Momenta Pharmaceuticals Inc.
Annual Report 2015

Plain-text annual report

MOMENTA PHARMACEUTICALS INC FORM 10-K (Annual Report) Filed 02/26/16 for the Period Ending 12/31/15 Address Telephone CIK 675 WEST KENDALL STREET CAMBRIDGE, MA 02142 617 491-9700 0001235010 Symbol MNTA SIC Code Industry 2836 - Biological Products, Except Diagnostic Substances Biotechnology & Drugs Sector Healthcare Fiscal Year 12/31 http://www.edgar-online.com © Copyright 2016, EDGAR Online, Inc. All Rights Reserved. Distribution and use of this document restricted under EDGAR Online, Inc. Terms of Use. Use these links to rapidly review the document TABLE OF CONTENTS PART IV Table of ContentsUNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549FORM 10-KCommission file number: 000-50797MOMENTA PHARMACEUTICALS, INC. (Exact name of registrant as specified in its charter)675 West Kendall Street, Cambridge, Massachusetts 02142 (Address of principal executive offices) (zip code)Registrant's telephone number, including area code: (617) 491-9700Securities registered pursuant to Section 12(b) of the Act:Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ý No o 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 o No ý Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirementsfor the past 90 days. Yes ý No o Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required tobe submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that theregistrant was required to submit and post such files). Yes ý No o 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 bestof registrant's knowledge, 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. o Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. Seedefinitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one): Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No ý(Mark One) ýý ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2015Oroo TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from to Delaware (State or other jurisdiction of incorporation or organization) 04-3561634 (I.R.S. Employer Identification No.)Title of each class Name of each exchange on which registeredCommon Stock, $0.0001 par value NASDAQ Global MarketLarge accelerated filer ý Accelerated filer o Non-accelerated filer o (Do not check if a smaller reporting company) Smaller reporting company o The aggregate market value of the registrant's voting shares of Common Stock held by non-affiliates of the registrant on June 30, 2015, based on $22.81 pershare, the last reported sale price of Common Stock on the Nasdaq Global Market on that date, was $1,535,271,963. As of February 1, 2016, the registrant had 69,144,957 shares of Common Stock outstanding.DOCUMENTS INCORPORATED BY REFERENCE: Portions of the information required by Part III of Form 10-K will appear in the registrant's definitive Proxy Statement on Schedule 14A for its 2016 AnnualMeeting of Stockholders and are hereby incorporated by reference into this report. Table of Contents2 Page CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS 3 PART I Item 1. BUSINESS 4 Item 1A. RISK FACTORS 30 Item 1B. UNRESOLVED STAFF COMMENTS 57 Item 2. PROPERTIES 58 Item 3. LEGAL PROCEEDINGS 58 Item 4. MINE SAFETY DISCLOSURES 59 PART II Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS ANDISSUER PURCHASES OF EQUITY SECURITIES 60 Item 6. SELECTED CONSOLIDATED FINANCIAL DATA 62 Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTSOF OPERATIONS 64 Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 81 Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 82 Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING ANDFINANCIAL DISCLOSURE 118 Item 9A. CONTROLS AND PROCEDURES 118 Item 9B. OTHER INFORMATION 119 PART III Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE 120 Item 11. EXECUTIVE COMPENSATION 120 Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT ANDRELATED STOCKHOLDER MATTERS 120 Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTORINDEPENDENCE 120 Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES 120 PART IV Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES 121 SIGNATURES 122 EXHIBIT INDEX 123 Table of ContentsCAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS Statements contained or incorporated by reference in this Annual Report on Form 10-K that are about future events or future results, or are otherwise notstatements of historical fact are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of theSecurities Act of 1933, as amended, and Section 21E of the Exchange Act. These statements are based on current expectations, estimates, forecasts, projections,intentions, goals, strategies, plans, prospects and the beliefs and assumptions of our management. In some cases, these statements can be identified by words suchas "anticipate," "believe," "continue," "could," "hope," "target," "project," "goal," "objective," "plan," "potential," "predict," "might," "estimate," "expect,""intend," "may," "seek", "should," "target," "will," "would," "look forward" and other similar words or expressions, or the negative of these words or similar wordsor expressions. These statements include, but are not limited to, statements regarding our expectations regarding the development and utility of our products,product candidates and novel therapeutic programs; our partnered development and commercial programs and efforts to partner our un-partnered developmentprograms; the timing of clinical trials and the availability of results; the significance and meaning of results of clinical trials, including without limitation, resultsfrom our necuparanib clinical trial; the timing of launch of products and product candidates; GLATOPA® (glatiramer acetate injection) product revenues andmarket potential; our M356-related patent litigation; Enoxaparin Sodium Injection revenues; collaboration revenues and research and development revenues;manufacturing, including our intent to rely on contract manufacturers; regulatory filings and approvals; and the sufficiency of our cash for future operations. Any forward-looking statements in this Annual Report on Form 10-K involve known and unknown risks, uncertainties and other important factors that maycause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied bythese forward-looking statements. Important factors that may cause actual results to differ materially from current expectations include, among other things, thoselisted under Part I, Item 1A. "Risk Factors" and discussed elsewhere in this Annual Report on Form 10-K. Given these uncertainties, you should not place unduereliance on these forward-looking statements. Except as required by law, we assume no obligation to update or revise these forward-looking statements for anyreason, even if new information becomes available in the future. This Annual Report on Form 10-K also contains estimates, projections and other information concerning our industry, our business, and the markets forcertain diseases, including data regarding the estimated size of those markets, and the incidence and prevalence of certain medical conditions. Information that isbased on estimates, forecasts, projections, market research or similar methodologies is inherently subject to uncertainties and actual events or circumstances maydiffer materially from events and circumstances reflected in this information. Unless otherwise expressly stated, we obtained this industry, business, market andother data from reports, research surveys, studies and similar data prepared by market research firms and other third parties, industry, medical and generalpublications, government data and similar sources.3Table of ContentsPART I Item 1. BUSINESS Our Company We are a biotechnology company focused on developing generic versions of complex drugs, biosimilars and novel therapeutics for oncology and autoimmunedisease. Our approach to drug discovery and development is built around a complex systems analysis platform that we use to obtain a detailed understanding ofcomplex chemical and biologic systems, design product candidates, evaluate the biological function of products and product candidates, and develop reliable andscalable manufacturing processes. The core objective of our platform is to resolve the complexity of molecular structures and related biologic systems. We firstmap the key measurements needed to obtain comprehensive data on a targeted molecular structure and related biology and then develop a set of analytic tools andmethods, including standard, modified and proprietary analytics, to generate the data, including multiple related and complementary, or orthogonal, measures. Wealso utilize proprietary data analytics software. Applying our approach, we developed the first generic version of LOVENOX® (enoxaparin sodium injection),which was approved by the United States Food and Drug Administration, or FDA, in July 2010, and GLATOPA®, which was approved by the FDA in April 2015and is, to date, the only generic version of once-daily COPAXONE® (glatiramer acetate injection) 20 mg/mL. Both products were approved without the need forclinical safety and efficacy data. We believe our complex systems analysis platform gives us a competitive advantage in developing complex generics, biosimilars and novel therapeutics, andtoday we are developing biosimilar and novel drug candidates using the structural and process insights gained from our work on complex generics. The analytictools and methods, models and data sets, the knowledge and insights developed in one area further expand the platform and can direct, inform and advance effortsin other areas. For example, in our biosimilars program, the analytics aimed at fully characterizing monoclonal antibodies and fusion proteins were adapted fromthe physicochemical analytics we developed in our complex generics programs. The biocharacterization efforts for our complex generics and biosimilar programsprovide a core set of models and biologic data sets that can form the basis of inquiries in our novel therapeutic research. The understanding of polysaccharidesgained from our successful generic LOVENOX program has enabled the design and engineering of our novel oncology product candidate. Our understanding of theimpact of sialylation patterns on antibodies derived in our biosimilars program has informed our research on our novel autoimmune product candidates. In selectingour current development programs and in the evaluation of any potentially new programs, we look for those opportunities where we believe we can best leverageour platform to realize a competitive advantage to bring new medicines to patients and create value for our stockholders.4Table of Contents We have three product areas: Complex Generics, Biosimilars and Novel Therapeutics. A summary of our programs in each area is set forth below.Complex Generics Our Approach We develop generic versions of complex drugs, which we refer to as complex generics. Generics are therapeutic equivalents of chemically synthesized brandname drugs that were approved by the FDA under New Drug Applications, or NDAs. Most chemically synthesized brand name drugs are simple small moleculesthat are relatively easy to duplicate. However, some brand name drugs, for example, LOVENOX and COPAXONE, are complex molecular mixtures that aredifficult to analyze and difficult to reproduce as generics.Our ProgramsGLATOPA®—Generic COPAXONE® (glatiramer acetate injection) 20 mg/mL GLATOPA is a generic version of once-daily COPAXONE 20 mg/mL indicated for the treatment of patients with relapsing-remitting multiple sclerosis, orRRMS, a chronic disease of the central nervous system characterized by inflammation and neurodegeneration. COPAXONE is available in both a once-daily 20mg/mL formulation, which was approved by the FDA in 1996, and a three-times-weekly 40 mg/mL formulation, which was approved in January 2014.COPAXONE is marketed in the United States by Teva Neuroscience, Inc., a subsidiary of Teva Pharmaceutical Industries, Ltd. GLATOPA was approved by the FDA on April 16, 2015 and was launched on June 18, 2015. GLATOPA is the first "AP" rated, substitutable genericequivalent of once-daily COPAXONE. GLATOPA was developed and is being commercialized in collaboration with Sandoz, the generic pharmaceuticals divisionof Novartis. Under our collaboration agreement with Sandoz, Sandoz is responsible for commercialization of GLATOPA and we earn 50% of contractually-definedprofits on Sandoz sales. The terms of our Sandoz collaboration for GLATOPA are further discussed below under " Collaborations, Licenses and Asset Purchases—Sandoz ."5Table of Contents For the year ended December 31, 2015, we recorded $43.4 million in product revenues from Sandoz' profits on sales of GLATOPA. GLATOPA was formerly referred to as M356. M356 now refers to our generic product candidate for three-times-weekly COPAXONE 40 mg/mL.M356—Generic Three-times-weekly COPAXONE® (glatiramer acetate injection) 40 mg/mL M356 is our generic product candidate for three-times-weekly COPAXONE 40 mg/mL. M356 is being developed for commercialization in the United Statesin collaboration with Sandoz. Our application seeking approval of M356 was filed by Sandoz in February 2014 and is under review by the FDA. Our M356formulation contains the same active pharmaceutical ingredient, or API, as GLATOPA, which we believe should help streamline the FDA review. To date, we arethe only generic applicant for the three-times-weekly COPAXONE 40 mg/mL with an approved API. Based on the scheduled September 2016 trial start date, and assuming customary patent litigation timelines, if we are successful in our challenge of the patentsrelated to 40 mg/mL COPAXONE, we believe M356 could be approved following expiration of any 30-month stay, if applicable, and be on the market as early asthe first quarter of 2017. In August 2015, the Patent Trial and Appeal Board of the U.S. Patent and Trademark Office, or PTAB, instituted an Inter Partes Review,or IPR, filed by a third party challenging the validity of several of the same patents relating to 40 mg/mL COPAXONE that are the subject of our patent litigation.We believe the outcome of this IPR could also impact our M356 litigation and launch timelines. The approval process and related patent challenge process aredescribed below under " Regulatory and Legal Matters—United States Government Regulation—"ANDA Approval Process" and "—Patent Challenge ProcessANDAs ." Teva reported $3.2 billion and $3.1 billion in U.S. sales of COPAXONE (combined 20 mg/mL and 40 mg/mL) in 2015 and 2014, respectively.Enoxaparin Sodium Injection—Generic LOVENOX® Enoxaparin Sodium Injection is a generic version of LOVENOX indicated for the prevention and treatment of deep vein thrombosis and to support thetreatment of acute coronary syndromes. LOVENOX is marketed in the United States by Sanofi. Our Enoxaparin Sodium Injection was developed and is beingcommercialized in the United States in collaboration with Sandoz. Sandoz is responsible for commercialization of Enoxaparin Sodium Injection and we earn 50%of contractually-defined profits on Sandoz' sales. We earned $5.1 million and $19.9 million in revenue on $113 million and $197 million in U.S. sales of Enoxaparin Sodium Injection by Sandoz in 2015 and2014, respectively. Due to increased generic competition and resulting decreased market pricing for generic enoxaparin sodium injection products, we do notanticipate significant Enoxaparin Sodium Injection product revenue in the near future.Biosimilars Our Approach We seek to develop and commercialize biosimilars with a goal of leveraging our biocharacterization platform, analytic toolset and process control to achieveextrapolation across indications, interchangeability and reduced clinical trials. Biosimilars are biologics that are highly similar to therapeutic biologic products,referred to as reference products, approved by the FDA under Biologics License Applications, or BLAs. Biologics are produced using living cells. Biosimilars haveno clinically meaningful differences from their respective reference products in terms of safety, purity and potency. The FDA may designate a biosimilar asinterchangeable with its reference product, allowing the biosimilar to be substituted at the pharmacy for the reference product without the intervention of theprescriber. The FDA may also allow extrapolation across indications where information about the6Table of Contentsreference product relating to its other indications are extrapolated to support approval of a biosimilar in one or more of those other indications. The biosimilarregulatory pathway is discussed in more detail below under "Regulatory and Legal Matters—United States Government Regulation—Biosimilars." Our approach includes the following three-part strategy:1.Build a broad and diverse product portfolio .We have put in place a high throughput biosimilar development engine to advance a broad portfolio of biosimilar candidates. We believe having abroad portfolio can help diversify risk, reduce reliance on single source revenue and allow us to capture the scale, technology, and regulatorysynergies that are possible in biologic product development. Our portfolio consists of over half a dozen complex biosimilar candidates such asmonoclonal antibodies and fusion proteins at various stages of development. We select biosimilar candidates with development and litigationtimelines that we believe provide us the opportunity to have the first, or among the first, biosimilars on the market for each targeted referenceproduct.2.Gain competitive advantage through our scientific approach and regulatory strategy .We believe our approach to biosimilars is capable of providing the FDA with robust and compelling analytical evidence of biosimilarity so that theFDA, under its totality-of-the-evidence approach to biosimilars, could designate our products as interchangeable and grant extrapolation acrossindications with reduced clinical trial requirements. We believe the realization of potentially reduced clinical and marketing costs would give ourproducts an advantage over competing biosimilars. The biosimilar regulatory pathway is discussed in more detail below under "Regulatory andLegal Matters—United States Government Regulation—Biosimilars."3.Ensure product candidates are positioned to capture the global opportunity through collaborations with leading pharmaceutical companies.We have identified and are collaborating with strategic partners who can bring best-in-class, global commercial capabilities and can help securehigh quality, low cost manufacturing and distribution. Our lead program, M923, is being developed and commercialized in collaboration withBaxalta, and M834 and five other programs are being developed and commercialized in collaboration with Mylan. Both of these collaborationpartners provide financial strength, manufacturing expertise and extensive commercial reach to better position our products for commercial success. Biologics represent an important advance in the treatment of disease and continue to have a transformative impact on the lives of patients with difficult to treatconditions like cancer and autoimmune disease. The market for biologics is significant and growing. In 2013, the global biologics market representedapproximately $150 billion in sales, with virtually the entire market composed of brand products. In 2020, global sales of biologics are expected to beapproximately $240 billion. Many currently commercially successful biologics are expected to face loss of patent exclusivity in the next five to ten years. Whiletherapeutically beneficial, biologics can be extremely costly to patients, costing upwards of thousands, or even hundreds of thousands, of dollars a year. They canalso be costly to governments, insurers and other payers of healthcare benefits. Biosimilars are expected to generally be more affordable than their referenceproducts. As a result, we believe there is a significant market potential for biosimilars. That potential, however, may be difficult to realize, in large part due to the challenges of successfully developing and manufacturing biosimilars. Biosimilarsare biologics, or therapeutic proteins, and are much more complex and much more difficult to characterize and replicate than small-molecule, chemicallysynthesized drugs. Proteins tend to be 100 to 1000 times larger than conventional drugs, and are more susceptible to physical factors such as light, heat andagitation. They also have greater7Table of Contentsstructural complexity. Protein molecules differ from one another primarily in their sequence of amino acids, which results in folding of the protein into a specificthree-dimensional structure that determines its activity. Although the sequence of amino acids in a protein is consistently replicated, there are a number of changesthat can occur following synthesis that create inherent variability. Chief among these is the glycosylation, or the attachment of sugars at certain amino acids.Glycosylation is critical to protein structure and function, and thoroughly characterizing and matching the glycosylation profile of a targeted biologic is essentialand poses significant scientific and technical challenges. Furthermore, it is often challenging to consistently manufacture proteins with complex glycosylationprofiles, especially on a commercial scale. Protein-based therapeutics are inherently heterogeneous and their structure is highly dependent on the productionprocess and conditions. Products from one production facility can differ within an acceptable range from those produced in another facility. Similarly,physicochemical differences can also exist among different lots of the same product produced at the same facility. The physicochemical complexity and size ofbiologics creates significant technical and scientific challenges in their replication as biosimilar products. Accordingly, while the market potential of biosimilars isgreat, the technical complexity involved and expertise and technical skill required to successfully develop and manufacture biosimilars poses significant barriers toentry. Our capabilities and our programs are designed to meet these challenges.Our ProgramsM923—Biosimilar HUMIRA® (adalimumab) Candidate M923 is being developed as a biosimilar of HUMIRA. HUMIRA is a monoclonal antibody that can bind to a substance in the body known as tumor necrosisfactor, or TNF, thereby inhibiting the known effect of TNF as a potent mediator of inflammation. HUMIRA is indicated for the treatment of patients withrheumatoid arthritis, Crohn's disease, ulcerative colitis and psoriasis, among other diseases. HUMIRA is the largest selling therapeutic in the world and is approvedin 13 indications globally and 9 indications in the United States. HUMIRA is marketed globally by AbbVie. M923 is being developed and commercialized in collaboration with Baxalta. We are responsible for development activities through submission of anInvestigational New Drug application, or IND, to the FDA, or equivalent application in the European Union, and Baxalta is responsible for clinical development,manufacturing and commercialization activities. Upon approval and commercialization, we will receive royalties on sales of M923 at rates that increase based onthe number of competitors, the interchangeability of M923 and the level of M923 sales. In addition, we are eligible to receive up to an additional $50 million inmilestone payments from Baxalta relating to M923 to the extent that the pivotal clinical trial expenses are less than $50 million. The terms of our Baxaltacollaboration are further discussed below under " Collaborations, Licenses and Asset Purchases—Baxalta ." In February 2015, Baxalta commenced a randomized, double-blind, single-dose study in healthy volunteers to compare the pharmacokinetics, safety,tolerability and immunogenicity of M923 versus EU-sourced and US-sourced HUMIRA. A total of 324 healthy volunteers were enrolled in the study. Thevolunteers were randomized 1:1:1 to receive a single 40 mg injection of M923, US-sourced HUMIRA, or EU-sourced HUMIRA. The volunteers were followed for71 days. In December 2015, we announced that M923 met its primary endpoint in the study as the data demonstrated pharmacokinetic bioequivalence to thereference products. In October 2015, Baxalta initiated a pivotal clinical trial in patients with chronic plaque psoriasis for M923. The trial is a randomized, doubleblind, active control, multi-center, global study in patients with chronic plaque psoriasis to compare the safety, efficacy and immunogenicity of M923 withHUMIRA. Baxalta is planning to submit the first regulatory submission for marketing approval for M923 in 2017 and, subject to marketing approval and patentconsiderations, we expect first commercial launch to be as early as 2018.8Table of Contents AbbVie reported approximately $14.0 billion in worldwide sales of HUMIRA in 2015, including approximately $8.4 billion in the United States. Totalworldwide sales of HUMIRA are expected to be approximately $18.8 billion in 2018, including approximately $12.3 billion in the United States.M834—Biosimilar ORENCIA® (abatacept) Candidate M834 is being developed as a biosimilar of ORENCIA. ORENCIA is a complex fusion protein composed of the Fc region of the immunoglobulin IgG1 fusedto the extracellular domain of CTLA-4 that inhibits an immune response by blocking certain T cell signals. ORENCIA is the only CTLA-4Ig fusion proteinapproved for use in treating patients with rheumatoid arthritis and juvenile idiopathic arthritis who have had an inadequate response to certain other currentlyavailable treatments. ORENCIA is currently in development for several high unmet need indications totaling greater than 1.5 million patients in the United States.ORENCIA is often a first choice option following patient failure on anti-TNFs. We could also see more use of ORENCIA as a first line biologic due to itsdemonstrated non-inferiority and equal time to efficacy versus HUMIRA in a double-blind, randomized trial in biological naïve rheumatoid arthritis patients.Analysts estimate that worldwide ORENCIA sales could increase to $2.7 billion by 2020. ORENCIA is marketed globally by Bristol-Myers Squibb and co-promoted by Ono Pharmaceutical in Japan. On January 8, 2016, we entered into a collaboration agreement, which became effective on February 9, 2016, with Mylan Ireland Limited, a wholly-ownedindirect subsidiary of Mylan N.V., or Mylan, to develop and commercialize M834 and five other biosimilar product candidates. Under our collaboration agreement,we and Mylan will share equally costs and profits (losses) for such product candidates. We and Mylan will share development responsibilities across productcandidates, and Mylan will lead commercialization of products. The terms of our Mylan collaboration are further discussed below under " Collaborations, Licensesand Asset Purchases—Mylan ." We plan to initiate a clinical trial for M834 in mid-2016. ORENCIA's composition of matter patents expire in the United States in 2019. The U.S. PTABinstituted the IPR we filed challenging Bristol Myers Squibb's formulations patent '239 on ORENCIA. We expect a decision from the PTAB in January 2017.Provided there are no unexpected development, regulatory or patent challenge delays, we expect to be able to launch M834 in the 2020 timeframe. Previously,M834 was being developed and commercialized in collaboration with Baxalta. In February 2015, Baxalta terminated in part our collaboration as it relatesspecifically to M834 and worldwide development and commercialization rights to M834 reverted to us. Bristol-Myers Squibb reported approximately $1.9 billion in worldwide sales of ORENCIA in 2015, including approximately $1.3 billion in the United States.Other Biosimilar Programs in Collaboration with Mylan We are also developing five other biosimilar candidates from our portfolio with Mylan, in addition to M834. We and Mylan will share equally costs andprofits (losses) related to these earlier stage product candidates. We and Mylan will share development responsibilities across product candidates, and Mylan willlead commercialization of the products. The terms of our Mylan collaboration are further discussed below under " Collaborations, Licenses and Asset Purchases—Mylan ." Total worldwide sales of the reference products that we are targeting in these biosimilar programs were approximately $13.0 billion in 2015, includingapproximately $7.7 billion in the United States, and are projected to be approximately $18.5 billion in 2018, including approximately $10.6 billion in the UnitedStates. Taking into account the timing of reference product loss of regulatory exclusivity and key reference product patent expirations, we plan to launch each ofthese products in the 2020-2025 timeframe to be among the first biosimilars on the market for each reference product.9Table of ContentsNovel Therapeutics Our Approach We seek to identify novel agents and novel combinations of agents that may positively modulate new targets or multiple pathways in a disease. The majorityof human diseases result from the interaction of a complex web of biologic systems. We believe that applying our complex systems analysis platform may enablenew insights into the complex biology underlying diseases. This enhanced understanding should help us establish the relative role of different biological targets andrelated cell-to-cell signaling pathways in contributing to the disease process.Our ProgramsNecuparanib—Oncology Product Candidate Necuparanib, formerly M402, is a novel oncology product candidate derived from heparin and engineered to have a broad range of potential effects on tumorcells and the environment in which tumor cells grow. The use of heparins to treat venous thrombosis in cancer patients has generated numerous reports of antitumoractivity; however, the dose of these products has been limited by their anticoagulant activity. Necuparanib has been engineered to have significantly reducedanticoagulant activity while preserving the relevant antitumor properties of heparin, permitting delivery of substantially higher doses. We designed necuparanibbased on our deep understanding of polysaccharides and our expertise in structural and biological characterization of heparins that we gained from successfullydeveloping Enoxaparin Sodium Injection, which is produced from biologically derived heparin. In June 2014, necuparanib received Orphan Drug Designation from the U.S. FDA for the treatment of pancreatic cancer. The FDA's Orphan Drug designationprogram provides orphan status to drugs and biologics intended to treat, diagnose or prevent rare diseases/disorders, defined as affecting fewer than 200,000 peoplein the United States. This designation provides certain incentives, including federal grants, tax credits, and waiver of Prescription Drug User Fee Act, or PDUFA,filing fees. A product with orphan drug status also has the potential to receive a seven-year orphan drug exclusivity once approved. In December 2014, we received Fast-Track designation by the FDA for necuparanib as a first-line treatment in combination with ABRAXANE® (nab-paclitaxel) and gemcitabine in patients with metastatic pancreatic cancer. The FDA's Fast Track Drug Development Program is a process designed to facilitate thedevelopment and expedite the review of drugs to treat serious conditions and fill an unmet medical need. This designation allows for companies to interact with theFDA frequently to discuss issues such as study design, the extent of safety data required to support approval, the structure and content of an NDA, and other criticalissues. In addition, such a product could be eligible for accelerated approval and/or priority review if supported by clinical data at the time of BLA, NDA, orefficacy supplement submission. If the FDA determines, after preliminary evaluation of clinical data submitted by a sponsor, that a Fast Track product may beeffective, the FDA may also consider reviewing portions of a marketing application before the sponsor submits the complete application.Nonclinical Development Researchers have conducted a series of nonclinical experiments using mouse and rat tumor models including pancreatic, breast, colorectal, and ovarian cancersto test the hypothesis that necuparanib can modulate tumor progression and metastasis in these cancers. Necuparanib exhibits potent binding to multiple heparin-binding growth factors, adhesion molecules, and chemokines (such as VEGF, FGF-2, SDF-1 and P-selectin) and neutralizes these by blocking the interaction withtheir receptors or by dissolving their gradients in the tumor microenvironment. As a result, necuparanib has been shown in these models to inhibit tumor cellprogression, metastasis, and angiogenesis. Additionally, the10Table of Contentsnonclinical data showed that necuparanib in combination with gemcitabine prolonged survival and substantially lowered the incidence of metastasis, suggestingthat necuparanib may have the potential to complement conventional chemotherapy in a range of cancers given its multi-targeted mechanism of action.Clinical Development In 2012, we initiated a Phase 1/2 clinical trial of necuparanib in patients with advanced metastatic pancreatic cancer. The trial consists of two parts: Part A, orPhase 1, an open-label, multiple ascending dose escalation study evaluating necuparanib in combination with ABRAXANE and gemcitabine; and Part B, orPhase 2, a randomized, controlled, proof of concept study to evaluate the antitumor activity of necuparanib in combination with ABRAXANE and gemcitabine,compared with ABRAXANE and gemcitabine alone. In October 2014, we successfully completed and reported top-line data from Phase 1. Phase 1 involved escalating daily necuparanib doses in combination with125 mg/m 2 ABRAXANE and 1000 mg/m 2 gemcitabine (Days 1, 8, and 15 of each 28-day cycle) in patients with metastatic pancreatic cancer. The necuparanibstarting dose was 0.5 mg/kg, which was increased via a modified 3+3 design until a maximum tolerated dose of 5 mg/kg was determined. ABRAXANE was addedto the treatment regimen starting with Cohort 3 following release of the Phase 3 ABRAXANE + gemcitabine data in 2013. Thirty-nine patients (12 patients in thefirst two cohorts and 27 patients in the five subsequent cohorts) received necuparanib as of data cutoff and were included in the analyses. In June 2015 at theAmerican Society of Clinical Oncology annual meeting, we reported more mature data from Phase 1 which continued to show acceptable safety and tolerability andencouraging signals of activity, including the following:•Adding necuparanib to ABRAXANE and gemcitabine did not appear to increase the toxicity profile associated with ABRAXANE and gemcitabinealone. •Of the 24 patients who received at least one dose of necuparanib in combination with ABRAXANE plus gemcitabine, the median overall survivalwas 14.2 months. Also, within a subset of 16 patients who completed one cycle and had at least one scan on treatment, the median overall survivalwas 15.3 months. •Of the 15 patients treated with necuparanib in combination with ABRAXANE plus gemcitabine that completed Cycle 1 and had at least one follow-up measurement for CA19.9 (a biomarker predictive of long-term outcome and treatment response in pancreatic cancer), 93% had a greater than50% decrease from baseline, and 100% had a greater than 20% decrease from baseline. We believe the safety data and early signals of activity are encouraging and that the 5 mg/kg dose has the potential to provide significantly higher levels ofactivity against multiple cancer targets than traditional anticoagulant heparins have achieved. We believe these results, combined with nonclinical data in othercancer models, and necuparanib's differentiated, multi-targeted mechanism of action, suggest the possibility of combining necuparanib with other chemotherapyand targeted therapy standards of care in a variety of other tumor types. We continue to collect data from Phase 1 of the trial and plan to publish and/or presentupdated results later this year. In October 2014, we initiated Phase 2 of the Phase 1/2 trial. In November 2015, we paused study enrollment in Phase 2 of the trial following our acceptance ofrecommendations from our Data Safety Monitoring Board, or DSMB, to develop guidelines for diagnosing and managing thrombocytopenia, based on a limitednumber of specific toxicities observed in the study. The DSMB noted that there were no safety signals that warranted discontinuation of dosing in patients alreadybeing treated, unblinding the results, or closing the study. In December 2015, we amended the study protocol to further reinforce these guidelines and resumedpatient enrollment. We continue to enroll patients in11Table of ContentsPhase 2 of the trial. We expect data from this randomized trial to be available in the second half of 2017. Subject to successfully completing clinical trials andobtaining marketing approval, we believe necuparanib could be on the market in the 2020-2021 timeframe, or potentially earlier under Fast-Track Designation.Other Novel Therapeutics Programs We are applying our advanced understanding of the complex biology underlying the anti-inflammatory effects of intravenous immunoglobulin, or IVIg, andthe biologic impact of sialylation, a method of adding sialic acid to proteins, on IVIg's activity, to the development of the following three novel therapeuticprograms:•M281, our Anti-FcRn program— The Anti-FcRn antibody is a fully-human monoclonal antibody that blocks the neonatal Fc receptor, or FcRn. Thisreceptor recycles IgG antibodies, enabling a long half-life. The blocking of this receptor with our antibody effectively inhibits the binding of IgGsand leads to their rapid clearance. We believe these data indicate high potential for acute and chronic / intermittent therapies in a broad range ofautoantibody driven disease. We have completed IND-enabling toxicology studies. M281 exhibits high affinity to human and non-human FcRn inpreclinical studies and shows selective induction of human and non-human IgG clearance. We plan to advance this program with a goal of enteringclinical development in mid-2016. •M230, our SIF3 program— The selective immunomodulator of Fc receptors, or SIF3, is a novel recombinant protein containing three IgG Fcregions joined carefully to maximize activity. Nonclinical data has shown that this construct enhances the molecules' avidity and affinity for the Fcreceptors. Using these data, we are seeking to develop an IVIg-like efficacy profile at lower doses, potentially reducing the risks associated withplasma-derived products. We plan to advance this program with a goal of entering clinical development in 2017. •hsIVIg program— Hyper-sialylated IVIg, or hsIVIg, is a hyper-sialylated version of IVIg. IVIg, which contains pooled, human immunoglobulin G,or IgG, antibodies purified from blood plasma, is indicated to treat several inflammatory diseases, including idiopathic thrombocytopenic purpura,or ITP, Kawasaki disease, and chronic inflammatory demyelinating polyneuropathy, or CIDP. The manufacture of IVIg, which requires largeamounts of human plasma sourced from donated blood, is expensive, subject to donated blood shortages and often involves high batch-to-batchvariation. Moreover, the IVIg that is available is predominantly used to treat primary immunodeficiency for diseases such as AIDS. Increasingdemand for IVIg products already exceeds available supply worldwide thus limiting broader clinical applications. Many in-vivo models have shownhsIVIg to have increased anti-inflammatory activity at a much lower dose than IVIg, which may enable a simpler and faster administration with thepotential for superior efficacy and reduced batch-to-batch variation compared to IVIg. We are currently identifying and pursuing potentialcollaboration opportunities to further develop and commercialize this program. We believe these early stage programs could have the potential to produce product candidates capable of treating a large number of immunological disordersdriven by antibodies, immune complexes, and Fc receptor biology. Such disorders include rheumatoid arthritis, autoimmune neurologic diseases such as Guillain-Barre syndrome, chronic inflammatory demyelinating neuropathy and myasthenia gravis, autoimmune blood disorders such as immune thrombocytopenic purpura,systemic autoimmune diseases such as dermatomyositis, lupus nephritis, and catastrophic antiphospholipid syndrome, antibody-mediated transplant rejection, andautoimmune blistering diseases, several of which have few treatment options.12Table of ContentsCollaborations, Licenses and Asset Purchases Sandoz In 2006 and 2007, we entered into a series of agreements, including a collaboration and license agreement, as amended, or the 2006 Sandoz CollaborationAgreement, with Sandoz AG, or Sandoz; and a stock purchase agreement and an investor rights agreement, with Novartis Pharma AG, or Novartis. Under the 2006Sandoz Collaboration Agreement, we and Sandoz agreed to exclusively collaborate on the development and commercialization of GLATOPA and M356, amongother products. Costs, including development costs and the costs of clinical studies, will be borne by the parties in varying proportions depending on the type ofexpense. For GLATOPA and M356, we are generally responsible for all of the development costs in the United States. For GLATOPA and M356 outside of theUnited States, we share development costs in proportion to our profit sharing interest. We are reimbursed at a contractual FTE rate for any full-time equivalentemployee expenses as well as any external costs incurred in the development of products to the extent development costs are born by Sandoz. Allcommercialization costs will be borne by Sandoz as they are incurred for all products. Sandoz commenced sales of GLATOPA in the United States on June 18, 2015. Under the 2006 Sandoz Collaboration Agreement, we earn 50% ofcontractually-defined profits on Sandoz' worldwide net sales of GLATOPA. We are entitled to earn 50% of contractually-defined profits on Sandoz' worldwide netsales of M356, if and when M356 is commercialized. Profits on net sales of GLATOPA and M356 are calculated by deducting from net sales the costs of goodssold and an allowance for selling, general and administrative costs, which is a contractual percentage of net sales. Sandoz is responsible for funding all of the legalexpenses incurred under the 2006 Sandoz Collaboration Agreement; however a portion of certain legal expenses, including any patent infringement damages, canbe offset against the profit-sharing amounts in proportion to our 50% profit sharing interest. In the year ended December 31, 2015, we earned a $10.0 millionregulatory milestone payment upon GLATOPA receiving sole FDA approval and an additional $10.0 million milestone payment upon the first commercial sale.We are eligible to receive up to $120.0 million in additional milestone payments upon the achievement of certain commercial and sales-based milestones forGLATOPA and M356 in the United States. None of these payments, once received, is refundable and there are no general rights of return in the arrangement.Sandoz has agreed to indemnify us for various claims, and a certain portion of such costs may be offset against certain future payments received by us. Under the 2006 Sandoz Collaboration Agreement, each party has granted the other an exclusive license under its intellectual property rights to develop andcommercialize such products for all medical indications in the relevant regions. We have agreed to provide development and related services on a commerciallyreasonable best-efforts basis, which includes developing a manufacturing process to make the products, scaling up the process, contributing to the preparation ofregulatory filings, further scaling up the manufacturing process to commercial scale, and related development of intellectual property. We have the right toparticipate in a joint steering committee, which is responsible for overseeing development, legal and commercial activities and which prepares and approves theannual collaboration plans. Sandoz is responsible for commercialization activities and exclusively distributes and markets the products. The term of the 2006 Sandoz Collaboration Agreement extends throughout the development and commercialization of the products until the last sale of theproducts, unless earlier terminated by either party pursuant to the provisions of the 2006 Sandoz Collaboration Agreement. The 2006 Sandoz CollaborationAgreement may be terminated if either party breaches the 2006 Sandoz Collaboration Agreement or files for bankruptcy. In addition, either we or Sandoz mayterminate the 2006 Sandoz Collaboration Agreement with respect to M356, if clinical trials are required for regulatory approval of M356.13Table of Contents Under the stock purchase agreement, we sold approximately 4.7 million shares of our common stock to Novartis for an aggregate purchase price of$75.0 million, representing a premium of $13.6 million based on the closing price of our common stock on the NASDAQ Global Market on the date of purchase.As of December 31, 2015, Novartis owned approximately 6.8% of our outstanding common stock. Pursuant to the investor rights agreement, we granted toNovartis "piggyback" and demand registration rights under the Securities Act of 1933, as amended, with respect to the shares of common stock purchased under thestock purchase agreement.Mylan We and Mylan Ireland Limited, a wholly-owned indirect subsidiary of Mylan N.V., or Mylan, entered into a collaboration agreement, or the MylanCollaboration Agreement, which became effective on February 9, 2016, pursuant to which we and Mylan agreed to collaborate exclusively, on a world-wide basis,to develop, manufacture and commercialize six of our biosimilar candidates, including M834. Under the terms of the Mylan Collaboration Agreement, Mylan has agreed to pay us a non-refundable upfront payment of $45 million. In addition, we andMylan will share equally costs (including development, manufacturing, commercialization and certain legal expenses) and profits (losses) with respect to suchproduct candidates, with Mylan funding its share of collaboration expenses incurred by us, in part, through up to six contingent early development milestonepayments, totaling up to $200 million across the six product candidates. For each product candidate other than M834, at a specified stage of early development, we and Mylan will each decide, based on the product candidate'sdevelopment progress and commercial considerations, whether to continue the development, manufacture and commercialization of such product candidate underthe collaboration or to terminate the collaboration with respect to such product candidate. If one party decides not to continue development, manufacture andcommercialization of a product candidate under the Mylan Collaboration Agreement, the other party will have the right to continue the development, manufactureand commercialization of such product candidate. Under the Mylan Collaboration Agreement, we granted Mylan an exclusive license under our intellectual property rights to develop, manufacture andcommercialize the product candidates for all therapeutic indications, and Mylan has granted us a co-exclusive license under Mylan's intellectual property rights forus to perform our development and manufacturing activities under the product work plans agreed by the parties, and to perform certain commercialization activitiesto be agreed by the Joint Steering Committee, or JSC, for such product candidates if we exercise our co-commercialization option described below. We and Mylanhave established a JSC consisting of an equal number of members from us and Mylan, to oversee and manage the development, manufacture andcommercialization of product candidates under