) an efficacy and safety clinical study ofMakena and (b) a follow-up study of the babies born to mothers from the efficacy and safety clinical study. Given the patient population (i.e., pregnantwomen who are at elevated risk for recurrent preterm delivery based on their pregnancy history) and the informed risk of receiving a placebo instead of theactive approved drug, the pool of prospective subjects for such clinical trials in the U.S. is small and we have therefore sought enrollment on a global scale.We expect to complete the studies by December 2018 and October 2020, respectively.CBR ServicesOverviewCBR is the largest private newborn stem cell bank in the world and offers pregnant women and their families the ability to preserve their newborns’umbilical cord blood and cord tissue for potential future use (the “CBR Services”). We acquired CBR in August 2015. Additional details regarding ouracquisition of CBR can be found in Note C, “Business Combinations,” to our consolidated financial statements included in this Annual Report on Form 10-K.4Table of ContentsWe market and sell the CBR Services directly to consumers, who pay for the services directly, as third-party insurance and reimbursement are notavailable. Even though our business is limited to the sale of services required to collect, process, and store umbilical cord blood stem cells and cord tissue,the FDA regulates such services as products.The CBR Services include the collection, processing and storage of both umbilical cord blood and cord tissue. As of December 31, 2017, CBR storedapproximately 700,000 umbilical cord blood and cord tissue units, which we estimate to represent nearly 40% of all privately stored cord blood and cordtissue units in the U.S. In 2017, revenue from the CBR Services accounted for approximately 19% of our total net revenues.CBR partners with reputable research institutions on FDA-regulated clinical trials investigating the use of cord blood in regenerative medicineapplications across a wide variety of conditions that have no cure today, including autism, acquired hearing loss and cerebral palsy. In addition, in an effortto realize the full potential of newborn stem cells, CBR’s Newborn Possibilities Program® provides free processing and five years of free storage of cord bloodand cord tissue for families with a qualifying medical need, as discussed further below.In 2005, the Institute of Medicine (“IOM”) issued a comprehensive report to Congress on cord blood banking. The report contained clearrecommendations that healthcare professionals should provide all expectant parents with fair and balanced education on cord blood preservation prior tolabor and delivery, thereby enabling families to make an informed decision regarding their options: preserve their newborns’ stem cells for potential futurefamily use, donate the cells for public use or research, or dispose of the cord blood. The IOM report has helped guide health policy at the state level and todate, 29 states have passed some form of cord blood education legislation, the majority of which follow the IOM recommendations. Several other states are invarious stages of developing similar legislation to help inform healthcare providers and expectant parents of all medically appropriate options for preservingcord blood stem cells. In support of this legislation, CBR collaborates with outside organizations to develop education initiatives to provide quality, relevantinformation to expectant parents, and medical professionals, including courses where continuing medical education credits can be earned, regarding newparents’ options for newborn stem cell preservation.CBR has been accredited by the AABB (formerly known as the American Association of Blood Banks) since 1998 and the company’s quality standardshave been recognized through International Organization for Standardization (ISO) 9001:2008 certification - the global business standard for quality. Inaddition, CBR is also certified by CLIA (Clinical Laboratory Improvement Amendments), a federal program to ensure quality laboratory testing and is FDA-registered. We believe that maintaining these accreditations, while not a requirement for preserving stem cells, are an important indicator of the quality of ourservices and the CBR brand.Cord Blood and Cord TissueCord blood comes from a newborn’s umbilical cord and can only be collected immediately after birth. It contains hematopoietic stem cells, which havebeen used in the treatment of over 80 diseases, including various cancers, blood disorders, immune disorders and metabolic disorders. Cord blood alsocontains a variety of other types of stem cells and monocytes that are being investigated for a variety of other therapeutic applications. Cord tissue containsmesenchymal stem cells, which are unique stem cells that are being investigated for their ability to help repair and heal the body in different ways than cordblood stem cells. Although there are not yet any conditions proven to be treatable with cord tissue, these cells have potential for use in regenerative medicineand are currently being evaluated in over 30 clinical trials mostly outside of the U.S. for their potential to treat heart disease, autoimmune disorders andorthopedic conditions. Approximately 79% of the stem cell units released by CBR have been used for experimental regenerative therapies.FerahemeOverviewFeraheme was approved for marketing by the FDA in June 2009 for the treatment of IDA in adult patients with CKD only and was commercially launchedshortly thereafter. In February 2018, we received FDA approval to expand the Feraheme label to treat all eligible adult IDA patients who have intolerance tooral iron or have had unsatisfactory response to oral iron in addition to patients who have CKD. In 2017, sales of Feraheme for the treatment of CKDaccounted for approximately 17% of our total net revenues.The recently expanded Feraheme label is supported by two positive pivotal Phase 3 trials evaluating Feraheme versus iron sucrose or placebo in a broadpopulation of patients with IDA. It was also supported by positive results from a third Phase 3 randomized, double-blind non-inferiority trial that evaluatedthe incidence of moderate-to-severe hypersensitivity reactions5Table of Contents(including anaphylaxis) and moderate-to-severe hypotension with Feraheme compared to Injectafer® (ferric carboxymaltose injection) (the “Ferahemecomparator trial”). Approximately 2,000 IDA patients were randomized in a 1:1 ratio into one of two treatment groups, those receiving 1.02 grams ofFeraheme infusion or those receiving 1.5 grams of Injectafer® infusion. The Feraheme comparator trial demonstrated non-inferiority to Injectafer® based onthe primary endpoint of the incidence of moderate-to-severe hypersensitivity reactions (including anaphylaxis) and moderate-to-severe hypotension(Feraheme incidence 0.6%; Injectafer® incidence 0.7%). The Feraheme comparator trial also met an additional safety endpoint based on a composite of theincidence of moderate-to-severe hypersensitivity reactions, serious cardiovascular events, and/or death (Feraheme incidence 1.3%; Injectafer® incidence2.0%). In addition, the Feraheme comparator trial met important secondary efficacy endpoints: the demonstration of non-inferiority to Injectafer® comparingmean improvement in (a) hemoglobin per gram of iron administered from baseline to week 5 (1.35 g/dL Feraheme versus 1.10 g/dL Injectafer®) and (b)hemoglobin per course of treatment from baseline to week 5 (Feraheme: 1.38 g/dL; Injectafer: 1.63 g/dL). Adverse event rates were similar across bothtreatment groups, however, the incidence of severe hypophosphatemia (defined by blood phosphorous of <0.6 mmol/L at week 2) was less in the patientsreceiving Feraheme (0.4% of patients) compared to those receiving Injectafer® (38.7% of patients).Iron Deficiency AnemiaCurrently there are two methods of iron therapy used to treat IDA: oral iron supplements and IV iron. Oral iron is currently the first-line iron replacementtherapy for most physicians. However, oral iron supplements are poorly absorbed by many patients, which may adversely impact their effectiveness, and areassociated with certain side effects, such as constipation, diarrhea, and cramping, that may adversely affect patient compliance in using such products. Inaddition, it can take an extended time for hemoglobin levels to improve following the initiation of oral iron treatment, and even then the targetedhemoglobin levels may not be reached. Conversely, iron given intravenously allows larger amounts of iron to be provided to patients in a shorter time framewhile avoiding many of the side effects and treatment compliance issues associated with oral iron, and can result in faster rises in hemoglobin levels. Webelieve that IV iron is underutilized in IDA patients, and thus a significant opportunity remains to grow the market for IV iron in this patient population.IDA is widely prevalent in many different patient populations. For many of these patients, treatment with oral iron is unsatisfactory or is not tolerated. Itis estimated that more than 4.5 million people in the U.S. have IDA (CKD and non-CKD) and we estimate that a small fraction of the patients who arediagnosed with IDA regardless of the underlying cause are currently being treated with IV iron. We estimate that the size of the total 2017 U.S. non-dialysisIV iron replacement therapy market was approximately 1.2 million grams. We believe that approximately half, or 600,000 grams, of the IV iron administeredwas for the treatment of non-dialysis patients with CKD and the other half was for non-CKD patients with IDA due to other causes, including patients withgastrointestinal diseases or disorders, inflammatory diseases, chemotherapy-induced anemia and abnormal uterine bleeding (“AUB”).•Chronic Kidney Disease: CKD is a progressive condition that leads to chronic and permanent loss of kidney function. It contributes to thedevelopment of many complications, including anemia, hypertension, fluid and electrolyte imbalances, acid/base abnormalities, bone disease andcardiovascular disease. Anemia, a common condition among CKD patients, is associated with cardiovascular complications, decreased quality oflife, hospitalizations, and increased mortality. Anemia can develop early during the course of CKD and worsens with advancing kidney disease.Based on data contained in a 2009 publication in the Journal of the American Society of Nephrology, we estimate that there are at least 1.6 millionadults in the U.S. diagnosed with IDA in stages 3 through 5 of CKD, who are patients in the mid to later stages of CKD but not yet on dialysis andcould therefore benefit from receiving IV iron.•Gastrointestinal Disease: It is estimated that approximately 40% - 80% of IDA patients have gastrointestinal diseases. IDA in patients withgastrointestinal diseases is likely caused by blood loss and/or the inadequate intake or absorption of iron. Oral iron has been used to treat IDA inpatients with gastrointestinal diseases, but its efficacy is variable due to inconsistent bioavailability and absorption, the high incidence ofgastrointestinal side effects and patient noncompliance.•Cancer and chemotherapy-induced anemia: IDA is also common in patients with cancer, and it is estimated that 32% - 60% of cancer patients haveiron deficiency, most of whom are anemic. Iron supplementation through both oral and IV administration plays an important role in treating anemiain cancer patients. While there may be some differences in the underlying causes of anemia and iron deficiency in cancer patients who are receivingchemotherapy and those who are not, patients in both categories may develop absolute IDA due to blood loss and/or the inadequate intake orabsorption of iron. Oral iron has been used to treat IDA in cancer patients, but its efficacy is variable due to inconsistent bioavailability andabsorption, a high incidence of gastrointestinal side effects, potential interactions with6Table of Contentsother treatments, and patient noncompliance. IV iron has been shown in clinical trials to be well tolerated in the cancer patient population in bothpatients who are receiving chemotherapy and those who are not.•Abnormal Uterine Bleeding: IDA is commonly associated with AUB, which is defined as chronic, heavy, or prolonged uterine bleeding that canresult from multiple causes, including uterine abnormalities, blood disorders, pregnancy, intrauterine devices, medications, and heavy menstrualbleeding. IDA in patients with AUB, regardless of the cause, requires treatment with iron supplementation, either by oral or IV administration.With the expanded label, in addition to an expanded opportunity within hematology and oncology centers, our authorized wholesalers and specialtydistributors can now sell Feraheme to obstetricians and gynecologists, gastroenterologists and rheumatologists.Paragraph IV certificationOn February 5, 2016, we received a Paragraph IV certification notice letter regarding an Abbreviated New Drug Application (“ANDA”) submitted to theFDA by Sandoz Inc. (“Sandoz”) requesting approval to engage in commercial manufacture, use and sale of a generic version of ferumoxytol. A genericversion of ferumoxytol can be marketed only with the approval of the FDA of the respective application for such generic version. The Drug PriceCompetition and Patent Term Restoration Act of 1984, as amended, (the “Hatch-Waxman Act”), requires an ANDA applicant whose proposed drug is ageneric version of a previously-approved drug listed in the FDA publication, “Approved Drug Products with Therapeutic Equivalence Evaluations,” alsoknown as the “Orange Book,” to certify to any patents listed in the Orange Book for the previously-approved drug and, in the case of a Paragraph IVcertification, to notify the owner of the approved application and the relevant patent-holder. The Paragraph IV certification notice is required to contain adetailed factual and legal statement explaining the basis for the applicant’s opinion that the proposed product does not infringe the subject patents, that suchpatents are invalid or unenforceable, or both. If a patent infringement suit is filed within 45 days of receipt of the Paragraph IV notice, a so-called 30-monthstay is triggered that generally prevents the FDA from approving the ANDA until the expiration of the 30-month stay period, conclusion of the litigation inthe generic applicant’s favor, or expiration of the patent, whichever is earlier. In its notice letter, Sandoz claims that our ferumoxytol patents are invalid,unenforceable and/or not infringed by Sandoz’s manufacture, use, sale or offer for sale of the generic version. In March 2016, we initiated a patentinfringement suit alleging that Sandoz’s ANDA filing itself constituted an act of infringement and that if it is approved, the manufacture, use, offer for sale,sale or importation of Sandoz’s ferumoxytol products would infringe our patents. If the litigation is resolved in favor of the applicant or the challenged patentexpires during the 30 month stay period, the stay is lifted and the FDA may thereafter approve the application based on the applicable standards for approval.By the filing of this complaint, we believe the 30 month stay was triggered and that Sandoz is prohibited from marketing its ferumoxytol product, even if itreceives conditional approval from the FDA until the earliest of (a) August 5, 2018 (30 months from the date we received Sandoz's notice of certification), (b)the conclusion of litigation in Sandoz’s favor, or (c) expiration of the patent(s). On May 2, 2016, Sandoz filed a response to our patent infringement suit andthe trial is scheduled for March 19, 2018. Any future unfavorable outcome in this matter could negatively affect the magnitude and timing of future Ferahemerevenues. We intend to vigorously enforce our intellectual property rights relating to ferumoxytol. The ANDA process is discussed in more detail belowunder the heading “Pharmaceutical Product Approval Process - Abbreviated New Drug Application.”Post-Approval Commitments for FerahemeAs part of our post-approval Pediatric Research Equity Act (“PREA”) requirement to support pediatric labeling of Feraheme for the treatment of CKD, wehad initiated a randomized, active-controlled pediatric study of Feraheme for the treatment of IDA in pediatric CKD patients. During 2015, we suspended thistrial due to difficulty in enrollment. In December 2016, we met with the FDA to advance the development of a plan in order to satisfy this post-approvalcommitment for Feraheme and subsequently proposed a protocol to the FDA for a new pediatric study. Following recent interactions with the FDA regardingthe adequacy of our proposed protocol, we amended the protocol and intend to initiate a new pediatric study in the second quarter of 2018. Further, as part ofour post-approval PREA requirement to support pediatric labeling of Feraheme for the treatment of IDA for the recently approved broader label, we arerequired to submit a final protocol to the FDA in July 2018 with the final report submission due to the FDA in November 2022.7Table of ContentsIntrarosaOverviewIn February 2017, we entered into a license agreement (the “Endoceutics License Agreement”) with Endoceutics pursuant to which Endoceutics grantedus rights to Intrarosa, an FDA-approved product for the treatment of moderate to severe dyspareunia (pain during sexual intercourse), a symptom of VVA, dueto menopause. The Endoceutics License Agreement grants us the right to develop and commercialize pharmaceutical products containingdehydroepiandrosterone (“DHEA”), including Intrarosa, at dosage strengths of 13 mg or less per dose and formulated for intravaginal delivery, excluding anycombinations with other active pharmaceutical ingredients, in the U.S. for the treatment of VVA and FSD. In April 2017, we entered into an exclusivecommercial supply agreement with Endoceutics, pursuant to which Endoceutics, itself or through affiliates or contract manufacturers, agreed to manufactureand supply Intrarosa to us (the “Endoceutics Supply Agreement”). In July 2017, we announced the commercial availability of Intrarosa at pharmaciesthroughout the U.S.To support the July 2017 launch of Intrarosa, we hired a new 170 person commercial team, including a sales force of nearly 140 sales representativesdedicated to Intrarosa. This newly established sales force provides additional flexibility as our portfolio evolves, including for the potential expansion of theIntrarosa label, the potential launch of bremelanotide and for future products we may acquire or develop in the women’s health space.In addition, Endoceutics initiated a 600 patient placebo-controlled, double blind randomized Phase 3 clinical study in the third quarter of 2017 tosupport an application for U.S. regulatory approval of Intrarosa for the treatment of HSDD in post-menopausal women. We and Endoceutics have agreed toshare the direct costs related to two clinical studies, including the HSDD trial, based upon a negotiated allocation with us funding up to $20.0 million. If thestudies are successful, we will file a supplemental New Drug Application (“sNDA”) with the FDA for the treatment of HSDD in post-menopausal women.Furthermore, each party's commercialization activities and budget are described in a commercialization plan, which is updated annually. Additional detailsregarding the Endoceutics License Agreement and the Endoceutics Supply Agreement can be found below under the heading “Collaboration, License andOther Strategic Agreements - Endoceutics”.Intrarosa is the only FDA-approved, vaginally administered, daily non-estrogen steroid, which is prescribed for the treatment of moderate to severedyspareunia, a symptom of VVA, due to menopause. Intrarosa contains prasterone, a synthetic version of the inactive endogenous (i.e. occurring in the body)sex hormone precursor, DHEA. Prasterone is converted by enzymes in the body into androgens and estrogens to help restore the vaginal tissue as indicated byimprovements in the percentage of superficial cells, parabasal cells, and pH. The mechanism of action of Intrarosa is not fully established. The effectivenessof Intrarosa on moderate to severe dyspareunia in post-menopausal women was examined in two primary 12-week placebo-controlled efficacy trials. Allwomen in both studies were assessed for improvement from baseline to week 12 for four co-primary efficacy endpoints: (a) most bothersome symptom(moderate to severe dyspareunia), (b) the percentage of vaginal superficial cells, (c) the percentage of parabasal cells, and (d) vaginal pH. All primaryendpoints were statistically significant. Women taking Intrarosa experienced a significant reduction in moderate to severe dyspareunia, as well as statisticallysignificant improvements in the percentage of vaginal superficial cells, parabasal cells and vaginal pH.A 52-week long-term safety study of 422 post-menopausal women showed no evidence of endometrial hyperplasia, a potential precursor to endometrialcancer that is associated with the use of unopposed estrogen. Vaginal discharge and atypical pap smears were the most common adverse reactions. Intrarosa iscontraindicated in women with undiagnosed abnormal genital bleeding. The label for Intrarosa contains a precaution that it has not been studied in womenwith a history of breast cancer.Vulvar and Vaginal Atrophy and DyspareuniaIn the U.S., there are an estimated 64 million post-menopausal women, with approximately half, or 32 million, of those women suffering from symptomsof VVA. Of the 32 million women who suffer from symptoms of VVA, we estimate there are approximately 20 million women in the U.S. who suffer fromdyspareunia, a symptom of VVA, the majority of which we believe suffer from moderate to severe dyspareunia. We estimate that of those women, only 1.7million are currently being treated with prescription therapy. The Women’s Health Initiative, a long-term national health study, which focused on strategiesrelated to estrogen replacement therapy in post-menopausal women, led to class labeling for all estrogen-containing products, including a boxed safetywarning. Intrarosa is not subject to a boxed warning nor any limitations to duration of use as are all other currently approved prescription products to treatVVA.MuGardMuGard is indicated for the management of oral mucositis/stomatitis (that may be caused by radiotherapy and/or8Table of Contentschemotherapy) and all types of oral wounds (mouth sores and injuries), including certain ulcers/canker sores and traumatic ulcers, such as those caused byoral surgery or ill-fitting dentures or braces. We acquired the U.S. commercial rights to MuGard under a June 2013 license agreement with Abeona (the“MuGard Rights”). MuGard was launched in the U.S. by Abeona in 2010 after receiving 510(k) clearance from the FDA.BremelanotideOverviewIn January 2017, we entered into a license agreement (the “Palatin License Agreement”) with Palatin pursuant to which we acquired (a) an exclusivelicense in all countries of North America (the “Palatin Territory”), with the right to grant sub-licenses, to research, develop and commercialize bremelanotideand any other products containing bremelanotide (collectively, the “Bremelanotide Products”), an investigational product designed to treat acquired HSDDin pre-menopausal women, (b) a worldwide non-exclusive license, with the right to grant sub-licenses, to manufacture the Bremelanotide Products, and (c) anon-exclusive license in all countries outside the Palatin Territory, with the right to grant sub-licenses, to research and develop (but not commercialize) theBremelanotide Products. Additional details regarding the Palatin License Agreement can be found below under the heading “Collaboration, License andOther Strategic Agreements-Palatin.”Bremelanotide, a melanocortin 4 receptor agonist, is currently being developed for the treatment of acquired HSDD in pre-menopausal women.Bremelanotide is designed to be an as desired therapy used in anticipation of sexual activity and self-administered by the patient in the thigh or abdomen viaa single-use subcutaneous auto-injector. Two Phase 3 bremelanotide studies conducted by Palatin for the treatment of HSDD in pre-menopausal women metthe pre-specified co-primary efficacy endpoints of improvement in desire and decrease in distress associated with low sexual desire as measured usingvalidated patient-reported outcome instruments. Both trials consisted of double-blind placebo-controlled, randomized parallel group studies comparing asubcutaneous dose of 1.75 mg bremelanotide versus placebo, in each case, delivered via an auto-injector. The co-primary endpoints for these trials wereevaluated using Question One and Two of the Female Sexual Function Index: Desire Domain (“FSFI-D”) and Female Sexual Distress Scale-Desires/Arousal/Orgasm (“FSDS-DAO”) Question 13 scores. For women taking bremelanotide compared to placebo, the change from baseline in FSFI-Dshowed statistically significant improvement in measures of desire in both Phase 3 studies, with one study demonstrating a median change of 0.60 vs. 0.00and p=0.0002, and the other study demonstrating a median change of 0.60 vs. 0.00 and p<0.0001. These studies also demonstrated statistically significantmean changes in FSFI-D for women taking bremelanotide compared to placebo of 0.54 vs. 0.24 and 0.63 vs. 0.21. The FSDS-DAO Question 13 scores werealso measured using the median change and showed statistically significant decreases in measures of distress related to low sexual desire in both Phase 3studies for women taking bremelanotide compared to placebo, with one study demonstrating a median change of -1.0 vs. 0.0 and p<0.0001, and the otherstudy demonstrating a median change of -1.0 vs. 0.0 and p=0.0053. These studies also demonstrated statistically significant mean changes in FSDS-DAOQuestion 13 scores for women taking bremelanotide compared to placebo of -0.7 vs. -0.4 for both studies. The change in the number of satisfying sexualevents, a key secondary endpoint, was not significantly different from placebo in either clinical trial. Each trial consisted of over 600 patients randomized ina 1:1 ratio to either the treatment arm or placebo arm, each with a 24 week evaluation period. The most frequent adverse events were nausea, flushing andheadache, which were generally mild-to-moderate in severity and were transient. Approximately 17% of patients discontinued participation in thebremelanotide arm due to adverse events in both studies versus 2% in placebo. Women in the trials had the option, after completion of the randomized trial,to continue in an ongoing open-label safety extension study for an additional 52 weeks, which gathered additional data on the safety of long-term andrepeated use of bremelanotide. Nearly 80% of patients who completed the randomized portion of the study elected to remain in the open-label portion of thestudy. All of the patients in the extension study, which was completed in 2017, received bremelanotide. The adverse events in the extension portion of thestudy were consistent with that of the controlled study described above. We expect to submit an NDA for bremelanotide in the first quarter of 2018.The Phase 3 bremelanotide studies were predicated on the results of a Phase 2b clinical study of bremelanotide conducted by Palatin. The Phase 2bclinical study was a multicenter, placebo-controlled, randomized, parallel group, dose-finding trial testing three dose levels, 0.75 mg, 1.25 mg and 1.75 mg,of subcutaneously administered bremelanotide against placebo in pre-menopausal women diagnosed with acquired HSDD, female sexual arousal disorder orboth. The 1.75 mg dose demonstrated clinically meaningful and statistically significant results for all predefined endpoints and was generally well-toleratedand was therefore selected as the dose to take into the Phase 3 trials.Female Sexual Dysfunction and Hypoactive Sexual Desire DisorderFSD is defined as persistent or recurring problems during one or more of the stages of a woman's sexual response. It is multi-dimensional and can becaused by physiological, psychological, emotional and/or relational factors. FSD can also have a9Table of Contentsmajor impact on a woman’s sexual relationships, interpersonal relationships, quality of life, and even their general well-being. HSDD is the most commontype of FSD and is characterized by a lack of sexual thoughts and desire for sexual activity, which causes a woman distress or puts a strain on the relationshipwith her partner, and cannot be accounted for by another medical physical or psychiatric condition, co-morbidity of another condition or the effects of amedication. Studies suggest that approximately 15 million women in the U.S. are affected by HSDD and approximately 5.8 million of these women are pre-menopausal and have a primary diagnosis of HSDD. Despite one FDA-approved HSDD therapy on the market today for pre-menopausal women, we believethat patient awareness and understanding of the condition is extremely low, and that few women currently seek treatment. HSDD may go undiagnosed due tovarious factors such as embarrassment or stigma, lack of awareness of low sexual desire as a medical condition or attribution to other external factors, such asstress or fatigue. Recent market research commissioned by Palatin indicates that 95% of pre-menopausal women suffering from low desire with associateddistress are unaware that HSDD is a treatable medical condition. As a result, assuming FDA approval of our NDA for bremelanotide, we expect that the initialfocus of our bremelanotide commercialization efforts will be raising awareness and education about the disease for both healthcare professionals and patientswith this disorder. We have launched an unbranded condition awareness campaign to healthcare professionals and will be expanding it to patients later in2018.Collaboration, License and Other Strategic AgreementsEndoceuticsUnder the terms of the Endoceutics License Agreement, which we entered into with Endoceutics in February 2017, we made an upfront payment of $50.0million and issued 600,000 shares of unregistered common stock to Endoceutics, which had a value of $13.5 million, as measured on April 3, 2017, the dateof closing. Of these 600,000 shares, 300,000 were subject to a 180-day lock-up provision, and the other 300,000 are subject to a one-year lock-up provision.In addition, we paid Endoceutics $10.0 million in the third quarter of 2017 upon the delivery by Endoceutics of Intrarosa launch quantities and have agreedto make a payment of $10.0 million in April 2018 on the first anniversary of the closing. The anniversary payment is reflected in accrued expenses atDecember 31, 2017. During 2017, we recorded a total of $83.5 million of consideration paid, of which $77.7 million was allocated to the Intrarosa developedtechnology intangible asset and $5.8 million was recorded as in-process research and development expense based on their relative fair values.In addition, we have also agreed to pay tiered royalties to Endoceutics equal to a percentage of net sales of Intrarosa in the U.S. ranging from mid-teensfor calendar year net U.S. sales up to $150.0 million to mid twenty percent for any calendar year net sales that exceed $1.0 billion (such royalty rate to bedependent on the aggregate annual net sales of Intrarosa in the U.S.) for the commercial life of Intrarosa, subject to certain deductions. Endoceutics is alsoeligible to receive certain sales milestone payments, including a first sales milestone payment of $15.0 million, which would be triggered when annual netU.S. sales of Intrarosa exceed $150.0 million, and a second milestone payment of $30.0 million, which would be triggered when annual net U.S. sales ofIntrarosa exceed $300.0 million. If annual net U.S. sales of Intrarosa exceed $500.0 million, there are additional sales milestone payments totaling up to$850.0 million, which would be triggered at various sales thresholds.We have the exclusive right to commercialize Intrarosa for the treatment of VVA and FSD in the U.S., subject to the terms of the Endoceutics LicenseAgreement, including having final decision-making authority with respect to commercial strategy, pricing and reimbursement and other commercializationmatters. We have agreed to use commercially reasonable efforts to market, promote and otherwise commercialize Intrarosa for the treatment of VVA and, ifapproved, FSD in the U.S. Endoceutics has the right to directly conduct additional commercialization activities for Intrarosa for the treatment of VVA andFSD in the U.S. and has the right to conduct activities related generally to the field of intracrinology, in each case, subject to our review and approval and ourright to withhold approval in certain instances. Each party's commercialization activities and budget are described in a commercialization plan, which isupdated annually. In connection with the Endoceutics License Agreement, we entered into the Endoceutics Supply Agreement with Endoceutics, which provides for theexclusive commercial supply by Endoceutics, itself or through affiliates or contract manufacturers, to manufacture and supply Intrarosa, subject to certainrights for us to manufacture and supply Intrarosa in the event of a cessation notice or supply failure. Under the Endoceutics License Agreement, except as permitted under the Endoceutics License Agreement or the Endoceutics Supply Agreement, andexcept for any compounds or products affecting the melanocortin receptor pathway, including without limitation, bremelanotide (collectively, “ExcludedProducts”), we are not permitted to research, develop, manufacture, or commercialize (a) DHEA for delivery by any route of administration anywhere in world,(b) any compound (including DHEA) or product for use in VVA anywhere in the world, or (c) commencing on the date of an approval of Intrarosa for thetreatment of FSD in the U.S. and continuing for the remainder of the term of the Endoceutics License Agreement, any compound (including DHEA) for use inFSD (each, a “Competing Product”). Any compound or product for use in FSD that10Table of Contentswould be a Competing Product in the United States but that (a) does not contain DHEA and (b) was acquired or licensed or for which the research,development, manufacture or commercialization of such compound or product is initiated by us or our affiliates, in each case, prior to the date of an approvalof Intrarosa for the treatment of FSD in the U.S., will be an Excluded Product and will not be subject to the exclusivity obligations under the EndoceuticsLicense Agreement for the treatment of FSD, subject to certain restrictions in the Endoceutics License Agreement. These noncompete restrictions are subjectto certain exclusions relating to the acquisition of competing programs.The Endoceutics License Agreement expires on the date of expiration of all royalty obligations due thereunder unless earlier terminated in accordancewith its terms, including by either party for material breach that is either uncured after a 90-day notice period (subject to certain extensions and disputeresolutions provisions). We have the ability to elect not to terminate the Endoceutics License Agreement in the case of a material breach, in which case futuremilestone and royalty payments owed to Endoceutics would be reduced by a negotiated percentage or by an amount determined by arbitration. Either partymay terminate under certain situations relating to the bankruptcy or insolvency of the other party. We may terminate the Endoceutics License Agreement fora valid business reason upon 365 days prior written notice to Endoceutics; or upon 60 days written notice in the event we reasonably determine in good faith,after due inquiry and after discussions with Endoceutics, that we cannot reasonably continue to develop or commercialize the product as a result of a safetyissue regarding the use of Intrarosa. We may also terminate the Endoceutics License Agreement upon 180 days’ notice if there is a change of control ofAMAG and the acquiring entity (alone or with its affiliates) is engaged in a competing program (as defined in the Endoceutics License Agreement) in the U.S.or in at least three countries within the European Union.PalatinUnder the terms of the Palatin License Agreement, which we entered into with Palatin in January 2017, we paid Palatin $60.0 million as a one-timeupfront payment in 2017 and subject to agreed-upon deductions, we reimbursed Palatin approximately $25.0 million for reasonable, documented, out-of-pocket expenses incurred by Palatin in connection with the development and regulatory activities necessary to submit an NDA in the U.S. for bremelanotidefor the treatment of acquired HSDD in pre-menopausal women. In addition, the Palatin License Agreement requires us to make future contingent payments of(a) up to $80.0 million upon achievement of certain regulatory milestones, including $20.0 million upon the acceptance by the FDA of our NDA forbremelanotide and $60.0 million upon FDA approval, and (b) up to $300.0 million of aggregate sales milestone payments upon the achievement of certainannual net sales in North America over the course of the license. The first sales milestone payment of $25.0 million will be triggered when bremelanotideannual net sales in North America exceed $250.0 million. We are also obligated to pay Palatin tiered royalties on annual net sales in North America of theBremelanotide Products, on a product-by-product basis, in the Palatin Territory ranging from the high-single digits to the low double-digits. The royaltieswill expire on a product-by-product and country-by-country basis upon the latest to occur of (a) the earliest date on which there are no valid claims of Palatinpatent rights covering such Bremelanotide Product in such country, (b) the expiration of the regulatory exclusivity period for such Bremelanotide Productin such country and (c) 10 years following the first commercial sale of such Bremelanotide Product in such country. These royalties are subject to reductionin the event that: (a) we must license additional third-party intellectual property in order to develop, manufacture or commercialize a Bremelanotide Productor (b) generic competition occurs with respect to a Bremelanotide Product in a given country, subject to an aggregate cap on such deductions of royaltiesotherwise payable to Palatin. After the expiration of the applicable royalties for any Bremelanotide Product in a given country, the license for suchBremelanotide Product in such country would become a fully paid-up, royalty-free, perpetual and irrevocable license.The Palatin License Agreement expires on the date of expiration of all royalty obligations due thereunder unless earlier terminated in accordance withthe agreement. In addition, we have the right to terminate the Palatin License Agreement without cause, in its entirety or on a product-by-product andcountry-by-country basis upon at least 180 days’ prior written notice to Palatin. Either party may terminate the Palatin License Agreement for cause if theother party materially breaches or defaults in the performance of its obligations, and, if curable, such material breach remains uncured for 90 days.VeloIn July 2015, we entered into an option agreement with Velo, a privately held life-sciences company that granted us an option to acquire the rights to anorphan drug candidate, DIF, a polyclonal antibody in clinical development for the treatment of severe preeclampsia in pregnant women. We made an upfrontpayment of $10.0 million in 2015 for the option to acquire the global rights to the DIF program (the “DIF Rights”). DIF has been granted both orphan drugand fast-track review designations by the FDA for use in treating severe preeclampsia. Under the option agreement, Velo will complete a Phase 2b/3a clinicalstudy, which began in the second quarter of 2017. Following the conclusion of the DIF Phase 2b/3a study, we may terminate, or, for additional consideration,exercise or extend, our option to acquire the DIF Rights. If we exercise the option to acquire the DIF Rights, we would be responsible for additional costs inpursuing FDA approval, and would be obligated to pay to Velo11Table of Contentscertain milestone payments and single-digit royalties based on regulatory approval and commercial sales of the product. If we exercise the option, we will beresponsible for payments totaling up to $65.0 million (including the payment of the option exercise price and the regulatory milestone payments) and up toan additional $250.0 million in sales milestone payments based on the achievement of annual sales milestones at targets ranging from $100.0 million to$900.0 million.AntaresThrough our acquisition of Lumara Health, we are party to a development and license agreement with Antares (the “Antares Agreement”), which grantsus an exclusive, worldwide, royalty-bearing license, with the right to sublicense, to certain intellectual property rights, including know-how, patents andtrademarks, to develop, use, sell, offer for sale and import and export the Makena auto-injector. In consideration for the license, to support joint meetings anda development strategy with the FDA, and for initial tooling and process validation, Lumara Health paid Antares an up-front payment in October 2014. Underthe Antares Agreement, we are responsible for the clinical development and preparation, submission and maintenance of all regulatory applications in eachcountry where we desire to market and sell the Makena auto-injector, including the U.S. We are required to pay royalties to Antares on net sales of theMakena auto-injector commencing on the launch of the Makena auto-injector in a particular country until the Makena auto-injector is no longer sold oroffered for sale in such country (the “Antares Royalty Term”). The royalty rates range from high single digit to low double digits and are tiered based onlevels of net sales of the Makena auto-injector and decrease after the expiration of licensed patents or where there are generic equivalents to the Makena auto-injector being sold in a particular country. In addition, we are required to pay Antares sales milestone payments upon the achievement of certain annual netsales. Antares is the exclusive supplier of the device components of the Makena auto-injector and Antares remains responsible for the manufacture andsupply of the device components and assembly of the Makena auto-injector. We are responsible for the supply of the drug to be used in the assembly of thefinished auto-injector product. The development and license agreement terminates at the end of the Antares Royalty Term, but is subject to early terminationby us for convenience and by either party upon an uncured breach by or bankruptcy of the other party.AbeonaIn June 2013, we entered into a license agreement (the “MuGard License Agreement”) with Abeona under which Abeona granted us 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 and possessions (the “MuGard Territory”) for themanagement of oral mucositis/stomatitis (that may be caused by radiotherapy and/or chemotherapy) and all types of oral wounds (mouth sores and injuries),including certain ulcers/canker sores and traumatic ulcers, such as those caused by oral surgery or ill-fitting dentures or braces.In consideration for the license, we paid Abeona an upfront license fee of $3.3 million in June 2013. We are required to pay royalties to Abeona on netsales of MuGard in the MuGard Territory until the later of (a) the expiration of the licensed patents or (b) the tenth anniversary of the first commercial sale ofMuGard in the MuGard Territory (the “MuGard Royalty Term”). These tiered, double-digit royalty rates decrease after the expiration of the licensed patents.After the expiration of the MuGard Royalty Term, the license shall become a fully paid-up, royalty-free and perpetual license in the MuGard Territory.Abeona remains responsible for the manufacture of MuGard and we have entered into a quality agreement and a supply agreement under which wepurchase MuGard inventory from them.Abeona is responsible for maintenance of the licensed patents at its own expense, and we retain the first right to enforce any licensed patent against third-party infringement. The MuGard License Agreement terminates at the end of the MuGard Royalty Term, but is subject to early termination by us forconvenience and by either party upon an uncured breach by or bankruptcy of the other party.ManufacturingOverviewWe do not own or operate, and currently do not plan to own or operate, facilities for the manufacture of our commercially distributed products, productcandidates or for any commercial products or product candidates we may acquire or in-license. We rely solely on third-party contract manufacturers and ourlicensors (who, in turn, may also rely on third-party contract manufacturers) to manufacture our products for our commercial and clinical use. Our third-partydrug product contract manufacturing facilities, and those of our licensors, are subject to current good manufacturing practices (“cGMP”) and regulationsenforced by the FDA through periodic inspections to confirm such compliance. We target to maintain, where possible, second source suppliers and/orsufficient inventory levels throughout our supply chain to meet our projected near-term12Table of Contentsdemand for all of our drug products in order to minimize risks of supply disruption. For example, although we do not currently have a manufacturer for theproduction of HPC, our supply chain practices have resulted in inventory of HPC, which we believe to be sufficient to meet demand until we can obtain FDAapproval of a new drug substance manufacturer. We intend to continue to outsource the manufacture and distribution of our products for the foreseeablefuture, and we believe this manufacturing strategy will enable us to direct more of our financial resources to the commercialization and development of ourproducts and product candidates.We own a facility located in Tucson, Arizona, which stores all of our customers’ cord blood and cord tissue samples. We rely solely on third-partycontract manufacturers and service providers for certain materials required to support the CBR Services, including to supply proprietary materials, some ofwhom are sole source providers. The business model for CBR Services is limited to charging customers for our services related to the collection, processingand storage of umbilical cord blood stem cells and cord tissues. Nevertheless, the FDA considers those services to constitute manufacturing of regulatedmaterials, and enforces regulations to ensure that establishments that perform such services do so in accordance with current Good Tissue Practices.To support the commercialization and development of our products and services, 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 enableus to maintain high standards of quality for our products and services.MakenaThe Makena drug product for our commercial and clinical use is currently manufactured by Pfizer under a Development and Supply Agreement (asamended and restated, the “Pfizer Agreement”). The Pfizer Agreement requires that we satisfy certain minimum purchase requirements, but we are notobligated to use Pfizer as our sole supplier of drug product. The Pfizer Agreement expires on December 31, 2022, which term will be automatically extendedthereafter for additional 18 month periods, unless canceled by us or Pfizer within an agreed-upon notice period. We also have an agreement with PiramalPharma Solutions (formerly Coldstream Laboratories, Inc.) as a second source manufacturer for the Makena 1 mL drug product. In addition, we have enteredinto an agreement with a supplier of the active pharmaceutical ingredient (“API”) for use in the finished Makena product. We also intend to enter into anagreement with a second source supplier to produce Makena API. Both API suppliers have filed with the FDA for approval of their sites.Antares is the exclusive supplier for the auto-injection system devices needed for the Makena auto-injector, and Antares is responsible for themanufacture and supply of the device and assembly of the Makena auto-injector. The Antares Agreement terminates at the end of the Antares Royalty Term,but is subject to early termination by us for convenience and by either party upon an uncured breach by or bankruptcy of the other party. In addition, we areresponsible for providing Antares with the supply of the Makena drug substance in pre-filled syringes to be used in the assembly of the finished auto-injectorproduct. We also expect to enter into a manufacturing agreement for the production of the pre-filled syringes. We intend to enter into a commercial supplyagreement with Antares.We entered into a distribution and supply agreement in December 2017 with a generic partner to launch an authorized generic of the IM formulation ofMakena upon the first entry of generic competition.FerahemeWe are party to a Commercial Supply Agreement with Sigma-Aldrich, Inc. (“SAFC”) pursuant to which SAFC agreed to manufacture and we agreed topurchase from SAFC the API for use in the finished product of ferumoxytol for commercial sale as well as for use in clinical trials (as amended, the “SAFCAgreement”). Subject to certain conditions, the SAFC Agreement provides that we purchase all of our API from SAFC. The SAFC Agreement has an initialterm that ends December 31, 2020, which may be automatically extended thereafter for additional two year periods, unless canceled by us or SAFC within anagreed-upon notice period.We are party to a Pharmaceutical Manufacturing and Supply Agreement with Patheon, Inc. (“Patheon”) pursuant to which Patheon agreed to manufactureferumoxytol finished drug product for commercial sale and for use in clinical trials at a fixed price per vial (as amended, the “Patheon Agreement”). ThePatheon Agreement will continue in force until December 31, 2020. The Patheon Agreement may be terminated at any time upon mutual written agreementby us and Patheon or at any time by us subject to certain notice requirements and early termination fees. In addition, the Patheon Agreement may beterminated by either us or Patheon in the event of a material breach of the agreement by the other party provided that the breaching party fails to cure suchbreach within an agreed-upon notice period.13Table of ContentsWe have also entered into a manufacturing and supply agreement with a second source supplier to produce ferumoxytol finished drug product inaddition to Patheon. This supplier has filed with the FDA for approval of its site and we anticipate a decision in 2018.IntrarosaUnder the terms of the Endoceutics Supply Agreement, Endoceutics, itself or through affiliates or contract manufacturers, agreed to manufacture andsupply Intrarosa to us and is our exclusive supplier of Intrarosa in the U.S., subject to certain rights for us to manufacture and supply Intrarosa in the event of acessation notice or supply failure (as such terms are defined in the Endoceutics Supply Agreement). Under the Endoceutics Supply Agreement, Endoceuticshas agreed to maintain a second source supplier for the manufacture of the drug product and identify, validate and transfer manufacturing intellectualproperty to the second source supplier by 2019. The Endoceutics Supply Agreement will remain in effect until the termination of the Endoceutics LicenseAgreement, unless terminated earlier by either party for an uncured material breach or insolvency of the other party, or by us if we exercise our rights tomanufacture and supply Intrarosa following a cessation notice or supply failure.MuGardUnder the terms of the MuGard License Agreement, Abeona is responsible for all aspects of manufacturing MuGard. We have entered into a supplyagreement with Abeona under which we purchase MuGard inventory from Abeona. Our inventory purchases are at the price actually paid by Abeona topurchase it from a third-party plus a mark-up to cover administration, handling and overhead.BremelanotideUnder the Palatin License Agreement, we assumed a long-term commercial supply agreement for drug product manufacture and assembly services forbremelanotide. We are currently negotiating other manufacturing and supply agreements for the drug substance and auto-injector sub-assemblies and maynot be able to enter into such agreements on acceptable terms, if at all.Raw MaterialsWe, our licensors and our respective third-party product manufacturers currently purchase certain raw and other materials used to manufacture ourproducts from third-party suppliers and, at present, do not have long-term supply contracts with most of these third parties. We also rely upon third-partycontractors to assist in providing the CBR Services, including to supply proprietary materials. Although certain of our raw or other materials are readilyavailable, others may be obtained only from qualified suppliers. The qualification of an alternative source may require repeated testing of the new materialsand generate greater expenses to us or our licensors if materials that we test do not perform in an acceptable manner. In addition, we, our licensors or ourrespective third-party manufacturers sometimes obtain raw or other materials from one vendor only, even where multiple sources are available, to maintainquality control and enhance working relationships with suppliers, which could make us susceptible to price inflation by the sole supplier, thereby increasingour production costs. As a result of the high-quality standards imposed on our raw or other materials, we, our licensors or our respective third-partymanufacturers may not be able to obtain such materials of the quality required to manufacture our products or support the CBR Services from an alternativesource on commercially reasonable terms, or in a timely manner, if at all.Patents, Trademarks and Trade SecretsWe 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 protectionand maintaining trade secret protection for our products. Our success depends, in large part, on our ability, and the ability of our licensors, collaborators andother business partners to maintain the proprietary nature of our technology and other trade secrets. To do so, we must prosecute and maintain existingpatents, obtain new patents and ensure trade secret protection. We must also operate without infringing the proprietary rights of third parties or allowing thirdparties to infringe our rights.Our policy is to aggressively protect our competitive technology position by a variety of means, including applying for or obtaining rights to patents inthe U.S. and in foreign countries. One of our U.S. Feraheme patents received a patent term extension under the Hatch-Waxman Act and will expire in June2023, and the other U.S. patents relating to Feraheme will expire in 2020. In December 2017, we were issued a U.S. patent related to the Makena auto-injectorproduct, which will expire in 2036, and we have a pending patent application related to the Makena auto-injector product. In addition, we have a license to14Table of Contentsseveral U.S. patents and patent applications from Antares related to the Makena auto-injector device and drug-device combination with expiration datesbetween 2019 and 2034. We intend to request Orange Book listing of our and Antares’ eligible patents. There are no issued patents covering the Makena IMproduct or the CBR Services.Under the Palatin License Agreement, we have exclusive rights to a number of U.S. and foreign patents and applications related to bremelanotide that areowned by Palatin. Certain of Palatin's U.S. patents include claims directed to the bremelanotide drug composition and methods of use thereof with termsexpiring in 2020, and other patents include claims directed to methods of treating FSD by subcutaneous administration of compositions that includebremelanotide with terms expiring in 2033. Any one of these issued patents may be granted up to five years of patent term extension (up to a maximumpatent term of 14 years after regulatory approval) pursuant to the Hatch-Waxman Act. Whether any of these patents will be granted patent term extensionunder the Hatch-Waxman Act and the length of any such extension cannot be determined until a product covered by such patents receives FDA approval.Under the terms of the Endoceutics License Agreement, we received rights to U.S. patents and applications related to Intrarosa that are owned byEndoceutics. One issued patent includes drug product claims with a term that expires in 2031. Two additional issued patents include method of use claimsand pharmaceutical dosage form claims with terms that expire in 2028, either of which may be granted up to five years of patent term extension (up to amaximum patent term of 14 years after regulatory approval pursuant to the Hatch-Waxman Act). However, there is no guarantee that the FDA will grant suchan extension.Under the Abeona License Agreement, we have exclusive rights to two U.S. patents related to MuGard that are owned by Abeona. These Abeona patentsinclude liquid composition claims and will expire in 2022.Additionally, we have an agreement with Velo that gives us an exclusive option to acquire the rights to DIF, an orphan drug candidate, for the treatmentof severe preeclampsia in pregnant women. Under the option agreement, at the conclusion of a Phase 2b/3a clinical trial we may exercise, extend or terminatethe acquisition option, at which time we have the right to purchase all intellectual property of Velo related to the DIF Rights.With regard to pending patent applications we own or have rights to, even though further patents may be issued on such applications, we cannot be surethat any such patents will be issued on a timely basis, if at all, or with a scope that provides our products with additional protection. The claims of issuedpatents related to any of our products may not provide meaningful protection for the product, and third parties may challenge the validity or scope of anysuch issued patents. Additionally, the claims of our issued patents may be narrowed or invalidated by administrative proceedings, such as interference orderivation, inter partes review, post grant review or reexamination proceedings before the United States Patent and Trademark Office. In addition, existing orfuture patents of third parties may limit our ability to commercialize our products.We also have numerous U.S. and foreign trademark registrations directed to our corporate and affiliate names, as well as our products, complianceprograms and services. These marks help to further distinguish our products and services and enhance our overall intellectual property position.CompetitionThe pharmaceutical and cord blood banking industries are intensely competitive and subject to rapid technological change. Makena competitioncurrently comes mainly from pharmacies that compound a non-FDA approved version of Makena, which is sold at a much lower list price and is lessregulated than Makena. However, we expect the competitive landscape for Makena to impose even greater challenges upon our commercialization effortswhen generic formulations of Makena IM product enter the market, which could happen at any time given the expiration of orphan drug exclusivity inFebruary 2018. Many of our competitors for Feraheme and Intrarosa are large, well-known pharmaceutical companies and may benefit from significantlygreater financial, sales and marketing capabilities, greater technological or competitive advantages, and other resources. For the CBR Services, competitionin the private cord blood and cord tissue banking business is already intense and is likely to increase as the number of competitors continues to grow giventhe relatively low barriers to entry. We also expect to face competition for bremelanotide, including from an already FDA-approved product for the treatmentof HSDD. Our existing or potential competitors for all our products and services have or may develop products or services that are more widely accepted thanours, are viewed as more safe, effective, convenient or easier to administer, have been on the market longer and have stronger patient/provider loyalty, havebeen approved for a larger patient population, are less expensive or offer more attractive insurance coverage, discounts, reimbursements, incentives or rebatesand may have or receive patent protection that dominates, blocks, makes obsolete or adversely affects our product development or business.15Table of ContentsMakenaMakena is currently the only FDA-approved drug indicated to reduce the risk of preterm birth in women pregnant with a single baby who have a historyof singleton spontaneous preterm birth. Its largest competitor has historically been compounding pharmacies, which have been manufacturing formulationsof HPC, the active ingredient in Makena and commonly referred to as “c17P”, for many years at a lower cost than Makena. The FDA implemented the DrugQuality and Security Act (“DQSA”) in 2013, which amended the Federal Food, Drug and Cosmetic Act (the “FDC Act”), with respect to the regulation andmonitoring of the manufacturing of compounded drugs. Although the FDA has issued a public statement recommending the use of Makena instead of acompounded drug except when there is a specific medical need (i.e., an allergy) that cannot be met by the approved drug and has stated that when it identifiesa pharmacist that compounds regularly or in inordinate amounts of any drug products that are essentially copies of Makena, it intends to take enforcementaction as it deems appropriate, doctors continue to prescribe, and compounders continue to manufacture and sell, c17P. Although we continue to educatehealthcare professionals and patients about progress made toward expanding coverage of Makena and about the benefits of Makena, certain doctors continueto choose to prescribe non-FDA approved c17P made by pharmacy compounders in lieu of prescribing Makena.The Makena IM product no longer has market exclusivity and we expect that going forward, Makena's primary competitors will be generic formulationsof HPC injection, which could enter the market through the approval of ANDAs that use Makena as a reference listed drug and allow generic competitors torely on Makena’s safety and efficacy trials instead of conducting their own studies. We currently believe that several companies filed ANDAs during 2017seeking approval for generic versions of HPC injection. The specific timing of potential approval of a generic HPC injection ANDA is uncertain, however webelieve that Makena could face generic competition by mid-2018. We have partnered with a generics company to launch and market an authorized generic ofthe Makena IM product to allow us to offset some of the impact of generics to branded Makena, including if a generic enters the market more quickly than weanticipate. If a generic version of Makena becomes available in the market, governmental and payer pressures to reduce pharmaceutical costs may causephysicians to prescribe the generic formulation rather than the branded Makena, and could materially and adversely affect the level of sales and the price atwhich we could sell Makena.Following the entry of generic competitors to Makena, the longer-term durability of the Makena franchise will be highly dependent on our ability tosuccessfully commercialize the Makena auto-injector, which was approved by the FDA in February 2018. The Makena auto-injector is intended to providehealthcare professionals and patients with an alternative treatment method to the Makena IM product. We plan to launch the Makena auto-injector in March2018. Upon the entry of a generic version of Makena to the market, the auto-injector will compete with generic versions of the Makena IM product, includingour own authorized generic, discussed above. We have limited experience in the development or commercialization of an auto-injector product and in orderto compete with potential generic entrants and retain sufficient Makena revenues, we will need to differentiate our auto-injector product from the IM genericproducts by successfully executing on the following strategies:•Rapidly driving awareness of the availability and benefits of the Makena auto-injector and converting current IM prescribers to the Makena auto-injector;•Provide training on the use of the auto-injector to healthcare providers, as well as the benefits of the subcutaneous delivery in light of the obstetricalcommunity's limited experience prescribing and using auto-injectors; and•Provide an easy and convenient process for patients and healthcare providers to prescribe, acquire and administer the Makena auto-injector.In addition, due to the lower cost of the generics, if physicians, patients and payers do not fully appreciate the potential benefits of the Makena auto-injector, payers may require treatment with the generic, which could cause sales of Makena to decline. Further, if healthcare professionals prefer the IMmethod of administration to the auto-injector method, they will not utilize the auto-injector and we could lose a significant amount of our Makena revenueand market share to the generic competitors. We expect the Makena auto-injector to be priced at parity with the Makena IM product at launch to help ensuretimely and affordable access.Makena also competes with products that may be prescribed off-label (i.e., outside of indications approved by the FDA) such as the generic version ofDelalutin, a product which contains the same active ingredient as Makena, but which was approved for conditions other than reducing the risk of pretermbirth and is not therapeutically equivalent to Makena. Further, other companies are or may be working on developing additional formulations or routes ofadministration for products that reduce or prevent preterm birth. For example, an oral HPC product is currently in development and has been granted orphandrug designation by the FDA.16Table of ContentsBased on market research we have conducted, we estimate that the following represents the 2017 and 2016 U.S. market share allocation of the Makenaat-risk patient population (as calculated by shipments to physicians), including patients treated with Makena, patients treated with c17P, and the patientpopulation being treated either with other therapies, such as vaginal progesterone, that are not approved for women pregnant with a single baby with a priorhistory of singleton spontaneous preterm birth, or not treated at all. 2017 2016Makena50% 42%c17P20% 28%Other therapies or untreated30% 30%For a detailed discussion regarding the risks and uncertainties related to competition for Makena, please refer to our Risk Factors, “We no longer havemarket exclusivity for Makena and generic competitors are seeking approval to market generic versions of Makena, which would cause sales of Makena tosignificantly decline and have an adverse impact on our business and results of operation.” and “Competition in the pharmaceutical andbiopharmaceutical industries, including from companies marketing generic products, is intense and competition in the cord blood stem cell and cord tissuebanking processing and storage business is increasing. If we fail to compete effectively, our business and market position will suffer.”CBR ServicesIn the past ten years, the cord blood banking industry has seen significant change. For example, in 2013 approximately 2.6% of U.S. parents wereprivately storing cord blood as compared to 2004 when only 0.2% of parents were privately storing cord blood. Similarly, the storage of umbilical cord tissuehas grown substantially from when it was first offered to the public as a commercial option in 2010. CBR was the first major company in the U.S. to offerumbilical cord tissue storage in 2010, and in 2017, most private U.S. cord blood banks now offer this service. The relatively low barriers to entry allowcompetitors to easily enter the market, and some of these competitors offer, or may in the future offer, additional bio-banking services to their customers, suchas noninvasive prenatal testing, newborn screening, whole genome sequencing and/or placenta banking services and have more advanced collection kits andstorage bags, which could make them more attractive to consumers than CBR. We also face competition from public banks, as families may choose to usepublic banks over private banks based on considerations such as the higher cost of private banking, the rate that cord blood is used within public banksversus private banks, the altruistic value to society of public banking and the perception that publicly stored cord blood is of a higher quality because privatecord blood banks are not subject to the same regulatory oversight as public banks. New entrants to the market could affect our market share or put downwardpressure on the pricing of the CBR Services or may offer and promote similar services at lower prices. In addition, new entrants may not abide by industryguidelines, regulations and standards, including quality, compliance and marketing standards and/or engage in marketing behaviors that communicate falseor misleading information. In addition to having a potential adverse impact on our business, these behaviors by such competitors could create a negativeperception of our industry if they violate regulations or pursue questionable business practices. Though the barriers to entry are low, we believe thatestablishing a high-quality brand and nationwide reputation like CBR’s, and growing a bank to a size where long-term stability of operations is not a primaryconcern for customers, gives CBR an advantage in the market.In the U.S., CBR is considered the largest private cord blood bank based on the number of cord blood and cord tissue units banked, with nearly 40% of theprivate bank market. CBR’s largest U.S. competitor is ViaCord®, a subsidiary of PerkinElmer, Inc. Two other banks, Cryo-Cell International, Inc.® andStemCyte™, are significantly smaller than either CBR or ViaCord®, but maintain a national footprint. In addition to these three competitors, CBR competeswith more than 20 other blood banks in the U.S., most of which have regional focuses. CBR differentiates itself from almost all of its competitors through itssize, brand recognition, longevity, investments in research and its commercial reach.FerahemeFeraheme currently competes primarily with the following IV iron replacement therapies for the treatment of IDA:•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, Inc. (“American Regent”), asubsidiary of Luitpold Pharmaceuticals, Inc. (a business unit of Daiichi Sankyo Group);•Injectafer®, a ferric carboxymaltose injection, which is approved to treat IDA in adult patients who have intolerance to oral iron or have hadunsatisfactory response to oral iron. Injectafer® is also indicated for IDA in adult patients with17Table of Contentsnon-dialysis dependent CKD. Injectafer® is marketed in the U.S. by American Regent, the same distributor of Venofer®;•Ferrlecit®, a sodium ferric gluconate, which is marketed by Sanofi-Aventis U.S. LLC, is approved for use only in hemodialysis patients;•A generic version of Ferrlecit® marketed by Teva Pharmaceuticals, Inc.; and•INFeD®, an iron dextran product marketed by Allergan, Inc. which is approved in the U.S. for the treatment of patients with documented irondeficiency in whom oral iron administration is unsatisfactory or impossible.In addition to the currently marketed products described above, Feraheme may also compete with Auryxia® (ferric citrate), an oral phosphate binder,which is marketed by Keryx Biopharmaceuticals, Inc., and which recently received a second indication for the treatment of IDA in adult patients with CKDnot on dialysis. Further, Pharmacosmos A/S is developing Monofer® (iron isomaltoside) and has commenced a Phase 3 trial in the U.S. In addition, there areseveral hypoxia inducible factor stabilizers in various stages of development to treat anemia related to CKD.We may face challenges retaining our existing Feraheme customers, gaining sales to new customers and gaining market share despite the February 2018approval of Feraheme’s broader label. For example, since Injectafer® was approved in 2013 with a broader indication than the original Feraheme indication,physicians may have increased their use of Injectafer® and other physicians may have begun to use Injectafer®, making it more difficult for us to cause thesephysicians to use Feraheme in the future. In addition, manufacturers of Injectafer® may have entered into commercial contracts with key customers or grouppurchasing organizations (“GPOs”), which would limit our ability to enter into favorable pricing arrangements. Further, Daiichi Sankyo Group has asubstantially larger sales force to market Injectafer® than we do to market Feraheme, which allows them to reach a broader group of healthcare professionals.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. Feraheme may face future competition from generic IV iron replacement therapy products. For example, as discussedabove, in February 2016, we received a Paragraph IV certification notice letter regarding an ANDA submitted to the FDA by Sandoz requesting approval toengage in commercial manufacture, use and sale of a generic version of ferumoxytol. In March 2016, we initiated a patent infringement suit alleging thatSandoz’ ANDA filing itself constituted an act of infringement and that if it is approved, the manufacture, use, offer for sale, sale or importation of Sandoz’ferumoxytol products would infringe our patents. By the filing of our complaint, we believe the 30 month stay was triggered and that Sandoz is prohibitedfrom marketing its ferumoxytol product, even if it receives conditional approval from the FDA until the earliest of (a) August 5, 2018 (30 months from thedate we received Sandoz's a notice of certification), (b) the conclusion of litigation in Sandoz’s favor, or (c) expiration of the patent(s). In May 2016, Sandozfiled a response to our patent infringement suit and the trial is scheduled for March 19, 2018.Based on sales data provided to us in January 2018 by IQVIA, we estimate that the size of the total 2017 U.S. non-dialysis IV iron replacement therapymarket was approximately 1.2 million grams, which represents an increase of approximately 10% over 2016. During 2017 and 2016, Feraheme competed inthe CKD portion of this market, which we estimate is approximately half of the total market. Based on this IQVIA data, the following represents the 2017 and2016 U.S. market share allocation of the total non-dialysis IV iron market based on the volume of IV iron administered: 2017 U.S. Non-dialysis IV IronMarket 2016 U.S. Non-dialysis IV IronMarket (1.2 million grams) (1.1 million grams)Venofer®35% 38%Injectafer®26% 21%INFeD®15% 15%Feraheme12% 13%Generic sodium ferric gluconate9% 9%Ferrlecit®3% 4%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.18Table of ContentsIntrarosaIntrarosa faces competition from the following approved products:•Estrace® Cream (Estradiol vaginal cream, USP 0.01%) (“Estrace”), a vaginal cream for the treatment of VVA marketed by Allergan PLC;•Estradiol® Vaginal Cream USP, 0.01% (generic version of Estrace®), including a generic marketed by Mylan N.V., which was launched in December2017, a generic marketed by Teva Pharmaceuticals USA, Inc., a subsidiary of Teva Pharmaceutical Industries Ltd. (“Teva”), which was launched inJanuary 2018 and a generic marketed by Perrigo PLC, which was launched in January 2018;•Vagifem® (estradiol vaginal inserts) (“Vagifem”), a suppository marketed by Novo Nordisk A/S for the treatment of VVA;•Estradiol vaginal inserts USP (generic versions of Vagifem®), including Yuvafem, which was launched in October 2016 and is marketed by AmnealPharmaceuticals LLC and a generic marketed by Teva, which was launched in July 2017;•Premarin Vaginal Cream®, a vaginal cream for the treatment of VVA marketed by Pfizer, Inc. (“Pfizer”);•Estring®(estradiol vaginal ring), a vaginal ring marketed by Pfizer for the treatment of VVA due to menopause;•Osphena®, an oral therapy marketed by Duchesnay Inc. for the treatment of moderate to severe dyspareunia due to menopause; and•Over the counter and compounded remedies that are marketed for dyspareunia and over the counter and compounded products that contain DHEA.The actual market size and market dynamics for moderate to severe dyspareunia due to menopause is uncertain. While we believe that Intrarosa, as theonly FDA approved, local non-estrogen-containing drug to treat moderate to severe dyspareunia, has competitive advantages compared to estrogen-containing therapies, we may not be able to realize this perceived advantage in the market. For example, Osphena®, is an oral non-estrogen product, whichhas a modified boxed warning. Our commercial opportunity could be reduced if physicians or patients perceive that other products are more effective, orconvenient or safer than Intrarosa, or if they are less expensive than Intrarosa.In addition, our ability to compete may be affected by the extent and scope of third-party reimbursement for products treating dyspareunia. Some of theproducts that Intrarosa competes with have a broader indication for VVA and receive reimbursement from governmental healthcare programs. Although wehave been able to gain coverage for Intrarosa with commercial health plans, given the increasing number of generic competitors, payers may choose toimplement step edits or prior authorizations prior to Intrarosa use. Intrarosa is generally classified as a Tier 3 drug, and as a result patients do not receive fullreimbursement by third-party commercial payers and do not receive any reimbursement from governmental healthcare programs. Many patients are thereforesubject to substantial copays or deductible requirements. The Center for Medicare & Medicaid Services (“CMS”) has historically not covered or paid forproducts to treat sexual dysfunctions, which currently include dyspareunia, under Medicare Part D. As a result, Medicare coverage of Intrarosa has beenlimited. Less than full reimbursement by governmental and other third-party payers may adversely affect the market acceptance of Intrarosa and put it at acompetitive disadvantage to some of the competing products, including generic versions of estrogens and compounded products, which are often pricedlower than branded products.In addition, TherapeuticsMD, Inc. is developing TX-004HR, an applicator-free vaginal estrogen softgel capsule for the treatment of dyspareunia, whichhas, per the target timeframes in the Prescription Drug User Fee Act (“PDUFA”), a target action date for completion of the FDA’s review of May 2018(“PDUFA date”).MuGardThere are currently few effective treatments for the treatment or management of oral mucositis. The market for treating oral mucositis is driven primarilyby convenience, price and reimbursement and the products in this market remain mostly undifferentiated. There are a number of approaches used to treat ormanage oral mucositis that compete with MuGard, including the use of ice chips during chemotherapy treatments, various medicinal mouthwashes, topicalanesthetics and19Table of Contentsanalgesics, and oral gel treatments. For example, many physicians use what is commonly known as “magic mouthwash”, which may currently be the mostcommonly prescribed medication to manage oral mucositis. Magic mouthwash is a combination of generic ingredients which are typically compounded in apharmacy and is preferred by many physicians because of the availability of less expensive generic ingredients used to formulate the mouthwash.BremelanotideIf bremelanotide is approved for marketing by the FDA and if we are successful in launching and commercializing it, we expect bremelanotide will facecompetition. Addyi® (flibanserin) was introduced into the market in October 2015 for the treatment of HSDD in pre-menopausal women and is marketed bySprout2 Inc. (“Sprout”). Addyi® is only available through a risk evaluation and mitigation strategy (“REMS”) program because of an increased risk of severehypotension and syncope due to the interaction between Addyi® and alcohol. In addition, Addyi® was approved with a boxed warning to highlight the risksof severe hypotension and syncope in patients who drink alcohol during treatment with Addyi®, in patients who use Addyi® with moderate or strongCYP3A4 inhibitors, or in patients who have liver impairment.We are not aware of any company actively developing another melanocortin receptor agonist drug for the treatment of HSDD. However, we are aware ofseveral other drugs at various stages of development, most of which are being developed to be taken on a chronic, typically once-daily, basis. EmotionalBrain BV, a Netherlands company, is developing two different oral fixed-dose, on-demand combination drugs, one a combination of sildenafil andtestosterone and the other a combination of testosterone and buspirone hydrochloride, and has conducted Phase 2b studies. There may be other companiesdeveloping new drugs for FSD indications, some of which may be in clinical trials in the U.S. or elsewhere, or other companies which may sell their productsoff-label for indications other than FSD.While we believe that bremelanotide will have competitive advantages for treating HSDD, such as desired use and length of the therapeutic effectcompared to chronic or daily use hormones and other drugs, we may not be able to realize these perceived advantages in the market, in part becausebremelanotide is administered by subcutaneous auto-injection. While the single-use, disposable auto-injector format is designed to maximize marketacceptability, apprehension associated with an injectable drug or certain side effects that were observed in the Phase 3 studies, such as nausea, may impactbremelanotide’s ability to achieve significant market acceptance, especially if an oral therapy is available as an alternative.Sales, Marketing and DistributionMakenaWe currently have sales representatives dedicated exclusively to Makena and the CBR Services, who are focused on calling on approximately 16,000obstetricians and maternal fetal medicine specialists in the U.S. Makena prescriptions are dispensed via the payer-preferred pharmacy or purchased directlyby hospitals, government agencies and integrated delivery systems.Based on market research we conducted, we estimate that Makena is currently used to treat approximately 50% of the at-risk patient population. Oursales and marketing teams use a variety of strategies and focused, multi-channel methods to promote Makena, including dedicating a managed care team tofocus on health plans, including commercial payers, pharmacy benefit managers, and managed Medicaid plans as well as fee-for-service Medicaid programs.In addition, we have partnered with a leading provider of home nursing services (which had previously utilized compounded HPC) pursuant to which theprovider performs at-home administration of Makena and co-promotes Makena to certain healthcare providers.In addition, we offer customer support through the Makena Care Connection, which is designed to help the prescriber and patient navigate eachindividual patient’s needs throughout the Makena prescription process, including confirming insurance coverage, providing education and support on priorauthorizations (when applicable), and working in collaboration with a payer-preferred pharmacy and home health agency to help ensure timely initiation oftherapy. The Makena Care Connection also screens eligible patients for and enrolls eligible patients in financial assistance programs including (a) our copaysavings program, which helps lower the out-of-pocket cost for commercially insured patients whose plan covers Makena, and (b) our patient assistanceprogram, which provides a full course of therapy at no cost to eligible uninsured and commercially underinsured patients. Additionally, the Makena CareConnection offers education and adherence support to eligible patients to assist with increasing patient compliance by encouraging adherence to the weeklyMakena injection schedule. 