the collaboration. Unless otherwise determined by the JSC, it is anticipated that, in collaboration with the otherparty, (a) we will be primarily responsible for nonclinical development activities and initial clinical development activities for the product candidates; additional(pivotal or phase 3 equivalent) clinical development activities for M834; and regulatory activities for the product candidates in the United States through regulatoryapproval; and (b) Mylan will be primarily responsible for additional (pivotal or phase 3 equivalent) clinical development activities for the product candidates otherthan M834; regulatory activities for the product candidates outside the United States; and regulatory activities for products in the United States after regulatoryapproval, when all marketing authorizations for the products in the United States will be transferred to Mylan. Mylan will commercialize any approved products,with us having an option to co-commercialize, in a supporting commercial role, any approved products in the United States. The JSC will allocate responsibilitiesfor other activities under the collaboration.14Table of Contents The term of the collaboration will continue throughout the development and commercialization of the product candidates, on a product-by-product andcountry-by-country basis, until development and commercialization by or on behalf of us and Mylan pursuant to the Mylan Collaboration Agreement has ceased fora continuous period of two years for a given product candidate in a given country, unless earlier terminated by either party pursuant to the terms of the MylanCollaboration Agreement. The Mylan Collaboration Agreement may be terminated by either party for breach by, or bankruptcy of, the other party; for its convenience; or for certainactivities involving competing products or the challenge of certain patents. Other than in the case of a termination for convenience, the terminating party shall havethe right to continue the development, manufacture and commercialization of the terminated products in the terminated countries. In the case of a termination forconvenience, the other party shall have the right to continue. If a termination occurs, the licenses granted to the non-continuing party for the applicable product willterminate for the terminated country. Subject to certain terms and conditions, the party that has the right to continue the development, manufacture orcommercialization of a given product candidate may retain royalty-bearing licenses to certain intellectual property rights, and rights to certain data, for thecontinued development and sale of the applicable product in the country or countries for which termination applies.Baxalta We and Baxter International, Inc., Baxter Healthcare Corporation and Baxter Healthcare SA (collectively referred to as "Baxter") entered into a globalcollaboration and license agreement effective February 2012, or the Baxter Collaboration Agreement, to develop and commercialize biosimilars, including M923.In connection with Baxter's internal corporate restructuring in July 2015, Baxter assigned all of its rights and obligations under the Baxter Collaboration Agreementto Baxalta U.S. Inc., Baxalta GmbH and Baxalta Incorporated (collectively, "Baxalta"). In light of the assignment, all references to "Baxter" and the "BaxterCollaboration Agreement" have been replaced with references to "Baxalta" and the "Baxalta Collaboration Agreement," respectively. Under the Baxalta Collaboration Agreement, we and Baxalta agreed to collaborate, on a world-wide basis, on the development and commercialization ofM923 and M834, and Baxalta had the right to select four additional reference products to target for biosimilar development under the collaboration. In July 2012,Baxalta selected an additional product: M511, a biosimilar candidate of AVASTIN® (bevacizumab). In December 2013, Baxalta terminated its option to licenseM511 under the Baxalta Collaboration Agreement following an internal portfolio review. In February 2015, Baxalta's right to select additional programs expiredwithout being exercised. Also, in February 2015, Baxalta terminated in part the Baxalta Collaboration Agreement as it relates specifically to M834 and allworldwide development and commercialization rights for M834 reverted to us. The Baxalta Collaboration Agreement remains in effect and unchanged with respectto M923. Under the Baxalta Collaboration Agreement, each party has granted the other an exclusive license under its intellectual property rights to develop andcommercialize M923 for all therapeutic indications. We have agreed to provide development and related services on a commercially reasonable basis through thefiling of an IND or equivalent application in the European Union for M923. Development and related services include high-resolution analytics, characterization,and product and process development. Baxalta is responsible for clinical development, manufacturing and commercialization activities and will exclusivelydistribute and market M923. We have the right to participate in a joint steering committee, consisting of an equal number of members from us and Baxalta, tooversee and manage the development and commercialization of M923 under the collaboration. Costs, including development costs, payments to third parties forintellectual property licenses, and expenses for legal proceedings, including the patent exchange process pursuant to the Biologics Price Competition andInnovation Act of 2009, will be borne by the parties in varying proportions, depending on the type of15Table of Contentsexpense and the stage of development. We will generally be responsible for research and process development costs prior to filing an IND or equivalent applicationin the European Union, and the cost of in-human clinical trials, manufacturing in accordance with current good manufacturing practices and commercialization willbe borne by Baxalta. Baxalta has a right of first negotiation with respect to collaborating with us on the development of any biosimilar product candidate that could compete withM923 based on the same mechanism of action. This right is effective until December 2017, subject to certain restrictions as outlined in the Baxalta CollaborationAgreement. Under the terms of the Baxalta Collaboration Agreement, we received an initial cash payment of $33.0 million, a $7.0 million license payment for achievingpre-defined "minimum development criteria" for M834, and $12.0 million in technical and development milestone payments in connection with the UK Medicinesand Healthcare Products Regulatory Agency's acceptance of Baxalta's clinical trial application to initiate a pharmacokinetic clinical trial for M923. We remaineligible to receive from Baxalta, in aggregate, up to $50 million in regulatory milestone payments for M923, on a sliding scale, where, based on the product'sregulatory application, there is a significant reduction in the scope of the clinical trial program required for regulatory approval. In addition, if M923 is successfully developed and launched, Baxalta will be required to pay us royalties on net sales of licensed products worldwide, with abase royalty rate in the high single digits with the potential for significant tiered increases based on the number of competitors, the interchangeability of theproduct, and the sales tier for the product. The maximum royalty with all potential increases would be slightly more than double the base royalty. The term of the collaboration will continue throughout the development and commercialization of M923 on a country-by-country basis until there is noremaining payment obligation with respect to the product in the relevant territory, unless earlier terminated by either party pursuant to the terms of the BaxaltaCollaboration Agreement. The Baxalta Collaboration Agreement may be terminated by:•either party for breach by or bankruptcy of the other party; •Baxalta for its convenience; or •us in the event Baxalta does not exercise commercially reasonable efforts to commercialize M923 in the United States or other specified countries,provided that we also have certain rights to directly commercialize M923, as opposed to terminating the Baxalta Collaboration Agreement, in eventof such a breach by Baxalta. In January 2016, Baxalta and Shire plc announced an agreement under which Shire will combine with Baxalta, subject to shareholder and regulatoryapprovals.Parivid In April 2007, we entered into an asset purchase agreement with Parivid, LLC, or Parivid, a provider of data integration and analysis services to us, and S.Raguram, the principal owner and Chief Technology Officer of Parivid. Pursuant to the purchase agreement, we acquired certain of the assets and assumed certainof the liabilities of Parivid related to the acquired assets in exchange for $2.5 million in cash paid at closing and up to $11.0 million in contingent milestonepayments in a combination of cash and/or stock in the manner and on the terms and conditions set forth in the purchase agreement if certain milestones areachieved within fifteen years of the date of the purchase agreement. Between 2009 and 2011, we made cash payments to Parivid of $7.3 million and issued 91,576shares of our common stock valued at $10.92 per share to Parivid in satisfaction of certain milestones under the purchase agreement. Under the purchaseagreement, which was amended in August 2009 and July 2011, Parivid remains eligible to receive up to $4.0 million of our common stock16Table of Contentsif GLATOPA remains the sole generic COPAXONE 20 mg product on the market through the one-year anniversary of commercial launch in June 2016.Patents and Proprietary Rights Our success depends in part on our ability to obtain and maintain proprietary protection for our technology and product candidates, to operate withoutinfringing on the proprietary rights of others and to prevent others from infringing our proprietary rights. Our policy is to seek to protect our proprietary positionby, among other methods, filing United States and foreign patent applications related to our proprietary technology and product candidates that are important to thedevelopment of our business. We also rely on trade secrets, know-how, continuing technological innovation and in-licensing opportunities to develop and maintainour proprietary position. We license or own a patent portfolio of over 100 patent families, each of which includes United States patent applications and/or issued patents as well asforeign counterparts to certain of the United States patents and patent applications. Our patent portfolio includes issued or pending claims covering:•methods and technologies for characterizing complex generics and biosimilars, including our biosimilar HUMIRA candidate and our biosimilarORENCIA candidate; •methods for manufacturing complex generics and biosimilars, including our biosimilar HUMIRA candidate and our biosimilar ORENCIAcandidate; •composition of matter, methods of use, and methods of making novel therapeutics for oncology and autoimmune disease; •composition of matter, methods of use, and methods of making certain novel low molecular weight heparins, including necuparanib; •composition of matter and use of certain heparinases, heparinase variants and other enzymes; and •methods and technologies for the analysis and synthesis of polysaccharides. A portion of our patent portfolio covering methods and technologies for analyzing and characterizing polysaccharides consists of patents and patentapplications owned and licensed to us by the Massachusetts Institute of Technology, or M.I.T. In addition, a portion of the claims in our patent portfolio coveringthe composition of matter of naturally occurring heparinases, heparinase variants and other enzymes, the use of these heparinases and enzymes in thecharacterization of sugars consists of patents and patent applications that are owned and licensed to us by M.I.T. The patent positions of companies like ours are generally uncertain and involve complex legal and factual questions. Our ability to maintain and solidify ourproprietary position for our technology will depend on our success in obtaining effective claims and enforcing those claims once granted. We do not know whetherany of our patent applications will result in the issuance of any patents. Moreover, any issued patent does not guarantee us the right to practice the patentedtechnology or to commercialize the patented product. Third parties may have blocking patents that could be used to prevent us from commercializing our patentedproducts and practicing our patented technology. Our issued patents and those that may be issued in the future may be challenged, invalidated or circumvented,which could limit our ability to stop competitors from marketing related products or the length of the term of patent protection that we may have for our products.In addition, the rights granted under any issued patents may not provide us with proprietary protection or competitive advantages against competitors with similartechnology. Furthermore, our competitors may independently develop similar technologies. For these reasons, we may have competition for our generic, biosimilarand novel products. Moreover, because of the extensive time required for development, testing and regulatory review of a potential product, it is possible that,before any of our novel heparin or other products can be commercialized, any related patent may expire or remain in force for only a short period followingcommercialization, thereby reducing any advantage of the patent.17Table of Contents We may rely, in some circumstances, on trade secrets to protect our technology. However, trade secrets are difficult to protect. We seek to protect ourtechnology and product candidates, in part, by confidentiality agreements with our employees, consultants, advisors, contractors and collaborators. Theseagreements may be breached and we may not have adequate remedies for any breach. In addition, our trade secrets may otherwise become known or beindependently discovered by competitors. To the extent that our employees, consultants, advisors, contractors and collaborators use intellectual property owned byothers in their work for us, disputes may arise as to the rights in related or resulting know-how and inventions.Manufacturing We do not own or operate facilities for manufacturing any products. While we have personnel with experience and expertise in manufacturing, as well asprocess development, analytical development, quality assurance and quality control, we rely on contract manufacturers and our collaboration partners formanufacturing and supply activities. Under the 2006 Sandoz Collaboration Agreement, Sandoz is responsible for commercial manufacture of GLATOPA andM356. Under the Baxalta Collaboration Agreement, Baxalta is responsible for clinical and commercial manufacturing of M923. Under the Mylan CollaborationAgreement, we and Mylan will jointly oversee manufacturing activities, with us having primary responsibility for contracting with contract manufacturers forclinical supply for products and Mylan having primary responsibility for contracting with contract manufacturers for commercial supply for products other thanM834. We have entered into various agreements with third party contractors for process development, analytical services and manufacturing. In each of ouragreements with contractors, we retain ownership of our intellectual property and generally own and/or are assigned ownership of processes, developments, data,results and other intellectual property generated during the course of the performance of each agreement that primarily relate to our products. Where applicable, weare granted non-exclusive licenses to certain contractor intellectual property for purposes of exploiting the products that are the subject of the agreement and in afew instances we grant non-exclusive licenses to the contract manufacturers for use outside of our product area. The agreements also typically contain provisionsfor both parties to terminate for material breach, bankruptcy and insolvency.Sales, Marketing and Distribution We do not currently have any sales, marketing and distribution capabilities, nor do we currently have any plans to build a sales, marketing and distributioncapability to support any of our products. While we have personnel with experience and expertise in sales and marketing, we rely on our collaboration partners forthese activities. In order for us to commercialize any products we would have to either develop a sales, marketing and distribution infrastructure or collaborate orcontract with third parties that have sales, marketing and distribution capabilities. Under the 2006 Sandoz Collaboration Agreement, Sandoz is responsible forcommercializing GLATOPA and M356. Under the Baxalta Collaboration Agreement, Baxalta is responsible for commercializing M923. Under the MylanCollaboration Agreement, we have an option to participate in the commercialization of products, in a supporting commercial role, with Mylan in the United States.Regulatory and Legal Matters Government authorities in the United States, at the federal, state and local level, the European Union and other countries extensively regulate, among otherthings, the research, development, testing, manufacture, labeling, promotion, advertising, distribution, marketing and exporting and importing of products such asthose we are developing.18Table of ContentsUnited States Government Regulation In the United States, the information that must be submitted to the FDA in order to obtain approval to market a new drug or biologic varies depending onwhether the drug or biologic is a new product whose safety and effectiveness has not previously been demonstrated in humans, or a drug or biologic whose activeingredient(s) and certain other properties are the same as those of a previously approved drug or biologic. Approval of new drugs and biologics follows the NDAand BLA routes, respectively. A drug that claims to be the same as an already approved NDA drug may be able to file for approval under the ANDA approvalpathway. Beginning in 2010, with the enactment of the Biologics Price Competition and Innovation Act, or BPCI Act, a biosimilar may also be filed for approvalunder the abbreviated pathway under Section 351(k) of the Public Health Service Act.ANDA Approval Process FDA approval is required before a generic equivalent of an existing brand name drug may be marketed. Such approval is typically obtained by submitting anANDA to the FDA and demonstrating therapeutic equivalence. However, it is within the FDA's regulatory discretion to determine the kind and amount of evidencerequired to approve a product for marketing. An ANDA may be submitted for a drug on the basis that it is the same as a previously approved branded drug, alsoknown as a reference listed drug. Specifically, the generic drug that is the subject of the ANDA must have the same active ingredient(s), route of administration,dosage form, and strength, as well as the same labeling, with certain exceptions, and the labeling must prescribe conditions of use that have been previouslyapproved for the listed drug. If the generic drug product has a different route of administration, dosage form, or strength, the FDA must grant a suitability petitionapproving the differences(s) from the listed drug before the ANDA may be filed. The ANDA must also contain data and information demonstrating that the genericdrug is bioequivalent to the listed drug (or alternatively seek a waiver as is requested for most injectable products), or if the application is submitted pursuant to anapproved suitability petition, information to show that the listed drug and the generic drug can be expected to have the same therapeutic effect when administeredto patients for a proposed condition of use. Generic drug applications are termed "abbreviated" because they are not required to duplicate the clinical (human) testing or, generally, nonclinical testingnecessary to establish the underlying safety and effectiveness of the branded product, other than the requirement for bioequivalence testing. However, the FDA mayrefuse to approve an ANDA if there is insufficient information to show that the active ingredients are the same and to demonstrate that any impurities or differencesin active ingredients do not affect the safety or efficacy of the generic product. In addition, like NDAs, an ANDA will not be approved unless the product ismanufactured in current Good Manufacturing Practices, or cGMP, compliant facilities to assure and preserve the drug's identity, strength, quality and purity. As isthe case for NDAs and BLAs, the FDA may refuse to accept and review insufficiently complete ANDAs. Generally, in an ANDA submission, determination of the "sameness" of the active ingredients to those in the reference listed drug is based on thedemonstration of the chemical equivalence of the components of the generic version to those of the branded product. While the standard for demonstratingchemical equivalence is relatively straightforward for small molecule drugs, it is inherently more difficult to define sameness for the active ingredients of complexdrugs. Under the NDA pathway, these types of drugs include such products as heparins and recombinant versions of certain hormones, among others. Due to thelimited number of ANDA submissions for generic complex drugs, the FDA has not reached a final position for demonstrating chemical equivalence for many ofthese products specifically, nor provided broad guidance for achieving "sameness" for complex drugs in general. In many cases, the criteria the FDA may apply areevolving and are being determined on an application-by-application basis.19Table of Contents To demonstrate bioequivalence, ANDAs generally must also contain in vivo bioavailability data for the generic and branded drugs. "Bioavailability" indicatesthe rate and extent of absorption and levels of concentration of a drug product in the bloodstream needed to produce a therapeutic effect. "Bioequivalence"compares the bioavailability of one drug product with another, and when established, indicates that the rate of absorption and levels of concentration of a genericdrug in the body are the same as the previously approved branded drug. The studies required to demonstrate in vivo bioequivalence are generally very small, quickto complete, and involve relatively few subjects. Under current regulations, the FDA may waive requirements for in vivo bioequivalence data for certain drugproducts, including products where bioequivalence is self-evident such as injectable solutions which have been shown to contain the same active and inactiveingredients as the reference listed drug. Although the FDA may waive requirements for in vivo bioequivalence data, it may still require the submission ofalternative data on purity, such as immunogenicity and/or pharmacokinetics and pharmacodynamics data, to provide additional evidence of pharmaceuticalequivalence. The FDA, however, does not always waive requirements for in vivo bioequivalence data. Generic drug products that are found to be therapeutically equivalent by the FDA receive an "A" rating in FDA's Orange Book, which lists all approved drugproducts and therapeutic equivalence evaluations. Products that are therapeutically equivalent can be expected in the FDA's judgment to have equivalent clinicaleffect and no difference in their potential for adverse effects when used under the approved conditions of their approved labeling. Products with "A" ratings aregenerally substitutable for the innovator drug by both in-hospital and retail pharmacies. Many health insurance plans require automatic substitution for "A" ratedgeneric versions of products when they are available, although physicians may still prescribe the branded drug for individual patients. On rare occasions in the past,generic products were approved that were not rated as therapeutically equivalent, and these products were generally not substitutable at retail pharmacies. The timing of final FDA approval of a generic drug for commercial distribution depends on a variety of factors, including whether the applicant challengesany listed patents for the drug and/or its use and whether the manufacturer of the branded product is entitled to one or more statutory periods of non-patentregulatory exclusivity, during which the FDA is prohibited from accepting or approving generic product applications. For example, submission of an ANDA for adrug that was approved under an NDA as a new chemical entity will be blocked for five years after the pioneer's approval or for four years after approval if theapplication includes a paragraph IV certification of non-infringement or invalidity against a patent applicable to the branded drug. In certain circumstances, aregulatory exclusivity period can extend beyond the life of a patent, and thus block ANDAs from being approved on or after the patent expiration date. Forexample, a three-year exclusivity period may be granted for new indications, dosage forms, routes of administration, or strengths of previously approved drugs, orfor new uses, if approval of such changes required the sponsor to conduct new clinical studies. In addition, the FDA may extend the exclusivity of a product by sixmonths past the date of patent expiry or other regulatory exclusivity if the manufacturer undertakes studies on the effect of their product in children, a so-calledpediatric exclusivity. The brand manufacturer may seek to delay or prevent the approval of an ANDA by filing a Citizen Petition with the FDA. For example, a Citizen Petition mayrequest the FDA to rule that a determination of "sameness" and/or therapeutic equivalence for a particular ANDA is not possible without extensive clinical testing,based on the characteristics of the brand product. Because relatively few ANDAs for complex mixture drugs have been reviewed by FDA, such a petition couldsubstantially delay approval, or result in non-approval, of an ANDA for a complex mixture generic product. For example, Teva filed a Citizen Petition that arguedthat "sameness" could not be established by any applicant filing an ANDA for a generic COPAXONE on the grounds that COPAXONE was too complex to bethoroughly characterized. The FDA denied Teva's petition in connection with the approval of the ANDA for GLATOPA. The review of the Citizen Petition and thepreparation of the20Table of ContentsFDA response, however, involved significant legal and regulatory resources that may have extended the time for FDA review and approval of the ANDA.Patent Challenge Process Regarding ANDAs The Hatch-Waxman Act provides incentives for generic pharmaceutical manufacturers to challenge patents on branded pharmaceutical products and/or theirmethods of use, as well as to develop products comprising non-infringing forms of the patented drugs. The Hatch-Waxman legislation places significant burdens onthe ANDA filer to ensure that such challenges are not frivolous, but also offers the opportunity for significant financial reward if the challenge is successful. If there is a patent listed for the branded drug in the FDA's Approved Drug Products with Therapeutic Equivalence and Evaluations listing or "Orange Book"at the time of submission of the ANDA, or at any time before the ANDA is approved, the generic manufacturer's ANDA must include one of four types of patentcertification with respect to each listed patent. If the applicant seeks approval to market the generic equivalent prior to the expiration of a listed patent, the genericcompany includes a certification asserting that the patent is invalid or unenforceable or will not be infringed, a so-called "paragraph IV certification." Within20 days after receiving notice from the FDA that its application is acceptable for review, or immediately if the ANDA has been amended to include a paragraph IVcertification after the application was submitted to the FDA, the generic applicant is required to send the patent owner and the holder of the NDA for the brand-name drug notice explaining why it believes that the listed patents in question are invalid, unenforceable or not infringed. If the patent holder commences a patentinfringement lawsuit within 45 days of receipt of such notice, the Hatch-Waxman Act provides for an automatic stay on the FDA's ability to grant final approval ofthe ANDA for the generic product, generally for a period of 30 months. A 30-month stay may be shortened or lengthened by a court order if the district court findsthat a party has failed to reasonably cooperate in expediting the action. Moreover, the district court may, before expiration of the stay, issue a preliminary injunctionprohibiting the commercial sale of the generic drug until the court rules on the issues of validity, infringement, and enforceability. If the district court finds that therelevant patent is invalid, unenforceable, or not infringed, such ruling terminates the 30-month stay on the date of the judgment. If it is finally determined that thepatent is valid, enforceable, and infringed, approval of the ANDA may not be granted prior to the expiration of the patent. In addition, if the challenged patentexpires during the 30-month period, the FDA may grant final approval for the generic drug for marketing, if the FDA has determined that the application meets alltechnical and regulatory requirements for approval and there are no other obstacles to approval. In most cases, patent holders may only obtain one 30-month stay with respect to patents listed in the Orange Book. Specifically, for ANDAs withparagraph IV certifications to a patent listed for the branded drug in the Orange Book on or after August 18, 2003, a single 30-month stay is available for litigationrelated to that patent only if the patent was submitted to the FDA before the date that the ANDA (excluding an amendment or supplement) was submitted. In otherwords, 30-months stays are not triggered by later listed patents submitted to the FDA on or after the date the ANDA application was submitted. Because of thislimitation, in most cases ANDAs will be subject to no more than one 30-month stay. Under the Hatch-Waxman Act, the first ANDA applicant to have submitted a substantially complete ANDA that includes a paragraph IV certification may beeligible to receive a 180-day period of generic market exclusivity during which the FDA may not approve any other ANDA for the same drug product. However,this exclusivity does not prevent the sponsor of the innovator drug from selling an unbranded "authorized generic" version of its own product during the 180-dayexclusivity period. This period of market exclusivity may provide the patent challenger with the opportunity to earn a return on the risks taken and its legal anddevelopment costs and to build its market share before other generic competitors can enter the market. Under the Hatch-Waxman Act, as amended by the Medicare21Table of ContentsModernization Act of 2003, or MMA, there are a number of ways an applicant who has filed an ANDA after the date of the MMA may forfeit its 180-dayexclusivity, including if the ANDA is withdrawn or if the applicant fails to market its product within the specified statutory timeframe or achieve at least tentativeapproval within the specified timeframe. In addition, for ANDAs filed after the MMA was enacted, it is possible for more than one ANDA applicant to be eligiblefor 180-day exclusivity. This occurs when multiple "first" applicants submit substantially complete ANDAs with paragraph IV certifications on the same day.Biosimilars With the enactment of federal healthcare reform legislation in March 2010, the Biologics Price Competition and Innovation Act, or BPCI Act, was enactedwhich created a new abbreviated approval pathway for biosimilars. The abbreviated pathway is codified in Section 351(k) of the Public Health Service Act. UnderSection 351(k), the FDA must wait four years after approval of a product under a BLA before accepting a filing for a biosimilar version of the reference product,and the FDA cannot approve a biosimilar version of the reference product until 12 years after the reference product was approved under a BLA. In addition, thenew legislation redefines "biologic" versus "drug." There is a ten year transition period during which applicants can elect regulation as a drug or biologic whenapplications are filed. For example, heparin-based products may now have the potential option of filing for approval as either a drug or a biologic. The Section 351(k) pathway creates a regulatory and legal pathway to encourage the development of biosimilars. First, it authorizes the FDA to rely on thesafety and efficacy of a reference product approved under a BLA to approve biosimilar products under the abbreviated pathway. Second, it establishes a process fornegotiation and clearance of patents controlled by the reference product BLA holder. The law defines a biosimilar product as a biologic that:•is "highly similar" to the reference product, notwithstanding minor differences in clinically inactive components; and •has no clinically meaningful differences from the reference product in terms of safety, purity and potency. Biosimilars may be approved for one or more, and possibly all, indications for which a reference product is approved. In some cases, clinical trial datasuccessfully demonstrating the use of a biosimilar for one indication, and submitted to support approval for that indication, may be extrapolated to support approvalfor one or more other indications of the reference product. The Section 351(k) pathway further defines a subset of biosimilar products as "interchangeable" if an applicant can demonstrate that:•the interchangeable biological product can be expected to produce the same clinical result as the reference product in any given patient; and •if the product is administered more than once in a patient, that the risk in terms of safety or diminished efficacy of alternating or switching betweenthe use of the interchangeable biologic product and the reference product is no greater than the risk of using the reference product without switching. The Section 351(k) pathway states that a biosimilar product that is determined to be interchangeable may be substituted for the reference product without theintervention of a health care provider who prescribed the reference product. The law states that the biosimilar must be for the same indication as the referenceproduct, involve the same mechanism of action and that the manufacturing22Table of Contentsfacility meets the standards necessary to assure that the product continues to be safe, pure and potent. The types of data that would ordinarily be required in anapplication to show similarity would include:•analytical data and studies to demonstrate chemical similarity; •nonclinical studies (including toxicity studies); and •clinical studies. The FDA has the discretion to determine whether one or more of these elements are necessary and its guidance to date does not establish a single method fordemonstrating biosimilarity but states that the degree of residual uncertainty that remains following analytical and nonclinical research will determine the natureand the extent of clinical studies that may be required. In addition, the FDA has not established final guidance for demonstrating interchangeability and applicantswill need to develop appropriate scientific evidence to support their filings. In 2012, the FDA implemented its biosimilar user fee program which includes a fee-based meeting process for consultation between applicants and the FDA reviewing division on biosimilar and interchangeable biologics applications under the newapproval pathway. It provides for pre-application meetings where the applicant can propose and submit analytic, physicochemical and biologic characterizationdata along with a proposed development plan. The proposed development plan may have a reduced scope of clinical development based on the nature and extent ofthe characterization data. There are defined time periods for meetings and written advice. In February 2012, the FDA published draft guidance documents for thedevelopment and registration of biosimilars and interchangeable biologics. The draft guidance documents indicate that the FDA will consider the totality-of-the-evidence developed by an applicant in determining the nature and extent of the development, nonclinical and clinical requirements for a biosimilar orinterchangeable biologic product. The BPCI Act also provides for limited regulatory exclusivity for the first FDA-approved interchangeable biologic with respectto each reference product. This means that the FDA will defer approval of additional interchangeable biologics to the same reference product for defined periods ofone year or more. Upon filing an abbreviated application, an applicant may trigger the patent negotiation and clearance process. Under the provisions, an applicant and thereference product company are required to share information to seek to resolve any patent disputes prior to regulatory approval and launch. A failure to shareinformation or participate in the process has defined consequences that include the loss of the right to seek patent clearance on the applicant's part and the loss ofthe right to seek lost profits or injunctive relief for infringement on the reference product patent right holder's part. The process, if initiated by the applicant, hasseveral stages, including defining which patents to include in a pre-approval litigation proceeding, initiating litigation, notice 180 days prior to launch of abiosimilar, the initiation of a second round of litigation relating to patents the parties did not include in the first round litigation, and, following approval, litigationon patents brought by the reference product company or other patent holders not involved in the prior patent process. The BPCI Act is complex and is only beginning to be interpreted and implemented by the FDA. As a result, its ultimate impact, implementation and meaningwill be subject to uncertainty for years to come.NDA and BLA Approval Processes for New Drugs and Biologics In the United States, the FDA regulates drugs and biologics under the Federal Food, Drug, and Cosmetic Act, and, in the case of biologics, also under thePublic Health Service Act, and implementing regulations. The steps required before a new or branded drug or biologic may be marketed in the United Statesinclude:•completion of nonclinical laboratory tests, nonclinical studies and formulation studies under the FDA's good laboratory practices;23Table of Contents•submission to the FDA of an IND for human clinical testing, which must become effective before human clinical trials may begin and must includeindependent Institutional Review Board, or IRB, approval at each clinical site before the trial is initiated; •performance of adequate and well-controlled clinical trials to establish the safety and efficacy of the investigational drug product for each indicationor the safety, purity and potency of the biological product for its intended indication; •completion of developmental chemistry, manufacturing and controls activities and manufacture under current Good Manufacturing Practices, orcGMP; •submission to the FDA of an NDA or BLA; •satisfactory completion of an FDA Advisory Committee review, if applicable; •satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the product is produced to assess compliance withcGMPs and to assure that the facilities, methods and controls are adequate to preserve the drug's identity, strength, quality and purity or to meetstandards designed to ensure the biologic's continued safety, purity and potency; •satisfactory completion of FDA inspections of nonclinical and or clinical testing sites; and •FDA review and approval of the NDA or BLA. Nonclinical tests include laboratory evaluations of product chemistry, toxicity and formulation, as well as nonclinical studies. An IND sponsor must submitthe results of the nonclinical tests, together with manufacturing information and analytical and stability data, to the FDA as part of the IND. An IND willautomatically become effective 30 days after receipt by the FDA unless, before that time, the FDA raises concerns or questions about issues such as the conduct ofthe trials as outlined in the IND. In that case, the IND sponsor and the FDA must resolve any outstanding FDA concerns or questions before clinical trials canproceed. Submission of an IND may not result in the FDA allowing clinical trials to commence. Clinical trials involve the administration of the investigational product to human subjects or patients in accordance with specific protocols and under thesupervision of qualified investigators in accordance with good clinical practices, or GCPs. Each clinical trial protocol must be submitted to the FDA as part of theIND, and an IRB at each site where the study is conducted must also approve the study. Clinical trials typically are conducted in three sequential phases, but thephases may overlap or be combined. Phase 1 trials usually involve the initial introduction of the investigational drug into humans to evaluate the product's safety,dosage tolerance, pharmacokinetics and pharmacodynamics. If feasible, Phase 1 studies also attempt to detect any early indication of a drug's potentialeffectiveness. Phase 2 trials usually involve controlled trials in a limited patient population to evaluate dosage tolerance and appropriate dosage, identify possibleadverse effects and safety risks and evaluate the preliminary efficacy of the drug for specific indications. Phase 3 trials usually test a specific hypothesis to evaluateclinical efficacy and test further for safety in an expanded patient population, to establish the overall benefit-risk relationship of the product and to provide adequateinformation for the labeling of the product. Phase 1, Phase 2 and Phase 3 testing may not be completed successfully within any specified period, if at all.Furthermore, the FDA, an IRB or a sponsor may suspend or terminate clinical trials at any time on various grounds, including a finding that the subjects or patientsare being exposed to an unacceptable health risk. The FDA can also request that additional clinical trials be conducted as a condition of product approval. Finally,sponsors are required to publicly disseminate information about ongoing and completed clinical trials on a government website administered by the NationalInstitutes of Health, or NIH, and are subject to civil money penalties and other civil and criminal sanctions for failing to meet these obligations.24Table of Contents Assuming successful completion of the required clinical testing, the results of the nonclinical studies and of the clinical studies, together with other detailedinformation, including information on the chemistry, manufacture and control of the product, are submitted to the FDA in the form of an NDA or BLA requestingapproval to market the product for one or more indications. The FDA reviews an NDA to determine, among other things, whether a product is safe and effective forits intended use and whether its manufacturing is cGMP-compliant to assure and preserve the product's identity, strength, quality and purity. The FDA reviews aBLA to determine, among other things, whether the product is safe, pure and potent and the facility in which it is manufactured, processed, packed or held meetsstandards designed to assure the product's continued safety, purity and potency. The FDA may refuse to accept and review insufficiently complete applications. The testing and approval process requires substantial time, effort and financial resources, and each may take several years to complete. Moreover, afterapproval, some types of changes to the approved product, such as adding new indications, manufacturing changes and additional labeling claims, are subject tofurther FDA review and approval of a new NDA or BLA, or NDA or BLA supplement, before the change can be implemented. Upon approval of a new drug or a new indication based under an NDA or a supplement to an NDA, the holder of the approval receives the benefit ofprotection from generic competition. As discussed above, for example, the FDA must wait at least four years before accepting a filing for approval of a genericversion of the brand product under an ANDA, and the FDA cannot approve a generic version of the brand product under an ANDA until five years after the brandproduct was approved under the NDA. In addition, in certain circumstances where a brand product files additional data as outlined above for a new indication oruse of a brand based upon new clinical studies and receives an approval, the FDA is similarly precluded from approving a generic version of the brand product forsuch new indication or use until three years after the new use or indication was approved by the brand. The BPCI Act added new exclusivity provisions for reference products along with the creation of a new approval pathway for biosimilars. Under the law, theFDA must wait four years after approval of a biologic under a BLA before accepting a filing for a biosimilar of that product, and the FDA cannot approve abiosimilar of the reference product until 12 years after the reference product was approved under a BLA. In addition, the new legislation redefines the definition ofbiologic versus drug and, as a result, a number of products that were previously regulated as drugs may now be regulated as biologics. There is a ten year transitionperiod during which applicants can elect regulation as a drug or as a biologic when applications are filed. For example, heparin based products may now have theoption of filing for approval as a biologic. This could provide an applicant that elects regulation as a biologic with the longer twelve year period of exclusivityprotection as compared to the five year period of exclusivity protection against generic drug competition.Manufacturing Requirements Before approving an NDA or BLA, the FDA will inspect the facility or the facilities at which the product is manufactured. The FDA will not approve theproduct unless it determines that the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistentproduction of the product within required specifications. Additionally, before approving an NDA or BLA, the FDA will typically inspect one or more clinical sitesto assure compliance with GCPs. If the FDA determines the application, manufacturing process or manufacturing facilities are not acceptable; it will outline thedeficiencies in the submission and often will request additional testing or information. Notwithstanding the submission of any requested additional information, theFDA ultimately may decide that the application does not satisfy the regulatory criteria for approval.25Table of ContentsPost-Approval Requirements After regulatory approval of a product is obtained, we will be required to comply with a number of post-approval requirements. For example, as a condition ofapproval of an NDA, BLA, ANDA or Section 351(k) application, the FDA may require post-marketing testing and surveillance to further assess and monitor theproduct's safety or efficacy after commercialization. Any post-approval regulatory obligations, and the cost of complying with such obligations, could expand in thefuture. In addition, holders of an approved NDA, BLA, ANDA or Section 351(k) approval are required to report, among other things, certain adverse reactions andproduction problems to the FDA, to provide updated safety and efficacy information and to comply with requirements concerning advertising and promotionallabeling for their products. Also, quality control and manufacturing procedures must continue to conform to cGMP after approval. The FDA periodically inspectsmanufacturing facilities to assess compliance with cGMP, which imposes extensive procedural, substantive and recordkeeping requirements. Accordingly,manufacturers must continue to expend time, money and effort in the area of production and quality control to maintain compliance with cGMP and other aspectsof regulatory compliance. Discovery of problems with a product or failure to comply with the applicable United States requirements at any time during the product development process,approval process or after approval, may subject an applicant to administrative or judicial sanctions. These sanctions could include the imposition by the FDA or anIRB of a clinical hold on or termination of studies, the FDA's refusal to approve pending applications or supplements, license suspension or revocation, withdrawalof an approval, restriction on marketing, warning letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions,fines, civil penalties or criminal prosecution. Also, new government requirements may be established that could delay or prevent regulatory approval of ourproducts under development.Foreign Regulation In addition to regulations in the United States, we will be subject to a variety of foreign regulations governing clinical trials and commercial sales anddistribution of our products if and when we enter those markets. Whether or not we obtain FDA approval for a product, we must obtain approval of a clinical trialapplication or product from the applicable regulatory authorities of foreign countries before we can commence clinical trials or marketing of the product in thosecountries. The approval process varies from country to country, and the time may be longer or shorter than that required for FDA approval. The requirementsgoverning the conduct of clinical trials, product licensing, pricing and reimbursement vary greatly from country to country. Under European Union regulatory systems, we may submit marketing authorizations either under a centralized or decentralized procedure. The centralizedprocedure is mandatory for the approval of biotechnology products and many pharmaceutical products and provides for the grant of a single marketingauthorization that is valid for all European Union member states. The decentralized procedure provides for mutual recognition of national approval decisions and isavailable at the request of the applicant for products that are not subject to the centralized procedure. Under this procedure, the holder of a national marketingauthorization from one European Union member state (the reference member state) may submit an application to the remaining member states. Generally, eachmember state decides whether to recognize the reference member state's approval in its own country.Related Matters From time to time, legislation is drafted, introduced and passed in Congress that could significantly change the statutory provisions governing the approval,manufacturing and marketing of products regulated by the FDA or reimbursed under Medicare by the Center for Medicare Services. In addition,26Table of ContentsFDA regulations and guidance are often revised or reinterpreted by the agency in ways that may significantly affect our business and our products. It is impossibleto predict whether legislative changes will be enacted, or FDA regulations, guidance or interpretations will be changed, or what the impact of such changes, if any,may be.Hazardous Materials Our research and development processes involve the controlled use of certain hazardous materials and chemicals, including radioactive materials andequipment. We are subject to federal, state and local environmental, health and workplace safety laws and regulations governing the use, manufacture, storage,handling and disposal of hazardous materials and waste products. We do not expect the cost of complying with these laws and regulations to be material.Competition The development and commercialization of pharmaceutical products is highly competitive due to existing product competition at the time of product launchand the development of subsequent therapeutics with different methods of action, efficacy and safety profiles. Many of our competitors, who already market or aredeveloping products similar to those in our portfolio, have considerable experience in product development, obtaining regulatory approval, and commercializingpharmaceutical products. Further, certain of these competitive companies have substantially greater financial, marketing, research and development and humanresources than we do. We believe that our ability to successfully compete will depend on a number of factors, including our ability to successfully develop safe and efficaciousproducts, the timing and scope of regulatory approval of our products and those of our competitors, our ability to collaborate with third parties, our ability tomaintain favorable patent protection for our products, our ability to obtain market acceptance of our products and our ability to manufacture sufficient quantities ofour products at commercially acceptable costs.GLATOPA®—Generic COPAXONE® (glatiramer acetate injection) 20 mg/mL GLATOPA is a substitutable generic equivalent for, and competes directly with, Teva's once-daily COPAXONE 20 mg/mL. It also competes with Teva'sthree-times-weekly COPAXONE 40 mg/mL. If the ANDA for M356 is approved, M356 would be a substitutable generic for, and would compete directly with,Teva's three-times-weekly COPAXONE 40 mg/mL. Teva's three-times-weekly COPAXONE 40 mg/mL, which launched in early 2014, accounts for more than70% of the overall U.S. glatiramer acetate market (20 mg/mL and 40mg/mL). Teva's three-times-weekly COPAXONE 40 mg/mL share of the overall glatirameracetate market may continue to increase, which could continue to decrease the size of the 20 mg/mL glatiramer acetate market and the market potential forGLATOPA. Currently, GLATOPA is the sole approved generic for once-daily COPAXONE 20 mg/mL in the United States and, to date, there is no approvedgeneric for three-times-weekly COPAXONE 40 mg/mL in the United States. However, we could compete with other generic versions of COPAXONE approved inthe future by the FDA. ANDAs for generic versions of COPAXONE 20 mg/mL and/or 40 mg/mL have been submitted to the FDA by Mylan Inc., SynthonPharmaceuticals, Inc., Dr. Reddy's Laboratories, and Amneal Pharmaceuticals. Other ANDAs or other regulatory applications may have been submitted or may besubmitted in the future. In addition, GLATOPA competes (and M356, if approved will compete) with alternative multiple sclerosis therapies that compete withCOPAXONE in the United States. These currently include, among others, Rebif (interferon-beta-1a), marketed by EMD Serono Inc. and Pfizer Inc.; Avonex(interferon beta-1a), Tysabri (natalizumab), Tecfidera (dimethyl fumarate), and Plegridy (peginterferon beta-1a), each marketed by Biogen Idec Inc.; Betaseron(interferon-beta-1b), marketed by Bayer Schering Pharma; Extavia (interferon-Beta-1b) and Gilenya27Table of Contents(fingolimod), each marketed by Novartis Pharmaceuticals Corporation; Lemtrada (alemtuzumab), marketed by Sanofi and Bayer; and Aubagio (teriflunomide),marketed by Sanofi.Biosimilars If approved, our biosimilar candidates would compete with their applicable reference products, as well as other biosimilars of those reference products.Currently, Amgen, Sandoz, Samsung Bioepis, Reliance Life Sciences, Fujifilm Kyowo Kirin Bio., Pfizer, Boehringer Ingelheim, Oncobiologics, Coherus, LG LifeSciences, Celltrion, Biocon/Mylan, Epirus Biopharmaceuticals and Genor have biosimilars of HUMIRA in clinical development. Worldwide, there are twobiosimilar adalimumab products approved, one from Torrent Pharmaceuticals and one from Zydus Cadila, both marketed in India. Alphamab, bioXpress,Dr. Reddy's Laboratories, Harvest Moon, and Oncobiologics have announced they are developing a biosimilar of ORENCIA. Other companies, including BiogenIdec Inc. and Teva, have also begun, or have announced their intention, to develop and commercialize biosimilars. Many of these companies are significantly largerthan us, have substantially greater financial resources and have significant pre-existing resources to devote to their biosimilars business. In addition, our biosimilarcandidates, if approved, would compete with alternative therapies that compete with their applicable reference products.Novel Therapeutics Our novel product pipeline will also face substantial competition from major pharmaceutical and other biotechnology companies. Necuparanib will facecompetition from existing pancreatic cancer treatments, like the FOLFIRINOX regimen, which is a combination of five chemotherapy agents, as well as from novelmechanisms of action in development. Among the novel mechanisms of action in development are several other heparin-based mechanisms. ProgenPharmaceuticals, Cantex Pharmaceuticals and Sigma Tau Research are believed to be developing compounds with a heparin-based mechanism of action foroncology indications. Other novel products in the pipeline for metastatic pancreatic cancer that may compete with necuparanib in the first line treatment settinginclude the assets PEGPH20 from Halozyme Therapeutics and demcizumab from OncoMed Pharmaceuticals, among others, all of which are also currently beingevaluated in combination with gemcitabine and nab-paclitaxel in this patient population. Necuparanib may also face competition from immunotherapy compoundsin combination with novel agents. Our development work focused on Fc biology, which has yielded two named product candidates: M230, an Fc multimer, and M281, an anti-FcRn product.These candidates face competition from a number of companies. Merck & Co. and Pfizer have compounds in development that are mechanistically similar toM230. Pfizer's compound is in nonclinical development, and Merck's compound completed a phase I clinical trial in May 2015. Several companies, including UCB,HanAll, Dyax, Syntimmune and argenx, are developing an FcRn targeted agent. UCB's compound completed a phase I clinical trial in October 2015, argenx'scompound is currently in phase I, and the compounds from HanAll, Dyax, and Syntimmune are in nonclinical development.Employees We believe that our success will depend greatly on our ability to identify, attract and retain capable employees. As of December 31, 2015, we had 258employees, including 79 employees who hold Ph.D. degrees and 3 employees who hold M.D degrees. Our employees are not represented by any collectivebargaining group or labor union, and we believe our relations with our employees are good.28Table of ContentsResearch and Development Expenses Research and development expenses consist of costs incurred in identifying, developing and testing product candidates. These expenses consist primarily ofsalaries and related expenses for personnel, license fees, consulting fees, nonclinical and clinical trial costs, contract research and manufacturing costs, and the costsof laboratory equipment and facilities. Research and development expense for 2015 was $126.0 million, compared with $106.5 million in 2014 and $104.0 millionin 2013.Financial Information about Segments and Geographic Areas We view our business as one reportable operating segment—the discovery, development and commercialization of pharmaceutical products. We derive ourrevenues from our collaborations. All of our revenues through December 31, 2015 have come from our collaborators and are based solely on activities in the UnitedStates. Our long-lived assets were $25.4 million, $30.0 million and $30.3 million at December 31, 2015, 2014, and 2013, respectively, and are located solely in theUnited States. See Part II, Item 6 "Selected Consolidated Financial Information" and the section entitled "Segment Reporting" appearing in Note 2 to ourconsolidated financial statements for further information about our segment. The notes to our consolidated financial statements are contained in Part II, Item 8 ofthis Annual Report on Form 10-K.Company Background and Securities Exchange Act Reports We were incorporated in Delaware in May 2001 under the name Mimeon, Inc. In September 2002, we changed our name to Momenta Pharmaceuticals, Inc.Our principal executive offices are located at 675 West Kendall Street, Cambridge, Massachusetts 02142, and our telephone number is (617) 491-9700. In this Annual Report on Form 10-K, the terms "Momenta," "we," "us" "the Company" and "our" refer to Momenta Pharmaceuticals, Inc. and its subsidiary. We are subject to the informational requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and, accordingly, file reports,proxy statements and other information with the Securities and Exchange Commission. Such reports, proxy statements and other information can be read andcopied at the public reference facilities maintained by the Securities and Exchange Commission at the Public Reference Room, 100 F Street, N.E., Room 1580,Washington, D.C. 20549. Information regarding the operation of the Public Reference Room may be obtained by calling the Securities and Exchange Commissionat 1-800-SEC-0330. The Securities and Exchange Commission maintains a web site ( http://www.sec.gov ) that contains material regarding issuers that fileelectronically with the Securities and Exchange Commission. Our internet address is www.momentapharma.com. We are not including the information contained on our web site as a part of, or incorporating it byreference into, this Annual Report on Form 10-K. We make available free of charge on our website our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K andamendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as reasonably practicable after we electronically filesuch material with, or furnish it to, the Securities and Exchange Commission. Our logo, trademarks, and service marks are the property of Momenta. Other trademarks or service marks appearing in this Annual Report on Form 10-K arethe property of their respective holders.29Table of ContentsItem 1A. RISK FACTORS Investing in our stock involves a high degree of risk. You should carefully consider the risks and uncertainties and other important factors described below inaddition to other information included or incorporated by reference in this Annual Report on Form 10-K before purchasing our stock. If any of the following risksactually occur, our business, financial condition or results of operations would likely suffer.Risks Relating to Our Business We have incurred a cumulative loss since inception. If we do not generate significant revenue, we may not return to profitability. We have incurred significant losses since our inception in May 2001. At December 31, 2015, our accumulated deficit was $452.4 million. We may incurannual operating losses over the next several years as we expand our drug development, commercialization and discovery efforts. In addition, we must successfullydevelop and obtain regulatory approval for our drug candidates, and effectively manufacture, market and sell any drugs we successfully develop. Accordingly, wemay not generate significant revenue in the longer term and, even if we do generate significant revenue, we may never achieve long-term profitability. To be profitable, we and our collaborative partners must succeed in developing and commercializing drugs with significant market potential. This will requireus and our collaborative partners to be successful in a range of challenging activities: developing product candidates; obtaining regulatory approval for productcandidates through either existing or new regulatory approval pathways; clearing allegedly infringing patent rights; enforcing our patent rights; and manufacturing,distributing, marketing and selling products. Our potential profitability will also be adversely impacted by the entry of competitive products and, if so, the degree ofthe impact could be affected by whether the entry is before or after the launch of our products. We may never succeed in these activities and may never generaterevenues that are significant.Even if M356 (our generic product candidate for three-times-weekly COPAXONE 40 mg/mL) is approved by the FDA, if Teva is successful in the currentM356 ANDA-related patent infringement litigation, we and Sandoz may not be able to launch M356 until the relevant COPAXONE patents expire, or we mayhave to pay significant damages if we launch before those patents expire. In addition, Teva may allege that we and Sandoz, in manufacturing and sellingGLATOPA and/or M356, are infringing COPAXONE patents other than those at issue in our current M356 patent litigation. If this occurs we may expendsubstantial resources in resulting litigation, the outcome of which would be uncertain. Any unfavorable outcome in such litigation could decrease or haltGLATOPA sales prior to a successful defense of such litigation or expiration of any such patents, and we and Sandoz may incur significant damages, reducingour profits and having a material adverse effect on our business. Should Teva succeed in the current M356 ANDA-related patent infringement litigation, the launch of M356, if approved, may not occur until the patentsexpire, which would impair our ability to commercialize M356 and would harm our business and financial condition. If M356 is approved by the FDA prior to adecision in the patent infringement litigation, and we and Sandoz launch prior to such decision, we may not be able to utilize M356 product revenue until theconclusion of the litigation, and if Teva is ultimately successful, we and Sandoz may be liable for significant damages, including damages in excess of M356product revenue, and our business and financial condition would be materially harmed. The possibility of incurring liability for such damages may reduce the scopeof, or may delay, any launch of M356 prior to a favorable outcome of the patent infringement litigation. In addition, if we are unsuccessful in litigation, or pendingthe outcome of litigation or while litigation is pending, a court could issue a temporary injunction or a permanent injunction preventing us from manufacturing30Table of Contentsand selling M356 and prohibiting the use of previously manufactured product for commercial sale until a favorable outcome of the litigation or the expiration of thepatents. Teva may also assert that our manufacturing and sale of M356 and/or GLATOPA infringes COPAXONE-related patents other than those at issue in thecurrent M356 ANDA-related patent infringement litigation, including patents that may issue in the future. If so, we would expect to incur significant expensesunder the terms of our collaboration with Sandoz to respond to and litigate these claims. Furthermore, we may be ordered to pay damages from the sale of M356and/or GLATOPA if we are found to have infringed Teva's patents. Litigation concerning intellectual property and proprietary technologies can be protracted andexpensive, and can distract management and other key personnel from running our business.If other generic versions of the brand name drugs, or other biosimilars of the reference products, for which we have products or product candidates, includingGLATOPA, M356, M923 and M834, are approved and successfully commercialized, our business would suffer. Generic versions of our products can contribute most significantly to revenues at the time of their launch, especially with limited competition. As such, thetiming of competition can have a significant impact on our financial results. We expect that certain of our product candidates may face intense and increasingcompetition from other manufacturers of generic and/or branded products. For example, Mylan announced that the FDA had accepted for filing its ANDAs forgeneric versions of COPAXONE and Synthon announced that it submitted ANDAs to the FDA for generic versions of COPAXONE. A launch of an additionalgeneric version of COPAXONE could significantly reduce anticipated revenue from GLATOPA. Furthermore, as patents for branded products and related exclusivity periods expire, manufacturers of generic products may receive regulatory approval forgeneric equivalents and may be able to achieve significant market share. As this happens, and as branded manufacturers launch authorized generic versions of suchproducts, market share, revenues and gross profit typically decline, in some cases, dramatically. If any of our current or potential future generic or biosimilarproduct offerings, including GLATOPA, M356, M923 and M834 enter markets with a number of competitors, we may not achieve significant market share,revenues or gross profit. In addition, as other generic products are introduced to the markets in which we participate, the market share, revenues and gross profit ofour generic products would likely decline significantly. In addition, the first biosimilar determined to be interchangeable with a particular reference product for anycondition of use is eligible for a period of market exclusivity that delays an FDA determination that a second or subsequent biosimilar product is interchangeablewith that reference product for any condition of use until the earlier of: (1) one year after the first commercial marketing of the first interchangeable product;(2) 18 months after resolution of a patent infringement suit instituted under 42 U.S.C. § 262(l)(6) against the applicant that submitted the application for the firstinterchangeable product, based on a final court decision regarding all of the patents in the litigation or dismissal of the litigation with or without prejudice;(3) 42 months after approval of the first interchangeable product, if a patent infringement suit instituted under 42 U.S.C. § 262(l)(6) against the applicant thatsubmitted the application for the first interchangeable product is still ongoing; or (4) 18 months after approval of the first interchangeable product if the applicantthat submitted the application for the first interchangeable product has not been sued under 42 U.S.C. § 262(l)(6). A determination that another company's productis interchangeable with HUMIRA or another of the reference brand products for which we have a product candidate prior to approval of M923 or other applicableproduct candidate may therefore delay the potential determination that our product is interchangeable with the reference product, which may materially adverselyaffect our results of operations and delay, prevent or limit our ability to generate revenue.31Table of ContentsIf an alternative version of a name brand drug or reference product, such as COPAXONE or HUMIRA, is developed that has a new product profile andlabeling, the alternative version of the product could significantly reduce the market share of the original name brand drug or reference product, and maycause a significant decline in sales or potential sales of our corresponding generic or biosimilar product. Brand companies may develop alternative versions of a reference brand product as part of a life cycle extension strategy, and may obtain approval of thealternative version under a supplemental new drug application, for a drug, or biologics license application for a biologic. The alternative version may offer patientsadded benefits such as a more convenient form of administration or dosing regimen. Should the brand company succeed in obtaining an approval of an alternativeproduct, it may capture a significant share of the collective reference brand product market and significantly reduce the market for the original reference brandproduct and thereby the potential size of the market for our generic or biosimilar products. For example, Teva's three-times-weekly COPAXONE 40 mg/mL, whichlaunched in early 2014, accounts for more than 70% of the overall U.S. glatiramer acetate market (20 mg/mL and 40mg/mL). As a result, the market potential forGLATOPA has decreased, and may decrease further as additional patients are converted from once-daily COPAXONE to three-times-weekly COPAXONE. Inaddition, the alternative product may be protected by additional patent rights as well as have the benefit, in the case of drugs, of an additional three years of FDAmarketing approval exclusivity, which would prohibit a generic version of the alternative product for some period of time. As a result, our business, including ourfinancial results and our ability to fund future discovery and development programs, would suffer.If the market for a name brand drug or reference product, such as COPAXONE, HUMIRA or ORENCIA, significantly declines, sales or potential sales of ourcorresponding generic and biosimilars product and product candidates may suffer and our business would be materially impacted. Competition in the biotechnology industry is intense. Brand name products face competition on numerous fronts as technological advances are made or newproducts are introduced that may offer patients a more convenient form of administration, increased efficacy or improved safety profile. As new products areapproved that compete with the reference brand product to our generic product and generic or biosimilar product candidates, such as COPAXONE, sales of thereference brand products may be significantly and adversely impacted and may render the reference brand product obsolete. Current injectable treatments commonly used to treat multiple sclerosis, including COPAXONE, are competing with novel therapeutic products, including oraltherapies. These oral therapies may offer patients a more convenient form of administration than COPAXONE and may provide increased efficacy. If the market for the reference brand product is impacted, we in turn may lose significant market share or market potential for our generic or biosimilarproducts and product candidates, and the value for our generic or biosimilar pipeline could be negatively impacted. As a result, our business, including our financialresults and our ability to fund future discovery and development programs, would suffer.We will require substantial funds and may require additional capital to execute our business plan and, if additional capital is not available, we may need todelay, limit or cease our product development efforts or other operations. If we are unable to fund our obligations under our collaboration agreements, we maybreach those agreements and our collaboration partners could terminate those agreements. As of December 31, 2015, we had cash, cash equivalents and marketable securities totaling approximately $350 million. For the year ended December 31,2015, we had a net loss of $83.3 million and cash used in operating activities of $71.5 million. We will continue to require substantial funds to conduct researchand development, process development, manufacturing, nonclinical testing and clinical trials of our product candidates, as well as funds necessary to manufactureand market products that32Table of Contentsare approved for commercial sale. Because successful development and commercialization of our drug candidates is uncertain, we are unable to estimate the actualfunds we will require to complete research and development and commercialize our products under development. Our future capital requirements will depend on many factors, including but not limited to:•the level of sales of GLATOPA; •the successful commercialization of our product candidates; •the cost of advancing our product candidates and funding our development programs, including the costs of nonclinical and clinical studies andobtaining regulatory approvals; •the receipt of milestone payments under our Baxalta Collaboration Agreement and continuation payments under our Mylan CollaborationAgreement; •the continuation of activities under our Baxalta Collaboration Agreement without disruption following the combination of Baxalta and Shire plc; •the timing of FDA approval of the products of our competitors; •the cost of litigation, including with Amphastar relating to enoxaparin, that is not otherwise covered by our collaboration agreement, or potentialpatent litigation with others, as well as any damages, including possibly treble damages, that may be owed to third parties should we be unsuccessfulin such litigation; •the ability to enter into additional collaborations for our non-partnered programs, as well as the terms and timing of any milestone, royalty or profitshare payments thereunder; •the continued progress in our research and development programs, including completion of our nonclinical studies and clinical trials; •the cost of acquiring and/or in-licensing other technologies, products or assets; and •the cost of manufacturing, marketing and sales activities, if any. We expect to finance and manage our planned operating and capital expenditure requirements principally through our current cash, cash equivalents andmarketable securities, capital raised through our collaboration agreements and equity financings, including utilization of our At-the-Market financing facility. Webelieve that these funds will be sufficient to meet our operating requirements through at least the end of 2018. We may seek additional funding in the future throughthird-party collaborations and licensing arrangements, public or private debt financings or from other sources. Any additional capital raised through the sale ofequity may dilute existing investors' percentage ownership of our common stock. Capital raised through debt financing would require us to make periodic interestpayments and may impose potentially restrictive covenants on the conduct of our business. Additional funds may not be available to us on acceptable terms or atall. In addition, the terms of any financing may adversely affect the holdings or the rights of our stockholders. If we are unable to obtain funding on a timely basis,we may be required to significantly curtail one or more of our research or development programs. We also may not be able to fund our obligations under one ormore of our collaboration agreements, which could enable one or more of our collaborators to terminate their agreements with us, and therefore harm our business,financial condition and results of operations.33Table of ContentsWe may need to enter into collaborations, joint ventures or other alliances with other companies that can provide capabilities and funds for the developmentand commercialization of our product candidates. If we are unsuccessful in forming or maintaining these arrangements on favorable terms, our business couldbe adversely affected. Because we have limited or no internal capabilities for late-stage product development, manufacturing, sales, marketing and distribution, we may need to enterinto strategic alliances with other companies. For example, we have entered into collaboration agreements to develop and commercialize our complex genericsprograms and our biosimilar programs. In the future, we may also find it necessary to form similar strategic alliances with major pharmaceutical companies tojointly develop and/or commercialize other product candidates across our product areas. In such alliances, we would expect our collaboration partners to providesubstantial capabilities in clinical development, manufacturing, regulatory affairs, sales and marketing. We may not be successful in entering into any suchalliances. Even if we do succeed in securing such alliances, we may not be able to maintain them if, for example, development or approval of a product candidate isdelayed or sales of an approved product are disappointing. If we are unable to secure or maintain such alliances we may not have the capabilities necessary tocontinue or complete development of our product candidates and bring them to market, which may have an adverse effect on our business. In addition to product development and commercialization capabilities, we may depend on our alliances with other companies to provide substantial additionalfunding for development and potential commercialization of our product candidates. These arrangements may require us to relinquish rights to some of ourtechnologies, product candidates or products which we would otherwise pursue on our own. These alliances may also involve the other company purchasing asignificant number of shares of our common stock. Future alliances may involve similar or greater sales of equity, debt financing or other funding arrangements.We may not be able to obtain funding on favorable terms from these alliances, and if we are not successful in doing so, we may not have sufficient funds to developa particular product candidate internally or to bring product candidates to market. Failure to bring our product candidates to market will prevent us from generatingsales revenue, and this may substantially harm our business. Furthermore, any delay in entering into these alliances could delay the development andcommercialization of our product candidates and reduce their competitiveness even if they reach the market. As a result, our business and operating results may beadversely affected.Our future GLATOPA product revenue is dependent on the continued successful commercialization of GLATOPA. Our near-term ability to generate GLATOPA product revenue depends, in large part, on Sandoz' continued ability to manufacture and commercializeGLATOPA, maintain pricing levels and market share and compete with Teva's three-times-weekly COPAXONE 40 mg/mL, which currently accounts for morethan 70% of the overall U.S. glatiramer acetate market (20 mg/mL and 40mg/mL). Because GLATOPA is only a substitutable generic version of the once-daily 20mg/mL formulation of COPAXONE, the market potential of GLATOPA is negatively impacted by the conversion of patients from once-daily COPAXONE tothree-times-weekly COPAXONE. In addition, other competitors may in the future receive approval to market generic versions of the 20 mg/mL formulation ofCOPAXONE which would further impact our product revenue, which is based on a fifty-percent contractual profit share and, as a result, our business, includingour near-term financial results and our ability to utilize GLATOPA revenue to fund future discovery and development programs, may suffer.Any future Enoxaparin product revenue is dependent on the continued successful manufacture and commercialization of Enoxaparin Sodium Injection . Our near-term ability to generate Enoxaparin product revenue depends, in large part, on Sandoz' continued ability to manufacture and commercializeEnoxaparin Sodium Injection, maintain pricing34Table of Contentslevels and market share and compete with LOVENOX brand competition as well as authorized and other generic competition. Sandoz is facing increasing competition and pricing pressure from brand, authorized generic and other currently-approved generic competitors, which has andwill continue to impact Sandoz' net sales and profits from Enoxaparin Sodium Injection, and therefore our product revenue. Furthermore, other competitors may inthe future receive approval to market generic enoxaparin products which would further impact our product revenue, which is based on a fifty-percent contractualprofit share. Due to these circumstances, the resulting market price for our Enoxaparin Sodium Injection product has substantially decreased and may decrease further. Inthe year ended December 31, 2015, we received $5.1 million in product revenue from Sandoz' sales of Enoxaparin Sodium Injection, and we do not anticipatesignificant enoxaparin revenue in the near term. As a result, our business, including our near-term financial results, may suffer.If our patent litigation against Amphastar related to Enoxaparin Sodium Injection is not successful or Amphastar or others are successful in anti-trust lawsuitsagainst us relating to Enoxparin Sodium Injection, we may be liable for damages and our business may be materially harmed. In the event that we are not successful in our continued prosecution of our suit against Amphastar and Amphastar is able to prove it suffered damages as aresult of the preliminary injunction preventing it from selling its enoxaparin product in the United States having been in effect, we could be liable for up to$35 million of the security bond for such damages. This amount may be increased if Amphastar is successful in their motion to increase the amount of the securitybond. Moreover, if Amphastar or others are successful in the anti-trust lawsuits against us for asserting our enoxaparin patent rights, they may be able to recoverdamages incurred as a result of enforcement of our patent rights, thereby negatively affecting our financial condition and results of operations.If efforts by manufacturers of brand name drugs and reference products to delay or limit the use of generics or biosimilars are successful, our sales of genericand biosimilar products may suffer. Many manufacturers of branded products have increasingly used legislative, regulatory and other means to delay regulatory approval and to seek to restrictcompetition from manufacturers of generic drugs and could be expected to use similar tactics to delay competition from biosimilars. These efforts have included:•settling patent lawsuits with generic or biosimilar companies, resulting in such patents remaining an obstacle for generic or biosimilar approval byothers; •seeking to restrict biosimilar commercialization options by making mandatory the optional right to adjudicate patent rights under Section 351(l) ofthe Biologics Price, Competition and Innovation Act or restricting access by biosimilar and generic applicants to the use of inter partes patentreview proceedings at the U.S. Patent Office to challenge invalid biologic patent rights; •settling paragraph IV patent litigation with generic companies to prevent the expiration of the 180-day generic marketing exclusivity period or todelay the triggering of such exclusivity period; •submitting Citizen Petitions to request the FDA Commissioner to take administrative action with respect to prospective and submitted generic drugor biosimilar applications or to influence the adoption of policy with regard to the submission of biosimilar applications; •appealing denials of Citizen Petitions in United States federal district courts and seeking injunctive relief to reverse approval of generic drug orbiosimilar applications;35Table of Contents•restricting access to reference brand products for equivalence and biosimilarity testing that interfere with timely generic and biosimilar developmentplans, respectively; •conducting medical education with physicians, payers and regulators that claim that generic or biosimilar products are too complex for generic orbiosimilar approval and influence potential market share; •seeking state law restrictions on the substitution of generic and biosimilar products at the pharmacy without the intervention of a physician orthrough other restrictive means such as excessive recordkeeping requirements or patient and physician notification; •seeking federal or state regulatory restrictions on the use of the same non-proprietary name as the reference brand product for a biosimilar orinterchangeable biologic; •seeking federal reimbursement policies that do not promote adoption of biosimilars and interchangeable biologics; •seeking changes to the United States Pharmacopeia, an industry recognized compilation of drug and biologic standards; •pursuing new patents for existing products or processes which could extend patent protection for a number of years or otherwise delay the launch ofgeneric drugs or biosimilars; and •influencing legislatures so that they attach special regulatory exclusivity or patent extension amendments to unrelated federal legislation. The FDA's practice is to rule within 150 days on Citizen Petitions that seek to prevent approval of an ANDA if the petition was filed after the MedicarePrescription Drug Improvement and Modernization Act of 2003, or MMA. If, at the end of the 150-day period, the ANDA is not ready for approval or rejection,then the FDA has typically denied and dismissed the petition without acting on the petition. For example, Teva Neuroscience, Inc. filed eight Citizen Petitionsregarding GLATOPA, all of which have been denied, dismissed or withdrawn. Teva also sought reversal of the denial of a Citizen Petition in federal court. Otherthird parties may also file Citizen Petitions requesting that the FDA adopt specific approval standards for generic or biosimilar products. Teva may seek to fileadditional Citizen Petitions pertaining to the 40mg M356 ANDA, and seek to delay or prevent the FDA approval of the 40mg M356 ANDA, which couldmaterially harm our business. If these efforts to delay or block competition are successful, we may be unable to sell our generic products, which could have a material adverse effect on oursales and profitability.If we or our collaborative partners and other third parties are unable to satisfy FDA quality standards and related regulatory requirements, experiencemanufacturing difficulties or are unable to manufacture sufficient quantities of our products or product candidates, our development and commercializationefforts may be materially harmed. We have limited personnel with experience in, and we do not own facilities for, manufacturing any products. We depend upon our collaborative partners andother third parties to provide raw materials meeting FDA quality standards and related regulatory requirements, manufacture the drug substance, produce the finaldrug product and provide certain analytical services with respect to our products and product candidates. We, our collaborative partners or our third-partycontractors may have difficulty meeting FDA manufacturing requirements, including, but not limited to, reproducibility, validation and scale-up, and continuedcompliance with current good manufacturing practices requirements. If we, our collaborative partners or our third-party manufacturers or suppliers are unable tosatisfy the FDA manufacturing requirements for our products and product candidates, or are unable to produce our products in sufficient quantities to meet therequirements for the launch of the product or to meet36Table of Contentsmarket demand, our revenue and gross margins could be adversely affected, which could have a material adverse impact on our business.Competition in the biotechnology and pharmaceutical industries is intense, and if we are unable to compete effectively, our financial results will suffer. The markets in which we intend to compete are undergoing, and are expected to continue to undergo, rapid and significant technological change. We expectcompetition to intensify as technological advances are made or new biotechnology products are introduced. New developments by competitors may render ourcurrent or future product candidates and/or technologies non-competitive, obsolete or not economical. Our competitors' products may be more efficacious ormarketed and sold more effectively than any of our products. Many of our competitors have:•significantly greater financial, technical and human resources than we have at every stage of the discovery, development, manufacturing andcommercialization process; •more extensive experience in commercializing generic drugs, conducting nonclinical studies, conducting clinical trials, obtaining regulatoryapprovals, challenging patents and manufacturing and marketing pharmaceutical products; •products that have been approved or are in late stages of development; and •collaborative arrangements in our target markets with leading companies and/or research institutions. If we successfully develop and obtain approval for our drug candidates, we will face competition based on many different factors, including:•the safety and effectiveness of our products; •with regard to our generic or biosimilar product candidates, the differential availability of clinical data and experience and willingness of physicians,payers and formularies to rely on biosimilarity data; •the timing and scope of regulatory approvals for these products and regulatory opposition to any product approvals; •the availability and cost of manufacturing, marketing, distribution and sales capabilities; •the effectiveness of our marketing, distribution and sales capabilities; •the price of our products; •the availability and amount of third-party reimbursement for our products; and •the strength of our patent positions. Our competitors may develop or commercialize products with significant advantages in regard to any of these factors. Our competitors may therefore be moresuccessful in commercializing their products than we are, which could adversely affect our competitive position and business.If we or our collaborators are unable to establish and maintain key customer distribution arrangements, sales of our products, and therefore revenue, woulddecline. Generic pharmaceutical biosimilars products are sold through various channels, including retail, mail order, and to hospitals through group purchasingorganizations, or GPOs. The distribution of such products is also managed by pharmacy benefit management firms such as Express Scripts or CVS.37Table of ContentsThese purchasers and pharmacy benefit management firms rely on competitive bidding, discounts and rebates across their purchasing arrangements. We alsobelieve that we, in collaboration with commercial collaboration partners, will need to maintain adequate drug supplies, remain price competitive, comply with FDAregulations and provide high-quality products to establish and maintain these relationships. The GPOs, pharmacy benefit management firms and other customerswith whom we or our collaborators have established contracts may also have relationships with our competitors and may decide to contract for or otherwise preferproducts other than ours, limiting access of products to certain market segments. Our sales could also be negatively affected by any rebates, discounts or fees thatare required by GPOs, pharmacy benefit management firms, and customers, including wholesalers, distributors, retail chains or mail order services, to gain andretain market acceptance for our products. If we or our collaborators are unable to establish and maintain distribution arrangements with all of these customers,sales of our products, our revenue and our profits would suffer.Even if we receive approval to market our product candidates, the market may not be receptive to our product candidates upon their commercial introduction,which could adversely affect our ability to generate sufficient revenue from product sales to maintain or grow our business. Even if our product candidates are successfully developed and approved for marketing, our success and growth will also depend upon the acceptance of ourproducts by patients, physicians and third-party payers. Acceptance of our products will be a function of our products being clinically useful, being cost effectiveand demonstrating superior or biosimilar therapeutic effect with an acceptable side effect profile as compared to existing or future treatments. In addition, even ifour products achieve market acceptance, we may not be able to maintain that market acceptance over time. Factors that we believe will materially affect market acceptance of our product candidates under development include:•the timing of our receipt of any marketing approvals, the terms of any approval and the countries in which approvals are obtained; •the safety, efficacy and ease of administration of our products; •the competitive pricing of our products; •physician confidence in the safety and efficacy of complex generic products or biosimilars; •the absence of, or limited clinical data available from sameness, biosimilarity or interchangeability testing of our complex generic or biosimilarproducts; •the success and extent of our physician education and marketing programs; •the clinical, medical affairs, sales, distribution and marketing efforts of competitors; and •the availability and amount of government and third-party payer reimbursement. If our products do not achieve market acceptance, we will not be able to generate