20Table of ContentsCBR ServicesIn addition to calling on physicians, we directly market CBR Services to pregnant women and their families through various digital marketing channels,including social media, email and web properties, and believe that we have the potential to reach approximately two million pregnant women each year,representing approximately half of the pregnancies in the U.S. The CBR consumer sales team educates expectant parents on their cord blood banking optionsand the benefits of preserving their newborn’s stem cells. This team of inside sales representatives uses both telephone and online chat to interact withconsumers and potential customers and is central to CBR’s direct-to-consumer approach that is coordinated with our digital marketing lead generation andqualification expertise and with detailing efforts by our women's health field force. Additionally, we nurture and develop customer referrals from an existingbase of over 385,000 families through our customer service team and digital and social media marketing efforts.We also offer the Newborn Possibilities Program®, which provides free processing and five years of free storage for cord blood and cord tissue to familieswith a qualifying medical need. To date, approximately 8,000 families have been enrolled. Further, the Newborn Possibilities Program has been expandedwith the launch of the first registry aimed at collecting family health data on diseases and conditions common among registry participants to help targetmedical research on those that may be treatable with newborn stem cell therapy. Currently, over 145,000 families are participating in the Family HealthRegistry™.FerahemeWe sell Feraheme to authorized wholesalers and specialty distributors who, in turn, sell Feraheme to healthcare providers who administer Ferahemeprimarily within hospitals, hematology and oncology centers and nephrology clinics. Since many hospitals and hematology, oncology and nephrologypractices are members of GPOs, which leverage the purchasing power of a group of entities to obtain discounts based on the collective bargaining power ofthe group, we also routinely enter into pricing agreements with GPOs in these markets so the members of the GPOs have access to Feraheme and to the relateddiscounts 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, andscientific meetings and conferences. In addition, through AMAG AssistTM, we provide customer service and other related programs for Feraheme includingfinancial and prescription support services, a patient assistance program for eligible uninsured or under-insured patients and a customer service call center.The recent label expansion for Feraheme to include all eligible IDA patients in the U.S. doubles the size of the addressable patient population forFeraheme. We believe this expanded label will allow for increased penetration in existing accounts thereby increasing the likelihood of broadening thenumber of customers utilizing Feraheme within the IV iron marketplace. Additionally, with the expanded label, Feraheme may be promoted as an option forpatients who have intolerance to oral iron or have unsatisfactory response to oral iron therapy that are in treatment settings where we already have salesteams, such as obstetricians and gynecologists. We believe this segment of patients is under-diagnosed and under-treated and there is a significantopportunity in this market to provide IV iron to such patients. Our sales team will work to educate healthcare providers who manage IDA patients to expandthe IV iron use in physicians’ offices, clinics, and hospitals where IDA patients are treated.IntrarosaIn July 2017, Intrarosa became available for healthcare provider prescribing and can be ordered through wholesalers and retail pharmacies. As part of ourlaunch strategy, and critical to the commercial success of Intrarosa, we are executing on an integrated marketing plan designed to drive awareness ofdyspareunia and the potential benefits of Intrarosa to increase the likelihood that healthcare providers and patients will view Intrarosa as an accessible andviable treatment option. Despite significant marketing and educational efforts by industry participants intended to spread awareness of the condition and itstreatment, studies suggest that women often do not recognize dyspareunia, a symptom of VVA, as a treatable medical condition and are often not aware oftreatment options. We have and plan to continue to undertake informational and educational programs such as speaker programs to help spread awareness ofdyspareunia and VVA and the benefits of Intrarosa for the conditions indicated. In addition, we have implemented a sampling program, which makes samplesof Intrarosa available to healthcare providers through our sales representatives or via our website to areas where we do not have sales representatives. We alsocurrently offer a comprehensive copay savings program to patients and are developing patient-specific marketing programs around the condition ofdyspareunia and Intrarosa utilizing digital marketing and social media platforms.21Table of ContentsMuGardOur commercial team uses a variety of common pharmaceutical marketing strategies and methods to promote MuGard, including sales calls to providingentities, such as hematology and oncology centers and hospitals. In addition, other marketing programs may include promotional materials to individualphysicians or other healthcare professionals.We market and sell MuGard to wholesalers and specialty pharmacies. Patients primarily receive MuGard through specialty pharmacies, which receiveprescriptions from physicians directly or from AMAG Assist, which acts as our MuGard patient reimbursement and support center. We utilize AMAG Assist asa centralized patient intake and referral management center to process insurance coverage issues and administer our patient assistance program. In order tomake MuGard available to patients as soon as possible, we provide a starter kit to clinicians, including a sample bottle and all pertinent information that thepatient or caregiver needs to immediately begin MuGard therapy.Product Supply ChainWe 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 CustomersThe following table sets forth customers who represented 10% or more of our total revenues for 2017, 2016 and 2015. Revenues from TakedaPharmaceutical Company Limited (“Takeda”), our former partner for the commercialization of Feraheme outside of the U.S., included payments under thelicense, development and commercialization agreement with Takeda, including in connection with its termination in 2015. Years Ended December 31, 2017 2016 2015AmerisourceBergen Drug Corporation21% 22% 25%McKesson Corporation19% 11% 12%Takeda Pharmaceuticals Company Limited—% —% 11%The loss of the above customers would have a material adverse effect on our business.Government RegulationOverviewOur activities are subject to extensive regulation by numerous governmental authorities in the U.S. The FDC Act and other federal and state statutes andregulations govern, among other things, the research and development, manufacturing, quality control, labeling, recordkeeping, approval, storage,distribution, and advertising, promotion and post-approval monitoring and reporting of pharmaceutical products and medical devices. In addition, under thePublic Health Service Act and its implementing regulations, we are required to register our cord blood and cord tissue banking facility with the FDA, whichgoverns all aspects of cord blood preservation, including the recovery, screening, testing, processing, storage, labeling, packaging and distribution of cordblood stem cells.Failure to comply with any of the applicable U.S. requirements may result in a variety of administrative or judicially imposed sanctions including,among other things, the regulatory agency’s refusal to approve pending applications, suspension, variations or withdrawals of approval, clinical holds,warning letters, product recalls, product seizures, total or partial suspension of operations, injunctions, fines, civil penalties, or criminal prosecution.Pharmaceutical Product Approval ProcessClinical DevelopmentBefore we may market a new drug product, we must obtain FDA approval of an NDA for that product. The FDA may approve an NDA if, among otherrequirements, the safety and efficacy of the drug candidate can be established based on the results of preclinical and clinical studies.22Table of ContentsPreclinical studies include laboratory evaluation of product chemistry and formulation, as well as in vitro and animal studies to assess the potential foradverse events and in some cases to establish a rationale for therapeutic use. The conduct of preclinical studies is subject to federal regulations andrequirements, including good laboratory practice regulations.Clinical trials involve the administration of the investigational new drug to human subjects under the supervision of qualified investigators inaccordance with good clinical practices (“GCPs”), which include the requirement that all research subjects provide their informed consent for theirparticipation in any clinical testing. Prior to beginning a clinical trial, an IND - a request for authorization from the FDA to administer an investigational newdrug to humans in clinical trials - must be submitted to FDA and must become effective. A protocol for each clinical trial and any subsequent protocolamendments must be submitted to the FDA as part of the IND. Additionally, approval must also be obtained from each clinical trial site’s institutional reviewboard (“IRB”), before any trials may be initiated, and the IRB must monitor the trial until completed. Additional ongoing regulatory requirements applythroughout the course of a clinical trial, including requirements governing the reporting of certain ongoing clinical trials and clinical trial results to publicregistries.Clinical testing typically proceeds in three phases, which may overlap or be combined. Phase 1 trials seek to collect initial data about safety, tolerability,and optimal dosing of the investigational product in healthy human subjects or, less commonly, in patients with the target disease or condition. The goal ofPhase 2 trials is to provide preliminary evidence about the desired therapeutic efficacy of the investigational product in limited studies with small numbers ofcarefully selected subjects with the target disease or condition. Phase 3 trials generally consist of expanded, large-scale, randomized, double-blind, multi-center studies of the safety and efficacy of the product in the target patient population and are used as the primary basis for regulatory approval.Submission and FDA Review of NDAs and sNDAsFollowing 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 preclinical tests and studies, as the FDA requires submission of all relevant data available from pertinent nonclinical studies and clinical trials, aswell as, among other required information, information related to the preparation and manufacturing of the drug candidate, analytical methods, and proposedpackaging and labeling. Pursuant to agreements reached during reauthorization of PDUFA, the FDA has a goal of acting on most original NDAs within sixmonths or ten months of the application submission or filing date (the FDA conducts a preliminary review of all NDAs within the first 60 days aftersubmission before accepting them for filing), depending on the nature of the drug. The FDA has a number of programs intended to help expedite testing,review, and approval of drug candidates that meet the applicable eligibility criteria. For example, under the provisions of the FDA’s Subpart H AcceleratedApproval regulations, accelerated approval may be permitted based on an appropriate surrogate endpoint for a new drug that is intended to treat a serious orlife-threatening disease or condition and that provides a meaningful therapeutic benefit over existing treatments.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 for the approved indications, subject to any post-approval requirements, described further below. If the FDA determines itcannot approve the NDA in its current form, it will issue a complete response letter indicating that the application will not be approved in its current form.The complete response letter usually describes the specific deficiencies that the FDA identified in the application and may require additional clinical or otherdata or impose other conditions that must be met in order to obtain approval of the NDA. Addressing the deficiencies noted by the FDA could be impractical,and it is possible that the sponsor could withdraw its application or approval may not be obtained or may be costly and may result in significant delays priorto 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 six or ten months from the receipt date,depending on whether or not the sNDA has priority review. As with an NDA, if the FDA determines that it cannot approve an sNDA in its current form, it willissue a complete response letter as discussed above.Abbreviated New Drug ApplicationAn 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 efficacy, as is required of an NDA, an ANDA must show that the proposed generic productis the same as the previously approved product in terms of active ingredient(s), strength, dosage form and route of administration. In addition, with certainexceptions, the generic product must have the same labeling as the product to which it refers. At the same time, the FDA must also determine that the genericdrug is23Table of Contents“bioequivalent” to the innovator drug. Under the statute, a generic drug is bioequivalent to the previously approved product if, in relevant part, “the rate andextent of absorption of the [generic] drug do not show a significant difference from the rate and extent of absorption of the listed drug.”NDA applicants and holders must provide certain information about patents related to the branded drug for listing in the Orange Book. When an ANDAapplication is submitted, it must contain one of several possible certifications regarding each of the patents listed in the Orange Book for the branded productthat is the reference listed drug. A certification that a listed patent is invalid, unenforceable, or will not be infringed by the sale of the proposed product iscalled a Paragraph IV certification. See above under “Feraheme - Overview - Paragraph IV certification” for additional details on a Paragraph IV certificationnotice letter regarding an ANDA submitted to the FDA by Sandoz.If the applicant has provided a Paragraph IV certification to the FDA, the applicant must also send appropriate notice of the Paragraph IV certification tothe NDA and patent holders within 20 days of the ANDA or 505(b)(2) application (a marketing application in which sponsors may rely on investigations thatwere not conducted by or for the applicant and for which the applicant has not obtained a right of reference or use from the person by or for whom theinvestigations were conducted) being accepted for filing by the FDA. The NDA and patent holders may then initiate a patent infringement lawsuit in responseto the notice of the Paragraph IV certification. The filing of a patent infringement lawsuit within 45 days after the receipt of a Paragraph IV certificationautomatically prevents the FDA from approving the ANDA or 505(b)(2) application until the earlier of expiration of the patent, a decision in the infringementcase that is favorable to the ANDA or 505(b)(2) applicant, or 30 months after the receipt of the Paragraph IV notice (which can be extended if the referenceproduct has 5-year exclusivity and the ANDA or 505(b)(2) application is submitted between four and five years after approval of the reference product).Adverse Event ReportingThe FDA requires a sponsor to submit reports of certain information on side effects and adverse events associated with its products that occur eitherduring clinical trials or after marketing approval. These requirements include specific and timely notification of certain serious, unexpected and/or frequentadverse events, as well as regular periodic reports summarizing adverse drug experiences. Failure to comply with these FDA safety reporting requirementsmay result in FDA regulatory action that may include civil action or criminal penalties. In addition, as a result of these reports, the FDA could create aTracked Safety Issue for a product in the FDA’s Document Archiving, Reporting and Regulatory Tracking System, place additional limitations on anapproved product’s use, such as through labeling changes, or, potentially, could require withdrawal or suspension of the product from the market. In addition,FDA could require post-approval studies or impose distribution and use restrictions and other requirements via a REMS based upon new safety informationobtained through adverse event reporting (discussed further below).FDA Post-Approval RequirementsEven if initial approval of an NDA or sNDA is granted, such approval may be subject to post-approval 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 4 clinical trials,also known as post-marketing requirements, to provide additional information on safety and efficacy. In addition, the FDA and the sponsor may agree to theconduct of certain post-market studies, known as post-marketing commitments, to further obtain safety and efficacy information. The results of such post-marketing requirement or commitment studies may be negative and could lead to limitations on the further marketing of a product, including safety labelingchanges. Also, under PREA, the FDA may require pediatric assessment of certain drugs unless waived or deferred due to the fact that necessary studies areimpossible or highly impractical to conduct in the specified age group or where the drug is not likely to be used in a substantial number of pediatric patientsin that age group. In addition, the FDA may require a sponsor to implement a REMS, which may include distribution or use restrictions to manage a known orpotential serious risk associated with the product. Failure to comply with REMS requirements may result in civil penalties. Further, if an approved productencounters any safety or efficacy issues, including drug interaction problems, the FDA has broad authority to require the sponsor to take any number ofactions, including but not limited to, undertaking post-approval clinical studies, implementing labeling changes, adopting a REMS, issuing Dear HealthCare Provider letters, or removing the product from the market.FDA Regulation of our Products and ServicesFDA Regulation of Product Marketing and PromotionThe 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 the24Table of Contentsscope of their approved use. The FDA may take enforcement action against a company for promoting unapproved uses of a product (“off-label promotion”) orfor other violations of its advertising and labeling laws and regulations. Failure to comply with these requirements could lead to, among other things, adversepublicity, product seizures, civil or criminal penalties, or regulatory letters, which may include warnings and require corrective advertising or other correctivecommunications to healthcare professionals.Under the Subpart H regulations, until the Makena confirmatory post-approval clinical trial is completed, we are subject to the requirement that allpromotional materials be submitted for review to the FDA’s Office of Promotional Drug Products at least 30 days prior to the intended time of initialdissemination of the promotional labeling or initial publication of the advertisement. This extra requirement means that there is a longer lead time before weare able to introduce new promotional material to the market for Makena and we are subject to increased scrutiny prior to using promotional pieces to ensurefair balance.FDA Regulation of Manufacturing FacilitiesManufacturing 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 often perform a pre-approval inspection of the sponsor’s manufacturing facility, including its equipment, facilities, laboratoriesand processes, 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 should be issued for violations of “regulatory significance” for which the failure to adequately and promptly achieve correctionmay result in agency consideration of an enforcement action.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.Orphan Drug ExclusivityUnder 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. The company that first obtains FDA approval for a designated orphan drug for the specified rare disease orcondition receives orphan drug marketing exclusivity for that drug for a period of seven years. This orphan drug exclusivity prevents the FDA fromapproving another application for the same drug for the same orphan indication during the exclusivity period, except in very limited circumstances. Adesignated orphan drug may not receive orphan drug exclusivity for an approved indication if that indication is for the treatment of a condition broader thanthat for which it received orphan designation. In addition, orphan drug exclusivity marketing rights may be lost if the FDA later determines that the requestfor designation 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. Finally, the FDA may approve a subsequent drug that is otherwise the same as a currently approved orphan drug for the same orphanindication during the exclusivity period if the sponsor of the subsequent drug can demonstrate that the drug is clinically superior to the already approveddrug. According to the FDA, clinical superiority may be demonstrated by showing that a drug is more effective in a clinical trial, safer in a substantial portionof the target population, or provides a major contribution to patient care relative to the currently approved drug.Drug Quality and Security ActIn November 2013, the DQSA legislation was enacted to amend the FDC Act with respect to the regulation and monitoring of the manufacturing ofcompounded drugs. Among other provisions of the DQSA, compounding pharmacies may now elect to register as an “outsourcing facility” under FDC ActSection 503B. Registration as an outsourcing facility requires that drugs be compounded according to cGMP standards; that facilities report adverse eventsto the FDA; and that facilities be subject to a risk-based inspection schedule, among other requirements. Additionally, FDC Act Section 503A describes theconditions that must be satisfied for drug products compounded by a licensed pharmacist or licensed physician to be exempt from approval, labeling, andcGMP requirements. To qualify for these exemptions, a compounded drug product must, among other things, be compounded for an identified patient basedon a valid prescription or in limited quantities before the receipt of a prescription25Table of Contentsfor such individual patient in certain circumstances. Under both Sections 503A and 503B of the FDC Act, compounding pharmacies may not compoundregularly or in inordinate amounts any drug products that are “essentially copies of commercially available drug products.”Fraud and Abuse RegulationOur 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 (“FCPA”), and their state analogues, and similar laws in countries outside of the U.S., laws governing sampling and distribution ofproducts and government price reporting laws.•The AKS makes it illegal for any person, including a prescription drug or medical device manufacturer, to knowingly and willfully solicit, offer,receive, or pay any remuneration, directly or indirectly, in cash or in kind, in exchange for, or to intended to induce, purchasing, ordering, arrangingfor, or recommending the purchase or order of any item or service, including the purchase or prescription of a particular drug, for which payment maybe made by a federal healthcare program. Liability may be established without proving actual knowledge of the statute or specific intent to violateit. In addition, federal law now provides that the government may assert that a claim including items or services resulting from a violation of theAKS constitutes a false or fraudulent claim for purposes of the FCA, described below. Violations of the AKS carry potentially significant civil andcriminal penalties, including imprisonment, fines, administrative civil monetary penalties and exclusion from participation in federal healthcareprograms. Many states have enacted similar anti-kickback laws, including in laws that prohibit paying or receiving remuneration to induce a referralor recommendation of an item or service reimbursed by any payer, including private payers.•The FCA imposes civil penalties, including through civil whistleblower or qui tam actions, against individuals or entities (including manufacturers)for, among other things, knowingly presenting, or causing to be presented, false or fraudulent claims for reimbursement of drugs or services forpayment by a federal healthcare program or making a false statement or record material to payment of a false claim or avoiding, decreasing orconcealing an obligation to pay money to the federal government. The FCA also prohibits knowingly making, using, or causing to be made or useda false record or statement material to a false or fraudulent claim or having possession, custody, or control of property or money used, or to be used,by the federal government and knowingly delivering or causing to be delivered, less than all of that money or property. The government may deemmanufacturers to have “caused” the submission of false or fraudulent claims by, for example, providing inaccurate billing or coding information tocustomers or promoting a product off-label. Claims which include items or services resulting from a violation of the federal Anti-Kickback Statuteare false or fraudulent claims for purposes of the FCA. The FCA permits a private individual acting as a “whistleblower” to bring an action on behalfof the federal government alleging violations of the FCA and to share in any monetary recovery. Government enforcement agencies and privatewhistleblowers have asserted liability under the FCA for, among other things, claims for items or services not provided as claimed or for medicallyunnecessary items or services, kickbacks, promotion of off-label uses, and misreporting of drug prices to federal agencies. Many states have enactedsimilar false claims laws, including in some cases laws that apply where a claim is submitted to any third-party payer, not just government programs.•The Health Insurance Portability and Accountability Act of 1996, (“HIPAA”) as amended by the Health Information Technology for Economic andClinical Health Act of 2009 (“HITECH”), and their respective implementing regulations, which imposes criminal and civil liability for knowinglyand willfully executing a scheme, or attempting to execute a scheme, to defraud any healthcare benefit program, including private payers, orfalsifying, concealing or covering up a material fact or making any materially false statements in connection with the delivery of or payment forhealthcare benefits, items or services. HITECH also created new tiers of civil monetary penalties, amended HIPAA to make civil and criminalpenalties directly applicable to business associates, and gave state attorneys general new authority to file civil actions for damages or injunctions infederal courts to enforce the federal HIPAA laws and seek attorneys' fees and costs associated with pursuing federal civil actions.•The Physician Payments Sunshine Act, enacted as part of the Patient Protection and Affordable Care Act, as amended by the Health Care andEducation Reconciliation Act of 2010 (the “ACA”), which imposed new annual reporting requirements for certain manufacturers of drugs, devices,biologics, and medical supplies for which payment is available under Medicare, Medicaid, or the Children’s Health Insurance Program, for certainpayments and “transfers of value” provided to physicians and teaching hospitals, as well as ownership and investment interests held by physiciansand their immediate family members.26Table of Contents•The FCPA prohibits companies and their intermediaries from making, or offering or promising to make improper payments to non-U.S. officials forthe purpose of obtaining or retaining business or otherwise seeking favorable treatment.Our activities are also subject to regulation by numerous regulatory authorities including CMS, other divisions of the Department of Health and HumanServices, the Department of Justice, the Drug Enforcement Administration, the Consumer Product Safety Commission, the Federal Trade Commission (the“FTC”), the Occupational Safety & Health Administration, the Environmental Protection Agency and state and local governments.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.Other Regulatory RequirementsSeveral states have enacted legislation requiring manufacturers operating within the state to establish marketing and promotional compliance programsor codes of conduct and/or file periodic reports with the state or make periodic public disclosures on sales, marketing, pricing, clinical trials and otheractivities. In addition, as part of the ACA manufacturers of drugs and medical devices are required to publicly report gifts and other payments or transfers ofvalue 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 futureenforcement for failure to comply with these requirements is unclear. However, compliance with these laws is difficult, time-consuming, and costly, and if weare found not to be in full compliance with these laws, we may face enforcement actions, fines, and other penalties, and we could receive adverse publicitywhich could have an adverse effect on our business, financial condition, and results of operations.We are also subject to data protection laws and regulations (i.e., laws and regulations that address privacy and data security). The legislative andregulatory landscape for data protection continues to evolve, and in recent years there has been an increasing focus on privacy and data security issues. In theU.S., numerous federal and state laws and regulations, including state data breach notification laws, state health information privacy laws, and federal andstate consumer protection laws, govern the collection, use, disclosure, and protection of health-related and other personal information. Failure to comply withdata protection laws and regulations could result in government enforcement actions (which could include civil or criminal penalties), private litigation,and/or adverse publicity and could negatively affect our operating results and business. In addition, we may obtain health information from third parties (i.e.,healthcare providers who prescribe our products) that are subject to privacy and security requirements under HIPAA. HIPAA imposes, among other things,specified requirements on covered entities and their business associates relating to the privacy and security of individually identifiable health informationincluding mandatory contractual terms and required implementation of technical safeguards of such information. Although we are not directly subject toHIPAA (other than potentially with respect to providing certain employee benefits) we could be subject to criminal penalties if we knowingly obtain ordisclose individually identifiable health information maintained by a HIPAA-covered entity in a manner that is not authorized or permitted by HIPAA. Weare also subject to laws and regulations covering data privacy and the protection of health-related and other personal information. We obtain patient healthinformation from most healthcare providers who prescribe our products and research institutions we collaborate with, and they are subject to privacy andsecurity requirements that may affect us. Claims that we have violated individuals’ privacy rights or breached our contractual obligations, even if we are notfound liable, could be expensive and time-consuming to defend and could result in adverse publicity that could harm our business. For example, throughApril 29, 2033, CBR is required to comply with a FTC Order (the “FTC Order”). The FTC Order requires CBR, among other things, to implement andmaintain a comprehensive information security program and conduct a biennial assessment of its information security program. CBR is also required not27Table of Contentsto make any misrepresentations, expressly or by implication, regarding its privacy practices or its information security program. The costs of compliancewith, and other burdens imposed by, these obligations are substantial and may impede our performance and our ability to develop the CBR Services, or leadto significant fines, penalties or liabilities for noncompliance.U. S. Healthcare ReformOur revenue and operations could be affected by changes in healthcare spending and policy in the U.S. We operate in a highly regulated industry andnew laws, regulations or judicial decisions, or new interpretations of existing laws, regulations or decisions, related to health care availability, the method ofdelivery or payment for health care products and services could negatively impact our business, operations and financial condition. The U.S. Congress andstate legislatures from time to time propose and adopt initiatives aimed at cost containment, which could impact our ability to sell our products profitably.For example, the ACA substantially changed the way healthcare is financed by both governmental and private insurers. Since its enactment, however, therehave been modifications and challenges to numerous aspects of the ACA. In 2018, litigation, regulation, and legislation related to the ACA are likely tocontinue, with unpredictable and uncertain results. The full impact of the ACA, any law repealing. replacing, and/or modifying elements of it, and thepolitical uncertainty surrounding any repeal or replacement legislation on our business remains unclear.Further, there has been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products, which hasresulted in several recent Congressional inquiries and proposed bills designed to, among other things, bring more transparency to product pricing, review therelationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for products. In addition, theU.S. government, state legislatures, and foreign governments have shown significant interest in implementing cost containment programs, including price-controls, restrictions on reimbursement and requirements for substitution of generic products for branded prescription drugs to limit the growth ofgovernment paid healthcare costs. Individual states in the U.S. have also become increasingly aggressive in passing legislation and implementing regulationsdesigned to control pharmaceutical product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product accessand marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.Regulation of Cord Blood and Cord Tissue BankingHuman tissues intended for transplantation, including umbilical cord blood stem cells and cord tissue, are subject to comprehensive regulations thataddress activities associated with human cells, tissues and cellular and tissue-based products (“HCT/Ps”). One set of regulations requires that companies thatengage in the recovery, processing, storage, labeling, packaging, or distribution of any HCT/Ps, or the screening or testing of a cell or tissue donor, registerwith the FDA. This set of regulations also includes the criteria that must be met in order for the HCT/P to be eligible for distribution solely under Section 361of the Public Health Service Act (the “PHSA”), and the regulations in 21 CFR Part 1271, rather than under the drug or device provisions of the FDC Act or thebiological product licensing provisions of the PHSA. Another set of regulations provides criteria that must be met for donors to be eligible to donate HCT/Psand is referred to as the “Donor Eligibility” rule. A third set of provisions governs the processing and distribution of the tissues and is often referred to as the“Current Good Tissue Practices” rule. The Current Good Tissue Practices rule covers all stages of HCT/P processing, from procurement to distribution of finalallografts. Together these regulations are designed to ensure that sound, high quality practices are followed to reduce the risk of tissue contamination and ofcommunicable disease transmission to recipients.CBR is registered with the FDA as an HCT/P establishment that screens, packages, processes, stores, labels and distributes umbilical cord blood stem celland cord tissue by virtue of the services it provides to expectant parents as a private cord blood and cord tissue bank. The FDA periodically inspects suchregistered establishments to determine compliance with HCT/P requirements. If the FDA determines that we have failed to comply with applicable regulatoryrequirements, or any future regulatory requirements or standards, it can impose or initiate a variety of enforcement actions, including but not limited to,public warning or untitled letters, written recall or destruction orders, written cease manufacturing orders, court-ordered seizures, injunctions, consent decrees,civil penalties, or criminal prosecutions.Some states impose additional regulation and oversight of cord blood and cord tissue banks and of clinical laboratories operating within their bordersand impose regulatory compliance obligations on out-of-state laboratories providing services to their residents, and many states in which we and our businesspartners operate have licensing requirements that must be complied with.28Table of ContentsDrug-Device Combination RegulationCombination products are defined by the FDA to include products composed of two or more regulated components (e.g., a drug and a device). Drugs anddevices each have their own regulatory requirements, and combination products may have additional requirements. The Makena auto-injector and thebremelanotide product, if approved, are considered drug-device combination products and are regulated under this framework.Medical Device RegulationMedical devices, such as MuGard, are similarly subject to FDA clearance or approval and extensive post-approval regulation under the FDC Act.Authorization to commercially distribute a new medical device in the U.S. is generally received in one of two ways. The first, known as premarketnotification (the “510(k) process”), requires a sponsor to obtain 510(k) clearance by demonstrating that the new medical device is substantially equivalent toa legally marketed medical device that is not subject to premarket approval. The second, more rigorous process, known as premarket approval, requires asponsor to independently demonstrate that the new medical device is safe and effective.Both before and after a device is commercially released, there are ongoing responsibilities under FDA regulations. For example, the FDA requires thatdevice manufacturers maintain particular reviews design and manufacturing practices, labeling and record keeping, and manufacturers’ required reports ofadverse experiences and other information to identify potential problems with marketed medical devices. If the FDA were to conclude that we are not incompliance with applicable laws or regulations, or that any of our medical devices are ineffective or pose an unreasonable health risk, the FDA could,depending on the FDA’s specific findings, require us to notify healthcare professionals and others that the devices present unreasonable risks of substantialharm to the public health, order a recall, repair, replacement, or refund of such devices, detain or seize adulterated or misbranded medical devices, or ban suchmedical devices. The FDA may also impose operating restrictions, enjoin and/or restrain certain conduct resulting in violations of applicable law pertainingto medical devices and assess civil or criminal penalties against our officers, employees, or us.MuGard received 510(k) clearance from the FDA in 2006 and under the terms of the MuGard License Agreement, Abeona continues to hold the 510(k).MuGard is categorized as a pre-amendments device. This type of device has not been classified under the classification processes applicable to pre-amendments devices, but continues to be subject to regulatory review under the 510(k) premarket clearance process.Pharmaceutical Pricing and ReimbursementOur ability to successfully commercialize our products is dependent, in significant part, on the availability and level of reimbursement from third-partypayers, including state and federal government, managed care organizations, private health insurers and other organizations.Third-party payers are increasingly challenging the prices charged for pharmaceutical products (including combination products), and continue toinstitute cost containment measures to control or influence the purchase of pharmaceutical products. The determination of coverage for a product may be aseparate process from setting the price or reimbursement rate that a payer will pay for a product. Payers may place restrictions on coverage through variousmechanisms, including: (a) formularies, which limit coverage for drugs not included on a predetermined list; (b) variable copayments, which may make acertain drug more expensive for patients as compared with a competing drug; (c) utilization management controls, such as requirements for priorauthorization before the payer will cover the drug and limits on the number of prescriptions that will be paid over a set time period; (d) restrictions onreimbursement and requirements for substitution of generic products for branded prescription drugs; and (e) other coverage policies that limit access tocertain drugs for certain uses based on the payer-specific coverage policy. Reimbursement by payers depends on a number of factors, including determinationthat the product is competitively priced, safe and effective, appropriate for the specific patient, and cost-effective.Medicaid is a joint federal and state health insurance program that is administered by the states for low-income children, families, pregnant women, andpeople with disabilities. Under the Medicaid Drug Rebate program, we are required to pay a rebate to each state Medicaid program for our covered outpatientdrugs that are dispensed to Medicaid beneficiaries and paid for by a state Medicaid program. The amount of the rebate is determined by law and will beadjusted upward if average manufacture price (“AMP”) increases more than inflation as measured by the Consumer Price Index - Urban. Each quarter, therebate amount is calculated based on our report of current AMP and best price for each of our products to CMS. The requirements for calculating AMP andbest price are complex. We are required to report revisions to AMP or best price previously reported within a certain period, which revisions could affect ourrebate liability for prior quarters. Further, recent changes to the Medicaid Drug Rebate Program, effective April of 2016, require state Medicaid programs toreimburse certain29Table of Contentsbrand name covered outpatient drugs at actual acquisition cost plus a dispensing fee. If we fail to provide information timely or we are found to haveknowingly submitted false information to the government, the statute governing the Medicaid Drug Rebate program provides for civil monetary penalties.Medicare is a federal health insurance program, administered by CMS, for people who are 65 or older, and certain people with disabilities or certainconditions, irrespective of their age. Medicare Part B covers products that are administered by physicians or other healthcare practitioners; are provided inconnection certain durable medical equipment; or are certain oral anti-cancer drugs and certain oral immunosuppressive drugs. We are required to provideaverage sales price (“ASP”) information to CMS on a quarterly basis. The submitted information is used to calculate a Medicare payment rate using ASP plusa specified percentage. These rates are adjusted periodically. If we fail to provide information timely or we are found to have knowingly submitted falseinformation to the government, the governing statutes provides for civil monetary penalties.Medicare Part D provides coverage to enrolled Medicare patients for self-administered drugs (i.e. drugs that do not need to be injected or otherwiseadministered by a physician), including combination products. Medicare Part D is a voluntary prescription drug benefit, administered by private prescriptiondrug plan sponsors approved by the U.S. government. Part D prescription drug plan sponsors are not required to pay for all covered Part D drugs; and eachdrug plan establishes its own Medicare Part D formulary for prescription drug coverage and pricing, which the drug plan may modify from time to time. Theprescription drug plans negotiate pricing with the manufacturers and may condition formulary placement on the availability of manufacturer discounts.Manufacturers, including us, are required to provide a 50% discount on brand name prescription drugs utilized by Medicare Part D beneficiaries when thosebeneficiaries reach the coverage gap in their drug benefits.Effective January 2018, CMS adopted a policy to pay for separately payable, non-pass-through drugs and biologicals other than vaccines purchasedthrough the 340B Drug Pricing Program under the Public Health Services Act (the “340B Program”), with certain exceptions, at the ASP minus 22.5% ratherthan ASP plus 6%. Drugs not purchased under the 340B Program will continue to be paid for at a rate of ASP plus 6%. The effect of this change is on theoverall 340B Program is unclear. However, there will be significant increases in budget pressure, which may adversely impact premium priced agents, such asFeraheme and Makena.Our products are available for purchase by authorized users of the Federal Supply Schedule (“FSS”), pursuant to a contract with the Department ofVeterans Affairs (“VA”), in which we are required to offer deeply discounted pricing to four federal agencies: VA; Department of Defense (“DOD”); the CoastGuard; and Public Health Services (“PHS”) (including the Indian Health Service) (together the “Big Four”). Coverage under Medicaid, Medicare and the PHSpharmaceutical pricing program is conditioned upon FSS participation. FSS pricing is not to exceed the price we charge our most-favored non-federalcustomer for a product. In addition, prices for drugs purchased by the Big Four (including products purchased by military personnel and dependents throughthe TRICARE retail pharmacy program), are subject to a cap on pricing equal to 76% of the non-federal average manufacturer price (non-FAMP). Anadditional discount applies if non-FAMP increases more than inflation, as measured by the Consumer Price Index - Urban. If we fail to provide informationtimely or we are found to have knowingly submitted false information, the governing statute provides for civil monetary penalties.Federal law requires that any company participating in the Medicaid Drug Rebate program also participate in the Public Health Service’s 340B Programin order for federal funds to be available for the manufacturer’s drugs under Medicaid and Medicare Part B. The 340B Program requires participatingmanufacturers to agree to charge statutorily defined covered entities no more than the 340B “ceiling price” for the manufacturer’s covered outpatient drugs.These 340B covered entities include a variety of community health clinics and other entities that receive health services grants from the Public HealthService, as well as hospitals that serve a disproportionate share of low-income patients. The 340B ceiling price is calculated using a statutory formula, whichis based on AMP and rebate amount for the covered outpatient drug as calculated under the Medicaid Drug Rebate program. In addition, we may, but are notrequired to, offer these covered entities a price lower than the 340B ceiling price. The ACA also obligates the Health Resources and Services Administration(the “HRSA”), the agency which administers the 340B Program, to promulgate various regulations and implement processes to improve the integrity of the340B Program. The status of new and pending regulations and guidance is uncertain under the new presidential administration and its impact.Federal, state and local governments continue to consider legislation to limit the growth of healthcare costs, including the cost of prescription drugs andcombination products. In 2017, we saw several states and local government either implement or consider implementing price transparency legislation thatmay prevent or limit our ability to take price increases at certain rates or frequencies. For example, in 2017, California enacted a new law, that went into effecton January 1, 2018, to facilitate greater transparency in brand-name and generic drug pricing through the implementation of specific price reportingrequirements for pharmaceutical manufacturers. The extent and timing of these changes are not known, but future legislation could limit the price and/orpayment for prescription drugs. If adequate reimbursement levels are not maintained by30Table of Contentsgovernment and other third-party payers for our products, our ability to sell our products may be limited and/or our ability to establish acceptable pricinglevels may be impaired, thereby reducing anticipated revenues and profitability.BacklogWe had a $7.6 million and $7.1 million product sales backlog as of December 31, 2017 and 2016, respectively. We expect to recognize the $7.6 millionin the first quarter of 2018, net of any applicable rebates or credits. These backlogs were largely due to timing of orders received from our third-party logisticsproviders. Generally, product orders from our customers are fulfilled within a relatively short time of receipt of a customer order.EmployeesAs of February 23, 2018, we had 762 employees. We also utilize consultants and independent contractors on a regular basis to assist in the developmentand commercialization of our products and services. Our success depends to a significant extent on our ability to continue to attract, retain and motivatequalified sales, technical and laboratory operations, managerial, scientific and medical personnel of all levels. Although we believe we have been relativelysuccessful to date in obtaining and retaining such personnel, we may not be successful in the future.None of our employees is represented by a labor union, and we consider our relationship with our employees to be good.Foreign OperationsWe have no foreign operations. We did not have material revenues from customers outside of the U.S. in 2017 and 2016. Revenues from customersoutside of the U.S. amounted to approximately 12% of our total revenues for 2015 and were principally related to collaboration revenues recognized inconnection with our former agreement with Takeda, which is headquartered in Japan, and which was terminated in June 2015 following a six-monthtransition period. We do not currently expect any material future sales outside of the U.S.Research and DevelopmentWe have dedicated a significant portion of our resources over the last several years to our efforts to develop our products and product candidates,including both Feraheme and Makena. We incurred research and development expenses of $75.0 million, $66.1 million, and $42.9 million during 2017,2016 and 2015, respectively. We expect our research and development expenses to increase in 2018 as compared to 2017 due to the preparation of filing theNDA for bremelanotide and post-approval commitments for Feraheme and Makena. We also expect to invest in studies that could potentially expand thelabels for Intrarosa and bremelanotide. Further, we expect to incur increased costs associated with manufacturing process development and the manufacture ofdrug product for bremelanotide.Segment ReportingWe conduct our operations in one business segment as further described in Note B, “Summary of Significant Accounting Policies,” to our consolidatedfinancial statements included in this Annual Report on Form 10-K.Code of EthicsOur 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 InformationWe are subject to the information and reporting requirements of the Securities Exchange Act of 1934, under which we file periodic reports, proxy andinformation statements and other information with the U.S. Securities and Exchange Commission31Table of Contents(the “SEC”). Copies of these reports may be examined by the public without charge at 100 F. Street N.E., Room 1580, Washington D.C. 20549 or on theInternet at http://www. sec.gov. Copies of all or a portion of such materials can be obtained from the SEC upon payment of prescribed fees. Please call theSEC at 1-800-SEC-0330 for further information. Our internet website address is http://www.amagpharma.com. Through our website, we make available, freeof 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 ourinsider Section 16 reports (and any amendments to such filings), as soon as reasonably practicable after such material is electronically filed with, or furnishedto, the SEC. These SEC reports can be accessed through the “Investors” section of our website. The information found on our website is not part of this or anyother 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 Investor Relations,AMAG Pharmaceuticals, Inc., 1100 Winter Street, Waltham, MA 02451. The content on any website referred to in this Form 10-K is not incorporated byreference 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 operational resultsand could cause our actual results to differ materially from those contained in forward-looking statements we have made in this Annual Report on Form 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.Risks Related to Our Business and IndustryOur ability to successfully commercialize our products and services, including our ability to achieve their widespread market acceptance, is critical to thesuccess of our business.Most of our resources are dedicated to the commercialization of our products and services and in preparation for the commercialization of our productcandidate, bremelanotide, for which we expect to file a New Drug Application in the first quarter of 2018. Our ability to generate significant revenue in thenear-term will depend almost entirely on our ability to execute on our commercialization plans and the level of market adoption for, and the continued useof, our products and services (and, if approved, our product candidates) by physicians, hospitals, patients, and/or healthcare payers, including governmentpayers, consumers, managed care organizations and specialty pharmacies. If we are not successful in commercializing our products or services, includingachieving and maintaining an adequate level of market adoption, our profitability and our future business prospects will be adversely impacted.The degree of commercial success and market acceptance of our products, services and product candidates will depend on a number of factors, includingthe following:•The competitive landscape for our products, including the timing of new competing products (including generics) or services entering the market,and the level and speed at which competing products (current or new) experience market acceptance;•Our ability to retain or grow our current customer base and maintain and efficiently deploy our expanded sales force and an experiencedcommercialization team to compete in the market, especially given the diverse nature of our product and services portfolio;•Our ability to maintain commercially viable manufacturing processes that are compliant with applicable laws and regulations (including currentgood manufacturing practices (“cGMP”)), and generate sufficient inventory of our products for commercial sale and clinical use and sufficientinventory of supplies to perform our services;•Our ability to successfully and timely launch new and expanded products, such as the Makena auto-injector and Feraheme's newly approved broaderindication;•Actual or perceived advantages or disadvantages of our products, services or product candidate, including the safety and efficacy profile or thepotential convenience and ease of administration, over alternative treatments or services, including generic versions;32Table of Contents•Our ability to engage with and educate healthcare providers and consumers to increase awareness and understanding of the underlying disease statesthat our products treat or the value of the underlying purpose of our products or services, including moderate to severe dyspareunia and hypoactivesexual desire disorder (“HSDD”), and recurrent preterm birth;•Current and future restrictions or limitations on our approved or future indications and patient populations or other adverse regulatory actions; •The relative price, constraints on pricing and the impact of price increases on our products or services, the availability and adequacy ofreimbursement from government and third-party payers, and the willingness and ability of patients to pay for our products or services, including thewillingness of healthcare providers to prescribe our products if more economical options are available;•The success and timing of regulatory approval for current or future product candidates or indications, including our ability to obtain regulatoryapproval for bremelanotide in the U.S. and whether the U.S. Food and Drug Administration (the “FDA”) imposes any restrictions on its distribution;•The performance of our manufacturers, license partners, distributors, providers and other business partners, over which we have limited control;•The timely approval of new active pharmaceutical ingredient (“API”) suppliers for Makena;•Our ability to maintain compliance with all applicable FDA or accrediting organization regulations; and•Our and our partners' ability to enforce intellectual property rights in and to our products to prohibit a third-party from marketing a competingproduct (including a generic product) and our ability to avoid third-party patent interference or intellectual property infringement claims.MakenaOur ability to continue successfully commercializing Makena is dependent upon a number of factors, including our ability to differentiate Makena fromother treatment options, especially after generic competitors enter the market. The outcome of our commercialization efforts will likely be adversely impactedby the timing and number of generic competitors that enter the market given the expiration of Makena's orphan drug exclusivity in February 2018. As part ofour strategy to offer an alternative to our intramuscular (“IM”) formulation of Makena (the “Makena IM product”), we have developed the Makenasubcutaneous auto-injector (the “Makena auto-injector”) for which we received FDA approval to market and sell in February 2018. We plan to launch thisline extension product in March 2018. Our ability to maintain Makena market share and generate consistent revenues once we face generic competition issubstantially dependent upon our ability to successfully launch the Makena auto-injector and rapidly convert current IM prescribers to the Makena auto-injector. We have limited experience in the commercialization of an auto-injector product. Our level of continued commercial success for the Makenafranchise will depend on our ability to:•Launch and commercialize the Makena auto-injector in a timely manner;•Differentiate the benefits of the Makena auto-injector over the Makena IM product to prescribers, patients and third-party payers;•Gain or maintain insurance coverage for the Makena auto-injector for patients through both commercial insurance companies and governmentprograms such as Medicaid, and ensure that such insurance coverage does not create difficulties for physicians or patients to gain access to Makena,such as through requiring use of generic formulations prior to use of the branded Makena IM product or the Makena auto-injector;•Provide training on the use of an auto-injector device to healthcare providers;•Manufacture the auto-injector on a commercial scale;•Maintain and defend the patent rights that we own or have licensed related to the Makena auto-injector;•Increase patient compliance, including by optimizing efficiency by increasing home administration and reducing the turn around time fromenrollment to the start of therapy; and33Table of Contents•Ensure an easy and convenient process for patients and healthcare providers to prescribe, acquire and administer the Makena auto-injector.Failure to achieve any or all of the above objectives could have an adverse material effect on the commercialization of Makena and our ability toachieve our revenue forecasts, which could impact our financial condition or results of operations.Although we intend to launch our own authorized generic formulation of Makena upon the first generic hydroxyprogesterone caproate (“HPC”)injection entrant to the market to mitigate the anticipated decrease in Makena revenue as generic entrants gain market share, our Makena revenues may fallbelow expectations and as a result, our financial condition and results of operations could be adversely impacted. For more information on genericcompetition, please see Risk Factor “We no longer have market exclusivity for Makena and generic competitors are seeking approval to market genericversions of Makena, which would cause sales of Makena to significantly decline and have an adverse impact on our business and results of operation.” CBRThe growth of our CBR Services depends on our ability to effectively compete with the growing number of blood banks, which often offer lower pricingand extended services. In addition, our ability to grow our CBR revenue depends, in part, on our ability to educate consumers and healthcare providers on thevalue of preserving newborn stem cells, rather than discarding the cells or opting for delayed clamping (“DCC”), a practice which has been shown to bebeneficial to preterm babies but that may also reduce the volume of cord blood available for cord blood preservation. Professional medical organizationsperiodically recommend certain practices that may negatively impact our business. The perception of the future value and uses of cord blood stem cells andcord tissue stored with CBR is a key driver of CBR’s business and therefore any significant changes to this perception, such as from generational behaviorand attitudes, could have an adverse impact on sales of our CBR Services. For example, in January 2017, the American College of Obstetrics and Gynecology(“ACOG”) issued a new opinion on DCC. In its opinion, ACOG noted that healthcare providers should counsel their patients that the benefits of DCC mayoutweigh cord blood banking. As DCC can significantly decrease the volume of cord blood stems cells collected, families may choose not to, or be unable to,bank their newborn's cord blood stem cells.CBR's commercial growth is also dependent upon realizing the potential for cord blood stem cell and cord tissue science and upon increasing itsrecognition and adoption, as well as actual and perceived value and utility, among the medical community. CBR’s success will be limited if applications arenot developed, the FDA does not approve those applications, and if the medical community does not embrace, a broader set of applications than is currentlyestablished. There is no guarantee that any further applications will be recognized. Further, although cord blood is utilized for certain homologous uses in thechild from whom the cord blood was recovered or in first- or second-degree relatives, if clinical research lowers the perceived value of cord blood stem celland cord tissue collection, is unable to demonstrate the utility of cord blood stem cells and cord tissue for use in treating diseases or injuries in a broader setof applications or if the FDA does not permit the clinical use of cord blood stem cells and cord tissue processed and stored using CBR’s methods for thoseapplications, then healthcare professionals may discount its potential utility among patients and patients may decide not to preserve, or continue preserving,their child's cord blood stem cells and cord tissue for such expanded uses.FerahemeOur ability to grow Feraheme's market share, including our ability to maximize its market potential following the February 2018 approval of theexpanded label to include all eligible adult patients with IDA, depends primarily on our ability to clinically differentiate Feraheme from its competitors,expand access through our contracting strategy and otherwise successfully execute our launch plan for the broader label. We believe the expanded labeldoubles the size of our addressable market; however, if we are unable to capture Feraheme's anticipated market share of the total IV iron market, if we haveoverestimated the size of such market or if the estimates we used to derive Feraheme's potential are incorrect, our profitability as well as our long-termbusiness prospects could be adversely affected.In addition, new safety or drug interaction issues may arise as Feraheme is used over longer periods of time by a wider group of patients, especially inlight of the expanded label, some of whom may be taking other medicines or have additional underlying health problems. If issues arise, we may be requiredto, among other things, implement a risk evaluation and mitigation strategy (“REMS”), provide additional warnings and/or restrictions related to Feraheme’scurrent or future indications, notify healthcare providers of new safety information, narrow our approved indications, change the rate of administration,conduct additional post-approval studies and clinical trials, alter or terminate future trials for additional uses of Feraheme, or even remove Feraheme from themarket. For example, our Feraheme label was changed in March 2015 to34Table of Contentsinclude, among other things, the addition of a boxed warning and a change in the Dosing and Administration section to indicate that Feraheme should onlybe administered by IV infusion (replacing injection). These or any future changes to the label could adversely impact our ability to successfully compete inthe IV iron market and could have an adverse impact on potential sales of Feraheme or require us to expend significant additional funds.IntrarosaOne of the most critical steps in successfully commercializing Intrarosa, is to drive awareness of moderate to severe dyspareunia, a symptom of vulvarand vaginal atrophy (“VVA”), due to menopause and the potential benefits of Intrarosa. Despite significant marketing and educational efforts by industryparticipants intended to spread awareness of the condition and its treatment, studies suggest that women often do not recognize VVA or its symptoms,including dyspareunia due to menopause, as a treatable medical condition and are often not aware of treatment options. We plan to undertake certaininformational and educational programs to help spread awareness of dyspareunia and VVA and the benefits of Intrarosa for the conditions indicated and suchprograms may not be successful, will be costly and may not result in the anticipated return on our investment. The market for VVA therapies, includingIntrarosa's indication (i.e., women suffering from moderate to severe dyspareunia due to menopause), is uncertain, and the number of women suffering fromthe condition is unclear, in part because of a reluctance to discuss vaginal or sexual symptoms with their healthcare professionals. If we have over-estimatedthe market opportunity for Intrarosa, if we are unable to successfully spread awareness and educate the community about VVA generally (and moderate tosevere dyspareunia in particular), or if our marketing efforts are unsuccessful and we cannot increase market share, then our business and results of operationscould be materially and adversely affected.In addition, we have limited experience with licensed products and with commercializing a drug in the field of post-menopausal women's healthsymptoms. Our future commercial success will significantly depend upon our ability to effectively maintain our commercial team and to leverage ourrelationships in the obstetrics and gynecology community. In order to support our growing portfolio, we will need to achieve revenues from sales of and otherfinancial goals for Intrarosa consistent with our business expectations, which may prove more difficult than currently expected. For example, in order tocreate affordable access for patients due to the limited reimbursement coverage for Intrarosa, we offer patients a comprehensive copay savings program andsamples, which has and will continue to impact our Intrarosa revenue. Any failure to achieve expectations could adversely affect our profitability.BremelanotideWe have limited experience with development-stage, investigational products such as bremelanotide, and the successful development andcommercialization of bremelanotide is dependent upon our ability to obtain regulatory approval for bremelanotide in the U.S. on favorable terms. Inaddition, our ability to successfully commercialize bremelanotide, if approved, depends significantly on the level of success we have in raising awarenessand understanding of HSDD, a type of female sexual dysfunction (“FSD”), and its treatment options, and the potential benefits of bremelanotide in treatingHSDD as compared to alternative treatment options. For example, bremelanotide will be sold as a self-administered auto-injector and if patients or healthcareproviders are hesitant or apprehensive to use an auto-injector product, our commercialization efforts may not be successful. For more information onbremelanotide, please see Risk Factor “We have limited experience with development stage products and cannot ensure that we will be successful in gainingapproval of our product candidates on a timely basis, or at all, including bremelanotide, or that such approval, if obtained, will not contain restrictionsthat the FDA may impose on the use or distribution of such product candidates.”We no longer have market exclusivity for Makena and generic competitors are seeking approval to market generic versions of Makena, which wouldcause sales of Makena to significantly decline and have an adverse impact on our business and results of operation.The Drug Price Competition and Patent Term Restoration Act of 1984, as amended (the “Hatch‑Waxman Act”) permits the FDA to approve anAbbreviated New Drug Application (“ANDA”) for generic versions of brand name drugs like Makena. Generics are generally significantly less expensive thanbranded versions and government and other pressures to reduce pharmaceutical costs may result in a generic product being utilized before or in preference tothe branded version of our products under third-party reimbursement programs or substituted by pharmacies under prescriptions written for the original listeddrug.Since acquiring Lumara Health Inc. (“Lumara Health”) in 2014, the majority of our revenue has come from our Makena product. Following theexpiration of its orphan drug exclusivity in February 2018, the Makena IM product is now subject to generic competition, which will subject us to increasedcompetition and could significantly reduce the market share of the Makena brand name product. We currently believe that several companies filed ANDAsduring 2017 seeking approval for35Table of Contentsgeneric versions of Makena. The specific timing of potential approval of a generic HPC ANDA is uncertain, however we believe that Makena will facegeneric competition sometime in mid-2018.The long-term success of the Makena franchise will be highly dependent on our ability to successfully commercialize the Makena auto-injector, whichwas approved for commercialization in February 2018, and which is intended to provide us with an alternative treatment method to the Makena IM product.Although there is no direct competition with the Makena auto-injector, the auto-injector will compete with generic versions of the Makena IM product,including our own authorized generic of the Makena IM product, discussed below. Physicians may choose to prescribe the generic formulation either becauseof the lower cost of the generics or because of a lack of perceived benefit of the Makena auto-injector, such as lack of improvement in safety or efficacy, orperceptions about the pain associated with the Makena auto-injector, which could cause sales of Makena to decline. We may not be able to convince patientsor healthcare providers to use or to switch from using the IM method of administration to the auto-injector if the auto-injector is not priced competitively,does not provide comparable insurance coverage or if patients or healthcare providers are hesitant or apprehensive to use an auto-injector product. If we donot convert a sufficient number of patients to the auto-injector method, we could lose a significant amount of our Makena revenue and market share togeneric competitors.In addition, we have entered into an agreement with a generic partner to launch an authorized generic of the Makena IM product, which we intend tolaunch upon the first generic Makena entrant to the market to allow us to offset some of the impact of generics to branded Makena, including if a genericenters the market more quickly than we anticipate. We will be relying on our generic partner to successfully bring the authorized generic of Makena tomarket and for our successful commercialization thereafter. We have no experience working with a generic vendor and they may not be able enter intocontracts with purchasers on favorable terms, or at all. Further, we are responsible for supplying product to our authorized generic partner and if there areproblems in the supply chain, we will be subject to certain penalties, which could be substantial. If we and our partner are not able to capture sufficientmarket share, or if generics are sold at a significant discount to Makena's price, it could materially and adversely affect the level of sales and the price atwhich we can sell Makena and, ultimately, our stock price and results of operations.Competition in the pharmaceutical and biopharmaceutical industries, including from companies marketing generic products, is intense and competitionin the cord blood stem cell and cord tissue banking processing and storage business is increasing. If we fail to compete effectively, our business and marketposition will suffer.The pharmaceutical and cord blood banking industries are intensely competitive and subject to rapid technological change. Our existing or potentialcompetitors have or may develop products or services that are more widely accepted than ours, are viewed as more safe, effective, convenient or easier toadminister, have been on the market longer and have stronger patient/provider loyalty, have been approved for a larger patient population, are less expensiveor offer more attractive insurance coverage, discounts, reimbursements, incentives or rebates and may have or receive patent protection that dominates,blocks, makes obsolete or adversely affects our product development or business. Any such advantages enjoyed by our competitors could reduce ourrevenues and the value of our commercialization and product development efforts.Makena competition currently comes mainly from pharmacies that compound a non-FDA approved version of Makena, which is sold at a much lower listprice and is less regulated than Makena. However, we expect the competitive landscape for Makena to impose even greater challenges upon ourcommercialization efforts when generic formulations of HPC injection enter the market. For more information on generic competition, please see Risk Factor“We no longer have market exclusivity for Makena and generic competitors are seeking approval to market generic versions of Makena, which would causesales of Makena to significantly decline and have an adverse impact on our business and results of operation.” We also expect to continue to facecompetition for Makena from products that may be prescribed off-label (i.e., outside of indications approved by the FDA) such as the generic version ofDelalutin, as well as products currently in development which offer additional formulations or routes of administration that doctors believe may reduce orprevent preterm birth, such as an oral HPC product.Many of our competitors for Feraheme and Intrarosa are large, well-known pharmaceutical companies and may benefit from significantly greaterfinancial, sales and marketing capabilities, greater technological or competitive advantages, and other resources. Feraheme competes primarily withInjectafer®, a ferric carboxymaltose injection, Venofer®, an iron sucrose complex, and INFeD®, an iron dextran product and there are a number of oral ironreplacement therapies either approved, such as Auryxia® (ferric citrate), an oral phosphate binder, or in development, such as Monofer® (iron isomaltoside),and hypoxia inducible factor stabilizers.Intrarosa faces competition primarily from Estrace® Cream (Estradiol vaginal cream, USP 0.01%), a vaginal cream for the treatment of VVA, Vagifem®(estradiol vaginal inserts), a suppository for the treatment of VVA, and Premarin Vaginal Cream®, a vaginal cream for the treatment of VVA as well as genericversions of these products and over the counter and36Table of Contentscompounded remedies to treat VVA and dyspareunia. In addition, TherapeuticsMD, Inc. is developing TX-004HR, a vaginal estrogen softgel capsule for thetreatment of dyspareunia, which has a PDUFA date in May 2018. For the CBR Services, competition in the private cord blood and cord tissue banking business is already intense and is likely to increase as the number ofcompetitors continues to grow given the relatively low barriers to entry. CBR competes primarily with ViaCord®, a subsidiary of PerkinElmer, Inc., Cryo-Cell International, Inc.® and StemCyte™, which are all private blood banks. In addition to these three competitors, CBR competes with more than 20 otherprivate blood banks in the U.S. as well as public blood banks.We also expect to face competition for bremelanotide, if approved, including from Addyi®, an FDA-approved product for treatment of HSDD in pre-menopausal women as a daily-use oral drug. In addition, we are aware of several other drugs at various stages of development, most of which are beingdeveloped to be taken on a chronic, typically once-daily, basis. However, Emotional Brain BV, a Netherlands company, is developing two different oralfixed-dose, on-demand combination drugs, one a combination of sildenafil and testosterone and the other a combination of testosterone and buspironehydrochloride, and has conducted Phase 2b studies. There may be other companies developing new drugs for FSD indications, some of which may be inclinical trials in the U.S. or elsewhere, or other companies which may sell their products off-label for indications other than FSD.If we are unable to compete effectively against existing and future competitors and existing and future alternative products or services, our business,financial condition and results of operations may be materially adversely affected. For further details on our competition, please see Item I, “Business -Competition”.We are completely dependent on third parties to manufacture our drug products and to provide materials required to support our CBR Services and anydifficulties, disruptions, delays or unexpected costs, or the need to find alternative sources, could adversely affect our profitability and future businessprospects.We do not own or operate, and currently do not plan to own or operate, facilities for the manufacture of our commercially distributed products, productcandidates or for any commercial products or product candidates we may acquire or in-license. We rely solely on third-party contract manufacturingorganizations (“CMOs”) and our licensors (who, in turn, may also rely on CMOs) to manufacture our products for our commercial and clinical use and forcertain materials required to support our CBR Services. We or our licensors may not be able to enter into agreements with manufacturers or second sourcemanufacturers whose facilities and procedures comply with cGMP regulations and other regulatory requirements on a timely basis and with terms that arefavorable to us, if at all. Further, our ability to have our drug products manufactured in sufficient quantities and at acceptable costs to meet our commercialdemand and clinical development needs is dependent on the uninterrupted and efficient operation of our CMO’s and our licensors’ manufacturing facilities.Any difficulties, disruptions, or delays in the manufacturing process or supply chain could result in product defects, shipment delays, suspension ofmanufacturing of, sale of or clinical development for the product, recall or withdrawal of product previously shipped for commercial or clinical purposes,inventory write-offs or the inability to meet commercial or clinical demand in a timely and cost-effective manner.For example, although we believe we have sufficient Makena IM product in inventory to meet demand, our primary drug product manufacturer hasexperienced issues regarding the delivery of products, including Makena, and we do not currently have a manufacturer for the production of Makena API.Given that our current inventory of Makena API is being used to manufacture multiple presentations of Makena (including the auto-injector and authorizedgeneric product), any such disruptions or delays could result in an inability to meet commercial demand.Additionally, we recently received approval for the Makena auto-injector, which will require us to contract for the manufacture of these devices atcommercial scale. We have no experience manufacturing an auto-injector product and are currently in discussions with third-party manufacturers to securecommercial supply of certain components. We may encounter difficulties in the production of the Makena auto-injector, including problems involving scale-up, yields, quality control and assurance, product reliability, and manufacturing costs, any of which could result in significant delays in production or ourinability to meet our demand for the auto-injector product. In addition, we do not currently have back-up suppliers for the Makena auto-injectormanufacturers. Establishing an alternative supplier for the auto-injector device is a long and costly process and may not be successful. While we takeprecautions to mitigate potential interruptions, any failure at our manufacturers could result in a shortage of our Makena inventory.Further, we are dependent upon Endoceutics to manufacture commercial supply of Intrarosa. Endoceutics has limited experience overseeing CMOs forproducts at commercial scale, which imposes significant and complex regulatory and compliance obligations. Endoceutics has and may continue to facechallenges and difficulties with its CMO in satisfying such obligations, particularly since such CMO has limited experience manufacturing prescriptiondrugs.37Table of ContentsWe also rely upon third-party contractors to assist in supporting the CBR Services, including to supply proprietary materials. Although we believe wehave sufficient contingency plans in place, if current suppliers need to be changed or suffer disruption, especially our sole source providers, we could faceoperational delays and lost revenue, as well as the need to reconfigure machinery and/or systems, which could be costly.In addition, bremelanotide is a synthetic peptide and while the production process involves well-established technology, there are few manufacturerscapable of scaling up to commercial quantities under cGMP at acceptable costs. Further, we do not have commercial supply agreements to manufacture thedrug substance and the bremelanotide auto-injector sub-assemblies and may not be able to enter into such agreements on acceptable terms, if at all, includingthe cost of goods.We rely on third-party manufacturers for many aspects of our manufacturing process for our products and in some cases we rely on single sourcemanufacturers without a qualified alternative manufacturer. Securing additional third-party contract manufacturers will require significant time for validatingthe necessary manufacturing processes, gaining regulatory approval, and implementing the appropriate oversight and may increase the risk of certainproblems, 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 our products or the propriety materials for our services in accordance with cGMP.Furthermore, none of our current third-party drug product manufacturers or licensors manufacture for us exclusively and as such they may exhaust some or allof their resources meeting the demand of other parties or themselves.Further, we, our licensors and our respective CMOs currently purchase certain raw and other materials used to manufacture our products from third-partysuppliers. At present, we do not have long-term supply contracts with most of these third parties. These third-party suppliers may cease to produce the raw orother materials used in our products or as part of the administration of our products or otherwise fail to supply these materials to us, our licensors or ourrespective third-party manufacturers, or fail to supply sufficient quantities of these materials to us, our licensors or our respective third-party manufacturers ina timely manner for a number of reasons, including but not limited to the following:•Adverse financial developments at or affecting the supplier;•Unexpected demand for or shortage of raw or other materials;•Regulatory requirements or action;•An inability to provide timely scheduling and/or sufficient capacity;•Manufacturing difficulties;•Changes to the specifications of the materials such that they no longer meet our standards;•Lack of sufficient quantities or profit on the production of materials to interest suppliers;•Labor disputes or shortages;•Disruption due to natural disasters; or•Import or export problems.In addition, we, our licensors or our respective third-party manufacturers sometimes obtain raw or other materials from one vendor only, even wheremultiple sources are available, to maintain quality control and enhance working relationships with suppliers, which could make us susceptible to priceinflation by the sole supplier, thereby increasing our production costs. As a result of the high-quality standards imposed on our raw or other materials, we, ourlicensors or our respective third-party manufacturers may not be able to obtain such materials of the quality required to manufacture our products from analternative source on commercially reasonable terms, or in a timely manner, if at all.If, because of the factors discussed above, we are unable to have our products manufactured on a timely or sufficient basis, or if our supply chain for theCBR Services is disrupted, we may not be able to meet commercial demand or our clinical development needs for our products, may not be able tomanufacture our products in a cost-effective manner or may be unable to adequately provide the CBR Services. As a result, we may lose sales, fail to generateprojected revenues or suffer regulatory setbacks, any of which could have an adverse impact on our profitability and future business prospects.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 trade secrets 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 or 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 or to prevent others from doing so. The issuance of a patent is not conclusive as to itsscope, validity or enforceability, and our owned or licensed patents may be challenged in the courts or patent offices in the U.S. or abroad. Such challengesmay result in patent claims being narrowed, invalidated or held38Table of Contentsunenforceable, which could limit our ability to stop or prevent us from stopping others from using or commercializing similar or identical technologies andproducts, or limit the duration of the patent protection of our technology and products. In addition, our owned or licensed intellectual property might besubject to liens or encumbrances, which, as a result, may not provide us with sufficient rights to exclude others from developing and commercializingproducts similar or identical to ours. Therefore, the patents issued or licensed to us may provide us with little or no competitive advantage.We currently hold a number of U.S. patents for our products, including the following:•One patent related to Feraheme that will expire in June 2023 and other patents related to Feraheme that expire in 2020. •One patent related to the Makena auto-injector product that will expire in 2036.We also rely on licensed patents for the protection of the products we commercialize. Under our current license agreements we have rights to a number ofU.S. and foreign patents and applications, including the following:•Patents licensed from Palatin Technologies, Inc. (“Palatin”) related to bremelanotide that expire in 2020 and 2033 (one of which may be extendedby up to five years under the Hatch-Waxman act).•Patents licensed from Endoceutics, Inc. (“Endoceutics”) related to Intrarosa that expire in 2028 and 2031 (one of which may be extended by up tofive years under the Hatch-Waxman act).•Patents licensed from Antares Pharma, Inc. related to the Makena auto-injector product that expire between 2019 and 2034.•Patents licensed from Abeona Therapeutics, Inc. related to MuGard that expire in 2022.These and any other patents owned by or licensed to us may be contested in litigation or reexamined or reviewed by the United States Patent andTrademark Office (the “USPTO”). Even if we come to a mutually acceptable settlement arrangement with an adverse party, we or they may become subject toincreased regulatory scrutiny or be subject to formal or informal requests or investigations, including by the FDA, the Department of Justice or the FederalTrade Commission (“FTC”). If any present or future patents relied on for the development or commercialization of our products are narrowed, invalidated orheld unenforceable, this could have an adverse effect on our business and financial results.In addition, although we believe that the patents related to each of our products were rightfully issued and the respective portfolios give us sufficientfreedom to operate, a third-party could assert that the development, manufacture or commercialization of any of our products infringes its patents or otherproprietary rights, potentially resulting in harm to our business and financial results. Further, the intellectual property rights that we own or license might besubject to liens or other encumbrances. If we are required to defend against such claims or to protect our own or our licensed proprietary rights against others,it could result in substantial financial and business costs as well as the distraction of our management. An adverse ruling in any litigation or administrativeproceeding could put one or more of our patents at risk of being invalidated or interpreted narrowly, result in monetary damages, injunctive relief orotherwise harm our competitive position, including by limiting our marketing and selling activities, increasing the risk for generic competition, limiting ourdevelopment and commercialization activities or requiring us to obtain licenses to use the relevant technology (which licenses may not be available oncommercially reasonable terms, if at all).There has been substantial litigation and other proceedings regarding patent and other intellectual property rights in the pharmaceutical andbiotechnology industries. We may become a party to intellectual property litigation or administrative proceedings, including interference or derivation, interpartes review, post grant review or reexamination proceedings before the USPTO. For example, the outcome of our ongoing litigation with Sandoz mayimpact our patent protection and potentially the competitive landscape for Feraheme. Even if we are successful, such litigation, or similar suits we may facein the future, will be expensive and will consume considerable time and other resources, which could materially and adversely impact our business,especially if we have to divert resources from our commercialization or business development efforts.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. However, these agreements may be breached and we may not have adequate remedies for any such breaches, and our trade secretsand other confidential information might become known. In addition, we cannot be certain that others will not independently develop substantially39Table of Contentsequivalent or superseding proprietary technology, or that an equivalent product or service will not be marketed in competition with our products, therebysubstantially reducing the value of our proprietary rights.A generic competitor is seeking approval of a generic version of Feraheme and the market entry of such generic or any future generic competitors wouldlimit Feraheme sales and have an adverse impact on our business and results of operation.The Hatch-Waxman Act requires an applicant for a drug product that relies, in whole or in part, on the FDA’s prior approval of a patented brand namedrug, to notify us of its application, a Paragraph IV certification notice, if the applicant is seeking to market its product prior to the expiration of the patentswith claims directed to the brand name drug. In February 2016, we received a Paragraph IV certification notice letter regarding an ANDA submitted to theFDA by Sandoz requesting approval to engage in commercial manufacture, use and sale of a generic version of Feraheme (ferumoxytol). In its Paragraph IVcertification notice letter, Sandoz claims that our ferumoxytol patents are invalid, unenforceable and/or not infringed by Sandoz’s manufacture, use, sale oroffer for sale of the generic version. In March 2016, we initiated a patent infringement suit alleging that Sandoz’ ANDA filing itself constituted an act ofinfringement and that if it is approved, the manufacture, use, offer for sale, sale or importation of Sandoz’ ferumoxytol products would infringe our patentsand the trial is currently scheduled for March 19, 2018. If such patents are not upheld or if the generic competitor is found not to infringe such patents, thenwe will likely face generic competition soon after such resolution. Further, Sandoz’s application could encourage other generic entrants seeking a path toapproval of a generic ferumoxytol to file an ANDA. Even if we are successful, such litigation is expensive and consumes considerable time and otherresources, which could materially and adversely impact business.If an ANDA filer, such as Sandoz, is ultimately successful in patent litigation against us, meets the requirements for a generic version of our brandedproduct, such as Feraheme, to the satisfaction of the FDA under its ANDA, and is able to supply the product in significant commercial quantities, the genericcompany could introduce a generic version to the market. Such a market entry would likely limit our sales, which would have an adverse impact on ourbusiness and results of operations.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, especially in light of potential generic competition, could adversely affect our revenues and results ofoperations.Our ability to successfully commercialize our products is dependent, in significant part, on the availability and level of reimbursement from third-partypayers, including state and federal governmental payers such as Medicare and Medicaid, managed care organizations, private health insurers and otherorganizations. Reimbursement by third-party payers depends on a number of factors, including the third-party’s determination that the product iscompetitively priced, safe and effective, appropriate for the specific patient, and cost-effective. Third-party payers are increasingly challenging the pricescharged for pharmaceutical products and continue to institute cost containment measures to control or influence the purchase of pharmaceutical products,such as through the use of prior authorizations and step therapy. Certain specialty pharmaceuticals, pharmaceutical companies and pricing strategies havebeen the subject of increased scrutiny and criticism by politicians and the media, which could also increase pricing pressure throughout the industry, or leadto new legislation that may limit our pricing flexibility. If these third-party payers do not provide coverage and reimbursement for our products, or provide aninsufficient level of coverage and reimbursement, physicians and other healthcare providers may choose to prescribe alternative products, including generics,which would have an adverse effect on our ability to generate revenues.In addition, the possible introduction of generic competition to our products, including Intrarosa, Makena and Feraheme, may also affect thereimbursement policies of government authorities and third-party payers, such as private health insurers and HMOs. These organizations determine whichmedications they will pay for and establish reimbursement levels. Cost containment is a primary concern in the U.S. healthcare industry and governmentauthorities and these third-party payers have attempted to control costs by limiting coverage and the amount of reimbursement for branded medications whenthere is a generic available. If generic products become available in the market, insurance companies and government payers, such as state Medicaidagencies, which currently provide coverage for our products may make it more difficult for physicians to prescribe our products by charging higher copays,requiring prior authorizations, implementing step edits or not providing reimbursement at all. Even if reimbursement is available, the level of suchreimbursement could be reduced or limited. Reimbursement levels or the lack of reimbursement may impact the demand for, or the price of, our brand nameproducts. If reimbursement is not available or is available only at limited levels, we may not be able to successfully commercialize our products, and/or ourfinancial results from the sale of related products could be negatively and materially impacted.Intrarosa is dependent on third-party reimbursement to reach its market potential. Payers frequently employ a tiered system in reimbursing end-users forpharmaceutical products, with tier designation affecting copay or deductible amounts. While some of the products that Intrarosa competes with receivereimbursement from governmental healthcare programs, Intrarosa is40Table of Contentsgenerally classified as a Tier 3 drug, and therefore patients are unlikely to receive full reimbursement by third-party commercial payers and may not receiveany reimbursement from governmental healthcare programs. As a result, patients may be subject to substantial copays or deductible requirements. Less thanfull reimbursement by governmental and other third-party payers may adversely affect the market acceptance of Intrarosa and put it at a competitivedisadvantage to some of the competing products, including generic versions, which are often priced lower than brand name products. In addition, given theincreasing number of generic competitors entering the VVA and dyspareunia market, payers may choose to implement step edits or prior authorizations priorto Intrarosa use, which could adversely impact our projected Intrarosa revenues and profitability. If Intrarosa does not receive adequate reimbursementcoverage, the growth in Intrarosa sales may not meet our expectations or receive more favorable third-party reimbursement than its competitors, and ourbusiness, financial condition and results of operations may be materially adversely affected.There is also significant uncertainty concerning the extent and scope of third-party reimbursement for products treating HSDD. Because Addyi® is theonly FDA-approved therapy to treat HSDD, there is little precedent on which to base expectations as to third-party reimbursement opportunities. We believereimbursement for HSDD will be similar to approved products treating erectile dysfunction and products treating women’s health conditions, such asIntrarosa. If this is the case, we expect that commercial payers will likely cover bremelanotide as a non-preferred product, which normally requires a highercopay or deductible than preferred drugs. As a result, patients would be unlikely to receive full reimbursement by third-party commercial payers and may notreceive any reimbursement from governmental healthcare programs. Therefore, patients may be subject to substantial copays or deductible requirements. Lessthan full reimbursement by governmental and other third-party payers may adversely affect the market acceptance of bremelanotide. If bremelanotide doesnot receive adequate reimbursement coverage, if approved, our business, financial condition and results of operations may be materially adversely affected.Further, the market for HSDD may be particularly vulnerable to unfavorable economic conditions. Because we expect bremelanotide to have significantcopay or deductible requirements and to be only partially reimbursed by third-party payers, demand for bremelanotide may be tied to discretionary spendinglevels of the targeted patient population. Thus, any downturn in the economy could result in weakened demand for bremelanotide.In addition, the U.S. government continues to propose and pass legislation designed to reduce the cost of healthcare for patients. The Patient Protectionand Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (collectively, the “ACA”) includes certain costcontainment measures including an increase to the minimum rebates for products covered by Medicaid programs, the extension of such rebates to drugsdispensed to Medicaid beneficiaries enrolled in Medicaid managed care organizations and the expansion of the 340B Drug Pricing Program under the PublicHealth Services Act (the “340B Program”). In addition, federal budgetary concerns and the current presidential administration could result in theimplementation of significant federal spending cuts or regulatory changes, including cuts in Medicare and other health-related spending in the near-term orchanges to the ACA. A key focus of the current presidential administration and Republican majorities in both houses of the U.S. Congress is to “repeal andreplace” all or portions of the ACA. Since its enactment, however, there have been modifications and challenges to numerous aspects of the ACA, includingthe repeal of the so-called “individual mandate” which imposed a tax on individuals who were eligible for, but did not enroll in, health insurance plans. In2018, litigation, regulation, and legislation related to the ACA are likely to continue, with unpredictable and uncertain results. The full impact of the ACA,any law repealing. replacing, and/or modifying elements of it, and the political uncertainty surrounding any repeal or replacement legislation on our businessremains unclear. The extent, timing and details of the changes are not currently known, but the federally funded healthcare landscape could face significantchanges during the current presidential administration, including in the near-term, and could impact state and local healthcare programs, including Medicaidand Medicare, which could also have a negative impact on our future operating results. The magnitude of the impact of these laws and developments on ourbusiness 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 managedcare to relieve some of their Medicaid cost burden. Given that approximately half of Makena patients are Medicaid beneficiaries, the impact of futurelegislative changes may have a significant and adverse impact on Makena sales. Further, while Medicare is the predominant payer for Feraheme, Medicarepayment policy, in time, can also influence pricing and reimbursement in the non-Medicare markets, as private third-party payers and state Medicaid plansfrequently adopt Medicare principles in setting reimbursement methodologies. These and any future changes in government regulation or private third-partypayers’ reimbursement policies may reduce the extent of reimbursement for our products and adversely affect our future operating results.Further, government agencies that oversee reimbursements such as Centers for Medicare & Medicaid Services (“CMS”) may adopt policies that impactthe reimbursement rate to our customers, which may in turn impact our net product revenues. For example, effective January 1, 2018, CMS adopted a policyto pay for separately payable, non-pass-through drugs and biologicals other than vaccines purchased through the 340B Program, with certain exceptions, atthe average sales price (“ASP”) minus 22.5% rather than ASP plus 6%. Drugs not purchased under the 340B Program will continue to be paid for at a rate ofASP plus 6%. The effect of this change on the overall 340B Program and our 340B eligible customers is unclear.41Table of ContentsHowever, there will be significant increases in budget pressure for our customers, which may adversely impact premium priced agents, such as Feraheme andMakena.We have limited experience with development stage products and cannot ensure that we will be successful in gaining approval of our product candidateson a timely basis, or at all, including bremelanotide, or that such approval, if obtained, will not contain restrictions that the FDA may impose on the use ordistribution of such product candidates.Our long-term success and revenue growth will depend upon our ability to continue to successfully develop new products. Drug development isinherently risky and the FDA imposes substantial requirements on the development of such candidates to become eligible for marketing approval. The FDAhas substantial discretion in the approval process and may decide that our data is insufficient for approval. Clinical data is often susceptible to varyinginterpretations, and many companies in the pharmaceutical and biotechnology industries that have believed their product candidates performed satisfactorilyin clinical trials have nonetheless failed to obtain FDA approval for their products. The FDA could also determine that our manufacturing processes are notproperly designed, are not conducted in accordance with federal laws or otherwise not properly managed. If we do not obtain FDA approval for our productcandidates, including bremelanotide, as discussed below, or if we experience significant delays or setbacks in obtaining approval, our ability to grow ourbusiness and leverage our product portfolio and the future prospects of our business could be materially adversely affected.In January 2017, we acquired an exclusive license from Palatin to research, develop and commercialize bremelanotide in North America. During 2016,Palatin completed two Phase 3 clinical trials to treat HSDD in pre-menopausal women. The trials consisted of double-blind placebo-controlled, randomizedparallel group studies comparing a subcutaneous dose of 1.75 mg bremelanotide versus placebo, in each case, delivered via an auto-injector. In both clinicaltrials, bremelanotide met the pre-specified co-primary efficacy endpoints of median improvement in desire and decrease in distress associated with low sexualdesire as measured using validated patient-reported outcome instruments; however, the change in the number of satisfying sexual events, the key secondaryendpoint, was not significantly different from placebo in either clinical trial. The most frequent adverse events were nausea, flushing and headache, whichwere generally mild-to-moderate in severity. Approximately 18% of patients discontinued participation in the bremelanotide arm due to adverse events inboth studies. We currently expect to submit the bremelanotide NDA in the first quarter of 2018.Despite the successful completion of the Phase 3 clinical trials, the approval of bremelanotide for commercial sale in the U.S. could be delayed or deniedor we may be required to conduct additional studies for a number of reasons, including:•The FDA may determine that bremelanotide does not demonstrate safety and efficacy in accordance with regulatory agency standards based on theresults of the Phase 3 trials, including the co-primary and secondary endpoints and safety results;•The FDA may determine that the magnitude of efficacy demonstrated in the bremelanotide studies does not amount to a clinically meaningfulbenefit to pre-menopausal women with HSDD and thus that the product cannot be approved despite statistically significant efficacy results;•The FDA could analyze and/or interpret data from preclinical testing and clinical trials in different ways than we or Palatin interpret them;•The auto-injector device that we plan to use to administer bremelanotide may not be adequate or may not be considered adequate by the FDA;•We may be unable to establish, and obtain FDA approval for, a commercially viable manufacturing process for bremelanotide in a timely manner, orat all;•Adverse medical events reported during the trials, including increases in blood pressure noted in prior clinical trials and a serious adverse event ofhepatitis of unknown etiology;•The failure of clinical investigational sites and the records kept at such sites, including the clinical trial data, to be in compliance with the FDA’scurrent good clinical practices regulations (“cGCP”), including the failure to pass FDA inspections of clinical trial sites; and•The FDA may change their approval policies or adopt new regulations.42Table of ContentsAny failure or delay in obtaining regulatory approval for bremelanotide could adversely affect our ability to successfully commercialize such product. Inaddition, share prices have declined significantly in certain instances where companies have failed to obtain FDA approval of a product or where the timingof FDA approval is delayed. If we are required to conduct additional studies, our share price could decline significantly.Even if regulatory approval to market bremelanotide is granted by the FDA, the approval may impose limitations on the indicated use for which the drugproduct may be marketed and additional post-approval requirements with which we and Palatin would need to comply in order to maintain bremelanotide’sapproval. Our business could be seriously harmed if we and/or Palatin do not complete any post-approval requirements and the FDA, as a result, requires us tochange sections of the labeling.We may not be able to further expand our portfolio by entering into additional business development transactions, such as in-licensing arrangements,acquisitions, or collaborations or, if such arrangements are entered into, we may not realize the anticipated benefits and they could disrupt our 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 portfolio, we are seeking to in-license or acquire additional pharmaceutical products or companies thatleverage our corporate infrastructure and commercial expertise, such as our license agreements with Palatin and Endoceutics. There are limited opportunitiesavailable that align with our business strategy and there can be no assurance that we will be able to identify or complete any additional transactions in atimely manner, on a cost-effective basis, or at all, or that such transactions will be successfully integrated into our business.Further, the valuation methods that we use for any acquired or licensed product or business require significant judgment and assumptions. Actual resultsand performance of the products or businesses that we may acquire, including anticipated synergies, economies of scale and other financial benefits, coulddiffer significantly from our original assumptions, especially during the periods immediately following the closing of the transaction. For example, if thetiming of FDA approval of bremelanotide, the market for bremelanotide or Intrarosa or the cost of goods for bremelanotide or Intrarosa is different from whatwe predicted in our model, the anticipated financial benefits of bremelanotide or Intrarosa may not be achieved. In addition, acquisitions may causesignificant changes to our current organization and operations, may subject us to more rigid or constraining regulations or government oversight and mayhave negative tax and accounting consequences. These results could have a negative impact on our financial position or results of operations and result insignificant charges in future periods.In addition, proposing, negotiating and implementing collaborations, in-licensing arrangements or acquisition agreements is a lengthy, complex, time-consuming and expensive process. Other companies, including those with substantially greater financial, marketing and sales resources, may compete with usfor 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 uscould result in write-offs or impairments, which may be larger than anticipated or impact our financial statements more quickly than anticipated. Suchtransactions may also require us to incur additional and significant debt and contingent liabilities, each of which may contain restrictive covenants thatcould adversely impact or limit our ability to grow our business, enter into new agreements, and adversely affect our operating results.In addition, our cash and investments may not be sufficient to finance any additional strategic transactions, and we may choose to issue shares of ourcommon or preferred stock as consideration. Alternatively, it may be necessary for us to raise additional funds through public or private financings, and suchadditional funds may not be available on terms that are favorable to us, if at all. For example, certain restrictions contained in the indenture governing our2023 Senior Notes, described below, may limit our ability to pursue attractive business development opportunities. If we are unable to successfully obtainrights to suitable products or if any acquisition or in-license arrangement we make is not successful, our business, financial condition and prospects forgrowth could suffer. Further, any equity or equity-linked issuance, whether as consideration for a strategic transaction or in a financing transaction, couldcause our stockholders to experience significant dilution.Even if we do acquire or license additional products or businesses, the management of a license arrangement, collaboration, or other strategicarrangement and/or integration of an acquired asset or company may disrupt our ongoing business and require management resources that otherwise wouldbe available for ongoing commercialization efforts and development of our existing enterprise. The integration of the operations of such acquired products orbusinesses requires significant efforts, including the coordination of information technologies, sales and marketing, operations, manufacturing, safety andpharmacovigilance, medical, finance and business systems and processes. These efforts result in additional expenses and involve significant amounts ofmanagement’s time. For example, with the bremelanotide license, we added a development stage product to our portfolio and therefore needed to enhanceour research and development expertise for product candidates.43Table of ContentsOur expanded portfolio may further necessitate an expanded commercial team, which will take a considerable amount of time and effort to hire and train. Ourfuture success will significantly depend upon our ability to manage our expanded enterprise, including multiple locations and various-staged products,which will pose substantial challenges for management, including challenges related to the management and monitoring of new operations and associatedincreased costs and complexity.If we cannot successfully integrate businesses or products we may acquire or in-license into our company, we may experience material negativeconsequences to our business, financial condition or results of operations. For example, different skills and training are required for the promotion of varioustherapeutic products, especially as compared to a service business, such as CBR. Our revenues and profitability could suffer if we do not successfully expandour sales and commercial expertise into new areas, such as HSDD with respect to bremelanotide, or if our integrated sales force focusing on both the CBRServices and Makena is unable to successfully promote a portfolio of products and services, especially since they may have limited experience withpromoting both therapeutics and a service business.We have significantly expanded the size of our product portfolio and our overall organization and we may experience difficulties in managing this orfuture expansion.In recent years, we more than tripled the size of our employee-base and we have considerably expanded our product portfolio by obtaining certaindevelopment and commercialization rights to bremelanotide and Intrarosa during 2017. Management, personnel, systems and facilities that we currently havein place may not be adequate to support this recent growth (especially given that we did not acquire any rights to any infrastructure or personnel under ourarrangements with Palatin and Endoceutics), and we may not be able to retain or recruit qualified personnel in the future in this competitive environment toadequately support our expanded organization and diversified portfolio. To manage this and any future growth effectively, we will be required to continue tomanage and expand the sales and marketing efforts for our existing products and services while continuing to identify and acquire attractive additions to ourportfolio, develop our oversight and collaboration efforts for our licensed products, including development-staged products, enhance our operational,financial and management controls, reporting systems and procedures, benefit plan maintenance, and establish and increase our access to commercialsupplies of our products and call points for our services, which will be challenging and for which we might not be successful, especially given our newly-expanded organization. We will be required to expand and maintain our facilities and equipment and manage our internal development efforts effectivelywhile complying with our contractual obligations to licensors, licensees, contractors, collaborators, distributors and other third parties and we will have tomanage multiple geographic locations across the U.S., which we have limited experience doing. 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.Further, if we add products to our portfolio through licenses or acquisitions, we may face legal, regulatory, and compliance scrutiny or increasedexpenses as a result of the target’s or licensor’s pre-acquisition or pre-license business practices, including if such targets or licensors were alleged to haveviolated any privacy, data security, or other healthcare compliance laws, or failed to comply with all applicable FDA laws and requirements, regardless ofwhether such allegations have merit. Our recourse for such risks may be limited depending upon the remedies we are able to negotiate in the relevanttransaction agreements. If any issues arise, we may not be entitled to sufficient, or any, indemnification or recourse from the licensor or the acquired company,which could have a materially adverse impact on our business and results of operations.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 any harm or injury. As Feraheme is used over longer periods of time by a wider group of patients taking numerous other medicines or bypatients with additional underlying health problems, the likelihood of adverse drug reactions or unintended side effects, including death, may increase.While these adverse events are rare, all IV irons, including Feraheme, can cause patients to experience serious hypersensitivity reactions, includinganaphylactic-type reactions, some of which have been life-threatening and/or fatal. Makena is a prescription hormone medicine (progestin) used to lower therisk of preterm birth in women who are pregnant and who have previously delivered preterm in the past. It is not known if Makena is safe and effective inwomen who have other risk factors for preterm birth and in one clinical study, certain complications or events associated with pregnancy occurred more oftenin women who received Makena, including miscarriage (pregnancy loss before 20 weeks of pregnancy), hospital admission for preterm labor, preeclampsia,gestational hypertension and gestational diabetes. In addition, other hormones administered during pregnancy have in the past been shown to cross theplacenta and have negative effects on the offspring. Similarly, as Intrarosa and bremelanotide, if approved, are introduced to the44Table of Contentsmarket, more serious adverse reactions than those reported during clinical trials could arise. We could also be subject to liability for the loss of or damage tocord blood or cord tissue units. Although we maintain product liability insurance coverage for claims arising from the use of our products in clinical trialsand commercial use, coverage is expensive, and we may not be able to maintain sufficient insurance at a reasonable cost, if at all. Product liability claims andany resulting litigation, whether or not they have merit, may generate negative publicity and could decrease demand for our products, cause other parties tosubmit claims or demands, subject us to product recalls, harm our reputation, cause us to incur substantial costs, and divert management’s time and attention.We may also be the target of claims asserting violations of securities and fraud and abuse laws and derivative actions or other litigation. Any suchlitigation could result in substantial costs and divert our management’s attention and resources, which could cause serious harm to our business, operatingresults and financial condition. Further, we may not be successful in defending ourselves in a litigation and, as a result, our business could be materiallyharmed and, as with any product liability litigation, regardless of the outcome, these claims or suits may generate negative publicity, cause other parties tosubmit claims or demands, harm our reputation and divert management’s time and attention. These lawsuits may also result in large judgments or settlementsagainst us, any of which could have a negative effect on our financial condition and business if in excess of our insurance coverage. Though we maintainliability insurance, if any costs or expenses associated with litigation exceed our insurance coverage, we may be forced to bear some or all of these costs andexpenses directly, which could be substantial.We must work effectively and collaboratively with our licensors to develop, market and/or sell certain products in our portfolio. We have limited experience commercializing licensed products, and the addition of Intrarosa and bremelanotide to our product portfolio means that ourfuture revenues are more dependent upon our ability to work effectively and collaboratively with our licensors to develop, market and/or sell the licensedproducts in our portfolio, including to obtain or maintain regulatory approval. Our arrangements with licensors will be critical to successfully bringing ourlicensed products to market and successfully commercializing them. We rely on our licensors in various respects, including to undertake research anddevelopment programs and conduct clinical trials for our licensed products, manage or assist with the regulatory filings and approval process andmaintenance and/or to assist with our commercialization efforts. We do not control our licensors, some of whom may be inexperienced, have a limitedoperating history, face financial and business hardships (including solvency issues), have limited operations or financial or other resources or have limited orno experience with commercialization activities; therefore, we cannot ensure that these third parties will adequately and timely perform all of theirobligations to us. For example, we are dependent upon the contributions of Endoceutics, which is a small company organized outside of the U.S. with limitedoperations, experience and resources, including to exclusively provide us with all commercial supply and conduct certain clinical and commercializationactivities. We cannot guarantee the satisfactory performance of any of our licensors and if any of our licensors breach or terminate their agreements with us,we may not be able to successfully commercialize the licensed product, which could materially and adversely affect our business, financial condition, cashflows and results of operations.Further, even if contractual safeguards are in place in our licensing arrangements, our licensors may use their own or other technology to develop analternative product and withdraw their support of the licensed product, or compete with the licensed product. Our licensing arrangements could also limit ouractivities, including our ability to compete with our licensors in certain geographic or therapeutic areas. For example, Endoceutics' assets, including theintellectual property licensed to us, are subject to a security interest held by a third-party lender, and therefore our rights and remedies under the licenseagreement may be impaired or inadequate. Disputes may arise between us and a licensor and may involve the ownership of technology developed under alicense or other issues arising out of collaborative agreements. In addition, we must work collaboratively with our partners to conduct various activities and ifwe cannot do so effectively, disagreements could arise. Such disagreements could delay the related program or result in distraction or expensive arbitration orlitigation, which may not be resolved in our favor.Our license and purchase agreements contain complex provisions and impose various milestone payment, royalty, insurance, diligence, reporting andother obligations on us. If we fail to comply with our obligations, our partners may have the right to terminate the license agreement, in which event wewould not be able to continue developing or commercializing the licensed products, or we may incur additional costs or may be required to litigate anydisputes. If our partners allege that we have breached our obligations under such arrangements, even if such allegations are without merit, defending suchallegations, including complying with any audit, reporting or dispute resolution provisions of such agreement, or conducting any investigations, can beexpensive and utilize considerable amounts of management’s time and efforts. For example, under the terms of our agreement with Lumara Health, the formershareholders of Lumara Health through its shareholder representatives can exercise a right to review our books and records related to the calculation ofrevenue which trigger the milestone payments owed to Lumara Health. Termination of a license agreement or reduction or elimination of our licensed rightsmay result in our45Table of Contentshaving to negotiate new or reinstated licenses with less favorable terms, and, if we lose rights to the licensed products it could materially and adversely affectour business.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 licensors, clinical research organizations (“CROs”), contract research manufacturers,healthcare providers, third-party logistics providers, packaging, storage and labeling providers, wholesale distributors and certain other important vendorsand consultants in the conduct of our business. For example, we or our partners contract with, and plan to continue to contract with, certain CROs to provideclinical trial services for the development of Intrarosa to treat HSDD, including site selection, enrollment, monitoring, data management and other services, inconnection with the conduct of our clinical trials and the preparation and filing of our regulatory applications. In addition, CBR is dependent upon third-parties to perform tests which must be conducted in compliance with the FDA regulations that govern those functions. Although we depend heavily on these parties, we do not control them and, therefore, we cannot ensure that these third parties will adequately and timelyperform all of their obligations to us. If our third-party service providers cannot adequately fulfill their obligations to us or our licensors in a timely andsatisfactory manner, if the quality and accuracy of our clinical trial data or our regulatory submissions are compromised due to poor quality or failure toadhere to our protocols or regulatory requirements, or if such third parties otherwise fail to adequately discharge their responsibilities or meet deadlines, ourcurrent and future development plans and regulatory submissions, or our commercialization efforts in current indications and with the CBR Services, may bedelayed, terminated, limited or subject us to additional expense or regulatory action, which would adversely impact our ability to generate revenues.Further, in many 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 our licensors, or encounter physical or natural damages at their facilities, our ability todeliver our products to meet commercial demand could be significantly impaired. The loss of any third-party provider, especially if compounded by a delayor inability to secure an alternate distribution source for end-users in a timely manner, could cause the distribution of our products to be delayed orinterrupted, which would have an adverse effect on our business, financial condition and results of operations.Additionally, we have limited experience independently commercializing multiple pharmaceutical products and services and collaborating with partnersto commercialize multiple licensed products, including managing and maintaining a supply chain and distribution network for multiple products and theCBR Services, and we are placing substantial reliance on licensors and other third parties to perform this expanded network of supply chain and distributionservices for us. For example, we rely on Endoceutics, and we may have to rely on the other parties with whom we may enter into future agreements, to performor oversee certain functions, such as supply, research and development, or the regulatory process for the product we license from them, and any failure of suchparty to perform these functions for any reason, including ceasing doing business, could have a material effect on our ability to commercialize the product.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 services and we plan to continue to expand our portfolio, includingthrough the addition of commercial or development-stage products or services through acquisitions and in-licensing; thus, the range of skills of ourexecutive officers needs to be broad and deep. If we are not able to hire and retain talent to drive commercialization and expansion of our portfolio, we willbe unlikely to maintain or increase our profitability. Because of the specialized nature of our business, including a service-based business model anddevelopment-stage licensed product, our success depends to a significant extent on our ability to continue to attract, retain and motivate qualified sales,technical operations, managerial, scientific, regulatory compliance and medical personnel of all levels. The loss of key personnel or our inability to hire andretain personnel who have such sales, technical operations, managerial, scientific, regulatory compliance and medical backgrounds could materiallyadversely affect our business (including research and development efforts).If our cord blood and cord tissue processing and storage facility in Tucson, Arizona is damaged or destroyed, the CBR Services will be materiallydisrupted and impaired.Currently, all of our customers’ cord blood and cord tissue samples are stored in one facility in Tucson, Arizona. Our46Table of Contentsbusiness would suffer, and we would lose credibility with and the trust of physicians, healthcare providers and consumers, if there were any materialdisruption in our ability to maintain continued and fully operating storage systems, or any loss or deterioration of cord blood and cord tissue stored in ourstorage systems, including in the event of any damage or interruption from fire, earthquake, flood, break-ins, tornadoes and similar events.Risks Related to Regulatory MattersThere have been, and we expect there will continue to be, a number of federal and state legislative initiatives implemented to reform the U.S. healthcaresystem in ways that could adversely impact our business and our ability to sell our products and services profitably.We expect that the ACA, as currently enacted or as it may be amended in the future, the 21st Century Cures Act, and other healthcare reform measuresthat may be adopted in the future, could have a material adverse effect on our industry generally and on our ability to maintain or increase our product sales.These changes might impact existing government healthcare programs and may result in the development of new programs, including Medicare payment forperformance initiatives and improvements to the physician quality reporting system and feedback program. Changes that may affect our business include, butare not limited to, those governing enrollment in federal healthcare programs, reimbursement changes, rules regarding prescription drug benefits under thehealth insurance exchanges, expansion of the 340B Program, and fraud and abuse enforcement. For example, beginning April 1, 2013, Medicare payments forall items and services under Part A and B, including drugs and biologics, and most payments to plans under Medicare Part D were reduced by 2% under thesequestration (i.e., automatic spending reductions) required by the Budget Control Act of 2011 (the “BCA”) as amended by the American Taxpayer ReliefAct of 2012. The BCA requires sequestration for most federal programs, excluding Medicaid, Social Security, and certain other programs. The BCA caps thecuts to Medicare payments for items and services at 2% and subsequent legislation extended the 2% reduction, on average, to 2025.We cannot predict the impact that newly enacted laws or any future legislation or regulation will have on us. We expect that there will continue to be anumber of U.S. federal and state proposals to implement governmental pricing controls and limit the growth of healthcare costs. These efforts could adverselyaffect our business by, among other things, limiting the prices that can be charged for our products or services, or the amount of reimbursement rates andterms available from governmental agencies or third-party payers, limiting the profitability of our products and services, increasing our rebate liability orlimiting the commercial opportunities for our products and services, including acceptance by healthcare payers.Our partners, including our licensors, are subject to similar requirements and thus the attendant risks and uncertainties. If our partners, including ourlicensors, suffer material and adverse effects from such risks and uncertainties, our rights and benefits for our licensed products could be negatively impacted,which could have a material and adverse impact on our revenues.If our products and services are marketed or distributed in a manner that violates federal or state healthcare fraud and abuse laws, marketing disclosurelaws or other federal or state laws and regulations, we may be subject to civil or criminal penalties.In addition to FDA and related regulatory requirements, our general operations, and the research, development, manufacture, sale and marketing of ourproducts and services, are subject to extensive additional federal and state healthcare regulation, including the Federal Anti-Kickback Statute and the FederalFalse Claims Act (“FCA”) (and their state analogues), as discussed above in Item 1 under the heading “Government Regulation - Fraud and AbuseRegulation.” If we or our partners, such as licensors, fail to comply with any federal and state laws or regulations governing our industry, we could be subjectto a range of regulatory actions that could adversely affect our ability to commercialize our products and services, harm or prevent sales of our products andservices, or substantially increase the costs and expenses of commercializing and marketing our products and services, all of which could have a materialadverse effect on our business, financial condition and results of operations.Our activities relating to the sale and marketing of our products and services may be subject to scrutiny under these laws, and private individuals havebeen active in bringing lawsuits on behalf of the government under the FCA and similar regulations in other countries. In addition, incentives exist underapplicable U.S. law that encourage employees and physicians to report violations of rules governing promotional activities for pharmaceutical products.These incentives could lead to so-called whistleblower lawsuits as part of which such persons seek to collect a portion of moneys allegedly overbilled togovernment agencies as a result of, for example, promotion of pharmaceutical products beyond labeled claims. For example, federal enforcement agenciesrecently have showed interest in pharmaceutical companies’ product and patient assistance programs, including manufacturer reimbursement support servicesand relationships with specialty pharmacies. Some of these47Table of Contentsinvestigations have resulted in government enforcement authorities intervening in related whistleblower lawsuits and obtaining significant civil and criminalsettlements. Such lawsuits, whether with or without merit, are typically time-consuming and costly to defend. Such suits may also result in related shareholderlawsuits, which are also costly to defend.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 the provisions ofthe FDA’s “Subpart H” Accelerated Approval regulations, the FDA may also withdraw approval of Makena if, among other things, the promotional materialsare false or misleading, or other evidence demonstrates that Makena is not shown to be safe or effective under its conditions of use.In recent years, several states have enacted legislation requiring pharmaceutical companies to establish marketing and promotional compliance programsor codes of conduct and/or to file periodic reports with the state or make periodic public disclosures on sales, marketing, pricing, clinical trials, and otheractivities. Several states have also adopted laws that prohibit certain marketing-related activities, including the provision of gifts, meals or other items tocertain healthcare providers.We have developed and implemented a corporate compliance program based on what we believe are current best practices in the pharmaceuticalindustry; however, relevant compliance laws are broad in scope and there may not be regulations, guidance or court decisions that definitively interpret theselaws in the context of particular industry practices. We cannot guarantee that we, our employees, our partners, our consultants or our contractors are or will bein compliance with all federal and state regulations. If we, our partners, or our representatives fail to comply with any of these laws or regulations, a range offines, penalties and/or other sanctions could be imposed on us, including, but not limited to, restrictions on how we market and sell our products, significantfines, exclusions from government healthcare programs, including Medicare and Medicaid, litigation, or other sanctions. Even if we are not determined tohave violated these laws, government investigations into these issues typically require the expenditure of significant resources and generate negativepublicity, which could also have an adverse effect on our business, financial condition and results of operations. Such investigations or suits may also resultin related shareholder lawsuits, which can also have an adverse effect on our business.Our partners, including our licensors, are subject to similar requirements and obligations as well as the attendant risks and uncertainties. If our partners,including our licensors, suffer material and adverse effects from such risks and uncertainties, our rights and benefits for our licensed products could benegatively impacted, which could have a material and adverse impact on our revenues.If we fail to comply with our reporting and payment obligations under 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 federal and state health insurance programs, we are required to calculate and report certain pricinginformation to federal and state agencies. Please see our discussion above in Item 1 under the heading, “Pharmaceutical Pricing and Reimbursement” formore information regarding price reporting obligations under the Medicaid Drug Rebate Program, Medicare, and the Department of Veterans Affairs FederalSupply Schedule (the “FSS”) program.The regulations governing the calculations, price reporting and payment obligations are complex and subject to interpretation by various governmentand regulatory agencies, as well as the courts. Reasonable assumptions have been made where there is lack of regulations or clear guidance and suchassumption involve subjective decisions and estimates. We are required to report any revisions to our calculation, price reporting and payment obligationspreviously reported or paid. Such revisions could affect our liability to federal and state payers and also adversely impact our reported financial results ofoperations in the period of such restatement.Uncertainty exists as new laws, regulations, judicial decisions, or new interpretations of existing laws, or regulations related to our calculations, pricereporting or payments obligations increases the chances of a legal challenge, restatement or investigation. If we become subject to investigations,restatements, or other inquiries concerning our compliance with price reporting laws and regulations, we could be required to pay or be subject to additionalreimbursements, penalties, sanctions or fines, which could have a material adverse effect on our business, financial condition and results of operations. Inaddition, it is possible that future healthcare reform measures could be adopted which could result in increased pressure on pricing and reimbursement of ourproducts and thus have an adverse impact on our financial position or business operations.48Table of ContentsFurther, state Medicaid programs may be slow to invoice pharmaceutical companies for calculated rebates resulting in a significant lag between the timea sale is recorded and the time the rebate is paid. This results in us having to carry a significant liability on our consolidated balance sheets for the estimate ofrebate claims expected for Medicaid patients. For example, almost half of Makena sales are reimbursed through state Medicaid programs and are subject tothe statutory Medicaid rebate, and in some cases, supplemental rebates offered by us. If actual claims are higher than current estimates, our financial positionand results of operations could be adversely affected.In addition to retroactive rebates and the potential for 340B Program refunds, if we are found to have knowingly submitted any false price informationrelated to the Medicaid Drug Rebate Program to CMS, we may be liable for civil monetary penalties. Such failure could also be grounds for CMS to terminateour Medicaid drug rebate agreement, pursuant to which we participate in the Medicaid program. In the event that CMS terminates our rebate agreement,federal payments may not be available under government programs, including Medicaid or Medicare Part B, for our covered outpatient drugs.Additionally, if we overcharge the government in connection with the FSS program or Tricare Retail Pharmacy Program, whether due to a misstatedFederal Ceiling Price or otherwise, 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.Our partners, including our licensors, are subject to similar requirements and thus the attendant risks and uncertainties. If our partners, including ourlicensors, suffer material and adverse effects from such risks and uncertainties, our rights and benefits for our licensed products could be negatively impacted,which could have a material and adverse impact on our revenues.We are subject to ongoing regulatory obligations and oversight of our products and services, and any failure by us to maintain compliance with applicableregulations may result in several adverse consequences including the suspension of the manufacturing, marketing and sale of our respective products andservices, the incurrence of significant additional expense and other limitations on our ability to commercialize our respective products and services.We are subject to ongoing regulatory requirements and review, including periodic audits pertaining to the development, manufacture, labeling,packaging, adverse event reporting, distribution, storage, marketing, promotion, record keeping and export of our respective products and services, includingthose regarding cord blood and cord tissue collection, processing and storage services, the application to and implications for CBR’s operations of certainlaws, regulations and industry guidelines relating to healthcare or stem cell preservation companies, new and evolving regulatory restrictions on cord bloodand cord tissue banking. Failure to comply with such regulatory requirements or the later discovery of previously unknown problems with the manufacture,distributions and storage of our products or services, or our third-party contract manufacturing facilities or processes by which we manufacture our productsor supply our services may result in restrictions on our ability to manufacture, market, distribute or sell our products or services, including potentialwithdrawal of our products from the market. Any such restrictions could result in a decrease in sales, damage to our reputation or the initiation of lawsuitsagainst us and/or our third-party contract manufacturers. We may also be subject to additional sanctions, including but not limited to the following:•Warning letters, public warnings and untitled letters;•Court-ordered seizures or injunctions;•Civil or criminal penalties, or criminal prosecutions;•Variation, suspension or withdrawal of regulatory approvals for our products or services;•Changes to the package insert of our products, such as additional warnings regarding potential side effects or potential limitations on the currentdosage or administration;•Requirements to communicate with physicians and other customers about concerns related to actual or potential safety, efficacy, or other issuesinvolving our products and services;•Implementation of risk mitigation programs and post-approval obligations;49Table of Contents•Restrictions on our continued manufacturing, marketing, distribution or sale of our products, or the ability to continue to market our services;•Temporary or permanent closing of the facilities of our third-party contract manufacturers;•Interruption or suspension of clinical trials;•For human cells, tissues and cellular and tissue-based products (“HCT/Ps”), including umbilical cord blood stem cells and cord tissue, recalls,destruction orders, or cease manufacturing orders; and•Refusal by regulators to consider or approve applications for additional indications.Any of the above sanctions could have a material adverse impact on our revenues and profitability or the value of our brand, and cause us to incursignificant additional expenses.In addition, if our products face any safety or efficacy issues, including drug interaction problems, under the FDC Act, the FDA has broad authority toforce us to take any number of actions, including, but not limited to the following:•Requiring us to conduct post-approval clinical studies to assess known risks or new signals of serious risks, or to evaluate unexpected serious risks;•Mandating changes to a product’s label;•Requiring us to implement a REMS where necessary to assure safe use of the drug; or•Removing an already approved product from the market.Further, our partners, including our licensors, are subject to similar requirements and obligations as well as the attendant risks and uncertainties. If ourpartners, including our licensors, suffer material and adverse effects from such risks and uncertainties, our rights and benefits for our licensed products couldbe negatively impacted, which could have a material and adverse impact on our revenues.Regulators could determine that our clinical trials and/or our manufacturing processes, and/or our storage or those of our third parties, were not properlydesigned or are not properly 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, new formulations or methods of administration for our drug products, seekcommercialization in other jurisdictions, or in support of our current indications. Similarly, our licensors are conducting certain clinical trials to gainapproval in various indications for drug product candidates. The FDA could determine that our clinical trials, or those of our licensors, and/or our or theirmanufacturing processes were not properly designed, did not include enough patients or appropriate administration, were not conducted in accordance withapplicable laws and regulations, or were otherwise not properly managed. In addition, according to cGCP we and/or our licensors are responsible forconducting, recording and reporting the results of clinical trials to ensure that the data and results are credible and accurate and that the trial participants areadequately protected. The FDA may conduct inspections of clinical investigator sites which are involved in clinical development programs for ourproprietary or licensed products to ensure their compliance with cGCP regulations. If the FDA determines that we, our licensors, our respective CROs or ourrespective study sites fail to comply with applicable cGCP regulations, the FDA may deem the clinical data generated in such clinical trials to be unreliableand may disqualify certain data generated from those sites or require us and/or our licensors to perform additional clinical trials. Clinical trials andmanufacturing processes are subject to similar risks and uncertainties outside of the U.S. Any such deficiency in the design, implementation or oversight ofclinical development programs or post-approval clinical studies could cause us to incur significant additional costs, experience delays or prevent us fromcommercializing our approved products in their current indications, or obtaining marketing approval for additional indications or for product candidates,including bremelanotide for the treatment of HSDD in pre-menopausal women or Intrarosa for the treatment of HSDD in post-menopausal women.In addition, the Current Good Tissue Practices rule governs the processing and distribution of cord blood stem cells and cord tissue and covers all stagesof HCT/P processing, from procurement to distribution of final allografts. CBR is registered50Table of Contentswith the FDA as an HCT/P establishment that screens, packages, processes, stores, labels and distributes umbilical cord blood stem cells and cord tissue byvirtue of the services it provides to expectant parents as a private cord blood and cord tissue bank. The FDA periodically inspects such registeredestablishments to determine compliance with HCT/P requirements. Violations of applicable regulations noted by the FDA during facility inspections couldadversely affect the continued operation and marketing of the CBR Services.Further, our third-party contract manufacturing facilities and those of our licensors are subject to cGMP regulations enforced by the FDA and equivalentforeign regulations and regulatory agencies through periodic inspections to confirm such compliance. Contract manufacturers must continually expend time,money and effort in production, record-keeping and quality assurance and control to ensure that these manufacturing facilities meet applicable regulatoryrequirements. Failure to maintain ongoing compliance with cGMP or similar foreign regulations and other applicable manufacturing requirements of variousU.S. or foreign regulatory agencies could result in, among other things, the issuance of warning letters, fines, the withdrawal or recall of our products from themarketplace, failure to approve product candidates for commercialization, total or partial suspension of product production, the loss of inventory, suspensionof the review of our or our licensors’ current or future New Drug Applications or equivalent foreign filings, enforcement actions, injunctions or criminalprosecution and suspension of manufacturing authorizations. For example, in early 2017, one of our manufacturers received a warning letter from the FDA,which it has not yet completely resolved. A government-mandated recall or a voluntary recall could divert managerial and financial resources, could bedifficult and costly to correct, could result in the suspension of sales of our products and could have a severe adverse impact on our profitability and thefuture prospects of our business. If any regulatory agency inspects any of these manufacturing facilities and determines that they are not in compliance withcGMP or similar regulations or our contract manufacturers otherwise determine that they are not in compliance with these regulations, as applicable, suchcontract manufacturers could experience an inability to manufacture sufficient quantities of product to meet demand or incur unanticipated complianceexpenditures.We and our licensors have also established certain testing and release specifications with the FDA. This release testing must be performed in order toallow products to be used for commercial sale. If a product does not meet these release specifications or if the release testing is variable, we may not be able tosupply product to meet our projected demand. We monitor annual batches of our products for ongoing stability after it has been released for commercial sale.If a particular batch of product exhibits variations in its stability or begins to generate test results that demonstrate an adverse trend against our specifications,we may need to conduct an investigation into the test results, quarantine the product to prevent further use, destroy existing inventory no longer acceptablefor commercial sale, or recall the batch or batches. If we or our licensors are unable to develop, validate, transfer or gain regulatory approval for the newrelease test, our ability to supply product will be adversely affected. Such setbacks could have an adverse impact on our revenues, our profitability and thefuture prospects of our business.The FDA has required post-approval studies to verify and describe the clinical benefit of Makena, and the FDA may limit further marketing of the productbased on the results of these post-approval studies, failure to complete these trials in a timely manner or evidence of safety risks or lack of efficacy.Makena was approved by the FDA in February 2011 under Subpart H. As a condition of approval under Subpart H, the FDA required that Makena’ssponsor perform certain adequate and well-controlled post-approval clinical studies to verify and describe the clinical benefits of Makena as well as fulfillcertain other post-approval commitments. Given the patient population (i.e., women pregnant and at an increased high risk for recurrent preterm deliverybased on their pregnancy history) and the informed risk of receiving a placebo instead of the active approved drug, the pool of prospective subjects for suchclinical trials in the U.S. is small, and we have therefore sought enrollment on a global scale. These factors make the enrollment process slow, difficult, time-consuming and costly. If the required post-approval studies fail to verify the clinical benefits of the drug, if a sufficient number of participants cannot beenrolled, or if we fail to perform the required post-approval studies with due diligence, the FDA has the authority to withdraw approval of the drug followinga hearing conducted under the FDA’s regulations, which would have a materially adverse impact on our business. We cannot be certain of the results of theconfirmatory clinical studies or what action the FDA may take if the results of those studies are not as expected based on clinical data that FDA has alreadyreviewed.The regulatory landscape for cord blood and cord tissue banking is complex and evolving, and we could therefore become subject to a more complicatedand rigorous regulatory scheme, which could expose us to more severe FDA enforcement action or other regulatory implications, which could materiallyharm our business.Human tissues intended for transplantation, including cord blood stem cells and cord tissue, are subject to comprehensive regulations that addressactivities associated with HCT/Ps. One set of regulations requires that companies that engage in the recovery, processing, storage, labeling, packaging, ordistribution of any HCT/Ps, or the screening or testing of a cell or tissue51Table of Contentsdonor, register with the FDA. This set of regulations also includes the criteria that must be met in order for the HCT/P to be eligible for distribution solelyunder Section 361 of the Public Health Service Act (the “PHSA”), and the regulations in 21 CFR Part 1271, rather than under the drug or device provisions ofthe FDC Act or the biological product licensing provisions of the PHSA. Another set of regulations provides criteria that must be met for donors to be eligibleto donate HCT/Ps and is referred to as the “Donor Eligibility” rule. A third set of provisions governs the processing and distribution of the tissues and is oftenreferred to as the “Current Good Tissue Practices” rule. The Current Good Tissue Practices rule covers all stages of HCT/P processing, from procurement todistribution of final allografts. Together these regulations are designed to ensure that sound, high quality practices are followed to reduce the risk of tissuecontamination and of communicable disease transmission to recipients.CBR is registered with the FDA as an HCT/P establishment that screens, packages, processes, stores, labels and distributes umbilical cord blood stem celland cord tissue by virtue of the services it provides to expectant parents as a private cord blood and cord tissue bank. The FDA periodically inspects suchregistered establishments to determine compliance with HCT/P requirements. Violations of applicable regulations noted by the FDA during facilityinspections could adversely affect the continued operation and marketing of the CBR Services.In addition, the FDA could conclude that CBR cord blood stem cells and cord tissue do not meet the criteria for distribution solely under Section 361 ofthe PHSA, and therefore, CBR’s banked HCT/Ps would require the submission and approval or clearance of a marketing application in order for us tocontinue to process and distribute any cord blood stem cells or cord tissue. Such an action by the FDA could cause negative publicity, decreased ordiscontinued sales of CBR’s banking services for cord blood stem cells and cord tissue, and significant expense in obtaining required marketing approval orclearance, if we are able to obtain such approval or clearance at all, and in conforming our marketing approach to the FDA’s expectations.Some states impose additional regulation and oversight of cord blood and cord tissue banks and of clinical laboratories operating within their bordersand impose regulatory compliance obligations on out-of-state laboratories providing services to their residents, and many states in which we and our businesspartners operate have licensing requirements that must be complied with.Further, in the future, the FDA or state governments may promulgate new regulatory requirements and standards for HCT/Ps. We may not be able tocomply with any such future regulatory requirements or product standards. If the FDA or any state regulators determine that we have failed to comply withapplicable regulatory requirements or any future regulatory requirements or standards, it can impose or initiate a variety of enforcement actions, includingbut not limited to, public warning or untitled letters, written recall or destruction orders, written cease manufacturing orders, court-ordered seizures,injunctions, consent decrees, civil penalties, or criminal prosecutions. Regulatory or other developments could result in unexpected increases in expenses,which will be difficult to pass on to current CBR customers, some of whom have agreed to a set price for a period of future storage services, and potentialCBR customers who may be unwilling to pay for the CBR Services if prices were to increase significantly. We can make no assurances that our businesspartners, or members of our healthcare provider network, will be able to obtain or maintain any necessary licenses required to conduct our business under thecurrent or future regulatory regime, which could in turn negatively impact our business and ability to comply with regulations. If any of these events were tooccur, our business could be materially and adversely affected.Our failure to comply with data protection laws and regulations could lead to government enforcement actions (which could include civil or criminalpenalties), private litigation, and/or adverse publicity and could negatively affect our operating results and business.We are subject to data protection laws and regulations (i.e., laws and regulations that address privacy and data security). The legislative and regulatorylandscape for data protection continues to evolve, and in recent years there has been an increasing focus on privacy and data security issues. In the U.S.,numerous federal and state laws and regulations, including state data breach notification laws, state health information privacy laws, and federal and stateconsumer protection laws, govern the collection, use, disclosure, and protection of health-related and other personal information. Failure to comply with dataprotection laws and regulations could result in government enforcement actions (which could include civil or criminal penalties), private litigation, and/oradverse publicity and could negatively affect our operating results and business. For example, based on events that occurred prior to our acquisition of CBR,CBR is required to comply with an FTC Order through April 29, 2033. The FTC Order requires CBR, among other things, to implement and maintain acomprehensive information security program and conduct a biennial assessment of its information security program. CBR is also required not to make anymisrepresentations, expressly or by implication, regarding its privacy practices or its information security program. The costs of compliance with, and otherburdens imposed by, these obligations are substantial and may impede our performance and our ability to develop the CBR Services, or lead to significantfines, penalties or liabilities for noncompliance.52Table of ContentsIn addition, in the course of our business, we may obtain health information from third parties (e.g., healthcare providers who prescribe our products) thatare subject to privacy and security requirements under the Health Insurance Portability and Accountability Act of 1996, as amended by the HealthInformation Technology for Economic and Clinical Health Act (“HIPAA”). Although we are not directly subject to HIPAA (other than potentially withrespect to providing certain employee benefits) we could be subject to criminal penalties if we knowingly obtain or disclose individually identifiable healthinformation maintained by a HIPAA-covered entity in a manner that is not authorized or permitted by HIPAA.Significant disruptions of information technology systems or security breaches could adversely affect our business.We are increasingly dependent upon information technology systems, infrastructure, and data to operate our business. In the ordinary course of business,we collect, store, and transmit large amounts of confidential information (including but not limited to intellectual property, proprietary business information,and personal information). It is critical that we do so in a secure manner to maintain the confidentiality and integrity of such confidential information. Wealso have outsourced elements of our operations to third parties, and as a result we manage a number of third-party vendors who may or could have access toour confidential information. The size and complexity of our information technology systems, and those of third-party vendors with whom we contract, andthe large amounts of confidential information stored on those systems, make such systems potentially vulnerable to service interruptions or to securitybreaches from inadvertent or intentional actions by our employees, third-party vendors, and/or business partners, or from cyber-attacks by malicious thirdparties. Cyber-attacks are increasing in their frequency, sophistication, and intensity, and have become increasingly difficult to detect. Cyber-attacks couldinclude the deployment of harmful malware, denial-of-service attacks, social engineering, and other means to affect service reliability and threaten theconfidentiality, integrity, and availability of information. Significant disruptions of our information technology systems or security breaches could adverselyaffect our business operations and/or result in the loss, misappropriation, and/or unauthorized access, use, or disclosure of, or the prevention of access to,confidential information (including but not limited to trade secrets or other intellectual property, proprietary business information, and personal information),and could result in financial, legal, business, and reputational harm to us. For example, any such event that leads to unauthorized access, use, or disclosure ofpersonal information, including personal information regarding our patients or employees, could harm our reputation, require us to comply with federaland/or state breach notification laws and foreign law equivalents, and otherwise subject us to liability under laws and regulations that protect the privacy andsecurity of personal information. Security breaches and other inappropriate access can be difficult to detect, and any delay in identifying them may lead toincreased harm of the type described above. While we have implemented security measures to protect our information technology systems and infrastructure,there can be no assurance that such measures will prevent service interruptions or security breaches that could adversely affect our business.Risks Related to our Financial Condition and ResultsOur level of indebtedness and the terms of our outstanding debt could adversely affect our operations and limit our ability to plan for or respond tochanges in our business or acquire additional products for our portfolio.As of December 31, 2017, we had approximately $816.0 million of total debt outstanding, including $475.0 million aggregate principal amount of oursenior notes due September 1, 2023 bearing interest at 7.875% annually (the “2023 Senior Notes”), issued in August 2015, $21.4 million aggregate principalamount of our convertible notes due February 15, 2019 bearing interest at 2.5% annually (the “2019 Convertible Notes”), issued in February 2014, and$320.0 million aggregate principal amount of our convertible notes due June 1, 2022 bearing interest at 3.25% annually (the “2022 Convertible Notes” and,together with the 2019 Convertible Notes, the “Convertible Notes”), issued in May 2017. Our high level of indebtedness, or restrictions in an indenturegoverning such indebtedness, could adversely affect our business in the following ways, among other things:•Make it more difficult for us to satisfy our financial obligations under the terms of such indebtedness, as well as our contractual and commercialcommitments, and could increase the risk that we may default on our debt obligations;•Prevent us from raising the funds necessary to repurchase the remaining 2023 Senior Notes or Convertible Notes tendered to us if there is a change ofcontrol, which would constitute a default under the indenture governing the 2023 Senior Notes;•Require us to use a substantial portion of our cash flow from operations to pay interest and principal, which would reduce the funds available forworking capital, capital expenditures and other general corporate purposes;•Limit our ability to obtain additional financing for working capital, capital expenditures, acquisitions and other investments or general corporatepurposes, which may limit the ability to execute our business strategy;53Table of Contents•Heighten our vulnerability to downturns in our business, our industry or in the general economy, and restrict us from exploiting businessopportunities or making acquisitions;•Place us at a competitive disadvantage compared to those of our competitors that may have proportionately less debt;•Limit management’s discretion in operating our business or pursuing additional portfolio expansion opportunities; and•Limit our flexibility in planning for, or reacting to, changes in our business, the industry in which we operate or the general economy.Our ability to make scheduled payments of the principal of, or to pay interest on our indebtedness, including the 2023 Senior Notes, the 2022Convertible Notes and the 2019 Convertible Notes (“our current Note obligations”), depends on our future performance, which is subject to economic,financial, competitive and other factors that may be beyond our control. Our business may not generate cash flow from operations in the future sufficient toservice our debt and support our growth strategies. If we are unable to generate such cash flow, we may be required to adopt one or more alternatives, such asselling assets, restructuring debt or obtaining additional equity capital on terms that may be onerous or highly dilutive. Our ability to repay our indebtednesswill depend on the capital markets and our financial condition at such time. We may not be able to engage in any of these activities or engage in theseactivities on desirable terms, which could result in a default on our debt obligations, including under our current Note obligations. In addition, if for anyreason we are unable to meet our debt service and repayment obligations, we could be in default under the terms of the agreements governing ourindebtedness, which could allow our creditors at that time to declare all outstanding indebtedness to be due and payable, and could further trigger cross-acceleration or cross-default rights between our applicable debt agreements. Under these circumstances, we may not have sufficient funds to satisfy our debtobligations.Also, upon the occurrence of specific types of change of control events, we will be required to offer to repurchase all of the outstanding 2023 SeniorNotes at a price equal to 101% of the aggregate principal amount of the 2023 Senior Notes repurchased, plus accrued and unpaid interest up to, but notincluding, the date of repurchase. In addition, in connection with certain asset sales, we may be required to offer to repurchase a portion of the 2023 SeniorNotes at a price equal to 100% of the principal amount, plus accrued and unpaid interest and additional interest up to, but not including, the date ofrepurchase. We may not have sufficient funds available to repurchase all of the 2023 Senior Notes tendered pursuant to any such offer and any other debt thatwould become payable upon a change of control or in connection with such an asset sale offer. Our failure to repurchase the 2023 Senior Notes upon theoccurrence of specific types of change of control events would be a default under the indenture governing the 2023 Senior Notes, which would in turn triggera default under the indenture governing the applicable Convertible Notes and may trigger a default under any future credit facility and the terms of our otherindebtedness outstanding at such time.Further, holders of the Convertible Notes have the right to require us to repurchase their notes upon the occurrence of a fundamental change (whichincludes certain change of control transactions, stockholder-approved liquidations and dissolutions and certain stock exchange delisting events) 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, unless we elect to deliver solely shares of our common stock to settle such conversion (other than paying cash in lieu of delivering any fractionalshare), we will be required to make cash payments in respect of the notes being converted. We may not have enough available cash or be able to obtainfinancing at the time we are required to make repurchases of the Convertible Notes surrendered therefore or at the time Convertible Notes are beingconverted. Our failure to repurchase Convertible Notes at a time when the repurchase is required by the indenture or to pay any cash payable on futureconversions of the Convertible Notes would constitute an event of default.We may need additional capital to achieve our business objectives and to service our debt obligations, including our 2023 Senior Notes, the ConvertibleNotes and contingent payments that may become due under our strategic transaction arrangements, which could cause significant dilution to ourstockholders.We may require additional funds or need to establish additional alternative strategic arrangements to execute a business development transaction. Wemay at any time seek funding through additional arrangements with collaborators through public or private equity or debt financings, subject to anyrestrictive covenants in the documents governing our current or future debt obligations. We may not be able to obtain financing or to secure alternativestrategic arrangements on acceptable terms or within an acceptable timeframe, if at all, which would limit our ability to execute on our strategic plan.Moreover, the condition of the credit markets can be unpredictable and we may experience a reduction in value or loss of liquidity with respect to ourinvestments, which would put further strain on our cash resources.54Table of ContentsOur current level of cash on hand may limit our ability to take advantage of attractive business development opportunities and execute on our strategicplan. In addition, our cash on hand may not be sufficient to service the principal and interest payments under our current Note obligations or any cashmilestone payments to our partners upon the achievement of sales or regulatory 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. We may also sufferreputational harm and be viewed as an undesirable acquiror or business development partner if we are unable to make the required payments under ourstrategic transaction arrangements. In addition, if equity or debt investors perceive that our debt levels are too high relative to our profit, our stock pricecould be negatively affected and/or our ability to raise new equity or debt capital could be limited.We have in the past, and may in the future, enter into term loans and credit facilities with various banking institutions. Our ability and the terms onwhich we can borrow will be subject to the state of our operations and the debt market, which is unpredictable and beyond the scope of our control. We maynot be able to borrow required amounts on favorable terms, including favorable interest rates, or at all. Further, borrowings under such facilities may bearinterest at variable rates exposing us to interest rate risk.