sufficient revenue from product sales to maintain or grow our business.If we are not able to retain our current management team or attract and retain qualified scientific, technical and business personnel, our business will suffer. We are dependent on the members of our management team for our business success. Our employment arrangements with our executive officers areterminable by either party on short notice or no notice. We do not carry key person life insurance on the lives of any of our personnel. The loss of any of ourexecutive officers would result in a significant loss in the knowledge and experience that we, as an organization, possess and could cause significant delays, oroutright failure, in the development and approval of our product candidates. In addition, there is intense competition from numerous38Table of Contentspharmaceutical and biotechnology companies, universities, governmental entities and other research institutions, for human resources, including management, inthe technical fields in which we operate, and we may not be able to attract and retain qualified personnel necessary for the successful development andcommercialization of our product candidates. Another component of retention is the intrinsic value of equity awards, including stock options. Many stock optionsgranted to our executives and employees are now under pressure given our recent stock performance. If we lose key members of our management team, or areunable to attract and retain qualified personnel, our business could be negatively affected.There is a substantial risk of product liability claims in our business. If our existing product liability insurance is insufficient, a product liability claim againstus that exceeds the amount of our insurance coverage could adversely affect our business. Our business exposes us to significant potential product liability risks that are inherent in the development, manufacturing and marketing of human therapeuticproducts. Product liability claims could delay or prevent completion of our development programs. If we succeed in marketing products, such claims could result ina recall of our products or a change in the approved indications for which they may be used. We cannot be sure that the product liability insurance coverage wemaintain will be adequate to cover any incident or all incidents. Furthermore, clinical trial and product liability insurance is becoming increasingly expensive. As aresult, we may be unable to maintain sufficient insurance at a reasonable cost to protect us against losses that could have a material adverse effect on our business.These liabilities could prevent or interfere with our product development and commercialization efforts.Our business and operations would suffer in the event of system failures or security breaches. Our internal computer systems are vulnerable to damage from computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunicationand electrical failures. Any system failure or security breach by employees or others may pose a risk that sensitive data, including clinical trial data, intellectualproperty, trade secrets or personal information belonging to us, our patients or our collaborators may be exposed to unauthorized persons or to the public. If such anevent were to occur and cause interruptions in our operations, it could result in a material disruption of our development programs and our business operations. Forexample, the loss of clinical trial data from completed or future clinical trials could result in delays in our regulatory approval efforts and significantly increase ourcosts to recover or reproduce the data. Likewise, we rely on third parties to manufacture and commercialize our products and conduct clinical trials, and similarevents relating to their computer systems could also have a material adverse effect on our business. To the extent that any disruption or security breach were toresult in a loss of, or damage to, our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability, the furtherdevelopment and commercialization of our products and product candidates could be delayed, and the trading price of our common stock could be adverselyaffected.As we evolve from a company primarily involved in drug discovery and development into one that is also involved in the development and commercialization ofmultiple pharmaceutical products, we may have difficulty managing our growth and expanding our operations successfully. As we advance an increasing number of product candidates through the development process, we will need to expand our development, regulatory,manufacturing, quality, distribution, sales and marketing capabilities or contract with other organizations to provide these capabilities for us. As our operationsexpand, we expect that we will need to lease additional or alternative facilities and manage additional relationships with various collaborative partners, suppliersand other organizations. The market for laboratory and office facilities is highly competitive near our current location. If we are not successful in leasing additionalor alternative space in our current area and have to move our facilities, the timing of our development programs could be disrupted.39Table of Contents In addition, our ability to manage our operations and growth requires us to continue to improve our operational, financial and management controls, reportingsystems and procedures. For example, some jurisdictions, such as the District of Columbia, have imposed licensing requirements for sales representatives. Inaddition, the District of Columbia and the Commonwealth of Massachusetts, as well as the federal government by way of the Sunshine Act provisions of the PatientProtection and Affordable Care Act of 2010, have established reporting requirements that would require public reporting of consulting and research fees to healthcare professionals. Because the reporting requirements vary in each jurisdiction, compliance will be complex and expensive and may create barriers to entering thecommercialization phase. The need to build new systems as part of our growth could place a strain on our administrative and operational infrastructure. We maynot be able to make improvements to our management information and control systems in an efficient or timely manner and may discover deficiencies in existingsystems and controls. Such requirements may also impact our opportunities to collaborate with physicians at academic research centers as new restrictions onacademic-industry relationships are put in place. In the past, collaborations between academia and industry have led to important new innovations, but the new lawsmay have an effect on these activities. While we cannot predict whether any legislative or regulatory changes will have negative or positive effects, they could havea material adverse effect on our business, financial condition and potential profitability.We may incur costs and allocate resources to identify and develop additional product candidates or acquire or make investments in companies or technologieswithout realizing any benefit, which could have an adverse effect on our business, results of operations and financial condition or cash flows. Along with continuing to progress our current product candidates, the long-term success of our business also depends on our ability to successfully identify,develop and commercialize additional product candidates. Research programs to identify new product candidates require substantial technical, financial and humanresources. We may focus our efforts and resources on potential programs and product candidates that ultimately prove to be unsuccessful. In addition, we may acquire or invest in companies, products and technologies. Such transactions involve a number of risks, including:•we may find that the acquired company or assets does not further our business strategy, or that we overpaid for the company or assets, or thateconomic conditions change, all of which may generate a future impairment charge; •difficulty integrating the operations and personnel of the acquired business, and difficulty retaining the key personnel of the acquired business; •difficulty incorporating the acquired technologies; •difficulties or failures with the performance of the acquired technologies or drug products; •we may face product liability risks associated with the sale of the acquired company's products; •disruption or diversion of management's attention by transition or integration issues and the complexity of managing diverse locations; •difficulty maintaining uniform standards, internal controls, procedures and policies; •the acquisition may result in litigation from terminated employees or third parties; and •we may experience significant problems or liabilities associated with product quality, technology and legal contingencies. These factors could have a material adverse effect on our business, results of operations and financial condition or cash flows, particularly in the case of alarger acquisition or multiple acquisitions40Table of Contentsin a short period of time. From time to time, we may enter into negotiations for acquisitions that are not ultimately consummated. Such negotiations could result insignificant diversion of management time, as well as out-of-pocket costs. The consideration paid in connection with an acquisition also affects our financial results. If we were to proceed with one or more significant acquisitions inwhich the consideration included cash, we could be required to use a substantial portion of our available cash to consummate any acquisition. To the extent weissue shares of stock or other rights to purchase stock, including options or other rights, existing stockholders may be diluted and earnings per share may decrease.In addition, acquisitions may result in the incurrence of debt, large one-time write-offs and restructuring charges. They may also result in goodwill and otherintangible assets that are subject to impairment tests, which could result in future impairment charges.If we fail to maintain appropriate internal controls in the future, we may not be able to report our financial results accurately, which may adversely affect ourstock price and our business. Our efforts to comply with Section 404 of the Sarbanes-Oxley Act of 2002 and the related regulations regarding our required assessment of our internalcontrols over financial reporting and our external auditors' audit of that assessment requires the commitment of significant financial and managerial resources. Internal control over financial reporting has inherent limitations, including human error, the possibility that controls could be circumvented or becomeinadequate because of changed conditions, and fraud. If we are unable to maintain effective internal controls, we may not have adequate, accurate or timelyfinancial information, and we may be unable to meet our reporting obligations as a publicly traded company or comply with the requirements of the SEC or theSarbanes-Oxley Act of 2002. This could result in a restatement of our financial statements, the imposition of sanctions, including the inability of registered brokerdealers to make a market in our stock, or investigation by regulatory authorities. Any such action or other negative results caused by our inability to meet ourreporting requirements or comply with legal and regulatory requirements or by disclosure of an accounting, reporting or control issue could adversely affect thetrading price of our stock and our business.Risks Relating to Development and Regulatory Approval The future success of our business is significantly dependent on the success of our M356 product candidate. If we are not able to obtain regulatory approval forthe commercial sale of our M356 product candidate, our future results of operations will be adversely affected. Our future results of operations depend to a significant degree on our ability to obtain regulatory approval for and commercialize M356. Our application forM356 has been under review with the FDA since February 2014. To receive approval, we will be required to demonstrate to the satisfaction of the FDA, amongother things, that M356:•contains the same active ingredients as COPAXONE 40 mg/mL; •is of the same dosage form, strength and route of administration as COPAXONE 40 mg/mL, and has the same labeling as the approved labeling forCOPAXONE 40 mg/mL, with certain exceptions; and •meets compendia or other applicable standards for strength, quality, purity and identity, including potency. In addition, approval of a generic product generally requires demonstrating that the generic drug is bioequivalent to the reference listed drug upon which it isbased, meaning that there are no significant differences with respect to the rate and extent to which the active ingredients are absorbed and become41Table of Contentsavailable at the site of drug action. However, the FDA may or may not waive the requirements for certain bioequivalence data (including clinical data) for certaindrug products, including injectable solutions that have been shown to contain the same active and inactive ingredients in the same concentration as the referencelisted drug. Determination of therapeutic equivalence of M356 to COPAXONE 40 mg/mL will be based, in part, on our demonstration of the chemical equivalence of ourversions to their respective reference listed drugs. The FDA may not agree that we have adequately characterized M356 or that M356 and COPAXONE 40 mg/mLare chemical equivalents. In that case, the FDA may require additional information, including nonclinical or clinical trial results, to determine therapeuticequivalence or to confirm that any inactive ingredients or impurities do not compromise the product's safety and efficacy. Provision of sufficient information forapproval may be difficult, expensive and lengthy. We cannot predict whether M356 will receive FDA approval as therapeutically equivalent to COPAXONE40 mg/mL. In the event that the FDA modifies its current standards for therapeutic equivalence with respect to generic versions of COPAXONE 40 mg/mL, or requires usto conduct clinical trials or complete other lengthy procedures, the commercialization of M356 could be delayed or prevented or become more expensive. Delays inany part of the process or our inability to obtain regulatory approval for M356 could adversely affect our operating results by restricting or significantly delayingour introduction of M356.Although health care reform legislation that establishes a regulatory pathway for the approval by the FDA of biosimilars has been enacted, the standards fordetermining biosimilarity and interchangeability for biosimilars are only just being implemented by the FDA. Therefore, substantial uncertainty remains aboutthe potential value of our scientific approach and regulatory strategy for biosimilar development. The regulatory climate in the United States for follow-on versions of biologic and complex protein products remains uncertain, even following the recentenactment of legislation establishing a regulatory pathway for the approval of biosimilars under the Biologics Price Competition and Innovation Act, or BPCI Act.For example, the FDA only recently issued guidance on certain matters concerning approval of biosimilars, including quality considerations and scientificconsiderations and to date, only one biosimilar product has been approved, and, to our knowledge, only a limited number of biosimilar applications have beenaccepted for review by the FDA, and one application has been approved for a biosimilar under the 351(k) pathway. The pathway contemplates approval of twocategories of follow-on biologic products: (1) biosimilar products, which are highly similar to the existing brand product, notwithstanding minor differences inclinically inactive components, and for which there are no clinically meaningful differences from the brand product and (2) interchangeable biologic products,which in addition to being biosimilar can be expected to produce the same clinical result in any given patient without an increase in risk due to switching from thebrand product. Only interchangeable biosimilar products would be considered substitutable at the retail pharmacy level without the intervention of a physician. Thelegislation authorizes but does not require the FDA to establish standards or criteria for determining biosimilarity and interchangeability, and also authorizes theFDA to use its discretion to determine the nature and extent of product characterization, nonclinical testing and clinical testing on a product-by-product basis. Our competitive advantage in this area will depend on our success in demonstrating to the FDA that our analytics, biocharacterization and protein engineeringplatform technology provides a level of scientific assurance that facilitates determinations of biosimilarity and/or interchangeability, reduces the need for largescale clinical trials or other testing, and raises the scientific quality requirements for our competitors to demonstrate that their products are highly similar to areference brand product. Our ability to succeed will depend in part on our ability to invest in new programs and develop data in a timeframe that enables the FDAto consider our approach within the context of the biosimilar meeting42Table of Contentsand application review process. In addition, the FDA will likely require significant new resources and expertise to review biosimilar applications, and the timelinessof the review and approval of our future applications could be adversely affected if there were a decline or even limited growth in FDA funding. Our strategy toreduce and target clinical requirements by relying on analytical and functional nonclinical data may not be successful or may take longer than strategies that relymore heavily on clinical trial data. The regulatory pathway also creates a number of additional obstacles to the approval and launch of biosimilar and interchangeable products, including:•a requirement for the applicant, as a condition to using the pre-approval patent exchange and clearance process, to share, in confidence, theinformation in its abbreviated pathway application with the brand company's and patent owner's counsel; •the inclusion of multiple potential patent rights in the patent clearance process; and •a grant to each brand company of 12 years of marketing exclusivity following the brand approval. Furthermore, the regulatory pathway creates the risk that the brand company, during its 12-year marketing exclusivity period, will develop and replace itsproduct with a non-substitutable or modified product that may also qualify for an additional 12-year marketing exclusivity period, reducing the opportunity forsubstitution at the retail pharmacy level for interchangeable biosimilars. Finally, the legislation also creates the risk that, as brand and biosimilar companies gainexperience with the regulatory pathway, subsequent FDA determinations or court rulings could create additional areas for potential disputes and resulting delays inbiosimilars approval. In addition, there is reconsideration and legislative debate that could lead to the repeal or amendment of the healthcare legislation. If the legislation issignificantly amended or is repealed with respect to the biosimilar approval pathway, our opportunity to develop biosimilars (including interchangeable biologics)could be materially impaired and our business could be materially and adversely affected. Similarly, the legislative debate at the federal level regarding the federalgovernment budget in 2013 restricted federal agency funding for the biosimilar pathway, including biosimilar user fee funding for fiscal year 2014, and has resultedin delays in the conduct of meetings with biosimilar applicants and the review of biosimilar meeting and application information. The scheduling and conduct ofbiosimilar meeting and applications review was also suspended during the U.S. Government shutdown in October 2013, and could be subject to future suspensionsas a result of future deadlocks in passage of federal appropriations bills in 2016 or future years. Depending on the timing and the extent of these funding, meetingand review disruptions, our development of biosimilar products could be delayed.Our opportunity to realize value from the potential of the biosimilars market is difficult and challenging due to the significant scientific and developmentexpertise required to develop and consistently manufacture complex protein biologics. The market potential of biosimilars may be difficult to realize, in large part due to the challenges of successfully developing and manufacturing biosimilars.Biologics are therapeutic proteins and are much more complex and much more difficult to characterize and replicate than small-molecule, chemically synthesizeddrugs. Proteins tend to be 100 to 1000 times larger than conventional drugs, and are more susceptible to physical factors such as light, heat and agitation. They alsohave greater structural complexity. Protein molecules differ from one another primarily in their sequence of amino acids, which results in folding of the protein intoa specific three-dimensional structure that determines its activity. Although the sequence of amino acids in a protein is consistently replicated, there are a number ofchanges that can occur following synthesis that create inherent variability. Chief among43Table of Contentsthese is the glycosylation, or the attachment of sugars at certain amino acids. Glycosylation is critical to protein structure and function, and thoroughlycharacterizing and matching the glycosylation profile of a targeted biologic is essential and poses significant scientific and technical challenges. Furthermore, it isoften challenging to consistently manufacture proteins with complex glycosylation profiles, especially on a commercial scale. Protein-based therapeutics areinherently heterogeneous and their structure is highly dependent on the production process and conditions. Products from one production facility can differ withinan acceptable range from those produced in another facility. Similarly, physicochemical differences can also exist among different lots of the same productproduced at the same facility. The physicochemical complexity and size of biologics creates significant technical and scientific challenges in their replication asbiosimilar products. Accordingly, the technical complexity involved and expertise and technical skill required to successfully develop and manufacture biosimilarsposes significant barriers to entry. Any difficulties encountered in developing and producing, or any inability to develop and produce, biosimilars could adverselyaffect our business, financial condition and results of operations.Even if we are able to obtain regulatory approval for our generic and biosimilar product candidates as therapeutically equivalent or interchangeable, statepharmacy boards or agencies may conclude that our products are not substitutable at the pharmacy level for the corresponding name brand drug or referenceproduct. If our generic or biosimilar products are not substitutable at the pharmacy level for their corresponding name brand drug or reference product, thiscould materially reduce sales of our products and our business would suffer. Although the FDA may determine that a generic product is therapeutically equivalent to a brand product and provide it with an "A" rating in the FDA's OrangeBook, this designation is not binding on state pharmacy boards or agencies for generic drugs. As a result, in states that do not deem our generic drug candidatestherapeutically equivalent, physicians will be required to specifically prescribe a generic product alternative rather than have a routine substitution at the pharmacylevel for the prescribed brand product. Should this occur with respect to one of our generic product candidates, it could materially reduce sales in those states whichwould substantially harm our business. While a designation of interchangeability is a finding by the FDA that a biosimilar can be substituted at the pharmacy without physician intervention orprescription, brand pharmaceutical companies are lobbying state legislatures to enact physician prescription requirements, or in the absence of a prescription,physician and patient notification requirements, special labeling requirements and alternative naming requirements which if enacted could create barriers tosubstitution and adoption rates of interchangeable biologics as well as biosimilars. Should this occur with respect to one of our biosimilars or interchangeablebiologic product candidates, it could materially reduce sales in those states which would substantially harm our business.If our nonclinical studies and clinical trials for our novel product candidates, including necuparanib, are not successful, we will not be able to obtainregulatory approval for commercial sale of those product candidates. To obtain regulatory approval for the commercial sale of our novel product candidates, we are required to demonstrate through nonclinical studies and clinicaltrials that our drug development candidates are safe and effective. Nonclinical studies and clinical trials of new development candidates are lengthy and expensiveand the historical failure rate for development candidates is high. A failure of one or more of our nonclinical studies or clinical trials can occur at any stage of testing. We may experience numerous unforeseen events during,or as a result of, nonclinical studies44Table of Contentsand clinical trials that could delay or prevent our ability to receive regulatory approval or commercialize necuparanib or our other drug candidates, including:•regulators or institutional review boards may not authorize us to commence a clinical trial or conduct a clinical trial at a prospective trial site; •our nonclinical studies or clinical trials may produce negative or inconclusive results, and we may be required to conduct additional nonclinicalstudies or clinical trials or we may abandon projects that we previously expected to be promising; •enrollment in our clinical trials may be slower than we anticipate, resulting in significant delays, and participants may drop out of our clinical trialsat a higher rate than we anticipate; •we might have to suspend or terminate our clinical trials if the participants are being exposed to unacceptable health risks; •regulators or institutional review boards may require that we hold, suspend or terminate clinical research for various reasons, includingnoncompliance with regulatory requirements or if, in their opinion, participants are being exposed to unacceptable health risks; •the cost of our clinical trials may be greater than we anticipate; •the effects of our drug candidates may not be the desired effects or may include undesirable side effects or our product candidates may have otherunexpected characteristics; and •we may decide to modify or expand the clinical trials we are undertaking if new agents are introduced that influence current standard of care andmedical practice, warranting a revision to our clinical development plan. The results from nonclinical studies of a development candidate and in initial human clinical studies of a development candidate may not predict the resultsthat will be obtained in subsequent human clinical trials. If we are required by regulatory authorities to conduct additional clinical trials or other testing ofnecuparanib or our other product candidates that we did not anticipate, if we are unable to successfully complete our clinical trials or other tests, or if the results ofthese trials are not positive or are only modestly positive, we may be delayed in obtaining marketing approval for our drug candidates or we may not be able toobtain marketing approval at all. Our product development costs will also increase if we experience delays in testing or approvals. Significant clinical trial delayscould allow our competitors to bring products to market before we do and impair our ability to commercialize our products or potential products. If any of theseevents occur, our business will be materially harmed.Failure to obtain regulatory approval in foreign jurisdictions would prevent us from marketing our products abroad. We intend in the future to market our products, if approved, outside of the United States, either directly or through collaborative partners. In order to marketour products in the European Union and many other foreign jurisdictions, we must obtain separate regulatory approvals and comply with the numerous and varyingregulatory requirements of each jurisdiction. The approval procedure and requirements vary among countries, and can require, among other things, conductingadditional testing in each jurisdiction. The time required to obtain approval abroad may differ from that required to obtain FDA approval. The foreign regulatoryapproval process may include all of the risks associated with obtaining FDA approval, and we may not obtain foreign regulatory approvals on a timely basis, if atall. Approval by the FDA does not ensure approval by regulatory authorities in other countries, and approval by one foreign regulatory authority does not ensureapproval by regulatory authorities in any other foreign country or by the FDA. We and our collaborators may not be able to file for regulatory approvals and maynot receive necessary approvals to commercialize our products in any market45Table of Contentsoutside of the United States. The failure to obtain these approvals could materially adversely affect our business, financial condition, and results of operations.Even if we obtain regulatory approvals, our marketed products will be subject to ongoing regulatory review. If we fail to comply with continuing United Statesand foreign regulations, we could lose our approvals to market products and our business would be seriously harmed. Even after approval, any drugs or biological products we develop will be subject to ongoing regulatory review, including the review of clinical results whichare reported after our products are made commercially available. Any regulatory approvals that we obtain for our product candidates may also be subject tolimitations on the approved indicated uses for which the product may be marketed or to the conditions of approval, or contain requirements for potentially costlypost-marketing testing, including Phase 4 clinical trials, and surveillance to monitor the safety and efficacy of the product candidate. In addition, the manufacturerand manufacturing facilities we use to produce any of our product candidates will be subject to periodic review and inspection by the FDA, or foreign equivalent,and other regulatory agencies. We will be required to report any serious and unexpected adverse experiences and certain quality problems with our products andmake other periodic reports to the FDA. The discovery of any new or previously unknown problems with the product, manufacturer or facility may result inrestrictions on the product or manufacturer or facility, including withdrawal of the product from the market. Certain changes to an approved product, including inthe way it is manufactured or promoted, often require prior FDA approval before the product as modified may be marketed. If we fail to comply with applicableFDA regulatory requirements, we may be subject to fines, warning letters, civil penalties, refusal by the FDA to approve pending applications or supplements,suspension or withdrawal of regulatory approvals, product recalls and seizures, injunctions, operating restrictions, refusal to permit the import or export ofproducts, and/or criminal prosecutions and penalties. Similarly, our commercial activities will be subject to comprehensive compliance obligations under state and federal reimbursement, Sunshine Act, anti-kickback and government pricing regulations. If we make false price reports, fail to implement adequate compliance controls or our employees violate the laws andregulations governing relationships with health care providers, we could also be subject to substantial fines and penalties, criminal prosecution and debarment fromparticipation in the Medicare, Medicaid, or other government reimbursement programs. In addition, the FDA's policies may change and additional government regulations may be enacted that could prevent, limit, or delay regulatory approval ofour product candidates. We cannot predict the likelihood, nature, or extent of government regulation that may arise from future legislation or administrative action,either in the United States or abroad. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if weare not able to maintain regulatory compliance, we may lose any marketing approval that we may have obtained and we may not achieve or sustain profitability,which would adversely affect our business.If third-party payers do not adequately reimburse customers for any of our approved products, they might not be purchased or used, and our revenue andprofits will not develop or increase. Our revenue and profits will depend heavily upon the availability of adequate reimbursement for the use of our approved product candidates fromgovernmental and other third-party payers, both in the United States and in foreign markets. Reimbursement by a third-party payer may depend upon a number offactors, including the third-party payer's determination that use of a product is:•a covered benefit under its health plan; •safe, effective and medically necessary;46Table of Contents•appropriate for the specific patient; •cost-effective; and •neither experimental nor investigational. Obtaining coverage and reimbursement approval for a product from each government or other third-party payer is a time-consuming and costly process thatcould require us to provide supporting scientific, clinical and cost-effectiveness data for the use of our products to each payer. We may not be able to provide datasufficient to gain acceptance with respect to coverage and reimbursement. There is substantial uncertainty whether any particular payer will reimburse the use ofany drug product incorporating new technology. Even when a payer determines that a product is eligible for reimbursement, the payer may impose coveragelimitations that preclude payment for some uses that are approved by the FDA or comparable authority. Moreover, eligibility for coverage does not imply that anyproduct will be reimbursed in all cases or at a rate that allows us to make a profit or even cover our costs. Interim payments for new products, if applicable, mayalso not be sufficient to cover our costs and may not be made permanent. Reimbursement rates may vary according to the use of the product and the clinical settingin which it is used, may be based on payments allowed for lower-cost products that are already reimbursed, may be incorporated into existing payments for otherproducts or services, and may reflect budgetary constraints and/or imperfections in Medicare, Medicaid or other data used to calculate these rates. Net prices forproducts may be reduced by mandatory discounts or rebates required by government health care programs or by any future relaxation of laws that restrict importsof certain medical products from countries where they may be sold at lower prices than in the United States. There have been, and we expect that there will continue to be, federal and state proposals to constrain expenditures for medical products and services, whichmay affect payments for our products. The Centers for Medicare and Medicaid Services, or CMS, frequently change product descriptors, coverage policies, productand service codes, payment methodologies and reimbursement values. Third-party payers often follow Medicare coverage policy and payment limitations in settingtheir own reimbursement rates, and both CMS and other third-party payers may have sufficient market power to demand significant price reductions. Due in part toactions by third-party payers, the health care industry is experiencing a trend toward containing or reducing costs through various means, including loweringreimbursement rates, limiting therapeutic class coverage and negotiating reduced payment schedules with service providers for drug products. We also anticipate that application of the existing and evolving reimbursement regimes to biosimilar products will be somewhat uncertain as CMS and privatepayers determine whether or not to apply generic drug reimbursement approaches to reimbursement or to develop alternative approaches under Medicare, Medicaidand private insurance coverage. For example, under Medicare Part B, the assignment of reimbursement codes to a reference drug product and its generic equivalentcreates a strong incentive for generic conversion. CMS has proposed to group all non-interchangeable biosimilars of a reference biologic under a single, separatereimbursement code from the code for the reference biologic. CMS has not determined that interchangeable biologic products should be under the samereimbursement code as their reference biologics. If separate codes are instituted, the value of interchangeability could be reduced or significantly impaired.Reimbursement uncertainty could adversely impact market acceptance of biosimilar products. Our inability to promptly obtain coverage and profitable reimbursement rates from government-funded and private payers for our products could have amaterial adverse effect on our operating results and our overall financial condition.47Table of ContentsFederal legislation will increase the pressure to reduce prices of pharmaceutical products paid for by Medicare or may otherwise seek to limit healthcare costs,either of which could adversely affect our revenue, if any. The Medicare Modernization Act of 2003, or MMA, changed the way Medicare covers and reimburses for pharmaceutical products. The legislationintroduced a new reimbursement methodology based on average sales prices for drugs that are used in hospital settings or under the direct supervision of aphysician and, starting in 2006, expanded Medicare coverage for drug purchases by the elderly. In addition, the MMA requires the creation of formularies for self-administered drugs, and provides authority for limiting the number of drugs that will be covered in any therapeutic class and provides for plan sponsors to negotiateprices with manufacturers and suppliers of covered drugs. As a result of the MMA and the expansion of federal coverage of drug products, we expect continuingpressure to contain and reduce costs of pharmaceutical products. Cost reduction initiatives and other provisions of this legislation could decrease the coverage andprice that we receive for our products and could materially adversely affect our operating results and overall financial condition. While the MMA generally appliesonly to drug benefits for Medicare beneficiaries, private payers often follow Medicare coverage policy and payment limitations in setting their own reimbursementpolicies and any reduction in coverage or payment that results from the MMA may result in a similar reduction in coverage or payments from private payers. Furthermore, health care reform legislation that was enacted in 2010 and is now being implemented could significantly change the United States health caresystem and the reimbursement of products. A primary goal of the law is to reduce or limit the growth of health care costs, which could change the market forpharmaceuticals and biological products. The law contains provisions that will affect companies in the pharmaceutical industry and other healthcare-related industries by imposing additional costs andchanges to business practices. Provisions affecting pharmaceutical companies include an increase to the mandatory rebates for drugs sold into the Medicaidprogram, an extension of the rebate requirement to drugs used in risk-based Medicaid managed care plans, an extension of mandatory discounts for drug productssold to certain critical access hospitals, cancer hospitals and other covered entities, and discounts and fees applicable to brand-name drugs. Although many of theseprovisions may not apply directly to us, they may change business practices in our industry and, assuming our products are approved for commercial sale, suchchanges could adversely impact our profitability. Additionally, the BPCI Act establishes an abbreviated regulatory pathway for the approval of biosimilars and provides that brand biologic products mayreceive 12 years of market exclusivity, with a possible six-month extension for pediatric products. By creating a new approval pathway for biosimilars andadjusting reimbursement for biosimilars, the new law could promote the development and commercialization of biosimilars. However, given the uncertainty of howthe law will be interpreted and implemented, the impact of the law on our strategy for biosimilars as well as novel biologics remains uncertain. Other provisions inthe law, such as the comparative effectiveness provisions, may ultimately impact positively or negatively both brand and biosimilars products alike depending onan applicant's clinical data, effectiveness and cost profile. If a brand product cannot be shown to provide a benefit over other therapies, then it might receivereduced coverage and reimbursement. While this might increase market share for biosimilars based on cost savings, it could also have the effect of reducingbiosimilars' market share. The financial impact of this United States health care reform legislation over the next few years will depend on a number of factors, including but not limitedto the issuance of implementation regulations and guidance and changes in sales volumes for products eligible for the new system of rebates, discounts and fees. The full effects of the United States health care reform legislation cannot be known until the new law is implemented through regulations or guidance issuedby the CMS and other federal and state48Table of Contentshealth care agencies. While we cannot predict whether any legislative or regulatory changes will have negative or positive effects, they could have a materialadverse effect on our business, financial condition and potential profitability. In addition, litigation may prevent some or all of the legislation from taking effect.Consequently, there is uncertainty regarding implementation of the new legislation.Foreign governments tend to impose strict price or reimbursement controls, which may adversely affect our revenue, if any. In some foreign countries, particularly the countries of the European Union, the pricing and/or reimbursement of prescription pharmaceuticals are subject togovernmental control. In these countries, pricing negotiations with governmental authorities can take considerable time after the receipt of marketing approval for aproduct. To obtain reimbursement or pricing approval in some countries, we may be required to conduct a clinical trial that compares the cost-effectiveness of ourproduct candidate to other available therapies. If reimbursement of our products is unavailable or limited in scope or amount, or if pricing is set at unsatisfactorylevels, our business could be adversely affected.If we do not comply with laws regulating the protection of the environment and health and human safety, our business could be adversely affected. Our research and development involves, and may in the future involve, the use of hazardous materials and chemicals and certain radioactive materials andrelated equipment. If an accident occurs, we could be held liable for resulting damages, which could be substantial. We are also subject to numerous environmental,health and workplace safety laws and regulations, including those governing laboratory procedures, exposure to blood-borne pathogens and the handling ofbiohazardous materials. Insurance may not provide adequate coverage against potential liabilities and we do not maintain insurance for environmental liability ortoxic tort claims that may be asserted against us. Additional federal, state and local laws and regulations affecting our operations may be adopted in the future. Wemay incur substantial costs to comply with, and substantial fines or penalties if we violate, any of these laws or regulations.The FDA has reported that it has a substantial backlog of ANDA filings that have resulted in significant delays in review and approval of applications. As aresult, the review and potential approval of our applications for M356 may be significantly delayed. The FDA has reported that it has a substantial backlog of ANDA filings that have resulted in significant delays in the review and approval of ANDAs andamendments or supplements due to insufficient staffing and resources. Resource constraints have also resulted in significant delays in conducting ANDA-relatedpre-approval inspections. Until the backlog of ANDA filings is reduced, our applications and supplements may be subject to significant delays during their reviewcycles.Risks Relating to Patents and Licenses If we are not able to obtain and enforce patent protection for our discoveries, our ability to successfully commercialize our product candidates will be harmedand we may not be able to operate our business profitably. Our success depends, in part, on our ability to protect proprietary methods and technologies that we develop under the patent and other intellectual propertylaws of the United States and other countries, so that we can prevent others from using our inventions and proprietary information. Because patent applications inthe United States and many foreign jurisdictions are typically not published until 18 months after filing, or in some cases not at all, and because publications ofdiscoveries in scientific literature lag behind actual discoveries, we cannot be certain that we were the first to make the inventions claimed in issued patents orpending patent applications, or that we were49Table of Contentsthe first to file for protection of the inventions set forth in our patent applications. As a result, we may be required to obtain licenses under third-party patents tomarket our proposed products. If licenses are not available to us on acceptable terms, or at all, we will not be able to market the affected products. Assuming the other requirements for patentability are met, the first inventor to file a patent application is entitled to the patent. We may be subject to a third-party preissuance submission of prior art to the U.S. Patent and Trademark Office, or become involved in opposition, derivation, reexamination, inter partes reviewor interference proceedings challenging our patent rights or the patent rights of others. For example, two of our European patents are being challenged in oppositionproceedings before the European Patent Office. An adverse determination in any such submission, proceeding or litigation could reduce the scope of, or invalidate,our patent rights, allow third parties to commercialize our technology or products and compete directly with us, without payment to us, or result in our inability tomanufacture or commercialize products without infringing third-party patent rights. Our strategy depends on our ability to rapidly identify and seek patent protection for our discoveries. This process is expensive and time consuming, and wemay not be able to file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner. Despite our efforts to protect our proprietary rights, unauthorized parties may be able to obtain and use information that we regard as proprietary. The issuanceof a patent does not guarantee that it is valid or enforceable, so even if we obtain patents, they may not be valid or enforceable against third parties. Our pending patent applications may not result in issued patents. The patent position of pharmaceutical or biotechnology companies, including