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.Our 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 (the “Code”), a corporation that undergoes an “ownership change” issubject to limitations on its ability to utilize its pre-change net operating losses and certain other tax assets to offset future taxable income. In general, anownership change occurs if the aggregate stock ownership of certain stockholders increases by more than 50 percentage points over such stockholders’lowest percentage ownership during the testing period, which is generally three years. An ownership change could limit our ability to utilize our netoperating loss and tax credit carryforwards for taxable years including or following such “ownership change” by allowing us to utilize only a portion of thenet operating losses and tax credits that would otherwise be available but for such ownership change. Limitations imposed on the ability to use net operatinglosses and tax credits to offset future taxable income or the failure to generate sufficient taxable income could require us to pay more U.S. federal incometaxes than we have estimated and could cause such net operating losses and tax credits to expire unused, in each case reducing or eliminating the benefit ofsuch net operating losses and tax credits and potentially adversely affecting our financial position, including our after-tax net income. Similar rules andlimitations may apply for state income tax purposes.In April 2017, we entered into a shareholder rights plan, which expires on April 6, 2018, to help preserve our tax assets by deterring certain stockholdersfrom increasing their percentage ownership in our stock; however, such a plan 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 shareholder rights plan, see the discussion in Note N, “Stockholders’ Equity,” to our consolidated financial statements included in this AnnualReport 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.55Table of ContentsIn December 2017, comprehensive federal tax reform was enacted that significantly changes the taxation of business entities. The changes include, butare not limited to, a permanent reduction to the federal corporate income tax rate, limitations on the deductibility of business interest expense, acceleratedexpensing of capital expenditures, and disallowance of certain deductions that had been previously allowed. The legislation is highly complex and unclearin certain respects and will require interpretations and regulations by the Internal Revenue Service and state tax authorities. Additionally, the legislationcould be subject to potential amendments and technical corrections, any of which could lessen or increase certain adverse impacts of the legislation. Thus,the impact of certain aspects of the legislation is currently unclear and could have an adverse impact on our financial condition, results of operations or cashflows. 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. Failure to comply with reporting requirements could subject us tosanctions and/or investigations by the U.S. Securities and Exchange Commission, NASDAQ or other regulatory authorities.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 management to make certain estimates and assumptions that affect the reported amounts of our assets, liabilities,revenues and expenses, and the related disclosure of contingent assets and liabilities. On an ongoing basis, our management evaluates our critical and othersignificant estimates and assumptions, including among others those associated with revenue recognition related to product sales and services revenue;product sales allowances and accruals; allowance for doubtful accounts, marketable securities; inventory; acquisition date fair value and subsequent fairvalue estimates used to assess impairment of long-lived assets, including goodwill, in-process research and development and other intangible assets;contingent consideration; debt obligations; certain accrued liabilities, including clinical trial accruals; income taxes, including valuation allowances, andequity-based compensation expense. We base our estimates on market data, our observance of trends in our industry, and various other assumptions that webelieve to be reasonable under the circumstances. If actual results differ from these estimates, there could be a material adverse effect on our financial resultsand the performance of our stock.Further, in January 2018, we issued financial guidance, including expected 2018 total revenue and profitability metrics, which is likewise based onestimates and the judgment of management. If, for any reason, we are unable to realize our projected 2018 revenue or profitability, we may not realize ourpublicly announced financial guidance. If we fail to realize, or if we change or update any element of, our publicly disclosed financial guidance or otherexpectations about our business, our stock price could decline in value.As part of our revenue recognition policy, our estimates of product returns, rebates and chargebacks, accounts receivable, fees and other discounts requiresubjective and complex judgments due to the need to make estimates about matters that are inherently uncertain. Any significant differences between ouractual results and our estimates could materially adversely affect our financial position and results of operations.56Table of ContentsIn addition, to determine the required quantities of our products and the materials that support the CBR Services and their related manufacturingschedules, we also need to make significant judgments and estimates based on inventory levels, current market trends, anticipated sales, forecasts and otherfactors. Because of the inherent nature of estimates, there could be significant differences between our estimates and the actual amount of product need. Forexample, the level of our access to wholesaler and distributor inventory levels and sales data, which varies based on the wholesaler, distributor, clinic orhospital, affects our ability to accurately estimate certain reserves included in our financial statements. Any difference between our estimates and the actualamount of product or services demand could result in unmet demand or excess inventory, each of which would adversely impact our financial results andresults of operations.We have significant goodwill and other intangible assets. Consequently, potential impairment of goodwill and other intangibles may significantly impactour profitability.Goodwill and other intangibles represent a significant portion of our assets. As of December 31, 2017 and 2016, goodwill and other net intangiblescomprised approximately 73% and 70%, respectively, of our total assets. Goodwill and other intangible assets are subject to an impairment analysis, whichinvolves judgment and assumptions, whenever events or changes in circumstances indicate the carrying amount of the asset may not be recoverable.Additionally, goodwill and indefinite-lived assets are subject to an impairment test at least annually. For the years ended December 31, 2017 and 2016, werecorded intangible asset impairment charges of $319.2 million and $16.0 million, respectively. The procedures, judgments and assumptions used in ourgoodwill and intangible assets impairment testing, and the results of our testing, are discussed in Item 7 of this report “Management’s Discussion andAnalysis of Financial Condition and Results of Operations” under the captions “Critical Accounting Policies” and “Results of Operations”. Events givingrise to impairment of goodwill or intangible assets are an inherent risk in the pharmaceutical industry and often cannot be predicted. As a result of thesignificance of goodwill and other intangible assets, our results of operations and financial position in a future period could be negatively impacted shouldadditional impairments of our goodwill or other intangible assets occur.Risks Related to Our Common StockOur 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 $11.93 and $25.20 in the fifty-two week period through February 23, 2018. 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, sales of large blocks of our commonstock, the impact of our stock repurchase program or the dilutive effect of our Convertible Notes, other equity or equity-linked financings, or alternativestrategic 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. We do not control these or any other analysts. Furthermore, there are many large, well-established, publicly traded companies active in our industryand market, which may mean that it is less likely that we will receive widespread analyst coverage. In addition, our future operating results are subject tosubstantial uncertainty, and our stock price could decline significantly if we fail to meet or exceed analysts’ forecasts and expectations. If any of the analystswho cover us downgrade our stock, lower their price target or issue commentary or observations about us or our stock that are perceived by the market asnegative, our stock price would likely decline rapidly. In addition, if these analysts cease coverage of our company, we could lose visibility in the market,which in turn could also cause our stock price to decline.Our operating results will likely fluctuate, including as a result of wholesaler, distributor and customer buying patterns, as such 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:•Product revenues, including the decline in Makena sales and the extent to which sales of the Makena auto-injector and the Makena authorizedgeneric are able to offset the expected decrease in sales of Makena;•If we have overestimated the size of the market and market potential for any of our products or services;57Table of Contents•The loss of a key customer or group purchasing organizations (“GPOs”);•Costs and liabilities incurred in connection with business development activities or business development transactions into which we may enter;•Costs associated with the commercialization of our products and services;•Milestone payments we may be required to pay pursuant to contractual obligations, including the Lumara Health Agreement, the Palatin LicenseAgreement and the Endoceutics License Agreement;•Costs associated with the manufacture of our products and collection, processing and storage services, including costs of raw and other materials andcosts associated with maintaining commercial inventory and qualifying additional manufacturing capacities and alternative suppliers;•Costs associated with our obligations under the Palatin License Agreement and Endoceutics License Agreement;•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 stability testing thatresults in a batch no longer meeting specifications;•Changes in accounting estimates related to reserves on revenue, returns, contingent consideration, impairment of long-lived or intangible assets orgoodwill 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•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, particularly in light of the recent tax reform.Our results of operations, including, in particular, product revenues, 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 revenues 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 similar benefits. In addition, these contracts are oftencancellable at any time by our customers, often without notice, and are non-exclusive agreements within the Feraheme or Makena markets. While thesecontracts are intended to support the use of our products, our competitors could offer better pricing, incentives, higher rebates or exclusive relationships.Our contracting strategy can also have an impact on the timing of certain purchases causing product revenues to vary from quarter to quarter. Forexample, in advance of an anticipated or rumored price increase, including following the publication of our quarterly ASP, which affects the rate at whichFeraheme is reimbursed, or a reduction in expected rebates or discounts for one of our products, customers may order our products in larger than normalquantities, which could cause sales to be lower in subsequent quarters than they would have been otherwise. Further, any changes in purchasing patterns orinventory levels, changes to our contracting strategy, increases in product returns, delays in purchasing products or delays in payment for products by one ofour distributors or GPOs could also 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.58Table of ContentsOur 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. Although the planwas put in place to protect these assets, its provisions could function to deter a hostile takeover by making any proposed hostile acquisition of us moreexpensive and less desirable to a potential acquirer by enabling our stockholders (other than the potential hostile acquiror) to purchase significant amountsof additional shares of our common stock at dilutive prices. The rights issued pursuant to our shareholder rights plan become exercisable generally upon theearlier of 10 days after a person or group acquires 4.99% or more of our outstanding common stock or 10 business days after the announcement by a person orgroup of an intention to acquire 4.99% of our outstanding common stock via tender offer or similar transaction. The shareholder rights plan could delay ordiscourage transactions involving an actual or potential change in control of us or our management, including transactions in which stockholders mightotherwise receive a premium for their shares over then-current prices.In addition, certain provisions in our certificate of incorporation and our by-laws may discourage, delay or prevent a change of control or takeoverattempt of our company by a third-party as well as substantially impede the ability of our stockholders to benefit from a change of control or effect 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 annual meetingof 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, which could have the effect of preventing a change of control, whether or not it is desired by, or beneficial to, our stockholders, ormay result in the acquisition of us being on terms less favorable to our stockholders than it would otherwise be.ITEM 1B. UNRESOLVED STAFF COMMENTS:None.59Table of ContentsITEM 2. PROPERTIES:We own an 80,000 square foot facility located at 6550 S Bay Colony Drive #160, Tucson, Arizona, which stores all of our customers’ cord blood andcord tissue samples.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 for use as our principal executive offices. Beginning in September 2013, the initial term of the lease is five years and twomonths with one five-year extension term at our option. During 2015, we entered into several amendments to the original lease to add additional space and toextend the term of the original lease to June 2021. In addition to base rent, we are also required to pay a proportionate share of the Landlord’s operating costs.We lease certain real property located at 611 Gateway Boulevard, South San Francisco, California. The lease expires in July 2022.See Note O, “Commitments and Contingencies,” to our consolidated financial statements included in this Annual Report on Form 10‑K for additionalinformation.ITEM 3. LEGAL PROCEEDINGSWe 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 certain matters, theliability is not probable or the amount cannot be reasonably estimated and, therefore, accruals have not been made. In addition, in accordance with therelevant 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. See Note O, “Commitments andContingencies,” to our consolidated financial statements included in this Annual Report on Form 10-K for a description of our legal proceedings.ITEM 4. MINE SAFETY DISCLOSURESNot Applicable.60Table of ContentsPART II ITEM 5.MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITYSECURITIES:Market InformationOur common stock trades on the NASDAQ Global Select Market (“NASDAQ”) under the trading symbol “AMAG.” On February 23, 2018, the closingprice of our common stock, as reported on the NASDAQ, was $19.65 per share. The following table sets forth, for the periods indicated, the high and low saleprices per share for our common stock as reported on the NASDAQ. High LowYear Ended December 31, 2017 First quarter$36.60 $19.95Second quarter$24.85 $16.00Third quarter$20.85 $16.05Fourth quarter$19.50 $11.93Year Ended December 31, 2016 First quarter$29.65 $20.22Second quarter$28.98 $17.92Third quarter$29.59 $22.01Fourth quarter$36.83 $22.81StockholdersOn February 23, 2018, we had approximately 90 stockholders of record of our common stock, and we believe that the number of beneficial holders of ourcommon stock was approximately 8,900 based on responses from brokers to a search conducted by Broadridge Financial Solutions, Inc. on our behalf.DividendsWe have never declared or paid a cash dividend on our common stock. We currently anticipate that we will retain all of our earnings for use in thedevelopment of our business and do not anticipate paying any cash dividends in the foreseeable future.Repurchases of Equity SecuritiesThe following table provides certain information with respect to our purchases of shares of our stock during the three months ended December 31, 2017.Period Total Numberof SharesPurchased (1) Average PricePaid Per Share Total Number of Shares Purchased as Part ofPublicly AnnouncedPlans or Programs (2) Maximum Number of Shares (or approximatedollar value) That May Yet BePurchased Under thePlans or Programs (2)October 1, 2017 through October 31, 2017 1,633 $15.80 — 2,547,771November 1, 2017 through November 30, 2017 2,953 12.98 1,025,153 1,821,469December 1, 2017 through December 31, 2017 3,090 14.01 341,113 1,547,656Total 7,676 $13.99 1,366,266 ________________________(1) Represents the surrender of 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 repurchased 1.4 million shares of our common stock during the fourth quarter of 2017. We have repurchased and retired $39.5 millioncumulatively of our common stock under our share repurchase program to date. These shares61Table of Contentswere purchased pursuant to a repurchase program authorized by our board of directors that was announced in January 2016 to repurchase up to $60.0million of our common stock, of which $20.5 million remains outstanding as of December 31, 2017. The repurchase program does not have anexpiration date and may be suspended for periods or discontinued at any time.Securities Authorized for Issuance Under Equity Compensation PlansSee 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, 2017.Five‑Year Comparative Stock PerformanceThe 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 Select Market Index and the NASDAQ Biotechnology Index over the past five years. The comparisons assume $100 wasinvested on December 31, 2012 in our common stock, the NASDAQ Global Select Market Index and the NASDAQ Biotechnology Index, and assumesreinvestment of dividends, if any. 12/31/2012 12/31/2013 12/31/2014 12/31/2015 12/31/2016 12/31/2017AMAG Pharmaceuticals, Inc.100.00 165.06 289.73 205.23 236.57 90.07NASDAQ Global Select Market Index100.00 141.84 162.90 175.05 189.46 245.70NASDAQ Biotechnology Index100.00 174.05 230.33 244.29 194.95 228.29The stock price performance shown in this performance graph is not necessarily indicative of future price performance. Information used in the graph wasobtained from Research Data Group, Inc., a source we believe is reliable.62Table of ContentsThe material in this section captioned Five-Year Comparative Stock Performance is being furnished and shall not be deemed “filed” with the SEC forpurposes 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.63Table of ContentsITEM 6. SELECTED FINANCIAL DATA:The following table sets forth selected financial data as of and for the years ended December 31, 2017, 2016, 2015, 2014 and 2013. 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. Years Ended December 31, 2017 2016 2015 (1) 2014 (2) 2013 (in thousands, except per share data)Statements of Operations Data Revenues: Product sales, net$495,645 $432,170 $341,816 $109,998 $71,692Service revenues, net114,177 99,604 24,132 — —License fee, collaboration and other revenues (3)124 317 52,328 14,386 9,164Total revenues609,946 532,091 418,276 124,384 80,856Costs and expenses: Cost of product sales (excluding impairment) (4)161,349 96,314 78,509 20,306 11,960Cost of services21,817 20,575 9,992 — —Research and development expenses75,017 66,084 42,878 24,160 20,564Acquired in-process research and development (5)65,845 — — — —Selling, general and administrative expenses (6)259,933 249,870 160,309 72,254 59,167Impairment of intangible assets (7)319,246 19,663 — — —Acquisition-related costs— — 11,232 9,478 782Restructuring expenses— 715 4,136 2,023 —Total costs and expenses903,207 453,221 307,056 128,221 92,473Operating (loss) income(293,261) 78,870 111,220 (3,837) (11,617)Other income (expense): Interest expense(68,382) (73,153) (53,251) (14,697) —Loss on debt extinguishment (8)(10,926) — (10,449) — —Interest and dividend income2,810 3,149 1,512 975 1,051Other income (expense) (8)(335) 189 (9,188) 217 964Total other (expense) income(76,833) (69,815) (71,376) (13,505) 2,015(Loss) income before income taxes(370,094) 9,055 39,844 (17,342) (9,602)Income tax (benefit) expense (9)(170,866) 11,538 7,065 (153,159) —Net (loss) income$(199,228) $(2,483) $32,779 $135,817 $(9,602)Net (loss) income per share: Basic$(5.71) $(0.07) $1.04 $6.06 $(0.44)Diluted$(5.71) $(0.07) $0.93 $5.45 $(0.44)Weighted average shares outstanding used to compute net (loss)income per share: Basic34,907 34,346 31,471 22,416 21,703Diluted34,907 34,346 35,308 25,225 21,70364Table of Contents As of December 31, 2017 2016 2015 2014 2013Balance Sheet Data Cash, cash equivalents and investments$328,707 $579,086 $466,331 $144,186 $213,789Working capital (current assets less current liabilities)$204,150 $405,681 $360,753 $107,548 $211,284Total assets$1,853,236 $2,478,426 $2,476,210 $1,388,933 $265,459Long-term liabilities$785,274 $1,231,160 $1,298,025 $762,492 $59,930Stockholders’ equity$790,244 $934,389 $932,264 $459,953 $172,408________________________(1) Includes the results of operations of CBR during the post-acquisition period from August 17, 2015 through December 31, 2015.(2) Includes the results of operations of Lumara Health during the post-acquisition period from November 12, 2014 through December 31, 2014.(3) In 2015, we recognized $44.4 million in revenues associated with the amortization of the remaining deferred revenue balance as a result of thetermination of a license, development and commercialization agreement (the “Takeda Termination Agreement”) with Takeda Pharmaceutical CompanyLimited (“Takeda”) and $6.7 million of additional revenues related to payments made by Takeda upon the final termination date under the terms of theTakeda Termination Agreement.(4) Cost of product sales in 2017, 2016, 2015, and 2014 included approximately $130.4 million, $77.8 million, $63.3 million, and $6.1 million of non-cashexpense related to the amortization of intangible assets and the step-up of Lumara Health’s inventories at the acquisition date, respectively.(5) Reflects $65.8 million related primarily to a $60.0 million one-time upfront payment under the terms of the Palatin License Agreement, and $5.8 million,which represented a portion of the consideration recorded in 2017 under the terms of the Endoceutics License Agreement.(6) 2016 reflects a full year recognition of CBR Services selling, general and administrative expenses compared to a partial period in 2015 following ourAugust 2015 acquisition of CBR as well as an increase in the Makena-related contingent consideration based on the expected timing of milestonepayments. In addition, 2015 reflects a full year recognition of Makena-related selling, general and administrative expenses compared to a partial periodin 2014 following our November 2014 acquisition of Lumara Health.(7) In 2017, we recognized a $319.2 million impairment charge related to the Makena base technology intangible asset. In 2016, we recognized $19.7million of charges related to the impairment of the remaining net intangible asset for the MuGard Rights, the remaining CBR-favorable lease intangibleasset and the CBR trade names and trademarks intangible asset.(8) Reflects $10.9 million and $10.4 million loss on debt extinguishment in 2017 and 2015, respectively, due to the early repayment of the 2015 Term LoanFacility and 2014 Term Loan Facility, respectively. In addition, 2015 includes $9.2 million of other expense associated with the financing of the CBRacquisition.(9) The $170.9 million income tax benefit in 2017 was primarily driven by the deferred tax benefit related to the Makena base technology intangible assetimpairment and amortization. The $153.2 million income tax benefit in 2014 reflects a $132.9 million decrease in our valuation allowance due totaxable temporary differences available as a source of income to realize the benefit of certain of our pre-existing deferred tax assets as a result of theacquisition of Lumara Health.65Table of ContentsITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS:OverviewAMAG Pharmaceuticals, Inc., a Delaware corporation, was founded in 1981. We are a biopharmaceutical company focused on developing and deliveringimportant therapeutics, conducting clinical research in areas of unmet need and creating education and support programs for the patients and families weserve. Our currently marketed products support the health of patients in the areas of maternal and women’s health, anemia management and cancer supportivecare, including Makena® (hydroxyprogesterone caproate injection), Intrarosa® (prasterone) vaginal inserts, Feraheme® (ferumoxytol injection) forintravenous (“IV”) use, and MuGard® Mucoadhesive Oral Wound Rinse. In addition, in February 2017, we acquired the rights to research, develop andcommercialize bremelanotide in North America. Through services related to the preservation of umbilical cord blood stem cell and cord tissue units operatedthrough Cord Blood Registry® (“CBR”), we also help families to preserve newborn stem cells, which are used today in transplant medicine for certain cancersand blood, immune and metabolic disorders, and which we believe have the potential to play a valuable role in the ongoing development of regenerativemedicine.We intend to expand the impact of these and future products and services for patients by delivering on our growth strategy, which includes organicgrowth, as well as the pursuit of additional products and companies that align with our existing therapeutic areas or that could benefit from our proven corecompetencies. Currently, our primary sources of revenue are from product sales of Makena and Feraheme and service revenue from the CBR Services.AMAG’s Portfolio of Products, Product Candidates and Services MakenaMakena is currently the only FDA-approved drug indicated to reduce the risk of preterm birth in women pregnant with a single baby who have a historyof singleton spontaneous preterm birth. We acquired the rights to Makena in connection with our acquisition of Lumara Health Inc. (“Lumara Health”) inNovember 2014.Makena was approved by the U.S. Food and Drug Administration (the “FDA”) in February 2011 as an intramuscular (“IM”) injection (the “Makena IMproduct”) packaged in a multi-dose vial and as of February 2016 was also available in a single-dose preservative-free vial. In February 2018, Makena wasalso approved by the FDA for administration via a pre-filled subcutaneous auto-injector (the “Makena auto-injector”), a drug-device combination product.Makena is administered weekly by a healthcare professional with treatment beginning between 16 weeks and 20 weeks and six days of gestation andcontinuing until 36 weeks and six days of gestation or delivery, whichever happens first. In 2017, sales of Makena accounted for approximately 63% of ourtotal net revenues.The Makena auto-injector was designed with features, such as a shorter, thinner, non-visible needle compared to the Makena IM product, to help addresssome of the known barriers to treatment of recurrent preterm birth, including the lack of patient acceptance and adherence. As such, based on market researchwe conducted, we believe that many healthcare professionals and patients will prefer the auto-injector over the IM administration. However, some healthcareprofessionals and/or patients may continue to employ the IM method of administration. The orphan drug exclusivity period that was granted to the Makenaproduct in 2011, expired on February 3, 2018 and accordingly, we expect to face generic competition to the Makena IM product in mid-2018, howevergenerics could enter the market at any time. In anticipation of generic competition, we have entered into an agreement with a generic partner and are preparedto launch our own authorized generic upon the first entry of a generic Makena injection in order to participate in the expected generic market for Makena.CBR ServicesCBR is the largest private newborn stem cell bank in the world and offers pregnant women and their families the ability to preserve their newborns’umbilical cord blood and cord tissue for potential future use (the “CBR Services”). We acquired CBR in August 2015. Additional details regarding ouracquisition of CBR can be found in Note C, “Business Combinations,” to our consolidated financial statements included in this Annual Report on Form 10-K.We market and sell the CBR Services directly to consumers, who pay for the services directly, as third-party insurance and reimbursement are notavailable. Even though our business is limited to the sale of services required to collect, process, and store umbilical cord blood stem cells and cord tissue,the FDA regulates such services as products.66Table of ContentsThe CBR Services include the collection, processing and storage of both umbilical cord blood and cord tissue. As of December 31, 2017, CBR storedapproximately 700,000 umbilical cord blood and cord tissue units, which we estimate to represent nearly 40% of all privately stored cord blood and cordtissue units in the U.S. In 2017, revenue from the CBR Services accounted for approximately 19% of our total net revenues.FerahemeFeraheme was approved for marketing by the FDA in June 2009 for the treatment of IDA in adult patients with chronic kidney disease (“CKD”) only andwas commercially launched shortly thereafter. In February 2018, we received FDA approval to expand the Feraheme label to treat all eligible adult IDApatients who have intolerance to oral iron or have had unsatisfactory response to oral iron in addition to patients who have CKD. In 2017, sales of Ferahemefor the treatment of CKD accounted for approximately 17% of our total net revenues.IntrarosaIn February 2017, we entered into a license agreement (the “Endoceutics License Agreement”) with Endoceutics, Inc. (“Endoceutics”) pursuant to whichEndoceutics granted us rights to Intrarosa, an FDA-approved product for the treatment of moderate to severe dyspareunia (pain during sexual intercourse), asymptom of vulvar and vaginal atrophy, due to menopause.To support the July 2017 launch of Intrarosa, we hired a new 170 person commercial team, including a sales force of nearly 140 sales representativesdedicated to Intrarosa. This newly established sales force provides additional flexibility as our portfolio evolves, including for the potential expansion of theIntrarosa label, the potential launch of bremelanotide and for future products we may acquire or develop in the women’s health space.In addition, Endoceutics initiated a clinical study in the third quarter of 2017 to support an application for U.S. regulatory approval of Intrarosa for thetreatment of hypoactive sexual desire disorder (“HSDD”) in post-menopausal women. We and Endoceutics have agreed to share the direct costs related to twoclinical studies based upon a negotiated allocation with us funding up to $20.0 million, including the HSDD trial. If the studies are successful, we will file asupplemental New Drug Application (“sNDA”) with the FDA for the treatment of HSDD in post-menopausal women. Furthermore, each party'scommercialization activities and budget are described in a commercialization plan, which is updated annually. Additional details regarding the EndoceuticsLicense Agreement can be found in Note P, “Collaboration, License and Other Strategic Agreements,” to our consolidated financial statements included inthis Annual Report on Form 10-K.MuGardMuGard is indicated for the management of oral mucositis/stomatitis (that may be caused by radiotherapy and/or chemotherapy) and all types of oralwounds (mouth sores and injuries), including certain ulcers/canker sores and traumatic ulcers, such as those caused by oral surgery or ill-fitting dentures orbraces. We acquired the U.S. commercial rights to MuGard under a June 2013 license agreement with Abeona Therapeutics, Inc. (“Abeona”) (the “MuGardRights”). MuGard was launched in the U.S. by Abeona in 2010 after receiving 510(k) clearance from the FDA.BremelanotideIn January 2017, we entered into a license agreement with Palatin Technologies, Inc. (“Palatin”) pursuant to which Palatin granted us the North Americanrights to research, develop and commercialize bremelanotide, which is being developed for the treatment of HSDD, the most common type of female sexualdysfunction, in pre-menopausal women. We currently expect to submit an NDA in the first quarter of 2018 for the treatment of HSDD in pre-menopausalwomen. Additional details regarding the license with Palatin (the “Palatin License Agreement”) can be found in Note P, “Collaboration, License and OtherStrategic Agreements,” to our consolidated financial statements included in this Annual Report on Form 10-K.VeloIn July 2015, we entered into an option agreement with Velo Bio, LLC (“Velo”), a privately held life-sciences company that granted us an option toacquire the rights (the “DIF Rights”) to an orphan drug candidate, digoxin immune fab (“DIF”), a polyclonal antibody in clinical development for thetreatment of severe preeclampsia in pregnant women. Under the option agreement, Velo will complete a Phase 2b/3a clinical study, which began in thesecond quarter of 2017. Following the conclusion of the DIF Phase 2b/3a study, we may terminate, or, for additional consideration, exercise or extend, ouroption to acquire the DIF Rights. Additional details regarding the Velo agreement can be found in Note P, “Collaboration, License and Other StrategicAgreements,” to our consolidated financial statements included in this Annual Report on Form 10-K.67Table of ContentsCritical Accounting PoliciesOur management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, whichhave been prepared in accordance with accounting principles generally accepted in the U.S (“GAAP”). The preparation of these financial statements requiresmanagement to make certain estimates and assumptions that affect the reported amount of assets, liabilities, revenues and expenses, and the related disclosureof contingent assets and liabilities. Actual results could differ materially from those estimates. Management employs the following critical accountingpolicies affecting our most significant estimates and assumptions: revenue recognition and related sales allowances and accruals; valuation of marketablesecurities; business combinations and asset acquisitions, including acquisition-related contingent consideration; goodwill; intangible assets; equity-basedcompensation; and income taxes.Revenue Recognition and Related Sales Allowances and AccrualsOur primary sources of revenue during the reporting periods were: (a) product revenues from Makena and Feraheme; (b) service revenues associated withthe CBR Services; and (c) license fees, collaboration and other revenues, which primarily included 2015 revenue recognized under our collaborationagreements, royalties received from our license agreements, and international product revenues of Feraheme derived from our collaboration agreement withTakeda Pharmaceutical Company Limited (“Takeda”), which was terminated in 2015. Revenue is recognized when the following criteria are met:•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.Product RevenueWe recognize product revenues net of certain allowances and accruals in our consolidated statements of operations at the time of sale. Our contractualadjustments include provisions for returns, pricing and prompt payment discounts, as well as wholesaler distribution fees, rebates to hospitals that qualify for340B pricing and volume-based and other commercial rebates. Governmental rebates relate to our reimbursement arrangements with state Medicaidprograms. In addition, we also monitor our distribution channel to determine whether additional allowances or accruals are required based on inventory inour sales channel. Calculating these gross to net sales adjustments involves estimates and judgments based primarily on actual product sales data, forecastedcustomer buying patterns, and market research data related to utilization rates by various end-users. If we determine in future periods that our actualexperience is not indicative of our expectations, if our actual experience changes, or if other factors affect our estimates, we may be required to adjust ourallowances and accruals estimates, which would affect our net product sales in the period of the adjustment and could be significant.Product Sales Allowances and AccrualsProduct 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, group purchasing organizations (“GPOs”), and dialysis organizations that typically do not purchase productsdirectly from us but rather from wholesalers and specialty distributors. In accordance with guidance related to accounting for fees and consideration given bya vendor to a customer, including a reseller of a vendor’s products, these fees, discounts and rebates are presumed to be a reduction of the selling price.Product sales allowances and accruals are based on definitive contractual agreements or legal requirements (such as Medicaid laws and regulations) related tothe purchase and/or utilization of the product by these entities and are recorded in the same period that the related revenue is recognized. We estimateproduct sales allowances and accruals using either historical, actual and/or other data, including estimated patient usage, applicable contractual rebate rates,contract performance by the benefit providers, other current contractual and statutory requirements, historical market data based upon experience of ourproducts and other products similar to them, specific known market events and trends such as competitive pricing and new product introductions, current andforecasted customer buying patterns and inventory levels, and the shelf life of our products. As part of this evaluation, we also review changes to federal andother legislation, changes to rebate contracts, changes in the level of discounts, and changes in product sales trends. Although68Table of Contentsallowances and accruals are recorded at 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 and the recording of an increase in accrued expenses.DiscountsWe 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.ChargebacksChargeback 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.Distributor/Wholesaler and Group Purchasing Organization FeesFees 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 characterizedas a reduction of product sales. Consideration should be characterized as a cost incurred if we receive, or will receive, an identifiable benefit (goods orservices) in exchange for the consideration and we can reasonably estimate the fair value of the benefit received. Because the fees we pay to wholesalers donot meet the foregoing conditions to be characterized as a cost, we have characterized these fees as a reduction of product sales and have included them incontractual adjustments or governmental rebates in the table below. We generally pay such amounts within several weeks of our receipt of an invoice fromthe 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 to reflect actual experience.Product ReturnsConsistent 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 our products have a range of three years to five years. We estimate product returnsbased on the historical return patterns and known or expected changes in the marketplace. We track actual returns by individual production lots. Returns onlots eligible for credits under our returned goods policy are monitored and compared with historical return trends and rates.We expect that wholesalers and healthcare providers will not stock significant inventory due to the cost of the products, the expense to store ourproducts, 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 ofreturns may be adjusted for actual return experience as it becomes available and for known or expected changes in the marketplace. We did not significantlyadjust our reserve for product returns during 2017, 2016, or 2015. To date, our product returns have been relatively limited; however, returns experience maychange over time. We may be required to make future adjustments to our product returns estimate, which would result in a corresponding change to our netproduct sales in the period of adjustment and could be significant.69Table of ContentsGovernmental RebatesGovernmental rebate reserves relate to our reimbursement arrangements with state Medicaid programs. We determine our estimates for Medicaid rebates,if applicable, based on actual product sales data and our historical product claims experience. In estimating these reserves, we provide for a Medicaid rebateassociated with both those expected instances where Medicaid will act as the primary insurer as well as in those instances where we expect Medicaid will actas the secondary insurer. Rebate amounts generally are invoiced quarterly and are paid in arrears, and we expect to pay such amounts within several weeks ofnotification by the Medicaid or provider entity. Estimated governmental rebates are recorded at the time of sale. During 2017 and 2016, we refined ourestimated Medicaid reserve based on actual claims received since the 2011 launch of Makena, our expectations of state level utilization, and estimated rebateclaims not yet submitted. This refinement resulted in a $1.2 million increase and a $6.1 million reduction of our estimated Medicaid rebate reserve related toprior period Makena sales in 2017 and 2016, respectively. We regularly assess our Medicaid reserve balance and the rate at which we accrue for claimsagainst product sales. If we determine in future periods that our actual rebate experience is not indicative of expected claims, if actual claims experiencechanges, or if other factors affect estimated claims rates, we may be required to adjust our current Medicaid accumulated reserve estimate, which would affectnet product sales in the period of the adjustment and could be significant.Healthcare Reform LegislationThe Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (collectively, the “ACA”) wasenacted in the U.S. in March 2010 and includes certain cost containment measures including an increase to the minimum rebates for products covered byMedicaid programs and the extension of such rebates to drugs dispensed to Medicaid beneficiaries enrolled in Medicaid managed care organizations as wellas the expansion of the 340B drug pricing program under the Public Health Service Act. This legislation contains provisions that can affect the operationalresults of companies in the pharmaceutical industry and healthcare related industries, including us, by imposing on them additional costs.The ACA also requires pharmaceutical manufacturers to pay a prorated share of the overall Branded Drug Fee, based on the dollar value of its brandedprescription drug sales to certain federal programs identified in the legislation. The amount of our annual share of the Branded Drug Fee for each of the 2017,2016, and 2015 annual periods was approximately $0.1 million and these payments were non-deductible for income tax purposes. We have included theseamounts in selling, general and administrative expense in our consolidated statements of operations. The amount of this annual payment could increase infuture years due to both higher eligible Feraheme sales and the increasing amount of the overall fee assessed across manufacturers, but any such increases arenot expected to be material to our results of operations or financial condition. The ACA exempts “orphan drugs” such as Makena from 340B ceiling pricerequirements for the covered entity types newly added to the program by the ACA.In addition, the number of 340B institutions, which provide drugs at reduced rates, was expanded by the ACA to include additional hospitals. As a result,the volume of Feraheme business sold to 340B eligible entities has increased since the implementation of the ACA. Feraheme sales to 340B eligible entitiescomprised approximately 29%, of our total Feraheme sales in grams for 2017 and 20% of our total Feraheme sales in grams for each of 2016 and 2015.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%.We were not materially impacted by healthcare reform legislation during 2017, 2016, and 2015. Presently, we have not identified any provisions thatcould materially impact our business but we continue to monitor ongoing legislative developments and we are assessing what impact recent healthcarereform legislation will have on our business. Since its enactment, there have been modifications and challenges to numerous aspects of the legislation. In2018, litigation, regulation, and legislation related to the ACA are likely to continue, with unpredictable and uncertain results. The full impact of the ACA,any law repealing. replacing, and/or modifying elements of it, and the political uncertainty surrounding any repeal or replacement legislation on our businessremains unclear. Federal budgetary concerns and the current presidential administration could result in the implementation of significant federal spendingcuts or regulatory changes, including cuts in Medicare and other health-related spending in the near-term or changes to the ACA. A key focus of the currentpresidential administration and Republican majorities in both houses of the U.S. Congress to “repeal and replace” all or portions of the ACA. Notably:70Table of Contents•In 2012, the U.S. Supreme Court heard challenges to the constitutionality of the individual mandate and the viability of certain provisions of theACA. The Supreme Court’s decision upheld most of the ACA and determined that requiring individuals to maintain “minimum essential” healthinsurance coverage or pay a penalty to the Internal Revenue Service was within Congress’s constitutional taxing authority. However, as a result oftax reform legislation passed in late December 2017, the individual mandate has been eliminated. The long ranging effects of the elimination of theindividual mandate on the viability of the ACA are unknown at this time.•On January 20, 2017, President Trump signed an Executive Order directing federal agencies with authorities and responsibilities under the ACA towaive, defer, grant exemptions from, or delay the implementation of any provision of the ACA that would impose a fiscal burden on states or a cost,fee, tax, penalty or regulatory burden on individuals, healthcare providers, health insurers, or manufacturers of pharmaceuticals or medical devices.•On October 13, 2017, President Trump signed an Executive Order terminating the cost-sharing subsidies that reimburse insurers under the ACA.Several state Attorneys General filed suit to stop the administration from terminating the subsidies, but their request for a restraining order wasdenied by a federal judge in California on October 25, 2017. CMS has recently proposed regulations that would give states greater flexibility insetting benchmarks for insurers in the individual and small group marketplaces, which may have the effect of relaxing the essential health benefitsrequired under the ACA for plans sold through such marketplaces.The extent, timing and details of the changes are not currently known, but the federally funded health care landscape could face significant changesduring the current presidential administration, including in the near-term, and could impact state and local healthcare programs, including Medicaid andMedicare, which could also have a negative impact on our future operating results.Multiple Element ArrangementsWe 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,companies are required to establish the selling price of its products and services based on a separate revenue recognition process using management’s bestestimate of the selling price when there is no vendor-specific objective evidence or third-party evidence to determine the selling price of that item. If adelivered element is not considered to have standalone value, all elements of the arrangement are recognized as revenue as a single unit of accounting overthe period of performance for the last such undelivered item or services. Significant management judgment is required in determining what elementsconstitute deliverables and what 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.For multiple element arrangements, we allocate revenue to all deliverables based on their relative selling prices. We determine the selling price to beused for allocating revenue to deliverables as follows: (a) vendor specific objective evidence; (b) third-party evidence of selling price and (c) the bestestimate of the selling price. Vendor specific objective evidence generally exists only when we sell the deliverable separately and it is the price actuallycharged by us for that deliverable. Any discounts given to the customer are allocated by applying the relative selling price method.Amounts received prior to satisfying the above revenue recognition criteria are recorded as deferred revenue in our consolidated balance sheets. Deferredrevenue associated with our CBR service revenues includes (a) amounts collected in advance of unit processing and (b) amounts associated with unearnedstorage fees collected at the beginning of the storage contract term, net of allocated discounts. Amounts not expected to be recognized within the next yearare classified as long-term deferred revenues.71Table of ContentsService RevenueOur service revenues for the CBR Services include the following two deliverables: (a) enrollment, including the provision of a collection kit and cordblood and cord tissue unit processing, which are delivered at the beginning of the relationship (the “processing services”), with revenue for this deliverablerecognized after the collection and successful processing of the cord blood and cord tissue; and (b) the storage of newborn cord blood and cord tissue units(the “storage services”), for either an annual fee or a prepayment of 18 years or the lifetime of the newborn donor (the “lifetime option”), with revenue for thisdeliverable recognized ratably over the applicable storage period. For the lifetime option, storage fees are not charged during the lifetime of the newborndonor. However, revenue is recognized based on the average of male and female life expectancies using lifetime actuarial tables published by the SocialSecurity Administration in effect at the time of the newborn’s birth. As there are other vendors who provide processing services and storage services atseparately stated list prices, the processing services and storage services, including the first year storage, each have standalone value to the customer, andtherefore represent separate deliverables. The selling price for the processing services, 18 year and lifetime storage options are estimated based on the bestestimate of selling price because we do not have vendor specific objective evidence or third-party evidence of selling price for these elements. The sellingprice for the annual storage services is determined based on vendor specific objective evidence as we have standalone renewals to support the selling price.Valuation of Marketable SecuritiesWe account for and classify our marketable securities as either “available-for-sale,” “held-to-maturity,” or “trading debt securities,” in accordance withthe accounting guidance related to the accounting and classification of certain investments in marketable securities. The determination of the appropriateclassification by us is based primarily on management’s ability and intent to sell the marketable security at the time of purchase. As of December 31, 2017and 2016, all of our marketable securities were classified as available-for-sale.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 marketable securities are stated at fair value with their unrealized gains and losses included in accumulated other comprehensive income (loss) withinthe consolidated statements of stockholders’ equity, until such gains and losses are realized in other income (expense) within the consolidated statements ofoperations or until an unrealized loss is considered other-than-temporary.We recognize other-than-temporary impairments of our marketable securities when there is a decline in fair value below the amortized cost basis and if(a) we have the intent to sell the security or (b) it is more likely than not that we will be required to sell the security prior to recovery of its amortized costbasis. If either of these conditions is met, we recognize the difference between the amortized cost of the security and its fair value at the impairmentmeasurement date in our consolidated statements of operations. If neither of these conditions is met, we must perform additional analysis to evaluate whetherthe unrealized loss is associated with the creditworthiness of the issuer of the security rather than other factors, such as interest rates or market factors. If wedetermine from this analysis that we do not expect to receive cash flows sufficient to recover the entire amortized cost of the security, a credit loss exists, theimpairment is considered other-than-temporary and is recognized in our consolidated statements of operations.Business Combinations and Asset AcquisitionsThe purchase price allocation for business combinations requires extensive use of accounting estimates and judgments to allocate the purchase price tothe identifiable tangible and intangible assets acquired and liabilities assumed based on their respective fair values. We early adopted ASU No. 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business (“ASU 2017-01”) as of January 1, 2017. Under ASU 2017-01, we firstdetermine whether substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiableassets. If this threshold is met, the single asset or group of assets, as applicable, is not a business.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 acquisition date. Acquisition-related costs are expensed as incurred. Any excess of the consideration transferred over the estimated fair values of the identifiable net assets acquired isrecorded as goodwill.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. Any72Table of Contentsadjustments to the purchase price allocations are made as soon as practicable but no later than one year from the acquisition date.Acquired inventory is recorded at its fair value, which may require a step-up adjustment to recognize the inventory at its expected net realizable value.The inventory step-up is recorded to cost of product sales in our consolidated statements of operations when related inventory is sold, and we record step-upcosts associated with clinical trial material as research and development expense.Contingent consideration arising from a business combination is included as part of the purchase price and is recognized at its estimated fair value as ofthe acquisition date. Subsequent to the acquisition date, we measure contingent consideration arrangements at fair value for each period until thecontingency is resolved. These changes in fair value are recognized in our selling, general and administrative expenses in our consolidated statements ofoperations. Changes in fair values reflect new information about the likelihood of the payment of the contingent consideration and the passage of time.GoodwillWe test goodwill at the reporting unit level for impairment on an annual basis and between annual tests if events and circumstances indicate it is morelikely than not that the fair value of a reporting unit is less than its carrying value. Events that could indicate impairment and trigger an interim impairmentassessment include, but are not limited to, an adverse change in current economic and market conditions, including a significant prolonged decline in marketcapitalization, a significant adverse change in legal factors, unexpected adverse business conditions, and an adverse action or assessment by a regulator. Ourannual impairment test date is October 31. We have determined that we operate in a single operating segment and have a single reporting unit.In performing our goodwill impairment tests during 2017, we utilized the approach prescribed under ASC 350, as amended by ASU 2017-04, Intangibles— Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which we adopted on January 1, 2017 (“ASU 2017-04”). ASU 2017-04requires that an entity perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. Anentity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value.Prior to our adoption of ASU 2017-04, we utilized the two-step approach prescribed under ASC 350 in performing our goodwill impairment tests. Thefirst step required a comparison of the reporting unit’s carrying value to its fair value. If the carrying value of a reporting unit exceeded its estimated fairvalue, a second step was required to measure the amount of impairment loss, if any. The second step of the goodwill impairment test compared the impliedfair value of a reporting unit’s goodwill to its carrying value. The second step required us to perform a hypothetical purchase price allocation as of themeasurement date and estimate the fair value of net tangible and intangible assets. The fair value of intangible assets is determined as described above and issubject to significant judgment. We conducted our 2016 and 2015 annual goodwill impairment tests using the market approach, as more fully describedbelow, in making our impairment test conclusions.When we perform any goodwill impairment test, the estimated fair value of our reporting unit is determined using an income approach that utilizes adiscounted cash flow (“DCF”) model or, a market approach, when appropriate, which assesses our market capitalization as adjusted for a control premium, ora combination thereof. The DCF model is based upon expected future after-tax operating cash flows of the reporting unit discounted to a present value usinga risk-adjusted discount rate. Estimates of future cash flows require management to make significant assumptions concerning (i) future operating performance,including future sales, long-term growth rates, operating margins, variations in the amount and timing of cash flows and the probability of achieving theestimated cash flows (ii) the probability of regulatory approvals, and (iii) future economic conditions, all of which may differ from actual future cash flows.These assumptions are based on significant inputs not observable in the market and thus represent Level 3 measurements within the fair value hierarchy. Thediscount rate, which is intended to reflect the risks inherent in future cash flow projections, used in the DCF model, is based on estimates of the weightedaverage cost of capital (“WACC”) of market participants relative to our reporting unit. Financial and credit market volatility can directly impact certaininputs and assumptions used to develop the WACC. Any changes in these assumptions may affect our fair value estimate and the result of an impairment test.We believe the discount rates and other inputs and assumptions are consistent with those that a market participant would use. In addition, in order to assessthe reasonableness of the fair value of our reporting unit as calculated under the DCF model, we also compare the reporting unit’s fair value to our marketcapitalization and calculate an implied control premium (the excess sum of the reporting unit’s fair value over its market capitalization). We evaluate theimplied control premium by comparing it to control premiums of recent comparable market transactions, as applicable. Throughout 2017 and as of December31, 2017, our market capitalization has been lower than our stockholders’ equity, or book value. We believe that a market participant buyer would berequired to pay a control premium for our business that would cover the difference between our market capitalization and our book value.73Table of ContentsAssumptions related to revenue, growth rates and operating margin are based on management’s annual and ongoing forecasting, budgeting and planningprocesses and represent our best estimate of the future results of operations across the company as of that point in time. These estimates are subject to manyassumptions, such as the economic environment in which our reporting unit operates, expectations of regulatory approval of our products in development orunder review with the FDA, demand for our products and competitor actions. If we were to apply different assumptions, or if the outcome of regulatory orother developments, or actual demand for our products and competitor actions, are inconsistent with our assumptions, our estimated discounted future cashflows and the resulting estimated fair value of our reporting unit would increase or decrease, and could result in the fair value of our reporting unit being lessthan its carrying value in an impairment test.Intangible AssetsWe amortize our intangible assets that have finite lives based either the straight-line method, or if reliably determinable, based on the pattern in whichthe economic benefit of the asset is expected to be utilized. When facts and circumstances exist that may indicate that an intangible asset is potentiallyimpaired, management compares the projected undiscounted future cash flows associated with the asset over its estimated useful life against the carryingamount. An impairment loss, if any, is measured as the excess of the carrying amount of the asset over its fair value.If we acquire a business as defined under applicable accounting standards, then the acquired in-process research and development (“IPR&D”) iscapitalized as an intangible asset. If we acquire an asset or a group of assets that do not meet the definition of a business, then the acquired IPR&D isexpensed on its acquisition date. Future costs to develop these assets are recorded to research and development expense as they are incurredAcquired IPR&D represents the fair value assigned to research and development assets that we acquire and have not been completed at the acquisitiondate. The fair value of IPR&D acquired in a business combination is capitalized on our consolidated balance sheets at the acquisition-date fair value and isdetermined by estimating the costs to develop the technology into commercially viable products, estimating the resulting revenue from the projects, anddiscounting the projected net cash flows to present value. IPR&D is not amortized, but rather is reviewed for impairment on an annual basis or morefrequently if indicators of impairment are present, until the project is completed or abandoned. If we determine that IPR&D becomes impaired or isabandoned, the carrying value is written down to its fair value with the related impairment charge recognized in our consolidated statement of operations inthe period in which the impairment occurs. Upon successful completion of each project and launch of the product, we will make a separate determination ofthe estimated 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;•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.Additionally, we have other indefinite-lived intangible assets which we acquired through our business combinations. These assets are reviewed forimpairment on an annual basis or more frequently if indicators of impairment are present. If we determine that the asset becomes impaired, the carrying valueis written down to its fair value with the related impairment charge recognized in our consolidated statements of operations in the period in which theimpairment occurs.Equity-Based CompensationEquity-based compensation cost is generally measured at the estimated grant date fair value and recorded to expense over the requisite service period,which is generally the vesting period. Because equity-based compensation expense is based on awards ultimately expected to vest, we must make certainjudgments about whether employees, officers, directors, consultants and advisers will complete the requisite service period, and reduce the compensationexpense being recognized for estimated forfeitures. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actualforfeitures differ from those estimates. Forfeitures are estimated based upon historical experience and adjusted for unusual events such as74Table of Contentscorporate 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. This model requiresthe input of several factors such as the expected option term, the expected risk-free interest rate over the expected option term, the expected volatility of ourstock price over the expected option term, and the expected dividend yield over the expected option term and are subject to various assumptions. The fairvalue of awards calculated using the Black-Scholes option pricing model is generally amortized on a straight-line basis over the requisite service period, andis recognized based on the proportionate amount of the requisite service period that has been rendered during each reporting period.We estimate the fair value of our restricted stock units (“RSUs”) whose vesting is contingent upon market conditions, such as total shareholder return,using the Monte-Carlo simulation model. The fair value of RSUs where vesting is contingent upon market conditions is amortized based upon the estimatedderived service period. The fair value of RSUs granted to our employees and directors is determined, where vesting is dependent on future services, basedupon the quoted closing market price per share on the date of grant, adjusted for estimated forfeitures.We believe our valuation methodologies are appropriate for estimating the fair value of the equity awards we grant to our employees and directors. Ourequity award valuations are estimates and may not be reflective of actual future results or amounts ultimately realized by recipients of these grants. Theseamounts are subject to future quarterly adjustments based upon a variety of factors, which include, but are not limited to, changes in estimated forfeiture ratesand the issuance of new equity-based awards.Income TaxesWe 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, 2017, we maintained a valuation allowance on certain of our state NOL and credit carryforwards.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.On December 22, 2017, the Tax Cuts and Jobs Act (the “2017 Tax Act”), was enacted. The 2017 Tax Act includes significant changes to the U.S.corporate income tax system, including a reduction of the federal corporate income tax rate from 35% to 21%, effective January 1, 2018. The SEC staff issuedStaff Accounting Bulletin No. 118 to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available,prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the 2017 Tax Act. We haverecognized the provisional tax impacts related to the revaluation of deferred tax assets and liabilities and included these75Table of Contentsamounts in our consolidated financial statements for the year ended December 31, 2017. While we believe these estimates are reasonable, the ultimate impactmay differ from these provisional amounts due to further review of the enacted legislation, changes in interpretations and assumptions we have made, andadditional accounting and regulatory guidance that may be issued. Impact of Recently Issued and Proposed Accounting PronouncementsFrom 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. For further discussion on recent accounting pronouncements,please see Note T, “Recently Issued and Pronounced Accounting Pronouncements,” to our consolidated financial statements included in this Annual Reporton Form 10-K for additional information.Results of Operations - 2017 as compared to 2016 Revenues Total revenues for 2017 and 2016 consisted of the following (in thousands except for percentages): Years Ended December 31, 2017 to 2016 2017 2016 $ Change % ChangeProduct sales, net Makena$387,158 $334,050 $53,108 16 %Feraheme105,930 97,058 8,872 9 %Intrarosa1,816 — 1,816 N/AMuGard741 1,062 (321) (30)%Total495,645 432,170 63,475 15 %Service revenues, net114,177 99,604 14,573 15 %License fee, collaboration and other revenues124 317 (193) (61)%Total revenues$609,946 $532,091 $77,855 15 % Our total revenues for 2017 increased by $77.9 million as compared to 2016, due primarily to increases in volume across substantially all of our productsand our services.The following table sets forth customers who represented 10% or more of our total revenues for 2017 and 2016: Years Ended December 31, 2017 2016AmerisourceBergen Drug Corporation21% 22%McKesson Corporation19% 11%76Table of ContentsProduct SalesTotal gross product sales were offset by product sales allowances and accruals for 2017 and 2016 as follows (in thousands except for percentages): Years Ended December 31, 2017 to 20162017 Percent ofgrossproduct sales 2016 Percent ofgrossproduct sales $ Change % ChangeGross product sales$920,061 $748,839 $171,222 23%Provision for product sales allowances andaccruals: Contractual adjustments310,588 34% 229,686 31% 80,902 35%Governmental rebates113,828 12% 86,983 12% 26,845 31%Total provision for product salesallowances and accruals424,416 46% 316,669 43% 107,747 34%Product sales, net$495,645 $432,170 $63,475 15% Gross product sales increased by $171.2 million, or approximately 23%, during 2017 as compared to 2016 primarily due to increases of $126.1 millionand $39.7 million of Makena and Feraheme gross sales, respectively. Of the $126.1 million increase in gross Makena sales, $112.7 million was due toincreased volume and $13.4 million was due to price increases. Of the $39.7 million increase in gross Feraheme sales, $27.7 million was due to priceincreases and $12.1 million was due to increased volume. This total increase in gross product sales was partially offset by $107.7 million of additionalallowances and accruals in 2017 as compared to 2016. The increase in contractual adjustments as a percentage of gross product sales primarily related to achange in mix of business to commercial customers.Net product sales increased by $63.5 million, or approximately 15%, during 2017 as compared to 2016 primarily due to a $53.1 million increase in netMakena sales and a $8.9 million increase in net Feraheme sales.We expect total product sales to decrease in 2018 due to expected generic erosion of the market for the Makena IM product. The degree of this decreasewill be impacted by the timing, number and behavior of generic entrants. We expect sales of Intrarosa and the Makena auto-injector to contribute positivegrowth. We also expect Feraheme sales to increase in 2018, however the hurricane-related shortage of saline, which is used in the administration of Feraheme,will impact Feraheme volumes in early 2018.Product Sales Allowances and AccrualsWe recognize product sales net of certain allowances and accruals in our consolidated statement of operations at the time of sale. Our contractualadjustments include provisions for returns, pricing and prompt payment discounts, as well as wholesaler distribution fees, rebates to hospitals that qualify for340B pricing, and volume-based and other commercial rebates. Governmental rebates relate to our reimbursement arrangements with state Medicaidprograms.During 2017 and 2016, we refined our estimated Medicaid reserve based on actual claims received since the 2011 launch of Makena, our expectations ofstate level utilization, and estimated rebate claims not yet submitted. This refinement resulted in a $1.2 million increase and $6.1 million decrease,respectively, of our estimated Medicaid rebate reserve related to prior period Makena sales. We may refine our estimated revenue reserves related toMakena as we continue to obtain additional experience or as our customer mix changes. If we determine in future periods that our actual experience is notindicative of our expectations, if our actual experience changes, or if other factors affect our estimates, we may be required to adjust our allowances andaccruals estimates, which would affect our net product sales in the period of the adjustment and could be significant.77Table of ContentsAn analysis of the amount of our product reserves for 2017 and 2016, is as follows (in thousands): Contractual Adjustments Governmental Rebates TotalBalance at January 1, 2016$30,177 $25,767 $55,944Current provisions relating to sales in current year224,894 93,035 317,929Adjustments relating to sales in prior years(2,348) (6,052) (8,400)Payments/returns relating to sales in current year(181,150) (41,636) (222,786)Payments/returns relating to sales in prior years(23,973) (19,715) (43,688)Balance at December 31, 2016$47,600 $51,399 $98,999Current provisions relating to sales in current year314,537 112,167 426,704Adjustments relating to sales in prior years(3,949) 1,661 (2,288)Payments/returns relating to sales in current year(253,545) (61,569) (315,114)Payments/returns relating to sales in prior years(42,479) (53,060) (95,539)Balance at December 31, 2017$62,164 $50,598 $112,762During 2017 and 2016, we implemented gross price increases for Feraheme and Makena, some portion of which were discounted back to customersunder volume or market share based contracts. When portions of price increases are discounted back to customers, it can widen the gross to net adjustmentpercentage while still resulting in a greater net price per unit. In 2018, we expect contractual adjustments and governmental rebates to continue to increase as a percentage of gross product sales due to ourcontracting and discounting strategy, the mix of our business to different customers and increasing competitive pressure on our products. Service Revenues CBR Services include the collection, processing and storage of both umbilical cord blood and cord tissue. The $14.6 million increase in service revenuesrecorded in 2017 as compared to 2016 was due to increased recurring revenue from new enrollments as well as a lower purchase accounting adjustment to theCBR deferred revenue balance in 2017 as compared to 2016. We expect service revenues to increase in 2018 due to increasing new enrollments of cord bloodand cord tissue units in our storage facility, improved pricing strategies and recurring revenue from our growing base of stored units.Costs and ExpensesCost of Product SalesCost of product sales for 2017 and 2016 were as follows (in thousands except for percentages): Years Ended December 31, 2017 to 2016 2017 2016 $ Change % ChangeCost of product sales$161,349 $96,314 $65,035 68%Percentage of net product sales33% 22% Our cost of product sales are primarily comprised of manufacturing costs, costs of managing our contract manufacturers, costs for quality assurance andquality control associated with our product sales, the amortization of product-related intangible assets and the inventory step-up in connection with theNovember 2014 acquisition of Lumara Health. Cost of product sales excludes the impairment of intangible assets described separately below under“Impairment of Intangible Assets.” The $65.0 million increase in our cost of product sales for 2017 as compared to 2016 was primarily attributable to a $58.2million net increase in amortization of the Makena base technology intangible asset due to the change in its estimated useful life in 2017 and the Intrarosadeveloped technology intangible asset, a $6.6 million increase due to increased volume across substantially all of our products and our services, a $3.0million increase due to overhead costs and inventory write-offs, partially offset by a $2.9 million decrease in amortization of the inventory step-up. We expect our cost of product sales, as a percentage of net product sales, to increase in 2018 as compared to 2017 primarily due to increasedamortization of the Makena base technology intangible asset. In addition, during 2018, we expect to78Table of Contentspay royalty obligations for Intrarosa and the Makena auto-injector, which will contribute to the increase in cost of product sales as a percentage of netproduct sales. Cost of Services Cost of services for 2017 and 2016 were as follows (in thousands except for percentages): Years Ended December 31, 2017 to 2016 2017 2016 $ Change % ChangeCost of services$21,817 $20,575 $1,242 6%Percentage of service revenues19% 21% Cost of services includes the transportation of the umbilical cord blood stem cells and cord tissue from the hospital and direct material plus labor costsfor processing, cryogenic storage and collection kit materials. We expect our cost of services as a percentage of service revenues to remain relatively constantin 2018 as compared to 2017.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 by major project. To theextent that external costs are not attributable to a specific project or activity, they are included in other external costs. Prior to the initial regulatory approvalof our products or development of new manufacturing processes, costs associated with manufacturing process development and the manufacture of drugproduct are recorded as research and development expenses, unless we believe regulatory approval and subsequent commercialization of the productcandidate is probable and we expect the future economic benefit from sales of the product to be realized, at which point we capitalize the costs as inventory.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. We do not track our internal costs by project since our research and development personnel work on a number of projectsconcurrently and much of these costs benefit multiple projects or our operations in general.Research and development expenses for 2017 and 2016 consisted of the following (in thousands except for percentages): Years Ended December 31, 2017 to 2016 2017 2016 $ Change % ChangeExternal research and development expenses Bremelanotide-related costs$27,832 $— $27,832 N/AMakena-related costs12,971 19,113 (6,142) (32)%Feraheme-related costs7,699 28,067 (20,368) (73)%Other external costs6,393 3,252 3,141 97 %Intrarosa-related costs1,058 — 1,058 N/ATotal55,953 50,432 5,521 11 %Internal research and development expenses19,064 15,652 3,412 22 %Total research and development expenses$75,017 $66,084 $8,933 14 % Total research and development expenses incurred in 2017 increased by $8.9 million, or 14%, as compared to 2016. The increase was due primarily to$27.8 million incurred in connection with our reimbursement of costs to Palatin associated with the development and regulatory activities for ourbremelanotide NDA submission expected to be filed in the first quarter of 2018. This increase was partially offset by a $6.1 million decrease related to costsincurred for the Makena auto-injector program and a $20.4 million decrease in Feraheme-related spending as the result of the completion in 2016 of thePhase 3 clinical trial to expand the Feraheme label.We have a number of ongoing research and development programs that we are conducting independently or in collaboration with third parties. Weexpect our research and development expenses to increase in 2018 as compared to 2017 due79Table of Contentsto the preparation of filing the NDA for bremelanotide and post approval commitments for Feraheme and Makena, including pediatric requirements forFeraheme and commitments required under the FDA's “Subpart H” accelerated approval regulations. Further, we expect to incur increased costs associatedwith manufacturing process development and the manufacture of drug product for bremelanotide to support its ultimate commercialization. We also expect toinvest in studies that could potentially expand the labels for Intrarosa and bremelanotide. We cannot determine with certainty the duration and completioncosts of our current or future clinical trials of our products or product candidates as the duration, costs and timing of clinical trials depends on a variety offactors including the uncertainties of future clinical and preclinical studies, uncertainties in clinical trial enrollment rates and significant and changinggovernment regulation.In-Process Research and DevelopmentDuring 2017, we recorded acquired IPR&D expense of $65.8 million related to the $60.0 million one-time upfront payment for the bremelanotide licenserights and $5.8 million, which represented a portion of the $83.5 million of consideration recorded to date under the terms of the Endoceutics LicenseAgreement for indications that are under development. We did not record any IPR&D expenses during 2016.In 2018, we expect to pay a $20.0 million regulatory milestone payment to Palatin, which will be recorded as IPR&D costs, upon the FDA acceptance ofthe bremelanotide NDA, pursuant to the terms of the Palatin License Agreement.Selling, General and Administrative Expenses Our selling, general and administrative expenses include costs related to our commercial personnel, including our specialty sales forces, medicaleducation professionals, pharmacovigilance, safety monitoring and commercial support personnel, costs related to our administrative personnel, includingour legal, finance, business development and executive personnel, external and facilities costs required to support the marketing and sale of our products andservices, and other costs associated with our corporate activities.Selling, general and administrative expenses for 2017 and 2016 consisted of the following (in thousands except for percentages): Years Ended December 31, 2017 to 2016 2017 2016 $ Change % ChangeCompensation, payroll taxes and benefits$130,996 $78,295 $52,701 67%Professional, consulting and other outside services141,743 114,813 26,930 23%Fair value of contingent consideration liability(47,686) 25,683 (73,369) >(100 %)Amortization expense related to customer relationship intangible15,719 12,529 3,190 25%Equity-based compensation expense19,161 18,550 611 3%Total selling, general and administrative expenses$259,933 $249,870 $10,063 4% Total selling, general and administrative expenses, excluding the $73.4 million decrease to the contingent consideration liability expense, describedbelow, increased by $83.4 million, or approximately 37%, as compared to the same period in 2016 due to the following:•$52.7 million increase in compensation, payroll taxes and benefits primarily due to increased personnel costs associated with the addition of ourwomen's health commercial team and other organizational growth to support the July 2017 launch of Intrarosa;•$26.9 million increase in sales and marketing, consulting, professional fees, and other expenses primarily due to costs related to the July 2017launch and commercialization of Intrarosa, increased costs associated with the expansion of our women's health sales force and litigation expenserelated to our ongoing Sandoz patent infringement litigation; and•$3.2 million increase in amortization expense related to CBR.In addition, total selling, general and administrative expenses for 2017 reflects a $73.4 million decrease driven by a $47.7 million decrease to the fairvalue of contingent consideration liability expense in 2017 primarily due to a change in our estimated Makena revenues and associated milestone payments,as discussed in more detail in Note E “Fair Value Measurements” to our consolidated financial statements included in this Annual Report on Form 10-K.80Table of ContentsWe expect that total selling, general and administrative expenses, excluding any impact from the Makena contingent consideration liability expense,will increase in 2018 as compared to 2017 due to a full year of expenses related to our Intrarosa commercial efforts, launch activities for the Ferahemeexpanded label and the Makena auto-injector and pre-launch activities for bremelanotide.Impairment of Intangible AssetsDuring the third quarter of 2017, we received new information from a variety of sources, including from external consulting firms and our authorizedgeneric partner, regarding the potential competitive landscape for the Makena IM product upon loss of orphan drug exclusivity in February 2018. Theinformation received from one of our external consulting firms included competitive intelligence information, which indicated that several genericmanufacturers had either likely filed an Abbreviated New Drug Application (“ANDA”) with the FDA in the third quarter of 2017 or were likely to file anANDA in the fourth quarter of 2017. During the third quarter of 2017, we also began negotiations with our own authorized generic partner and gainedindustry insight into how the competitive landscape of the market might evolve once multiple generics entered. This information, combined with continuedprogress on our own authorized generic strategy, was incorporated into our revised long-range revenue forecasts for the Makena IM product during the thirdquarter of 2017. This new information received in the third quarter, altered our previous assumptions, including the potential number of generic entrants andpotential timing of entry following the loss of its orphan drug exclusivity, which significantly impacted our long-term revenue forecast for the Makena IMproduct.We determined that the revised long-term forecast, resulting from the information received in the third quarter of 2017, constituted a triggering eventwith respect to our Makena base technology intangible asset, which relates solely to the Makena IM product. We determined that as of September 30, 2017,the fair value of the Makena base technology intangible asset was less than the carrying value and accordingly, we recorded an impairment charge of $319.2million. No additional impairments of intangible assets were determined to be necessary during our annual impairment testing in the fourth quarter of 2017.During the year ended December 31, 2016, we recognized an impairment loss on our intangible assets of $19.7 million, primarily due to a $15.7 millionimpairment charge for the MuGard Rights and a $3.7 million impairment related to a portion of the CBR trade names and trademarks indefinite-livedintangible asset. Other Income (Expense)Other income (expense) for 2017 and 2016 consisted of the following (in thousands except for percentages): Years Ended December 31, 2017 to 2016 2017 2016 $ Change % ChangeInterest expense$(68,382) $(73,153) $4,771 (7)%Loss on debt extinguishment(10,926) — (10,926) N/AInterest and dividend income2,810 3,149 (339) (11)%Other (expense) income(335) 189 (524) >(100 %)Total other income (expense)$(76,833) $(69,815) $(7,018) 10 %Other income (expense) for 2017 increased by $7.0 million as compared to 2016 primarily as the result of the following:•$10.9 million loss on debt extinguishment in 2017 from the early repayment of the outstanding principal amount of the 2015 Term Loan Facility (asdefined below) and the repurchase of a portion of the 2023 Senior Notes; and•$4.8 million decrease of interest expense as compared to 2016 primarily as the result of the repayment of the 2015 Term Loan Facility.We expect our other income (expense) to decrease in 2018 as compared to 2017 as the loss on debt extinguishment during 2017 is not expected toreoccur.81Table of ContentsIncome Tax (Benefit) ExpenseThe following table summarizes our effective tax rate and income tax (benefit) expense for 2017 and 2016 (in thousands except for percentages): Years Ended December 31, 2017 2016Effective tax rate46% 127%Income tax (benefit) expense$(170,866) $11,538For 2017, we recognized an income tax benefit of $170.9 million, representing an effective tax rate of 46%. The difference between the expectedstatutory federal tax rate of 35% and the 46% effective tax rate for 2017 was primarily attributable to the impact of federal tax reform, as discussed below,contingent consideration associated with Lumara Health, federal research and orphan drug tax credits generated during the year, and the impact of stateincome taxes, partially offset by equity-based compensation expenses and an increase to our valuation allowance.On December 22, 2017, the 2017 Tax Act was enacted. The 2017 Tax Act includes significant changes to the U.S. corporate income tax system,including a reduction of the federal corporate income tax rate from 35% to 21%, effective January 1, 2018. As a result of the reduction in the federal tax rate,we revalued our ending net deferred tax liabilities at December 31, 2017 and recognized a provisional $17.6 million tax benefit. See Note J, “Income Taxes,”for additional information regarding the 2017 Tax Act.For 2016, we recognized income tax expense of $11.5 million, representing an effective tax rate of 127%. The difference between the expected statutoryfederal tax rate of 35% and the 127% effective tax rate for 2016 was attributable to the impact of contingent consideration associated with Lumara Health,equity-based compensation expenses and other permanent items, including meals and entertainment expense, officers compensation and Makena-relatedexpenses, partially offset by the benefit of the federal research and development and orphan drug tax credits generated during the year.Results of Operations - 2016 as compared to 2015Revenues Total revenues for 2016 and 2015 consisted of the following (in thousands except for percentages): Years Ended December 31, 2016 to 2015 2016 2015 $ Change % ChangeProduct sales, net Makena$334,050 $251,615 $82,435 33 %Feraheme97,058 88,452 8,606 10 %MuGard1,062 1,749 (687) (39)%Total432,170 341,816 90,354 26 %Service revenues, net99,604 24,132 75,472 >100 %License fee, collaboration and other revenues317 52,328 (52,011) (99)%Total revenues$532,091 $418,276 $113,815 27 % Our total revenues for 2016 increased by $113.8 million as compared to the same period in 2015, primarily as the result of a $82.4 million increase in ournet Makena sales and a $75.5 million increase of CBR Services revenue due to the full period recognition of CBR Services revenue in 2016 compared to apartial period in 2015 following our August 2015 acquisition of CBR. This increase in revenues was partially offset by a $52.0 million decrease in licensefee, collaboration and other revenues during 2016 as compared to 2015. Under the terms of the 2014 termination of a license, development andcommercialization agreement (as amended, the “Takeda Agreement”) with Takeda related to the commercialization of Feraheme outside of the U.S., in 2015we recognized revenues of $6.7 million for payments made by Takeda as well as $44.4 million of previously deferred revenues associated with theamortization of the then-remaining deferred revenue balance under the Takeda Agreement.82Table of ContentsThe following table sets forth customers who represented 10% or more of our total revenues for 2016 and 2015: Years Ended December 31, 2016 2015AmerisourceBergen Drug Corporation22% 25%McKesson Corporation11% 11%Takeda Pharmaceuticals Company Limited—% 12% Product SalesTotal gross product sales were offset by product sales allowances and accruals for 2016 as compared to 2015 as follows (in thousands except forpercentages):Years Ended December 31, 2016 to 20152016 Percent ofgross U.S.product sales 2015 Percent ofgross U.S.product sales $ Change % ChangeGross product sales$748,839 $561,255 $187,584 33%Provision for product sales allowances andaccruals: Contractual adjustments229,686 31% 161,665 29% 68,021 42%Governmental rebates86,983 12% 57,774 10% 29,209 51%Total provision for product salesallowances and accruals316,669 43% 219,439 39% 97,230 44%Product sales, net$432,170 $341,816 $90,354 26%Gross product sales increased by $187.6 million, or approximately 33%, during 2016 as compared to 2015 primarily due to increases of $156.6million and $32.4 million of Makena and Feraheme gross sales, respectively. Of the $156.6 million increase in gross Makena sales in 2016, $135.3million was due to increased volume of Makena and $21.3 million was due to price increases. Of the $32.4 million increase in gross Feraheme sales, $20.9million was due to price increases and $11.5 million was due to increased volume. This total increase in gross product sales was partially offset by $97.2million of additional allowances and accruals in 2016 as compared to 2015.Net product sales increased by $90.4 million, or approximately 26%, during 2016 as compared to 2015 primarily due to a $82.4 million increase innet Makena sales and a $8.6 million increase in net Feraheme sales. Product Sales Allowances and AccrualsDuring 2016, we revised our estimated Medicaid reserve based on actual claims received since the 2011 launch of Makena, our expectations of statelevel utilization, and estimated rebate claims not yet submitted. This revision resulted in a $6.1 million reduction of our estimated Medicaid rebate reserverelated to prior period Makena sales. During 2015, we reduced our Makena-related Medicaid and chargeback reserves, which were initially recorded at thetime of the Lumara Health acquisition, by $4.0 million and $1.9 million, respectively. These measurement period adjustments were recorded to goodwillduring 2015.83Table of ContentsAn analysis of the amount of our product reserves for 2016 and 2015 is as follows (in thousands): Contractual Adjustments Governmental Rebates TotalBalance at January 1, 2015$26,408 $29,102 $55,510Measurement period adjustments - Lumara Health acquisition(2,619) (4,034) (6,653)Current provisions relating to sales in current year156,234 58,011 214,245Adjustments relating to sales in prior years172 (237) (65)Payments/returns relating to sales in current year(131,214) (33,073) (164,287)Payments/returns relating to sales in prior years(18,804) (24,002) (42,806)Balance at December 31, 2015$30,177 $25,767 $55,944Current provisions relating to sales in current year224,894 93,035 317,929Adjustments relating to sales in prior years(2,348) (6,052) (8,400)Payments/returns relating to sales in current year(181,150) (41,636) (222,786)Payments/returns relating to sales in prior years(23,973) (19,715) (43,688)Balance at December 31, 2016$47,600 $51,399 $98,999During 2016 and 2015, 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 widen the gross to net adjustment percentage whilestill resulting in a greater net price per gram. Service RevenuesThe $75.5 million increase in service revenues recorded in 2016 as compared to 2015 was due to the full period recognition of CBR Services revenuein 2016 compared to a partial period in 2015 following our August 2015 acquisition of CBR.License Fee, Collaboration and Other Revenues Our license fee, collaboration and other revenues in 2016 decreased by $52.0 million as compared to 2015 primarily as the result ofthe 2015 recognition of the $44.4 million balance of deferred revenue and $6.7 million of revenues recognized in 2015 in connection with the 2015termination of the Takeda Agreement. Costs and ExpensesCost of Product SalesCost of product sales for 2016 and 2015 were as follows (in thousands except for percentages): Years Ended December 31, 2016 to 2015 2016 2015 $ Change % ChangeCost of product sales$96,314 $78,509 $17,805 23%Percentage of net product sales22% 23% Our cost of product sales are primarily comprised of manufacturing costs, costs of managing our contract manufacturers, costs for quality assurance andquality control associated with our U.S. product sales, the amortization of product-related intangible assets and the inventory step-up in connection with theNovember 2014 acquisition of Lumara Health. Cost of product sales excludes the impairment of intangible assets described separately below under“Impairments of Intangible Assets.” The $17.8 million increase in our cost of product sales for 2016 as compared to 2015 was primarily attributable to a$20.0 million net increase in amortization of the Makena and MuGard product intangible assets and a $5.8 million increase in production costs andoverhead, partially offset by $4.4 million decrease in inventory write-offs and $3.5 million decrease in inventory step-up. 84Table of ContentsCost of Services Cost of services for 2016 and 2015 were as follows (in thousands except for percentages): Years Ended December 31, 2016 to 2015 2016 2015 $ Change % ChangeCost of services$20,575 $9,992 $10,583 >100 %Percentage of service revenues21% 41% Cost of services includes the transportation of the umbilical cord blood stem cells and cord tissue from the hospital and direct material plus labor costsfor processing, cryogenic storage and collection kit materials. The $10.6 million increase in cost of services recorded in 2016 as compared to 2015 was due tothe full period recognition of CBR Services revenue in 2016 compared to a partial period in 2015 following our August 2015 acquisition of CBR. Thedecrease in the cost of services as a percentage of service revenues reflects a higher purchase accounting adjustment to the CBR deferred revenue balancein 2015 as compared to 2016.Research and Development Expenses Research and development expenses for 2016 and 2015 consisted of the following (in thousands except for percentages): Years Ended December 31, 2016 to 2015 2016 2015 $ Change % ChangeExternal research and development expenses Makena-related costs$19,113 $10,820 $8,293 77 %Feraheme-related costs28,067 6,279 21,788 >100 %Velo option— 10,000 (10,000) (100)%Other external costs3,252 1,799 1,453 81 %Total50,432 28,898 21,534 75 %Internal research and development expenses15,652 13,980 1,672 12 %Total research and development expenses$66,084 $42,878 $23,206 54 % Total research and development expenses incurred in 2016 increased by $23.2 million, or 54%, as compared to 2015. The $21.8 million increasein Feraheme-related costs was primarily attributed to new costs related to our Phase 3 clinical trial evaluating Feraheme in adults with IDA, which wasinitiated and completed enrollment in 2016. The increase of Makena-related costs of $8.3 million was primarily attributed to $5.1 million in increased costsrelated to our Makena next-generation development program. The increase in total research and development expenses was partially offset by a $10.0million 2015 upfront payment related to the Velo option.Selling, General and Administrative Expenses Selling, general and administrative expenses for 2016 and 2015 consisted of the following (in thousands except for percentages): Years Ended December 31, 2016 to 2015 2016 2015 $ Change % ChangeCompensation, payroll taxes and benefits$78,295 $62,122 $16,173 26%Professional, consulting and other outside services114,813 78,981 35,832 45%Fair value of contingent consideration liability25,683 4,271 21,412 >100 %Amortization expense related to customer relationship intangible12,529 1,061 11,468 >100 %Equity-based compensation expense18,550 13,874 4,676 34%Total selling, general and administrative expenses$249,870 $160,309 $89,561 56% Total selling, general and administrative expenses incurred in 2016 increased by $89.6 million, or 56%, as compared to 2015 for the following reasons:85Table of Contents•$16.2 million increase in compensation, payroll taxes and benefits primarily due to increased headcount resulting from the August 2015 CBRacquisition;•$25.0 million increase in sales and marketing, consulting, professional fees, and other expenses due to costs related to CBR marketing activities andrevenue driven spend related to Makena;•$10.8 million increase in general and administrative, consulting, professional fees and other expenses primarily due to increased costs associatedwith the CBR acquisition;•$21.4 million increase to the contingent consideration liability due to a $22.8 million increase in the Makena-related contingent considerationbased on the expected timing of the milestone payments;•$11.5 million increase in amortization expense related to the CBR customer relationship intangible due to the full period recognition of CBRamortization expense in 2016 compared to a partial period in 2015 following our August 2015 acquisition of CBR; and•$4.7 million increase in equity-based compensation expense due primarily to an increase in the number of equity awards to new and existingemployees, including additional employees from the CBR acquisition.Impairment of Intangible AssetsDuring the year ended December 31, 2016, we recognized an impairment loss on our intangible assets of $19.7 million, due to a $15.7million impairment charge related to the impairment of the remaining net intangible asset for the MuGard Rights based on the lack of broad reimbursementand insurance coverage for MuGard and the impairment of the remaining $0.2 million, net, CBR-favorable lease intangible asset due the subleasing of aportion of our CBR office space in San Bruno, California at a rate below the market rate used to determine the favorable lease intangible asset. In addition, aspart of our annual impairment test, we recorded an impairment charge of $3.7 million in the fourth quarter of 2016 related to the impairment of a portion ofthe CBR trade names and trademarks indefinite-lived intangible asset based on the revised long-term revenue forecast for CBR.Acquisition-related CostsAcquisition-related costs of $11.2 million incurred in 2015 included costs for financial advising, legal fees, due diligence, and other costs and expensesrelated to our August 2015 acquisition of CBR. We did not incur any acquisition-related costs in 2016.Restructuring ExpensesIn connection with the August 2015 CBR acquisition and the November 2014 Lumara Health acquisition, we initiated restructuring programs, whichincluded severance benefits related to former CBR and Lumara Health employees. We recorded charges of approximately $0.7 million and $4.1million in 2016 and 2015, respectively.Other Income (Expense)Other income (expense) for 2016 and 2015 consisted of the following (in thousands except for percentages): Years Ended December 31, 2016 to 2015 2016 2015 $ Change % ChangeInterest expense$(73,153) $(53,251) $(19,902) 37 %Loss on debt extinguishment— (10,449) 10,449 (100)%Interest and dividend income3,149 1,512 1,637 >100 %Other income (expense)189 (9,188) 9,377 >(100%)Total other (expense) income$(69,815) $(71,376) $1,561 (2)%Other expense for 2016 decreased by $1.6 million as compared to 2015 primarily as the result of the following:86Table of Contents•$10.4 million loss on debt extinguishment in 2015 as the result of the early repayment of the remaining $323.0 million outstanding principalamount of our then existing five-year term loan facility (the “2014 Term Loan Facility”); and•$9.4 million decrease of other expenses as compared to 2015, including a payment of a $6.8 million bridge loan commitment fee and $2.4 million infees and expenses paid in 2015 as part of the early repayment of the 2014 Term Loan Facility.These decreases described above were partially offset by an additional $19.9 million in interest expense in 2016, which was primarily comprised ofcontractual interest expense and amortization of debt issuance costs and debt discount due to the full period recognition in 2016 of the debt obligationsincurred in the third quarter of 2015, compared to a partial period in in 2015.Income Tax ExpenseThe following table summarizes our effective tax rate and income tax expense for 2016 and 2015 (in thousands except for percentages):Years Ended December 31,2016 2015Effective tax rate127% 18%Income tax expense$11,538 $7,065For 2016, we recognized income tax expense of $11.5 million representing an effective tax rate of 127%. The difference between the expected statutoryfederal tax rate of 35% and the 127% effective tax rate for 2016 was primarily attributable to the impact of contingent consideration associated with LumaraHealth, equity-based compensation expenses and other permanent items, including meals and entertainment expense, officers compensation and Makena-related expenses, partially offset by the benefit of the federal research and development and orphan drug tax credits generated during the year. For 2015, werecognized an income tax expense of $7.1 million, representing an effective tax rate of 18%. The difference between the expected statutory federal tax rate of35% and the 18% effective tax rate for 2015 was attributable to the impact of a valuation allowance release related to certain deferred tax assets and theimpact of state income taxes, partially offset by non-deductible transaction costs associated with the acquisition of CBR and non-deductible contingentconsideration expense associated with Lumara Health.Liquidity and Capital Resources General We currently finance our operations primarily from the cash generated from our operating activities, including sales of our products and services. Weexpect to continue to incur significant expenses as we continue to market, sell and contract for the manufacture of our products and sell the CBR Services,develop and seek U.S. regulatory approval for bremelanotide for the treatment of HSDD. For a detailed discussion regarding the risks and uncertainties relatedto our liquidity and capital resources, please refer to our Risk Factors in Part I, Item 1A of this Annual Report on Form 10-K. 87Table of ContentsCash, cash equivalents, investments and certain financial obligations as of December 31, 2017 and 2016 consisted of the following (in thousands exceptfor percentages): December 31, 2017 2016 $ Change % ChangeCash and cash equivalents$192,114 $274,305 $(82,191) (30)%Investments136,593 304,781 (168,188) (55)%Total$328,707 $579,086 $(250,379) (43)% Outstanding principal on 2023 Senior Notes$475,000 $500,000 $(25,000) (5)%Outstanding principal on 2022 Convertible Notes320,000 — 320,000 N/AOutstanding principal on 2019 Convertible Notes21,417 199,998 (178,581) (89)%Outstanding principal on 2015 Term Loan Facility— 328,125 (328,125) (100)%Total$816,417 $1,028,123 $(211,706) (21)% Cash FlowsThe following table presents a summary of the primary sources and uses of cash for the years ended December 31, 2017, 2016 and 2015 (in thousands): For the Years Ended December 31 2017 comparedto 2016 2016 compared to2015(In thousands, except percentages)2017 2016 2015 Net cash provided by operating activities$107,908 $246,222 $95,981 $(138,314) $150,241Net cash provided by (used in) investing activities$102,920 $(72,704) $(899,041) $175,624 $826,337Net cash (used in) provided by financing activities$(293,019) $(127,918) $912,469 $(165,101) $(1,040,387)Net (decrease) increase in cash and cash equivalents$(82,191) $45,600 $109,409 $(127,791) $(63,809)Operating ActivitiesCash flows from operating activities represent the cash receipts and disbursements related to all of our activities other than investing and financingactivities. We expect cash provided from operating activities will continue to be our primary source of funds to finance operating needs and capitalexpenditures. We have historically financed our operating and capital expenditures primarily through cash flows earned through our operations. We expectto continue funding our current and planned operating requirements principally through our cash flows from operations.Operating cash flow is derived by adjusting our net income for:•Non-cash operating items such as depreciation and amortization, impairment charges, acquired IPR&D and equity-based compensation;•Changes in operating assets and liabilities which reflect timing differences between the receipt and payment of cash associated with transactionsand when they are recognized in results of operations; and•Changes associated with the fair value of contingent payments associated with our acquisitions of businesses.For 2017 compared to 2016, net cash flows provided by operations decreased by $138.3 million, driven primarily by a $85.3 million decrease in netincome as adjusted for non-cash charges and a $53.0 million decrease due to changes in operating assets and liabilities.For 2016 compared to 2015, net cash flows provided by operations increased by $150.2 million driven primarily by a $39.0 million increase in netincome as adjusted for non-cash charges and a $111.3 million increase due to changes in operating assets and liabilities.88Table of ContentsInvesting ActivitiesCash flows provided from investing activities was $102.9 million in 2017. This increase was due to proceeds from sales of investments, net of purchasesof $167.7 million, offset by a payment for Intrarosa developed technology of $55.8 million and capital expenditures of $9.0 million. Cash used in investingactivities in 2016 was $72.7 million. This was due to purchases of investments, net of proceeds of $67.2 million and $5.5 million of capital expenditures.For 2016 compared to 2015, the decrease in net cash flows used in investing activities of $826.3 million was primarily due to the 2015 Acquisition ofCBR of $682.4 million and a net decrease in the purchase and sales of our investments of $148.5 million.Financing ActivitiesCash used in financing activities was $293.0 million in 2017. This use of cash was driven by the early retirement of $328.1 million of our 2015 TermLoan (as defined below), the repurchase of a substantial portion of our 2019 Convertible Notes (as defined below) for $191.7 million, and the repurchase of$19.5 million of common stock, partially offset by the issuance of $320.0 million 2022 Convertible Notes (as defined below). Cash used in financingactivities in 2016 was $127.9 million driven primarily by payments of contingent consideration of $92.1 million, repurchase of common stock of $20.0million and principal debt payments of $17.5 million.For 2016 compared to 2015, the increase in cash used in financing activities of $1.0 billion was primarily attributable to $834.8 million of proceeds fromlong term debt offerings in 2015 and $407.5 million in net proceeds from the aggregate issuance of common stock from our March 2015 and August 2015public offerings, partially offset by $92.1 million in contingent consideration payments made in 2016 to the former Lumara shareholders, $20.0 million ofcash paid in 2016 for the repurchase of shares under our share repurchase program and $17.5 million of mandatory debt principal payments in 2016.Future Liquidity ConsiderationsWe expect that our cash, cash equivalents and investments balances will be positively impacted by operating profits in 2018. We expect cash generatedby operating profits may be offset by the $50.0 million milestone payment that we may pay in the first half of 2018 to the former Lumara Health securityholders based on the achievement of a net sales milestone of Makena, a $20 million milestone payment expected to be made to Palatin upon the acceptanceby the FDA of our NDA for bremelanotide, a $10.0 million milestone payment expected to be made to Endoceutics in April 2018 upon the first anniversary ofthe close of the Endoceutics license, interest to be paid and cash taxes, primarily state taxes due during year. We believe that our cash, cash equivalents andinvestments as of December 31, 2017, and the cash we currently expect to receive from sales of our products and services, and earnings on our investments,will be sufficient to satisfy our cash flow needs for the foreseeable future.Borrowings and Other LiabilitiesIn the second quarter of 2017, we issued $320.0 million aggregate principal amount of convertible senior notes due 2022 (the “2022 ConvertibleNotes”), as discussed in more detail in Note Q, “Debt,” to our consolidated financial statements included in this Annual Report on Form 10‑K and receivednet proceeds of $310.4 million from the sale of the 2022 Convertible Notes, after deducting fees and expenses of $9.6 million. The 2022 Convertible Notesare senior unsecured obligations and bear interest at a rate of 3.25% per year, payable semi-annually in arrears on June 1 and December 1 of each year,beginning on December 1, 2017. The 2022 Convertible Notes will mature on June 1, 2022, unless earlier repurchased or converted. Upon conversion of the2022 Convertible Notes, such 2022 Convertible Notes will be convertible into, at our election, cash, shares of our common stock, or a combination thereof, ata conversion rate of 36.5464 shares of common stock per $1,000 principal amount of the 2022 Convertible Notes, which corresponds to an initial conversionprice of approximately $27.36 per share of our common stock. The conversion rate is subject to adjustment from time to time. The 2022 Convertible Noteswere not convertible as of December 31, 2017.89Table of ContentsIn August 2015, in connection with the CBR acquisition, we completed a private placement of $500.0 million aggregate principal amount of 7.875%Senior Notes due 2023 (the “2023 Senior Notes”) and entered into a credit agreement with a group of lenders, including Jefferies Finance LLC, who acted asadministrative and collateral agent, that provided us with, among other things, a six-year $350.0 million term loan facility (the “2015 Term Loan Facility”).The 2023 Senior Notes, which are senior unsecured obligations, will mature on September 1, 2023 and will bear interest at a rate of 7.875% per year, withinterest payable semi-annually on September 1 and March 1 of each year, which began in March 2016. On May 11, 2017, we repaid the remaining $321.8million of outstanding borrowings and accrued interest of, and terminated, the 2015 Term Loan Facility and recognized a $9.7 million loss on debtextinguishment. In October 2017, we repurchased $25.0 million principal of the 2023 Senior Notes in a privately negotiated transaction with cash on hand.For additional information, see Note Q, “Debt,” to our consolidated financial statements included in this Annual Report on Form 10‑K. In February 2014, we issued $200.0 million aggregate principal amount of 2.5% convertible senior notes due February 15, 2019 (the “2019 ConvertibleNotes”). In May 2017 and September 2017, we entered into privately negotiated transactions with certain investors to repurchase approximately $158.9million and $19.6 million, respectively, aggregate principal amount of the 2019 Convertible Notes for an aggregate repurchase price of approximately$171.3 million and $21.4 million, respectively, including accrued interest, as discussed in more detail in Note Q, “Debt,” to our consolidated financialstatements included in this Annual Report on Form 10-K. The remaining 2019 Convertible Notes are senior unsecured obligations and bear interest at a rateof 2.5% per year, payable semi-annually in arrears on February 15 and August 15 of each year. The 2019 Convertible Notes will mature on February 15, 2019,unless repurchased or converted earlier. The 2019 Convertible Notes will be convertible into cash, shares of our common stock, or a combination thereof, atour election, at a conversion rate of 36.9079 shares of common stock per $1,000 principal amount of the 2019 Convertible Notes, which corresponds to aconversion price of approximately $27.09 per share of our common stock. The conversion rate is subject to adjustment from time to time. The 2019Convertible Notes were not convertible as of December 31, 2017. Share Repurchase Program In January 2016, we announced that our board of directors had authorized a program to repurchase up to $60.0 million in shares of our common stock.The repurchase program does not have an expiration date and may be suspended for periods or discontinued at any time. Under the program, we maypurchase our stock from time to time at the discretion of management in the open market or in privately negotiated transactions. The number of sharesrepurchased and the timing of the purchases will depend on a number of factors, including share price, trading volume and general market conditions, alongwith working capital requirements, general business conditions and other factors. We may also from time to time establish a trading plan under Rule 10b5-1of the Securities and Exchange Act of 1934 to facilitate purchases of our shares under this program. During 2017, we repurchased and retired 1,366,266 sharesof common stock under this repurchase program for $19.5 million, at an average purchase price of $14.27 per share. During 2016, we repurchased and retired831,744 shares of common stock under this repurchase program for $20.0 million, at an average purchase price of $24.05 per share. Contractual ObligationsOur 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, debt obligations (including interest payments), and other purchase obligations.Future lease obligations and purchase commitments, as of December 31, 2017, are as follows (in thousands): Payment due by period Total Less than 1 year 1-3 years 3-5 years More than 5 yearsFacility lease obligations$10,943 $2,792 $6,289 $1,862 $—Purchase commitments16,476 16,476 — — —2019 Convertible Notes22,019 535 21,484 — —2022 Convertible Notes366,800 10,400 20,800 335,600 —2023 Senior Notes690,087 37,406 74,813 74,813 503,055Total1,106,325 67,609 123,386 412,275 503,055Facility Lease ObligationsIn 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 executive90Table of Contentsoffices. Beginning in September 2013, the initial term of the lease is five years and two months with one five-year extension term at our option. During 2015,we entered into several amendments to the original lease to add additional space and to extend the term of the original lease to June 2021. In addition to baserent, 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, the Landlord holds a security deposit in the form of an irrevocable letter ofcredit, which is classified on our balance sheet as a long-term asset and was $0.7 million and $0.6 million as of December 31, 2017 and 2016, respectively.We lease certain real property located at 611 Gateway Boulevard, South San Francisco, California. The lease expires in July 2022.Facility-related rent expense, net of deferred rent amortization, for all the leased properties was $3.0 million, $2.8 million, and $1.5 million for 2017,2016 and 2015, respectively.Purchase ObligationsPurchase obligations primarily represent minimum purchase commitments for inventory. As of December 31, 2017, our minimum purchase commitmentstotaled $16.5 million.Contingent Consideration Related to Business CombinationsIn connection with our acquisition of Lumara Health in November 2014, we agreed to pay up to $350.0 million in milestone payments based on theachievement of certain sales thresholds. Due to the contingent nature of these milestone payments, we cannot predict the amount or timing of such paymentswith certainty. During 2017 and 2016, we paid $50.0 million and $100.0 million of these milestone payments, respectively. Subject to achieving specifiedsales thresholds, we expect to pay a $50.0 million milestone payment in the first half of 2018.As of December 31, 2017, the contingent consideration related to the Lumara Health and MuGard acquisitions are our only financial liabilities measuredand recorded using Level 3 inputs in accordance with accounting guidance for fair value measurements, and represent 100% of the total liabilities measuredat fair value. See Note E, “Fair Value Measurements,” to our consolidated financial statements included in this Annual Report on Form 10-K for moreinformation.Contingent Regulatory and Commercial Milestone PaymentsIn connection with the option agreement entered into with Velo, if we exercise the option to acquire the DIF rights, we will be responsible for paymentstotaling up to $65.0 million (including the payment of the option exercise price and the regulatory milestone payments) and up to an additional $250.0million in sales milestone payments based on the achievement of annual sales milestones at targets ranging from $100.0 million to $900.0 million. Velobegan its Phase 2b/3a clinical study in the second quarter of 2017, and until we exercise our option, no contingencies related to this agreement have beenrecorded in our consolidated financial statements as of December 31, 2017.Under the terms of the Endoceutics License Agreement, which we entered into with Endoceutics in February 2017, we have agreed to make a payment toEndoceutics of $10.0 million in April 2018 on the first anniversary of the closing. In addition, we have also agreed to pay tiered royalties to Endoceuticsequal to a percentage of net sales of Intrarosa in the U.S. ranging from the mid-teens (for calendar year net sales up to $150.0 million) to mid twenty percent(for any calendar year net sales that exceed $1 billion). Endoceutics is also eligible to receive certain sales milestone payments, including a first salesmilestone payment of $15.0 million, which would be triggered when Intrarosa annual net U.S. sales exceed $150.0 million, and a second milestone paymentof $30.0 million, which would be triggered when annual net U.S. sales exceed $300.0 million. If annual net U.S. sales exceed $500.0 million, there areadditional sales milestone payments totaling up to $850.0 million, which would be triggered at various increasing sales thresholds.91Table of ContentsUnder the terms of the Palatin License Agreement, which we entered into with Palatin in January 2017, we have agreed to make future contingentpayments of (a) up to $80.0 million upon achievement of certain regulatory milestones, including $20.0 million upon the acceptance by the FDA of our NDAfor bremelanotide and $60.0 million upon FDA approval, and (b) up to $300.0 million of aggregate sales milestone payments upon the achievement ofcertain annual net sales over the course of the license. The first sales milestone of $25.0 million will be triggered when bremelanotide annual net sales exceed$250.0 million. We are also obligated to pay Palatin tiered royalties on annual net sales of bremelanotide, on a product-by-product basis, in all countries ofNorth America ranging from the high-single digits to the low double-digits.In connection with the development and license agreement entered into with Antares Pharma, Inc. (“Antares”), we are required to pay royalties toAntares on net sales of the Makena auto-injector commencing on the launch of the Makena auto-injector in a particular country until the Makena auto-injector is no longer sold or offered for sale in such country. The royalty rates range from high single digit to low double digits and are tiered based on levelsof net sales of the Makena auto-injector and decrease after the expiration of licensed patents or where there are generic equivalents to the Makena auto-injector being sold in a particular country. In addition, we are required to pay Antares sales milestone payments upon the achievement of certain annual netsales.Other CommitmentsUnder the terms of the Endoceutics License Agreement, we have committed to an annual minimum marketing spend for Intrarosa and are also required toprovide funding of approximately $20.0 million for clinical studies being conducted by Endoceutics to support an application for U.S. regulatory approvalof Intrarosa for the treatment of HSDD in post-menopausal women.Employment ArrangementsWe 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.Indemnification ObligationsIn 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 O, “Commitments and Contingencies,” to our consolidatedfinancial statements included in this Annual Report on Form 10-K.Legal ProceedingsFor detailed information on our legal proceedings, see Note O, “Commitments and Contingencies,” to our consolidated financial statements included inthis Annual Report on Form 10-K. Off-Balance Sheet ArrangementsAs of December 31, 2017, 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 RiskAs of December 31, 2017 and 2016, our investments equaled $136.6 million and $304.8 million, respectively, and were invested in corporate debtsecurities, U.S. treasury and government agency securities, commercial paper, and certificates of deposit. Our investments meet high credit quality anddiversification standards, as specified in our investment policy. Our investment policy also limits the amount of our credit exposure to any one issue or issuer,excluding U.S. government entities, and seeks to manage these assets to achieve our goals of preserving principal, maintaining adequate liquidity at alltimes, and maximizing returns. These investments are subject to interest rate risk. The modeling technique used measures the change in fair values arisingfrom an immediate hypothetical shift in market interest rates and assumes that ending fair values include92Table of Contentsprincipal plus accrued interest. If market interest rates for comparable investments were to increase or decrease immediately and uniformly by 50 basis points,or one-half of a percentage point, from levels as of December 31, 2017 and 2016, this would have resulted in a hypothetical change in fair value of ourinvestments of approximately $0.7 million and $1.4 million, respectively. These amounts are determined by considering the impact of the hypotheticalinterest rate movements on our available-for-sale investment portfolios. This analysis does not consider the effect of credit risk as a result of the changes inoverall economic activity that could exist in such an environment.Equity Price RiskConvertible NotesOn May 10, 2017, we issued $320.0 million aggregate principal amount of the 2022 Convertible Notes. The 2022 Convertible Notes are seniorunsecured obligations and bear interest at a rate of 3.25% per year, payable semi-annually in arrears on June 1 and December 1 of each year, beginning onDecember 1, 2017. The 2022 Convertible Notes will mature on June 1, 2022, unless earlier repurchased or converted. Upon conversion of the 2022Convertible Notes, such 2022 Convertible Notes will be convertible into, at our election, cash, shares of our common stock, or a combination thereof, at aconversion rate of 36.5464 shares of common stock per $1,000 principal amount of the 2022 Convertible Notes, which corresponds to an initial conversionprice of approximately $27.36 per share of our common stock. As of December 31, 2017, the fair value of the Convertible Notes was $282.9 million.On February 14, 2014, we issued $200.0 million aggregate principal amount of 2019 Convertible Notes. The 2019 Convertible Notes are seniorunsecured obligations 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. In May 2017and September 2017, we entered into privately negotiated transactions with certain investors to repurchase approximately $158.9 million and $19.6 million,respectively, aggregate principal amount of the 2019 Convertible Notes. The remaining 2019 Convertible Notes will mature on February 15, 2019, unlessrepurchased or converted earlier. The 2019 Convertible Notes will be convertible into cash, shares of our common stock, or a combination thereof, at ourelection, at a conversion rate of approximately 36.9079 shares of common stock per $1,000 principal amount of the Convertible Notes, which corresponds toa conversion price of approximately $27.09 per share of our common stock and represents a conversion premium of approximately 35% based on the lastreported sale price of our common stock of $20.07 on February 11, 2014, the date the notes offering was priced. As of December 31, 2017, the fair value of the2019 Convertible Notes was $21.6 million.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.93Table of ContentsITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA:Index To Consolidated Financial StatementsManagement’s Annual Report on Internal Control over Financial Reporting95Report of Independent Registered Public Accounting Firm96Consolidated Balance Sheets - as of December 31, 2017 and 201698Consolidated Statements of Operations - for the years ended December 31, 2017, 2016, and 201599Consolidated Statements of Comprehensive (Loss) Income - for the years ended December 31, 2017, 2016, and 2015100Consolidated Statements of Stockholders’ Equity - for the years ended December 31, 2017, 2016, and 2015101Consolidated Statements of Cash Flows - for the years ended December 31, 2017, 2016, and 2015102Notes to Consolidated Financial Statements10494Table of ContentsMANAGEMENT’S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTINGManagement is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f)and 15d-15(f) under the Securities and Exchange Act of 1934, as amended. Our internal control over financial reporting is a process designed under thesupervision of our principal executive officer and principal financial officer to provide reasonable assurance regarding the reliability of financial reportingand the preparation of our financial statements for external reporting purposes in accordance with U.S. generally accepted accounting principles. Because ofits inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectivenessto future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with thepolicies or procedures 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, 2017 based on the framework in Internal Control -Integrated Framework issued by the Committee of Sponsoring Organizationsof the Treadway Commission (COSO) in 2013. Based on this assessment, management concluded that our internal control over financial reporting waseffective as of December 31, 2017.The effectiveness of our internal control over financial reporting as of December 31, 2017, has been audited by PricewaterhouseCoopers LLP, anindependent registered public accounting firm, as stated in their report which is included herein.95Table of ContentsReport of Independent Registered Public Accounting FirmTo the Board of Directors and Stockholders of AMAG Pharmaceuticals, Inc.Opinions on the Financial Statements and Internal Control over Financial ReportingWe have audited the accompanying consolidated balance sheets of AMAG Pharmaceuticals, Inc. and its subsidiaries as of December 31, 2017 and 2016, andthe related consolidated statements of operations, comprehensive (loss) income, stockholders’ equity and cash flows for each of the three years in the periodended December 31, 2017, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited theCompany's internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control - Integrated Framework(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as ofDecember 31, 2017 and 2016, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2017 inconformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all materialrespects, effective internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control - Integrated Framework(2013) issued by the COSO.Change in Accounting PrincipleAs discussed in Note T to the consolidated financial statements, the Company changed the manner in which it accounts for and presents the income taxeffects of share based payment transactions in 2017.Basis for OpinionsThe Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, andfor its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on InternalControl over Financial Reporting. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company'sinternal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting OversightBoard (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and theapplicable rules and regulations of the Securities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonableassurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internalcontrol over financial reporting was maintained in all material respects.Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financialstatements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis,evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles usedand significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internalcontrol over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weaknessexists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performingsuch other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.Definition and Limitations of Internal Control over Financial ReportingA company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reportingand the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal controlover financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairlyreflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accounting principles, and that receipts and96Table of Contentsexpenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) providereasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have amaterial effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation ofeffectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliancewith the policies or procedures may deteriorate./s/PricewaterhouseCoopers LLPBoston, MassachusettsFebruary 28, 2018We have served as the Company’s auditor since 1982.97Table of ContentsAMAG PHARMACEUTICALS, INC.CONSOLIDATED BALANCE SHEETS(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) As of December 31, 2017 2016ASSETS Current assets: Cash and cash equivalents$192,114 $274,305Marketable securities136,593 304,781Accounts receivable, net103,501 92,375Inventories37,356 37,258Prepaid and other current assets12,304 9,839Total current assets481,868 718,558Property, plant and equipment, net25,996 24,460Goodwill639,484 639,484Intangible assets, net704,470 1,092,178Restricted cash656 2,593Other long-term assets762 1,153Total assets$1,853,236 $2,478,426LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable$10,335 $3,684Accrued expenses175,490 156,008Current portion of long-term debt— 21,166Current portion of acquisition-related contingent consideration49,399 97,068Deferred revenues42,494 34,951Total current liabilities277,718 312,877Long-term liabilities: Long-term debt, net466,291 785,992Convertible notes, net268,392 179,363Acquisition-related contingent consideration686 50,927Deferred tax liabilities23,927 197,066Deferred revenues24,387 14,850Other long-term liabilities1,591 2,962Total liabilities1,062,992 1,544,037Commitments and Contingencies (Note O) 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, 117,500,000 shares authorized; 34,083,112 and 34,336,147 sharesissued and outstanding at December 31, 2017 and December 31, 2016, respectively341 343Additional paid-in capital1,271,628 1,238,031Accumulated other comprehensive loss(3,908) (3,838)Accumulated deficit(477,817) (300,147)Total stockholders’ equity790,244 934,389Total liabilities and stockholders’ equity$1,853,236 $2,478,426The accompanying notes are an integral part of these consolidated financial statements.98Table of ContentsAMAG PHARMACEUTICALS, INC.CONSOLIDATED STATEMENTS OF OPERATIONS(IN THOUSANDS, EXCEPT PER SHARE DATA) Years Ended December 31, 2017 2016 2015Revenues: Product sales, net$495,645 $432,170 $341,816Service revenues, net114,177 99,604 24,132License fee, collaboration and other revenues124 317 52,328Total revenues609,946 532,091 418,276Costs and expenses: Cost of product sales (excluding impairment)161,349 96,314 78,509Cost of services21,817 20,575 9,992Research and development expenses75,017 66,084 42,878Acquired in-process research and development65,845 — —Selling, general and administrative expenses259,933 249,870 160,309Impairment of intangible assets319,246 19,663 —Acquisition-related costs— — 11,232Restructuring expenses— 715 4,136Total costs and expenses903,207 453,221 307,056Operating (loss) income(293,261) 78,870 111,220Other income (expense): Interest expense(68,382) (73,153) (53,251)Loss on debt extinguishment(10,926) — (10,449)Interest and dividend income2,810 3,149 1,512Other income (expense)(335) 189 (9,188)Total other income (expense)(76,833) (69,815) (71,376)(Loss) income before income taxes(370,094) 9,055 39,844Income tax (benefit) expense(170,866) 11,538 7,065Net (loss) income$(199,228) $(2,483) $32,779Net (loss) income per share: Basic$(5.71) $(0.07) $1.04Diluted$(5.71) $(0.07) $0.93Weighted average shares outstanding used to compute net (loss) income per share: Basic34,907 34,346 31,471Diluted34,907 34,346 35,308The accompanying notes are an integral part of these consolidated financial statements.99Table of ContentsAMAG PHARMACEUTICALS, INC.CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME(IN THOUSANDS) Years Ended December 31, 2017 2016 2015Net (loss) income$(199,228) $(2,483) $32,779Other comprehensive (loss) income Unrealized (losses) gains on marketable securities: Holding (losses) gains arising during period, net of tax(70) 261 (4)Reclassification adjustment for gains (losses) included in net (loss) income, net of tax— 106 (584)Net unrealized (losses) gains on securities(70) 367 (588)Total comprehensive (loss) income$(199,298) $(2,116) $32,191The accompanying notes are an integral part of these consolidated financial statements.100Table of ContentsAMAG PHARMACEUTICALS, INC.CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY(IN THOUSANDS, EXCEPT SHARES) Common Stock Additional Paid-in Capital Accumulated OtherComprehensiveIncome (Loss) AccumulatedDeficit Total Stockholders'Equity Shares AmountBalance at December 31, 201425,599,550 $256 $793,757 $(3,617) $(330,443) $459,953Shares issued in connection with financings, net ofissuance costs of $24.7 million8,196,362 82 407,395 — — 407,477Net shares issued in connection with the exerciseof stock options and vesting of restricted stockunits937,205 9 15,397 — — 15,406Non-cash equity-based compensation— — 17,237 — — 17,237Unrealized losses on securities, net of tax— — — (588) — (588)Net income— — — — 32,779 32,779Balance at December 31, 201534,733,117 347 1,233,786 (4,205) (297,664) 932,264Net shares issued in connection with the exerciseof stock options and vesting of restricted stockunits355,450 3 227 — — 230Repurchase of common stock pursuant to the 2016Share Repurchase Program(831,744) (8) (19,992) — — (20,000)Issuance of common stock under employee stockpurchase plan79,324 1 1,467 — — 1,468Non-cash equity-based compensation— — 22,543 — — 22,543Unrealized losses on securities, net of tax— — — 367 — 367Net loss— — — — (2,483) (2,483)Balance at December 31, 201634,336,147 343 1,238,031 (3,838) (300,147) 934,389Settlement of warrants— — 323 — — 323Equity component of the 2022 Convertible Notes,net of issuance costs and taxes— — 43,236 — — 43,236Cumulative effect of previously unrecognizedexcess tax benefits related to stock compensation— — — — 21,558 21,558Equity component of debt repurchase— — (27,988) — — (27,988)Shares issued in connection with EndoceuticsLicense Agreement600,000 6 13,494 — — 13,500Repurchase and retirement of common stockpursuant to the 2016 Share Repurchase Program(1,366,266) (14) (19,453) — — (19,467)Issuance of common stock under employee stockpurchase plan120,580 1 1,593 — — 1,594Net shares issued in connection with the exerciseof stock options and vesting of restricted stockunits, net of withholdings392,651 5 (1,272) — — (1,267)Non-cash equity based compensation— — 23,664 — — 23,664Unrealized losses on securities, net of tax— — — (70) — (70)Net loss— — — — (199,228) (199,228)Balance at December 31, 201734,083,112 $341 $1,271,628 $(3,908) $(477,817) $790,244The accompanying notes are an integral part of these consolidated financial statements. 101Table of ContentsAMAG PHARMACEUTICALS, INC.CONSOLIDATED STATEMENTS OF CASH FLOWS(IN THOUSANDS) Years Ended December 31, 2017 2016 2015Cash flows from operating activities: Net (loss) income$(199,228) $(2,483) $32,779Adjustments to reconcile net (loss) income to net cash provided by operating activities: Depreciation and amortization155,538 99,886 69,103Impairment of intangible assets319,246 19,663 —Provision for bad debt expense3,852 3,209 —Amortization of premium/discount on purchased securities302 624 2,152Write-down of inventory to net realizable value— — 1,235Gain (loss) on disposal of property and equipment265 — —Non-cash equity-based compensation expense 23,664 22,543 17,237Non-cash IPR&D expense945 — —Non-cash loss on debt extinguishment10,301 — 6,426Amortization of debt discount and debt issuance costs14,395 12,105 11,379(Loss) gain on sale of investments, net70 38 (14)Change in fair value of contingent consideration(47,686) 25,683 4,271Deferred income taxes(178,421) 7,279 5,007Changes in operating assets and liabilities: Accounts receivable, net(14,978) (9,906) (36,913)Inventories(2,331) (2,355) (5,237)Receivable from collaboration— 428 4,090Prepaid and other current assets(285) 4,095 4,034Accounts payable and accrued expenses16,834 49,037 7,876Deferred revenues17,080 24,522 (22,197)Payment of contingent consideration in excess of acquisition date fair value(10,432) (8,116) —Repayment of term loan attributable to original issue discount— — (12,491)Other assets and liabilities(1,223) (30) 7,244Net cash provided by operating activities107,908 246,222 95,981Cash flows from investing activities: Acquisition of Lumara Health, net of acquired cash— — 562Acquisition of CBR, net— — (682,356)Proceeds from sales or maturities of investments294,957 127,479 208,966Purchase of investments(127,249) (194,723) (424,759)Acquisition of Intrarosa developed technology(55,800) — —Change in restricted cash— — (195)Capital expenditures(8,988) (5,460) (1,259)Net cash provided by (used in) investing activities102,920 (72,704) (899,041)The accompanying notes are an integral part of these consolidated financial statements.102Table of ContentsAMAG PHARMACEUTICALS, INC.CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)(IN THOUSANDS) Years Ended December 31, 2017 2016 2015Cash flows from financing activities: Proceeds from the issuance of common stock, net of underwriting discount and other expenses— — 407,477Long-term debt principal payments(353,125) (17,502) (327,509)Proceeds from long-term debt— — 834,750Proceeds from 2022 Convertible Notes issuance320,000 — —Payments to repurchase 2019 Convertible Notes(191,730) — —Proceeds to settle warrants323 — —Payment of convertible debt issuance costs(9,553) — (10,004)Payment of contingent consideration(39,793) (92,130) (456)Payment to former CBR shareholders— — (7,195)Payments for repurchases of common stock(19,466) (20,000) —Proceeds from the issuance and exercise of common stock options3,021 3,885 15,406Payments of employee tax withholding related to equity-based compensation(2,696) (2,171) —Net cash (used in) provided by financing activities(293,019) (127,918) 912,469Net (decrease) increase in cash and cash equivalents(82,191) 45,600 109,409Cash and cash equivalents at beginning of the year274,305 228,705 119,296Cash and cash equivalents at end of the year$192,114 $274,305 $228,705Supplemental data of cash flow information: Cash paid for taxes$5,296 $5,309 $2,373Cash paid for interest$56,959 $62,381 $28,014Non-cash investing activities: Fair value of common stock issued in connection with the acquisition of the Intrarosa intangibleasset$12,555 $— $—Contingent consideration accrued for the acquisition of the Intrarosa intangible asset$9,300 $— $—The accompanying notes are an integral part of these consolidated financial statements.103Table of ContentsAMAG PHARMACEUTICALS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS A. DESCRIPTION OF BUSINESSAMAG Pharmaceuticals, Inc., a Delaware corporation, was founded in 1981. We are a biopharmaceutical company focused on developing and deliveringimportant therapeutics, conducting clinical research in areas of unmet need and creating education and support programs for the patients and families weserve. Our currently marketed products support the health of patients in the areas of maternal and women’s health, anemia management and cancer supportivecare, including Makena® (hydroxyprogesterone caproate injection), Intrarosa® (prasterone) vaginal inserts, Feraheme® (ferumoxytol injection) forintravenous (“IV”) use, and MuGard® Mucoadhesive Oral Wound Rinse. In addition, in February 2017, we acquired the rights to research, develop andcommercialize bremelanotide in North America. Through services related to the preservation of umbilical cord blood stem cell and cord tissue units operatedthrough Cord Blood Registry® (“CBR”), we also help families to preserve newborn stem cells, which are used today in transplant medicine for certain cancersand blood, immune and metabolic disorders, and which we believe have the potential to play a valuable role in the ongoing development of regenerativemedicine.We are subject to risks common to companies in the pharmaceutical industry including, but not limited to (as such risks pertain to our business) ourability to successfully commercialize our products and services, intense competition, including from generic products; maintaining and defending theproprietary nature of our technology; our dependence upon third-party manufacturers and our potential inability to obtain raw or other materials; our relianceon and the extent of reimbursement from third parties for the use of our products, including the impact of generic competitors, Makena’s high Medicaidreimbursement concentration and the limited level of reimbursement for Intrarosa; our ability to expand our product portfolio through business developmenttransactions; the approval of bremelanotide and our ability to commercialize bremelanotide, if approved; employee retention and our ability to manage ourexpanded product portfolio and operations; potential litigation, including securities and product liability suits; our ability to work effectively andcollaboratively with our licensors; our reliance on other third parties in our business, including to conduct our clinical trials and undertake our product anddistribution; our ability to attract and retain key employees; if our storage facility in Tucson, Arizona is damaged or destroyed; our potential failure tocomply with federal and state healthcare fraud and abuse laws, marketing disclosure laws, cord blood and tissue regulations and laws or other federal andstate laws and regulations and potential civil or criminal penalties as a result thereof; uncertainties regarding reporting and payment obligations undergovernment pricing programs; post-approval commitments for Makena; our ability to comply with data protection laws and regulations; the impact ofdisruptions to our information technology systems; our level of and ability to repay our indebtedness; our access to sufficient capital; the availability of netoperating loss carryforwards and other tax assets; potential differences between actual future results and the estimates or assumptions used by us inpreparation of our consolidated financial statements, including goodwill and intangible assets; the volatility of our stock price; the potential fluctuation ofour operating results; and provisions in our charter, by-laws and certain contracts that discourage an acquisition of our company.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.”B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESBasis of Presentation and Principles of ConsolidationThe accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the U.S.(“GAAP”) and include the accounts of our wholly-owned subsidiaries. Our results of operations for 2015 include the results of CBR, subsequent to its August17, 2015 acquisition date. See Note C, “Business Combinations,” for additional information. All intercompany balances and transactions have beeneliminated in consolidation.Use of Estimates and AssumptionsThe preparation of consolidated financial statements in conformity with GAAP requires management to make certain estimates and assumptions thataffect the reported amounts of assets, liabilities, revenues and expenses, and the related disclosure of contingent assets and liabilities. The most significantestimates and assumptions are used to determine amounts and values of, but are not limited to: revenue recognition related to product sales and servicesrevenue; product sales allowances and accruals; allowance for doubtful accounts; marketable securities; inventory; acquisition date fair value andsubsequent fair value estimates used to assess impairment of long-lived assets, including goodwill, in-process research and development (“IPR&D”) and otherintangible assets; contingent consideration; debt obligations; certain accrued liabilities, including clinical trial accruals and restructuring liabilities; incometaxes, inclusive of valuation allowances, and equity-based compensation expense. Actual results could differ materially from those estimates.104Table of ContentsCash and Cash EquivalentsCash 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 at the date of acquisition. We consider all highly liquid marketable securities with a maturity of three months orless as of the acquisition date to be cash equivalents. At December 31, 2017 and 2016, substantially all of our cash and cash equivalents were held in eithercommercial bank accounts or money market funds.Marketable SecuritiesWe account for and classify our marketable securities as either “available-for-sale,” “held-to-maturity,” or “trading debt securities,” in accordance withthe accounting guidance related to the accounting and classification of certain investments in marketable securities. The determination of the appropriateclassification by us is based primarily on management’s ability and intent to sell the debt security at the time of purchase. As of December 31, 2017 and2016, all of our marketable securities were classified as available-for-sale.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 marketable securities are stated at fair value with their unrealized gains and losses included in accumulated other comprehensive income (loss) withinthe consolidated statements of stockholders’ equity, until such gains and losses are realized in other income (expense) within the consolidated statements ofoperations or until an unrealized loss is considered other-than-temporary.We recognize other-than-temporary impairments of our marketable securities when there is a decline in fair value below the amortized cost basis and if(a) we have the intent to sell the security or (b) it is more likely than not that we will be required to sell the security prior to recovery of its amortized costbasis. If either of these conditions is met, we recognize the difference between the amortized cost of the security and its fair value at the impairmentmeasurement date in our consolidated statements of operations. If neither of these conditions is met, we must perform additional analysis to evaluate whetherthe unrealized loss is associated with the creditworthiness of the issuer of the security rather than other factors, such as interest rates or market factors. If wedetermine from this analysis that we do not expect to receive cash flows sufficient to recover the entire amortized cost of the security, a credit loss exists, theimpairment is considered other-than-temporary and is recognized in our consolidated statements of operations.InventoryInventory 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 U.S. Food and Drug Administration (the “FDA”) or other regulatory agencies, we expense costs relating to the production of inventory inthe period incurred, unless we believe regulatory approval and subsequent commercialization of the product candidate is probable and we expect the futureeconomic benefit from sales of the product to be realized, at which point we capitalize the costs as inventory. We assess the costs capitalized prior toregulatory approval each quarter for indicators of impairment, such as a reduced likelihood of approval. We expense costs associated with clinical trialmaterial 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, our products have a shelf-life ranging from three to five years. As a result of comparison to internal sales forecasts, we expect tofully realize the carrying value of our finished goods inventory. If actual market conditions are less favorable than those projected by management, inventorywrite-downs may be required. Charges for inventory write-downs are not reversed if it is later determined that the product is saleable.Restricted CashAs of December 31, 2017 and 2016, we classified $0.7 million and $2.6 million of our cash as restricted cash, respectively. The December 31, 2016balance included both $2.0 million held in a restricted fund previously established by Lumara Health, Inc. (“Lumara Health”) in connection with its Chapter11 plan of reorganization to pay potential claims against its former directors and officers, as well as a $0.6 million security deposit delivered to the landlordof our Waltham, Massachusetts105Table of Contentsheadquarters in the form of an irrevocable letter of credit. In December 2017, the $2.0 million previously established by Lumara in connection with itsChapter 11 plan of reorganization was unrestricted and the funds were moved into operating cash.Concentrations and Significant Customer InformationFinancial instruments which potentially subject us to concentrations of credit risk consist principally of cash and cash equivalents, marketable securities,and accounts receivable. We currently hold our excess cash primarily in institutional money market funds, corporate debt securities, U.S. treasury andgovernment agency securities, commercial paper and certificates of deposit. As of December 31, 2017, we did not have a material concentration in any singleinvestment.Our operations are located entirely within the U.S. We focus primarily on developing, manufacturing, and commercializing Makena, Feraheme, Mugard,Intrarosa, bremelanotide, and marketing and selling the CBR Services. We perform ongoing credit evaluations of our product sales customers and generallydo not require collateral. The following table sets forth customers or partners who represented 10% or more of our total revenues for 2017, 2016 and 2015: Years Ended December 31, 2017 2016 2015AmerisourceBergen Drug Corporation21% 22% 25%McKesson Corporation19% 11% 11%Takeda Pharmaceuticals Company Limited—% —% 12% Approximately 12% of our total revenues for 2015 were principally related to deferred Feraheme collaboration revenue recognized in connection withthe termination of our license, development and commercialization agreement (the “Takeda Agreement”) with Takeda Pharmaceutical Company Limited(“Takeda”), which is headquartered in Japan, and which revenues were thus generated from outside the U.S. All of the revenues generated during 2017 and2016 were generated within the U.S.Our net accounts receivable primarily represented amounts due for products sold directly to wholesalers, distributors, and specialty pharmacies andamounts due for CBR Services sold to consumers who pay for the services directly. Accounts receivable for our products and services are recorded net ofreserves for estimated chargeback obligations, prompt payment discounts and any allowance for doubtful accounts.As part of our credit management policy, we perform ongoing credit evaluations of our product sales customers, and we have not required collateral fromany customer. We maintain an allowance for doubtful accounts for estimated losses inherent in our CBR service revenues portfolio. In establishing theallowance, we consider historical losses adjusted to take into account current market conditions and customers’ financial conditions, the amount ofreceivables in dispute, and the current receivables aging and current payment patterns. Account balances are charged off against the allowance after allcollection means have been exhausted and the potential for recovery is considered remote. If the financial condition of any of our significant product salescustomers was to deteriorate and result in an impairment of its ability to make payments owed to us, an allowance for doubtful accounts may be requiredwhich could have a material effect on earnings in the period of any such adjustment. We did not experience any significant bad debts and have notestablished an allowance for doubtful accounts on our product sales at December 31, 2017 and 2016.Customers which represented greater than 10% of our accounts receivable balance as of December 31, 2017 and 2016 were as follows: December 31, 2017 2016AmerisourceBergen Drug Corporation27% 13%McKesson Corporation22% 32% We are currently dependent on a single supplier for Feraheme drug substance (produced in two separate facilities) and finished drug product as well as fordrug substance and fill finish services for Intrarosa. In addition, we rely on single sources for certain materials required to support the CBR Services. Wewould be exposed to a significant loss of revenue from the sale of our products and services if our suppliers and/or manufacturers could not fulfill demand forany reason.106Table of ContentsProperty, Plant and Equipment, NetProperty, plant and equipment are recorded at cost and depreciated when placed into service using the straight-line method based on their estimateduseful lives as follows: Useful LifeBuildings and improvements15 - 40 YearsComputer equipment and software5 YearsFurniture and fixtures5 YearsLeasehold improvementsLesser of Lease or Asset LifeLaboratory and production equipment5 YearsLand improvements10 YearsCosts 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, plant and equipment, thecost and related depreciation are removed from the accounts and any resulting gain or loss is charged to our consolidated statements of operations. Long-lived assets to be held and used are evaluated for impairment whenever events or changes in circumstances indicate that the carrying value of the asset maynot be recoverable. Determination of recoverability is based on an estimate of undiscounted future cash flows resulting from the use of the asset 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 and Asset AcquisitionsThe purchase price allocation for business combinations requires extensive use of accounting estimates and judgments to allocate the purchase price tothe identifiable tangible and intangible assets acquired and liabilities assumed based on their respective fair values. We early adopted ASU No. 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business (“ASU 2017-01”) as of January 1, 2017. Under ASU 2017-01, we firstdetermine whether substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiableassets. If this threshold is met, the single asset or group of assets, as applicable, is not a business.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 acquisition date. Acquisition-related costs are expensed as incurred. Any excess of the consideration transferred over the estimated fair values of the identifiable net assets acquired isrecorded as goodwill.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 may require a step-up adjustment to recognize the inventory at its expected net realizable value.The inventory step-up is recorded to cost of product sales in our consolidated statements of operations when related inventory is sold, and we record step-upcosts associated with clinical trial material as research and development expense.Acquisition-Related Contingent ConsiderationContingent consideration arising from a business combination is included as part of the purchase price and is recognized at its estimated fair value as ofthe acquisition date. Subsequent to the acquisition date, we measure contingent consideration arrangements at fair value for each period until thecontingency is resolved. These changes in fair value are recognized in selling, general and administrative expenses in our consolidated statements ofoperations. Changes in fair values reflect new information about the likelihood of the payment of the contingent consideration and the passage of time.GoodwillWe test goodwill at the reporting unit level for impairment on an annual basis and between annual tests if events and107Table of Contentscircumstances indicate it is more likely than not that the fair value of a reporting unit is less than its carrying value. Events that could indicate impairmentand trigger an interim impairment assessment include, but are not limited to, an adverse change in current economic and market conditions, including asignificant prolonged decline in market capitalization, a significant adverse change in legal factors, unexpected adverse business conditions, and an adverseaction or assessment by a regulator. Our annual impairment test date is October 31. We have determined that we operate in a single operating segment andhave a single reporting unit.In performing our goodwill impairment tests during 2017, we utilized the approach prescribed under the Accounting Standards Codification (“ASC”)350, as amended by Accounting Standards Update (“ASU”) 2017-04, Intangibles — Goodwill and Other (Topic 350): Simplifying the Test for GoodwillImpairment, which we adopted on January 1, 2017 (“ASU 2017-04”). ASU 2017-04 requires that an entity perform its annual, or interim, goodwill impairmenttest by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which thecarrying amount exceeds the reporting unit’s fair value.Prior to our adoption of ASU 2017-04, we utilized the two-step approach prescribed under ASC 350 in performing our goodwill impairment tests. Thefirst step required a comparison of the reporting unit’s carrying value to its fair value. If the carrying value of a reporting unit exceeded its estimated fairvalue, a second step was required to measure the amount of impairment loss, if any. The second step of the goodwill impairment test compared the impliedfair value of a reporting unit’s goodwill to its carrying value. The second step required us to perform a hypothetical purchase price allocation as of themeasurement date and estimate the fair value of net tangible and intangible assets. The fair value of intangible assets is determined as described below and issubject to significant judgment.Intangible AssetsWe amortize our intangible assets that have finite lives based on either the straight-line method, or if reliably determinable, based on the pattern in whichthe economic benefit of the asset is expected to be utilized. When such facts and circumstances exist, management compares the projected undiscountedfuture cash flows associated with the asset over its estimated useful life against the carrying amount. The impairment loss, if any, is measured as the excess ofthe carrying amount of the asset over its fair value.If we acquire a business as defined under applicable accounting standards, then the acquired IPR&D is capitalized as an intangible asset. If we acquire anasset or a group of assets that do not meet the definition of a business, then the acquired IPR&D is expensed on its acquisition date. Future costs to developthese assets are recorded to research and development expense as they are incurredAcquired IPR&D represents the fair value assigned to research and development assets that we acquire and have not been completed at the acquisitiondate. The fair value of IPR&D acquired in a business combination is capitalized on our consolidated balance sheets at the acquisition-date fair value and isdetermined by estimating the costs to develop the technology into commercially viable products, estimating the resulting revenue from the projects, anddiscounting the projected net cash flows to present value. IPR&D is not amortized, but rather is reviewed for impairment on an annual basis or morefrequently if indicators of impairment are present, until the project is completed or abandoned. If we determine that IPR&D becomes impaired or isabandoned, the carrying value is written down to its fair value with the related impairment charge recognized in our consolidated statement of operations inthe period in which the impairment occurs. Upon successful completion of each project and launch of the product, we will make a separate determination ofthe estimated useful life of the IPR&D intangible asset and the related amortization will be recorded as an expense prospectively over its estimated useful life.Additionally, we have other indefinite-lived intangible assets which we acquired through our business combinations. These assets are reviewed forimpairment on an annual basis or more frequently if indicators of impairment are present. If we determine that the asset becomes impaired, the carrying valueis written down to its fair value with the related impairment charge recognized in our consolidated statements of operations in the period in which theimpairment occurs.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;108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.PatentsWe expense all patent-related costs in selling, general and administrative expenses as incurred.Revenue Recognition and Related Sales Allowances and AccrualsOur primary sources of revenue during the reporting periods were: (a) product revenues from Makena, Feraheme, and Intrarosa; (b) service revenuesassociated with the CBR Services; and (c) license fees, collaboration and other revenues, which primarily included revenue recognized under ourcollaboration agreements, royalties received from our license agreements, and international product revenues of Feraheme derived from our collaborationagreement with Takeda, which was terminated in 2015. Revenue is recognized when the following criteria are met:•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.Product RevenueWe recognize product revenues net of certain allowances and accruals in our consolidated statements of operations at the time of sale. Our contractualadjustments include provisions for returns, pricing and prompt payment discounts, as well as wholesaler distribution fees, rebates to hospitals that qualify for340B pricing and volume-based and other commercial rebates. Governmental rebates relate to our reimbursement arrangements with state Medicaidprograms. In addition, we also monitor our distribution channel to determine whether additional allowances or accruals are required based on inventory inour sales channel. Calculating these gross to net sales adjustments involves estimates and judgments based primarily on actual product sales data, forecastedcustomer buying patterns, and market research data related to utilization rates by various end-users. If we determine in future periods that our actualexperience is not indicative of our expectations, if our actual experience changes, or if other factors affect our estimates, we may be required to adjust ourallowances and accruals estimates, which would affect our net product sales in the period of the adjustment and could be significant.Our product sales, which primarily represented revenues from Makena and Feraheme for 2017, 2016 and 2015 were offset by provisions for allowancesand accruals as follows (in thousands): Years Ended December 31, 2017 2016 2015Gross product sales$920,061 $748,839 $561,255Provision for product sales allowances and accruals: Contractual adjustments310,588 229,686 161,665Governmental rebates113,828 86,983 57,774Total provision for product sales allowances and accruals424,416 316,669 219,439Product sales, net$495,645 $432,170 $341,816 Product Sales Allowances and AccrualsProduct 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, group purchasing organizations (“GPOs”), and dialysis organizations that typically do not purchase productsdirectly109Table of Contentsfrom us but rather from wholesalers and specialty distributors. In accordance with guidance related to accounting for fees and consideration given by avendor to a customer, including a reseller of a vendor’s products, these fees, discounts and rebates are presumed to be a reduction of the selling price. Productsales allowances and accruals are based on definitive contractual agreements or legal requirements (such as Medicaid laws and regulations) related to thepurchase and/or utilization of the product by these entities and are recorded in the same period that the related revenue is recognized. We estimate productsales allowances 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 and the recording of an increase in accrued expenses.DiscountsWe 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.ChargebacksChargeback 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.Distributor/Wholesaler and Group Purchasing Organization FeesFees 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 characterizedas a reduction of product sales. Consideration should be characterized as a cost incurred if we receive, or will receive, an identifiable benefit (goods orservices) in exchange for the consideration and we can reasonably estimate the fair value of the benefit received. Because the fees we pay to wholesalers donot meet the foregoing conditions to be characterized as a cost, we have characterized these fees as a reduction of product sales and have included them incontractual adjustments or governmental rebates in the table above. We generally pay such amounts within several weeks of our receipt of an invoice fromthe 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 to reflect actual experience.Product ReturnsConsistent 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 our products have a range of three years to five years. We estimate product returnsbased on the historical return patterns and known or expected changes in the marketplace. We track actual returns by individual production lots. Returns onlots eligible for credits under our returned goods policy are monitored and compared with historical return trends and rates.110Table of ContentsWe expect that wholesalers and healthcare providers will not stock significant inventory due to the cost of the products, the expense to store ourproducts, 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 ofreturns may be adjusted for actual return experience as it becomes available and for known or expected changes in the marketplace. We did not significantlyadjust our reserve for product returns during 2017, 2016, or 2015. To date, our product returns have been relatively limited; however, returns experience maychange over time. We may be required to make future adjustments to our product returns estimate, which would result in a corresponding change to our netproduct sales in the period of adjustment and could be significant.Governmental RebatesGovernmental rebate reserves relate to our reimbursement arrangements with state Medicaid programs. We determine our estimates for Medicaid rebates,if applicable, based on actual product sales data and our historical product claims experience. In estimating these reserves, we provide for a Medicaid rebateassociated with both those expected instances where Medicaid will act as the primary insurer as well as in those instances where we expect Medicaid will actas the secondary insurer. Rebate amounts generally are invoiced quarterly and are paid in arrears, and we expect to pay such amounts within several weeks ofnotification by the Medicaid or provider entity. Estimated governmental rebates are recorded at the time of sale. During 2017 and 2016, we refined ourestimated Medicaid reserve based on actual claims received since the 2011 launch of Makena, our expectations of state level utilization, and estimated rebateclaims not yet submitted. This refinement resulted in a $1.2 million increase and a $6.1 million reduction of our estimated Medicaid rebate reserve related toprior period Makena sales in 2017 and 2016, respectively. We regularly assess our Medicaid reserve balance and the rate at which we accrue for claimsagainst product sales. If we determine in future periods that our actual rebate experience is not indicative of expected claims, if actual claims experiencechanges, or if other factors affect estimated claims rates, we may be required to adjust our current Medicaid accumulated reserve estimate, which would affectnet product sales in the period of the adjustment and could be significant.Multiple Element ArrangementsWe 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,companies are required to establish the selling price of its products and services based on a separate revenue recognition process using management’s bestestimate of the selling price when there is no vendor-specific objective evidence or third-party evidence to determine the selling price of that item. If adelivered element is not considered to have standalone value, all elements of the arrangement are recognized as revenue as a single unit of accounting overthe period of performance for the last such undelivered item or services. Significant management judgment is required in determining what elementsconstitute deliverables and what 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.For multiple element arrangements, we allocate revenue to all deliverables based on their relative selling prices. We determine the selling price to beused for allocating revenue to deliverables as follows: (a) vendor specific objective evidence; (b) third-party evidence of selling price and (c) the bestestimate of the selling price. Vendor specific objective evidence generally exists only when we sell the deliverable separately and it is the price actuallycharged by us for that deliverable. Any discounts given to the customer are allocated by applying the relative selling price method.Amounts received prior to satisfying the above revenue recognition criteria are recorded as deferred revenue in our consolidated balance sheets. Deferredrevenue associated with our CBR service revenues includes (a) amounts collected in advance of unit processing and (b) amounts associated with unearnedstorage fees collected at the beginning of the storage contract term, net of allocated discounts. Amounts not expected to be recognized within the next yearare classified as long-term deferred revenues.111Table of ContentsService RevenueOur service revenues for the CBR Services include the following two deliverables: (a) enrollment, including the provision of a collection kit and cordblood and cord tissue unit processing, which are delivered at the beginning of the relationship (the “processing services”), with revenue for this deliverablerecognized after the collection and successful processing of the cord blood and cord tissue; and (b) the storage of newborn cord blood and cord tissue units(the “storage services”), for either an annual fee or a prepayment of 18 years or the lifetime of the newborn donor (the “lifetime option”), with revenue for thisdeliverable recognized ratably over the applicable storage period. For the lifetime option, storage fees are not charged during the lifetime of the newborndonor. However, revenue is recognized based on the average of male and female life expectancies using lifetime actuarial tables published by the SocialSecurity Administration in effect at the time of the newborn’s birth. As there are other vendors who provide processing services and storage services atseparately stated list prices, the processing services and storage services, including the first year storage, each have standalone value to the customer, andtherefore represent separate deliverables. The selling price for the processing services, 18 year and lifetime storage options are estimated based on the bestestimate of selling price because we do not have vendor specific objective evidence or third-party evidence of selling price for these elements. The sellingprice for the annual storage services is determined based on vendor specific objective evidence as we have standalone renewals to support the selling price.License Fee, Collaboration and Other RevenuesThe 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,including research and development expenses, payment for manufacturing services, and royalties on product sales. We recognize license fee and research anddevelopment revenue under collaborative arrangements over the term of the applicable agreements using a proportional performance model, if practical.Otherwise, we recognize such revenue on a straight-line basis. Under this model, revenue is generally recognized in an amount equal to the lesser of theamount due under the agreements or an amount based on the proportional performance to date. In cases where project costs or other performance metrics arenot estimable but there is an established contract period, revenues are recognized on a straight-line basis over the term of the relevant agreement. In caseswhere we are reimbursed for certain research and development costs associated with our collaboration agreements and where we are acting as the principal incarrying out these services, any reimbursement payments are recorded in license fee, collaboration and other revenues in our consolidated statement ofoperations to match the costs that we incur during the period in which we perform those services. Nonrefundable payments and fees are recorded as deferredrevenue upon receipt and may require deferral of revenue recognition to future periods.Research and Development ExpensesResearch 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.Advertising CostsAdvertising costs are expensed as incurred and included in selling, general and administrative expenses in our consolidated statements of operations.Advertising costs, including promotional expenses, costs related to trade shows and print media advertising space were $22.7 million, $16.4 million and $8.0million for the years ended December 31, 2017, 2016 and 2015, respectively.Shipping and Handling CostsWe bill customers of our CBR Services a fee for the shipping of the collection kits to CBR. Shipping and handling revenues are reported in servicesrevenues, with the associated costs reported in costs of services.Equity-Based CompensationEquity-based compensation cost is generally measured at the estimated grant date fair value and recorded to expense over the requisite service period,which is generally the vesting period. Because equity-based compensation expense is based on112Table of Contentsawards ultimately expected to vest, we must make certain judgments about whether employees, officers, directors, consultants and advisers will complete therequisite service period, and reduce the compensation expense being recognized for estimated forfeitures. Forfeitures are estimated at the time of grant andrevised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Forfeitures are estimated based upon historical experience andadjusted for unusual events such as corporate restructurings, which can result in higher than expected turnover and forfeitures. If factors change and weemploy different assumptions in future periods, the compensation expense that we record in the future may differ significantly from what we have recorded inthe current period.We estimate the fair value of equity-based compensation involving stock options based on the Black-Scholes option pricing model. This model requiresthe input of several factors such as the expected option term, the expected risk-free interest rate over the expected option term, the expected volatility of ourstock price over the expected option term, and the expected dividend yield over the expected option term and are subject to various assumptions. The fairvalue of awards calculated using the Black-Scholes option pricing model is generally amortized on a straight-line basis over the requisite service period, andis recognized based on the proportionate amount of the requisite service period that has been rendered during each reporting period.We estimate the fair value of our restricted stock units (“RSUs”) whose vesting is contingent upon market conditions, such as total shareholder return,using the Monte-Carlo simulation model. The fair value of RSUs where vesting is contingent upon market conditions is amortized based upon the estimatedderived service period. The fair value of RSUs granted to our employees and directors whose vesting is dependent on future service is determined based uponthe quoted closing market price per share on the date of grant, adjusted for estimated forfeitures.We believe our valuation methodologies are appropriate for estimating the fair value of the equity awards we grant to our employees and directors. Ourequity award valuations are estimates and may not be reflective of actual future results or amounts ultimately realized by recipients of these grants. Theseamounts are subject to future quarterly adjustments based upon a variety of factors, which include, but are not limited to, changes in estimated forfeiture ratesand the issuance of new equity-based awards.Income TaxesWe 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 business. As of December 31, 2017, we maintained a valuation allowance on certain of our state NOL and credit carryforwards.