ours, isgenerally uncertain and involves complex legal and factual considerations. The standards which the U.S. Patent and Trademark Office and its foreign counterpartsuse to grant patents are not always applied predictably or uniformly and can change. There is also no uniform, worldwide policy regarding the subject matter andscope of claims granted or allowable in pharmaceutical or biotechnology patents. The laws of some foreign countries do not protect proprietary information to thesame extent as the laws of the United States, and many companies have encountered significant problems and costs in protecting their proprietary information inthese foreign countries. While the United States Court of Appeals for the Federal Circuit ruled that the practice of our patented commercial manufacturing test by Amphaster did notfall within the scope of the safe harbor from patent infringement under federal patent law, 35 USC section 271(e)(1), Amphastar may challenge the ruling and theremay remain uncertainty in the future regarding enforcement of our patents protecting manufacturing test methods. Additional information about this litigation is setforth under Part II, Item 3 " Legal Proceedings "in this Annual Report on Form 10-K. The uncertainty regarding the scope of the safe harbor may impair our abilityto enforce certain of our patent rights and reduce the likelihood of enforcing certain of our patent rights to protect our innovations and our products. Accordingly,we do not know the degree of future enforceability for some of our proprietary rights. The breadth of patent claims allowed in any patents issued to us or to others may be unclear. The allowance of broader claims may increase the incidence andcost of patent interference proceedings and/or opposition proceedings, and the risk of infringement litigation. On the other hand, the allowance of narrower claimsmay limit the value of our proprietary rights. Our issued patents may not contain claims sufficiently broad to protect us against third parties with similartechnologies or products, or provide us with any competitive advantage. Moreover, once they have issued, our patents and any patent for which we have licensed ormay license rights may be challenged, narrowed, invalidated or circumvented. If our patents are invalidated or otherwise limited, other companies will be betterable to develop products that compete with ours, which could adversely affect our competitive business position, business prospects and financial condition.50Table of Contents We also rely on trade secrets, know-how and technology, which are not protected by patents, to maintain our competitive position. If any trade secret, know-how or other technology not protected by a patent were to be disclosed to or independently developed by a competitor, our business and financial condition couldbe materially adversely affected.Third parties may allege that we are infringing their intellectual property rights, forcing us to expend substantial resources in resulting litigation, the outcomeof which would be uncertain. Any unfavorable outcome of such litigation could have a material adverse effect on our business, financial position and results ofoperations. The issuance of our own patents does not guarantee that we have the right to practice the patented inventions. Third parties may have blocking patents thatcould be used to prevent us from marketing our own patented product and practicing our own patented technology. If any party asserts that we are infringing its intellectual property rights or that our creation or use of proprietary technology infringes upon its intellectualproperty rights, we might be forced to incur expenses to respond to and litigate the claims. Furthermore, we may be ordered to pay damages, potentially includingtreble damages, if we are found to have willfully infringed a party's patent rights. In addition, if we are unsuccessful in litigation, or pending the outcome oflitigation, a court could issue a temporary injunction or a permanent injunction preventing us from marketing and selling the patented drug or other technology forthe life of the patent that we have been alleged or deemed to have infringed. Litigation concerning intellectual property and proprietary technologies is widespreadand can be protracted and expensive, and can distract management and other key personnel from performing their duties for us. Any legal action against us or our collaborators claiming damages and seeking to enjoin any activities, including commercial activities relating to the affectedproducts, and processes could, in addition to subjecting us to potential liability for damages, require us or our collaborators to obtain a license in order to continueto manufacture or market the affected products and processes. Any license required under any patent may not be made available on commercially acceptable terms,if at all. In addition, some licenses may be non-exclusive, and therefore, our competitors may have access to the same technology licensed to us. If we fail to obtain a required license or are unable to design around a patent, we may be unable to effectively market some of our technology and products,which could limit our ability to generate revenue or achieve profitability and possibly prevent us from generating revenue sufficient to sustain our operations.If we remain involved in patent litigation or other proceedings to determine or enforce our intellectual property rights, we could incur substantial costs whichcould adversely affect our business. We may need to continue to resort to litigation to enforce a patent issued to us or to determine the scope and validity of a third-party patent or other proprietaryrights such as trade secrets in jurisdictions where we intend to market our products, including the United States, the European Union, and many other foreignjurisdictions. The cost to us of any litigation or other proceeding relating to determining the validity of intellectual property rights, even if resolved in our favor,could be substantial and could divert our management's efforts. Some of our competitors may be able to sustain the costs of complex patent litigation moreeffectively than we can because they may have substantially greater resources. Moreover, the failure to obtain a favorable outcome in any litigation in a jurisdictionwhere there is a claim of patent infringement could significantly delay the marketing of our products in that particular jurisdiction. Counterclaims for damages andother relief may be triggered by such enforcement actions. The costs, uncertainties and counterclaims resulting from the initiation and continuation of any litigationcould limit our ability to continue our operations.51Table of ContentsWe in-license a portion of our proprietary technologies and if we fail to comply with our obligations under any of the related agreements, we could lose licenserights that are necessary to develop our product candidates. We are a party to and rely on a number of in-license agreements with third parties, such as those with the Massachusetts Institute of Technology andRockefeller University, which give us rights to intellectual property that may be necessary for certain parts of our business. In addition, we expect to enter intoadditional licenses in the future. Our current in-license arrangements impose various diligence, development, royalty and other obligations on us. If we breach ourobligations with regard to our exclusive in-licenses, they could be converted to non-exclusive licenses or the agreements could be terminated, which would result inour being unable to develop, manufacture and sell products that are covered by the licensed technology.Risks Relating to Our Dependence on Third Parties The 2006 Sandoz Collaboration Agreement is important to our business. If Sandoz fails to adequately perform under this collaboration, or if we or Sandozterminate all or a portion of this collaboration, the development and commercialization of some of our products and product candidates, including GLATOPAand M356, would be impacted, delayed or terminated and our business would be adversely affected.2006 Sandoz Collaboration Agreement Either we or Sandoz may terminate the 2006 Sandoz Collaboration Agreement for material uncured breaches or certain events of bankruptcy or insolvency bythe other party. For some of the products, for any termination of the 2006 Sandoz Collaboration Agreement other than a termination by Sandoz due to our uncuredbreach or bankruptcy, or a termination by us alone due to the need for clinical trials, we will be granted an exclusive license under certain intellectual property ofSandoz to develop and commercialize the particular product. In that event, we would need to expand our internal capabilities or enter into another collaboration,which could cause significant delays that could prevent us from completing the development and commercialization of such product. For some products, if Sandozterminates the 2006 Sandoz Collaboration Agreement due to our uncured breach or bankruptcy, or if there is a termination by us alone due to the need for clinicaltrials, Sandoz would retain the exclusive right to develop and commercialize the applicable product. In that event, we would no longer have any influence over thedevelopment or commercialization strategy of such product. In addition, for other products, if Sandoz terminates due to our uncured breach or bankruptcy, Sandozretains a right to license certain of our intellectual property without the obligation to make any additional payments for such licenses. For certain products, if the2006 Sandoz Collaboration Agreement is terminated other than due to our uncured breach or bankruptcy, neither party will have a license to the other party'sintellectual property. In that event, we would need to expand our internal capabilities or enter into another collaboration, which, if we were able to do so, couldcause significant delays that could prevent us from completing the development and commercialization of such product. Any alternative collaboration could also beon less favorable terms to us. Accordingly, if the 2006 Sandoz Collaboration Agreement is terminated, our introduction of certain products may be significantlydelayed, or our revenue may be significantly reduced, either of which could have a material adverse effect on our business. Under our collaboration agreement, we are dependent upon Sandoz to successfully continue to commercialize GLATOPA and are significantly dependent onSandoz to successfully commercialize M356. We do not fully control Sandoz' commercialization activities or the resources it allocates to our products. While the2006 Sandoz Collaboration Agreement contemplates joint decision making and alignment, our interests and Sandoz' interests may differ or conflict from time-to-time or we may disagree with Sandoz' level of effort or resource allocation. Sandoz may internally prioritize our products differently than we do or it may fail toallocate sufficient resources to effectively or optimally52Table of Contentscommercialize our products and alignment may only be achieved through dispute resolution. If these events were to occur, our business would be adverselyaffected.The Baxalta Collaboration Agreement is important to our business. If we or Baxalta fail to adequately perform under the Agreement, or if we or Baxaltaterminate the Agreement, the development and commercialization of our lead biosimilar, M923, would be delayed or terminated and our business would beadversely affected. The Baxalta Collaboration Agreement may be terminated:•by either party for breach by or bankruptcy of the other party; •by Baxalta for its convenience; •by us in the event Baxalta does not exercise commercially reasonable efforts to commercialize M923 in the United States or other specifiedcountries, provided, that we also have certain rights to directly commercialize M923, as opposed to terminating the Baxalta CollaborationAgreement, in event of such a breach by Baxalta; or •by either party in the event there is a condition constituting force majeure for more than a certain consecutive number of days. If the Baxalta Collaboration Agreement were terminated by Baxalta for convenience or if Baxalta elects to terminate the Baxalta Collaboration Agreementwith respect to M923 in the specified time frame or if we terminate the Baxalta Collaboration Agreement for breach by Baxalta, while we would have the right toresearch, develop, manufacture or commercialize the terminated products or license a third party to do so, we would need to expand our internal capabilities orenter into another collaboration, which, if we were able to do so, could cause significant delays that could prevent us from commercializing M923. Any alternativecollaboration could be on less favorable terms to us. In addition, we may need to seek additional financing to support the research, development andcommercialization of any terminated products, or alternatively we may decide to discontinue any terminated products, which could have a material adverse effecton our business. If Baxalta terminates the Baxalta Collaboration Agreement due to our uncured breach, Baxalta would retain the exclusive right to commercializeM923 on a world-wide basis, subject to certain payment obligations to us as outlined in the Agreement. In addition, depending upon the timing of the termination,we would no longer have any influence over or input into the clinical development strategy or/and the commercialization strategy or/and the legal strategy ofM923. Under the Baxalta Collaboration Agreement, we are dependent upon Baxalta to successfully conduct clinical trials for, and if approved, commercialize M923.We do not control Baxalta's administration of the clinical trials, commercialization activities or the resources it allocates to M923. Our interests and Baxalta'sinterests may differ or conflict from time to time, or we may disagree with Baxalta's level of effort or resource allocation. Baxalta may internally prioritize M923differently than we do or it may not allocate sufficient resources to effectively or optimally administer clinical trials for, or commercialize, M923. If these eventswere to occur, our business would be adversely affected.The Mylan Collaboration Agreement is important to our business. If we or Mylan fail to adequately perform under the Agreement, or if we or Mylan terminatethe Agreement, the development and commercialization of one or more of our biosimilar candidates, including M834, could be delayed or terminated and ourbusiness would be adversely affected. The Mylan Collaboration Agreement may be terminated by either party for breach by, or bankruptcy of, the other party; for its convenience; or for certainactivities involving competing products or the challenge of certain patents. Other than in the case of a termination for convenience, the terminating party shall havethe right to continue the development, manufacture and53Table of Contentscommercialization of the terminated products in the terminated countries. In the case of a termination for convenience, the other party shall have the right tocontinue. If a termination occurs, the licenses granted to the non-continuing party for the applicable product will terminate for the terminated country. Subject tocertain terms and conditions, the party that has the right to continue the development or commercialization of a given product candidate may retain royalty-bearinglicenses to certain intellectual property rights, and rights to certain data, for the continued development and sale of the applicable product in the country or countriesfor which termination applies. If the Mylan Collaboration Agreement was terminated and we had the right to continue the development and commercialization of one or more terminatedproducts, to fully exercise that right, we would need to expand our internal capabilities or enter into another collaboration, which, if we were able to do so, couldcause significant delays that could prevent us from commercializing those products. Any alternative collaboration could be on less favorable terms to us. Inaddition, we may need to seek additional financing to support the development and commercialization of any terminated products, or alternatively we may decideto discontinue one or more terminated products, which could have a material adverse effect on our business. If the Mylan Collaboration Agreement was terminatedand Mylan had the right to continue the development and commercialization of one or more terminated products, we would have no influence or input into thoseactivities. Under the Mylan Collaboration Agreement, we are dependent upon Mylan to successfully perform its responsibilities and activities, including conductingclinical trials for certain products and leading the commercialization of products. We do not control Mylan's execution of its responsibilities, includingcommercialization activities, or the resources it allocates to our products. Our interests and Mylan's interests may differ or conflict from time to time, or we maydisagree with Mylan's level of effort or resource allocation. Mylan may internally prioritize our products differently than we do or it may not allocate sufficientresources to effectively or optimally execute its responsibilities or activities. If these events were to occur, our business would be adversely affected.We and our collaborative partners depend on third parties for the manufacture of products. If we encounter difficulties in our supply or manufacturingarrangements, our business may be materially adversely affected. We have a limited number of personnel with experience in, and we do not own facilities for, manufacturing products. In addition, we do not have, and do notintend to develop, the ability to manufacture material for our clinical trials or at commercial scale. To develop our product candidates, apply for regulatoryapprovals and commercialize any products, we or our collaborative partners need to contract for or otherwise arrange for the necessary manufacturing facilities andcapabilities. In order to generate revenue from the sales of Enoxaparin Sodium Injection and GLATOPA, sufficient quantities of such product must also beproduced in order to satisfy demand. If these contract manufacturers are unable to manufacture sufficient quantities of product, comply with regulatoryrequirements, or breach or terminate their manufacturing arrangements with us, the development and commercialization of the affected products or drug candidatescould be delayed, which could have a material adverse effect on our business. In addition, any change in these manufacturers could be costly because thecommercial terms of any new arrangement could be less favorable and the expenses relating to the transfer of necessary technology and processes could besignificant. We have relied upon third parties to produce material for nonclinical and clinical studies and may continue to do so in the future. We cannot be certain that wewill be able to obtain and/or maintain long-term supply and supply arrangements of those materials on acceptable terms, if at all. If we are unable to arrange forthird-party manufacturing, or to do so on commercially reasonable terms, we may not be able to complete development of our products or market them. In addition, the FDA and other regulatory authorities require that our products be manufactured according to current good manufacturing practices, or cGMP,regulations and that proper procedures54Table of Contentsare implemented to assure the quality of our sourcing of raw materials and the manufacture of our products. Any failure by us, our collaborative partners or ourthird-party manufacturers to comply with cGMP, and/or our failure to scale-up our manufacturing processes could lead to a delay in, or failure to obtain, regulatoryapproval. In addition, such failure could be the basis for action by the FDA to withdraw approvals for drug candidates previously granted to us and for otherregulatory action, including product recall or seizure, fines, imposition of operating restrictions, total or partial suspension of production or injunctions. To theextent we rely on a third-party manufacturer, the risk of non-compliance with cGMPs may be greater and the ability to effect corrective actions for any suchnoncompliance may be compromised or delayed.If we are unable to establish sales and marketing capabilities or enter into agreements with third parties to market and sell our product candidates, we may beunable to generate product revenue. We do not have a sales organization and have no experience as a company in the sale, marketing or distribution of pharmaceutical products. There are risksinvolved with establishing our own sales and marketing capabilities, as well as entering into arrangements with third parties to perform these services. For example,developing a sales force is expensive and time consuming and could delay any product launch. In addition, to the extent that we enter into arrangements with thirdparties to perform sales, marketing or distribution services, we will have less control over sales of our products and our future revenue would depend heavily on thesuccess of the efforts of these third parties.A significant change in the business operations of, a change in senior executive management within, or a change in control of Sandoz, Baxalta or Mylan, orany future collaboration partners or third party manufacturers could have a negative impact on our business operations. Since many of our product candidates are developed under collaborations with third parties, we do not have sole decision making authority with respect tocommercialization or development of those product candidates. We have built relationships and work collaboratively with our third party collaborators andmanufacturers to ensure the success of our development and commercialization efforts. A significant change in the senior management team, or businessoperations, including, a change in control or internal corporate restructuring, of any of our collaboration partners or third party manufacturers could result indelayed timelines on our products. In addition, we may have to re-establish working relationships and familiarize new counterparts with our products and business.Any such change may result in the collaboration partner or third party manufacturer internally re-prioritizing our programs or decreasing resources allocated tosupport our programs. For example, in January 2016, Baxalta and Shire plc announced an agreement under which Shire will combine with Baxalta, subject toshareholder and regulatory approvals. Following such combination, we will become dependent on Shire plc to allocate resources for future development andcommercialization of M923, and there could be changes or delays in the timing of the M923 program in connection with the integration of Baxalta and Shire plc.Similar changes with respect to any of our other collaborators may negatively impact our business operations.General Company Related Risks Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of us, which may be beneficial to our stockholders,more difficult and may prevent attempts by our stockholders to replace or remove our current management. Provisions in our certificate of incorporation and our by-laws may delay or prevent an acquisition of us or a change in our management. In addition, theseprovisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders toreplace members of our board of directors. Because our board of directors is responsible for appointing the members of our management team, these provisionscould in turn affect55Table of Contentsany attempt by our stockholders to replace current members of our management team. These provisions include:•a classified board of directors; •a prohibition on actions by our stockholders by written consent; and •limitations on the removal of directors. Moreover, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, whichprohibits a person who owns in excess of 15% of our outstanding voting stock from merging or combining with us for a period of three years after the date of thetransaction in which the person acquired in excess of 15% of our outstanding voting stock, unless the merger or combination is approved in a prescribed manner.Finally, these provisions establish advance notice requirements for nominations for election to our board of directors or for proposing matters that can be actedupon at stockholder meetings. These provisions would apply even if the offer may be considered beneficial by some stockholders.Our stock price may be volatile, and purchasers of our common stock could incur substantial losses. The stock market in general and the market prices for securities of biotechnology companies in particular have experienced extreme volatility that often hasbeen unrelated or disproportionate to the operating performance of these companies. The trading price of our common stock has been, and is likely to continue tobe, volatile. Furthermore, our stock price could be subject to wide fluctuations in response to a variety of factors, including the following:•delays in achievement of, or failure to achieve, program milestones that are associated with the valuation of our company or significant milestonerevenue; •failure of GLATOPA to sustain profitable sales or market share that meet expectations of securities analysts; •other adverse FDA decisions relating to our GLATOPA or M356 programs, including an FDA decision to require additional data, includingrequiring clinical trials, as a condition to M356 ANDA approval; •litigation involving our company or our general industry or both, including litigation pertaining to the launch of our, our collaborative partners' orour competitors' products; •a decision in favor of, or against, Amphastar in our patent litigation suits, a settlement related to any case; or a decision in favor of Amphastar orothers in the anti-trust suits filed against us; •announcements by other companies regarding the status of their ANDAs for generic versions of COPAXONE; •FDA approval of other companies' ANDAs for generic versions of COPAXONE; •marketing and/or launch of other companies' generic versions of COPAXONE; •adverse FDA decisions regarding the development requirements for one of our biosimilar development candidates or failure of our other productapplications to meet the requirements for regulatory review and/or approval; •results or delays in our or our competitors' clinical trials or regulatory filings; •enactment of legislation that repeals the law enacting the biosimilar regulatory approval pathway or amends the law in a manner that is adverse toour biosimilar development strategy;56Table of Contents•failure to demonstrate therapeutic equivalence, biosimilarity or interchangeability with respect to our technology-enabled generic product candidatesor biosimilars; •demonstration of or failure to demonstrate the safety and efficacy for our novel product candidates; •our inability to manufacture any products in conformance with cGMP or in sufficient quantities to meet the requirements for the commercial sale ofthe product or to meet market demand; •failure of any of our product candidates, if approved, to achieve commercial success; •the discovery of unexpected or increased incidence in patients' adverse reactions to the use of our products or product candidates or indications ofother safety concerns; •developments or disputes concerning our patents or other proprietary rights; •changes in estimates of our financial results or recommendations by securities analysts; •termination of any of our product development and commercialization collaborations; •significant acquisitions, strategic partnerships, joint ventures or capital commitments by us or our competitors; •investors' general perception of our company, our products, the economy and general market conditions; •rapid or disorderly sales of stock by holders of significant amounts of our stock; or •significant fluctuations in the price of securities generally or biotech company securities specifically. If any of these factors causes an adverse effect on our business, results of operations or financial condition, the price of our common stock could fall andinvestors may not be able to sell their common stock at or above their respective purchase prices.We could be subject to class action litigation due to stock price volatility, which, if it occurs, will distract our management and could result in substantial costsor large judgments against us. The stock market in general has recently experienced extreme price and volume fluctuations. In addition, the market prices of securities of companies in thebiotechnology industry have been extremely volatile and have experienced fluctuations that have often been unrelated or disproportionate to the operatingperformance of these companies. These fluctuations could adversely affect the market price of our common stock. In the past, securities class action litigation hasoften been brought against companies following periods of volatility in the market prices of their securities. We may be the target of similar litigation in the future.Securities litigation could result in substantial costs and divert our management's attention and resources, which could cause serious harm to our business, operatingresults and financial condition.Item 1B. UNRESOLVED STAFF COMMENTS None.57Table of ContentsItem 2. PROPERTIES As of February 5, 2016, pursuant to our sublease agreements, we lease a total of approximately 183,500 square feet of office and laboratory space inCambridge, Massachusetts:Item 3. LEGAL PROCEEDINGS M356-Related Proceedings On September 10, 2014, Teva Pharmaceuticals Industries Ltd. and related entities, or Teva, and Yeda Research and Development Co., Ltd., or Yeda, filed suitagainst us and Sandoz in the United States Federal District Court in the District of Delaware in response to the filing by Sandoz of the ANDA with a Paragraph IVcertification for M356. The suit initially alleged infringement related to two Orange Book-listed patents for COPAXONE 40 mg/mL, each expiring in 2030, andseeks declaratory and injunctive relief prohibiting the launch of our product until the last to expire of these patents. In April 2015, Teva and Yeda filed anadditional suit against us and Sandoz in the United States District Court for the District of Delaware alleging infringement related to a third Orange Book-listedpatent for COPAXONE 40 mg/mL, which issued in March 2015 and expires in 2030. In May 2015, this suit was consolidated with the initial suit filed inSeptember 2014. In November 2015, Teva and Yeda filed a suit against us and Sandoz in the United States District Court for the District of Delaware alleginginfringement related to a fourth Orange Book-listed patent for COPAXONE 40 mg/mL, which issued in October 2015 and expires in 2030. Teva and Yeda seekdeclaratory and injunctive relief prohibiting the launch of M356 until the expiration of this patent. In December 2015, this suit was consolidated with the initial suitfiled in September 2014. We and Sandoz have asserted various defenses and filed counterclaims for declaratory judgments of non-infringement, invalidity andunenforceability of the COPAXONE 40 mg/mL patents. A pre-trial claim construction hearing was held in February 2016 and the trial is scheduled to begin inSeptember 2016.M834-Related Proceedings On July 2, 2015, we filed a petition for Inter Partes Review, or IPR, with the Patent Trial and Appeal Board of the U.S. Patent and Trademark Office, orPTAB, to challenge the validity of U.S. Patent No 8,476,239, a patent for ORENCIA owned by Bristol Myers Squibb (BMS). The PTAB issued a decisioninstituting the IPR proceedings in January 2016, and BMS filed for a rehearing by the full PTAB. Briefings by the parties will take place in 2016, with oralarguments scheduled for September 2016. A final opinion from the PTAB is expected in January 2017.Enoxaparin Sodium Injection-Related Proceedings On September 21, 2011, we and Sandoz sued Amphastar, International Medical Systems, Ltd., a wholly owned subsidiary of Amphastar and, together withAmphastar ("Amphastar") and Actavis, Inc. (formerly Watson Pharmaceuticals, Inc.), or Actavis, in the United States District Court for the District ofMassachusetts for infringement of two of our patents. Also in September, 2011, we filed a request for a temporary restraining order and preliminary injunction toprevent Amphastar and Actavis from58Property Location Approximate Square Footage Use Lease Expiration Date 675 West Kendall Street Cambridge, Massachusetts 02142 78,500 Laboratory and Office 04/30/2018 320 Bent Street Cambridge, Massachusetts 02141 105,000 Laboratory and Office 02/28/2027 183,500 Table of Contentsselling their enoxaparin product in the United States. In October 2011, the District Court granted our motion for a preliminary injunction and entered an orderenjoining Amphastar and Actavis from advertising, offering for sale or selling their enoxaparin product in the United States until the conclusion of a trial on themerits and required us and Sandoz to post a security bond of $100 million in connection with the litigation. Amphastar and Actavis appealed the decision to theCourt of Appeals for the Federal Circuit, or CAFC, and in January 2012, the CAFC stayed the preliminary injunction. In August 2012, the CAFC vacated thepreliminary injunction and remanded the case to the District Court. In September 2012, we filed a petition with the CAFC for rehearing by the full court en banc ,which was denied. In February 2013, we filed a petition for a writ of certiorari for review of the CAFC decision by the United States Supreme Court and in June2013 the Supreme Court denied the petition. In July 2013, the District Court granted a motion by Amphastar and Actavis for summary judgment. We filed a notice of appeal of that decision to the CAFC.In February 2014, Amphastar filed a motion to the CAFC for summary affirmance of the District Court ruling, which the CAFC denied in May 2014. OnNovember 10, 2015, the CAFC affirmed the District Court summary judgment decision with respect to Actavis, reversed the District Court summary judgmentdecision with respect to Amphastar, and remanded the case against Amphastar to the District Court. On January 11, 2016, Amphastar filed a petition for rehearingby the CAFC, which was denied on February 17, 2016. In the event that we are not successful in further prosecution or settlement of this action against Amphastar, and Amphastar is able to prove it suffereddamages as a result of the preliminary injunction, we could be liable for damages for up to $35 million of the security bond. Amphastar has filed motions toincrease the amount of the security bond, which we and Sandoz have opposed. Litigation involves many risks and uncertainties, and there is no assurance that we orSandoz will prevail in this patent enforcement suit. On September 17, 2015, Amphastar filed a complaint against us and Sandoz in the United States District Court for the Central District of California. Thecomplaint alleges that, in connection with filing the September 2011 patent infringement suit against Amphastar and Actavis, we and Sandoz sought to preventAmphastar from selling generic enoxaparin sodium injection and thereby exclude competition for generic enoxaparin sodium injection in violation of federal andCalifornia anti-trust laws and California unfair business laws. Amphastar is seeking unspecified damages and fees. In December 2015, we and Sandoz filed amotion to dismiss and a motion to transfer the case. In January 2016, the case was transferred to the United States District Court for the District of Massachusetts.In February 2016, Amphastar filed a writ of mandamus with the United States Court of Appeals for the Ninth Circuit requesting that court to reverse and review theDistrict Court's grant of transfer. While the outcome of litigation is inherently uncertain, we believe this suit is without merit, and we intend to vigorously defendourself in this litigation. On October 14, 2015, The Hospital Authority of Metropolitan Government of Nashville and Davidson County, Tennessee, d/b/a Nashville General Hospital("NGH") filed a class action suit against us and Sandoz in the United States District Court for the Middle District of Tennessee on behalf of certain purchasers ofLOVENOX or generic enoxaparin sodium injection. The complaint alleges that, in connection with filing the September 2011 patent infringement suit againstAmphastar and Actavis, we and Sandoz sought to prevent Amphastar from selling generic enoxaparin sodium injection and thereby exclude competition for genericenoxaparin sodium injection in violation of federal anti-trust laws. NGH is seeking injunctive relief, disgorgement of profits and unspecified damages and fees. InDecember 2015, we and Sandoz filed a motion to dismiss and a motion to transfer the case to the United States District Court for the District of Massachusetts.These motions are pending before the court. While the outcome of litigation is inherently uncertain, we believe this suit is without merit, and we intend tovigorously defend ourself in this litigation.Item 4. MINE SAFETY DISCLOSURES Not applicable.59Table of ContentsPART II Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITYSECURITIES Market Information Our common stock is traded publicly on the NASDAQ Global Market under the symbol "MNTA." The following table sets forth the high and low sale pricesof our common stock for the periods indicated, as reported on the NASDAQ Global Market:Holders On February 22, 2016, the approximate number of holders of record of our common stock was 33.Dividends We have never declared or paid any cash dividends on our common stock. We anticipate that, in the foreseeable future, we will continue to retain any earningsfor use in the operation of our business and will not pay any cash dividends.Equity Compensation Plan Information Information relating to compensation plans under which our equity securities are authorized for issuance is set forth in Item 12 below.60Quarter ended High Low March 31, 2014 $19.90 $11.26 June 30, 2014 13.91 9.85 September 30, 2014 12.55 10.40 December 31, 2014 13.10 9.38 March 31, 2015 $15.98 $10.22 June 30, 2015 25.56 14.58 September 30, 2015 23.89 15.61 December 31, 2015 18.85 14.55 Table of ContentsStock Performance Graph The comparative stock performance graph below compares the cumulative total stockholder return (assuming reinvestment of dividends, if any) frominvesting $100 on December 31, 2010 through December 31, 2015, in each of (i) our common stock, (ii) The NASDAQ Composite Index and (iii) The NASDAQBiotechnology Index (capitalization weighted).COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN* Among Momenta Pharmaceuticals, Inc., the NASDAQ Composite Index, and the NASDAQ Biotechnology Index *$100 invested on 12/31/10 in stock or index, including reinvestment of dividends. Fiscal year ending December 31. The information included under the heading "Stock Performance Graph" in Item 5 of this Annual Report on Form 10-K is "furnished" and not "filed" and shallnot be deemed to be "soliciting material" or subject to Regulation 14A, shall not be deemed "filed" for purposes of Section 18 of the Exchange Act, or otherwisesubject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the ExchangeAct.61 12/10 12/11 12/12 12/13 12/14 12/15 Momenta Pharmaceuticals, Inc . 100.00 116.17 78.76 118.10 80.43 99.13 NASDAQ Composite 100.00 100.53 116.92 166.19 188.78 199.95 NASDAQ Biotechnology 100.00 113.92 153.97 263.29 348.49 369.06 Table of ContentsItem 6. SELECTED CONSOLIDATED FINANCIAL DATA The selected consolidated financial data set forth below with respect to our statements of comprehensive loss data for the years ended December 31, 2015,2014 and 2013 and the balance sheet data as of December 31, 2015 and 2014 are derived from our audited financial statements included in this Annual Report onForm 10-K. The statements of comprehensive income data for the years ended December 31, 2012 and 2011 and the balance sheet data as of December 31, 2013,2012 and 2011 are derived from our audited financial statements, which are not included herein. Historical results are not necessarily indicative of future results.See the notes to the consolidated financial statements for an explanation of the method used to determine the number of shares used in computing basic and dilutednet (loss) income per share. The selected consolidated financial data set forth below should be read in conjunction with and is qualified in its entirety by our auditedconsolidated financial statements and related notes thereto found under Item 8 " Financial Statements and Supplementary Data " and Item 7 " Management'sDiscussion and Analysis of Financial Condition and Results of Operations " included in this Annual Report on Form 10-K.Momenta Pharmaceuticals, Inc. Selected Financial Data 62 2015 2014 2013 2012 2011 (in thousands, except per share information) Statements of Comprehensive (Loss) Income Data: Collaboration revenues: Product revenue $48,503 $19,963 $16,701 $54,772 $270,473 Research and development revenue 41,147 32,287 18,764 9,149 12,595 Total collaboration revenue 89,650 52,250 35,465 63,921 283,068 Operating expenses: Research and development 126,033 106,482 103,999 80,345 64,657 General and administrative 48,051 45,164 41,057 43,682 38,710 Total operating expenses 174,084 151,646 145,056 124,027 103,367 Operating (loss) income (84,434) (99,396) (109,591) (60,106) 179,701 Interest income 808 548 950 1,238 746 Interest expense — — — — (91)Other income 313 248 233 220 — Net (loss) income $(83,313)$(98,600)$(108,408)$(58,648)$180,356 Net (loss) income per share: Basic $(1.32)$(1.91)$(2.13)$(1.16)$3.62 Diluted $(1.32)$(1.91)$(2.13)$(1.16)$3.55 Shares used in calculating net (loss) income per share: Basic 63,130 51,664 50,907 50,411 49,852 Diluted 63,130 51,664 50,907 50,411 50,823 Comprehensive (loss) income $(83,293)$(98,641)$(108,494)$(58,456)$180,291 Table of Contents63 As of December 31, 2015 2014 2013 2012 2011 Balance Sheet Data: Cash and cash equivalents $61,461 $61,349 $29,766 $52,990 $49,245 Marketable securities 288,583 130,180 215,916 287,613 299,193 Working capital 335,926 181,541 243,649 339,006 383,393 Total assets 421,040 256,216 316,815 406,629 420,909 Deferred revenue 21,983 30,998 27,716 31,695 3,764 Other liabilities 29,081 18,850 19,262 14,447 14,067 Total liabilities 51,064 49,848 46,978 46,142 17,831 Accumulated deficit (452,372) (369,059) (270,459) (162,051) (103,403)Total stockholders' equity 369,976 206,368 269,837 360,487 403,078 Table of ContentsItem 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and thenotes to those financial statements appearing elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements that involvesignificant risks and uncertainties. As a result of many important factors, such as those set forth under "Risk Factors" in Item 1A of this Annual Report onForm 10-K, our actual results may differ materially from those anticipated in these forward-looking statements.Business Overview Introduction We are a biotechnology company focused on developing generic versions of complex drugs, biosimilars and novel therapeutics for oncology and autoimmunedisease. To date, we have devoted substantially all of our capital resource expenditures to the research and development of our product candidates. Although we wereprofitable in fiscal years 2010 and 2011, since that time we have been incurring operating losses and we expect to incur annual operating losses over the nextseveral years as we advance our drug development portfolio. As of December 31, 2015, we had an accumulated deficit of approximately $452 million. We willneed to generate significant revenue to return to profitability. We expect that our return to profitability, if at all, will most likely come from the commercializationof the products in our drug development portfolio.Recent Development—Mylan Collaboration Agreement On January 8, 2016, we and Mylan Ireland Limited, a wholly-owned indirect subsidiary of Mylan N.V., or Mylan, entered into a collaboration agreement, orthe Mylan Collaboration Agreement, which became effective on February 9, 2016, pursuant to which we and Mylan agreed to collaborate exclusively, on a world-wide basis, to develop, manufacture and commercialize six of our biosimilar candidates, including M834. Under the terms of the Mylan Collaboration Agreement, Mylan has agreed to pay us a non-refundable upfront payment of $45 million. In addition, we andMylan will share equally costs (including development, manufacturing, commercialization and certain legal expenses) and profits (losses) across the six productcandidates.Complex GenericsGLATOPA®—Generic COPAXONE® (glatiramer acetate injection) 20 mg/mL On April 16, 2015, the FDA approved the ANDA for once-daily GLATOPA (glatiramer acetate injection) 20 mg/mL, a generic equivalent of once-dailyCOPAXONE® 20 mg/mL. GLATOPA is the first "AP" rated, substitutable generic equivalent of once-daily COPAXONE. Sandoz commenced sales ofGLATOPA on June 18, 2015. Under our collaboration agreement with Sandoz, we earn 50% of contractually-defined profits on GLATOPA sales. For the yearended December 31, 2015, we recorded $43.4 million in product revenues from Sandoz' sales of GLATOPA, reflecting $52.5 million in profit share net of adeduction of $9.1 million for reimbursement to Sandoz of 50% of pre-launch GLATOPA-related legal expenses incurred by Sandoz since 2008. GLATOPA was formerly referred to as M356. M356 now refers to our generic product candidate for three-times-weekly COPAXONE 40 mg/mL.64Table of ContentsM356—Generic Three-times-weekly COPAXONE® (glatiramer acetate injection) 40 mg/mL An ANDA with a Paragraph IV certification for our generic version of three-times-weekly COPAXONE 40 mg/mL, which was filed in February 2014,remains under review by the FDA. Our M356 formulation contains the same drug substance as GLATOPA, which we believe should help streamline the FDAreview of the ANDA. To date, we are the only ANDA applicants for the three-times-weekly COPAXONE 40 mg/mL with an approved active pharmaceuticalingredient. If we are successful in our challenge of the patents related to 40 mg/mL COPAXONE, and based on the scheduled September 2016 trial start date andassuming customary patent litigation timelines, we believe M356 could be approved, following expiration of any 30-month stay, if applicable, and be on the marketas early as the first quarter of 2017. In August 2015, the Patent Trial and Appeal Board of the U.S. Patent and Trademark Office, or PTAB, instituted an Inter PartesReview, or IPR, filed by a third party challenging the validity of several of the same patents relating to 40 mg/mL COPAXONE that are the subject of our patentlitigation. We believe the outcome of this IPR could also impact our M356 litigation and launch timelines.Enoxaparin Sodium Injection—Generic LOVENOX® In June 2015, we and Sandoz amended our collaboration agreement relating to Enoxaparin Sodium Injection, replacing Sandoz' obligation to pay us a royaltyon net sales with an obligation to pay us 50% of contractually-defined profits on sales. The amendment, which was effective April 1, 2015, better aligned ourinterests in an evolving market that has seen continued pricing pressure. Excluding contractual adjustments under our collaboration agreement, revenue earned on Enoxaparin Sodium Injection decreased from $20.0 million in 2014to $6.9 million in 2015 on Sandoz' net sales of $197 million and $113 million, respectively, for those years. Due to increased generic competition and resultingdecreased market pricing for generic enoxaparin sodium injection products, we do not anticipate significant Enoxaparin Sodium Injection product revenue