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.On December 22, 2017, the Tax Cuts and Jobs Act (the “2017 Tax Act”), was enacted. The 2017 Tax Act includes significant changes to the U.S.corporate income tax system, including a reduction of the federal corporate income tax rate from113Table of Contents35% to 21%, effective January 1, 2018. The SEC staff issued Staff Accounting Bulletin No. 118 to address the application of U.S. GAAP in situations when aregistrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accountingfor certain income tax effects of the 2017 Tax Act. We have recognized the provisional tax impacts related to the revaluation of deferred tax assets andliabilities and included these amounts in our consolidated financial statements for the year ended December 31, 2017. While we believe these estimates arereasonable, the ultimate impact may differ from these provisional amounts due to further review of the enacted legislation, changes in interpretations andassumptions we have made, and additional accounting and regulatory guidance that may be issued. Comprehensive (Loss) IncomeOur comprehensive (loss) income consists of net (loss) income and other comprehensive (loss) income. Other comprehensive (loss) income includeschanges in equity that are excluded from net (loss) income, which for all periods presented in these consolidated financial statements related to unrealizedholding gains and losses on available-for-sale marketable securities, net of tax.Basic and Diluted Net (Loss) Income per ShareWe 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 common sharesoutstanding during the period. Except where the result would be antidilutive to net income, diluted net income per common share would be computedassuming the impact of the conversion of the 2.5% convertible senior notes due in 2019 (the “2019 Convertible Notes”) and the 3.25% convertible seniornotes due in 2022 (the “2022 Convertible Notes”), the exercise of outstanding stock options, the vesting of RSUs, and the exercise of warrants.We have a choice to settle the conversion obligation of our 2022 Convertible Notes and the 2019 Convertible Notes (together, the “Convertible Notes”)in cash, shares or any combination of the two. Prior to May 2017, and pursuant to certain covenants in our six-year $350.0 million term loan facility (the“2015 Term Loan Facility”), which was repaid in full in May 2017, we were restricted from settling the conversion obligation in whole or in part with cashunless certain conditions in the 2015 Term Loan Facility were satisfied. Prior to the repayment of the 2015 Term Loan Facility, we utilized the if-convertedmethod to reflect the impact of the conversion of the Convertible Notes. Our current policy is to settle the principal balance of the Convertible Notes in cash.As such, subsequent to the repayment of the 2015 Term Loan Facility, we apply the treasury stock method to these securities and the dilution related to theconversion premium, if any, of the Convertible Notes is included in the calculation of diluted weighted-average shares outstanding to the extent eachissuance is dilutive based on the average stock price during each reporting period being greater than the conversion price of the respective ConvertibleNotes.The dilutive effect of the warrants, stock options and RSUs has been calculated using the treasury stock method.The components of basic and diluted net income (loss) per share for 2017, 2016 and 2015 were as follows (in thousands, except per share data):Years Ended December 31,2017 2016 2015Net (loss) income$(199,228) $(2,483) $32,779 Weighted average common shares outstanding34,907 34,346 31,471Effect of dilutive securities: Warrants— — 2,466Stock options and RSUs— — 1,371Shares used in calculating dilutive net (loss) income per share34,907 34,346 35,308 Net (loss) income per share: Basic$(5.71)$(0.07) $1.04Diluted$(5.71)$(0.07) $0.93 114Table of ContentsThe following table sets forth the potential common shares issuable upon the exercise of outstanding options, the vesting of RSUs, the exercise ofwarrants (prior to consideration of the treasury stock method), and the conversion of the Convertible Notes, which were excluded from our computation ofdiluted net (loss) income per share because their inclusion would have been anti-dilutive (in thousands):Years Ended December 31,2017 2016 2015Options to purchase shares of common stock3,5312,5901,619Shares of common stock issuable upon the vesting of RSUs1,070613167Warrants1,0087,382—2022 Convertible Notes11,695 — —2019 Convertible Notes790 7,382 7,382Total18,09417,9679,168 In connection with the issuance of the 2019 Convertible Notes, in February 2014, we entered into convertible bond hedges. The convertible bondhedges are not included for purposes of calculating the number of diluted shares outstanding, as their effect would be anti-dilutive. The convertible bondhedges are generally expected, but not guaranteed, to reduce the potential dilution and/or offset the cash payments we are required to make upon conversionof the remaining 2019 Convertible Notes. During 2017 and 2015, the average common stock price was below the exercise price of the warrants and during2016, the average common stock price was above the exercise price of the warrants.Business SegmentsWe have determined that we conduct our operations in one business segment: the manufacture, development and commercialization of products andservices for use in treating various conditions, with a focus on women’s health, anemia management and cancer supportive care. Long-lived assets consistentirely of property, plant and equipment and are located in the U.S. for all periods presented. C. BUSINESS COMBINATIONSOn August 17, 2015 (the “CBR Acquisition Date”), we acquired CBR for $700.0 million in cash consideration, subject to estimated working capital,indebtedness and other adjustments.We accounted for the CBR acquisition as a business combination using the acquisition method of accounting. Under the acquisition method ofaccounting, the total purchase price of an acquisition is allocated to the net tangible and identifiable intangible assets acquired and liabilities assumed basedon their estimated fair values as of the date of acquisition. We have allocated the purchase price to the net tangible and intangible assets acquired andliabilities assumed, based on available information and various assumptions we believed were reasonable, with the remaining purchase price recorded asgoodwill.The following table summarizes the components of the total purchase price paid for CBR, as adjusted for the final net working capital, indebtedness andother adjustments (in thousands): Total AcquisitionDate Fair ValueCash consideration$700,000Estimated working capital, indebtedness and other adjustments(17,837)Purchase price paid at closing682,163Cash paid on finalization of the net working capital, indebtedness and other adjustments193Total purchase price$682,356115Table of ContentsThe following table summarizes the fair values assigned to the CBR assets acquired and liabilities assumed by us along with the resulting goodwill at theCBR Acquisition Date, as adjusted for certain measurement period adjustments recorded since the CBR Acquisition Date (in thousands): Total AcquisitionDate Fair ValueAccounts receivable$8,660Inventories3,825Prepaid and other current assets8,480Restricted cash - short-term30,752Property, plant and equipment29,401Customer relationships297,000Trade name and trademarks65,000Favorable lease asset358Deferred income tax assets5,062Other long-term assets496Accounts payable(2,853)Accrued expenses(13,770)Deferred revenues - short-term(3,100)Payable to former CBR shareholders(37,947)Deferred income tax liabilities(149,873)Other long-term liabilities(506)Total estimated identifiable net assets$240,985Goodwill441,371Total $682,356 During 2016, we recorded measurement period adjustments related to the filing of pre-acquisition federal and state income tax returns and thefinalization of other tax-related matters. These measurement period adjustments resulted in a net increase to goodwill of $0.3 million and were reflected ascurrent period adjustments during the second quarter of 2016 in accordance with the guidance in ASU 2015-16, Business Combinations (Topic 805):Simplifying the Accounting for Measurement-Period Adjustments (“ASU 2015-16”). Measurement period adjustments recorded in the fourth quarter of 2015consisted primarily of reductions to accounts receivable, inventories, prepaid and other current assets and property, plant and equipment totaling $1.9million and increases to accrued expenses and long-term liabilities totaling $0.5 million, which resulted in an increase to goodwill of $1.8 million, net of$0.6 million of deferred taxes.The gross contractual amount of accounts receivable at the CBR Acquisition Date of $11.7 million was adjusted to its fair value of $8.7 million. The fairvalue amounts for CBR’s customer relationships, trade names and trademarks were determined based on assumptions that market participants would use inpricing an asset, based on the most advantageous market for the assets (i.e., its highest and best use).We determined the fair value of the customer relationships, using an income approach, which is a valuation technique that provides an estimate of thefair value of an asset based on market participant expectations of the cash flows an asset would generate over its remaining life. Some of the more significantassumptions used in the income approach from the perspective of a market participant include the estimated net cash flows for each year for the identifiableintangible asset, the discount rate that measures the risk inherent in each cash flow stream, as well as other factors. The customer relationships will beamortized to selling, general and administrative expenses based on an economic consumption model over an expected useful life of approximately 20 years.The fair value of the trade names and trademarks was determined using the relief from royalty method, which is also an income approach. We believe thefair values assigned to the CBR customer relationships, and the trade names and trademarks are based upon reasonable estimates and assumptions givenavailable facts and circumstances as of the CBR Acquisition Date. If these assets are not successful, sales and profitability may be adversely affected in futureperiods, and as a result, the value of the assets may become impaired. The trade names and trademark intangible asset is deemed to be an indefinite-livedasset, which is not amortized but is subject to periodic assessments for impairment. See Note H, “Goodwill and Intangible Assets, Net,” for additionalinformation.116Table of ContentsBased on the fair value adjustments primarily related to deferred revenue and identifiable intangible assets acquired, we recorded a net deferred taxliability of $144.8 million in acquisition accounting using a combined federal and state statutory income tax rate of 37.0%. The net deferred tax liabilityrepresents the $149.9 million of deferred tax liabilities recorded in acquisition accounting, primarily related to the fair value adjustments to CBR’s deferredrevenue and identifiable intangible assets, partially offset by $5.1 million of deferred tax assets acquired from CBR.We incurred approximately $11.2 million of acquisition-related costs in 2015 related to the CBR acquisition. These costs primarily represented financialadvisory fees, legal fees, due diligence and other costs and expenses.In connection with the CBR acquisition, we incurred a $6.8 million bridge loan commitment fee, which was included in other income (expense) in our2015 consolidated statement of operations and paid in the third quarter of 2015.During the post-acquisition period in 2015, CBR generated approximately $24.1 million of revenue. Separate disclosure of CBR’s earnings for the post-acquisition period in 2015 is not practicable due to the integration of CBR’s operations into our business upon acquisition.During the third quarter of 2016, we finalized the fair values assigned to the assets acquired and liabilities assumed by us at the CBR Acquisition Date.Unaudited Pro Forma Supplemental InformationThe following supplemental unaudited pro forma information presents our revenue and net income on a pro forma combined basis, including CBR,assuming that the CBR acquisition occurred on January 1, 2015. For purposes of preparing the following pro forma information, certain items recordedduring 2015, such as the $11.2 million of acquisition-related costs, the $10.4 million loss on debt extinguishment, and $9.2 million of other one-time feesand expenses incurred in connection with the CBR acquisition financing, are excluded from 2015. The pro forma amount does not include any then expectedcost savings or restructuring action which might have been achievable or might have occurred subsequent to the acquisition CBR, or the impact of any non-recurring activity. The following table presents the unaudited pro forma consolidated result (in thousands): Year Ended December 31, 2015Pro forma revenues490,451Pro forma net income28,217The pro forma adjustments reflected in the pro forma net income in the above table primarily represent adjustments to historical amortization ofintangible assets, to historical depreciation of property, plant and equipment, and reductions to historical CBR revenues due to fair value purchaseaccounting adjustments to intangible assets, property, plant and equipment and deferred revenue. In addition, the pro forma net income includes increasedinterest expense due to the increase in term loan borrowings and the issuance of $500.0 million aggregate principal amount of 7.875% Senior Notes due 2023(the “2023 Senior Notes”) in connection with the CBR acquisition. Income taxes were adjusted accordingly. This pro forma financial information is notnecessarily indicative of our consolidated operating results that would have been reported had the transaction been completed as described herein, nor issuch information necessarily indicative of our consolidated results for any future period.GoodwillIn connection with the CBR acquisition, we recognized $441.4 million of goodwill, primarily due to the synergies expected from combining ouroperations with CBR and to deferred tax liabilities related to fair value adjustments of intangible assets and deferred revenue. The goodwill resulting from theCBR acquisition is not deductible for income tax purposes.D. MARKETABLE SECURITIESAs of December 31, 2017 and 2016, our marketable securities consisted of securities classified as available-for-sale in accordance with accountingstandards which provide guidance related to accounting and classification of certain investments in marketable securities.117Table of ContentsThe following is a summary of our marketable securities as of December 31, 2017 and 2016 (in thousands): December 31, 2017 Gross Gross Estimated Amortized Unrealized Unrealized FairDescription of Securities:Cost Gains Losses ValueShort-term investments:* Corporate debt securities$57,257 $— $(68) $57,189U.S. treasury and government agency securities1,999 — (13) 1,986Commercial paper1,999 — — 1,999Certificates of deposit9,151 — — 9,151Total short-term investments70,406 — (81) 70,325Long-term investments:** Corporate debt securities59,282 1 (320) 58,963U.S. treasury and government agency securities7,381 — (76) 7,305Total long-term investments66,663 1 (396) 66,268Total investments$137,069 $1 $(477) $136,593 December 31, 2016 Gross Gross Estimated Amortized Unrealized Unrealized FairDescription of Securities:Cost Gains Losses ValueShort-term investments:* Corporate debt securities$106,430 $3 $(69) $106,364U.S. treasury and government agency securities1,021 — — 1,021Commercial paper40,560 — — 40,560Certificates of deposit6,000 — — 6,000Total short-term investments154,011 3 (69) 153,945Long-term investments:** Corporate debt securities139,742 32 (281) 139,493U.S. treasury and government agency securities11,395 — (52) 11,343Total long-term investments151,137 32 (333) 150,836Total investments$305,148 $35 $(402) $304,781* Represents marketable securities with a remaining maturity of less than one year.** Represents marketable securities with a remaining maturity of one to three years. Impairments and Unrealized Gains and Losses on Marketable SecuritiesWe did not recognize any other-than-temporary impairment losses in our consolidated statements of operations related to our marketable securitiesduring 2017, 2016 and 2015. We considered various factors, including the length of time that each security was in a realized loss position and our ability andintent to hold these securities until recovery of their amortized cost basis occurs. As of December 31, 2017, we have no material losses in an unrealized lossposition for more than one year. Future events may occur, or additional information may become available, which may cause us to identify credit losseswhere we do not expect to receive cash flows sufficient to recover the entire amortized cost basis of a security and may necessitate the recording of futurerealized losses on securities in our portfolio. Significant losses in the estimated fair values of our marketable securities could have a material adverse effect onour earnings in future periods.118Table of ContentsE. FAIR VALUE MEASUREMENTSWe apply the provisions of Accounting Standards Codification Topic 820, Fair Value Measurements (“ASC 820”) for our financial assets and liabilitiesthat are re-measured and reported at fair value each reporting period and our nonfinancial assets and liabilities that are re-measured and reported at fair valueon a non-recurring basis. Fair value is the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction betweenmarket participants at the measurement date. When determining fair value, we consider the principal or most advantageous market in which it would transactand consider assumptions that market participants would use when pricing the asset or liability. ASC 820 establishes a three-level valuation hierarchy fordisclosure of fair value measurements. Financial assets and liabilities are categorized within the valuation hierarchy based upon the lowest level of input thatis significant to the measurement of fair value. The three levels of the hierarchy are defined as follows:•Level 1—Inputs to the valuation methodology are quoted market prices for identical assets or liabilities.•Level 2—Inputs to the valuation methodology are other observable inputs, including quoted market prices for similar assets or liabilities andmarket-corroborated inputs.•Level 3—Inputs to the valuation methodology are unobservable inputs based on management’s best estimate of inputs market participants woulduse in pricing the asset or liability at the measurement date, including assumptions about risk.The following tables represent the fair value hierarchy as of December 31, 2017 and 2016, for those assets and liabilities that we measure at fair value ona recurring basis (in thousands): Fair Value Measurements at December 31, 2017 Using: Total Quoted Prices inActive Markets forIdentical Assets(Level 1) Significant OtherObservable Inputs(Level 2) SignificantUnobservableInputs(Level 3)Assets: Cash equivalents$4,591 $4,591 $— $—Corporate debt securities116,152 — 116,152 —U.S. treasury and government agency securities9,291 — 9,291 —Commercial paper1,999 — 1,999 —Certificates of deposit9,151 — 9,151 —Total Assets$141,184 $4,591 $136,593 $—Liabilities: Contingent consideration - Lumara Health$49,187 $— $— $49,187Contingent consideration - MuGard898 — — 898Total Liabilities$50,085 $— $— $50,085 119Table of Contents Fair Value Measurements at December 31, 2016 Using: Total Quoted Prices inActive Markets forIdentical Assets(Level 1) Significant OtherObservable Inputs(Level 2) SignificantUnobservableInputs(Level 3)Assets: Cash equivalents$9,951 $9,951 $— $—Corporate debt securities245,857 — 245,857 —U.S. treasury and government agency securities12,364 — 12,364 —Commercial paper40,560 — 40,560 —Certificates of deposit6,000 — 6,000 —Total Assets$314,732 $9,951 $304,781 $—Liabilities: Contingent consideration - Lumara Health145,974 $— $— $145,974Contingent consideration - MuGard2,021 — — 2,021Total Liabilities$147,995 $— $— $147,995 Marketable securitiesOur cash equivalents are classified as Level 1 assets under the fair value hierarchy as these assets have been valued using quoted market prices in activemarkets and do not have any restrictions on redemption. Our marketable securities are classified as Level 2 assets under the fair value hierarchy as these assetswere primarily determined from independent pricing services, which normally derive security prices from recently reported trades for identical or similarsecurities, making adjustments based upon other significant observable market transactions. At the end of each reporting period, we perform quantitative andqualitative analysis of prices received from third parties to determine whether prices are reasonable estimates of fair value. After completing our analysis, wedid not adjust or override any fair value measurements provided by our pricing services as of December 31, 2017 or 2016. In addition, there were no transfersor reclassifications of any securities between Level 1 and Level 2 during 2017 or 2016.Contingent considerationIn accordance with GAAP, for asset acquisitions, such as Intrarosa, we record contingent consideration for obligations we consider to be probable andestimable and these liabilities are not adjusted to fair value. As of December 31, 2017, $10.0 million of contingent consideration was recorded in accruedexpenses and is required to be paid to Endoceutics, Inc. (“Endoceutics”) in April 2018 on the first anniversary of the closing of a license agreement weentered into with Endoceutics (the “Endoceutics License Agreement”). We recorded contingent consideration related to the November 2014 acquisition ofLumara Health and related to our June 2013 license agreement for MuGard® Mucoadhesive Oral Wound Rinse (the “MuGard License Agreement”) withAbeona Therapeutics, Inc. (“Abeona”), under which we acquired the U.S. commercial rights for the management of oral mucositis and stomatitis (the“MuGard Rights”). There were no contingent consideration obligations related to the CBR acquisition.The fair value measurements of contingent consideration obligations and the related intangible assets arising from business combinations are classifiedas Level 3 assets under the fair value hierarchy as these assets have been valued using unobservable inputs. These inputs include: (a) the estimated amountand timing of projected cash flows; (b) the probability of the achievement of the factors on which the contingency is based; and (c) the risk-adjusted discountrate used to present value the probability-weighted cash flows. Significant increases or decreases in any of those inputs in isolation could result in asignificantly lower or higher fair value measurement.120Table of ContentsThe following table presents a reconciliation of contingent consideration obligations related to the acquisition of Lumara Health and the MuGard Rights(in thousands):Balance as of January 1, 2016$222,559Payments made(100,246)Adjustments to fair value of contingent consideration25,682Balance as of December 31, 2016$147,995Payments made(50,224)Adjustments to fair value of contingent consideration(47,686)Balance as of December 31, 2017$50,085 During 2017, we adjusted the fair value of our contingent consideration liability by approximately $47.7 million, primarily due to a decrease to theMakena contingent consideration based on a revision of our long-term forecast of total projected net Makena sales, which impacted both the amount andtiming of future milestone payments. In addition, during 2017 we paid a $50.0 million sales milestone to the former stockholders of Lumara Health and a$0.2 million royalty payment for MuGard. We have classified $49.2 million of the Makena contingent consideration and $0.2 million of the MuGardcontingent consideration as short-term liabilities in our consolidated balance sheet as of December 31, 2017.The $25.7 million adjustment to the fair value of the contingent consideration liability in 2016 was due to a $31.1 million increase tothe Makena contingent consideration and a $5.4 million decrease to the MuGard contingent consideration. During the second quarter of 2016, we revised ourforecast of total projected net sales for MuGard and reassessed the fair value of the contingent consideration liability related to the MuGard Rights. As aresult, we reduced our MuGard-related contingent consideration liability by $5.6 million during the second quarter of 2016. In addition, during 2016 wemade a $100.0 million sales milestone payment to the former stockholders of Lumara Health.The fair value of the contingent milestone payments payable by us to the former stockholders of Lumara Health was determined based on ourprobability-adjusted discounted cash flows estimated to be realized from the net sales of Makena from December 1, 2014 through December 31, 2019. Thecash flows were discounted at a rate of 5.0%, which we believe is reasonable given the estimated likelihood of the pay-out. As of December 31, 2017, thetotal undiscounted milestone payment amounts we could pay in connection with the Lumara Health acquisition was $200.0 million through December 31,2019.The fair value of the contingent royalty payments payable by us to Abeona under the MuGard License Agreement was determined based on variousmarket factors, including an analysis of estimated sales using a discount rate of approximately 14% as of December 31, 2017. In addition, as of December 31,2017, we estimated that the undiscounted royalty amounts we could pay under the MuGard License Agreement, based on current projections, may range from$2.0 million to $6.0 million over the remainder of the ten year period, which commenced on June 6, 2013, the acquisition date, which is our best estimate ofthe period over which we expect the majority of the asset’s cash flows to be derived. We believe the estimated fair values of Lumara Health and the MuGard Rights are based on reasonable assumptions, however, our actual results may varysignificantly from the estimated results.DebtWe estimate the fair value of our debt obligations by using quoted market prices obtained from third-party pricing services, which is classified as a Level2 input. As of December 31, 2017, the estimated fair value of our 2023 Senior Notes (as defined below), the 2022 Convertible Notes and the 2019Convertible Notes was $463.7 million, $282.9 million and $21.6 million, respectively, which differed from their carrying values. See Note Q, “Debt,” foradditional information on our debt obligations.121Table of ContentsF. INVENTORIESOur major classes of inventories were as follows as of December 31, 2017 and 2016 (in thousands): December 31, 2017 2016Raw materials$12,418 $14,382Work in process4,146 3,924Finished goods20,792 18,952Total inventories$37,356 $37,258G. PROPERTY, PLANT AND EQUIPMENT, NETProperty, plant and equipment, net consisted of the following as of December 31, 2017 and 2016 (in thousands): December 31, 2017 2016Land$700 $700Land improvements300 300Building and improvements9,552 9,500Computer equipment and software14,073 13,866Furniture and fixtures2,512 2,401Leasehold improvements4,959 3,718Laboratory and production equipment8,030 6,449Construction in progress5,360 1,619 45,486 38,553Less: accumulated depreciation(19,490) (14,093)Property, plant and equipment, net$25,996 $24,460During 2017, 2016 and 2015, depreciation expense was $7.2 million, $9.2 million, and $3.9 million, respectively.H. GOODWILL AND INTANGIBLE ASSETS, NETGoodwillOur goodwill balance consisted of the following (in thousands): Balance at January 1, 2016$639,188Measurement period adjustments related to Lumara Health acquisition296Balance as of December 31, 2017 and 2016639,484Our $639.5 million goodwill balance consisted of $198.1 million of goodwill acquired through the November 2014 Lumara Health acquisition and$441.4 million acquired through the August 2015 CBR acquisition. During 2016, the CBR goodwill increased by $0.3 million related to measurementperiod net tax adjustments. As of December 31, 2017, we had no accumulated impairment losses related to goodwill. We test goodwill at the reporting unit level for impairment on an annual basis and between annual tests if events and circumstances indicate it is morelikely than not that the fair value of a reporting unit is less than its carrying value. Events that could indicate impairment and trigger an interim impairmentassessment include, but are not limited to, an adverse change in current economic and market conditions, including a significant prolonged decline in marketcapitalization, a significant adverse change in legal factors, unexpected adverse business conditions, and an adverse action or assessment by a regulator. Ourannual impairment test date is October 31. We have determined that we operate in a single operating segment and have a single reporting unit.122Table of ContentsIn performing our goodwill impairment tests during 2017, we utilized the approach prescribed under ASC 350, as amended by ASU 2017-04 whichrequires that an entity perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. Anentity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value.When we perform any goodwill impairment test, the estimated fair value of our reporting unit is determined using an income approach that utilizes adiscounted cash flow (“DCF”) model or, a market approach, when appropriate, which assesses our market capitalization as adjusted for a control premium, ora combination thereof. The DCF model is based upon expected future after-tax operating cash flows of the reporting unit discounted to a present value usinga risk-adjusted discount rate. Estimates of future cash flows require management to make significant assumptions concerning (i) future operating performance,including future sales, long-term growth rates, operating margins, variations in the amount and timing of cash flows and the probability of achieving theestimated cash flows (ii) the probability of regulatory approvals, and (iii) future economic conditions, all of which may differ from actual future cash flows.These assumptions are based on significant inputs not observable in the market and thus represent Level 3 measurements within the fair value hierarchy. Thediscount rate, which is intended to reflect the risks inherent in future cash flow projections, used in the DCF model, is based on estimates of the weightedaverage cost of capital (“WACC”) of market participants relative to our reporting unit. Financial and credit market volatility can directly impact certaininputs and assumptions used to develop the WACC. Any changes in these assumptions may affect our fair value estimate and the result of an impairment test.We believe the discount rates and other inputs and assumptions are consistent with those that a market participant would use. In addition, in order to assessthe reasonableness of the fair value of our reporting unit as calculated under the DCF model, we also compare the reporting unit’s fair value to our marketcapitalization and calculate an implied control premium (the excess sum of the reporting unit’s fair value over its market capitalization). We evaluate theimplied control premium by comparing it to control premiums of recent comparable market transactions, as applicable. Throughout 2017 and as of December31, 2017, our market capitalization was lower than our stockholders’ equity, or book value. We believe that a market participant buyer would be required topay a control premium for our business that would cover the difference between our market capitalization and our book value.During the third quarter of 2017, we determined that the significant reduction in the long-term forecasted cash flows of our largest product, Makena,which led to a $319.2 million impairment of the Makena base technology intangible asset, was an indicator that an interim impairment test of goodwill wasnecessary at September 30, 2017. We performed a quantitative goodwill impairment test at September 30, 2017 in accordance with ASU 2017-04, to bothassess whether a goodwill impairment existed and if so, the amount of the impairment loss. We considered our market capitalization, as adjusted for a controlpremium, to be one indicator of the fair value of our reporting unit. On September 30, 2017, our stock price closed at $18.45, resulting in a marketcapitalization of approximately $653.0 million, which was 18% below the carrying amount of the reporting unit as of September 30, 2017.As described in the accounting guidance for evaluating long-lived assets for impairment, an entity’s fair value may include a control premium inaddition to the quoted market price to determine the fair value of a single reporting unit entity, as an acquiring entity is often willing to pay more for equitysecurities that give it a controlling interest than an investor would pay for a number of equity securities representing less than a controlling interest. Thisaccounting guidance also indicates that the quoted market price of an individual security need not be the sole measurement basis of the fair value of a singlereporting unit. During the third quarter of 2017, we obtained a control premium analysis which benchmarked average control premiums paid in prior mergerand acquisition transactions among biotechnology and pharmaceutical companies. The analysis indicated that control premiums vary depending on factsand circumstances for each transaction. The range of control premiums observed was between 30% and 83%, with a mean of 64%. Management believes thatusing this market approach of assessing reasonable control premiums provided a sufficient basis to assess whether the fair value of our reporting unit,including a range of reasonable control premiums, was above its carrying amount as of September 30, 2017. Incorporating control premiums in this range toour September 30, 2017 market capitalization of $653.0 million resulted in a fair value which was at least 6% greater (at the low end of the range) than thecarrying amount of our net assets as of September 30, 2017. As a result of this review, we determined that there was no impairment of our goodwill atSeptember 30, 2017.On October 31, 2017 (the “measurement date”), we conducted our 2017 annual goodwill impairment test using an income approach, specifically a DCFmodel, and a market approach to estimate the fair value of our reporting unit as of the measurement date. We used a range of discount rates between 10.0%and 19.5% across our commercial products and product candidates, which resulted in a weighted average discount rate of 13.6% to determine the fair value ofour reporting unit. We believe the discount rate and other inputs and assumptions are consistent with those that a market participant would use. In addition,we believe we utilized reasonable estimates and assumptions about future revenues, cost projections, and cash flows as of the measurement date. As acorroborating step in our 2017 annual impairment assessment, we compared our implied control premium, as determined by the difference between the fairvalue of our reporting unit as estimated by our DCF analysis and our market capitalization, to control premiums of recent comparable market transactions.The results indicated that the implied control premium was within the range of control premiums observed in prior merger and acquisition transactions123Table of Contentsamong biotechnology and pharmaceutical companies. We believe that using this market approach further corroborated our DCF fair value assessment atOctober 31, 2017. As a result of our DCF analysis, we determined that the fair value of our reporting unit exceeded its carrying value by 18% and as such, noimpairment was recorded as of October 31, 2017. In performing a sensitivity analysis, had we increased the weighted average discount rate by 1%, the fairvalue of the reporting unit would have still exceeded the carrying value. In addition, we determined that there were no other indicators of impairment throughDecember 31, 2017 requiring further assessment.Assumptions related to revenue, growth rates and operating margin are based on management’s annual and ongoing forecasting, budgeting and planningprocesses and represent our best estimate of the future results of operations across the company as of that point in time. These estimates are subject to manyassumptions, such as the economic environment in which our reporting unit operates, expectations of regulatory approval of our products in development orunder review with the FDA, demand for our products and competitor actions. If we were to apply different assumptions, or if the outcome of regulatory orother developments, or actual demand for our products and competitor actions, are inconsistent with our assumptions, our estimated discounted future cashflows and the resulting estimated fair value of our reporting unit would increase or decrease, and could result in the fair value of our reporting unit being lessthan its carrying value in an impairment test.Prior to our adoption of ASU 2017-04, we utilized the two-step approach prescribed under ASC 350 in performing our goodwill impairment tests. Thefirst step required a comparison of the reporting unit’s carrying value to its fair value. If the carrying value of a reporting unit exceeded its estimated fairvalue, a second step was required to measure the amount of impairment loss, if any. The second step of the goodwill impairment test compared the impliedfair value of a reporting unit’s goodwill to its carrying value. The second step required us to perform a hypothetical purchase price allocation as of themeasurement date and estimate the fair value of net tangible and intangible assets. The fair value of intangible assets is determined as described above and issubject to significant judgment. We conducted our 2016 and 2015 annual goodwill impairment tests on October 31 of each respective year. We used themarket approach, as more fully described above, in making our impairment test conclusions. As a result of our analysis, our reporting unit had a fair valuewell in excess of its carrying value for both 2016 and 2015, and as such, no impairments were recorded in either of the respective periods.Intangible Assets December 31, 2017 December 31, 2016 Accumulated Accumulated Cost Amortization Impairments Net Cost Amortization Impairments NetAmortizable intangible assets: Makena base technology$797,100 $255,754 $319,246 $222,100 $797,100 $128,732 $— $668,368CBR customer relationships297,000 29,309 — 267,691 297,000 13,590 — 283,410Intrarosa developed technology77,655 3,376 — 74,279 — — — —CBR Favorable lease— — — — 358 119 239 —MuGard Rights— — — — 16,893 1,169 15,724 — 1,171,755 288,439 319,246 564,070 1,111,351 143,610 15,963 951,778Indefinite-lived intangible assets: Makena IPR&D79,100 — — 79,100 79,100 — — 79,100CBR trade names andtrademarks65,000 — 3,700 61,300 65,000 — 3,700 61,300Total intangible assets$1,315,855 $288,439 $322,946 $704,470 $1,255,451 $143,610 $19,663 $1,092,178The Makena base technology and IPR&D intangible assets were acquired in November 2014 in connection with our acquisition of Lumara Health.During the third quarter of 2017, we received new information from a variety of sources, including from external consulting firms and our authorized genericpartner, regarding the potential competitive landscape for the Makena intramuscular (“IM”) product (the “Makena IM product”) upon loss of orphan drugexclusivity in February 2018. The information received from one of our external consulting firms included competitive intelligence information, whichindicated that several generic manufacturers had either likely filed an Abbreviated New Drug Application (“ANDA”) with the FDA in the third quarter of2017 or were likely to file an ANDA in the fourth quarter of 2017. During the third quarter of 2017, we also began negotiations with our own authorizedgeneric partner and gained industry insight into how the competitive landscape of the market might evolve once multiple generics entered. Thisinformation, combined with continued progress on our own authorized generic strategy, was incorporated into our revised long-range revenue forecasts forthe Makena IM product during the third quarter of 2017. This new information received in the third quarter, altered our previous124Table of Contentsassumptions, including the potential number of generic entrants and potential timing of entry following the loss of its orphan drug exclusivity, whichsignificantly impacted our long-term revenue forecast for the Makena IM product.We determined that the revised long-term forecast resulting from the information received in the third quarter of 2017 constituted a triggering event withrespect to our Makena base technology intangible asset, which relates solely to the Makena IM product. We estimated that the sum of the undiscountedprojected cash flows of the Makena IM product was less than the carrying value of the corresponding intangible asset. Therefore, we reassessed the fair valueof the Makena base technology intangible asset using an income approach, a Level 3 measurement technique. We determined that as of September 30, 2017,the fair value of the Makena base technology intangible asset was less than the carrying value and accordingly, we recorded an impairment charge of $319.2million, which was recorded within a separate operating expense line item in our consolidated statements of operations.Amortization of the Makena base technology asset is being recognized using an economic consumption model. Prior to the third quarter of 2017, thisasset was being amortized over 20 years from the acquisition date, which we believed was an appropriate amortization period. During the third quarter of2017, we reassessed the remaining useful life of the Makena base technology intangible asset. Based on the revised long-term forecast for the Makena IMproduct, we believe that the substantive period of revenue from the Makena IM asset will be through 2024 and thus concluded that seven years is anappropriate amortization period based on its revised estimated remaining economic life. Accordingly, we prospectively adjusted the remaining useful life ofthe Makena base technology intangible asset to seven years.Further, during the third and fourth quarters of 2017, we evaluated our Makena IPR&D intangible asset, which is related to the Makena auto-injector, forimpairment and concluded that its fair value was greater than its carrying value, and therefore it was not impaired. Furthermore, additional information maybecome available, which may cause us to identify additional impairment charges. Such charges could have a material adverse effect on our earnings in futureperiods.The CBR intangible assets (the CBR customer relationships, favorable lease and trade names and trademarks) were acquired in August 2015 inconnection with our acquisition of CBR. Amortization of the CBR customer relationships is being recognized using an estimated useful life of 20 years fromthe CBR Acquisition Date, which we believe is an appropriate amortization period due to the estimated economic lives of the CBR intangible assets. Thefavorable lease was being amortized on a straight-line basis over the remaining term of the lease. In May 4, 2016, we entered into a sublease arrangement for aportion of our former CBR office space in San Bruno, California with a sublessee at a rate lower than the market rate used to determine the favorable leaseintangible asset. We reevaluated the favorable lease asset based on the negotiated sublease rate, resulting in an impairment charge for the full $0.2 million netintangible asset in 2016. As part of our 2017 annual impairment test, we evaluated our CBR trade name and trademark intangible assets and concluded thatits fair value was greater than its carrying value and therefore it was not impaired. As part of our 2016 annual impairment test, we recorded an impairmentcharge of $3.7 million related to the impairment of a portion of the CBR trade names and trademarks indefinite-lived intangible asset based on a revisedlong-term revenue forecast for CBR.The Intrarosa developed technology was acquired in April 2017 from Endoceutics. Amortization of the Intrarosa developed technology is beingrecognized on a straight line basis over 11.5 years.The MuGard Rights were acquired from Abeona in June 2013. Amortization of the MuGard Rights was being recognized using an economicconsumption model over ten years from the acquisition date, which represented our best estimate of the period over which we expected the majority of theasset’s cash flows to be derived. Based on interactions with government payers during 2016, we determined that broader reimbursement coverage for MuGardby was unlikely and we assessed the MuGard Rights for potential impairment. From this assessment, we concluded that based on the lack of broadreimbursement and insurance coverage for MuGard and the resulting decrease in expected revenues and cash flows, the projected undiscounted cash flowswere less than the book value, indicating impairment of this intangible asset. As a result of an analysis of the fair value of the net MuGard Rights intangibleasset as compared to its recorded book value, we recognized an impairment charge for the full $15.7 million net intangible asset in the second quarter of2016. 125Table of ContentsAs of December 31, 2017, the weighted average remaining amortization period for our finite-lived intangible assets was approximately 10.8 years. Totalamortization expense for 2017, 2016 and 2015, was $146.1 million, $84.9 million and $53.5 million, respectively. Amortization expense for the Makenabase technology, Intrarosa developed technology, and the MuGard Rights is recorded in cost of product sales in our consolidated statements of operations.Amortization expense for the CBR related intangible assets is recorded in selling, general and administrative expenses in our consolidated statements ofoperations. We expect amortization expense related to our finite-lived intangible assets to be as follows (in thousands):Period EstimatedAmortizationExpenseYear Ending December 31, 2018 $188,574Year Ending December 31, 2019 39,527Year Ending December 31, 2020 31,907Year Ending December 31, 2021 31,696Year Ending December 31, 2022 31,640Thereafter 240,726Total $564,070I. CURRENT AND LONG-TERM LIABILITIESAccrued ExpensesAccrued expenses consisted of the following as of December 31, 2017 and 2016 (in thousands): December 31, 2017 2016Commercial rebates, fees and returns$102,357 $89,466Professional, license, and other fees and expenses28,692 24,248Salaries, bonuses, and other compensation19,099 14,823Interest expense13,525 16,683Intrarosa-related license fees10,000 —Accrued research and development1,817 10,714Restructuring expense— 74Total accrued expenses$175,490 $156,008 Deferred RevenuesOur deferred revenue balances as of December 31, 2017 and 2016 of $66.9 million and $49.8 million respectively, were related to our CBR Servicesrevenues and included: (a) amounts collected in advance of unit processing and (b) amounts associated with unearned storage fees collected at the beginningof the storage contract term, net of allocated discounts.126Table of ContentsJ. INCOME TAXESFor the years ended December 31, 2017, 2016, and 2015, all of our profit or loss before income taxes was from U.S. operations. The income tax (benefit)expense consisted of the following (in thousands): Years Ended December 31, 2017 2016 2015Current: Federal$2,180 $— $—State5,375 4,259 2,058Total current$7,555 $4,259 $2,058Deferred: Federal$(167,667) $9,815 $9,819State(10,754) (2,536) (4,812)Total deferred$(178,421) $7,279 $5,007Total income tax (benefit) expense$(170,866) $11,538 $7,065The reconciliation of the statutory U.S. federal income tax rate to our effective income tax rate was as follows: Years Ended December 31, 2017 2016 2015Statutory U.S. federal tax rate35.0 % 35.0 % 35.0 %State taxes, net of federal benefit3.4 6.4 0.1Impact of 2017 tax reform on deferred tax balance4.8 — —Equity-based compensation expense(1.0) 34.0 0.4Contingent consideration4.5 69.9 4.7Transaction costs— — 3.9Other permanent items, net(0.6) 21.2 3.2Tax credits0.7 (32.3) (1.7)Write-down of acquired state net operating losses— 114.2 —Valuation allowance(0.8) (115.2) (28.0)Other, net0.2 (5.8) 0.1Effective tax rate46.2 % 127.4 % 17.7 %For the year ended December 31, 2017, we recognized an income tax benefit of $170.9 million, representing an effective tax rate of 46.2%. Thedifference between the expected statutory federal tax rate of 35.0% and the effective tax rate of 46.2% for the year ended December 31, 2017, was primarilyattributable to the impact of the 2017 federal tax reform legislation, as discussed below, contingent consideration associated with Lumara Health, federalresearch and orphan drug tax credits generated during the year, and the impact of state income taxes, partially offset by equity-based compensation expensesand an increase to our valuation allowance.On December 22, 2017, the Tax Cuts and Jobs Act (the “2017 Tax Act”), was enacted. The 2017 Tax Act includes significant changes to the U.S.corporate income tax system, including a reduction of the federal corporate income tax rate from 35.0% to 21.0%, effective January 1, 2018. 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. As aresult of the reduction in the federal tax rate from 35.0% to 21.0%, we revalued our ending net deferred tax liabilities at December 31, 2017 and recognized aprovisional $17.6 million tax benefit. We are still assessing the implications of the 2017 Tax Act on both a federal and state level, as further discussed below.On December 22, 2017, the SEC staff issued Staff Accounting Bulletin No. 118 (“SAB 118”) to address the application of U.S. GAAP in situations whena registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete theaccounting for certain income tax effects of the 2017 Tax Act. SAB 118 allows us to record provisional amounts during a measurement period which issimilar to the measurement period used when accounting for business combinations. We have recognized the provisional tax impacts related to therevaluation of deferred tax127Table of Contentsassets and liabilities and included these amounts in our consolidated financial statements for the year ended December 31, 2017. While we believe theseestimates are reasonable, the ultimate impact may differ from these provisional amounts due to further review of the enacted legislation, changes ininterpretations and assumptions we have made, and additional accounting and regulatory guidance that may be issued.For the year ended December 31, 2016, we recognized income tax expense of $11.5 million representing an effective tax rate of 127.4%. The differencebetween the expected statutory federal tax rate of 35.0% and the 127.4% effective tax rate for 2016 was primarily attributable to the impact of contingentconsideration associated with Lumara Health, equity-based compensation expenses and other permanent items, including meals and entertainment expense,officers compensation and Makena-related expenses, partially offset by the benefit of the federal research and development and orphan drug tax creditsgenerated during the year. The effective tax rate for the year-ended December 31, 2016 reflected the significance of these permanent differences in relation tothe pre-tax income for the year-ended December 31, 2016. As a result of state tax planning during 2016, we analyzed the acquired state net operating losses(“NOLs”) and determined that a significant portion were not utilizable and should be written down. This write-down was offset with a decrease in thevaluation allowance as we had previously determined that it was more likely than not that these NOLs would not be utilized.For the year ended December 31, 2015, we recognized income tax expense of $7.1 million representing an effective tax rate of 17.7%. The differencebetween the statutory tax rate and the effective tax rate was primarily attributable to a valuation allowance release related to certain deferred tax assets,partially offset by non-deductible transaction costs associated with the acquisition of CBR, and non-deductible contingent consideration expense associatedwith Lumara Health.See Note C, “Business Combinations,” for more information on the CBR acquisition.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 the deferredtax assets will not be realized. The components of our deferred tax assets and liabilities were as follows (in thousands): December 31, 2017 2016Assets Net operating loss carryforwards$61,070 $116,275Tax credit carryforwards15,892 9,415Deferred revenue3,420 1,811Equity-based compensation expense6,401 8,045Capitalized research & development7,872 18,284Reserves4,273 8,018Contingent consideration1,406 4,140Other6,777 9,769Valuation allowance(5,597) (1,429)Liabilities Property, plant and equipment depreciation(1,501) (2,145)Intangible assets and inventory(107,906) (367,667)Debt instruments(15,744) (1,040)Other(290) (542)Net deferred tax liabilities$(23,927) $(197,066)The valuation allowance increased by approximately $4.2 million for the year ended December 31, 2017, which was primarily attributable to theestablishment of a valuation allowance on certain state NOL and credit carryforwards. During the year ended December 31, 2017, we entered into a three-yearcumulative loss position and established a valuation allowance on certain deferred tax assets to the extent that our existing taxable temporary differenceswould not be available as a source of income to realize the benefits of those deferred tax assets. At December 31, 2017, the valuation allowance relatedprimarily to certain of our state NOL and credit carryforwards.128Table of ContentsAt December 31, 2017, we had federal and state NOL carryforwards of approximately $265.8 million and $90.9 million, respectively, of which $165.5million and $16.6 million federal and state NOL carryforwards, were acquired as part of the Lumara Health transaction, respectively. Also included in thestate NOL carryforwards at December 31, 2017 were $10.9 million of state NOL carryforwards which were acquired as part of the CBR transaction. The stateNOL carryforwards acquired from Lumara Health are subject to a full valuation allowance as it is not more likely than not that they will be realized. Thefederal and state NOLs expire at various dates through 2037. We have federal tax credits of approximately $14.8 million to offset future tax liabilities ofwhich $1.5 million were acquired as part of the Lumara Health transaction. We have state tax credits of $1.4 million to offset future tax liabilities. Thesefederal and state tax credits will expire periodically through 2037 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 occurred previously 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 state provisions. These ownership changes may limit the amount of NOL and R&D credit carryforwards that can be utilizedannually to offset future taxable income and taxes, respectively. In general, an ownership change as defined by Section 382 results from transactionsincreasing the ownership of certain shareholders or public groups in the stock of a corporation by more than 50% over a three-year period. Since ourformation, we have raised capital through the issuance of capital stock on several occasions. These financings, combined with the purchasing shareholders’subsequent disposition of those shares, could result in a change of control, as defined by Section 382. We conducted an analysis under Section 382 todetermine if historical changes in ownership through December 31, 2017 would limit or otherwise restrict our ability to utilize these NOL and R&D creditcarryforwards. As a result of this analysis, we do not believe there are any significant limitations on our ability to utilize these carryforwards. The NOLs andtax credits acquired from Lumara health are subject to restrictions under Section 382. These restricted NOLs and credits may be utilized subject to an annuallimitation. While we identified two ownership changes associated with the attributes acquired as part of the Lumara Health transaction and determined theseattributes are subject to an annual limitation, we do not expect the limitations to result in expiration of these attributes prior to utilization. However, futurechanges in ownership after December 31, 2017 could affect the limitation in future years and any limitation may result in expiration of a portion of the NOLor R&D credit carryforwards before utilization.Unrecognized tax benefits represent uncertain tax positions for which reserves have been established. A reconciliation of our changes in unrecognizedtax benefits is as follows (in thousands): Years Ended December 31, 2017 2016 2015Unrecognized tax benefits at the beginning of the year$13,330 $12,695 $—Additions based on tax positions related to the current year574 300 12,695Additions for tax positions from prior years340 379 —Subtractions for federal tax reform(3,296) — —Subtractions for tax positions from prior years(78) (44) —Unrecognized tax benefits at the end of the year$10,870 $13,330 $12,695Included in the balance of unrecognized tax benefits as of December 31, 2017, 2016, and 2015 are $10.7 million, $13.0 million, and $12.4 million,respectively, of unrecognized tax benefits that would impact the effective tax rate if recognized.Our unrecognized tax benefits as of December 31, 2017 decreased by $2.5 million as compared to December 31, 2016 primarily due to the change in thefederal tax rate, which reduced the future value of our federal NOLs and the corresponding value of the unrecognized tax benefits related to those NOLs. Thisdecrease was partially offset by tax reserves established on R&D tax credits.Our unrecognized tax benefits as of December 31, 2016 increased by $0.6 million as compared to December 31, 2015 primarily due to tax reservesestablished on R&D tax credits.During the year ended December 31, 2015, we completed studies of our historical R&D tax credits and other tax attributes, including those acquired inconnection with the Lumara Health transaction. Our unrecognized tax benefits as of December 31, 2015 were attributable to the results of those studies,which identified uncertain tax positions of $12.7 million related to federal and state R&D credits and NOL carryforwards. These amounts were recorded as areduction to our deferred tax assets as of December 31, 2015. A valuation allowance was recorded against these attributes at December 31, 2014, thereforethere was no impact to income tax expense as a result of recording the unrecognized tax benefits during the year ended December 31, 2015.129Table of ContentsWe have recorded minimal interest or penalties on unrecognized tax benefits since inception. We recognize both accrued interest and penalties related tounrecognized tax benefits in income tax expense. We do not expect our unrecognized tax benefits to change significantly in the next 12 months.The statute of limitations for assessment by the Internal Revenue Service (the “IRS”) and most state tax authorities is closed for tax years prior toDecember 31, 2014, although carryforward attributes that were generated prior to tax year 2014 may still be adjusted upon examination by the IRS or statetax authorities if they either have been or will be used in a future period. We file income tax returns in the U.S. federal and various state jurisdictions. Thereare currently no federal or state audits in progress.K. ACCUMULATED OTHER COMPREHENSIVE LOSSThe table below presents information about the effects of net income (loss) of significant amounts reclassified out of accumulated other comprehensiveloss, net of tax, associated with unrealized gains on securities during 2017 and 2016 (in thousands): December 31, 2017 2016Beginning balance$(3,838) $(4,205)Other comprehensive (loss) income before reclassifications(70) 261Reclassification adjustment for gains included in net loss— 106Ending balance$(3,908) $(3,838) L. EQUITY-BASED COMPENSATIONWe currently maintain three equity compensation plans, namely our Fourth Amended and Restated 2007 Equity Incentive Plan, as amended (the “2007Plan”), the Lumara Health Inc. Amended and Restated 2013 Incentive Compensation Plan (the “Lumara Health 2013 Plan”) and our 2015 Employee StockPurchase Plan (“2015 ESPP”). All outstanding stock options granted under each of our equity compensation plans other than our 2015 ESPP (discussedbelow) have an exercise price equal to the closing price of a share of our common stock on the grant date. During the fourth quarter of 2017, the thenoutstanding awards under our Amended and Restated 2000 Stock Plan (the “2000 Plan”) expired.Our 2007 Plan was originally approved by our stockholders in November 2007, and succeeded our 2000 Plan, which has expired and under which nofurther grants may be made. Any shares that remained available for issuance under the 2000 Plan as of the date of adoption of the 2007 Plan were included inthe number of shares that were issued under the 2007 Plan. In addition, any shares subject to outstanding awards granted under the 2000 Plan that expired orterminated for any reason prior to exercise were added to the total number of shares of our stock available for issuance under the 2007 Plan. In May 2017, ourstockholders approved an amendment to our 2007 Plan to, among other things, increase the number of shares available for issuance thereunder by 2,485,000shares. The total number of shares available for issuance under the 2007 Plan was 9,494,365 as of December 31, 2017 and there were 2,715,012 sharesremaining available for issuance under the 2007 Plan. As of December 31, 2017, all outstanding options under the 2007 Plan as of December 31, 2017 haveeither a seven or ten-year term.In November 2014, we assumed the Lumara Health 2013 Plan in connection with the acquisition of Lumara Health. The total number of shares issuablepursuant to awards under this plan as of the effective date of the acquisition and after taking into account any adjustments as a result of the acquisition, was200,000 shares. As of December 31, 2017, there were 21,108 shares remaining available for issuance under the Lumara Health 2013 Plan, which are availablefor grants to certain employees, officers, directors, consultants, and advisers of AMAG and our subsidiaries who are newly-hired or who previously performedservices for Lumara Health. All outstanding options under the Lumara Health 2013 Plan have a ten-year term.The 2007 Plan and the Lumara Health 2013 Plan provide for the grant of stock options, RSUs, restricted stock, stock, stock appreciation rights and otherequity interests in our company. We generally issue common stock from previously authorized but unissued shares to satisfy option exercises and restrictedstock awards. The terms and conditions of each award are determined by our Board of Directors (the “Board”) or the Compensation Committee of our Board.The terms and conditions of each award assumed in the acquisition of Lumara Health were previously determined by Lumara Health prior to being assumedin connection with the acquisition, subject to applicable adjustments made in connection with such acquisition.In May 2015, our stockholders approved our 2015 ESPP, which authorizes the issuance of up to 200,000 shares of our common stock to eligibleemployees. The terms of the 2015 ESPP permit eligible employees to purchase shares (subject to130Table of Contentscertain plan and tax limitations) in semi-annual offerings through payroll deductions of up to an annual maximum of 10% of the employee’s “compensation”as defined in the 2015 ESPP. Shares are purchased at a price equal to 85% of the fair market value of our common stock on either the first or last business dayof the offering period, whichever is lower. Plan periods consist of six-month periods typically commencing June 1 and ending November 30 and commencingDecember 1 and ending May 31. As of December 31, 2017, 199,904 shares have been issued under our 2015 ESPP.During 2017, we also granted equity through inducement grants outside of our equity compensation plans to certain employees to induce them to acceptemployment with us (collectively, “Inducement Grants”). The options were granted at an exercise price equal to the fair market value of a share of ourcommon stock on the respective grant dates and will be exercisable in four equal annual installments beginning on the first anniversary of the respectivegrant dates. The RSU grants will vest in three equal annual installments beginning on the first anniversary of the respective grant dates. The foregoing grantswere made pursuant to inducement grants outside of our stockholder approved equity plans as permitted under the NASDAQ Stock Market listing rules. Weassessed the terms of these awards and determined there was no possibility that we would have to settle these awards in cash and therefore, equity accountingwas applied.Stock OptionsThe following table summarizes stock option activity during 2017:2007 Equity 2000 Equity 2013 Lumara Inducement Plan Plan Equity Plan Grants TotalOutstanding at December 31, 20162,158,822 5,200 134,181 814,975 3,113,178Granted1,044,817 — 10,075 91,100 1,145,992Exercised(92,529) — — — (92,529)Expired or terminated(520,737) (5,200) (18,720) (90,625) (635,282)Outstanding at December 31, 20172,590,373 — 125,536 815,450 3,531,359 Restricted Stock UnitsThe following table summarizes RSU activity during 2017:2007 Equity 2000 Equity 2013 Lumara Inducement Plan Plan Equity Plan Grants TotalOutstanding at December 31, 2016773,804 — 27,694 135,456 936,954Granted797,027 — — 24,300 821,327Vested(361,548) — (13,330) (56,312) (431,190)Expired or terminated(242,660) — (2,753) (11,903) (257,316)Outstanding at December 31, 2017966,623 — 11,611 91,541 1,069,775 In February 2017, we granted RSUs under our 2007 Plan to certain members of our senior management covering a maximum of 191,250 shares ofcommon stock. These performance-based RSUs will vest, if at all, on February 22, 2020, based on our total shareholder return (“TSR”) performance measuredagainst the median TSR of a defined group of companies over a three-year period. As of December 31, 2017, the maximum shares of common stock that maybe issued under these awards is 162,750. The maximum aggregate total fair value of these RSUs is $3.2 million, which is being recognized as expense over aperiod of three years from the date of grant, net of any estimated and actual forfeitures.131Table of ContentsEquity-based compensation expenseEquity-based compensation expense for 2017, 2016 and 2015 consisted of the following (in thousands): Years Ended December 31, 2017 2016 2015Cost of product sales and services$1,278 $520 $371Research and development3,225 3,476 2,992Selling, general and administrative19,161 18,547 13,874Total equity-based compensation expense$23,664 $22,543 $17,237Income tax effect(6,884) (6,232) (4,885)After-tax effect of equity-based compensation expense$16,780 $16,311 $12,352 We reduce the compensation expense being recognized to account for estimated forfeitures, which we estimate based primarily on historical experience,adjusted for unusual events such as corporate restructurings, which may result in higher than expected turnover and forfeitures. Under current accountingguidance, forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.The following table summarizes the weighted average assumptions we utilized for purposes of valuing grants of options to our employees and non-employee directors: Years Ended December 31, 2017 2016 2015 Non-Employee Non-Employee Non-Employee Employees Directors Employees Directors Employees DirectorsRisk free interest rate (%)1.86 1.61 1.32 1.10 1.55 1.24Expected volatility (%)53 57 49 54 47 46Expected option term (years)5.0 4.0 5.0 3.0 5.0 4.0Dividend yieldnone none none none none noneRisk free interest rates utilized are based upon published U.S. Treasury yields at the date of the grant for the expected option term. During 2017, 2016and 2015, we estimated our expected stock price volatility by using the historical volatility of our own common stock price over the prior period equivalentto our expected option term, in order to better reflect expected future volatility. To compute the expected option term, we analyze historical exerciseexperience as well as expected stock option exercise patterns.The following table summarizes details regarding stock options granted under our equity incentive plans for the year ended December 31, 2017: December 31, 2017 Options Weighted AverageExercise Price Weighted AverageRemainingContractual Term Aggregate IntrinsicValue ($ in thousands)Outstanding at beginning of year3,113,178 $31.97 — $—Granted1,145,992 20.11 — —Exercised(92,529) 15.39 — —Expired and/or forfeited(635,282) 33.56 — —Outstanding at end of year3,531,359 $28.27 7.2 $55Outstanding at end of year - vested and unvested expected to vest3,267,530 $28.37 7.1 $55Exercisable at end of year1,871,179 $29.33 5.8 $55The weighted average grant date fair value of stock options granted during 2017, 2016 and 2015 was $9.52, $10.63 and $23.57, respectively. A total of699,701 stock options vested during 2017. The aggregate intrinsic value of options exercised during 2017, 2016 and 2015, excluding purchases madepursuant to our 2015 ESPP, measured as of the exercise date, was132Table of Contentsapproximately $0.4 million, $1.5 million and $31.2 million, respectively. The intrinsic value of a stock option is the amount by which the fair market valueof the underlying stock on a specific date exceeds the exercise price of the common stock option.The following table summarizes details regarding RSUs granted under our equity incentive plans for the year ended December 31, 2017: December 31, 2017 Restricted Stock Units Weighted Average GrantDate Fair ValueOutstanding at beginning of year936,954 $28.78Granted821,327 24.18Vested(431,190) 28.45Forfeited(257,316) 25.95Outstanding at end of year1,069,775 $26.07Outstanding at end of year and expected to vest886,876 $26.19The weighted average grant date fair value of RSUs granted during 2017, 2016 and 2015 was $24.18, $22.28 and $52.71, respectively. The total fairvalue of RSUs that vested during 2017, 2016 and 2015 was $12.3 million, $9.1 million and $3.5 million, respectively.At December 31, 2017, the amount of unrecorded equity-based compensation expense for both option and RSU awards, attributable to future periods wasapproximately $34.3 million. Of this amount, $17.0 million was associated with stock options and is expected to be amortized on a straight-line basis toexpense over a weighted average period of approximately 2.4 years, $14.9 million was associated with RSUs and is expected to be amortized on a straight-line basis to expense over a weighted average period of approximately 1.7 years, and $2.4 million was associated with performance-based RSUs and isexpected to be amortized on a straight-line basis to expense over a weighted average period of approximately 2.1 years. Such amounts will be amortizedprimarily to research and development or selling, general and administrative expense. These future estimates are subject to change based upon a variety offuture events, which include, but are not limited to, changes in estimated forfeiture rates, employee turnover, and the issuance of new stock options and otherequity-based awards.M. EMPLOYEE SAVINGS PLANWe 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. As of December 31, 2017 our 401(k) Planprovided, among other things, for a company contribution of 3% of each employee’s combined salary and certain other compensation for the plan year.Effective January 1, 2018, the company contribution increased to 4%. Salary deferred by employees and contributions by us to the 401(k) Plan are nottaxable to employees until withdrawn from the 401(k) Plan and contributions are deductible by us when made. The amount of our company contribution forthe 401(k) Plan was $2.9 million, $2.2 million and $1.7 million for 2017, 2016 and 2015, respectively.N. STOCKHOLDERS’ EQUITYPreferred Stock and our 2017 NOL Rights AgreementOur 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. Following the expiration of our prior rights agreement and in an effort to protectstockholder value by continuing to help preserve our substantial tax assets associated with NOLs and certain other deferred tax assets, our Board entered intoa new shareholder rights plan with American Stock Transfer & Trust Company, LLC, as Rights Agent, in April 2017 (which was approved by our stockholdersat our May 2017 annual meeting of stockholders and which is essentially a restatement of the prior rights agreement, but with an expiration date of April 6,2018, subject to earlier expiration as described below) (the “2017 NOL Rights Agreement”).Our business operations have generated significant NOLs, and we may generate additional NOLs in future years. Under federal tax laws, we generally canuse our NOLs and certain related tax credits to offset ordinary income tax paid in our prior two tax years or on our future taxable income for up to 20 years,when they “expire” for such purposes. Until they expire, we133Table of Contentscan “carry forward” NOLs and certain related tax credits that we do not use in any particular year to offset taxable income in future years. Our ability to utilizeour NOLs to offset future taxable income may be significantly limited if we experience an “ownership change,” as determined under Section 382 of theInternal Revenue Code of 1986, as amended (“Section 382”). Under Section 382, an “ownership change” occurs if a stockholder or a group of stockholdersthat is deemed to own at least 5% of our outstanding stock increases its ownership by more than 50 percentage points over its lowest ownership percentagewithin a rolling three-year period. If an ownership change occurs, Section 382 would impose an annual limit on the amount of our NOLs that we can use tooffset taxable income equal to the product of the total value of our outstanding equity immediately prior to the ownership change (reduced by certain itemsspecified in Section 382) and the federal long-term tax-exempt interest rate in effect for the month of the ownership change. The 2017 NOL Rights Agreementis intended to act as a deterrent to any person or group acquiring 4.99% or more of our outstanding common stock without the prior approval of our Board.Under the 2017 NOL Rights Agreement, stockholders of record as of April 17, 2017 (the “Record Date”) were issued one preferred share purchase right (a“Right”) for each outstanding share of common stock, par value $0.01 per share (the “Common Shares”), outstanding as of the Record Date. The Rights willalso attach to new Common Shares issued after the Record Date. Each Right entitles the registered holder to purchase from us one one-thousandth of a shareof our Series A Junior Participating Preferred Stock, par value $0.01 per share (the “Preferred Shares”) at a price of $80 per one one-thousandth of a PreferredShare (the “Purchase Price”), subject to adjustment. Each Preferred Share is designed to be the economic equivalent of 1,000 Common Shares. The Rights will separate from the common stock and become exercisable on the earlier of (a) the tenth day after a public announcement that a person orgroup of affiliated or associated persons, has become an “Acquiring Person” (as such term is defined in the 2017 NOL Rights Agreement) or (b) ten businessdays (or such later date as the Board may determine) following the commencement of, or announcement of an intention to make, a tender offer or exchangeoffer which would result in the beneficial ownership by an Acquiring Person of 4.99% (or, in the case of a Grandfathered Person, the GrandfatheredPercentage applicable to such Grandfathered Person (as such terms are defined in the 2017 NOL Rights Agreement)) or more of the outstanding CommonShares (the earlier of such dates being called the “Distribution Date”). In the event that we are acquired in a merger or other business combination transaction or 50% or more of our consolidated assets or earning power aresold to an Acquiring Person, its affiliates or associates or certain other persons in which such persons have an interest, proper provision will be made so thateach such holder of a Right will thereafter have the right to receive, upon the exercise thereof at the then current exercise price of the Right, that number ofshares of common stock of the acquiring company which at the time of such transaction will have a market value of two times the exercise price of the Right.The Rights will expire on the earliest of the close of business on (1) April 6, 2018, (2) the effective date of the repeal of Section 382 or any successorstatute if the Board determines that the 2017 NOL Rights Agreement is no longer necessary or desirable for the preservation of tax benefits or (3) the first dayof a taxable year of the Company to which the Board determines that no tax benefits may be carried forward (the “Final Expiration Date”), unless the FinalExpiration Date is extended or unless the Rights are earlier redeemed or exchanged by us. The terms of the Rights generally may be amended by the Board without the consent of the holders of the Rights, except that from and after the time thatthe Rights are no longer redeemable, no such amendment may adversely affect the interests of the holders of the Rights (excluding the interests of anyAcquiring Person and any group of affiliated or associated persons).There can be no assurance that the 2017 NOL Rights Agreement will result in us being able to preserve all or any of the substantial tax assets associatedwith NOLs and other tax benefits.Share Repurchase ProgramIn January 2016, we announced that our Board authorized a program to repurchase up to $60.0 million in shares of our common stock. The repurchaseprogram does not have an expiration date and may be suspended for periods or discontinued at any time. Under the program, we may purchase our stock fromtime to time at the discretion of management in the open market or in privately negotiated transactions. The number of shares repurchased and the timing ofthe purchases will depend on a number of factors, including share price, trading volume and general market conditions, along with working capitalrequirements, general business conditions and other factors. We may also from time to time establish a trading plan under Rule 10b5-1 of the Securities andExchange Act of 1934 to facilitate purchases of our shares under this program. During 2017, we repurchased and retired 1,366,266 shares of common stockunder this repurchase program for $19.5 million, at an average purchase price of $14.27 per share. During 2016, we repurchased and retired 831,744 shares ofcommon stock under this repurchase program for $20.0 million, at an average purchase price of $24.05 per share. As of December 31, 2017, $20.5 millionremains available for the repurchase of shares under the program. 134Table of ContentsO. COMMITMENTS AND CONTINGENCIESCommitmentsOur 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, debt obligations, and other purchase obligations.Facility Lease ObligationsIn 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 thelease is five years and two months with one five-year extension term at our option. During 2015, we entered into several amendments to the original lease toadd additional space and to extend the term of the original lease to June 2021. In addition to base rent, we are also required to pay a proportionate share ofthe 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, the Landlord hold a security deposit of $0.7 million and $0.6 million in theform of an irrevocable letter of credit which is classified on our balance sheet as a long-term asset as of December 31, 2017 and 2016, respectively.We lease certain real property located at 611 Gateway Boulevard, South San Francisco, California. The lease expires in July 2022.Facility-related rent expense, net of deferred rent amortization, for all the leased properties was $3.0 million, $2.8 million, and $1.5 million for 2017,2016 and 2015, respectively.Future minimum payments under our non-cancelable facility-related leases as of December 31, 2017 are as follows (in thousands):Period Future Minimum LeasePaymentsYear Ending December 31, 2018 $2,792Year Ending December 31, 2019 3,100Year Ending December 31, 2020 3,189Year Ending December 31, 2021 1,488Year Ending December 31, 2022 374Total $10,943Purchase ObligationsPurchase obligations primarily represent minimum purchase commitments for inventory. As of December 31, 2017, our minimum purchase commitmentstotaled $16.5 million.Contingent Consideration Related to Business CombinationsIn connection with our acquisition of Lumara Health in November 2014, we agreed to pay up to an additional $350.0 million through December 31,2019, of which, $50.0 million and $100.0 million were paid in 2017 and 2016, respectively, based on the achievement of certain sales milestones. Due to thecontingent nature of these milestone payments, we cannot predict the amount or timing of any future payments with certainty.135Table of ContentsContingent Regulatory and Commercial Milestone PaymentsIn connection with the Endoceutics License Agreement, we are required to pay Endoceutics $10.0 million in April 2018 on the first anniversary of theclosing. In addition, we are required to pay Endoceutics certain sales milestone payments, including a first sales milestone payment of $15.0 million, whichwould be triggered when Intrarosa annual net U.S. sales exceed $150.0 million, and a second milestone payment of $30.0 million, which would be triggeredwhen annual net U.S. sales of Intrarosa exceed $300.0 million. If annual net U.S. sales of Intrarosa exceed $500.0 million, there are additional sales milestonepayments totaling up to $850.0 million, which would be triggered at various sales thresholds. We are also obligated to pay tiered royalties to Endoceuticsequal to a percentage of net sales of Intrarosa in the U.S. ranging from mid-teens for calendar year net sales up to $150.0 million to mid twenty percent for anycalendar year net sales that exceed $1.0 billion for the commercial life of Intrarosa, with deductions (a) after the later of (i) the expiration date of the last toexpire of a licensed patent containing a valid patent claim or (ii) 10 years after the first commercial sale of Intrarosa for the treatment of vulvar and vaginalatrophy (“VVA”) or female sexual dysfunction (“FSD”) in the U.S. (as applicable), (b) for generic competition and (c) for third-party payments, subject to anaggregate cap on such deductions of royalties otherwise payable to Endoceutics.In connection with the license agreement we entered into with Palatin Technologies, Inc. (“Palatin”) in January 2017 (the “Palatin License Agreement”),we are required to pay Palatin up to $380.0 million in regulatory and commercial milestone payments including up to $80.0 million upon achievement ofcertain regulatory milestones, including $20.0 million upon the acceptance by the FDA of our New Drug Application (“NDA”) for bremelanotide and $60.0million upon FDA approval, and up to $300.0 million of aggregate sales milestone payments upon the achievement of certain annual net sales over thecourse of the license. We are also obligated to pay Palatin tiered royalties on annual net sales of the Bremelanotide Products (as defined below), on a product-by-product basis, in the Palatin Territory, as defined below, ranging from the high-single digits to the low double-digits.In July 2015, we entered into an option agreement with Velo Bio, LLC, a privately-held life-sciences company (“Velo”) that granted us an option toacquire the global rights (the “DIF Rights”) to an orphan drug candidate, digoxin immune fab (“DIF”), a poly clonal antibody in clinical development for thetreatment of severe preeclampsia in pregnant woman. If we exercise the option to acquire the DIF Rights, we will be responsible for payments totaling up to$65.0 million (including the payment of the option exercise price and the regulatory milestone payments) and up to an additional $250.0 million in salesmilestone payments based on the achievement of annual sales milestones at targets ranging from $100.0 million to $900.0 million. See Note P,“Collaboration, License and Other Strategic Agreements,” for more information on the Velo option. Velo began its Phase 2b/3a clinical study in the secondquarter of 2017, and until we exercise our option, no contingencies related to this agreement have been recorded in our consolidated financial statements asof December 31, 2017.In connection with a development and license agreement (the “Antares Agreement”) with Antares Pharma, Inc. (“Antares”), we are required to payroyalties to Antares on net sales of the auto-injection system for use with hydroxyprogesterone caproate (the “Makena auto-injector”) commencing on thelaunch of the Makena auto-injector in a particular country until the Makena auto-injector is no longer sold or offered for sale in such country (the “AntaresRoyalty Term”). The royalty rates range from high single digit to low double digits and are tiered based on levels of net sales of the Makena auto-injector anddecrease after the expiration of licensed patents or where there are generic equivalents to the Makena auto-injector being sold in a particular country. Antaresis also entitles to sales-based milestone payments.Employment ArrangementsWe 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.Indemnification ObligationsAs 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 and our policy provides significant coverage. As a result, webelieve the estimated fair value of these indemnification obligations is likely to be immaterial.136Table of ContentsWe 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, which was settled in2015, we have not incurred any expenses as a result of such indemnification provisions. Accordingly, we have determined that the estimated aggregate fairvalue of our potential liabilities under such indemnification provisions is not significant, and we have not recorded any liability related to suchindemnification.ContingenciesLegal ProceedingsWe 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 certain mattersreferenced below, the liability is not probable or the amount cannot be reasonably estimated and, therefore, accruals have not been made. In addition, inaccordance with the relevant authoritative guidance, for any matters in which the likelihood of material loss is at least reasonably possible, we will providedisclosure of the possible loss or range of loss. If a reasonable estimate cannot be made, however, we will provide disclosure to that effect. We expense legalcosts as they are incurred.Sandoz Patent Infringement LawsuitOn February 5, 2016, we received a Paragraph IV certification notice letter regarding an ANDA submitted to the FDA by Sandoz Inc. (“Sandoz”)requesting approval to engage in commercial manufacture, use and sale of a generic version of ferumoxytol. A generic version of Feraheme can be marketedonly with the approval of the FDA of the respective application for such generic version. The Drug Price Competition and Patent Term Restoration Act of1984, as amended, (the “Hatch-Waxman Act”), requires an an ANDA applicant whose proposed drug is a generic version of a previously-approved drug listedin the FDA publication, “Approved Drug Products with Therapeutic Equivalence Evaluations,” also known as the “Orange Book,” to certify to any patentslisted in the Orange Book for the previously-approved drug and, in the case of a Paragraph IV certification, to notify the owner of the approved applicationand the relevant patent-holder. The Paragraph IV certification notice is required to contain a detailed factual and legal statement explaining the basis for theapplicant’s opinion that the proposed product does not infringe the subject patents, that such patents are invalid or unenforceable, or both. If a patentinfringement suit is filed within 45 days of receipt of the Paragraph IV notice, a so-called 30-month stay is triggered that generally prevents the FDA fromapproving the ANDA until the expiration of the 30-month stay period, conclusion of the litigation in the generic applicant’s favor, or expiration of thepatent, whichever is earlier. In its notice letter, Sandoz claims that our ferumoxytol patents are invalid, unenforceable and/or not infringed by Sandoz’smanufacture, use, sale or offer for sale of the generic version. In March 2016, we initiated a patent infringement suit alleging that Sandoz’ ANDA filing itselfconstituted an act of infringement and that if it is approved, the manufacture, use, offer for sale, sale or importation of Sandoz’ ferumoxytol products wouldinfringe our patents. If the litigation is resolved in favor of the applicant or the challenged patent expires during the 30 month stay period, the stay is liftedand the FDA may thereafter approve the application based on the applicable standards for approval. By the filing of this complaint, we believe the 30 monthstay was triggered and that Sandoz is prohibited from marketing its ferumoxytol product, even if it receives conditional approval from the FDA until theearliest of (a) August 5, 2018 (30 months from the date we received Sandoz's a notice of certification), (b) the conclusion of litigation in Sandoz’s favor, or (c)expiration of the patent(s). On May 2, 2016, Sandoz filed a response to our patent infringement suit and the trial is scheduled for March 19, 2018. Any futureunfavorable outcome in this matter could negatively affect the magnitude and timing of future Feraheme revenues. We intend to vigorously enforce ourintellectual property rights relating to ferumoxytol.OtherOn July 20, 2015, the Federal Trade Commission (the “FTC”) notified us that it is conducting an investigation into whether Lumara Health or itspredecessor engaged in unfair methods of competition with respect to Makena or any hydroxyprogesterone caproate product. The FTC noted in its letter thatthe existence of the investigation does not indicate that the FTC has concluded that Lumara Health or its predecessor has violated the law and we believe thatour contracts and practices comply with relevant law and policy, including the federal Drug Quality and Security Act (the “DQSA”), which was enacted inNovember 2013, and public statements from and enforcement actions by the FDA regarding its implementation of the DQSA. We have provided the FTC witha response providing a brief overview of the DQSA for context, which we believe was helpful, including: (a) how the statute outlined that large-scalecompounding of products that are copies or near-copies of137Table of ContentsFDA-approved drugs (like Makena) is not in the interests of public safety; (b) our belief that the DQSA has had a significant impact on the compounding ofhydroxyprogesterone caproate; and (c) how our contracts with former compounders allow those compounders to continue to serve physicians and patientswith respect to supplying medically necessary alternative/altered forms of hydroxyprogesterone caproate. We believe we have fully cooperated with the FTCand we have had no further interactions with the FTC on this matter since we provided our response to the FTC in August 2015.On or about April 6, 2016, we received Notice of a Lawsuit and Request to Waive Service of a Summons in a case entitled Plumbers’ Local Union No.690 Health Plan v. Actavis Group et. al. (“Plumbers’ Union”), which was filed in the Court of Common Pleas of Philadelphia County, First Judicial District ofPennsylvania and, after removal to federal court, is now pending in the United States District Court for the Eastern District of Pennsylvania (Civ. Action No.16-65-AB). Thereafter, we were also made aware of a related complaint entitled Delaware Valley Health Care Coalition v. Actavis Group et. al. (“DelawareValley”), which was filed with the Court of Common Pleas of Philadelphia County, First Judicial District of Pennsylvania District Court of Pennsylvania(Case ID: 160200806). The complaints name K-V Pharmaceutical Company (“KV”) (Lumara Health’s predecessor company), certain of its successor entities,subsidiaries and affiliate entities (the “Subsidiaries”), along with a number of other pharmaceutical companies. We acquired Lumara Health in November2014, a year after KV emerged from bankruptcy protection, at which time it, along with its then existing subsidiaries, became our wholly-owned subsidiary.We have not been served with process or waived service of summons in either case. The actions are being brought alleging unfair and deceptive tradepractices with regard to certain pricing practices that allegedly resulted in certain payers overpaying for certain of KV’s generic products. On July 21, 2016,the Plaintiff in the Plumbers’ Union case dismissed KV with prejudice to refiling and on October 6, 2016, all claims against the Subsidiaries were dismissedwithout prejudice. We are in discussions with Plaintiff’s counsel to similarly dismiss all claims in the Delaware Valley case. Because the Delaware Valley caseis in the earliest stages and we have not been served with process in this case, we are currently unable to predict the outcome or reasonably estimate the rangeof potential loss associated with this matter, if any.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 as of December 31, 2017. P. COLLABORATION, LICENSE AND OTHER STRATEGIC AGREEMENTSOur commercial strategy includes expanding our portfolio through the in-license or acquisition of additional pharmaceutical products or companies,including revenue-generating commercial products and late-stage development assets. As of December 31, 2017, we were a party to the followingcollaborations:EndoceuticsIn February 2017, we entered into the Endoceutics License Agreement with Endoceutics. Pursuant to the Endoceutics License Agreement, Endoceuticsgranted us the right to develop and commercialize pharmaceutical products containing dehydroepiandrosterone (“DHEA”), including Intrarosa, at dosagestrengths of 13 mg or less per dose and formulated for intravaginal delivery, excluding any combinations with other active pharmaceutical ingredients, in theU.S. for the treatment of VVA and FSD. The transactions contemplated by the Endoceutics License Agreement closed on April 3, 2017. We accounted for theEndoceutics License Agreement as an asset acquisition under ASU No. 2017-01, described in Note T, Recently Issued and Proposed AccountingPronouncements.Upon the closing of the Endoceutics License Agreement, we made an upfront payment of $50.0 million and issued 600,000 shares of unregisteredcommon stock to Endoceutics, which had a value of $13.5 million, as measured on April 3, 2017, the date of closing. Of these 600,000 shares, 300,000 weresubject to a 180-day lock-up provision, and the other 300,000 are subject to a one-year lock-up provision. In addition, we paid Endoceutics $10.0 million inthe third quarter of 2017 upon the delivery by Endoceutics of Intrarosa launch quantities and have agreed to make a payment of $10.0 million in April 2018on the first anniversary of the closing. The anniversary payment is reflected in accrued expenses at December 31, 2017. In the second quarter of 2017, werecorded a total of $83.5 million of consideration paid, of which $77.7 million was allocated to the Intrarosa developed technology intangible asset and $5.8million was recorded as IPR&D expense based on their relative fair values.In addition, we have also agreed to pay tiered royalties to Endoceutics equal to a percentage of net sales of Intrarosa in the U.S. ranging from mid-teensfor calendar year net U.S. sales up to $150.0 million to mid twenty percent for any calendar year net sales that exceed $1.0 billion for the commercial life ofIntrarosa, with deductions (a) after the later of (i) the expiration date of the last to expire of a licensed patent containing a valid patent claim or (ii) 10years after the first commercial sale of Intrarosa for the treatment of VVA or FSD in the U.S. (as applicable), (b) for generic competition and (c) for third-partypayments, subject to an aggregate cap on such deductions of royalties otherwise payable to Endoceutics. Endoceutics is also138Table of Contentseligible to receive certain sales milestone payments, including a first sales milestone payment of $15.0 million, which would be triggered when annual netU.S. sales of Intrarosa exceed $150.0 million, and a second milestone payment of $30.0 million, which would be triggered when annual net U.S. sales ofIntrarosa exceed $300.0 million. If annual net U.S. sales of Intrarosa exceed $500.0 million, there are additional sales milestone payments totaling up to$850.0 million, which would be triggered at various sales thresholds.In the third quarter of 2017, Endoceutics initiated a clinical study to support an application for U.S. regulatory approval for Intrarosa for the treatment ofhypoactive sexual desire disorder (“HSDD”) in post-menopausal women. We and Endoceutics have agreed to share the direct costs related to such studiesbased upon a negotiated allocation with us funding up to $20.0 million. We may, with Endoceutics’ consent (not to be unreasonably withheld, conditionedor delayed), conduct any other studies of Intrarosa for the treatment of VVA and FSD anywhere in the world for the purpose of obtaining or maintainingregulatory approval of or commercializing Intrarosa for the treatment of VVA or FSD in the U.S. All data generated in connection with the above describedstudies would be owned by Endoceutics and licensed to us pursuant to the Endoceutics License Agreement.We have the exclusive right to commercialize Intrarosa for the treatment of VVA and FSD in the U.S., subject to the terms of the Endoceutics LicenseAgreement, including having final decision making authority with respect to commercial strategy, pricing and reimbursement and other commercializationmatters. We have agreed to use commercially reasonable efforts to market, promote and otherwise commercialize Intrarosa for the treatment of VVA and, ifapproved, FSD in the U.S. Endoceutics has the right to directly conduct additional commercialization activities for Intrarosa for the treatment of VVA andFSD in the U.S. and has the right to conduct activities related generally to the field of intracrinology, in each case, subject to our review and approval and ourright to withhold approval in certain instances. Each party's commercialization activities and budget are described in a commercialization plan, which isupdated annually.In April 2017, we entered into an exclusive commercial supply agreement with Endoceutics pursuant to which Endoceutics, itself or through affiliates orcontract manufacturers, agreed to manufacture and supply Intrarosa to us (the “Endoceutics Supply Agreement”) and will be our exclusive supplier ofIntrarosa in the U.S., subject to certain rights for us to manufacture and supply Intrarosa in the event of a cessation notice or supply failure (as such terms aredefined in the Endoceutics Supply Agreement). Under the Endoceutics Supply Agreement, Endoceutics has agreed to maintain at all times a second sourcesupplier for the manufacture of DHEA and the drug product and to identify, validate and transfer manufacturing intellectual property to the second sourcesupplier by April 2019. The Endoceutics Supply Agreement will remain in effect until the termination of the Endoceutics License Agreement, unlessterminated earlier by either party for an uncured material breach or insolvency of the other party, or by us if we exercise our rights to manufacture and supplyIntrarosa following a cessation notice or supply failure.The Endoceutics License Agreement expires on the date of expiration of all royalty obligations due thereunder unless earlier terminated in accordancewith the Endoceutics License Agreement.PalatinIn January 2017, we entered into the Palatin License Agreement with Palatin under which we acquired (a) an exclusive license in all countries of NorthAmerica (the “Palatin Territory”), with the right to grant sub-licenses, to research, develop and commercialize bremelanotide and any other productscontaining bremelanotide (collectively, the “Bremelanotide Products”), an investigational product designed to be a treatment for HSDD in pre-menopausalwomen, (b) a worldwide non-exclusive license, with the right to grant sub-licenses, to manufacture the Bremelanotide Products, and (c) a non-exclusivelicense in all countries outside the Palatin Territory, with the right to grant sub-licenses, to research and develop (but not commercialize) the BremelanotideProducts. Following the satisfaction of the conditions to closing under the Palatin License Agreement, the transaction closed in February 2017. Weaccounted for the Palatin License Agreement as an asset acquisition under ASU No. 2017-01.Under the terms of the Palatin License Agreement, in February 2017 we paid Palatin $60.0 million as a one-time upfront payment and subject to agreed-upon deductions reimbursed Palatin approximately $25.0 million for reasonable, documented, out-of-pocket expenses incurred by Palatin in connection withthe development and regulatory activities necessary to submit an NDA in the U.S. for bremelanotide for the treatment of HSDD in pre-menopausal women. Asof December 31, 2017, we have fulfilled these payment obligations to Palatin. The $60.0 million upfront payment made in February 2017 to Palatin wasrecorded as IPR&D expense as the product candidate had not received regulatory approval.In addition, the Palatin License Agreement requires us to make future contingent payments of (a) up to $80.0 million upon achievement of certainregulatory milestones, including $20.0 million upon the acceptance by the FDA of our NDA for bremelanotide and $60.0 million upon FDA approval, and(b) up to $300.0 million of aggregate sales milestone payments upon the achievement of certain annual net sales in North America over the course of thelicense. The first sales milestone payment139Table of Contentsof $25.0 million will be triggered when bremelanotide annual net sales in North America exceed $250.0 million. We are also obligated to pay Palatin tieredroyalties on annual net sales in North America of the Bremelanotide Products, on a product-by-product basis, in the Palatin Territory ranging from the high-single digits to the low double-digits. The royalties will expire on a product-by-product and country-by-country basis upon the latest to occur of (a) theearliest date on which there are no valid claims of Palatin patent rights covering such Bremelanotide Product in such country, (b) the expiration of theregulatory exclusivity period for such Bremelanotide Product in such country and (c) 10 years following the first commercial sale of such BremelanotideProduct in such country. These royalties are subject to reduction in the event that: (a) we must license additional third-party intellectual property in order todevelop, manufacture or commercialize a Bremelanotide Product or (b) generic competition occurs with respect to a Bremelanotide Product in a givencountry, subject to an aggregate cap on such deductions of royalties otherwise payable to Palatin. After the expiration of the applicable royalties for anyBremelanotide Product in a given country, the license for such Bremelanotide Product in such country would become a fully paid-up, royalty-free, perpetualand irrevocable license. The Palatin License Agreement expires on the date of expiration of all royalty obligations due thereunder, unless earlier terminatedin accordance with the Palatin License Agreement.VeloIn July 2015, we entered into an option agreement with Velo, a privately held life-sciences company that granted us an option to acquire the rights to anorphan drug candidate, DIF, a polyclonal antibody in clinical development for the treatment of severe preeclampsia in pregnant women. We made an upfrontpayment of $10.0 million in 2015 for the option to acquire the DIF Rights. DIF has been granted both orphan drug and fast-track review designations by theFDA for use in treating severe preeclampsia. Under the option agreement, Velo will complete a Phase 2b/3a clinical study, which began in the second quarterof 2017. Following the conclusion of the DIF Phase 2b/3a study, we may terminate, or, for additional consideration, exercise or extend, our option to acquirethe DIF Rights. If we exercise the option to acquire the DIF Rights, we would be responsible for additional costs in pursuing FDA approval, and would beobligated to pay to Velo certain milestone payments and single-digit royalties based on regulatory approval and commercial sales of the product. If weexercise the option, we will be responsible for payments totaling up to $65.0 million (including the payment of the option exercise price and the regulatorymilestone payments) and up to an additional $250.0 million in sales milestone payments based on the achievement of annual sales milestones at targetsranging from $100.0 million to $900.0 million. In the event the royalty rate applicable to the quarter in which a milestone payment threshold is first achievedis zero, the applicable milestone payment amount will increase by 50%.We have determined that Velo is a variable interest entity (“VIE”) as it does not have enough equity to finance its activities without additional financialsupport. As we do not have the power to direct the activities of the VIE that most significantly affect its economic performance, which we have determined tobe the Phase 2b/3a clinical study, we are not the primary beneficiary of and do not consolidate the VIE.AntaresThrough our acquisition of Lumara Health, we are party to a development and license agreement with Antares, which grants us an exclusive, worldwide,royalty-bearing license, with the right to sublicense, to certain intellectual property rights, including know-how, patents and trademarks, to develop, use, sell,offer for sale and import and export the Makena auto-injector. In consideration for the license, to support joint meetings and a development strategy with theFDA, and for initial tooling and process validation, Lumara Health paid Antares an up-front payment in October 2014. Under the Antares Agreement, we areresponsible for the clinical development and preparation, submission and maintenance of all regulatory applications in each country where we desire tomarket and sell the Makena auto-injector, including the U.S. We are required to pay royalties to Antares on net sales of the Makena auto-injectorcommencing on the launch of the Makena auto-injector in a particular country until the Makena auto-injector is no longer sold or offered for sale in suchcountry (the “Antares Royalty Term”). The royalty rates range from high single digit to low double digits and are tiered based on levels of net sales of theMakena auto-injector and decrease after the expiration of licensed patents or where there are generic equivalents to the Makena auto-injector being sold in aparticular country. In addition, we are required to pay Antares sales milestone payments upon the achievement of certain annual net sales. Antares is theexclusive supplier of the device components of the Makena auto-injector and Antares remains responsible for the manufacture and supply of the devicecomponents and assembly of the Makena auto-injector. We are responsible for the supply of the drug to be used in the assembly of the finished auto-injectorproduct. The development and license agreement terminates at the end of the Antares 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.140Table of ContentsAbeonaIn June 2013, we entered into the MuGard License Agreement under which Abeona 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 and possessions (the “MuGard Territory”) for the management of oral mucositis/stomatitis (that may becaused by radiotherapy and/or chemotherapy) and all types of oral wounds (mouth sores and injuries), including certain ulcers/canker sores andtraumatic ulcers, such as those caused by oral surgery or ill-fitting dentures or braces.In consideration for the license, we paid Abeona an upfront license fee of $3.3 million in June 2013. We are required to pay royalties to Abeona on netsales of MuGard in the MuGard Territory until the later of (a) the expiration of the licensed patents or (b) the tenth anniversary of the first commercial sale ofMuGard in the MuGard Territory (the “MuGard Royalty Term”). These tiered, double-digit royalty rates decrease after the expiration of the licensed patents.After the expiration of the MuGard Royalty Term, the license shall become a fully paid-up, royalty-free and perpetual license in the MuGard Territory.Abeona remains responsible for the manufacture of MuGard and we have entered into a quality agreement and a supply agreement under which wepurchase MuGard inventory from them. Our inventory purchases are at the price actually paid by Abeona to purchase it from a third-party plus a mark-up tocover administration, handling and overhead.Abeona is responsible for maintenance of the licensed patents at its own expense, and we retain the first right to enforce any licensed patent against third-party infringement. The MuGard License Agreement terminates at the end of the MuGard Royalty Term, but is subject to early termination by us forconvenience and by either party upon an uncured breach by or bankruptcy of the other party.Q. DEBTOur outstanding debt obligations as of December 31, 2017 and December 31, 2016 consisted of the following (in thousands): December 31, 2017 20162023 Senior Notes$466,291 $489,6122022 Convertible Notes248,194 —2019 Convertible Notes20,198 179,3632015 Term Loan Facility— 317,546Total long-term debt734,683 986,521Less: current maturities— 21,166Long-term debt, net of current maturities$734,683 $965,355 2023 Senior NotesOn August 17, 2015, in connection with the CBR acquisition, we completed a private placement of $500 million aggregate principal amount of 7.875%Senior Notes due 2023 (the “2023 Senior Notes”). The 2023 Senior Notes were issued pursuant to an Indenture, dated as of August 17, 2015 (the“Indenture”), by and among us, certain of our subsidiaries acting as guarantors of the 2023 Senior Notes and Wilmington Trust, National Association, astrustee. The Indenture contains certain customary negative covenants, which are subject to a number of limitations and exceptions. Certain of the covenantswill be suspended during any period in which the 2023 Senior Notes receive investment grade ratings.In October 2017, we repurchased $25.0 million of the 2023 Senior Notes in a privately negotiated transaction, resulting in a loss on extinguishment ofdebt of $1.1 million. At December 31, 2017, the principal amount of the outstanding borrowings was $475.0 million and the carrying value of theoutstanding borrowings, net of issuance costs and other lender fees and expenses, was $466.3 million.The 2023 Senior Notes, which are senior unsecured obligations of the Company, will mature on September 1, 2023 and bear interest at a rate of 7.875%per year, with interest payable semi-annually on September 1 and March 1 of each year (which began in March 2016). We may redeem some or all of the 2023Senior Notes at any time, or from time to time, on or after September 1, 2018 at the redemption prices listed in the Indenture, plus accrued and unpaid interestto, but not including, the date of redemption. In addition, prior to September 1, 2018, we may redeem up to 35% of the aggregate principal amount of the141Table of Contents2023 Senior Notes utilizing the net cash proceeds from certain equity offerings, at a redemption price of 107.875% of the principal amount thereof, plusaccrued and unpaid interest to, but not including, the date of redemption; provided that at least 65% of the aggregate amount of the 2023 Senior Notesoriginally issued under the Indenture remain outstanding after such redemption. We may also redeem all or some of the 2023 Senior Notes at any time, orfrom time to time, prior to September 1, 2018, at a price equal to 100% of the principal amount of the 2023 Senior Notes to be redeemed, plus a “make-whole” premium plus accrued and unpaid interest, if any, to the date of redemption. Upon the occurrence of a “change of control,” as defined in theIndenture, we are required to offer to repurchase the 2023 Senior Notes at 101% of the aggregate principal amount thereof, plus any accrued and unpaidinterest to, but not including, the repurchase date. The Indenture contains customary events of default, which allow either the trustee or the holders of not lessthan 25% in aggregate principal amount of the then-outstanding 2023 Senior Notes to accelerate, or in certain cases, which automatically cause theacceleration of, the amounts due under the 2023 Senior Notes.Convertible NotesThe outstanding balances of our Convertible Notes as of December 31, 2017 consisted of the following (in thousands): 2022 ConvertibleNotes 2019 ConvertibleNotes TotalLiability component: Principal$320,000 $21,417 $341,417Less: debt discount and issuance costs, net71,806 1,219 73,025Net carrying amount$248,194 $20,198 $268,392Gross equity component$72,576 $9,905 $82,481In accordance with accounting guidance for debt with conversion and other options, we separately account for the liability and equity components ofour Convertible Notes by allocating the proceeds between the liability component and the embedded conversion option (the “Equity Component”) due toour ability to settle the Convertible Notes in cash, common stock or a combination of cash and common stock, at our option. The carrying amount of theliability components was calculated by measuring the fair value of a similar liability that does not have an associated convertible feature. The allocation wasperformed in a manner that reflected our non-convertible debt borrowing rate for similar debt. The Equity Component of the Convertible Notes wasrecognized as a debt discount and represents the difference between the proceeds from the issuance of the Convertible Notes and the fair value of the liabilityof the Convertible Notes on their respective dates of issuance. The excess of the principal amount of the liability component over its carrying amount (the“Debt Discount”) is amortized to interest expense using the effective interest method over five years. The Equity Component is not remeasured as long as itcontinues to meet the conditions for equity classification.2022 Convertible NotesIn the second quarter of 2017, we issued $320.0 million aggregate principal amount of convertible senior notes due in 2022 (the “2022 ConvertibleNotes”) and received net proceeds of $310.4 million from the sale of the 2022 Convertible Notes, after deducting fees and expenses of $9.6 million. Theapproximately $9.6 million of debt issuance costs primarily consisted of underwriting, legal and other professional fees, and allocated these costs to theliability and equity components based on the allocation of the proceeds. Of the total $9.6 million of debt issuance costs, $2.2 million was allocated to theEquity Component and recorded as a reduction to additional paid-in capital and $7.4 million was allocated to the liability component and is now recorded asa reduction of the 2022 Convertible Notes in our consolidated balance sheet. The portion allocated to the liability component is amortized to interestexpense using the effective interest method over five years.The 2022 Convertible Notes are governed by the terms of an indenture between us, as issuer, and Wilmington Trust, National Association, as the trustee.The 2022 Convertible Notes are senior unsecured obligations and bear interest at a rate of 3.25% per year, payable semi-annually in arrears on June 1 andDecember 1 of each year, beginning on December 1, 2017. The 2022 Convertible Notes will mature on June 1, 2022, unless earlier repurchased or converted.Upon conversion of the 2022 Convertible Notes, such 2022 Convertible Notes will be convertible into, at our election, cash, shares of our common stock, or acombination thereof, at a conversion rate of 36.5464 shares of common stock per $1,000 principal amount of the 2022 Convertible Notes, which correspondsto an initial conversion price of approximately $27.36 per share of our common stock.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 March 1, 2022, holders mayconvert their 2022 Convertible Notes at their option only under the following circumstances:142Table of Contents1)during any calendar quarter (and only during such calendar quarter) commencing after the calendar quarter ending September 30, 2017, if the lastreported sale price of our common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading daysending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on eachapplicable 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 $1,000principal amount of the 2022 Convertible Notes for each trading day of the measurement period was less than 98% of the product of the last reportedsale price of our common stock and the conversion rate on each such trading day; or3)upon the occurrence of specified corporate events.On or after March 1, 2022, until the close of business on the business day immediately preceding the maturity date, holders may convert all or anyportion of their 2022 Convertible Notes, in multiples of $1,000 principal amount, at the option of the holder regardless of the foregoing circumstances. The2022 Convertible Notes were not convertible as of December 31, 2017.We determined the expected life of the debt was equal to the five-year term on the 2022 Convertible Notes. The effective interest rate on the liabilitycomponent was 9.49% for the period from the date of issuance through December 31, 2017. As of December 31, 2017, the “if-converted value” did notexceed the remaining principal amount of the 2022 Convertible Notes.2019 Convertible NotesIn February 2014, we issued $200.0 million aggregate principal amount of the 2019 Convertible Notes. We received net proceeds of $193.3 million fromthe sale of the 2019 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 2019Convertible Notes to pay the cost of the convertible bond hedges, as described below (after such cost was partially offset by the proceeds to us from the saleof warrants in the warrant transactions described below). In May 2017 and September 2017, we entered into privately negotiated transactions with certaininvestors to repurchase approximately $158.9 million and $19.6 million, respectively, aggregate principal amount of the 2019 Convertible Notes for anaggregate repurchase price of approximately $171.3 million and $21.4 million, respectively, including accrued interest. Pursuant to ASC Topic 470, Debt(“ASC 470”), the accounting for the May 2017 repurchase of the 2019 Convertible Notes was evaluated on a creditor-by-creditor basis with regard to the2022 Convertible Notes to determine modification versus extinguishment accounting. We concluded that the May 2017 repurchase of the 2019 ConvertibleNotes should be accounted for as an extinguishment and we recorded a debt extinguishment gain of $0.2 million related to the difference between theconsideration paid, the fair value of the liability component and carrying values at the repurchase date. As a result of the September 2017 repurchase of the2019 Convertible Notes, we recorded a debt extinguishment loss of $0.3 million related to the difference between the consideration paid, the fair value of theliability component and carrying value at the repurchase date.The 2019 Convertible Notes are governed by the terms of an indenture between us, as issuer, and Wilmington Trust, National Association, as the trustee.The 2019 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. The 2019 Convertible Notes will mature on February 15, 2019 repurchased or converted. Upon conversion of the remaining 2019Convertible Notes, such 2019 Convertible Notes will be convertible into, at our election, cash, shares of our common stock, or a combination thereof, at aconversion rate of 36.9079 shares of common stock per $1,000 principal amount of the 2019 Convertible Notes, which corresponds to an initial conversionprice of approximately $27.09 per share of our common stock.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 2019 Convertible Notes, at their option, only under the following circumstances:1)during any calendar quarter (and only during such calendar quarter), if the last reported sale price of our common stock for at least 20 trading days(whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendarquarter is greater than or equal to 130% of the conversion price on each applicable trading day;2)during the measurement period in which the trading price per $1,000 principal amount of the 2019 Convertible Notes for each trading day of themeasurement period was less than 98% of the product of the last reported sale price of our common stock and the conversion rate on each suchtrading day; or3)upon the occurrence of specified corporate events.143Table of ContentsOn 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 2019 Convertible Notes, in multiples of $1,000 principal amount, at the option of the holder, regardless of the foregoingcircumstances. The 2019 Convertible Notes were not convertible as of December 31, 2017.We determined the expected life of the debt was equal to the five-year term of the 2019 Convertible Notes. The effective interest rate on the liabilitycomponent was 7.79% for the period from the date of issuance through December 31, 2017. As of December 31, 2017, the “if-converted value” did notexceed the remaining principal amount of the 2019 Convertible Notes.Convertible Notes Interest ExpenseThe following table sets forth total interest expense recognized related to the Convertible Notes during 2017, 2016, and 2015 (in thousands): Years Ended December 31,2017 2016 2015Contractual interest expense$8,961 $5,000 $5,000Amortization of debt issuance costs1,275 1,072 985Amortization of debt discount11,071 7,544 6,927Total interest expense$21,307 $13,616 $12,912Convertible Bond Hedge and Warrant TransactionsIn connection with the pricing of the 2019 Convertible Notes and in order to reduce the potential dilution to our common stock and/or offset cashpayments due upon conversion of the 2019 Convertible Notes, in February 2014 we entered into convertible bond hedge transactions and separate warranttransactions of our common stock underlying the aggregate principal amount of the 2019 Convertible Notes with the call spread counterparties. Inconnection with the May 2017 and September 2017 repurchases of the 2019 Convertible Notes, as discussed above, we entered into agreements with the callspread counterparties to terminate a portion of the then existing convertible bond hedge transactions in an amount corresponding to the amount of such 2019Convertible Notes repurchased and to terminate a portion of the then-existing warrant transactions.As of December 31, 2017, the remaining bond hedge transactions covered approximately 0.8 million shares of our common stock underlying theremaining $21.4 million principal amount of the 2019 Convertible Notes. 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 2019 Convertible Notes are converted. If upon conversion of the 2019Convertible Notes, the price of our common stock is above the exercise price of the convertible bond hedges, the call spread counterparties will deliver sharesof our common stock and/or cash with an aggregate value approximately equal to the difference between the price of our common stock at the conversiondate and the exercise price, multiplied by the number of shares of our common stock related to the convertible bond hedges being exercised. The convertiblebond hedges were separate transactions entered into by us and were not part of the terms of the 2019 Convertible Notes or the warrants, discussed below.Holders of the 2019 Convertible Notes will not have any rights with respect to the convertible bond hedges.As of December 31, 2017, the remaining warrant transactions covered approximately 1.0 million shares of our common stock underlying the remaining$21.4 million principal amount of the 2019 Convertible Notes. The initial exercise price of the warrants is $34.12 per share, subject to adjustment uponcertain events, which was 70% above the last reported sale price of our common stock of $20.07 on February 11, 2014. The warrants would separately have adilutive effect to the extent that the market value per share of our common stock, as measured under the terms of the warrants, exceeds the applicable exerciseprice of the warrants. The warrants were issued to the call spread counterparties pursuant to the exemption from registration set forth in Section 4(a)(2) of theSecurities Act of 1933, as amended.As part of the May 2017 agreements to partially terminate the bond hedge and warrant transactions, we received approximately $0.3 million, which werecorded as a net increase to additional paid-in capital during 2017.2015 Term Loan FacilityIn August 2015, we entered into a credit agreement with a group of lenders, including Jefferies Finance LLC as administrative and collateral agent, thatprovided us with, among other things, a six-year $350.0 million term loan facility, under which we borrowed the full amount.The 2015 Term Loan Facility included an annual mandatory prepayment of the debt in an amount equal to 50% of our excess cash flow (as defined inthe 2015 Term Loan Facility) as measured on an annual basis, beginning with the year ended December 31, 2016. We prepaid $3.0 million of the debt inApril 2017.144Table of ContentsIn May 2017, we repaid the remaining $321.8 million of outstanding borrowings and accrued interest of the 2015 Term Loan Facility and, in accordancewith ASC 470, recognized a $9.7 million loss on debt extinguishment.Future PaymentsFuture annual principal payments on our long-term debt as of December 31, 2017 were as follows (in thousands):PeriodFuture AnnualPrincipal PaymentsYear Ending December 31, 2018$—Year Ending December 31, 201921,417Year Ending December 31, 2020—Year Ending December 31, 2021—Year Ending December 31, 2022320,000Thereafter475,000Total$816,417R.CONSOLIDATED QUARTERLY FINANCIAL DATA - UNAUDITEDThe following tables provide unaudited consolidated quarterly financial data for 2017 and 2016 (in thousands, except per share data): March 31, 2017 June 30, 2017 September 30, 2017 December 31, 2017Total revenues$139,472 $158,394 $153,741 $158,338Gross profit (1)106,889 120,731 (202,149) 82,064Operating expenses146,913 117,091 47,581 89,210Net (loss) income$(36,560) $(14,066) $(152,061) $3,460Net (loss) income per share - basic$(1.06) $(0.40) $(4.31) $0.10Net (loss) income per share - diluted$(1.06) $(0.40) $(4.31) $0.10 March 31, 2016 June 30, 2016 September 30, 2016 December 31, 2016Total revenues$109,300 $127,419 $143,782 $151,591Gross profit (2)85,474 84,563 113,092 116,349Operating expenses78,026 66,486 74,332 101,764Net (loss) income$(7,527) $(596) $16,196 $(10,557)Net (loss) income per share - basic$(0.22) $(0.02) $0.47 $(0.31)Net (loss) income per share - diluted$(0.22) $(0.02) $0.43 $(0.31)The sum of quarterly (loss) income per share totals differ from annual (loss) income per share totals due to rounding.(1) Gross profit for the third quarter of 2017 included an impairment charge of $319.2 million relating to the Makena base technology intangible asset.(2) Gross profit for the second quarter of 2016 included an impairment charge of $15.7 million relating to the MuGard Rights intangible asset.145Table of ContentsS.VALUATION AND QUALIFYING ACCOUNTS (IN THOUSANDS) Balance at Beginningof Period Additions (1) Deductions Chargedto Reserves Balance at End ofPeriodYear ended December 31, 2017: Allowance for doubtful accounts (1)$3,161 $3,852 $(3,308) $3,705Accounts receivable allowances (2)$9,533 $168,945 $(166,418) $12,060Rebates, fees and returns reserves(1)$89,466 $255,471 $(244,235) $100,702Valuation allowance for deferred tax assets (3)$1,429 $4,732 $(564) $5,597Year ended December 31, 2016: Allowance for doubtful accounts (1)$900 $3,209 $(948) $3,161Accounts receivable allowances (2)$10,783 $122,792 $(124,042) $9,533Rebates, fees and returns reserves(1)$45,162 $186,941 $(142,637) $89,466Valuation allowance for deferred tax assets (3)$11,859 $632 $(11,062) $1,429Year ended December 31, 2015: Allowance for doubtful accounts (1)$— $900 $— $900Accounts receivable allowances (2)$11,618 $93,887 $(94,722) $10,783Rebates, fees and returns reserves(1)$43,892 $120,293 $(119,023) $45,162Valuation allowance for deferred tax assets (3)$33,557 $— $(21,698) $11,859________________________(1) Addition to allowance for doubtful accounts are recorded in selling, general and administrative expenses. Additions to rebates, fees and returns reserves are recorded as areduction of revenues.(2) Accounts receivable allowances represent discounts and other chargebacks related to the provision for our product sales.(3) The valuation allowance for deferred tax assets includes purchase accounting adjustments and other activity related to our acquisition of Lumara Health. At December 31,2017, the valuation allowance related primarily to certain of our state NOL and credit carryforwards.T. RECENTLY ISSUED AND PROPOSED ACCOUNTING PRONOUNCEMENTSFrom 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.In January 2017, the FASB issued ASU No. 2017-01. This standard clarifies the definition of a business and provides a screen to determine when anintegrated set of assets and activities is not a business. The screen requires that when substantially all of the fair value of the gross assets acquired (or disposedof) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business. As discussed in Note B. Summary ofSignificant Accounting Policies, we have early adopted ASU 2017-01 as of January 1, 2017, with prospective application to any business developmenttransaction. Depending upon individual facts and circumstances of future transactions, this guidance will likely result in more transactions being accountedfor as asset acquisitions rather than business combinations.In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (“ASU 2016-18”).which requires amountsgenerally described as restricted cash and restricted cash equivalents to be included with cash and cash equivalents when reconciling beginning-of-periodand end-of-period total amounts shown on the statement of cash flows. We will adopt the standard on January 1, 2018 using the retrospective approach. Theadoption of ASU 2016-18 is not expected to have a material effect on the Company's consolidated financial statements.In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments(“ASU 2016-15”).This standard clarifies certain aspects of the statement of cash flows, including the classification of debt prepayment or debtextinguishment costs or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing,contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, proceeds from the settlement ofcorporate owned life insurance policies, distributions received from equity method investees and beneficial interests in securitization transactions. This newstandard also clarifies that an entity should determine each separately identifiable source of use within the cash receipts and payments on the basis of thenature of the underlying cash flows. In situations in which cash receipts and payments have146Table of Contentsaspects of more than one class of cash flows and cannot be separated by source or use, the appropriate classification should depend on the activity that islikely to be the predominant source or use of cash flows for the item. ASU 2016-15 will be effective for us on January 1, 2018. The adoption of ASU 2016-15is not expected to have a material effect on the Company's consolidated financial statements.In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on FinancialInstruments (“ASU 2016-13”). This standard requires entities to measure all expected credit losses for financial assets held at the reporting date based onhistorical experience, current conditions and reasonable and supportable forecasts. ASU 2016-13 will be effective for us for fiscal years beginning on or afterJanuary 1, 2020, including interim periods within those annual reporting periods and early adoption is permitted. We are currently evaluating the impact ofour adoption of ASU 2016-13 in our consolidated financial statements.In March 2016, the FASB issued ASU No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based PaymentAccounting (“ASU 2016-09”). The new standard involves several aspects of the accounting for share-based payment transactions, including the income taxconsequences, classification of awards as either equity or liabilities and classification on the statement of cash flows. We adopted ASU 2016-09 during thefirst quarter of 2017 and will now record all excess tax benefits and deficiencies related to share-based compensation in our condensed consolidatedstatements of operations as discrete events in the interim reporting period in which the benefit or deficiency occurs. Such benefits and deficiencies will not beconsidered in the calculation of our annual estimated effective tax rate. Any excess tax benefits that were not previously recognized because the related taxdeduction had not reduced current taxes payable (i.e. was not realized) are to be recorded using a modified retrospective transition method through acumulative-effect adjustment to retained earnings as of the beginning of the period in which the new guidance is adopted. We recorded a cumulative-effectadjustment to our accumulated deficit from previously unrecognized excess tax benefits of $21.6 million during the first quarter of 2017. Lastly, we willcontinue to use the current method of estimated forfeitures each period rather than accounting for forfeitures as they occur.In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”). This statement requires entities to recognize on its balancesheet assets and liabilities associated with the rights and obligations created by leases with terms greater than twelve months. This statement is effective forannual reporting periods beginning after December 15, 2018, and interim periods within those annual periods and early adoption is permitted. We arecurrently evaluating the impact of ASU 2016-02 in our consolidated financial statements and we currently expect that most of our operating leasecommitments will be subject to the new standard and recognized as operating lease liabilities and right-of-use assets upon our adoption of ASU 2016-02.In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of FinancialAssets and Financial Liabilities (“ASU 2016-01”). This standard amends certain aspects of accounting and disclosure requirements of financial instruments,including the requirement that equity investments with readily determinable fair values be measured at fair value with changes in fair value recognized in ourresults of operations. This new standard does not apply to investments accounted for under the equity method of accounting or those that result inconsolidation of the investee. Equity investments that do not have readily determinable fair values may be measured at fair value or at cost minus impairmentadjusted for changes in observable prices. A financial liability that is measured at fair value in accordance with the fair value option is required to bepresented separately in other comprehensive income for the portion of the total change in the fair value resulting from change in the instrument-specificcredit risk. In addition, a valuation allowance should be evaluated on deferred tax assets related to available-for-sale debt securities in combination withother deferred tax assets. ASU 2016-01 will be effective for us on January 1, 2018. The adoption of ASU 2016-01 is not expected to have a material impact onthe Company's consolidated financial statements.In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, as a new Topic, Accounting Standards Codification Topic606 (“ASU 2014-09”). The new revenue recognition standard provides a five-step analysis of transactions to determine when and how revenue is recognized.The core principle is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects theconsideration to which the entity expects to be entitled in exchange for those goods or services. In March 2016, the FASB issued ASU No. 2016-08, Revenuefrom Contracts with Customer Topic 606s, Principal versus Agent Considerations, which clarifies the implementation guidance on principal versus agentconsiderations. In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers Topic 606, Identifying Performance Obligations andLicensing, which clarifies certain aspects of identifying performance obligations and licensing implementation guidance. In May 2016, the FASB issued ASU2016-12, Revenue from Contracts with Customers Topic 606, Narrow-Scope Improvements and Practical Expedients, related to disclosures of remainingperformance obligations, as well as other amendments to guidance on collectibility, non-cash consideration and the presentation of sales and other similartaxes collected from customers. In December 2016, the FASB issued ASU No. 2016-20, Technical Corrections and Improvements to Topic 606, Revenue fromContracts with Customers, which amends147Table of Contentscertain narrow aspects of the guidance issued in ASU 2014-09, including guidance related to the disclosure of remaining performance obligations and prior-period performance obligations, as well as other amendments to the guidance on loan guarantee fees, contract costs, refund liabilities, advertising costs andthe clarification of certain examples. These ASUs are effective for entities for interim and annual reporting periods beginning after December 15, 2017,including interim periods within that year, which for us is the period beginning January 1, 2018. Early adoption is permitted any time after the originaleffective date, which for us was January 1, 2017. Entities have the choice to apply these ASUs either retrospectively to each reporting period presented or byrecognizing the cumulative effect of applying these standards at the date of initial application and not adjusting comparative information. During the fourthquarter of 2017 we finalized our assessments over the impact that these new standards will have on our consolidated results of operations, financial positionand disclosures and are finalizing our accounting policies. As of December 31, 2017, we have not identified any accounting changes that would materiallyimpact the amount of reported revenues with respect to our product or service revenues. However, we expect to capitalize incremental contract acquisitioncosts (specifically sales commissions related to the CBR Services) and amortize over the contractual relationship with the customer. We currently plan toadopt the standard using the “modified retrospective method.” Under that method, we will apply the rules to contracts that are not completed as of January 1,2018, and recognize the cumulative effect of initially applying the standard as an adjustment to the opening balance of retained earnings. As of December 31,2017, we expect to recognize an immaterial adjustment to retained earnings reflecting the cumulative impact for the accounting changes related to contractacquisition costs upon adoption of these new standards. There are also certain considerations related to internal control over financial reporting that areassociated with implementing Topic 606. We are evaluating our internal control framework over revenue recognition to identify any changes that may needto be made in response to the new guidance. In addition, disclosure requirements under the new guidance in Topic 606 have been significantly expanded incomparison to the disclosure requirements under the current guidance. We will have completed the design and implementation of the appropriate controls toobtain and disclose the information required under Topic 606 in our first quarter of 2018.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 ProceduresOur principal executive officer and principal financial officer, after evaluating the effectiveness of our “disclosure controls and procedures” (as definedin the 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, 2017, theend of the period covered by this Annual Report on Form 10-K, our disclosure controls and procedures were designed and were effective to providereasonable assurance that information we are required to disclose in the reports that we file or submit under the Securities Exchange Act of 1934, as amended,is recorded, 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 ReportingManagement’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, 2017 and is incorporated herein by reference.Changes in Internal Control Over Financial Reporting There were no changes in our internal control over financial reporting (as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) thatoccurred during the three months ended December 31, 2017 that have materially affected, or that are reasonably likely to materially affect, our internalcontrol over financial reporting. ITEM 9B. OTHER INFORMATION:None.148Table of ContentsPART IIIITEM 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, 2017.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, 2017.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, 2017.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, 2017.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, 2017.149Table of ContentsPART IVITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES:(a) The following documents are filed as part of this Annual Report on Form 10-K:(1)Financial Statements:The financial statements are filed as part of this Annual Report on Form 10-K under “Item 8. Financial Statements and Supplementary Data.”(2)Financial Statement Schedules:The financial statement schedules are omitted as they are either not applicable or the information required is presented in the financial statementsand notes thereto under “Item 8. Financial Statements and Supplementary Data.”(3)Exhibits:See Exhibit Index immediately preceding the signature page of this Annual Report on Form 10-K.150Table of ContentsITEM 16. FORM 10-K SUMMARY:None.EXHIBIT INDEX ExhibitNumber Description2.1 Agreement and Plan of Merger, dated as of September 28, 2014, by and among Lumara Health Inc., AMAG Pharmaceuticals, Inc.,Snowbird, Inc., and Lunar Representative, LLC as the Stockholders’ Representative (incorporated herein by reference toExhibit 2.1 to the Company’s Current Report on Form 8-K filed September 29, 2014, File No. 001-10865)2.2 Stock Purchase Agreement, dated as of June 29, 2015, by and among CBR Holdco, LLC, CBR Acquisition Holdings Corp. andAMAG Pharmaceuticals, Inc. (incorporated herein by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filedJune 29, 2015, File No. 001-10865)3.1, 4.1 Restated Certificate of Incorporation of AMAG Pharmaceuticals, Inc. (incorporated herein by reference to Exhibits 3.1 and 4.1tothe Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2010, File No. 001-10865)3.2,4.2 Certificate of Amendment of Restated Certificate of Incorporation of AMAG Pharmaceuticals, Inc. as filed on May 21, 2015 withthe Delaware Secretary of State (incorporated herein by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-Kfiled May 28, 2015, File No. 001-10865)3.3, 4.3 Amended and Restated By-Laws of AMAG Pharmaceuticals, Inc. (incorporated herein by reference to Exhibit 3.1 to theCompany’s Current Report on Form 8-K filed December 17, 2015, File No. 001-10865)3.4, 4.4 Amended and Restated Certificate of Designation of Series A Junior Participating Preferred Stock (incorporated herein byreference to Exhibits 3.1 to the Company’s Current Report on Form 8-K filed April 10, 2017, File No. 001-10865)4.5 Specimen certificate representing AMAG Pharmaceuticals, Inc.’s Common Stock (incorporated herein by reference to Exhibit 4.3to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2009, File No. 001-14732)4.6 Rights Agreement, dated as of April 7, 2017 by and between AMAG Pharmaceuticals, Inc. and American Stock Transfer & TrustCompany, LLC (incorporated herein by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed April 10,2017, File No. 001-10865)4.7 Form of Right Certificate (incorporated herein by reference to Exhibit 4.3 to the Company’s Current Report on Form 8-K filedApril 10, 2017, File No. 001-10865)4.8 Base Indenture, dated as of February 14, 2014, by and between AMAG Pharmaceuticals, Inc. and Wilmington Trust, NationalAssociation (incorporated herein by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed February 14,2014, File No. 001-10865)4.9 First Supplemental Indenture, dated as of February 14, 2014, by and between AMAG Pharmaceuticals, Inc. and Wilmington Trust,National Association (incorporated herein by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filedFebruary 14, 2014, File No. 001-10865)4.10 Form of 2.50% Convertible Senior Note due 2019 (incorporated herein by reference to Exhibit 4.3 to the Company’s CurrentReport on Form 8-K filed February 14, 2014, File No. 001-10865)4.11 Indenture, dated as of August 17, 2015, by and among AMAG Pharmaceuticals, Inc., the Guarantors party thereto and WilmingtonTrust, National Association, as trustee (incorporated herein by reference to Exhibit 4.1 to the Company’s Current Report on Form8-K filed August 17, 2015, File No. 001-10865)4.12 Form of 7.875% Senior Note due 2023 (incorporated herein by reference to Exhibit 4.2 to the Company’s Current Report on Form8-K filed August 17, 2015, File No. 001-10865)4.13 Indenture, dated as of May 10, 2017, by and between AMAG Pharmaceuticals, Inc. and Wilmington Trust, National Association(incorporated herein by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed May 15, 2017, File No. 001-10865)4.14 First Supplemental Indenture, dated as of May 10, 2017, by and between AMAG Pharmaceuticals, Inc. and Wilmington Trust,National Association (incorporated herein by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed May15, 2017, File No. 001-10865)4.15 Form of 3.25% Convertible Senior Note due 2022 (incorporated herein by reference to Exhibit 4.3 to the Company’s CurrentReport on Form 8-K filed May 15, 2017, File No. 001-1086510.1* Form of Indemnification Agreement (incorporated herein by reference to Exhibit 10.2 to the Company’s Annual Report onForm 10-K for the year ended December 31, 2009, File No. 001-14732)10.2* AMAG Pharmaceuticals, Inc.’s Amended and Restated Non-Employee Director Compensation Policy (incorporated herein byreference to Exhibit 10.6 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2017, File No. 001-10865)151Table of Contents10.3* AMAG Pharmaceuticals, Inc.’s Fourth 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 20, 2017, File No. 001-10865)10.4* AMAG Pharmaceuticals, Inc. 2015 Employee Stock Purchase Plan (incorporated herein by reference to Appendix C tothe Company’s Definitive Proxy Statement on Schedule 14A filed April 16, 2015, File No. 001-10865)105* Lumara Health Inc. Amended and Restated 2013 Incentive Compensation Plan (incorporated herein by reference to Exhibit 10.6 tothe Company’s Annual Report on Form 10-K for the year ended December 31, 2014, File No. 001-10865)10.6*+ Form of Incentive Stock Option Agreement for AMAG Pharmaceuticals, Inc. Employees under AMAG Pharmaceuticals, Inc.’sFourth Amended and Restated 2007 Equity Incentive Plan and the Lumara Health Inc. Amended and Restated 2013 IncentiveCompensation Plan10.7*+ Form of Non-Qualified Stock Option Agreement for AMAG Pharmaceuticals, Inc. Employees under AMAG Pharmaceuticals, Inc.’sFourth Amended and Restated 2017 Equity Incentive Plan and the Lumara Health Inc. Amended and Restated 2013 IncentiveCompensation Plan10.8*+ Form of Restricted Stock Unit Agreement for AMAG Pharmaceuticals, Inc. Employees under AMAG Pharmaceuticals, Inc.’s FourthAmended and Restated 2007 Equity Incentive Plan and the Lumara Health Inc. Amended and Restated 2013 IncentiveCompensation Plan10.9*+ Form of Non-Qualified Stock Option Agreement for Non-Employee Directors under AMAG Pharmaceuticals, Inc.’s FourthAmended and Restated 2007 Equity Incentive Plan10.10*+ Form of Restricted Stock Unit Agreement for Non-Employee Directors under AMAG Pharmaceuticals, Inc.’s Fourth Amended andRestated 2007 Equity Incentive Plan10.11* Form of Non-Plan Stock Option Agreement, by and between AMAG Pharmaceuticals, Inc. 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)10.12*+ Form of Non-Qualified Stock Option Agreement - Non-Plan Inducement Grant10.13*+ Form of Restricted Stock Unit Agreement - Non-Plan Inducement Grant10.14* AMAG Pharmaceuticals, Inc. Long-Term Incentive Plan (incorporated herein by reference to Exhibit 10.4 to the Company’sQuarterly Report on Form 10-Q for the quarter ended March 31, 2017, File No. 001-10865)10.15* Form of Award Notice under the AMAG Pharmaceuticals, Inc. Long-term Incentive Plan (incorporated herein by reference toExhibit 10.5 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2017, File No. 001-10865)10.16* Form of Employment Agreement between AMAG Pharmaceuticals, Inc. and each of its executive officers (other than William K.Heiden) (incorporated herein by reference to Exhibit 10.19 to the Company’s Annual Report on Form 10-K for the year endedDecember 31, 2015, File No. 001-10865)10.17* Amended and Restated Employment Agreement dated as of February 7, 2014 between AMAG Pharmaceuticals, Inc. andWilliam K. 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)10.18* Amendment to Amended and Restated Employment Agreement, dated as of November 29, 2017, between AMAG Pharmaceuticals,Inc. and William K. Heiden (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filedNovember 30, 2017, File No. 001-10865)10.19 Indenture of Lease, dated as of May 22, 2008, by and between AMAG Pharmaceuticals, Inc., as tenant, and Mortimer B. Zuckermanand Edward H. 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 Current Report onForm 8-K filed May 29, 2008, File No. 0-14732)10.20 Assignment and Assumption of Lease, dated as of June 10, 2013, by and among AMAG Pharmaceuticals, Inc., Mortimer B.Zuckerman and Edward H. Linde, trustees of 92 Hayden Avenue Trust under Declaration of Trust dated August 18, 1983 and ShireHuman Genetic Therapies, Inc. (incorporated herein by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-Kfiled June 13, 2013, File No. 001-10865)10.21 Lease Agreement, dated as of June 10, 2013, by and between AMAG Pharmaceuticals, Inc. 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)10.22 First Amendment to Lease Agreement, dated June 10, 2013, by and between AMAG Pharmaceuticals, Inc. and BP BAY COLONYLLC, dated March 24, 2015 (incorporated herein by reference to Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q forthe quarter ended March 31, 2015, File No. 001-10865)152Table of Contents10.23 Second Amendment to Lease Agreement, dated June 10, 2013, by and between AMAG Pharmaceuticals, Inc. and BP BAYCOLONY LLC, dated December 4, 2015 (incorporated herein by reference to Exhibit 10.30 to the Company’s Annual Report onForm 10-K for the year ended December 31, 2015, File No. 001-10865)10.24 Third Amendment to Lease Agreement, dated June 10, 2013, by and between AMAG Pharmaceuticals, Inc. and BP BAY COLONYLLC, dated December 7, 2015 (incorporated herein by reference to Exhibit 10.31 to the Company’s Annual Report on Form 10-Kfor the year ended December 31, 2015, File No. 001-10865)10.25 License Agreement between AMAG Pharmaceuticals, Inc. and Abeona Therapeutics, Inc. (formerly known as PlasmaTechBiopharmaceuticals, Inc. and Access Pharmaceuticals, Inc.) dated as of June 6, 2013 (incorporated herein by reference toExhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2013, File No. 001-10865)(confidential treatment previously granted) 10.26 Commercial Supply Agreement, dated effective as of August 29, 2012, by and between AMAG Pharmaceuticals, Inc. and Sigma-Aldrich, Inc. (incorporated herein by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarterended September 30, 2012, File No. 001-10865) (confidential treatment previously granted)10.27 Amendment No.1 to Commercial Supply Agreement, dated October 3, 2013, by and between AMAG Pharmaceuticals, Inc. andSigma-Aldrich, Inc. (incorporated herein by reference to Exhibit 10.54 to the Company’s Annual Report on Form 10-K for the yearended December 31, 2013, File No. 001-10865) (confidential treatment previously granted)10.28 Amendment No. 2 to Commercial Supply Agreement, dated April 28, 2015, by and between AMAG Pharmaceuticals, Inc. andSigma-Aldrich, Inc. (incorporated herein by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for thequarter ended June 30, 2015, File No. 001-10865) (confidential treatment previously granted)10.29 Amendment No. 3 to Commercial Supply Agreement, dated October 19, 2015, by and between the Company and Sigma-Aldrich, Inc. (incorporated herein by reference to Exhibit 10.36 to the Company’s Annual Report on Form 10-K for the year endedDecember 31, 2015, File No. 001-10865) (confidential treatment previously granted)10.30 Pharmaceutical Manufacturing and Supply Agreement, dated effective as of January 8, 2010, by and between AMAGPharmaceuticals, Inc. and 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 ended September 30, 2012, FileNo. 001-10865) (confidential treatment previously granted)10.31 Amendment No. 1 to Pharmaceutical Manufacturing and Supply Agreement, dated July 5, 2014, by and between AMAGPharmaceuticals, Inc. and Patheon Manufacturing Services LLC (as assignee from DSM Pharmaceuticals, Inc.) (incorporated hereinby reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2014, FileNo. 001-10865)10.32 Amendment No. 2 to Pharmaceutical Manufacturing and Supply Agreement, dated June 19, 2015, by and between AMAGPharmaceuticals, Inc. and Patheon Manufacturing Services LLC (as assignee from DPI Newco LLC as assignee from DSMPharmaceuticals, Inc.) (incorporated herein by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for thequarter ended September 30, 2015, File No. 001-10865) (confidential treatment previously granted)10.33 Amended and Restated Technical Transfer and Supply Agreement, dated as of December 19, 2016, by and between AMAGPharmaceuticals, Inc. and the Pfizer CentreOne Group of Pfizer, Inc. (incorporated herein by reference to Exhibit 10.34 to theCompany’s Annual Report on Form 10-K for the year ended December 31, 2016) (confidential treatment previously granted)10.34 Development and License Agreement, dated September 30, 2014, by and between Lumara Health Inc and Antares Pharma, Inc.(incorporated herein by reference to Exhibit 10.42 to the Company’s Annual Report on Form 10-K for the year endedDecember 31, 2015, File No. 001-10865) (confidential treatment previously granted)10.35 License Agreement, dated January 8, 2017, by and between AMAG Pharmaceuticals, Inc. and Palatin Technologies, Inc.,(incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed February 3, 2017, FileNo. 001-10865) (confidential treatment previously granted)10.36 Base Call Option Transaction Confirmation, dated as of February 11, 2014, between AMAG Pharmaceuticals, Inc. and JPMorganChase Bank, National Association, London Branch (incorporated herein by reference to Exhibit 10.1 to the Company’s CurrentReport on Form 8-K filed February 14, 2014, File No. 001-10865)10.37 Base Call Option Transaction Confirmation, dated as of February 11, 2014, between AMAG Pharmaceuticals, Inc. and Royal Bankof 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)153Table of Contents10.38 Base Call Option Transaction Confirmation, dated as of February 11, 2014, between AMAG Pharmaceuticals, Inc. and MorganStanley & Co. International plc (incorporated herein by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-Kfiled February 14, 2014, File No. 001-10865)10.39 Base Warrants Confirmation, dated as of February 11, 2014, between AMAG Pharmaceuticals, Inc. and JPMorgan Chase Bank,National Association, London Branch (incorporated herein by reference to Exhibit 10.4 to the Company’s Current Report onForm 8-K filed February 14, 2014, File No. 001-10865)10.40 Amendment to Warrant Transaction, dated as of February 23, 2015, by and between AMAG Pharmaceuticals, Inc. and J.P. MorganSecurities LLC, as agent (incorporated herein by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q forthe quarter ended March 31, 2015, File No. 001-10865)10.41 Base Warrants Confirmation, dated as of February 11, 2014, between AMAG Pharmaceuticals, Inc. 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, FileNo. 001-10865)10.42 Base Warrants Confirmation, dated as of February 11, 2014, between AMAG Pharmaceuticals, Inc. and Morgan Stanley & Co.International plc (incorporated herein by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K filedFebruary 14, 2014, File No. 001-10865)10.43 Additional Call Option Transaction Confirmation, dated as of February 13, 2014, between AMAG Pharmaceuticals, Inc. andJPMorgan Chase Bank, National Association, London Branch (incorporated herein by reference to Exhibit 10.7 to the Company’sCurrent Report on Form 8-K filed February 14, 2014, File No. 001-10865)10.44 Additional Call Option Transaction Confirmation, dated as of February 13, 2014, between AMAG Pharmaceuticals, Inc. and RoyalBank of Canada (incorporated herein by reference to Exhibit 10.8 to the Company’s Current Report on Form 8-K filedFebruary 14, 2014, File No. 001-10865)10.45 Additional Call Option Transaction Confirmation, dated as of February 13, 2014, between AMAG Pharmaceuticals, Inc. andMorgan Stanley & Co. International plc (incorporated herein by reference to Exhibit 10.9 to the Company’s Current Report onForm 8-K filed February 14, 2014, File No. 001-10865)10.46 Additional Warrants Confirmation, dated as of February 13, 2014, between AMAG Pharmaceuticals, Inc. and JPMorgan ChaseBank, National Association, London Branch (incorporated herein by reference to Exhibit 10.10 to the Company’s Current Reporton Form 8-K filed February 14, 2014, File No. 001-10865)10.47 Additional Warrants Confirmation, dated as of February 13, 2014, between AMAG Pharmaceuticals, Inc. and Royal Bank ofCanada (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)10.48 Additional Warrants Confirmation, dated as of February 13, 2014, between AMAG Pharmaceuticals, Inc. and MorganStanley & 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)10.49 Credit Agreement, dated as of November 12, 2014, by and among AMAG Pharmaceuticals, Inc., the financial institutions andagents listed therein, and Jefferies Finance LLC (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Reporton Form 8-K filed November 12, 2014, File No. 001-10865)10.50 First Amendment to Credit Agreement, dated March 31, 2015, by and among AMAG Pharmaceuticals, Inc., the Lenders namedtherein, and Jefferies Finance LLC, as administrative agent (incorporated herein by reference to Exhibit 10.6 to the Company’sQuarterly Report on Form 10-Q for the quarter ended March 31, 2015, File No. 001-10865)10.51 Credit Agreement, dated as of August 17, 2015, by and among AMAG Pharmaceuticals, Inc., the financial institutions and agentslisted therein, and Jefferies Finance LLC (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report onForm 8-K filed August 17, 2015, File No. 001-10865)10.52 License Agreement, dated as of February 13, 2017, by and between AMAG Pharmaceuticals, Inc. and Endoceutics Inc.(incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed April 5, 2017, File No. 001-10865) (confidential treatment previously granted)10.53 Manufacturing and Supply Agreement, dated as of April 5, 2017, by and between AMAG Pharmaceuticals, Inc. and EndoceuticsInc. (incorporated herein by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed April 5, 2017, File No.001-10865) (confidential treatment previously granted)21.1+ Subsidiaries of AMAG Pharmaceuticals, Inc.23.1+ Consent of PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm154Table of Contents24.1 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 of the 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 of the 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 Act of 200232.2++ Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 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 and not marked with a “+” or “++” have previously been filed with the SEC and are incorporated hereinby reference, as indicated.155Table of ContentsSIGNATURESPursuant 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 onits behalf by the undersigned, thereunto duly authorized. AMAG PHARMACEUTICALS, INC. By:/s/ William K. Heiden William K. HeidenPresident and Chief Executive Officer Date:February 28, 2018We, the undersigned officers and directors of AMAG Pharmaceuticals, Inc., hereby severally constitute and appoint William K. Heiden and EdwardMyles, 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.Name Title Date /s/ William K. Heiden President and Chief Executive Officer (Principal ExecutiveOfficer) and Director February 28, 2018William K. Heiden /s/ Edward Myles Executive Vice President of Finance, Chief Financial Officerand Treasurer (Principal Financial and Accounting Officer) February 28, 2018Edward Myles /s/ Barbara Deptula Director February 28, 2018Barbara Deptula /s/ John Fallon, M.D. Director February 28, 2018John Fallon, M.D. /s/ Robert J. Perez Director February 28, 2018Robert J. Perez /s/ Lesley Russell, MB. Ch.B., MRCP Director February 28, 2018Lesley Russell, MB. Ch.B., MRCP /s/ Gino Santini Director February 28, 2018Gino Santini /s/ Davey S. Scoon Director February 28, 2018Davey S. Scoon /s/ James Sulat Director February 28, 2018James Sulat 156Exhibit 10.6AMAG PHARMACEUTICALS, INC.INCENTIVE STOCK OPTION AGREEMENTFOR COMPANY EMPLOYEESName of Optionee: No. of Option Shares: Option Exercise Price per Share:$ [FMV on Grant Date] Grant Date: Expiration Date: [up to 10 years] Pursuant to the AMAG Pharmaceuticals, Inc. Fourth Amended and Restated 2007 Equity Incentive Plan as amended throughthe date hereof (the “Plan”), AMAG Pharmaceuticals, Inc. (the “Company”) hereby grants to the Optionee named above an option (the“Stock Option”) to purchase on or prior to the Expiration Date specified above all or part of the number of shares of Common Stock,par value $0.01 per share (the “Stock”), of the Company specified above at the Option Exercise Price per Share specified abovesubject to the terms and conditions set forth herein and in the Plan.1.Exercisability Schedule. No portion of this Stock Option may be exercised until such portion shall have becomeexercisable. Except as set forth below, and subject to the discretion of the Administrator (as defined in Section 2 of the Plan) toaccelerate the exercisability schedule hereunder, this Stock Option shall be exercisable with respect to the following number of OptionShares on the dates indicated so long as the Optionee remains in a Business Relationship (as defined in Section 3 below) on such dates:Incremental Number of Option Shares Exercisable*Exercisability Date_____________ (___%)_________________________ (___%)_________________________ (___%)_________________________ (___%)____________* Max. of $100,000 per yr.Once exercisable, this Stock Option shall continue to be exercisable at any time or times prior to the close of business on theExpiration Date, subject to the provisions hereof and of the Plan.2. Manner of Exercise.(a) The Optionee may exercise this Stock Option only in the following manner: from time to time on or prior to theExpiration Date of this Stock Option, the Optionee may give written or electronic notice to the Company to the attention of theCompany’s Treasurer or his or her designee of his or her election to purchase some or all of the Option Shares purchasable at the timeof such notice. This notice shall specify the number of Option Shares to be purchased.Payment of the purchase price for the Option Shares may be made by one or more of the following methods: (i) in cash, bycertified or bank check or other instrument acceptable to the Company; (ii) subject to the Company’s approval, through the delivery (orattestation to the ownership) of shares of Stock that have been purchased by the Optionee on the open market or that are beneficiallyowned by the Optionee and are not then subject to any restrictions under any Company plan and that otherwise satisfy any holdingperiods as may be required by the Administrator; (iii) by the Optionee delivering to the Company a properly executed exercise noticetogether with irrevocable instructions to a broker to promptly deliver to the Company cash or a check payable and acceptable to theCompany to pay the option purchase price, provided that in the event the Optionee chooses to pay the option purchase price as soprovided, the Optionee and the broker shall comply with such procedures and enter into such agreements of indemnity and otheragreements as the Company shall prescribe as a condition of such payment procedure; or (iv) a combination of (i), (ii) and (iii) above.Payment instruments will be received subject to collection.The transfer to the Optionee on the records of the Company or of the transfer agent of the Option Shares will be contingentupon (i) the Company’s receipt from the Optionee of the full purchase price for the Option Shares, as set forth above, (ii) the fulfillmentof any other requirements contained herein or in the Plan or in any other agreement or provision of laws, and (iii) the receipt by theCompany of any agreement, statement or other evidence that the Company may require to satisfy itself that the issuance of Stock to bepurchased pursuant to the exercise of Stock Options under the Plan and any subsequent resale of the shares of Stock will be incompliance with applicable laws and regulations. In the event the Optionee chooses to pay the purchase price by previously-ownedshares of Stock through the attestation method, the number of shares of Stock transferred to the Optionee upon the exercise of theStock Option shall be net of the Shares attested to.