in thenear future.BiosimilarsM923—Biosimilar HUMIRA® (adalimumab) Candidate In connection with Baxter's internal corporate restructuring in July 2015, Baxter assigned all of its rights and obligations under the Baxter CollaborationAgreement to Baxalta U.S. Inc., Baxalta GmbH and Baxalta Incorporated (collectively, "Baxalta"). In light of the assignment, all references to "Baxter" and the"Baxter Collaboration Agreement" have been replaced with references to "Baxalta" and the "Baxalta Collaboration Agreement," respectively. In January 2016,Baxalta and Shire plc announced an agreement under which Shire will combine with Baxalta, subject to shareholder and regulatory approvals. In February 2015, Baxalta commenced a randomized, double-blind, single-dose study in healthy volunteers to compare the pharmacokinetics, safety,tolerability and immunogenicity of M923 versus EU-sourced and US-sourced HUMIRA. A total of 324 healthy volunteers were enrolled in the study. Thevolunteers were randomized 1:1:1 to receive a single 40 mg injection of M923, US-sourced HUMIRA, or EU-sourced HUMIRA. The volunteers were followed for71 days. In December 2015, we announced that M923 met its primary endpoint in the study as the data demonstrated pharmacokinetic bioequivalence to thereference products. In October 2015, Baxalta initiated a pivotal clinical trial in patients with chronic plaque psoriasis for M923. The trial is a randomized, doubleblind, active control, multi-center, global study in patients with chronic plaque psoriasis to compare the safety, efficacy and immunogenicity of M923 withHUMIRA. Baxalta is planning to submit the first regulatory submission for marketing approval for M923 in 2017 and, subject to marketing approval and patentconsiderations, we expect first commercial launch to be as early as 2018.65Table of ContentsM834—Biosimilar ORENCIA® (abatacept) Candidate On January 8, 2016, we entered into a collaboration agreement, which became effective on February 9, 2016, with Mylan Ireland Limited, a wholly-ownedindirect subsidiary of Mylan N.V., or Mylan, to develop and commercialize M834. We are in the final stages of preclinical and process development work and planto initiate clinical trials for this program in mid-year 2016. We believe there is currently limited biosimilar competition for M834. Subject to development,marketing approval and patent considerations, we expect to be able to launch M834 in the 2020 timeframe to be able to be among the first biosimilars on the marketfor ORENCIA.Other Biosimilar Candidates Under our Mylan collaboration, we and Mylan are also developing five other biosimilar candidates from our portfolio, in additon to M834. We and Mylan willshare equally costs and profits (losses) related to these earlier stage product candidates. We and Mylan will share development responsibilities across productcandidates, and Mylan will lead commercialization of the products. As of December 31, 2015, we had over 100 employees working on our biosimilars programs. We maintain a state-of-the-art development facility forbioprocess manufacturing development and scale-up.Novel TherapeuticsNecuparanib In 2012, we initiated a Phase 1/2 clinical trial evaluating necuparanib in combination with ABRAXANE® (nab-paclitaxel) plus gemcitabine in patients withadvanced metastatic pancreatic cancer. In October 2014, we successfully completed and reported top-line data from Part A, or Phase 1, of the trial, includingdetermining a maximum tolerated dose of 5 mg/kg. In June 2015 at the American Society of Clinical Oncology annual meeting, we reported more mature data fromPhase 1 which continued to show acceptable safety and tolerability and encouraging signals of activity, including the following:•Adding necuparanib to ABRAXANE and gemcitabine did not appear to increase the toxicity profile associated with ABRAXANE and gemcitabinealone. •Of the 24 patients who received at least one dose of necuparanib in combination with ABRAXANE plus gemcitabine, the median overall survivalwas 14.2 months. Also, within a subset of 16 patients who completed one cycle and had at least one scan on treatment, the median overall survivalwas 15.3 months. •Of the 15 patients treated with necuparanib in combination with ABRAXANE plus gemcitabine that completed Cycle 1 and had at least one follow-up measurement for CA19.9 (a biomarker predictive of long-term outcome and treatment response in pancreatic cancer), 93% had a greater than50% decrease from baseline, and 100% had a greater than 20% decrease from baseline. We believe the safety data and early signals of activity are encouraging and that the 5 mg/kg dose has the potential to provide significantly higher levels ofactivity against multiple cancer targets than traditional anticoagulant heparins have achieved. We believe these results, combined with nonclinical data in othercancer models, and necuparanib's differentiated, multi-targeted mechanism of action, suggest the possibility of combining necuparanib with other chemotherapyand targeted therapy standards of care in a variety of other tumor types. We continue to collect data from Phase 1 of the trial and plan to publish and/or presentupdated results following the completion of the study. We continue to enroll patients in Part B, or Phase 2, of the trial, to evaluate the antitumor activity of necuparanib in combination with ABRAXANE plusgemcitabine, versus ABRAXANE plus66Table of Contentsgemcitabine alone. We expect data from this randomized trial to be available in the second half of 2017. Subject to successfully completing clinical trials andobtaining marketing approval, we believe necuparanib could be on the market in the 2020-2021 timeframe, or potentially earlier under Fast-Track Designation. In June 2014, necuparanib received Orphan Drug Designation from the U.S. FDA for the treatment of pancreatic cancer. In December 2014, we received Fast-Track designation by the FDA for necuparanib as a first-line treatment in combination with ABRAXANE and gemcitabine in patients with metastatic pancreaticcancer.Other Novel Therapeutic Programs We are continuing to advance M281, our Anti-FcRn program, and M230, our SIF3 program. Our goal is to progress M281 and M230 into clinicaldevelopment in mid-2016 and in 2017, respectively. We are currently identifying and pursuing potential collaboration opportunities to further develop andcommercialize of our hsIVIg program. We believe these early stage programs could have the potential to produce product candidates capable of treating a large number of immunological disordersdriven by antibodies, immune complexes, and Fc receptor biology. Such disorders include rheumatoid arthritis, autoimmune neurologic diseases such as Guillain-Barre syndrome, chronic inflammatory demyelinating neuropathy and myasthenia gravis, autoimmune blood disorders such as immune thrombocytopenic purpura,systemic autoimmune diseases such as dermatomyositis, lupus nephritis, and catastrophic antiphospholipid syndrome, antibody-mediated transplant rejection, andautoimmune blistering diseases, several of which have few treatment options.Equity Financings In May 2015, we sold an aggregate of 8,337,500 shares of its common stock through an underwritten public offering at a price to the public of $19.00 pershare. As a result of the offering, which included the full exercise of the underwriters' option to purchase additional shares, we received aggregate net proceeds ofapproximately $148.4 million, after deducting underwriting discounts and commissions and other offering expenses. We intend to use these proceeds for generalcorporate purposes, including working capital. In May 2014, we entered into an At-the-Market Equity Offering Sales Agreement, or the 2014 ATM Agreement, with Stifel, Nicolaus & Company,Incorporated, or Stifel, under which we were authorized to issue and sell shares of our common stock having aggregate sales proceeds of up to $75 million fromtime to time through Stifel, acting as sales agent and/or principal. We paid Stifel a commission of 2.0% of the gross proceeds from the sale of shares of ourcommon stock under this facility. The offering was conducted by us pursuant to an effective shelf registration statement previously filed with the Securities andExchange Commission (Reg. No. 333-188227) and a related prospectus supplement. We intend to use the net proceeds from this facility to advance ourdevelopment pipeline and for general corporate purposes, including working capital. We concluded sales under the 2014 ATM Agreement in April 2015. In theyear ended December 31, 2014, we sold approximately 1.7 million shares of common stock under the 2014 ATM Agreement, raising aggregate net proceeds ofapproximately $18.3 million. In the year ended December 31, 2015, we sold approximately 3.8 million shares of common stock under the 2014 ATM Agreement,raising aggregate net proceeds of approximately $55.2 million. Between October 2014 and April 2015, we sold approximately 5.4 million shares of common stockunder the 2014 ATM Agreement, raising aggregate net proceeds of approximately $73.5 million. In April 2015, we entered into a new ATM Agreement, or the 2015 ATM Agreement, with Stifel, under which we are authorized to issue and sell shares of ourcommon stock having aggregate sales67Table of Contentsproceeds of up to $75 million from time to time through Stifel, acting as sales agent and/or principal. We are required to pay Stifel a commission of 2.0% of thegross proceeds from the sale of shares of our common stock under the 2015 ATM Agreement. Sales of common stock under this facility are made pursuant to aneffective shelf registration statement previously filed with the Securities and Exchange Commission (Reg. No. 333-188227) and a related prospectus supplement. Inthe year ended December 31, 2015, we sold approximately 0.5 million shares of common stock under the 2015 ATM Agreement, raising aggregate net proceeds ofapproximately $9.3 million.Results of Operations Comparison of Years Ended December 31, 2015, 2014 and 2013Collaboration Revenue Collaboration revenue includes both product revenue and research and development revenue earned under our collaborative arrangements. Product revenueincludes our contractually-defined profits and/or royalties earned on Sandoz' sales of Enoxaparin Sodium Injection and GLATOPA. A portion of EnoxaparinSodium Injection development expenses and certain legal expenses, which in the aggregate have exceeded a specified amount, are offset against profit-sharingamounts, royalties and milestone payments. Our contractual share of such development and legal expenses is subject to an annual claw-back adjustment at the endof each of the first five product years, with the product year beginning on July 1 and ending on June 30. The annual adjustment can only reduce our profits,royalties and milestones by up to 50% in a given calendar quarter and any excess amount due would be carried forward into future quarters and reduce any profitsin those future periods until it is paid in full. Annual adjustments, including amounts carried forward into future periods, are recorded as a reduction in productrevenue.GLATOPA®—Generic COPAXONE® (glatiramer acetate injection) 20 mg/mL Sandoz commenced sales of GLATOPA in the United States on June 18, 2015. We earn 50% of contractually-defined profits on Sandoz' sales of GLATOPA.A portion of certain GLATOPA legal expenses, including any patent infringement damages, is deducted from our profits in proportion to our 50% profit sharinginterest. For the year ended December 31, 2015, we recorded $43.4 million in product revenues from Sandoz' sales of GLATOPA, reflecting $52.5 million in profitshare net of a deduction of $9.1 million for reimbursement to Sandoz of 50% of pre-launch GLATOPA-related legal expenses incurred by Sandoz since 2008. Weexpect that any future quarterly legal expense deductions will be significantly less as they will generally be incurred and reimbursed on a quarterly basis. Weestimate that the number of prescriptions for GLATOPA represents approximately 30% of the once-daily 20 mg/mL U.S. glatiramer acetate market. We believe there is a meaningful market opportunity for GLATOPA. The price for COPAXONE 20 mg/mL has increased over 165% since 2009 and there isno other generic for multiple sclerosis currently available in the United States. However, Teva received marketing approval of its three-times-weekly COPAXONE40 mg/mL in January 2014. Teva's three-times-weekly COPAXONE 40 mg/mL accounts for more than 70% of the overall U.S. glatiramer acetate market (20mg/mL and 40mg/mL). Because GLATOPA is only a substitutable generic version of the 20 mg/mL formulation of COPAXONE, the market potential ofGLATOPA is negatively impacted by the conversion of patients from once-daily COPAXONE to three-times-weekly COPAXONE. Teva reported $4.0 billion inworldwide sales of COPAXONE (20 mg/mL and 40 mg/mL) in 2015, $3.2 billion of which was from the United States.68Table of ContentsEnoxaparin Sodium Injection—Generic LOVENOX® Effective April 1, 2015, we began to earn 50% of contractually-defined profits on Sandoz' sales of Enoxaparin Sodium Injection. For the year endedDecember 31, 2015, we earned $5.1 million in product revenue consisting of $6.9 million in profit share and royalties, net of an annual claw-back adjustment of$1.8 million for the product year ended June 30, 2015, on Sandoz' reported net sales of Enoxaparin Sodium Injection of $113 million. As of December 31, 2015,the 2015 annual claw-back adjustment was fully paid. For the year ended December 31, 2014, we earned $19.9 million in product revenue, which consists of $20.0 million in royalties on Sandoz' reported net salesof Enoxaparin Sodium Injection of $197 million, offset by $2.2 million of our contractual share of development and other expenses for the product year endedJune 30, 2014, and increased by $2.1 million to reflect an adjustment to royalties earned in the product year ended June 30, 2012. For the year ended December 31, 2013, we earned $16.7 million in product revenue, which consists of $20.5 million in royalties on Sandoz' reported net salesof Enoxaparin Sodium Injection of $213 million, offset by $3.8 million of our contractual share of development and other expenses for the product year endedJune 30, 2013. The decrease in our product revenue was $14.8 million, or 74%, from the 2014 period to the 2015 period. The amount of the decrease attributed to the changein our collaboration economics is approximately $4.5 million. In addition, product revenue in 2014 was increased by $2.1 million to reflect an adjustment toroyalties earned in the product year ended June 30, 2012. The decrease in Sandoz' net sales of $84 million, or 43%, from the 2014 period to the 2015 period wasdue to 38% lower unit sales driven by lower market share and 7% lower prices in response to competitor pricing reductions on enoxaparin. The increase in ourproduct revenue of $3.2 million, or 19%, from the 2013 period to the 2014 period is due to the $2.1 million adjustment to royalties earned as well as a lower annualclaw-back adjustment in 2014. Due to increased generic competition and resulting deceased market pricing for generic enoxaparin sodium injection products, we do not anticipate significantEnoxaparin Sodium Injection product revenue in the near future.Research and Development Revenue Research and development revenue generally consists of amounts earned by us under our collaborations for:•Technical development, regulatory and commercial milestones; •Reimbursement of research and development services and reimbursement of development costs under our collaborative arrangements; and •Amortization of the equity premium (2006 Sandoz Collaboration Agreement) and amortization of the arrangement consideration (BaxaltaCollaboration Agreement). Research and development revenue for 2015 was $41.1 million, compared with $32.3 million for 2014 and $18.8 million for 2013. The increase in researchand development revenue of $8.8 million, or 27%, from the 2014 period to the 2015 period includes an increase of $20.0 million for 2015 milestone payments weearned upon receiving sole FDA approval for GLATOPA and upon first commercial sale of GLATOPA. This increase is partially offset by a decrease of$12.0 million reflecting milestone payments we earned in 2014 upon achieving technical development criteria for M923 under the Baxalta CollaborationAgreement. The increase in research and development revenue of $13.5 million, or 72%, from the 2013 period to the 2014 period is primarily due to $12.0 millionearned by us in 2014 for the achievement of M923 technical development milestones under the Baxalta Collaboration Agreement.69Table of Contents We expect collaborative research and development revenue earned by us related to FTE and external expense reimbursement from Baxalta and Sandoz willfluctuate from quarter to quarter in 2016 depending on our research and development activities. Furthermore, we expect to continue to amortize the $40 millionarrangement consideration from Baxalta as we deliver research and development services under the collaboration agreement, with anticipated 2016 quarterlyamortization of approximately $2.4 million related to M923.Research and Development Expense Research and development expenses consist of costs incurred to conduct research, such as the discovery and development of our product candidates. Werecognize all research and development costs as they are incurred. We track the external research and development costs incurred for each of our productcandidates. Our external research and development expenses consist primarily of:•expenses incurred under agreements with consultants, third-party contract research organizations, or CROs, and investigative sites where all of ournonclinical studies and clinical trials are conducted; •costs of acquiring reference comparator materials and manufacturing nonclinical study and clinical trial supplies and other materials from contractmanufacturing organizations, or CMOs, and related costs associated with release and stability testing; and •costs associated with process development activities. Internal research and development costs are associated with activities performed by our research and development organization and consist primarily of:•personnel-related expenses, which include salaries, benefits and share-based compensation; and •facilities and other allocated expenses, which include direct and allocated expenses for rent and maintenance of facilities, depreciation andamortization of leasehold improvements and equipment and laboratory and other supplies. Research and development expense for 2015 was $126.0 million, compared with $106.5 million in 2014 and $104.0 million in 2013. The increase of$19.5 million, or 18%, from the 2014 period to the 2015 period primarily resulted from increases of $17.6 million in third-party research and process developmentcosts primarily attributable to advance M834 and M281 towards the clinic; $3.3 million in clinical trial expenses as the necuparanib Phase 2 clinical trial continuedto accrue patients; and $1.4 million in nonclinical studies for our novel therapeutics and early stage biosimilar programs. These increases were partially offset by adecrease of: $2.5 million for purchases of antibodies to be used in our novel therapeutics research program and a decrease of $0.3 million in personnel-relatedexpenses, primarily attributed to the reversal of prior period share-based compensation expense associated with performance-based stock awards. In 2011 and 2012,we granted broad-based performance stock awards that vested 50% upon approval of the GLATOPA ANDA and 50% one year later. The awards were scheduled toexpire March 28, 2015. In March 2015, we amended the awards to extend the performance period to September 2015, but with share amounts that decreasedmonthly. Upon the amendment, stock compensation previously recognized was reversed and new stock compensation was recognized ratably based on theGLATOPA ANDA approval, which occurred in April 2015. In the year ended December 31, 2015, research and development expense included a stockcompensation credit of $5.1 million and expense of $4.0 million relating to the performance grants. The increase in research and development expense of $2.5 million, or 2%, from the 2013 period to the 2014 period resulted from increases of: $2.7 million inrent and facility-related costs due to additional subleased laboratory and office space; $2.5 million in costs to purchase antibodies to be used in our noveltherapeutics research program; $2.1 million in personnel-related expenses associated with70Table of Contentsour annual merit salary increase and grants of stock options and stock awards; $1.9 million in necuparanib clinical costs incurred to complete the Phase 1 clinicaltrial as well as start-up and patient enrollment costs incurred for the Phase 2 trial; $1.0 million in laboratory supplies to support our product candidates; and$0.2 million in depreciation expense due to higher capital investments. These increases were partially offset by decreases of: $5.8 million primarily related to lowerthird-party process development and contract research costs incurred for M923; $1.8 million in consulting fees related to our biosimilars business activities; and$0.3 million in travel-related expenses to support our portfolio. The lengthy process of securing FDA approval for generics and new drugs requires the expenditure of substantial resources. Any failure by us to obtain, or anydelay in obtaining, regulatory approvals would materially adversely affect our product development efforts and our business overall. Accordingly, we cannotcurrently estimate with any degree of certainty the amount of time or money that we will be required to expend in the future on our product candidates prior to theirregulatory approval, if such approval is ever granted. As a result of these uncertainties surrounding the timing and outcome of any approvals, we are currentlyunable to estimate when, if ever, our product candidates will generate revenues and cash flows. The following table sets forth the primary components of our research and development external expenditures, including the amortization of our intangibleasset, for each of our principal development programs for the years ended December 31, 2015, 2014 and 2013. The figures in the table include project expendituresincurred by us and reimbursed by our collaborators, but exclude project expenditures incurred by our collaborators. Although we track and accumulate personneleffort by percentage of time spent on our programs, a significant portion of our internal research and development costs, including salaries and benefits, share-based compensation, facilities, depreciation and laboratory supplies are not directly charged to programs. Therefore, our methods for accounting for internalresearch and development costs preclude us from reporting these costs on a project-by-project basis. Certain prior period amounts have been reclassified to conformto the current period presentation.71 Year Ended December 31, Project Inception to December 31, 2015 Phase of Development as of December 31, 2015 2015 2014 2013 External Costs Incurred by ProductCandidate: GLATOPA and M356—GenericCOPAXONE® (20 mg/mL and40 mg/mL) ANDAs filed(1) $856 $920 $2,525 $48,863 Necuparanib—Oncology ProductCandidate Phase 2 11,801 6,739 3,930 36,875 Biosimilars Various(2) 23,605 19,583 24,501 79,127 Other novel therapeutic programs Discovery/Nonclinical 15,999 5,213 3,298 Internal Costs 73,772 74,027 69,745 Total Research and Development Expenses $126,033 $106,482 $103,999 (1)On April 16, 2015, the FDA approved the ANDA for once-daily GLATOPA. Sandoz launched GLATOPA on June 18, 2015. The ANDAfor M356 is under FDA review.Table of Contents Our necuparanib external expenditures increased by $5.1 million, or 75%, from the 2014 period to the 2015 period as the latter period includes ongoing patientcosts for the Phase 1 clinical trial as well as contract research and site and patient costs for Phase 2 of the Phase 1/2 trial. The increase of $4.0 million, or 21%, inbiosimilars external expenditures from the 2014 period to the 2015 period was due to higher third-party process development and contract research costs incurredfor M834 and our other early stage biosimilar candidates partially offset by lower costs for M923 as Baxalta is responsible for clinical development. The increaseof $10.8 million, 207%, in other novel therapeutics program external expenditures from the 2014 period to the 2015 period was due to increased nonclinical andprocess development to advance M281 and M230. The decrease of $1.6 million in GLATOPA and M356 external expenditures from the 2013 period to the 2014 period was due to lower process developmentactivities, manufacturing and third-party costs. Our necuparanib external expenditures increased by $2.8 million from the 2013 period to the 2014 period as wecompleted Part A of the Phase 1/2 trial and entered Phase 2 of the trial during the fourth quarter of 2014. The decrease of $4.9 million in biosimilars externalexpenditures from the 2013 period to the 2014 period was due to lower third-party process development and contract research costs incurred for our biosimilars indevelopment. The increase of $1.9 million in other novel therapeutics program external expenditures from the 2013 period to the 2014 period was primarily due toincreased expenditures to support development of product candidates. The decrease of $0.3 million, or less than 1%, in research and development internal costs from the 2014 period to the 2015 period was primarily due to thereversal of prior period share-based compensation expense associated with performance-based stock awards discussed under " Research and Development Expense". The increase of $4.3 million from the 2013 period to the 2014 period was due to additional research and development headcount and related costs in support ofour development programs. Due to the variability in the length of time necessary to develop a product, the uncertainties related to the estimated cost of the projects and ultimate ability toobtain governmental approval for commercialization, accurate and meaningful estimates of the ultimate cost to bring our product candidates to market are notavailable.General and Administrative General and administrative expenses consist primarily of salaries and other related costs for personnel in general and administrative functions, professionalfees for legal and accounting services, royalty and license fees, insurance costs, and allocated rent, facility and lab supplies, and depreciation expense. General and administrative expense for 2015 was $48.1 million, compared with $45.2 million in 2014 and $41.1 million in 2013. The increase of $2.9 million,or 6%, from the 2014 period to the 2015 period was due to increases of: $2.3 million in professional fees, driven mainly by increased legal and consulting fees;$0.8 million in allocated rent and facility-related costs due to additional subleased laboratory and office space; and $0.4 million in allocated depreciation expensedue to higher capital investments. The increases were partially offset by a $0.6 million decrease in personnel-related expenses primarily due to the reversal of priorperiod share-based compensation expenses associated with performance-based stock awards discussed under "Research and Development Expense".72(2)Biosimilars includes M923, a biosimilar version of HUMIRA® (adalimumab), M834, a biosimilar version of ORENCIA® (abatacept), aswell as seven other biosimilar candidates. A pivotal clinical trial for M923 commenced in October 2015. M834 is in the nonclinical phaseof development, and our other biosimilar candidates are in discovery and process development.Table of Contents The increase in general and administrative expense of $4.1 million, or 10%, from the 2013 period to the 2014 period was due to increases of: $1.1 million inallocated rent and facility-related costs due to additional subleased laboratory and office space; $1.3 million in personnel-related expenses associated with ourannual merit salary increase and grants of stock options and stock awards; $0.6 million in allocated lab supplies, $0.4 million in professional fees, driven mainly byincreased IT infrastructure and tax-related accounting fees; $0.3 million in allocated depreciation expense due to higher capital investments; and $0.2 million inother fees. We expect our general and administrative expenses, including internal and external legal and business development costs that support our various productdevelopment efforts, to vary from period to period in relation to our commercial and development activities.Interest Income Interest income was $0.8 million, $0.5 million and $1.0 million for the years ended December 31, 2015, 2014 and 2013, respectively. The increase of$0.3 million from the 2014 period to the 2015 period was caused by higher average investment balances due to 2015 fundraising activities. The decrease of$0.5 million from the 2013 period to the 2014 period was primarily due to lower average investment balances.Other Income We recognized one-fifth of a job creation tax award, or $0.2 million, as other income in each of the years ended December 31, 2015, 2014 and 2013.Liquidity and Capital Resources At December 31, 2015, we had $350 million in cash, cash equivalents and marketable securities and $19.4 million in accounts receivable, including$15.6 million for fourth quarter 2015 GLATOPA sales and $2.2 million for fourth quarter 2015 Enoxaparin Sodium Injection sales. In addition, we also held$20.7 million in restricted cash, of which $17.5 million serves as collateral for a security bond posted in the litigation against Amphastar. Our funds atDecember 31, 2015 were primarily invested in senior debt of government-sponsored enterprises, commercial paper, overnight repurchase agreements, asset-backedsecurities, corporate debt securities and United States money market funds, directly or through managed funds, with remaining maturities of 24 months or less. Ourcash is deposited in and invested through highly rated financial institutions in North America. The composition and mix of cash, cash equivalents and marketablesecurities may change frequently as a result of our evaluation of conditions in the financial markets, the maturity of specific investments, and our near termliquidity needs. We do not believe that our cash equivalents and marketable securities were subject to significant market risk at December 31, 2015. We have funded our operations primarily through the sale of equity securities and payments received under our collaboration and license agreements,including product revenue from Sandoz' sales of Enoxaparin Sodium Injection and GLATOPA. Since our inception through December 31, 2015, we have received$638 million through private and public issuances of equity securities, including approximately $148 million in net proceeds from our May 2015 public offering ofcommon stock and approximately $83 million under our At-the-Market Equity Offering Sales Agreements with Stifel, Nicolaus & Company, Incorporated enteredinto in May 2014 and April 2015 (the "ATM Agreements"). As of December 31, 2015, we had received a cumulative total of $659 million under our collaborationswith Sandoz, including $469 million in revenues on sales of Enoxaparin Sodium Injection and regulatory and commercial milestones related to that product and$63 million in revenues on sales of GLATOPA and regulatory and commercial milestones related to that product. In addition, we received $83 million under ourcollaboration with Baxalta, including a $33 million upfront payment,73Table of Contents$31 million in reimbursement of research and development services and costs and $19 million in license and milestone payments. In the first quarter of 2016, weexpect to receive a $45 million upfront payment from Mylan and, in addition to the upfront payment, in 2016 we expect to receive $60 million of the total$200 million in early development milestone payments from Mylan under our collaboration with Mylan. We expect to finance and manage our planned operating and expenditure requirements principally through our current cash, cash equivalents and marketablesecurities; capital raised through equity financings, including under our ATM Agreements; and future product revenues. We believe that these funds will besufficient to meet our operating requirements through at least the end of 2018.Cash used in operating activities The cash used for operating activities generally approximates our net loss adjusted for non-cash items and changes in operating assets and liabilities. Cash used in operating activities was $71.5 million for the year ended December 31, 2015 reflecting a net loss of $83.3 million, which was partially offset bynon-cash charges of $8.7 million for depreciation and amortization of property, equipment and intangible assets, $11.4 million for share-based compensation and$1.4 million for amortization of purchased premiums on our marketable securities. In addition, the net change in our operating assets and liabilities used cash of$9.7 million and resulted from: an increase in accounts receivable of $12.0 million, which includes receivables totaling $17.8 million for fourth quarter 2015GLATOPA and Enoxaparin Sodium Injection product revenues and the collection of a $4.7 million receivable for fourth quarter 2014 Enoxaparin Sodium Injectionroyalties; a decrease in unbilled revenue of $1.1 million primarily due to lower reimbursable FTEs and external costs for M923; a decrease in accounts payable of$3.4 million due to timing of vendor payments; an increase in accrued expenses of $14.2 million primarily due to process development services for our biosimilarsand novel therapeutics programs; a decrease in deferred revenue of $9.0 million, due to higher quarterly amortization of revenue from the $40 million arrangementconsideration from Baxalta; and a decrease in other long-term liabilities of $0.5 million, of which $0.2 million is the annual amortization of a job creation tax awardand $0.3 million is the amortization of the tenant improvement allowance over the term of the facility lease. Cash used in operating activities was $65.2 million for the year ended December 31, 2014 reflecting a net loss of $98.6 million, which was partially offset bynon-cash charges of $8.7 million for depreciation and amortization of property, equipment and intangible assets, $13.6 million for share-based compensation and$2.2 million for amortization of purchased premiums on our marketable securities. In addition, the net change in our operating assets and liabilities provided cashof $9.0 million and resulted from: decreases in accounts receivable and unbilled revenue totaling $6.2 million due to lower reimbursable FTEs and costs for M923as M923 entered the clinic in late 2014 (under the Baxalta Collaboration Agreement, Baxalta has responsibility for all clinical development and associated clinicalcosts once a biosimilar enters the clinic); an increase in accounts payable of $1.1 million due to timing of vendor payments; a decrease in accrued expenses of$1.1 million due to lower legal fees, lower compensation-based accruals, and lower process development and contract research costs for M923; an increase indeferred revenue of $3.3 million, which includes74 Year Ended December 31, 2015 2014 2013 (in thousands) Net cash used in operating activities $(71,515)$(65,168)$(86,832)Net cash (used in) provided by investing activities $(163,834)$75,173 $58,586 Net cash provided by financing activities $235,461 $21,578 $5,022 Net increase (decrease) in cash and cash equivalents $112 $31,583 $(23,224)Table of Contentsan increase related to the $7.0 million M834 license payment from Baxalta partially offset by amortization of $3.2 million of revenue from the $40 millionarrangement consideration from Baxalta and $0.5 million of revenue from the Sandoz equity premium; and a decrease in other long-term liabilities of $0.5 million,of which $0.2 million is the annual amortization of a job creation tax award and $0.3 million is the amortization of the tenant improvement allowance over the termof the facility lease. Cash used in operating activities was $86.8 million for the year ended December 31, 2013 reflecting a net loss of $108.4 million, which was partially offset bynon-cash charges of $8.2 million for depreciation and amortization of property, equipment and intangible assets, $12.8 million for share-based compensation and$3.6 million for amortization of purchased premiums on our marketable securities. In addition, the net change in our operating assets and liabilities used cash of$3.3 million and resulted from: an increase in accounts receivable of $2.3 million due to an increase in reimbursable M923 FTEs and expenses incurred inconnection with the Baxalta Collaboration Agreement offset by lower Enoxaparin Sodium Injection product revenue due to aggressive competitor pricingreductions; an increase in unbilled revenue of $2.6 million, primarily due to an increase in reimbursable M923 FTEs and expenses incurred in connection with theBaxalta Collaboration Agreement; a decrease in prepaid expenses and other current assets of $1.6 million, primarily due to the receipt of a $1.1 million job creationtax award and the receipt of a $0.4 million security deposit related to subleased office and laboratory space; an increase in restricted cash of $0.7 million due to thedesignation of this cash as collateral for a letter of credit related to the lease of office and laboratory space at 320 Bent Street; an increase in accounts payable of$2.7 million due to timing of M923 expenses incurred; an increase in accrued expenses of $1.8 million due to higher compensation-related accruals due toincreased staffing levels; a decrease in deferred revenue of $4.0 million, primarily due to the amortization of revenue from the $33.0 million Baxalta upfrontpayment; and an increase in other long-term liabilities of $0.3 million driven by the receipt of $0.7 million from our landlord for leasehold improvementsconstructed to our leased space at 320 Bent Street and partially offset by $0.3 million in amortization of the tenant improvement allowance over the term of ourfacility lease and $0.2 million in amortization of a job creation tax award.Cash (used in) provided by investing activities Cash used in investing activities of $163.8 million for the year ended December 31, 2015 includes cash inflows of $245.9 million from maturities ofmarketable securities offset by cash outflows of $405.6 million for purchases of marketable securities and $4.1 million for capital equipment and leaseholdimprovements. Cash provided by investing activities of $75.2 million for the year ended December 31, 2014 includes cash inflows of $195.3 million from maturities ofmarketable securities offset by cash outflows of $111.8 million for purchases of marketable securities and $8.3 million for capital equipment and leaseholdimprovements. Cash provided by investing activities of $58.6 million for the year ended December 31, 2013 includes cash inflows of $294.2 million from maturities ofmarketable securities and $3.8 million from sales of marketable securities, offset by cash outflows of $230.0 million for purchases of marketable securities and$9.5 million for capital equipment and leasehold improvements.Cash provided by financing activities Cash provided by financing activities of $235.5 million for the year ended December 31, 2015 includes $148.4 million of net proceeds from the sale of8.3 million shares of our common stock through an underwritten public offering, $64.5 million of net proceeds from the sale of 4.3 million shares of our commonstock under our ATM Agreements and $24.6 million from stock option exercises75Table of Contentsand purchases of shares of our common stock through our employee stock purchase plan, for total proceeds of $237.5 million. Total proceeds were partially offsetby $2.0 million of cash paid to tax authorities in connection with the vesting of employee performance-based restricted stock. Cash provided by financing activities of $21.6 million for the year ended December 31, 2014 includes $18.3 million of net proceeds from the ATM facilityand $3.3 million from stock option exercises and purchases of shares of our common stock through our employee stock purchase plan. Cash provided by financing activities of $5.0 million for the year ended December 31, 2013 consists solely of stock option exercises and purchases of sharesof our common stock through our employee stock purchase plan.Contractual Obligations Our major outstanding contractual obligations relate to license maintenance obligations including royalties payable to third parties, purchase commitments to acontractual research and manufacturing organization as well as operating lease obligations. During the three months ended December 31, 2015, we entered into purchase commitments for approximately $4.8 million related to analytical testingservices for certain of our programs. We expect to pay the amounts related to the purchase commitments over the next four quarters. In the event we terminate thepurchase commitment, we shall pay all amounts due for work performed by vendor through the termination date. The following table summarizes our contractual obligations and commercial commitments at December 31, 2015 (in thousands):Critical Accounting Policies and Estimates Our management's discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which havebeen prepared in accordance with United States generally accepted accounting principles, or GAAP. The preparation of these consolidated financial statementsrequires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at thedate of the consolidated financial statements, as well as the reported revenue generated and expenses incurred during the reporting periods. Our estimates are basedon our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for makingjudgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates underdifferent assumptions or conditions. We believe that the accounting policies discussed below are critical to understanding our historical and future performance, asthese policies relate to the more significant areas involving management's judgments and estimates.76Contractual Obligations Total 2016 2017 through 2018 2019 through 2020 After 2020 License maintenance obligations $1,163 $233 $465 $465 * Operating lease obligations 99,590 9,254 20,216 15,842 $54,278 Other non-cancelable contractual commitments 4,773 4,773 — — — Total contractual obligations $105,526 $14,260 $20,681 $16,307 $54,278 *After 2020, the annual obligations, which extend through the life of the patents are approximately $0.2 million per year.Table of ContentsRevenue Recognition We generate revenue from collaboration and license agreements with pharmaceutical companies for the development and commercialization of certain of ourproduct candidates. Collaboration and license agreements may include non-refundable upfront payments, reimbursement of research and development services andcosts, payments based upon the achievement of defined collaboration objectives, license fees and profit share and/or royalties on sales of product candidates if theyare successfully approved and commercialized. Our performance obligations under the collaborations may include the transfer of intellectual property rights in theform of licenses, obligations to provide research and development services and participation on certain committees with the collaborators. We make judgments thataffect the periods over which we recognize revenue. Our collaboration and license agreements may provide for reimbursement by our collaborators of a portion of our research and development expenses, and wemake judgments that affect how these reimbursements are recorded. In collaborations where we are actively engaged in the research and development activities andcontract directly with, manage the work of and are responsible for payments to third-party vendors for such development and related services, we recognizereimbursement of our research and development expenses as revenue. We recognize revenue when persuasive evidence of an arrangement exists; services have been performed or products have been delivered; the fee is fixed anddeterminable; and collection is reasonably assured. For collaborations with multiple-elements, at the inception of each agreement, we identify the deliverables included within the agreement and evaluate whichdeliverables may represent separate units of accounting based on criteria in the applicable revenue guidance, including whether the deliverable has stand-alonevalue to the collaborator. Deliverables under the arrangement are a separate unit of accounting if (i) the delivered item has value to the customer on a standalonebasis and (ii) the arrangement includes a general right of return relative to the delivered item and delivery or performance of the undelivered items are consideredprobable and substantially within the Company's control. As a biotechnology entity with proprietary research and development services, we have been unable todemonstrate stand-alone value for the delivery of product licenses apart from the related research and development services as the services are essential to thefunctionality of the product licenses. Arrangement consideration includes upfront payments and license payments. The Company determines how to allocate arrangement consideration toidentified units of accounting based on the selling price hierarchy provided under the relevant guidance. The selling price used for each unit of accounting is basedon vendor-specific objective evidence, if available, third-party evidence if vendor-specific objective evidence is not available or estimated selling price if neithervendor-specific nor third-party evidence is available. We expect, in general, to use the estimated selling price for allocating consideration to each deliverable.Management may be required to exercise considerable judgment in determining whether a deliverable is a separate unit of accounting and in estimating the sellingprices of identified units of accounting under its agreements. The estimated selling prices may be based on similar license arrangements, the nature of the researchand development services to be performed and market rates for similar services. The impact of any change in expected deliverables or arrangement consideration isaccounted for on a prospective basis. Upfront payments received in connection with licenses of our technology rights are deferred if facts and circumstances dictate that the product license does nothave stand-alone value apart from the related research and development services and are recognized as research and development revenue over the estimated periodof performance for the product. License payments are treated like upfront payments. Our estimate of the performance period is based on the period we expect todeliver research and development services under the collaboration. We periodically review our estimated periods of77Table of Contentsperformance based on the progress under each arrangement and account for the impact of any changes in estimated periods of performance on a prospective basis. At the inception of each agreement that includes milestone payments, we evaluate whether each milestone is substantive and at risk to both parties on the basisof the contingent nature of the milestone. We evaluate factors such as the scientific, regulatory, commercial and other risks that must be overcome to achieve therespective milestone, the level of effort and investment required to achieve the respective milestone and whether the milestone consideration is reasonable relativeto all deliverables and payment terms in the arrangement in