(b) The shares of Stock purchased upon exercise of this Stock Option shall be transferred to the Optionee on therecords of the Company or of the transfer agent upon compliance to the satisfaction of the Company with all requirements underapplicable laws or regulations in connection with such transfer and with the requirements hereof and of the Plan. The determination ofthe Company as to such compliance shall be final and binding on the Optionee. The Optionee shall not be deemed to be the holder of,or to have any of the rights of a holder with respect to, any shares of Stock subject to this Stock Option unless and until this StockOption shall have been exercised pursuant to the terms hereof, the Company or the transfer agent shall have transferred the shares tothe Optionee, and the Optionee’s name shall have been entered as the stockholder of record on the books of the Company. Thereupon,the Optionee shall have full voting, dividend and other ownership rights with respect to such shares of Stock.(c) Notwithstanding any other provision hereof or of the Plan, no portion of this Stock Option shall be exercisableafter the Expiration Date hereof.(d) Without derogating from the foregoing, “statutory option stock” (as defined below) may be tendered in payment ofthe exercise price of this Stock Option even if the stock to be so tendered has not, at the time of tender, been held by the Optionee forthe applicable minimum statutory holding period required to receive the tax benefits afforded under Section 421(a) of the Code withrespect to such stock. The Optionee acknowledges that the tender of such “statutory option stock” may have adverse tax consequencesto the Optionee. As used above, the term “statutory option stock” means stock acquired through the exercise of an incentive stockoption or an option granted under an employee stock purchase plan. The tender of statutory option stock in payment of the exerciseprice of this Option shall be accompanied by written representation (in form satisfactory to the Company) stating whether such stockhas been held by the Optionee for the applicable minimum statutory holding period.3. Termination of Business Relationship.(a) If the Optionee’s Business Relationship (as defined below) is terminated, the period within which to exercise theStock Option may be subject to earlier termination as follows:(i) If the Optionee’s Business Relationship is terminated by reason of the Optionee’s death or disability (asdetermined by the Company) or, if the Optionee dies or becomes disabled within the three-month period following the date theOptionee’s Business Relationship terminates for any other reason, any portion of this Stock Option outstanding on the date oftermination, may be exercised, to the extent exercisable on such date, for a period of twelve months from the date of death ordisability or until the Expiration Date, if earlier. Any portion of this Stock Option that is not exercisable on the date theOptionee’s Business Relationship is terminated shall terminate immediately and be of no further force or effect.(ii) If the Optionee’s Business Relationship is terminated for any reason other than death or disability, anyportion of this Stock Option outstanding on such date may be exercised, to the extent exercisable on the date of termination, fora period of three months from the date of termination or until the Expiration Date, if earlier. Any portion of this Stock Optionthat is not exercisable on the date the Optionee’s Business Relationship is terminated shall terminate immediately and be of nofurther force or effect.(iii) Notwithstanding the foregoing, if the Optionee, prior to the termination date of this Stock Option, (i)violates any provision of any employment agreement or any confidentiality or other agreement between the Optionee and theCompany, (ii) commits any felony or any crime involving moral turpitude under the laws of the United States or any statethereof, (iii) attempts to commit, or participate in, a fraud or act of dishonesty against the Company, or (iv) commits grossmisconduct, the right to exercise this Stock Option shall terminate immediately upon written notice to the Optionee from theCompany describing such violation or act.The Company’s determination of the reason for termination of the Optionee’s Business Relationship shall be conclusive andbinding on the Optionee and his or her representatives or legatees. Notwithstanding the foregoing, under certain circumstances set forthin the Employment Agreement dated as of [ ] by and between the Company and the Optionee (the “Employment Agreement”), andsubject to compliance by the Optionee with the requirements of the Employment Agreement related to such circumstances, the vestingof the unvested portion of this Stock Option may be accelerated as provided in and subject to the terms of the Employment Agreement.(b) For purposes hereof, “Business Relationship” means service to the Company or any of its Subsidiaries, or its ortheir successors, in the capacity of an employee, officer, director, consultant or advisor. For purposes hereof, a Business Relationshipshall not be considered as having terminated during any military leave, sick leave, or other leave of absence if approved in writing bythe Company and if such written approval, or applicable law, contractually obligates the Company to continue the BusinessRelationship of the Optionee after the approved period of absence (an “Approved Leave of Absence”). For purposes hereof, aBusiness Relationship shall include a consulting arrangement between the Optionee and the Company that immediately followstermination of employment, but only if so stated in a written consulting agreement executed by the Company.4. Incorporation of Plan. Notwithstanding anything herein to the contrary, this Stock Option shall be subject to and governedby all the terms and conditions of the Plan, including the powers of the Administrator set forth in Section 2(b) of the Plan. Capitalizedterms in this Agreement shall have the meaning specified in the Plan, unless a different meaning is specified herein.5. Transferability. This Agreement is personal to the Optionee, is non-assignable and is not transferable in any manner, byoperation of law or otherwise, other than by will or the laws of descent and distribution. This Stock Option is exercisable, during theOptionee’s lifetime, only by the Optionee, and thereafter, only by the Optionee’s legal representative or legatee. Notwithstanding theforegoing, this Stock Option may be transferred pursuant to a domestic relations order; provided, however, that an “incentive stockoption” under Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”) may be deemed to be a nonqualified stockoption as a result of such transfer.6. Status of the Stock Option. This Stock Option is intended to qualify as an “incentive stock option” under Section 422 of theCode, but the Company does not represent or warrant that this Stock Option qualifies as such. The Optionee should consult with his orher own tax advisors regarding the tax effects of this Stock Option and the requirements necessary to obtain favorable income taxtreatment under Section 422 of the Code, including, but not limited to, holding period requirements. To the extent any portion of thisStock Option does not so qualify as an “incentive stock option,” such portion shall be deemed to be a non-qualified stock option. If theOptionee intends to dispose or does dispose (whether by sale, gift, transfer or otherwise) of any Option Shares within the one-yearperiod beginning on the date after the transfer of such shares to him or her, or within the two-year period beginning on the day after thegrant of this Stock Option, he or she will so notify the Company within 30 days after such disposition.7. Tax Withholding. The Optionee shall, not later than the date as of which the exercise of this Stock Option becomes ataxable event for Federal income tax purposes, pay to the Company or make arrangements satisfactory to the Company for payment ofany Federal, state, and local taxes required by law to be withheld on account of such taxable event. The Company shall have theauthority to cause the required tax withholding obligation to be satisfied, in whole or in part, by withholding from shares of Stock to beissued to the Optionee a number of shares of Stock with an aggregate Fair Market Value that would satisfy the withholding amountdue; provided, however, that the amount withheld does not exceed the maximum tax rate, or such lesser amount as determined by theAdministrator.8. No Obligation to Continue Business Relationship. Neither the Company nor any Subsidiary is obligated by or as a result ofthe Plan or this Agreement to continue the Optionee’s Business Relationship, and neither the Plan nor this Agreement shall interfere inany way with the right of the Company or any Subsidiary to terminate the Business Relationship of the Optionee at any time.9. Integration. This Agreement constitutes the entire agreement between the parties with respect to this Stock Option andsupersedes all prior agreements and discussions between the parties concerning such subject matter.10. Data Privacy Consent. In order to administer the Plan and this Agreement and to implement or structure future equitygrants, the Company, its subsidiaries and affiliates and certain agents thereof (together, the “Relevant Companies”) may process anyand all personal or professional data, including but not limited to Social Security or other identification number, home address andtelephone number, date of birth and other information that is necessary or desirable for the administration of the Plan and/or thisAgreement (the “Relevant Information”). By entering into this Agreement, the Optionee (i) authorizes the Company to collect, process,register and transfer to the Relevant Companies all Relevant Information; (ii) waives any privacy rights the Optionee may have withrespect to the Relevant Information; (iii) authorizes the Relevant Companies to store and transmit such information in electronic form;and (iv) authorizes the transfer of the Relevant Information to any jurisdiction in which the Relevant Companies consider appropriate.The Optionee shall have access to, and the right to change, the Relevant Information. Relevant Information will only be used inaccordance with applicable law.11. Notices. Notices hereunder shall be mailed or delivered to the Company at its principal place of business to the attention ofthe Company’s Treasurer and shall be mailed or delivered to the Optionee at the address on file with the Company or, in either case, atsuch other address as one party may subsequently furnish to the other party in writing.[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]SIGNATURE PAGE TO AMAG PHARMACEUTICALS, INC.INCENTIVE STOCK OPTION AGREEMENT AMAG PHARMACEUTICALS, INC. By: Name: William K. Heiden Title: President and Chief Executive Officer The foregoing Agreement is hereby accepted and the terms and conditions thereof hereby agreed to by the undersigned, and theundersigned acknowledges receipt of a copy of this entire Agreement, a copy of the Plan, and a copy of the Plan’s related prospectus.Electronic acceptance of this Agreement pursuant to the Company’s instructions to the Optionee (including through an onlineacceptance process) is acceptable. Dated: Optionee's Signature Optionee's name and address: Exhibit 10.7AMAG PHARMACEUTICALS, INC.NON-QUALIFIED STOCK OPTION AGREEMENT FOR COMPANY EMPLOYEES Name of Optionee: No. of Option Shares: Option Exercise Price per Share:$ [FMV on Grant Date] Grant Date: Expiration Date: [up to 10 years] Pursuant to the AMAG Pharmaceuticals, Inc. Fourth Amended and Restated 2007 Equity Incentive Plan as amended throughthe date hereof (the “Plan”), AMAG Pharmaceuticals, Inc. (the “Company”) hereby grants to the Optionee named above an option (the“Stock Option”) to purchase on or prior to the Expiration Date specified above all or part of the number of shares of Common Stock,par value $0.01 per share (the “Stock”) of the Company specified above at the Option Exercise Price per Share specified above subjectto the terms and conditions set forth herein and in the Plan. This Stock Option is not intended to be an “incentive stock option” underSection 422 of the Internal Revenue Code of 1986, as amended.1.Exercisability Schedule. No portion of this Stock Option may be exercised until such portion shall have becomeexercisable. Except as set forth below, and subject to the discretion of the Administrator (as defined in Section 2 of the Plan) toaccelerate the exercisability schedule hereunder, this Stock Option shall be exercisable with respect to the following number of OptionShares on the dates indicated so long as the Optionee remains in a Business Relationship (as defined in Section 3 below) on such dates:Incremental Number of Option Shares ExercisableExercisability Date_____________ (___%)_________________________ (___%)_________________________ (___%)_________________________ (___%)____________Once exercisable, this Stock Option shall continue to be exercisable at any time or times prior to the close of business on theExpiration Date, subject to the provisions hereof and of the Plan.2. Manner of Exercise.(a) The Optionee may exercise this Stock Option only in the following manner: from time to time on or prior to theExpiration Date of this Stock Option, the Optionee may give written or electronic notice to the Company to the attention of theCompany’s Treasurer or his or her designee of his or her election to purchase some or all of the Option Shares purchasable at the timeof such notice. This notice shall specify the number of Option Shares to be purchased.Payment of the purchase price for the Option Shares may be made by one or more of the following methods: (i) in cash, bycertified or bank check or other instrument acceptable to the Company; (ii) subject to the Company’s approval, through the delivery (orattestation to the ownership) of shares of Stock that have been purchased by the Optionee on the open market or that are beneficiallyowned by the Optionee and are not then subject to any restrictions under any Company plan and that otherwise satisfy any holdingperiods as may be required by the Administrator; (iii) by the Optionee delivering to the Company a properly executed exercise noticetogether with irrevocable instructions to a broker to promptly deliver to the Company cash or a check payable and acceptable to theCompany to pay the option purchase price, provided that in the event the Optionee chooses to pay the option purchase price as soprovided, the Optionee and the broker shall comply with such procedures and enter into such agreements of indemnity and otheragreements as the Company shall prescribe as a condition of such payment procedure; or (iv) a combination of (i), (ii) and (iii) above.Payment instruments will be received subject to collection.The transfer to the Optionee on the records of the Company or of the transfer agent of the Option Shares will be contingentupon (i) the Company’s receipt from the Optionee of the full purchase price for the Option Shares, as set forth above, (ii) the fulfillmentof any other requirements contained herein or in the Plan or in any other agreement or provision of laws, and (iii) the receipt by theCompany of any agreement, statement or other evidence that the Company may require to satisfy itself that the issuance of Stock to bepurchased pursuant to the exercise of Stock Options under the Plan and any subsequent resale of the shares of Stock will be incompliance with applicable laws and regulations. In the event the Optionee chooses to pay the purchase price by previously-ownedshares of Stock through the attestation method, the number of shares of Stock transferred to the Optionee upon the exercise of theStock Option shall be net of the Shares attested to.(b) The shares of Stock purchased upon exercise of this Stock Option shall be transferred to the Optionee on therecords of the Company or of the transfer agent upon compliance to the satisfaction of the Company with all requirements underapplicable laws or regulations in connection with such transfer and with the requirements hereof and of the Plan. The determination ofthe Company as to such compliance shall be final and binding on the Optionee. The Optionee shall not be deemed to be the holder of,or to have any of the rights of a holder with respect to, any shares of Stock subject to this Stock Option unless and until this StockOption shall have been exercised pursuant to the terms hereof, the Company or the transfer agent shall have transferred the shares tothe Optionee, and the Optionee’s name shall have been entered as the stockholder of record on the books of the Company. Thereupon,the Optionee shall have full voting, dividend and other ownership rights with respect to such shares of Stock.(c) Notwithstanding any other provision hereof or of the Plan, no portion of this Stock Option shall be exercisableafter the Expiration Date hereof.(d) Without derogating from the foregoing, “statutory option stock” (as defined below) may be tendered in payment ofthe exercise price of this Stock Option even if the stock to be so tendered has not, at the time of tender, been held by the Optionee forthe applicable minimum statutory holding period required to receive the tax benefits afforded under Section 421(a) of the Code withrespect to such stock. The Optionee acknowledges that the tender of such “statutory option stock” may have adverse tax consequencesto the Optionee. As used above, the term “statutory option stock” means stock acquired through the exercise of an incentive stockoption or an option granted under an employee stock purchase plan. The tender of statutory option stock in payment of the exerciseprice of this Option shall be accompanied by written representation (in formsatisfactory to the Company) stating whether such stock has been held by the Optionee for the applicable minimum statutory holdingperiod.3. Termination of Business Relationship.(a) If the Optionee’s Business Relationship (as defined below) is terminated, the period within which to exercise theStock Option may be subject to earlier termination as follows:(i) If the Optionee’s Business Relationship is terminated by reason of the Optionee’s death or disability (asdetermined by the Company) or, if the Optionee dies or becomes disabled within the three-month period following the date theOptionee’s Business Relationship terminates for any other reason, any portion of this Stock Option outstanding on the date oftermination, may be exercised, to the extent exercisable on such date, for a period of twelve months from the date of death ordisability or until the Expiration Date, if earlier. Any portion of this Stock Option that is not exercisable on the date theOptionee’s Business Relationship is terminated shall terminate immediately and be of no further force or effect.(ii) If the Optionee’s Business Relationship is terminated for any reason other than death or disability, anyportion of this Stock Option outstanding on such date may be exercised, to the extent exercisable on the date of termination, fora period of three months from the date of termination or until the Expiration Date, if earlier. Any portion of this Stock Optionthat is not exercisable on the date the Optionee’s Business Relationship is terminated shall terminate immediately and be of nofurther force or effect.(iii) Notwithstanding the foregoing, if the Optionee, prior to the termination date of this Stock Option, (i)violates any provision of any employment agreement or any confidentiality or other agreement between the Optionee and theCompany, (ii) commits any felony or any crime involving moral turpitude under the laws of the United States or any statethereof, (iii) attempts to commit, or participate in, a fraud or act of dishonesty against the Company, or (iv) commits grossmisconduct, the right to exercise this Stock Option shall terminate immediately upon written notice to the Optionee from theCompany describing such violation or act.The Company’s determination of the reason for termination of the Optionee’s Business Relationship shall be conclusive andbinding on the Optionee and his or her representatives or legatees.(b) For purposes hereof, “Business Relationship” means service to the Company or any of its Subsidiaries, or its ortheir successors, in the capacity of an employee, officer, director, consultant or advisor. For purposes hereof, a Business Relationshipshall not be considered as having terminated during any military leave, sick leave, or other leave of absence if approved in writing bythe Company and if such written approval, or applicable law, contractually obligates the Company to continue the BusinessRelationship of the Optionee after the approved period of absence (an “Approved Leave of Absence”). For purposes hereof, aBusiness Relationship shall include a consulting arrangement between the Optionee and the Company that immediately followstermination of employment, but only if so stated in a written consulting agreement executed by the Company.4. Incorporation of Plan. Notwithstanding anything herein to the contrary, this Stock Option shall be subject to and governedby all the terms and conditions of the Plan, including thepowers of the Administrator set forth in Section 2(b) of the Plan. Capitalized terms in this Agreement shall have the meaning specifiedin the Plan, unless a different meaning is specified herein.5. Transferability. This Agreement is personal to the Optionee, is non-assignable and is not transferable in any manner, byoperation of law or otherwise, other than by will or the laws of descent and distribution. This Stock Option is exercisable, during theOptionee’s lifetime, only by the Optionee, and thereafter, only by the Optionee’s legal representative or legatee. Notwithstanding theforegoing, this Stock Option may be transferred pursuant to a domestic relations order.6. Tax Withholding. The Optionee shall, not later than the date as of which the exercise of this Stock Option becomes ataxable event for Federal income tax purposes, pay to the Company or make arrangements satisfactory to the Company for payment ofany Federal, state, and local taxes required by law to be withheld on account of such taxable event. The Company shall have theauthority to cause the required tax withholding obligation to be satisfied, in whole or in part, by withholding from shares of Stock to beissued to the Optionee a number of shares of Stock with an aggregate Fair Market Value that would satisfy the withholding amountdue; provided, however, that the amount withheld does not exceed the maximum tax rate, or such lesser amount as determined by theAdministrator.7. No Obligation to Continue Business Relationship. Neither the Company nor any Subsidiary is obligated by or as a result ofthe Plan or this Agreement to continue the Optionee’s Business Relationship, and neither the Plan nor this Agreement shall interfere inany way with the right of the Company or any Subsidiary to terminate the Business Relationship of the Optionee at any time.8. Integration. This Agreement constitutes the entire agreement between the parties with respect to this Stock Option andsupersedes all prior agreements and discussions between the parties concerning such subject matter.9. Data Privacy Consent. In order to administer the Plan and this Agreement and to implement or structure future equitygrants, the Company, its subsidiaries and affiliates and certain agents thereof (together, the “Relevant Companies”) may process anyand all personal or professional data, including but not limited to Social Security or other identification number, home address andtelephone number, date of birth and other information that is necessary or desirable for the administration of the Plan and/or thisAgreement (the “Relevant Information”). By entering into this Agreement, the Optionee (i) authorizes the Company to collect, process,register and transfer to the Relevant Companies all Relevant Information; (ii) waives any privacy rights the Optionee may have withrespect to the Relevant Information; (iii) authorizes the Relevant Companies to store and transmit such information in electronic form;and (iv) authorizes the transfer of the Relevant Information to any jurisdiction in which the Relevant Companies consider appropriate.The Optionee shall have access to, and the right to change, the Relevant Information. Relevant Information will only be used inaccordance with applicable law.10. Notices. Notices hereunder shall be mailed or delivered to the Company at its principal place of business to the attention ofthe Company’s Treasurer and shall be mailed or delivered to the Optionee at the address on file with the Company or, in either case, atsuch other address as one party may subsequently furnish to the other party in writing.[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]SIGNATURE PAGE TO AMAG PHARMACEUTICALS, INC.NON-QUALIFIED STOCK OPTION AGREEMENT AMAG PHARMACEUTICALS, INC. By: Name: William K. Heiden Title: President and Chief Executive Officer The foregoing Agreement is hereby accepted and the terms and conditions thereof hereby agreed to by the undersigned, and theundersigned acknowledges receipt of a copy of this entire Agreement, a copy of the Plan, and a copy of the Plan’s related prospectus.Electronic acceptance of this Agreement pursuant to the Company’s instructions to the Optionee (including through an onlineacceptance process) is acceptable. Dated: Optionee's Signature Optionee's name and address: Exhibit 10.8AMAG PHARMACEUTICALS, INC.RESTRICTED STOCK UNIT AWARD AGREEMENT FOR COMPANY EMPLOYEES Name of Grantee: No. of Restricted Stock Units: Grant Date: Pursuant to the AMAG Pharmaceuticals, Inc. Fourth Amended and Restated 2007 Equity Incentive Plan (the “Plan”), AMAGPharmaceuticals, Inc. (the “Company”) hereby grants an award of the number of Restricted Stock Units listed above (an “Award”) tothe Grantee named above. Each Restricted Stock Unit shall relate to one share of Common Stock, par value $0.01 per share (the“Stock”) of the Company.1.Restrictions on Transfer of Award. This Award may not be sold, transferred, pledged, assigned or otherwiseencumbered or disposed of by the Grantee, and any shares of Stock issuable with respect to the Award may not be sold, transferred,pledged, assigned or otherwise encumbered or disposed of until (i) the Restricted Stock Units have vested as provided in Section 2 ofthis Agreement and (ii) shares of Stock have been issued to the Grantee in accordance with the terms of the Plan and this Agreement.2. Vesting of Restricted Stock Units. The restrictions and conditions of Section 1 of this Agreement shall lapse on the VestingDate or Dates specified in the following schedule so long as the Grantee remains in a Business Relationship (as defined in Section 3below) on such Dates. If a series of Vesting Dates is specified, then the restrictions and conditions in Section 1 shall lapse only withrespect to the number of Restricted Stock Units specified as vested on such date.Incremental Number of Restricted Stock Units VestedVesting Date_____________ (___%)_________________________ (___%)_________________________ (___%)____________ The Administrator may at any time accelerate the vesting schedule specified in this Section 2.3. Termination of Business Relationship.(a) If the Grantee’s Business Relationship terminates for any reason (including death or disability) prior to thesatisfaction of the vesting conditions set forth in Section 2 above, any Restricted Stock Units that have not vested as of such date shallautomatically and without notice terminate and be forfeited, and neither the Grantee nor any of his or her successors, heirs, assigns, orpersonal representatives will thereafter have any further rights or interests in such unvested Restricted Stock Units. Notwithstanding theforegoing, under certain circumstances set forth in the Employment Agreement dated as of [ ] by and between the Company and theGrantee (the “Employment Agreement”), and subject to compliance by the Grantee with the requirements of the EmploymentAgreement related to such circumstances, the vesting of unvested Restricted Stock Units may be accelerated as provided in and subjectto the terms of the Employment Agreement.(b) “Business Relationship” means service to the Company or any of its Subsidiaries, or its or their successors, in thecapacity of an employee, officer, director, consultant or advisor. For purposes hereof, a Business Relationship shall not be consideredas having terminated during any military leave, sick leave, or other leave of absence if approved in writing by the Company and if suchwritten approval, or applicable law, contractually obligates the Company to continue the Business Relationship of the Grantee after theapproved period of absence (an “Approved Leave of Absence”). For purposes hereof, a Business Relationship shall include aconsulting arrangement between the Grantee and the Company that immediately follows termination of employment, but only if sostated in a written consulting agreement executed by the Company.4. Issuance of Shares of Stock. As soon as practicable following each Vesting Date, the Company shall issue to the Granteethe number of shares of Stock equal to the aggregate number of Restricted Stock Units that have vested pursuant to Section 2 of thisAgreement on such date and the Grantee shall thereafter have all the rights of a stockholder of the Company with respect to suchshares; provided, however, if a Vesting Date shall occur during either a regularly scheduled or special “blackout period” wherein theGrantee is precluded from selling shares of Stock, the receipt of the corresponding underlying shares issuable with respect to suchVesting Date pursuant to this Agreement shall be deferred until after the expiration of such blackout period unless such underlyingshares are covered by a previously established Company-approved 10b5-1 plan of the Grantee, in which case the underlying sharesshall be issued in accordance with the terms of such 10b5-1 plan; provided, however, that the issuance of such shares shall not bedeferred any later than the later of: (a) December 31st of the calendar year in which such vesting occurs, or (b) the 15th day of the thirdcalendar month following such vesting date, and if such settlement occurs while either a regularly scheduled or special “blackoutperiod” is still in effect, neither the Company nor the Grantee may sell any shares issued in settlement thereof to satisfy any tax orwithholding obligations except in compliance with the Company’s Statement of Company Policy Regarding Insider Training and otherapplicable requirements and laws.5. Incorporation of Plan. Notwithstanding anything herein to the contrary, this Agreement shall be subject to and governed byall the terms and conditions of the Plan, including the powers of the Administrator set forth in Section 2(b) of the Plan. Capitalizedterms in this Agreement shall have the meaning specified in the Plan, unless a different meaning is specified herein.6. Tax Withholding. The Grantee shall, not later than the date as of which thereceipt of this Award becomes a taxable event for Federal income tax purposes, pay to the Company or make arrangements satisfactoryto the Company for payment of any Federal, state, and local taxes required by law to be withheld on account of such taxable event.The Company shall have the authority to cause the required tax withholding obligation to be satisfied, in whole or in part, bywithholding from shares of Stock to be issued to the Grantee a number of shares of Stock with an aggregate Fair Market Value thatwould satisfy the withholding amount due; provided, however, that the amount withheld does not exceed the maximum tax rate, orsuch lesser amount as determined by the Administrator.7. Section 409A of the Code. This Agreement shall be interpreted in such a manner that all provisions relating to thesettlement of the Award are exempt from the requirements of Section 409A of the Code as “short-term deferrals” as described inSection 409A of the Code.8. No Obligation to Continue Business Relationship. Neither the Company nor any Subsidiary is obligated by or as a result ofthe Plan or this Agreement to continue the Grantee’s Business Relationship, and neither the Plan nor this Agreement shall interfere inany way with the right of the Company or any Subsidiary to terminate the Business Relationship of the Grantee at any time.9. Integration. This Agreement constitutes the entire agreement between the parties with respect to this Award and supersedesall prior agreements and discussions between the parties concerning such subject matter.10. Data Privacy Consent. In order to administer the Plan and this Agreement and to implement or structure future equitygrants, the Company, its subsidiaries and affiliates and certain agents thereof (together, the “Relevant Companies”) may process anyand all personal or professional data, including but not limited to Social Security or other identification number, home address andtelephone number, date of birth and other information that is necessary or desirable for the administration of the Plan and/or thisAgreement (the “Relevant Information”). By entering into this Agreement, the Grantee (i) authorizes the Company to collect, process,register and transfer to the Relevant Companies all Relevant Information; (ii) waives any privacy rights the Grantee may have withrespect to the Relevant Information; (iii) authorizes the Relevant Companies to store and transmit such information in electronic form;and (iv) authorizes the transfer of the Relevant Information to any jurisdiction in which the Relevant Companies consider appropriate.The Grantee shall have access to, and the right to change, the Relevant Information. Relevant Information will only be used inaccordance with applicable law.11. Notices. Notices hereunder shall be mailed or delivered to the Company at its principal place of business to the attention ofthe Company’s Treasurer and shall be mailed or delivered to the Grantee at the address on file with the Company or, in either case, atsuch other address as one party may subsequently furnish to the other party in writing.[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]SIGNATURE PAGE TO AMAG PHARMACEUTICALS, INC.RESTRICTED STOCK UNIT AWARD AGREEMENT AMAG PHARMACEUTICALS, INC. By: Name: William K. Heiden Title: President and Chief Executive Officer The foregoing Agreement is hereby accepted and the terms and conditions thereof hereby agreed to by the undersigned, and theundersigned acknowledges receipt of a copy of this entire Agreement, a copy of the Plan, and a copy of the Plan’s related prospectus.Electronic acceptance of this Agreement pursuant to the Company’s instructions to the Grantee (including through an onlineacceptance process) is acceptable. Dated: Grantee's Signature Grantee's name and address: Exhibit 10.9AMAG PHARMACEUTICALS, INC.NON-QUALIFIED STOCK OPTION AGREEMENT FOR NON-EMPLOYEE DIRECTORS Name of Optionee: No. of Option Shares: Option Exercise Price per Share:$ [FMV on Grant Date] Grant Date: Expiration Date: [No more than 10 years] Pursuant to the AMAG Pharmaceuticals, Inc. Fourth Amended and Restated 2007 Equity Incentive Plan (the “Plan”), AMAGPharmaceuticals, Inc. (the “Company”) hereby grants to the Optionee named above, who is a Director of the Company but is not anemployee of the Company, an option (the “Stock Option”) to purchase on or prior to the Expiration Date specified above all or part ofthe number of shares of Common Stock, par value $0.01 per share (the “Stock”), of the Company specified above at the OptionExercise Price per Share specified above subject to the terms and conditions set forth herein and in the Plan. This Stock Option is notintended to be an “incentive stock option” under Section 422 of the Internal Revenue Code of 1986, as amended.1.Exercisability Schedule. No portion of this Stock Option may be exercised until such portion shall have becomeexercisable. Except as set forth below, and subject to the discretion of the Administrator (as defined in Section 2 of the Plan) toaccelerate the exercisability schedule hereunder, this Stock Option shall be exercisable with respect to the following number of OptionShares on the dates indicated so long as the Optionee maintains a Business Relationship with the Company (as defined below) on suchdates:Incremental Number of Option Shares ExercisableExercisability Date[1/12 of [Number]]June 1, 20XX[1/12 of [Number]]July 1, 20XX[1/12 of [Number]]August 1, 20XX[1/12 of [Number]]September 1, 20XX[1/12 of [Number]]October 1, 20XX[1/12 of [Number]]November 1, 20XX[1/12 of [Number]]December 1, 20XX[1/12 of [Number]]January 1, 20XX[1/12 of [Number]]February 1, 20XX[1/12 of [Number]]March 1, 20XX[1/12 of [Number]]April 1, 20XX[1/12 of [Number]]May 1, 20XXOnce exercisable, this Stock Option shall continue to be exercisable at any time or times prior to the close of business on theExpiration Date, subject to the provisions hereof and of the Plan.“Business Relationship” means service to the Company or its successor in the capacity of an employee, officer, director,consultant, or advisor.2. Manner of Exercise.(a) The Optionee may exercise this Stock Option only in the following manner: from time to time on or prior to theExpiration Date of this Stock Option, the Optionee may give written or electronic notice to the Company to the attention of theCompany’s Treasurer or his or her designee of his or her election to purchase some or all of the Option Shares purchasable at the timeof such notice. This notice shall specify the number of Option Shares to be purchased.Payment of the purchase price for the Option Shares may be made by one or more of the following methods: (i) in cash, bycertified or bank check or other instrument acceptable to the Company; (ii) subject to the Company’s approval, through the delivery (orattestation to the ownership) of shares of Stock that have been purchased by the Optionee on the open market or that are beneficiallyowned by the Optionee and are not then subject to any restrictions under any Company plan and that otherwise satisfy any holdingperiods as may be required by the Administrator; (iii) by the Optionee delivering to the Company a properly executed exercise noticetogether with irrevocable instructions to a broker to promptly deliver to the Company cash or a check payable and acceptable to theCompany to pay the option purchase price, provided that in the event the Optionee chooses to pay the option purchase price as soprovided, the Optionee and the broker shall comply with such procedures and enter into such agreements of indemnity and otheragreements as the Company shall prescribe as a condition of such payment procedure; or (iv) a combination of (i), (ii) and (iii) above.Payment instruments will be received subject to collection.The transfer to the Optionee on the records of the Company or of the transfer agent of the Option Shares will be contingentupon (i) the Company’s receipt from the Optionee of the full purchase price for the Option Shares, as set forth above, (ii) the fulfillmentof any other requirements contained herein or in the Plan or in any other agreement or provision of laws, and (iii) the receipt by theCompany of any agreement, statement or other evidence that the Company may require to satisfy itself that the issuance of Stock to bepurchased pursuant to the exercise of Stock Options under the Plan and any subsequent resale of the shares of Stock will be incompliance with applicable laws and regulations. In the event the Optionee chooses to pay the purchase price by previously-ownedshares of Stock through the attestation method, the number of shares of Stock transferred to the Optionee upon the exercise of theStock Option shall be net of the Shares attested to.(b) The shares of Stock purchased upon exercise of this Stock Option shall be transferred to the Optionee on therecords of the Company or of the transfer agent upon compliance to the satisfaction of the Company with all requirements underapplicable laws or regulations in connection with such transfer and with the requirements hereof and of the Plan. The determination ofthe Company as to such compliance shall be final and binding on the Optionee. The Optionee shall not be deemed to be the holder of,or to have any of the rights of a holder with respect to, any shares of Stock subject to this Stock Option unless and until this StockOption shall have been exercised pursuant to the terms hereof, the Company or the transfer agent shall have transferred the shares tothe Optionee, and the Optionee’s name shall have been entered as the stockholder of record on the books of the Company. Thereupon,the Optionee shall have full voting, dividend and other ownership rights with respect to such shares of Stock.(c) Notwithstanding any other provision hereof or of the Plan, no portion of this Stock Option shall be exercisableafter the Expiration Date hereof.3. Termination of Business Relationship.(a) If the Optionee ceases to maintain a Business Relationship with the Company, the period within which to exercisethe Stock Option may be subject to earlier termination as follows:(i) If the Optionee ceases to maintain a Business Relationship with the Company by reason of the Optionee’sdeath or disability (as determined by the Company) or, if the Optionee dies or becomes disabled within the three-month periodfollowing the date the Optionee ceases to maintain a Business Relationship with the Company, any portion of this StockOption outstanding on the date the Optionee ceases to maintain a Business Relationship with the Company, may be exercised,to the extent exercisable on such date, for a period of three years from the date of death or disability or until the ExpirationDate, if earlier. Any portion of this Stock Option that is not exercisable on the date the Optionee ceases to maintain a BusinessRelationship with the Company shall terminate immediately and be of no further force or effect.(ii) If the Optionee ceases to maintain a Business Relationship with the Company for any reason other thandeath or disability, any portion of this Stock Optionoutstanding on such date may be exercised, to the extent exercisable on such date, for a period of three years from the date theOptionee ceased to maintain a Business Relationship with the Company or until the Expiration Date, if earlier. Any portion ofthis Stock Option that is not exercisable on the date the Optionee ceases to maintain a Business Relationship with the Companyshall terminate immediately and be of no further force or effect.(iii) Notwithstanding the foregoing, if the Optionee, prior to the termination date of this Stock Option, (i)violates any provision of any confidentiality, consulting or other agreement between the Optionee and the Company, (ii)commits any felony or any crime involving moral turpitude under the laws of the United States or any state thereof, (iii)attempts to commit, or participate in, a fraud or act of dishonesty against the Company, or (iv) commits gross misconduct, theright to exercise this Stock Option shall terminate immediately upon written notice to the Optionee from the Companydescribing such violation or act.4. Incorporation of Plan. Notwithstanding anything herein to the contrary, this Stock Option shall be subject to and governedby all the terms and conditions of the Plan, including the powers of the Administrator set forth in Section 2(b) of the Plan. Capitalizedterms in this Agreement shall have the meaning specified in the Plan, unless a different meaning is specified herein.5. Transferability. This Agreement is personal to the Optionee, is non-assignable and is not transferable in any manner, byoperation of law or otherwise, other than by will or the laws of descent and distribution. This Stock Option is exercisable, during theOptionee’s lifetime, only by the Optionee, and thereafter, only by the Optionee’s legal representative or legatee. Notwithstanding theforegoing, this Stock Option may be transferred pursuant to a domestic relations order.6. No Obligation to Continue Service. Neither the Plan nor this Stock Option confers upon the Optionee any rights withrespect to continued service as a member of the Board or to the Company.7. Integration. This Agreement constitutes the entire agreement between the parties with respect to this Stock Option andsupersedes all prior agreements and discussions between the parties concerning such subject matter.8. Data Privacy Consent. In order to administer the Plan and this Agreement and to implement or structure future equitygrants, the Company, its subsidiaries and affiliates and certain agents thereof (together, the “Relevant Companies”) may process anyand all personal or professional data, including but not limited to Social Security or other identification number, home address andtelephone number, date of birth and other information that is necessary or desirable for the administration of the Plan and/or thisAgreement (the “Relevant Information”). By entering into this Agreement, the Optionee (i) authorizes the Company to collect, process,register and transfer to the Relevant Companies all Relevant Information; (ii) waives any privacy rights the Optionee may have withrespect to the Relevant Information; (iii) authorizes theRelevant Companies to store and transmit such information in electronic form; and (iv) authorizes the transfer of the RelevantInformation to any jurisdiction in which the Relevant Companies consider appropriate. The Optionee shall have access to, and the rightto change, the Relevant Information. Relevant Information will only be used in accordance with applicable law.9. Notices. Notices hereunder shall be mailed or delivered to the Company at its principal place of business to the attention ofthe Company’s Treasurer and shall be mailed or delivered to the Optionee at the address on file with the Company or, in either case, atsuch other address as one party may subsequently furnish to the other party in writing.[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]SIGNATURE PAGE TO AMAG PHARMACEUTICALS, INC.NON-QUALIFIED STOCK OPTION AGREEMENT AMAG PHARMACEUTICALS, INC. By: Name: William K. Heiden Title: President and Chief Executive Officer The foregoing Agreement is hereby accepted and the terms and conditions thereof hereby agreed to by the undersigned, and theundersigned acknowledges receipt of a copy of this entire Agreement, a copy of the Plan, and a copy of the Plan’s related prospectus.Electronic acceptance of this Agreement pursuant to the Company’s instructions to the Optionee (including through an onlineacceptance process) is acceptable. Dated: Optionee's Signature Optionee's name and address: Exhibit 10.10AMAG PHARMACEUTICALS, INC.RESTRICTED STOCK UNIT AWARD AGREEMENT FOR NON-EMPLOYEE DIRECTORS Name of Grantee: No. of Restricted Stock Units: Grant Date: Pursuant to the AMAG Pharmaceuticals, Inc. Fourth Amended and Restated 2007 Equity Incentive Plan (the “Plan”), AMAGPharmaceuticals, Inc. (the “Company”) hereby grants an award of the number of Restricted Stock Units listed above (an “Award”) tothe Grantee named above. Each Restricted Stock Unit shall relate to one share of Common Stock, par value $0.01 per share (the“Stock”) of the Company.1.Restrictions on Transfer of Award. This Award may not be sold, transferred, pledged, assigned or otherwiseencumbered or disposed of by the Grantee, and any shares of Stock issuable with respect to the Award may not be sold, transferred,pledged, assigned or otherwise encumbered or disposed of until (i) the Restricted Stock Units have vested as provided in Section 2 ofthis Agreement and (ii) shares of Stock have been issued to the Grantee in accordance with the terms of the Plan and this Agreement.2. Vesting of Restricted Stock Units. The restrictions and conditions of Section 1 of this Agreement shall lapse on the VestingDate or Dates specified in the following schedule so long as the Grantee maintains a Business Relationship with the Company (asdefined below) on such Dates. If a series of Vesting Dates is specified, then the restrictions and conditions in Section 1 of thisAgreement shall lapse only with respect to the number of Restricted Stock Units specified as vested on such date.Incremental Number of Restricted Stock Units VestedVesting Date [1/12 of [Number]]June 1, 20XX[1/12 of [Number]]July 1, 20XX[1/12 of [Number]]August 1, 20XX[1/12 of [Number]]September 1, 20XX[1/12 of [Number]]October 1, 20XX[1/12 of [Number]]November 1, 20XX[1/12 of [Number]]December 1, 20XX[1/12 of [Number]]January 1, 20XX[1/12 of [Number]]February 1, 20XX[1/12 of [Number]]March 1, 20XX[1/12 of [Number]]April 1, 20XX [1/12 of [Number]]May 1, 20XXThe Administrator may at any time accelerate the vesting schedule specified in this Section 2.“Business Relationship” means service to the Company or its successor in the capacity of an employee, officer, director,consultant, or advisor.3. Termination of Business Relationship. If the Grantee ceases to maintain a Business Relationship with the Company for anyreason (including death or disability) prior to the satisfaction of the vesting conditions set forth in Section 2 above, any Restricted StockUnits that have not vested as of such date shall automatically and without notice terminate and be forfeited, and neither the Grantee norany of his or her successors, heirs, assigns, or personal representatives will thereafter have any further rights or interests in suchunvested Restricted Stock Units.4. Issuance of Shares of Stock. The Company shall issue to the Grantee, on the earlier of (a) the first anniversary of the GrantDate or (b) as soon as practicable (but not later than 90 days) following the date of termination of the Grantee’s service, provided thatsuch termination constitutes a “separation from service” as such term is defined in Treasury Regulation Section 1.409A-1(h), (in eithercase, the “Delivery Date”), the number of shares of Stock equal to the aggregate number of Restricted Stock Units that have vestedpursuant to Section 2 of this Agreement, provided that, if the Delivery Date shall occur during either a regularly scheduled or special“blackout period” of the Company wherein Grantee is precluded from selling shares of the Company’s Stock, the receipt of the sharesof Stock pursuant to this Agreement shall be deferred until immediately after the expiration of such blackout period, unless such sharesare covered by a previously established Company-approved 10b5-1 plan of the Grantee, in which case the shares shall be issued inaccordance with the terms of such 10b5-1 plan. The shares the receipt of which was deferred as provided above shall be issued to theGrantee as soon as practicable after the expiration of the blackout period. Notwithstanding the above, in no event may the shares beissued to the Grantee later than the later of: (i) December 31st of the calendar year in which the Delivery Date occurs, or (ii) the 75thday following the Delivery Date; provided that the Grantee acknowledges and agrees that if the shares are issued to the Granteepursuant to this sentence while either a regularly scheduled or special “blackout period” is still in effect with respect to the Company orthe Grantee, neither the Company nor the Grantee may sell any shares of the Company’s Stock to satisfy any tax obligations except incompliance with the Company’s insider trading policies and requirements and applicable laws; provided further, that the Granteeacknowledges that the exact date of issuance of the shares shall be at the sole and exclusive discretion of the Company in accordancewith this Section 4. The form of such issuance (e.g., a stock certificate or electronic entry evidencing such shares) shall be determinedby the Company. Upon such issuance, the Grantee shall thereafter have all the rights of a stockholder of the Company with respect tosuch shares.5. Incorporation of Plan. Notwithstanding anything herein to the contrary, this Agreement shall be subject to and governed byall the terms and conditions of the Plan, including the powers of the Administrator set forth in Section 2(b) of the Plan. Capitalizedterms in thisAgreement shall have the meaning specified in the Plan, unless a different meaning is specified herein.6. Section 409A of the Code. The parties intend that this Award will be administered in accordance with Section 409A of theCode. To the extent that any provision of this Award is ambiguous as to its compliance with Section 409A of the Code, the provisionshall be read in such a manner so that all payments and provisions hereunder comply with Section 409A of the Code. Anything in thisAgreement to the contrary notwithstanding, if at the time of the Grantee’s separation from service within the meaning of Section 409Aof the Code, the Company determines that the Grantee is a “specified employee” within the meaning of Section 409A(a)(2)(B)(i) of theCode, then to the extent the shares of Stock that the Grantee becomes entitled to receive under this Agreement on account of theGrantee’s separation from service would be considered deferred compensation otherwise subject to the 20 percent additional taximposed pursuant to Section 409A(a) of the Code as a result of the application of Section 409A(a)(2)(B)(i) of the Code, such shares ofStock shall not be issued until the date that is the earlier of (a) six months and one day after the Grantee’s separation from service, or(b) the Grantee’s death. The determination of whether and when a separation from service has occurred shall be made in accordancewith the presumptions set forth in Treasury Regulation Section 1.409A-1(h).7. No Obligation to Continue Service. Neither the Plan nor this Award confers upon the Grantee any rights with respect tocontinued service as a member of the Board or to the Company.8. Integration. This Agreement constitutes the entire agreement between the parties with respect to this Award and supersedesall prior agreements and discussions between the parties concerning such subject matter.9. Data Privacy Consent. In order to administer the Plan and this Agreement and to implement or structure future equitygrants, the Company, its subsidiaries and affiliates and certain agents thereof (together, the “Relevant Companies”) may process anyand all personal or professional data, including but not limited to Social Security or other identification number, home address andtelephone number, date of birth and other information that is necessary or desirable for the administration of the Plan and/or thisAgreement (the “Relevant Information”). By entering into this Agreement, the Grantee (i) authorizes the Company to collect, process,register and transfer to the Relevant Companies all Relevant Information; (ii) waives any privacy rights the Grantee may have withrespect to the Relevant Information; (iii) authorizes the Relevant Companies to store and transmit such information in electronic form;and (iv) authorizes the transfer of the Relevant Information to any jurisdiction in which the Relevant Companies consider appropriate.The Grantee shall have access to, and the right to change, the Relevant Information. Relevant Information will only be used inaccordance with applicable law.10. Notices. Notices hereunder shall be mailed or delivered to the Company at its principal place of business to the attention ofthe Treasurer of the Company and shall be mailed or delivered to the Grantee at the address on file with the Company or, in eithercase, at such other address as one party may subsequently furnish to the other party in writing.[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]SIGNATURE PAGE TO AMAG PHARMACEUTICALS, INC.RESTRICTED STOCK UNIT AWARD AGREEMENT AMAG PHARMACEUTICALS, INC. By: Name: William K. Heiden Title: President and Chief Executive Officer The foregoing Agreement is hereby accepted and the terms and conditions thereof hereby agreed to by the undersigned, and theundersigned acknowledges receipt of a copy of this entire Agreement, a copy of the Plan, and a copy of the Plan’s related prospectus.Electronic acceptance of this Agreement pursuant to the Company’s instructions to the Grantee (including through an onlineacceptance process) is acceptable. Dated: Grantee's Signature Grantee's name and address: Exhibit 10.12AMAG PHARMACEUTICALS, INC.NON-QUALIFIED STOCK OPTION AGREEMENTNON-PLAN INDUCEMENT GRANTName of Optionee: No. of Option Shares: Option Exercise Price per Share:$ [FMV on Grant Date] Grant Date: Expiration Date: AMAG Pharmaceuticals, Inc. (the “Company”) hereby grants to the Optionee named above an option (the “Stock Option”) topurchase on or prior to the Expiration Date specified above all or part of the number of shares of Common Stock, par value $0.01 pershare (the “Stock”) of the Company specified above at the Option Exercise Price per Share specified above, as an inducement grantmade pursuant to Rule 5635(c)(4) of the NASDAQ Listing Rules subject to the terms and conditions set forth herein and in the Plan.For the avoidance of doubt, this Stock Option is not issued under the Company’s Fourth Amended and Restated 2007 Equity IncentivePlan, as amended through the date hereof (the “Plan”) and does not reduce the share reserve under the Plan. However, for purposes ofinterpreting the applicable provisions of this Stock Option, the terms and conditions of the Plan (other than those applicable to the sharereserve) shall govern and apply to this Stock Option as if such Stock Option had actually been issued under the Plan. This StockOption is not intended to be an “incentive stock option” under Section 422 of the Internal Revenue Code of 1986, as amended.1.Exercisability Schedule. No portion of this Stock Option may be exercised until such portion shall have becomeexercisable. Except as set forth below, and subject to the discretion of the Administrator (as defined in Section 2 of the Plan) toaccelerate the exercisability schedule hereunder, this Stock Option shall be exercisable with respect to the following number of OptionShares on the dates indicated so long as the Optionee remains in a Business Relationship (as defined in Section 3 below) on such dates:Incremental Number of Option Shares ExercisableExercisability Date_____________ (___%)_________________________ (___%)_________________________ (___%)_________________________ (___%)____________Once exercisable, this Stock Option shall continue to be exercisable at any time or times prior to the close of business on theExpiration Date, subject to the provisions hereof and of the Plan.2. Manner of Exercise.(a) The Optionee may exercise this Stock Option only in the following manner: from time to time on or prior to theExpiration Date of this Stock Option, the Optionee may give written or electronic notice to the Company to the attention of theCompany’s Treasurer or his or her designee of his or her election to purchase some or all of the Option Shares purchasable at the timeof such notice. This notice shall specify the number of Option Shares to be purchased.Payment of the purchase price for the Option Shares may be made by one or more of the following methods: (i) in cash, bycertified or bank check or other instrument acceptable to the Company; (ii) subject to the Company’s approval, through the delivery (orattestation to the ownership) of shares of Stock that have been purchased by the Optionee on the open market or that are beneficiallyowned by the Optionee and are not then subject to any restrictions under any Company plan and that otherwise satisfy any holdingperiods as may be required by the Administrator; (iii) by the Optionee delivering to the Company a properly executed exercise noticetogether with irrevocable instructions to a broker to promptly deliver to the Company cash or a check payable and acceptable to theCompany to pay the option purchase price, provided that in the event the Optionee chooses to pay the option purchase price as soprovided, the Optionee and the broker shall comply with such procedures and enter into such agreements of indemnity and otheragreements as the Company shall prescribe as a condition of such payment procedure; or (iv) a combination of (i), (ii) and (iii) above.Payment instruments will be received subject to collection.The transfer to the Optionee on the records of the Company or of the transfer agent of the Option Shares will be contingentupon (i) the Company’s receipt from the Optionee of the full purchase price for the Option Shares, as set forth above, (ii) the fulfillmentof any other requirements contained herein or in the Plan or in any other agreement or provision of laws, and (iii) the receipt by theCompany of any agreement, statement or other evidence that the Company may require to satisfy itself that the issuance of Stock to bepurchased pursuant to the exercise of Stock Options under the Plan and any subsequent resale of the shares of Stock will be incompliance with applicable laws and regulations. In the event the Optionee chooses to pay the purchase price by previously-ownedshares of Stock through the attestation method, the numberof shares of Stock transferred to the Optionee upon the exercise of the Stock Option shall be net of the Shares attested to.(b) The shares of Stock purchased upon exercise of this Stock Option shall be transferred to the Optionee on therecords of the Company or of the transfer agent upon compliance to the satisfaction of the Company with all requirements underapplicable laws or regulations in connection with such transfer and with the requirements hereof and of the Plan. The determination ofthe Company as to such compliance shall be final and binding on the Optionee. The Optionee shall not be deemed to be the holder of,or to have any of the rights of a holder with respect to, any shares of Stock subject to this Stock Option unless and until this StockOption shall have been exercised pursuant to the terms hereof, the Company or the transfer agent shall have transferred the shares tothe Optionee, and the Optionee’s name shall have been entered as the stockholder of record on the books of the Company. Thereupon,the Optionee shall have full voting, dividend and other ownership rights with respect to such shares of Stock.(c) Notwithstanding any other provision hereof or of the Plan, no portion of this Stock Option shall be exercisableafter the Expiration Date hereof.(d) Without derogating from the foregoing, “statutory option stock” (as defined below) may be tendered in payment ofthe exercise price of this Stock Option even if the stock to be so tendered has not, at the time of tender, been held by the Optionee forthe applicable minimum statutory holding period required to receive the tax benefits afforded under Section 421(a) of the Code withrespect to such stock. The Optionee acknowledges that the tender of such “statutory option stock” may have adverse tax consequencesto the Optionee. As used above, the term “statutory option stock” means stock acquired through the exercise of an incentive stockoption or an option granted under an employee stock purchase plan. The tender of statutory option stock in payment of the exerciseprice of this Option shall be accompanied by written representation (in form satisfactory to the Company) stating whether such stockhas been held by the Optionee for the applicable minimum statutory holding period.3. Termination of Business Relationship.(a) If the Optionee’s Business Relationship (as defined below) is terminated, the period within which to exercise theStock Option may be subject to earlier termination as follows:(i) If the Optionee’s Business Relationship is terminated by reason of the Optionee’s death or disability (asdetermined by the Company) or, if the Optionee dies or becomes disabled within the three-month period following the date theOptionee’s Business Relationship terminates for any other reason, any portion of this Stock Option outstanding on the date oftermination, may be exercised, to the extent exercisable on such date, for a period of twelve months from the date of death ordisability or until the Expiration Date, if earlier. Any portion of this Stock Option that is not exercisable on the date theOptionee’s Business Relationship is terminated shall terminate immediately and be of no further force or effect.(ii) If the Optionee’s Business Relationship is terminated for any reason other than death or disability, anyportion of this Stock Option outstanding on such date may be exercised, to the extent exercisable on the date of termination, fora period of three months from the date of termination or until the Expiration Date, if earlier. Any portion of this Stock Optionthat is not exercisable on the date the Optionee’s Business Relationship is terminated shall terminate immediately and be of nofurther force or effect.(iii) Notwithstanding the foregoing, if the Optionee, prior to the termination date of this Stock Option, (i)violates any provision of any employment agreement or any confidentiality or other agreement between the Optionee and theCompany, (ii) commits any felony or any crime involving moral turpitude under the laws of the United States or any statethereof, (iii) attempts to commit, or participate in, a fraud or act of dishonesty against the Company, or (iv) commits grossmisconduct, the right to exercise this Stock Option shall terminate immediately upon written notice to the Optionee from theCompany describing such violation or act.The Company’s determination of the reason for termination of the Optionee’s Business Relationship shall be conclusive andbinding on the Optionee and his or her representatives or legatees. Notwithstanding the foregoing, under certain circumstances set forthin the Employment Agreement dated as of [ ] by and between the Company and the Optionee (the “Employment Agreement”), andsubject to compliance by the Optionee with the requirements of the Employment Agreement related to such circumstances, the vestingof the unvested portion of this Stock Option may be accelerated as provided in and subject to the terms of the Employment Agreement.(b) For purposes hereof, “Business Relationship” means service to the Company or any of its Subsidiaries, or its ortheir successors, in the capacity of an employee, officer, director, consultant or advisor. For purposes hereof, a Business Relationshipshall not be considered as having terminated during any military leave, sick leave, or other leave of absence if approved in writing bythe Company and if such written approval, or applicable law, contractually obligates the Company to continue the BusinessRelationship of the Optionee after the approved period of absence (an “Approved Leave of Absence”). For purposes hereof, aBusiness Relationship shall include a consulting arrangement between the Optionee and the Company that immediately followstermination of employment, but only if so stated in a written consulting agreement executed by the Company.4. Incorporation of Plan. As stated above, this Stock Option is not granted pursuant to the Plan. Instead, this Stock Option isgranted as an inducement grant pursuant to Rule 5635(c)(4) of the NASDAQ Listing Rules. However, for purposes of interpreting theapplication provisions of this Stock Option, the terms and conditions of the Plan (other than those applicable to the share reserve),including the powers of the Administrator set forth in Section 2(b), shall govern and apply to this Stock Option as if such Stock Optionhad actually been issued under thePlan. Capitalized terms in this Agreement shall have the meaning specified in the Plan, unless a different meaning is specified herein.5. Transferability. This Agreement is personal to the Optionee, is non-assignable and is not transferable in any manner, byoperation of law or otherwise, other than by will or the laws of descent and distribution. This Stock Option is exercisable, during theOptionee’s lifetime, only by the Optionee, and thereafter, only by the Optionee’s legal representative or legatee. Notwithstanding theforegoing, this Stock Option may be transferred pursuant to a domestic relations order.6. Tax Withholding. The Optionee shall, not later than the date as of which the exercise of this Stock Option becomes ataxable event for Federal income tax purposes, pay to the Company or make arrangements satisfactory to the Company for payment ofany Federal, state, and local taxes required by law to be withheld on account of such taxable event. The Company shall have theauthority to cause the required tax withholding obligation to be satisfied, in whole or in part, by withholding from shares of Stock to beissued to the Optionee a number of shares of Stock with an aggregate Fair Market Value that would satisfy the withholding amountdue; provided, however, that the amount withheld does not exceed the maximum tax rate, or such lesser amount as determined by theAdministrator.7. No Obligation to Continue Business Relationship. Neither the Company nor any Subsidiary is obligated by or as a result ofthe Plan or this Agreement to continue the Optionee’s Business Relationship, and neither the Plan nor this Agreement shall interfere inany way with the right of the Company or any Subsidiary to terminate the Business Relationship of the Optionee at any time.8. Integration. This Agreement constitutes the entire agreement between the parties with respect to this Stock Option andsupersedes all prior agreements and discussions between the parties concerning such subject matter.9. Data Privacy Consent. In order to administer the Plan and this Agreement and to implement or structure future equitygrants, the Company, its subsidiaries and affiliates and certain agents thereof (together, the “Relevant Companies”) may process anyand all personal or professional data, including but not limited to Social Security or other identification number, home address andtelephone number, date of birth and other information that is necessary or desirable for the administration of the Plan and/or thisAgreement (the “Relevant Information”). By entering into this Agreement, the Optionee (i) authorizes the Company to collect, process,register and transfer to the Relevant Companies all Relevant Information; (ii) waives any privacy rights the Optionee may have withrespect to the Relevant Information; (iii) authorizes the Relevant Companies to store and transmit such information in electronic form;and (iv) authorizes the transfer of the Relevant Information to any jurisdiction in which the Relevant Companies consider appropriate.The Optionee shall have access to, and the right to change, the Relevant Information. Relevant Information will only be used inaccordance with applicable law.10. Notices. Notices hereunder shall be mailed or delivered to the Company at its principal place of business to the attention ofthe Company’s Treasurer and shall be mailed or delivered to the Optionee at the address on file with the Company or, in either case, atsuch other address as one party may subsequently furnish to the other party in writing.[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]SIGNATURE PAGE TO AMAG PHARMACEUTICALS, INC.NON-QUALIFIED STOCK OPTION AGREEMENT AMAG PHARMACEUTICALS, INC. By: Name: William K. Heiden Title: President and Chief Executive Officer The foregoing Agreement is hereby accepted and the terms and conditions thereof hereby agreed to by the undersigned, and theundersigned acknowledges receipt of a copy of this entire Agreement, a copy of the Plan, and a copy of the Plan’s related prospectus.Electronic acceptance of this Agreement pursuant to the Company’s instructions to the Optionee (including through an onlineacceptance process) is acceptable. Dated: Optionee's Signature Optionee's name and address: Exhibit 10.13AMAG PHARMACEUTICALS, INC.RESTRICTED STOCK UNIT AWARD AGREEMENTNON-PLAN INDUCEMENT GRANT Name of Grantee: No. of Restricted Stock Units: Grant Date: AMAG Pharmaceuticals, Inc. (the “Company”) hereby grants an award of the number of Restricted Stock Units listed above(an “Award”) to the Grantee named above, as an inducement grant made pursuant to Rule 5635(c)(4) of the NASDAQ Listing Rules.Each Restricted Stock Unit shall relate to one share of Common Stock, par value $0.01 per share (the “Stock”) of the Company. Forthe avoidance of doubt, this Award is not issued under the Company’s Fourth Amended and Restated 2007 Equity Incentive Plan, asamended through the date hereof (the “Plan”) and does not reduce the share reserve under the Plan. However, for purposes ofinterpreting the applicable provisions of this Award, the terms and conditions of the Plan (other than those applicable to the sharereserve) shall govern and apply to this Award as if such Award had actually been issued under the Plan.1.Restrictions on Transfer of Award. This Award may not be sold, transferred, pledged, assigned or otherwiseencumbered or disposed of by the Grantee, and any shares of Stock issuable with respect to the Award may not be sold, transferred,pledged, assigned or otherwise encumbered or disposed of until (i) the Restricted Stock Units have vested as provided in Section 2 ofthis Agreement and (ii) shares of Stock have been issued to the Grantee in accordance with the terms of the Plan and this Agreement.2. Vesting of Restricted Stock Units. The restrictions and conditions of Section 1 of this Agreement shall lapse on the VestingDate or Dates specified in the following schedule so long as the Grantee remains in a Business Relationship (as defined in Section 3below) on such Dates. If a series of Vesting Dates is specified, then the restrictions and conditions in Section 1 shall lapse only withrespect to the number of Restricted Stock Units specified as vested on such date.Incremental Number of Restricted Stock Units VestedVesting Date_____________ (___%)____________________________ (___%)____________________________ (___%)_______________ The Administrator may at any time accelerate the vesting schedule specified in this Section 2.3. Termination of Business Relationship.(a) If the Grantee’s Business Relationship terminates for any reason (including death or disability) prior to thesatisfaction of the vesting conditions set forth in Section 2 above, any Restricted Stock Units that have not vested as of such date shallautomatically and without notice terminate and be forfeited, and neither the Grantee nor any of his or her successors, heirs, assigns, orpersonal representatives will thereafter have any further rights or interests in such unvested Restricted Stock Units. Notwithstanding theforegoing, under certain circumstances set forth in the Employment Agreement dated as of [ ] by and between the Company and theGrantee (the “Employment Agreement”), and subject to compliance by the Grantee with the requirements of the EmploymentAgreement related to such circumstances, the vesting of unvested Restricted Stock Units may be accelerated as provided in and subjectto the terms of the Employment Agreement.(b) “Business Relationship” means service to the Company or any of its Subsidiaries, or its or their successors, in thecapacity of an employee, officer, director, consultant or advisor. For purposes hereof, a Business Relationship shall not be consideredas having terminated during any military leave, sick leave, or other leave of absence if approved in writing by the Company and if suchwritten approval, or applicable law, contractually obligates the Company to continue the Business Relationship of the Grantee after theapproved period of absence (an “Approved Leave of Absence”). For purposes hereof, a Business Relationship shall include aconsulting arrangement between the Grantee and the Company that immediately follows termination of employment, but only if sostated in a written consulting agreement executed by the Company.4. Issuance of Shares of Stock. As soon as practicable following each Vesting Date, the Company shall issue to the Granteethe number of shares of Stock equal to the aggregate number of Restricted Stock Units that have vested pursuant to Section 2 of thisAgreement on such date and the Grantee shall thereafter have all the rights of a stockholder of the Company with respect to suchshares; provided, however, if a Vesting Date shall occur during either a regularly scheduled or special “blackout period” wherein theGrantee is precluded from selling shares of Stock, the receipt of the corresponding underlying shares issuable with respect to suchVesting Date pursuant to this Agreement shall be deferred until after the expiration of such blackout period unless such underlyingshares are covered by a previously established Company-approved 10b5-1 plan of the Grantee, in which case the underlying sharesshall be issued in accordance with the terms of such 10b5-1 plan; provided, however, that the issuance of such shares shall not bedeferred any later than the later of: (a) December 31st of the calendar year in which such vesting occurs, or (b) the 15th day of the thirdcalendar month following such vesting date, and if such settlement occurs while either a regularly scheduled or special “blackoutperiod” is still in effect, neither the Company nor the Grantee may sell any shares issued in settlement thereof to satisfy any tax orwithholding obligations except in compliance with the Company’s Statement of Company Policy Regarding Insider Training and otherapplicable requirements and laws.5. Incorporation of Plan. As stated above, this Award is not granted pursuant to the Plan. Instead, this Award is granted as aninducement grant pursuant to Rule 5635(c)(4) of theNASDAQ Listing Rules. However, for purposes of interpreting the application provisions of this Award, the terms and conditions ofthe Plan (other than those applicable to the share reserve), including the powers of the Administrator set forth in Section 2(b), shallgovern and apply to this Award as if such Award had actually been issued under the Plan. Capitalized terms in this Agreement shallhave the meaning specified in the Plan, unless a different meaning is specified herein.6. Tax Withholding. The Grantee shall, not later than the date as of which the receipt of this Award becomes a taxable eventfor Federal income tax purposes, pay to the Company or make arrangements satisfactory to the Company for payment of any Federal,state, and local taxes required by law to be withheld on account of such taxable event. The Company shall have the authority to causethe required tax withholding obligation to be satisfied, in whole or in part, by withholding from shares of Stock to be issued to theGrantee a number of shares of Stock with an aggregate Fair Market Value that would satisfy the withholding amount due; provided,however, that the amount withheld does not exceed the maximum tax rate, or such lesser amount as determined by the Administrator.7. Section 409A of the Code. This Agreement shall be interpreted in such a manner that all provisions relating to thesettlement of the Award are exempt from the requirements of Section 409A of the Code as “short-term deferrals” as described inSection 409A of the Code.8. No Obligation to Continue Business Relationship. Neither the Company nor any Subsidiary is obligated by or as a result ofthe Plan or this Agreement to continue the Grantee’s Business Relationship, and neither the Plan nor this Agreement shall interfere inany way with the right of the Company or any Subsidiary to terminate the Business Relationship of the Grantee at any time.9. Integration. This Agreement constitutes the entire agreement between the parties with respect to this Award and supersedesall prior agreements and discussions between the parties concerning such subject matter.10. Data Privacy Consent. In order to administer the Plan and this Agreement and to implement or structure future equitygrants, the Company, its subsidiaries and affiliates and certain agents thereof (together, the “Relevant Companies”) may process anyand all personal or professional data, including but not limited to Social Security or other identification number, home address andtelephone number, date of birth and other information that is necessary or desirable for the administration of the Plan and/or thisAgreement (the “Relevant Information”). By entering into this Agreement, the Grantee (i) authorizes the Company to collect, process,register and transfer to the Relevant Companies all Relevant Information; (ii) waives any privacy rights the Grantee may have withrespect to the Relevant Information; (iii) authorizes the Relevant Companies to store and transmit such information in electronic form;and (iv) authorizes the transfer of the Relevant Information to any jurisdiction in which the Relevant Companies consider appropriate.The Grantee shall have access to, and the right to change, the Relevant Information. Relevant Information will only be used inaccordance with applicable law.11. Notices. Notices hereunder shall be mailed or delivered to the Company at its principal place of business to the attention ofthe Company’s Treasurer and shall be mailed or delivered to the Grantee at the address on file with the Company or, in either case, atsuch other address as one party may subsequently furnish to the other party in writing.[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]SIGNATURE PAGE TO AMAG PHARMACEUTICALS, INC.RESTRICTED STOCK UNIT AWARD AGREEMENT AMAG PHARMACEUTICALS, INC. By: Name: William K. Heiden Title: President and Chief Executive Officer The foregoing Agreement is hereby accepted and the terms and conditions thereof hereby agreed to by the undersigned, and theundersigned acknowledges receipt of a copy of this entire Agreement, a copy of the Plan, and a copy of the Plan’s related prospectus.Electronic acceptance of this Agreement pursuant to the Company’s instructions to the Grantee (including through an onlineacceptance process) is acceptable. Dated: Grantee's Signature Grantee's name and address: Exhibit 21.1AMAG 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 AMAG Pharma USA, Inc., a Delaware corporation FP1096, Inc., a Pennsylvania corporation Drugtech Sárl, a Swiss company Lumara Health Services Ltd., a Missouri corporationCBR Acquisition Holdings Corp., a Delaware corporationCbr Systems, Inc., a Delaware corporation Exhibit 23.1Consent of Independent Registered Public Accounting FirmWe hereby consent to the incorporation by reference in the Registration Statements on Forms S‑3 (File Nos. 333‑202009 and 333-202252) and Forms S‑8(File Nos. 333‑131656, 333‑148682, 333‑159938, 333‑168786, 333-182821, 333‑190435, 333‑197873, 333-203924, 333-211277 and 333-218911) ofAMAG Pharmaceuticals, Inc. of our report dated February 28, 2018 relating to the financial statements and the effectiveness of internal control over financialreporting, which appears in this Form 10‑K./s/ PricewaterhouseCoopers LLP Boston, Massachusetts February 28, 2018 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 thisreport;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) and15d‑15(f)) for the registrant and have:a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others withinthose entities, particularly during the period in which this report is being prepared;b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles;c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; andd)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s mostrecent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likelyto materially affect, the registrant’s internal control over financial reporting; and5.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; andb)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 28, 2018 /s/ William K. Heiden William K. Heiden President and Chief Executive Officer(Principal Executive Officer)Exhibit 31.2CERTIFICATIONSI, Edward Myles, 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 thisreport;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) and15d‑15(f)) for the registrant and have:a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others withinthose entities, particularly during the period in which this report is being prepared;b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles;c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; andd)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s mostrecent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likelyto materially affect, the registrant’s internal control over financial reporting; and5.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; andb)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 28, 2018 /s/ Edward Myles Edward Myles Executive Vice President of Finance, Chief Financial Officer and Treasurer(Principal Financial Officer)Exhibit 32.1 CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES‑OXLEY ACT OF 2002In connection with the Annual Report of AMAG Pharmaceuticals, Inc. (the “Company”) on Form 10-K for the year ended December 31, 2017 as filedwith the Securities and Exchange Commission on the date hereof (the “Report”), I, William K. Heiden, President and Chief Executive Officer of theCompany, 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 the Company. /s/ William K. Heiden William K. Heiden President and Chief Executive Officer (Principal Executive Officer) February 28, 2018 Exhibit 32.2CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES‑OXLEY ACT OF 2002In connection with the Annual Report of AMAG Pharmaceuticals, Inc. (the “Company”) on Form 10-K for the year ended December 31, 2017 as filedwith the Securities and Exchange Commission on the date hereof (the “Report”), I, Edward Myles, Executive Vice President of Finance, Chief FinancialOfficer and Treasurer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the bestof my knowledge:(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Edward Myles Edward Myles Executive Vice President of Finance, Chief Financial Officer and Treasurer (Principal Financial Officer) February 28, 2018 

Continue reading text version or see original annual report in PDF format above