making this assessment. Non-refundable payments that are contingent upon achievement of asubstantive milestone are recognized in their entirety in the period in which the milestone is achieved, assuming all other revenue recognition criteria are met. Werecognize non-substantive milestone payments over the remaining estimated period of performance once the milestone is achieved. Sales-based and commercialmilestones are accounted for as royalties and are recorded as revenue upon achievement of the milestone, assuming all other revenue recognition criteria are met. We record product revenue on Sandoz' sales of Enoxaparin Sodium Injection and GLATOPA. Product revenue is based upon net sales of licensed products inlicensed territories in the period the sales occur as provided by the collaboration agreement. These amounts are determined based on amounts Sandoz provides to usand involve the use of estimates and judgments, such as product sales allowances and accruals related to prompt payment discounts, chargebacks, governmentaland other rebates, distributor, wholesaler and group purchasing organizations, or GPO, fees, and product returns, which could be adjusted based on actual results inthe future. Sandoz began selling Enoxaparin Sodium Injection in July 2010. Under the original payment terms of our 2003 collaboration agreement with Sandoz (the"2003 Sandoz Collaboration Agreement"), as discussed in Note 9 to our consolidated financial statements " Collaborations and License Agreements," Sandoz wasobligated to pay us either a contractually-defined profit-share or royalty on net sales depending on the kind and number of other marketed generic versions ofLOVENOX. We received 45% of profits from July 2010 through September 2011, a royalty on net sales from October 2011 through December 2011 and a share ofprofits in January 2012. From February 2012 to March 2015, we received a 10% royalty on net sales (12% on net sales above a certain threshold). In June 2015, weand Sandoz amended the 2003 Sandoz Collaboration Agreement, effective April 1, 2015, to provide that Sandoz would pay us 50% of contractually-defined profitson sales of Enoxaparin Sodium Injection. Sandoz commenced sales of GLATOPA in the United States on June 18, 2015. Under the 2006 Sandoz Collaboration Agreement, we are entitled to earn 50%of contractually-defined profits on Sandoz' sales of GLATOPA. A portion of certain GLATOPA legal expenses, including any patent infringement damages, isdeducted from our profits in proportion to our 50% profit sharing interest.Fair Value Measurements Financial assets that we measure at fair value on a recurring basis include cash equivalents and marketable securities. These financial assets are generallyclassified as Level 1 or 2 within the fair value hierarchy. In general, fair values determined by Level 1 inputs utilize quoted prices (unadjusted) in active markets foridentical assets or liabilities. Fair values determined by Level 2 inputs utilize data points that are observable, such as quoted prices (adjusted), interest rates andyield curves. Fair values determined by Level 3 inputs utilize unobservable data points for the asset or liability, and include situations where there is little, if any,market activity for the asset or liability. The fair value hierarchy level is determined by the lowest level of significant input. Our financial assets have been initially valued at the transaction price and subsequently valued at the end of each reporting period, typically utilizing third-party pricing services or other market observable data. The pricing services utilize industry standard valuation models, including both income78Table of Contentsand market based approaches, and observable market inputs to determine value. These observable market inputs include reportable trades, benchmark yields, creditspreads, broker/dealer quotes, bids, offers, current spot rates and other industry and economic events. We validate the prices provided by its third-party pricingservices by reviewing their pricing methods and matrices, obtaining market values from other pricing sources, analyzing pricing data in certain instances andconfirming that the relevant markets are active. We did not adjust or override any fair value measurements provided by its pricing services as of December 31,2015 and December 31, 2014. During the years ended December 31, 2015 and 2014, there were no transfers between Level 1 and Level 2 financial assets. We did not have any non-recurringfair value measurements on any assets or liabilities at December 31, 2015 and December 31, 2014. The carrying amounts reflected in our consolidated balancesheets for cash, accounts receivable, unbilled revenue, other current assets, accounts payable and accrued expenses approximate fair value due to their short-termmaturities.Accrued Research and Development Expenses As part of the process of preparing financial statements, we are required to estimate and accrue expenses, the largest of which are research and developmentexpenses. This process involves the following:•communicating with appropriate internal personnel to identify services that have been performed on our behalf and estimating the level of serviceperformed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of actual cost; •estimating and accruing expenses in our consolidated financial statements as of each balance sheet date based on facts and circumstances known tous at the time; and •periodically confirming the accuracy of our estimates with service providers and making adjustments, if necessary. Examples of estimated research and development expenses that we accrue include:•fees paid to CROs in connection with process development and manufacturing activities; •fees paid to CROs in connection with nonclinical and toxicology studies and clinical trials; •fees paid to investigative sites in connection with clinical trials; and •professional service fees for consulting and related services. We base our expense accruals related to clinical trials on our estimates of the services received and efforts expended pursuant to contracts with multipleresearch institutions and CROs that conduct and manage clinical trials on our behalf. The financial terms of these agreements vary from contract to contract andmay result in uneven payment flows. Payments under some of these contracts depend on factors such as the successful enrollment of patients and the completion ofclinical trial milestones. In accruing service fees, we estimate the time period over which services will be performed and the level of effort to be expended in eachperiod. If we do not identify costs that we have begun to incur or if we underestimate or overestimate the level of services performed or the costs of these services,our actual expenses could differ from our estimates. To date, we have not experienced significant changes in our estimates of accrued research and development expenses after a reporting period. However, due tothe nature of estimates, we cannot assure you that we will not make changes to our estimates in the future as we become aware of additional information about thestatus or conduct of our clinical trials and other research activities.79Table of ContentsShare-Based Compensation We recognize the fair value of share-based compensation in our consolidated statements of comprehensive loss. Share-based compensation expense primarilyrelates to stock options, restricted stock and stock issued under our stock option plans and employee stock purchase plan. For stock options, we recognize share-based compensation expense equal to the fair value of the stock options on a straight-line basis over the requisite service period. For time-based restricted stockawards, we record share-based compensation expense equal to the market value on the date of the grant on a straight-line basis over each award's explicit serviceperiod. For performance-based restricted stock awards, at each reporting period we assess the probability that the performance condition(s) will be achieved. Wethen expense the awards over the implicit service period based on the probability of achieving the performance objectives. We estimate an award's implicit serviceperiod based on our best estimate of the period over which an award's vesting condition(s) will be achieved. We review and evaluate these estimates on a quarterlybasis and will recognize any remaining unrecognized compensation as of the date of an estimate revision over the revised remaining implicit service period. Weissue new shares upon stock option exercises, upon the grant of restricted stock awards and under our employee stock purchase plan. We estimate the fair value of each option award on the date of grant using the Black-Scholes-Merton option-pricing model. The Black-Scholes option-pricingmodel requires the use of highly subjective assumptions which determine the fair value of share-based awards. These assumptions include:•Expected term. The expected term represents the period that share-based awards are expected to be outstanding. We use a blend of our ownhistorical data and peer data to estimate option exercise patterns and post-vesting employment termination behavior, adjusted for known trends, toarrive at the estimated expected life of an option. For purposes of identifying peer entities, we consider characteristics such as industry, stage of lifecycle and financial leverage. We review and evaluate these assumptions regularly to reflect recent historical data. •Expected volatility. For our expected volatility assumption, we consider, among other factors, the implied volatilities of our currently tradedoptions to provide an estimate of volatility based upon current trading activity. We use a blended volatility rate based upon our historicalperformance, as well as the implied volatilities of our currently traded options, as we believe this appropriately reflects the expected volatility of ourstock. Changes in market price directly affect volatility and could cause share-based compensation expense to vary significantly in future reportingperiods. •Risk-free interest rate. The risk free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods correspondingwith the expected term. •Expected dividends. We have not paid and do not anticipate paying any dividends in the near future, and therefore we used an expected dividendyield of zero in the valuation model. In addition to the Black-Scholes assumptions, we apply an estimated forfeiture rate to current period expense to recognize share-based compensation expenseonly for those stock and option awards expected to vest. We estimate forfeitures based upon historical data, adjusted for known trends, and will adjust our estimateof forfeitures if actual forfeitures differ, or are expected to differ from such estimates. Subsequent changes in estimated forfeitures will be recognized in fullthrough a cumulative adjustment in the period of change and will also impact the amount of share-based compensation expense in future periods.80Table of ContentsIncome Taxes We determine our deferred tax assets and liabilities based on the differences between the financial reporting and tax bases of assets and liabilities. Thedeferred tax assets and liabilities are measured using the enacted tax rates that will be in effect when the differences are expected to reverse. A valuation allowanceis recorded when it is more likely than not that the deferred tax asset will not be recovered. We apply judgment in the determination of the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.We recognize any material interest and penalties related to unrecognized tax benefits in income tax expense. We file income tax returns in the United States federal jurisdiction and multiple state jurisdictions. We are no longer subject to any tax assessment from anincome tax examination for years before 2012, except to the extent that in the future we utilize net operating losses or tax credit carryforwards that originatedbefore 2012.New Accounting Standards Please see Note 2 to our consolidated financial statements, "Summary of Significant Accounting Policies" , for a discussion of new accounting standards. Thenotes to our consolidated financial statements are contained in Part II, Item 8 of this Annual Report on Form 10-K.Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We are exposed to market risk related to changes in interest rates. Our current investment policy is to maintain an investment portfolio consisting mainly ofUnited States money market, government-secured, and high-grade corporate securities, directly or through managed funds, with maturities of twenty-four monthsor less. Our cash is deposited in and invested through highly rated financial institutions in North America. Our marketable securities are subject to interest rate riskand will fall in value if market interest rates increase. However, due to the conservative nature of our investments, low prevailing market rates and relatively shorteffective maturities of debt instruments, interest rate risk is mitigated. If market interest rates were to increase immediately and uniformly by 10% from levels atDecember 31, 2015, we estimate that the fair value of our investment portfolio would decline by an immaterial amount. We do not own derivative financialinstruments in our investment portfolio. Accordingly, we do not believe that there is any material market risk exposure with respect to derivative, foreign currencyor other financial instruments that would require disclosure under this item.81Table of ContentsItem 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Report of Independent Registered Public Accounting Firm The Board of Directors and Stockholders of Momenta Pharmaceuticals, Inc. We have audited the accompanying consolidated balance sheets of Momenta Pharmaceuticals, Inc. as of December 31, 2015 and 2014, and the relatedconsolidated statements of comprehensive loss, stockholders' equity and cash flows for each of the three years in the period ended December 31, 2015. Thesefinancial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on ouraudits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require thatwe plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includesexamining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principlesused and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide areasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of MomentaPharmaceuticals, Inc. at December 31, 2015 and 2014, and the consolidated results of its operations and its cash flows for each of the three years in the periodended December 31, 2015, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Momenta Pharmaceuticals, Inc.'sinternal control over financial reporting as of December 31, 2015, based on criteria established in Internal Control—Integrated Framework issued by the Committeeof Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 26, 2016 expressed an unqualified opinion thereon./s/ Ernst & Young LLPBoston, Massachusetts February 26, 201682Table of ContentsMOMENTA PHARMACEUTICALS, INC.CONSOLIDATED BALANCE SHEETS(in thousands, except per share amounts) The accompanying notes are an integral part of these consolidated financial statements.83 December 31, 2015 2014 Assets Current assets: Cash and cash equivalents $61,461 $61,349 Marketable securities 288,583 130,180 Accounts receivable 19,385 7,427 Unbilled revenue 1,800 2,909 Prepaid expenses and other current assets 3,479 3,465 Total current assets 374,708 205,330 Property and equipment, net 21,896 25,422 Restricted cash 20,660 20,719 Intangible assets, net 3,528 4,589 Other long-term assets 248 156 Total assets $421,040 $256,216 Liabilities and Stockholders' Equity Current liabilities: Accounts payable $4,053 $7,433 Accrued expenses 24,499 10,348 Deferred revenue 9,770 5,490 Other current liabilities 460 518 Total current liabilities 38,782 23,789 Deferred revenue, net of current portion 12,213 25,508 Other long-term liabilities 69 551 Total liabilities 51,064 49,848 Commitments and contingencies (Note 14) Stockholders' Equity: Preferred stock, $0.01 par value per share; 5,000 shares authorized at December 31, 2015 and 2014,100 shares of Series A Junior Participating Preferred Stock, $0.01 par value per share designatedand no shares issued and outstanding — — Common stock, $0.0001 par value per share; 100,000 shares authorized at December 31, 2015 and2014, 69,077 and 54,486 shares issued and outstanding at December 31, 2015 and 2014,respectively 7 5 Additional paid-in capital 824,385 575,438 Accumulated other comprehensive income (loss) 4 (16)Accumulated deficit (452,372) (369,059)Treasury stock, at cost, 119 shares and zero shares at December 31, 2015 and December 31, 2014,respectively (2,048) — Total stockholders' equity 369,976 206,368 Total liabilities and stockholders' equity $421,040 $256,216 Table of ContentsMOMENTA PHARMACEUTICALS, INC.CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS(in thousands, except per share amounts) The accompanying notes are an integral part of these consolidated financial statements.84 Year Ended December 31, 2015 2014 2013 Collaboration revenues: Product revenue $48,503 $19,963 $16,701 Research and development revenue 41,147 32,287 18,764 Total collaboration revenue 89,650 52,250 35,465 Operating expenses: Research and development* 126,033 106,482 103,999 General and administrative* 48,051 45,164 41,057 Total operating expenses 174,084 151,646 145,056 Operating loss (84,434) (99,396) (109,591)Other income: Interest income 808 548 950 Other income 313 248 233 Total other income 1,121 796 1,183 Net loss $(83,313)$(98,600)$(108,408)Net loss per share: Basic and diluted $(1.32)$(1.91)$(2.13)Weighted average shares outstanding: Basic and diluted 63,130 51,664 50,907 Comprehensive loss: Net loss $(83,313)$(98,600)$(108,408)Net unrealized holding gains (losses) on available-for-sale marketable securities 20 (41) (86)Comprehensive loss $(83,293)$(98,641)$(108,494)* Non-cash share-based compensation expense included in operating expenses is asfollows: Research and development $5,145 $6,204 $5,520 General and administrative $6,295 $7,390 $7,302 Table of ContentsMOMENTA PHARMACEUTICALS, INC.CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY(in thousands) Common Stock Accumulated Other Comprehensive Income (Loss) Treasury Stock Par Value Additional Paid-In Capital Accumulated Deficit Total Stockholders' Equity Shares Shares Amount Balances at December 31,2012 51,709 $5 $522,422 $111 $(162,051) — $— $360,487 Issuance of common stockpursuant to the exercise ofstock options and employeestock purchase plan 516 — 5,022 — — — — 5,022 Issuance of restricted stock 172 — — — — — — — Cancellation of restricted stock (40) — — — — — — — Share-based compensationexpense for employees — — 12,668 — — — — 12,668 Share-based compensationexpense for non-employees — — 154 — — — — 154 Unrealized loss on marketablesecurities — — — (86) — — — (86)Net loss — — — — (108,408) — — (108,408)Balances at December 31,2013 52,357 $5 $540,266 $25 $(270,459) — $— $269,837 Net proceeds from issuance ofcommon stock pursuant tothe ATM facility 1,612 — 18,305 — — — — 18,305 Issuance of common stockpursuant to the exercise ofstock options and employeestock purchase plan 332 — 3,273 — — — — 3,273 Issuance of restricted stock 227 — — — — — — — Cancellation of restricted stock (42) — — — — — — — Share-based compensationexpense for employees — — 13,562 — — — — 13,562 Share-based compensationexpense for non-employees — — 32 — — — — 32 Unrealized loss on marketablesecurities — — — (41) — — — (41)Net loss — — — — (98,600) — — (98,600)Balances at December 31,2014 54,486 $5 $575,438 $(16)$(369,059) — $— $206,368 Proceeds from public offeringof common stock, net ofissuance costs 8,337 1 148,438 — — 148,439 Net proceeds from issuance ofcommon stock pursuant tothe ATM facilities 4,303 1 64,502 — — — — 64,503 Issuance of common stockpursuant to the exercise ofstock options and employeestock purchase plan 1,846 — 24,567 — — — — 24,567 Repurchase of common stockpursuant to share surrender — — — — — (119) (2,048) (2,048)Issuance of restricted stock 255 — — — — — — — Cancellation/forfeiture ofrestricted stock (150) — — — — — — — Share-based compensationexpense for employees — — 11,189 — — — — 11,189 Share-based compensationexpense for non-employees — — 251 — — — — 251 Unrealized gain on marketablesecurities — — — 20 — — — 20 Net loss — — — — (83,313) — — (83,313) The accompanying notes are an integral part of these consolidated financial statements.85Balances at December 31,2015 69,077 $7 $824,385 $4 $(452,372) (119)$(2,048)$369,976 Table of ContentsMOMENTA PHARMACEUTICALS, INC.CONSOLIDATED STATEMENTS OF CASH FLOWS(in thousands) The accompanying notes are an integral part of these consolidated financial statements.86 Year Ended December 31, 2015 2014 2013 Cash Flows from Operating Activities: Net loss $(83,313)$(98,600)$(108,408)Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization of property and equipment 7,594 7,637 7,108 Share-based compensation expense 11,440 13,594 12,822 Amortization of premium on investments 1,383 2,162 3,575 Amortization of intangibles 1,061 1,061 1,061 Impairment of equity investment — — 244 Loss on disposal of assets — — 23 Changes in operating assets and liabilities: Accounts receivable (11,958) 5,668 (2,284)Unbilled revenue 1,109 504 (2,613)Prepaid expenses and other current assets (14) (64) 1,552 Restricted cash 59 — (748)Other long-term assets (92) — — Accounts payable (3,380) 1,126 2,727 Accrued expenses 14,151 (1,099) 1,806 Deferred revenue (9,015) 3,282 (3,979)Other current liabilities (58) 22 (18)Other long-term liabilities (482) (461) 300 Net cash used in operating activities (71,515) (65,168) (86,832)Cash Flows from Investing Activities: Purchases of property and equipment (4,068) (8,360) (9,450)Purchases of marketable securities (405,673) (111,809) (229,969)Proceeds from maturities of marketable securities 245,907 195,342 294,183 Proceeds from sales of marketable securities — — 3,822 Net cash (used in) provided by investing activities (163,834) 75,173 58,586 Cash Flows from Financing activities: Proceeds from public offering of common stock, net of issuance costs 148,439 — — Net proceeds from issuance of common stock under ATM facility 64,503 18,305 — Proceeds from issuance of common stock under stock plans 24,567 3,273 5,022 Repurchase of common stock pursuant to share surrender (2,048) — — Net cash provided by financing activities 235,461 21,578 5,022 Increase (decrease) in cash and cash equivalents 112 31,583 (23,224)Cash and cash equivalents, beginning of period 61,349 29,766 52,990 Cash and cash equivalents, end of period $61,461 $61,349 $29,766 Table of ContentsMOMENTA PHARMACEUTICALS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS1. The CompanyBusiness Momenta Pharmaceuticals, Inc. (the "Company" or "Momenta") was incorporated in the state of Delaware in May 2001 and began operations in early 2002.Its facilities are located in Cambridge, Massachusetts. Momenta is a biotechnology company focused on developing generic versions of complex drugs, biosimilarsand novel therapeutics for oncology and autoimmune disease. The Company presently derives all of its revenue from its collaborations.2. Summary of Significant Accounting PoliciesPrinciples of Consolidation The accompanying consolidated financial statements reflect the operations of the Company and the Company's wholly-owned subsidiary MomentaPharmaceuticals Securities Corporation. All significant intercompany accounts and transactions have been eliminated.Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles in the United States, or GAAP, requires management tomake estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of theconsolidated financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, the Company evaluates itsestimates and judgments, including those related to revenue recognition, accrued expenses, and share-based payments. The Company bases its estimates onhistorical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about thecarrying values of assets and liabilities. Actual results could differ from those estimates.Revenue Recognition The Company recognizes revenue when persuasive evidence of an arrangement exists; services have been performed or products have been delivered; the feeis fixed and determinable; and collection is reasonably assured. The Company enters into collaboration and license agreements for the development and commercialization of biosimilar products. The Company'sperformance obligations under the terms of these agreements may include (i) transfer of intellectual property rights (licenses), (ii) providing research anddevelopment services, and (iii) participation on certain committees with the collaborators. Payments to the Company under these agreements may includenonrefundable upfront license fees, payments for research and development services and costs, payments based upon the achievement of defined collaborationobjectives and profit share and/or royalties on product sales. For revenue agreements with multiple-elements, the Company identifies the deliverables included within the agreement and evaluates which deliverables mayrepresent separate units of accounting based on the achievement of certain criteria, including whether the delivered element has stand-alone value to thecollaborator. Deliverables under the arrangement are a separate unit of accounting if (i) the delivered item has value to the customer on a standalone basis and (ii) ifthe arrangement includes a general right of return relative to the delivered item and delivery or performance of the undelivered items are considered probable andsubstantially within the Company's control.87Table of Contents The Company determines how to allocate arrangement consideration to identified units of accounting based on the selling price hierarchy provided under therelevant guidance. The selling price used for each unit of accounting is based on vendor-specific objective evidence, if available, third-party evidence if vendor-specific objective evidence is not available or estimated selling price if neither vendor-specific nor third-party evidence is available. Management may be requiredto exercise considerable judgment in determining whether a deliverable is a separate unit of accounting and in estimating the selling prices of identified units ofaccounting under its agreements. Upfront payments received in connection with licenses of the Company's technology rights are deferred if facts and circumstances dictate that the license doesnot have stand-alone value. Such payments are recognized as revenue over the estimated period of performance. The Company regularly reviews the estimatedperiod of performance based on the progress made under each arrangement. Amounts received as funding of research and development activities are recognized asrevenue when the Company contracts directly with, manages the work of and is responsible for payments to third-party vendors for such development and relatedservices. Payments that are contingent upon the achievement of a substantive milestone are recognized in their entirety in the period in which the milestone is achieved,assuming all other revenue recognition criteria are met. Milestones are defined as an event that can only be achieved based on the Company's performance andthere is substantive uncertainty about whether the event will be achieved at the inception of the arrangement. Events that are contingent only on the passage of timeor only on counterparty performance are not considered milestones under accounting guidance. The Company's evaluation includes an assessment of whether(a) the consideration is commensurate with either (1) the Company's performance to achieve the milestone, or (2) the enhancement of the value of the delivereditem(s) as a result of a specific outcome resulting from the Company's performance to achieve the milestone, (b) the consideration relates solely to pastperformance and (c) the consideration is reasonable relative to all of the deliverables and payment terms within the arrangement. The Company evaluates factorssuch as the scientific, regulatory, commercial and other risks that must be overcome to achieve the respective milestone, the level of effort and investment requiredto achieve the respective milestone and whether the milestone consideration is reasonable relative to all deliverables and payment terms in the arrangement inmaking this assessment. Non-substantive contingent payments are classified as deferred revenue if they are ultimately expected to result in revenue recognition. The Companyrecognizes non-substantive contingent payments over the remaining estimated period of performance once the specific objective is achieved. Sales-based andcommercial milestones are accounted for as royalties and are recorded as revenue upon achievement of the milestone, assuming all other revenue recognitioncriteria are met. Profit share and/or royalty revenue is reported as product revenue and is recognized based upon net sales or contractual profit of licensed products in licensedterritories in the period the sales occur as provided by the collaboration agreement. These amounts are determined based on amounts provided by the collaborationpartner and involve the use of estimates and judgments, such as product sales allowances and accruals related to prompt payment discounts, chargebacks,governmental and other rebates, distributor, wholesaler and group purchasing organizations, or GPO, fees, and product returns, which could be adjusted based onactual results in the future.Cash, Cash Equivalents and Marketable Securities The Company invests its cash in bank deposits, money market accounts, corporate debt securities, United States treasury obligations, commercial paper, asset-backed securities, overnight repurchase agreements and United States government-sponsored enterprise securities in accordance with its investment policy. TheCompany has established guidelines relating to diversification and maturities that allow the Company to manage risk.88Table of Contents The Company invests its excess cash balances in short-term and long-term marketable debt securities. The Company classifies its investments in marketabledebt securities as available-for-sale based on facts and circumstances present at the time it purchased the securities. Purchased premiums or discounts onmarketable debt securities are amortized to interest income through the stated maturities of the debt securities. The Company reports available-for-sale investmentsat fair value at each balance sheet date and includes any unrealized holding gains and losses (the adjustment to fair value) in accumulated other comprehensiveincome (loss), a component of stockholders' equity. Realized gains and losses are determined using the specific identification method and are included in interestincome. To determine whether an other-than-temporary impairment exists, the Company considers whether it intends to sell the debt security and, if it does notintend to sell the debt security, it considers available evidence to assess whether it is more likely than not that it will be required to sell the security before therecovery of its amortized cost basis. The Company reviewed its investments with unrealized losses and concluded that no other-than-temporary impairment existedat December 31, 2015 as it has the ability and intent to hold these investments to maturity and it is not more likely than not that it will be required to sell thesecurity before the recovery of its amortized cost basis. The Company did not record any impairment charges related to its marketable securities during the yearsended December 31, 2015, 2014 and 2013. There were no realized gains or losses on marketable securities during the years ended December 31, 2015 or 2014.Realized gains on marketable securities for the year ended December 31, 2013 were immaterial. The Company's marketable securities are classified as cashequivalents if the original maturity, from the date of purchase, is 90 days or less, and as marketable securities if the original maturity, from the date of purchase, isin excess of 90 days. The Company's cash equivalents are primarily composed of money market funds carried at fair value, which approximates cost atDecember 31, 2015 and 2014.Fair Value Measurements The Company measures certain financial assets including cash equivalents and marketable securities at fair value on a recurring basis. These financial assetsare generally classified as Level 1 or 2 within the fair value hierarchy. In general, fair values determined by Level 1 inputs utilize quoted prices (unadjusted) inactive markets for identical assets or liabilities. Fair values determined by Level 2 inputs utilize data points that are observable, such as quoted prices (adjusted),interest rates and yield curves. Fair values determined by Level 3 inputs utilize unobservable data points for the asset or liability, and include situations where thereis little, if any, market activity for the asset or liability. The fair value hierarchy level is determined by the lowest level of significant input. The Company's financial assets have been initially valued at the transaction price and subsequently valued at the end of each reporting period, typicallyutilizing third-party pricing services or other market observable data. The pricing services utilize industry standard valuation models, including both income andmarket based approaches, and observable market inputs to determine value. These observable market inputs include reportable trades, benchmark yields, creditspreads, broker/dealer quotes, bids, offers, current spot rates and other industry and economic events. The Company validates the prices provided by its third-partypricing services by reviewing their pricing methods and matrices, obtaining market values from other pricing sources, analyzing pricing data in certain instancesand confirming that the relevant markets are active. The Company did not adjust or override any fair value measurements provided by its pricing services as ofDecember 31, 2015 and December 31, 2014. The carrying amounts reflected in the Company's consolidated balance sheets for cash, accounts receivable, unbilled receivables, other current assets, accountspayable and accrued expenses approximate fair value due to their short-term maturities.89Table of ContentsConcentration of Credit Risks The Company's primary exposure to credit risk derives from its cash, cash equivalents, marketable securities and accounts receivable.Accounts Receivable and Unbilled Revenue Accounts receivable represents amounts due to the Company at December 31, 2015 from collaborators related to profit share due on net sales of EnoxaparinSodium Injection and GLATOPA, as well as reimbursement of research and development services and external costs. Accounts receivable represents amounts dueto the Company at December 31, 2014 from collaborators related to royalties due on net sales of Enoxaparin Sodium Injection and reimbursement of research anddevelopment services and external costs. Unbilled revenue represents amounts owed at December 31, 2015 and December 31, 2014 from collaborators forreimbursement of research and development services and external costs. The Company has not recorded any allowance for uncollectible accounts or bad debt write-offs and it monitors its receivables to facilitate timely payment.Deferred Revenue Deferred revenue represents consideration received from collaborators in advance of achieving certain criteria that must be met for revenue to be recognized inconformity with GAAP.Property and Equipment Property and equipment are stated at cost. Costs of major additions and betterments are capitalized; maintenance and repairs which do not improve or extendthe life of the respective assets are charged to expense. Upon disposal, the related cost and accumulated depreciation or amortization is removed from the accountsand any resulting gain or loss is included in the consolidated statements of operations. Depreciation is computed using the straight-line method over the estimateduseful lives of the assets, which range from three to seven years. Leased assets meeting certain capital lease criteria are capitalized and the present value of therelated lease payments is recorded as a liability. Assets under capital lease arrangements are depreciated using the straight-line method over their estimated usefullives. Leasehold improvements are amortized over the estimated useful lives of the assets or related lease terms, whichever is shorter. When the Company disposesof property and equipment, it removes the associated cost and accumulated depreciation from the related accounts on its consolidated balance sheet and includesany resulting gain or loss in its consolidated statement of income (loss).Long-Lived Assets The Company evaluates the recoverability of its property, equipment and intangible assets when circumstances indicate that an event of impairment may haveoccurred. The Company recognizes an impairment loss only if the carrying amount of a long-lived asset is not recoverable based on its undiscounted future cashflows. Impairment is measured based on the difference between the carrying value of the related assets or businesses and the fair value of such assets or businesses.No impairment charges have been recognized through December 31, 2015.Research and Development Research and development expenses consist of costs incurred to conduct research, such as the discovery and development of the Company's productcandidates. Research and development costs are expensed as incurred. These expenses consist primarily of salaries and related expenses for personnel, license fees,consulting fees, nonclinical and clinical trial costs, contract research and manufacturing costs, and the costs of laboratory equipment and facilities.90Table of Contents Non-refundable advance payments for goods or services to be received in the future for use in research and development activities are deferred andcapitalized. The capitalized amounts are expensed as the related goods are delivered or the services are received.Share-Based Compensation Expense The Company recognizes the fair value of share-based compensation in its consolidated statements of comprehensive loss. Share-based compensation expenseprimarily relates to stock options, restricted stock and stock issued under its stock option plans and the employee stock purchase plan ("ESPP"). For stock options,the Company recognizes share-based compensation expense equal to the fair value of the stock options on a straight-line basis over the requisite service period. Fortime-based restricted stock awards, the Company records share-based compensation expense equal to the market value on the date of the grant on a straight-linebasis over each award's explicit service period. For performance-based restricted stock, at each reporting period the Company assesses the probability that theperformance condition(s) will be achieved. The Company then expenses the awards over the implicit service period based on the probability of achieving theperformance conditions. The Company estimates an award's implicit service period based on its best estimate of the period over which an award's vestingcondition(s) will be achieved. The Company reviews and evaluates these estimates on a quarterly basis and will recognize any remaining unrecognizedcompensation as of the date of an estimate revision over the revised remaining implicit service period. The Company issues new shares upon stock optionexercises, upon the grant of restricted stock awards and under its ESPP. The Company estimates the fair value of each option award on the date of grant using the Black-Scholes-Merton option-pricing model. The Black-Scholes-Merton option-pricing model requires the Company to develop certain subjective assumptions including the expected volatility of its stock, the expected term of theaward and the expected forfeiture rate associated with the Company's stock option plan. The Company considers, among other factors, the implied volatilities of itscurrently traded options to provide an estimate of volatility based upon current trading activity. The Company uses a blended volatility rate based upon its historicalperformance, as well as the implied volatilities of its currently traded options, as it believes this appropriately reflects the expected volatility of its stock. Changes inmarket price directly affect volatility and could cause share-based compensation expense to vary significantly in future reporting periods. The expected term of awards represents the period of time that the awards are expected to be outstanding. The Company uses a blend of its own historical dataand peer data to estimate option exercise and employee termination behavior, adjusted for known trends, to arrive at the estimated expected life of an option. Forpurposes of identifying peer entities, the Company considers characteristics such as industry, stage of life cycle and financial leverage. The Company reviews andevaluates these assumptions regularly to reflect recent historical data. The risk-free interest rate for periods within the expected term of the option is based on theUnited States Treasury yield curve in effect at the time of grant. The Company applies an estimated forfeiture rate to current period expense to recognize share-based compensation expense only for those stock and optionawards expected to vest. The Company estimates forfeitures based upon historical data, adjusted for known trends, and will adjust its estimate of forfeitures ifactual forfeitures differ, or are expected to differ from such estimates. Subsequent changes in estimated forfeitures will be recognized through a cumulativeadjustment in the period of change and will also impact the amount of share-based compensation expense in future periods. Unvested stock options held by consultants are revalued at each reporting period until vesting occurs using the Company's estimate of fair value.91Table of ContentsNet Loss Per Common Share The Company computes basic net loss per common share by dividing net loss by the weighted average number of common shares outstanding, which includescommon stock issued and outstanding and excludes unvested shares of restricted common stock. The Company computes diluted net loss per common share bydividing net loss by the weighted average number of common shares and potential shares from outstanding stock options and unvested restricted stock determinedby applying the treasury stock method.Income Taxes The Company uses the liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on thedifferences between the financial reporting and the tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effectwhen the differences are expected to reverse. The Company must then assess the likelihood that the resulting deferred tax assets will be realized. A valuationallowance is provided when it is more likely than not that some portion or all of a deferred tax asset will not be realized. The Company was profitable andgenerated taxable income in 2010 and 2011. Since 2011, the Company has generated operating losses and expects to continue to incur losses therefore the netdeferred tax assets have been fully offset by a valuation allowance. The Company recognizes uncertain income tax positions that are more likely than not to be sustained upon audit by the relevant taxing authority. An uncertainincome tax position will not be recognized if it has less than a 50% likelihood of being sustained. The Company's policy is to recognize interest and/or penaltiesrelated to income tax matters in income tax expense. The Company had accrued no amounts for interest and penalties in the Company's consolidated balance sheetsat December 31, 2015 and 2014. The Company files income tax returns in the United States federal jurisdiction and multiple state jurisdictions. The Company is no longer subject to any taxassessment from an income tax examination for years before 2012, except to the extent that in the future it utilizes net operating losses or tax credit carry forwardsthat originated before 2012. As of December 31, 2015, the Company was not under examination by the Internal Revenue Service or other jurisdictions for any taxyears.Comprehensive Loss Comprehensive income (loss) is the change in equity of a company during a period from transactions and other events and circumstances, excludingtransactions resulting from investments by owners and distributions to owners. Comprehensive income (loss) includes net (loss) income and the change inaccumulated other comprehensive income (loss) for the period. Accumulated other comprehensive income (loss) consists entirely of unrealized gains and losses onavailable-for-sale marketable securities for all periods presented.92Table of Contents The following tables summarize the changes in accumulated other comprehensive income (loss) during the years ended December 31, 2015 and December 31,2014 (in thousands): Segment Reporting Operating segments are determined based on the way management organizes its business for making operating decisions and assessing performance. Momenta is a biotechnology company focused on discovering and developing medicines in three product areas: complex generics, biosimilars and noveltherapeutics for oncology and autoimmune disease. The three product areas correspond with their respective regulatory pathways. However the Company'sportfolio of complex generics, biosimilars, and novel therapeutics have similar development risk and market characteristics. The Company does not operateseparate lines of business with respect to any of its products or product candidates and the Company does not prepare discrete financial information with respect tothe three product areas. Accordingly, the Company views its business as one reportable operating segment—the discovery, development and commercialization ofpharmaceutical products.New Accounting Pronouncements In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2014-09, Revenue from Contracts withCustomers (Topic 606), which supersedes all existing revenue recognition requirements, including most industry-specific guidance. The new standard requires acompany to recognize revenue when it transfers goods or services to customers in an amount that reflects the consideration that the company expects to receive forthose goods or services. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date,which delayed the effective date of the new standard from January 1, 2017 to January 1, 2018. The FASB also agreed to allow entities to choose to adopt thestandard as of the original effective date. The Company is currently evaluating the method of adoption and the potential impact that Topic 606 may have on itsfinancial position and results of operations.93 Unrealized Gains (Losses) on Securities Available for Sale Balance as of January 1, 2015 $(16)Other comprehensive income before reclassifications 20 Amounts reclassified from accumulated other comprehensive income — Net current period other comprehensive income 20 Balance as of December 31, 2015 $4 Unrealized Gains (Losses) on Securities Available for Sale Balance as of January 1, 2014 $25 Other comprehensive income before reclassifications (41)Amounts reclassified from accumulated other comprehensive income — Net current period other comprehensive income (41)Balance as of December 31, 2014 $(16)Table of Contents In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements—Going Concern (Subtopic 205-40). The ASU requires all entitiesto evaluate for the existence of conditions or events that raise substantial doubt about the entity's ability to continue as a going concern within one year after theissuance date of its financial statements. The accounting standard is effective for interim and annual periods after December 15, 2016, and will not have materialimpact on the consolidated financial statements, but may impact the Company's footnote disclosures. In November 2015, the FASB issued ASU No. 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes. The new standardrequires that deferred tax assets and liabilities be classified as noncurrent in a classified statement of financial position. The Company will adopt ASU No. 2015-17in 2016. The Company does not expect the adoption of this standard will have a material impact on its financial position and results of operations.3. Fair Value Measurements The tables below present information about the Company's assets that are measured at fair value on a recurring basis at December 31, 2015 and December 31,2014, and indicate the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value, which is described further within Note 2,Summary of Significant Accounting Policies . Financial assets measured at fair value on a recurring basis at December 31, 2015 and December 31, 2014 are summarized as follows (in thousands): 94Description Balance as of December 31, 2015 Quoted Prices in Active Markets (Level 1) Significant Other Observable Inputs (Level 2) Significant Other Unobservable Inputs (Level 3) Assets: Cash equivalents: Money market funds and overnight repurchase agreements $54,077 $30,077 $24,000 $— Marketable securities: U.S. government-sponsored enterprise securities 24,290 — 24,290 — Corporate debt securities 73,651 — 73,651 — Commercial paper obligations 125,805 — 125,805 — Asset-backed securities 64,837 — 64,837 — Total $342,660 $30,077 $312,583 $— Description Balance as of December 31, 2014 Quoted Prices in Active Markets (Level 1) Significant Other Observable Inputs (Level 2) Significant Other Unobservable Inputs (Level 3) Assets: Cash equivalents: Money market funds $55,283 $55,283 $— $— Corporate debt securities 980 — 980 — Marketable securities: Corporate debt securities 70,668 — 70,668 — Commercial paper obligations 15,250 — 15,250 — Foreign government bonds 18,520 — 18,520 — Asset-backed securities 25,742 — 25,742 — Total $186,443 $55,283 $131,160 $— Table of Contents As of December 31, 2015, the Company held $24.0 million in overnight repurchase agreements. Overnight purchase agreements yields are comparable tomoney market funds. Principal and interest on the instruments is due the next day. The instruments are classified as Level 2 due to the collateral including both U.S.government-sponsored enterprise securities and treasury instruments. For the years ended December 31, 2015 and 2014, there were no transfers between Level 1and Level 2 financial assets. The Company did not have any non-recurring fair value measurements on any assets or liabilities at December 31, 2015 andDecember 31, 2014.4. Cash, Cash Equivalents and Marketable Securities The following tables summarize the Company's cash, cash equivalents and marketable securities as of December 31, 2015 and December 31, 2014 (inthousands): At December 31, 2015 and December 31, 2014, the Company held 66 and 44 marketable securities, respectively, which were in a continuous unrealized lossposition for less than one year. At December 31, 2015, there were no marketable securities in a continuous unrealized loss position for greater than one year. AtDecember 31, 2014, there was one marketable security in a continuous unrealized loss position for greater than one year. The unrealized losses were caused byfluctuations in interest rates.95As of December 31, 2015 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Cash, money market funds and overnight repurchase agreements $61,461 $— $— $61,461 U.S. government-sponsored enterprise securities due in one year or less 24,285 5 — 24,290 Corporate debt securities due in one year or less 73,735 1 (84) 73,652 Commercial paper obligations due in one year or less 125,693 120 (8) 125,805 Asset-backed securities due in one year or less 64,866 — (30) 64,836 Total $350,040 $126 $(122)$350,044 Reported as: Cash and cash equivalents $61,461 $— $— $61,461 Marketable securities 288,579 126 (122) 288,583 Total $350,040 $126 $(122)$350,044 As of December 31, 2014 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Cash and money market funds $60,369 $— $— $60,369 Corporate debt securities due in one year or less 71,669 3 (24) 71,648 Commercial paper obligations due in one year or less 15,237 13 — 15,250 Foreign government bonds due in one year or less 18,519 2 (1) 18,520 Asset-backed securities due in one year or less 25,751 — (9) 25,742 Total $191,545 $18 $(34)$191,529 Reported as: Cash and cash equivalents $61,349 $— $— $61,349 Marketable securities 130,196 18 (34) 130,180 Total $191,545 $18 $(34)$191,529 Table of Contents The following table summarizes the aggregate fair value of these securities at December 31, 2015 and December 31, 2014 (in thousands):5. Property and Equipment As of December 31, 2015 and December 31, 2014, property and equipment, net consists of the following (in thousands): During 2015 and 2014, the Company disposed of laboratory equipment with total gross carrying amount of $0.3 million and $0.2 million, respectively, andaccumulated depreciation of $0.3 million and $0.2 million, respectively. Depreciation and amortization expense amounted to $7.9 million, $7.6 million and$7.1 million for the years ended December 31, 2015, 2014 and 2013, respectively.6. Intangible Assets Intangible assets consist solely of core developed technology acquired as part of a 2007 asset purchase agreement with Parivid LLC. See Part I, Item 1 "Business—Collaborations, Licenses and Asset Purchases—Parivid " in this Annual Report on Form 10-K for relevant disclosures. The developed technologyintangible assets are being amortized over the estimated useful life of the Enoxaparin Sodium Injection and GLATOPA developed technology of approximately10 years. As of December 31, 2015 and December 31, 2014, intangible assets, net of accumulated amortization, are as follows (in thousands): Amortization is computed using the straight-line method over the useful lives of the respective intangible assets as there is no other pattern of use that isreasonably estimable. Amortization expense was approximately $1.1 million in each of the years ended December 31, 2015, 2014 and 2013.96 As of December 31, 2015 As of December 31, 2014 Aggregate Fair Value Unrealized Losses Aggregate Fair Value Unrealized Losses Corporate debt securities due in one year or less $70,657 $(84)$63,221 $(24)Commercial paper obligations due in one year or less $33,734 $(8)$— $— Asset-backed securities due in one year or less $61,337 $(30)$25,742 $(9)Foreign government bonds due in one year or less $— $— $12,773 $(1) 2015 2014 Depreciable LivesComputer equipment $2,426 $2,005 3 yearsSoftware 9,900 9,001 3 yearsOffice furniture and equipment 2,524 2,436 5 to 6 yearsLaboratory equipment 43,286 40,626 7 yearsLeasehold improvements 12,735 12,735 Shorter of asset life or lease termLess: accumulated depreciation (48,975) (41,381) ​ $21,896 $25,422 ​ 2015 2014 Weighted-Average Amortization Period (in years) Gross Carrying Amount Accumulated Amortization Gross Carrying Amount Accumulated Amortization Total intangible assets for core anddeveloped technology and non-competeagreement 10 $10,427 $(6,899)$10,427 $(5,838)Table of Contents The Company expects to incur amortization expense of appropriately $1.1 million per year for each of the next three years (2016 to 2018) and $0.3 million inthe fourth year (2019).7. Restricted Cash The Company designated $17.5 million as collateral for a security bond posted in the litigation against Amphastar, International Medical Systems, Ltd., awholly owned subsidiary of Amphastar and, together with Amphastar ("Amphastar") and Actavis, as discussed within Note 14, Commitments and Contingencies .The $17.5 million is held in an escrow account by Hanover Insurance. The Company classified this restricted cash as long-term as the timing of a final decision inthe Enoxaparin Sodium Injection patent litigation is not known. The Company designated $2.4 million as collateral for a letter of credit related to the lease of office and laboratory space located at 675 West Kendall Street inCambridge, Massachusetts. This balance will remain restricted through the remaining term of the lease which ends in April 2015 and will remain restricted duringthe extension period, which ends in April 2018. The Company will earn interest on the balance. The Company designated $0.7 million as collateral for a letter of credit related to the lease of office and laboratory space located at 320 Bent Street inCambridge, Massachusetts. This balance will remain restricted through the lease term and during any lease term extensions. The Company will earn interest on thebalance.8. Accrued Expenses As of December 31, 2015 and December 31, 2014, accrued expenses consisted of the following (in thousands):9. Collaborations and License Agreements The following tables provide amounts by year and by line item included in the Company's consolidated statements of comprehensive loss attributable totransactions arising from its significant97 2015 2014 Accrued compensation $7,848 $6,912 Accrued contracted research costs 14,710 2,031 Accrued professional fees 1,354 828 Accrued royalties 19 165 Other 568 412 $24,499 $10,348 Table of Contentscollaborative arrangements and all other arrangements, as defined in the Financial Accounting Standards Board's Accounting Standards Codification Topic 808,Collaborative Arrangements . 98 For the Year Ended December 31, 2015 (in thousands) 2003 Sandoz Collaboration Agreement 2006 Sandoz Collaboration Agreement Baxalta Collaboration Agreement Total Collaborations Collaboration revenues: Product revenue $5,063 $43,440 $— $48,503 Research and development revenue: Milestone payments — 20,000 — 20,000 Amortization of upfront payments and licensepayments — — 9,014 9,014 Research and development services and external costs 789 2,861 8,483 12,133 Total research and development revenue $789 $22,861 $17,497 $41,147 Total collaboration revenues $5,852 $66,301 $17,497 $89,650 Operating expenses: Research and development expense(1) $324 $856 $1,851 $3,031 General and administrative expense(1) $344 $206 $963 $1,513 Total operating expenses $668 $1,062 $2,814 $4,544 For the Year Ended December 31, 2014 (in thousands) 2003 Sandoz Collaboration Agreement 2006 Sandoz Collaboration Agreement Baxalta Collaboration Agreement Total Collaborations Collaboration revenues: Product revenue $19,963 $— $— $19,963 Research and development revenue: Milestone payments — — 12,000 12,000 Amortization of upfront payments and licensepayments — 480 3,239 3,719 Research and development services and external costs 1,043 2,452 13,073 16,568 Total research and development revenue $1,043 $2,932 $28,312 $32,287 Total collaboration revenues $21,006 $2,932 $28,312 $52,250 Operating expenses: Research and development expense(1) $341 $920 $16,637 $17,898 General and administrative expense(1) $125 $299 $527 $951 Total operating expenses $466 $1,219 $17,164 $18,849 Table of Contents2003 Sandoz Collaboration Agreement In 2003, the Company entered into a collaboration and license agreement, or the 2003 Sandoz Collaboration Agreement, with Sandoz AG (formerlySandoz N.V. and Biochemie West Indies, N.V.) and Sandoz Inc. (formerly Geneva Pharmaceuticals, Inc.) to jointly develop, manufacture and commercializeEnoxaparin Sodium Injection, a generic version of LOVENOX®, in the United States. Sandoz N.V. later assigned its rights in the 2003 Sandoz CollaborationAgreement to Sandoz AG, an affiliate of Novartis Pharma AG. The Company refers to Sandoz AG and Sandoz Inc. together as Sandoz. Under the terms of the 2003 Sandoz Collaboration Agreement, the Company and Sandoz agreed to exclusively work with each other to develop andcommercialize Enoxaparin Sodium Injection for any and all medical indications within the United States. In addition, the Company granted Sandoz an exclusivelicense under our intellectual property rights to develop and commercialize injectable enoxaparin for all medical indications within the United States. The Companyidentified two significant deliverables in this arrangement consisting of: (i) the license and (ii) development and related services. The Company determined that thelicense did not meet the criteria for separation as it did not have stand-alone value apart from the development services, which are proprietary to the Company.Therefore, the Company determined that a single unit of accounting exists with respect to the 2003 Sandoz Collaboration Agreement. Sandoz began selling Enoxaparin Sodium Injection in July 2010. Under the original payment terms of the 2003 Sandoz Collaboration Agreement, Sandoz wasobligated to pay the Company either a contractually-defined profit-share or royalty on net sales depending on the kind and number of other marketed genericversions of LOVENOX. The Company received 45% of profits from July 2010 through September 2011, a royalty on net sales from October 2011 throughDecember 2011 and a share of profits in January 2012. From February 2012 to March 2015, the Company received a 10% royalty on net sales (12% on net salesabove a certain threshold). In June 2015, the Company and Sandoz amended the 2003 Sandoz Collaboration Agreement, effective April 1, 2015, to provide thatSandoz would pay the Company 50% of contractually-defined profits on sales. See "Product revenue" in the tables above for product revenue earned by theCompany in the years ended December 31, 2015, 2014 and 2013 on Sandoz' sales of Enoxaparin Sodium Injection.99 For the Year Ended December 31, 2013 (in thousands) 2003 Sandoz Collaboration Agreement 2006 Sandoz Collaboration Agreement Baxalta Collaboration Agreement Total Collaborations Collaboration revenues: Product revenue $16,701 $— $— $16,701 Research and development revenue: Amortization of upfront payments — 1,128 2,851 3,979 Research and development services and external costs 3,040 715 11,030 14,785 Total research and development revenue $3,040 $1,843 $13,881 $18,764 Total collaboration revenues $19,741 $1,843 $13,881 $35,465 Operating expenses: Research and development expense(1) $802 $2,525 $22,707 $26,034 General and administrative expense(1) $— $511 $493 $1,004 Total operating expenses $802 $3,036 $23,200 $27,038 (1)The amounts represent external expenditures, including amortization of an intangible asset, and exclude salaries and benefits, share-basedcompensation, facilities, depreciation and laboratory supplies, as these costs are not directly charged to programs.Table of Contents The Company is no longer eligible to receive milestones under the 2003 Sandoz Collaboration Agreement because the remaining milestones were contingentupon there being no third-party competitors marketing an interchangeable generic version of LOVENOX. The collaboration is governed by a joint steering committee and a joint project team, each consisting of an equal number of Sandoz and Companyrepresentatives. Most decisions must be made unanimously, with Sandoz collectively having one vote and the Company having one vote. Sandoz has the soleauthority to determine the price at which it sells Enoxaparin Sodium Injection. A portion of Enoxaparin Sodium Injection development expenses and certain legal expenses, which in the aggregate have exceeded a specified amount, areoffset against profit-sharing amounts, royalties and milestone payments. The Company's contractual share of such development and legal expenses is subject to anannual claw-back adjustment at the end of each of the first five product years, with the product year beginning on July 1 and ending on June 30. The annualadjustment can only reduce the Company's profits, royalties and milestones by up to 50% in a given calendar quarter and any excess amount due will be carriedforward into future quarters and reduce any profits in those future periods until it is paid in full. Annual adjustments, including amounts carried forward into futureperiods, are recorded as a reduction in product revenue. The annual adjustment was approximately $1.8 million for the product year ended June 30, 2015 and waspaid in full as of December 31, 2015. The annual adjustment of $2.2 million for the product year ended June 30, 2014 was decreased by $2.1 million to reflect anadjustment to royalties earned in the 2012 product year. The annual adjustment was $3.8 million for the product year ended June 30, 2013. The Company is reimbursed at a contractual FTE rate for any full-time equivalent employee expenses as well as any external costs incurred for commercialand related activities. The Company recognizes research and development revenue from FTE services and external costs upon completion of the performancerequirements (i.e., as the services are performed and the reimbursable costs are incurred). Revenues are recorded on a gross basis as the Company contracts directlywith, manages the work of and is responsible for payments to third-party vendors for such commercial and related services. See "Research and developmentrevenue" in the tables above for research and development revenue earned by the Company under the 2003 Sandoz Collaboration Agreement.2006 Sandoz Collaboration Agreement In 2006 and 2007, the Company entered into a series of agreements, including a collaboration and license agreement, as amended, or the 2006 SandozCollaboration Agreement, with Sandoz AG, or Sandoz; and a stock purchase agreement and an investor rights agreement, with Novartis Pharma AG, or Novartis.Under the 2006 Sandoz Collaboration Agreement, the Company and Sandoz agreed to exclusively collaborate on the development and commercialization ofCOPAXONE and M356, among other products. Costs, including development costs and the costs of clinical studies, will be borne by the parties in varyingproportions depending on the type of expense. For GLATOPA and M356, the Company is generally responsible for all of the development costs in the UnitedStates. For GLATOPA and M356 outside of the United States, the Company shares development costs in proportion to its profit sharing interest. The Company isreimbursed at a contractual FTE rate for any full-time equivalent employee expenses as well as any external costs incurred in the development of products to theextent development costs are born by Sandoz. All commercialization costs are borne by Sandoz. Sandoz commenced sales of GLATOPA in the United States on June 18, 2015. Under the 2006 Sandoz Collaboration Agreement, the Company earns 50% ofcontractually-defined profits on Sandoz' worldwide net sales of GLATOPA. The Company is entitled to earn 50% of contractually-defined profits on Sandoz'worldwide net sales of M356, if and when M356 is commercialized. Profits on net sales of GLATOPA and M356 are calculated by deducting from net sales thecosts of goods sold and an allowance for selling, general and administrative costs, which is a contractual percentage of net sales.100Table of ContentsSandoz is responsible for funding all of the legal expenses incurred under the 2006 Sandoz Collaboration Agreement; however a portion of certain legal expenses,including any patent infringement damages, can be offset against the profit-sharing amounts in proportion to the Company's 50% profit sharing interest. For the year ended December 31, 2015, the Company recorded $43.4 million in product revenues from Sandoz' sales of GLATOPA, reflecting $52.5 million inprofit share net of a deduction of $9.1 million for reimbursement to Sandoz of the Company's 50% share of pre-launch GLATOPA-related legal expenses. Theseexpenses consist primarily of the costs incurred by Sandoz in connection with the patent infringement suit brought in 2008 by Teva Pharmaceuticals Industries Ltd.and related parties. See Note 14 "Commitments and Contingencies" for information on the suit. In the year ended December 31, 2015, the Company earned a$10.0 million regulatory milestone payment upon GLATOPA receiving sole FDA approval and an additional $10.0 million milestone payment upon the firstcommercial sale. The Company is eligible to receive in the aggregate up to $120.0 million in additional milestone payments upon the achievement of certaincommercial and sales-based milestones for GLATOPA and M356 in the United States. None of these payments, once received, is refundable and there are nogeneral rights of return in the arrangement. Sandoz has agreed to indemnify the Company for various claims, and a certain portion of such costs may be offsetagainst certain future payments received by the Company. The term of the 2006 Sandoz Collaboration Agreement extends throughout the development and commercialization of the products until the last sale of theproducts, unless earlier terminated by either party pursuant to the provisions of the 2006 Sandoz Collaboration Agreement. The 2006 Sandoz CollaborationAgreement may be terminated if either party breaches the 2006 Sandoz Collaboration Agreement or files for bankruptcy. In addition, either the Company or Sandozmay terminate the 2006 Sandoz Collaboration Agreement with respect to M356, if clinical trials are required for regulatory approval of M356. Under the stock purchase agreement, the Company sold approximately 4.7 million shares of its common stock to Novartis for an aggregate purchase price of$75.0 million, representing a premium of $13.6 million based on the closing price of the Company's common stock on the NASDAQ Global Market on the on thedate of purchase. The premium was recognized as revenue on a straight-line basis over the estimated development period. See "Amortization of upfront payments"in the tables above for research and development revenue earned by the Company relating to this paid premium. The equity premium has been earned as ofDecember 31, 2014. The Company recognizes research and development revenue from FTE services and research and development revenue from external development costs uponcompletion of the performance requirements (i.e., as the services are performed and the reimbursable costs are incurred). Revenue from external development costsis recorded on a gross basis as the Company contracts directly with, manages the work of and is responsible for payments to third-party vendors for suchdevelopment and related services, except with respect to any amounts due Sandoz for shared development costs, which are recorded on a net basis. See "Researchand development services and external costs" in the tables above for research and development revenue earned by the Company from FTE services and externaldevelopment costs under the 2006 Sandoz Collaboration Agreement.Baxalta Collaboration Agreement The Company and Baxter International Inc., Baxter Healthcare Corporation and Baxter Healthcare SA (collectively, referred to as "Baxter") entered into aglobal collaboration and license agreement effective February 2012, or the Baxter Collaboration Agreement, to develop and commercialize biosimilars, includingM923. In connection with Baxter's internal corporate restructuring in July 2015, Baxter assigned all of its rights and obligations under the Baxter CollaborationAgreement101Table of Contentsto Baxalta U.S. Inc., Baxalta GmbH and Baxalta Incorporated (collectively, "Baxalta"). In light of the assignment, all references to "Baxter" and the "BaxterCollaboration Agreement" have been replaced with references to "Baxalta" and the "Baxalta Collaboration Agreement," respectively. Under the Baxalta Collaboration Agreement, the Company and Baxalta agreed to collaborate, on a world-wide basis, on the development andcommercialization of M923, the Company's biosimilar HUMIRA® (adalimumab) candidate, and M834, the Company's biosimilar ORENCIA® (abatacept)candidate, and Baxalta had the right to select four additional reference products to target for biosimilar development under the collaboration. In July 2012, Baxaltaselected an additional product: M511, the Company's biosimilar AVASTIN® (bevacizumab) candidate. In December 2013, Baxalta terminated its option to licenseM511 under the Baxalta Collaboration Agreement following an internal portfolio review. In February 2015, Baxalta's right to select additional programs expiredwithout being exercised. Also in February 2015, Baxalta terminated in part the Baxalta Collaboration Agreement as it relates specifically to M834 and allworldwide development and commercialization rights for M834 reverted to the Company. The Baxalta Collaboration Agreement remains in effect and unchangedwith respect to M923. Under the Baxalta Collaboration Agreement, each party has granted the other an exclusive license under its intellectual property rights to develop andcommercialize M923 for all therapeutic indications. The Company has agreed to provide development and related services on a commercially reasonable basisthrough the filing of an Investigational New Drug application, or IND, or equivalent application in the European Union for M923. Development and relatedservices include high-resolution analytics, characterization, and product and process development. Baxalta is responsible for clinical development, manufacturingand commercialization activities and will exclusively distribute and market M923. The Company has the right to participate in a joint steering committee,consisting of an equal number of members from the Company and Baxalta, to oversee and manage the development and commercialization of M923 under thecollaboration. Costs, including development costs, payments to third parties for intellectual property licenses, and expenses for legal proceedings, including thepatent exchange process pursuant to the Biologics Price Competition and Innovation Act of 2009, will be borne by the parties in varying proportions, depending onthe type of expense and the stage of development. The Company is reimbursed at a contractual FTE rate for any full-time equivalent employee expenses andexternal development costs for reimbursable activities related to M923. Baxalta has a right of first negotiation with respect to collaborating with the Company on the development of any biosimilar product candidate that couldcompete with M923 based on the same mechanism of action. This right is effective until December 2017, subject to certain restrictions as outlined in the BaxaltaCollaboration Agreement. Under the terms of the Baxter Agreement, the Company received an initial cash payment of $33.0 million, a $7.0 million licensepayment for achieving pre-defined "minimum development criteria" for M834, and $12.0 million in technical and development milestone payments in connectionwith the UK Medicines and Healthcare Products Regulatory Agency's acceptance of Baxalta's clinical trial application to initiate a pharmacokinetic clinical trial forM923. The Company is eligible to receive from Baxalta, in aggregate, up to $50.0 million in regulatory milestone payments for M923, on a sliding scale, where,based on the product's regulatory application, there is a significant reduction in the scope of the clinical trial program required for regulatory approval. In addition, if M923 is successfully developed and launched, Baxalta will be required to pay to the Company royalties on net sales of licensed productsworldwide, with a base royalty rate in the high single digits with the potential for significant tiered increases based on the number of competitors, theinterchangeability of the product, and the sales tier for the product. The maximum royalty with all potential increases would be slightly more than double the baseroyalty.102Table of Contents The term of the collaboration shall continue throughout the development and commercialization of M923 on a country-by-country basis until there is noremaining payment obligation with respect to the product in the relevant territory, unless earlier terminated by either party pursuant to the terms of the BaxaltaCollaboration Agreement. The Baxalta Collaboration Agreement may be terminated by:•either party for breach by or bankruptcy of the other party; •Baxalta for its convenience; or •the Company in the event Baxalta does not exercise commercially reasonable efforts to commercialize M923 in the United States or other specifiedcountries, provided that the Company also has certain rights to directly commercialize M923, as opposed to terminating the Baxalta CollaborationAgreement, in event of such a breach by Baxalta. In accordance with FASB's ASU No. 2009-13: Multiple-Deliverable Revenue Arrangements (Topic 615), the Company identified all of the deliverables at theinception of the Baxalta Collaboration Agreement. The deliverables were determined to include (i) the development and product licenses to M923, M834 and thefour additional reference products, (ii) the research and development services related to M923, M834 and the four additional reference products and (iii) theCompany's participation in a joint steering committee. The Company has determined that each of the license deliverables do not have stand-alone value apart fromthe related research and development services deliverables as there are no other vendors selling similar, competing products on a stand-alone basis, Baxalta doesnot have the contractual right to resell the license, and Baxalta is unable to use the license for its intended purpose without the Company's performance of researchand development services. As such, the Company determined that separate units of accounting exist for each of the six licenses together with the related researchand development services, as well as the joint steering committee with respect to this arrangement. The estimated selling prices for these units of accounting weredetermined based on similar license arrangements and the nature of the research and development services to be performed for Baxalta and market rates for similarservices. At the inception of the Baxalta Collaboration Agreement, the arrangement consideration of $61.0 million, which included the $33.0 million upfrontpayment and aggregate option payments for the four additional reference products of $28.0 million, was allocated to the units of accounting based on the relativeselling price method. Of the $61.0 million, $10.3 million was allocated to the M923 product license together with the related research and development services,$10.3 million to each of the four additional reference products product licenses with the related research and development services, $9.4 million was allocated tothe M834 product license together with the related research and development services due to that product's stage of development at the time the license wasdelivered, and $114,000 was allocated to the joint steering committee unit of accounting. At the inception of the Baxalta Collaboration Agreement, the Company delivered development and product licenses for M923 and M834 and commencedrevenue recognition of the arrangement consideration allocated to those products. In addition, the Company began revenue recognition for the arrangementconsideration allocated to the joint steering committee unit of accounting. Baxalta's termination of its option to license M511 in December 2013 as well as itstermination of M834 and the lapsing of its right to select additional products in February 2015 reduced the number of deliverables from seven to two and decreasedthe total consideration from $61.0 million to $40.0 million. The Company determined that the change in total consideration received and total deliverables underthe arrangement represented a change in estimate and, as a result, the Company reallocated the revised total consideration of $40.0 million to the remainingdeliverables under the agreement using the original best estimate of selling price. The remaining deliverables are the combined unit of account for the M923 licenseand the related research and development services and the Company's participation on the joint steering committee. Of the $40.0 million, $39.6 million wasallocated to the M923 product103Table of Contentslicense together with the related research and development services and $0.4 million was allocated to the joint steering committee unit of accounting. The Companyrecognized the resulting change in revenue as a result of the decrease in deliverables and expected consideration on a prospective basis beginning in the first quarterof 2015. The Company records this revenue on a straight-line basis over the applicable performance period, which begins upon delivery of the development andproduct license and ends upon FDA approval of the product. The Company currently estimates that the performance period for M923 and for the joint steeringcommittee is approximately six years. As of December 31, 2015, $22.0 million of revenue was deferred under this agreement, of which $9.8 million was includedin current liabilities and $12.2 million was included in non-current liabilities in the consolidated balance sheet. The Company recognizes research and development revenue from FTE services and research and development revenue from external development costs uponcompletion of the performance requirements (i.e., as the services are performed and the reimbursable costs are incurred). Revenue from external development costsis recorded on a gross basis as the Company contracts directly with, manages the work of and is responsible for payments to third-party vendors for suchdevelopment and related services. Beginning in 2013, the Company commenced billing to Baxalta FTE services and external development costs for reimbursableactivities related to M923. See tables above for research and development revenue earned by the Company under the Baxalta Collaboration Agreement. The Company has concluded that the M923 technical development milestones and the IND milestones pursuant to the Baxalta Collaboration Agreement aresubstantive. The Company evaluated factors such as the scientific and regulatory risks that must be overcome to achieve these milestones, the level of effort andinvestment required and whether the milestone consideration is reasonable relative to all deliverables and payment terms in the arrangement in making thisassessment. Revenues from the non-refundable, technical development and IND milestones were recognized upon successful accomplishment of the milestones asresearch and development revenue. The regulatory milestones, along with any associated royalty or profit sharing payments, will be considered contingent fees that will be recorded as earned infuture periods.10. Preferred, Common and Treasury StockPreferred Stock The Company is authorized to issue 5.0 million shares of preferred stock in one or more series and to fix the powers, designations, preferences and relativeparticipating, option or other rights thereof, including dividend rights, conversion rights, voting rights, redemption terms, liquidation preferences and the number ofshares constituting any series, without any further vote or action by the Company's stockholders. As of December 31, 2015 and 2014, the Company had no sharesof preferred stock issued or outstanding.Common Stock Holders of common stock are entitled to receive dividends, if and when declared by the Board of Directors, and to share ratably in the Company's assetslegally available for distribution to the Company's stockholders in the event of liquidation. Holders of common stock have no preemptive, subscription, redemption,or conversion rights. The holders of common stock do not have cumulative voting rights. The holders of a majority of the shares of common stock can elect all ofthe directors and can control the Company's management and affairs. Holders of common stock are entitled to one vote per share on all matters to be voted upon bythe stockholders of the Company.104Table of ContentsTreasury Stock Treasury stock represents common stock currently owned by the Company as a result of shares withheld from the vesting of performance-based restrictedcommon stock to satisfy minimum tax withholding requirements.11. Share-Based PaymentsIncentive Award Plans The 2013 Incentive Award Plan, or the 2013 Plan, initially became effective on June 11, 2013, the date the Company received stockholder approval for theplan. Also on June 11, 2013, the 2004 Stock Incentive Plan terminated except with respect to awards previously granted under that plan. No further awards will begranted under the 2004 Stock Incentive Plan. The 2013 Plan allows for the granting of stock options (both incentive stock options and nonstatutory stock options), restricted stock, stock appreciation rights,performance awards, dividend equivalents, stock payments and restricted stock units to employees, consultants and members of the Company's board of directors. Incentive stock options are granted only to employees of the Company. Incentive stock options granted to employees who own more than 10% of the totalcombined voting power of all classes of stock are granted with exercise prices no less than 110% of the fair market value of the Company's common stock on thedate of grant. Incentive stock options generally vest ratably over four years. Non-statutory stock options and restricted stock awards may be granted to employees,consultants and members of the Company's board of directors. Non-statutory stock options granted have varying vesting schedules. Restricted stock awardsgenerally vest ratably over four years. Incentive and non-statutory stock options generally expire ten years after the date of grant. Restricted stock awards have beengranted only to employees of the Company. The total number of shares reserved for issuance under the 2013 Plan before giving effect to the amendment and restatement described below equaled the sumof: (a) 5,100,000, (b) one share for each share subject to a stock option that was granted through December 31, 2012 under the 2004 Stock Incentive Plan and theAmended and Restated 2002 Stock Incentive Plan (together, the "Prior Plans") that subsequently expires, is forfeited or is settled in cash (up to a maximum of4,337,882 shares) and (c) 1.35 shares for each share subject to an award other than a stock option that was granted through December 31, 2012 under the PriorPlans and that subsequently expires, is forfeited, is settled in cash or repurchased (up to a maximum of 950,954 shares). On March 11, 2015, the board of directors approved an amendment and restatement of the 2013 Plan subject to and effective upon stockholder approval. Atthe Company's 2015 Annual Meeting of Stockholders, held on June 9, 2015 (the "Annual Meeting"), stockholders approved the amendment and restatement of the2013 Plan. The amendment and restatement increased (1) the number of shares of common stock available for issuance under the 2013 Plan by 2,550,000 sharesand (2) the fungible ratio under the 2013 Plan such that any shares subject to awards granted under the 2013 Plan on or after June 9, 2015 or that, on or after suchdate, become available for grant under the 2013 Plan upon forfeiture, expiration or cash settlement of awards granted under the Plan on or after June 9, 2015 orawards granted under the Prior Plans, in each case, other than awards that are options or stock appreciation rights, are counted against or, as applicable, added to theaggregate number of shares available for issuance under the 2013 Plan as 1.67 shares for every one share granted.105Table of Contents The following table is a roll-forward of shares available for issuance under the 2013 Plan for the period beginning June 11, 2013 through the year endedDecember 31, 2015 (in thousands):Share-Based Compensation The Company records compensation cost for all share-based payment arrangements, including employee, director and consultant stock options, restrictedstock and the employee stock purchase plan. The following table summarizes share-based compensation expense recorded in the years ended December 31, 2015, 2014 and 2013 (in millions): During the year ended December 31, 2015, the Company granted 1,635,796 stock options, of which 1,190,146 were granted in connection with annual meritawards, 124,250 were granted to the Company's board of directors, and 321,400 were primarily granted to new hires. The average grant date fair value of optionsgranted was calculated using the Black-Scholes-Merton option-pricing model and the weighted average assumptions noted in the table below. The following table summarizes the weighted average assumptions the Company used in its fair value calculations at the date of grant:106 Shares Available for Issuance Shares reserved for issuance at June 11, 2013 3,300 Add: Stockholder-approved increase in share pool in 2014 1,800 Stockholder-approved increase in share pool in 2015 2,550 Stock options and restricted stock awards forfeited or expired under prior plans 630 Stock options and awards forfeited under 2013 Plan 278 Less: Stock options and awards granted under 2013 Plan (4,009)Shares reserved for issuance at December 31, 2015 4,549 2015 2014 2013 Outstanding employee and non-employee stock option grants $10.5 $9.7 $8.1 Outstanding restricted stock awards 0.5 3.5 4.3 Employee stock purchase plan 0.4 0.4 0.4 Total compensation cost $11.4 $13.6 $12.8 Weighted Average Assumptions Stock Options Employee Stock Purchase Plan 2015 2014 2013 2015 2014 2013 Expected volatility 59% 66% 63% 59% 63% 64%Expected dividends — — — — — — Expected life (years) 6.1 6.1 6.0 0.5 0.5 0.5 Risk-free interest rate 1.9% 2.2% 1.5% 0.1% 0.1% 0.1%Table of Contents The following table presents stock option activity of the 2013 Plan and Prior Plans for the year ended December 31, 2015: The weighted average grant date fair value of option awards granted during 2015, 2014 and 2013 was $8.11, $10.51 and $7.62 per option, respectively. Thetotal intrinsic value of options exercised during 2015, 2014 and 2013 was $11.4 million, $1.3 million and $2.7 million, respectively. At December 31, 2015, thetotal remaining unrecognized compensation cost related to nonvested stock option awards amounted to $16.3 million, including estimated forfeitures, which will berecognized over the weighted average remaining requisite service period of 2.4 years. The total fair value of options vested during 2015, 2014 and 2013 was$9.9 million, $10.1 million and $8.3 million, respectively. Cash received from option exercises for 2015, 2014 and 2013 was $23.6 million, $2.2 million and $4.2 million, respectively.Restricted Stock Awards The Company has also made awards of time-based and performance-based restricted common stock to employees and officers. During the year endedDecember 31, 2015, the Company awarded 255,087 shares of time-based restricted common stock primarily to its officers in connection with its annual merit grant.The time-based restricted common stock vest as to 25% on the one year anniversary of the grant date and as to 6.25% quarterly over three years that follow thegrant date. The time-based awards are generally forfeited if the employment relationship terminates with the Company prior to vesting. Between 2011 and early2013, the Company awarded 949,620 shares of performance-based restricted common stock to employees and officers. The performance-based restricted commonstock was scheduled to vest upon FDA approval of the GLATOPA ANDA on or before the performance deadline date of March 28, 2015 according to thefollowing schedule: 50% of the shares vest upon FDA approval and 50% vest upon the one-year anniversary of FDA approval. The Company had historicallydetermined that the performance condition was probable of being achieved by March 28, 2015 and, as a result, had recognized approximately $10.5 million of stockcompensation costs related to the awards. On March 11, 2015, the Board of Directors approved an amendment to the awards that extended the performancedeadline date to September 1, 2015 and provided for the forfeiture of 15% of the number of shares originally subject to each award on the 29th of each month,beginning March 29, 2015 until the shares vested or were forfeited in full. On March 29, 2015, 117,898 shares of performance-based restricted common stock wereforfeited pursuant to the modified awards. The Company evaluated the modification and determined it was a Type III modification or "Improbable to Probable"pursuant to ASC 718 as the awards, on the date of modification, were no longer deemed to be probable of being earned by March 28, 2015. As a result, theCompany reversed the cumulative compensation cost related to the original awards of $10.5 million in the first quarter of107 Number of Stock Options (in thousands) Weighted Average Exercise Price Weighted Average Remaining Contractual Term (in years) Aggregate Intrinsic Value (in thousands) Outstanding at December 31, 2014 7,110 $14.43 Granted 1,635 14.61 Exercised (1,737) 13.57 Forfeited (157) 14.71 Expired (240) 18.52 Outstanding at December 31, 2015 6,611 $14.54 6.45 $9,041 Exercisable at December 31, 2015 4,211 $14.09 5.21 $6,507 Vested or expected to vest at December 31, 2015 6,362 $14.52 6.35 $8,777 Table of Contents2015. Also, in accordance with ASC 718, the Company re-measured the modified awards with a measurement date of March 11, 2015, and determined theaggregate compensation was $9.8 million. The FDA approved GLATOPA on April 16, 2015. The Company is recognizing the compensation cost attributed to themodified awards as follows: the first 50% of the awards was expensed over the period beginning on March 11, 2015 and ending on April 16, 2015, the date of FDAapproval, and the remaining 50% of the awards expected to vest will be expensed over the period beginning on March 11, 2015 and ending on April 16, 2016, theone year anniversary of FDA approval. Accordingly, approximately $8.1 million of stock compensation cost was recognized in the period beginning March 11,2015 and ending December 31, 2015. As of December 31, 2015, the total remaining unrecognized compensation cost related to the nonvested portion of themodified awards amounted to $1.2 million, which is expected to be recognized over the weighted average remaining requisite service period of 0.3 years. As of December 31, 2015, the total remaining unrecognized compensation cost related to nonvested restricted stock awards amounted to $6.8 million, which isexpected to be recognized over the weighted average remaining requisite service period of 1.7 years. A summary of the status of nonvested shares of restricted stock as of December 31, 2015 and the changes during the year then ended are presented below (inthousands, except fair values): Nonvested shares of restricted stock that have time-based or performance-based vesting schedules as of December 31, 2015 are summarized below (inthousands): The total fair value of shares of restricted stock vested during 2015, 2014 and 2013 was $7.9 million, $2.0 million and $2.0 million, respectively.Employee Stock Purchase Plan In 2004, the Company's Board of Directors adopted the 2004 Employee Stock Purchase Plan, or ESPP. An aggregate of 1,024,652 shares of common stockhave been reserved for issuance under the ESPP. The ESPP is generally available to all employees who work more than 20 hours per week and five months per year. Under the ESPP, eligible participantspurchase shares of the Company's common stock at a price equal to 85% of the lesser of the closing price of the Company's common stock on the first business dayand the final business day of the applicable plan purchase period. Plan purchase periods begin on February 1 and August 1 of each year, with purchase datesoccurring on the final business day of the given purchase period. To pay for the shares, each participant authorizes periodic108 Number of Shares Weighted Average Grant Date Fair Value Nonvested at January 1, 2015 1,174 $15.15 Granted 255 13.19 Vested (517) 15.15 Forfeited (151) 14.55 Nonvested at December 31, 2015 761 $14.61 Vesting Schedule Nonvested Shares Time-based 449 Performance-based 312 Nonvested at December 31, 2015 761 Table of Contentspayroll deductions of up to 15% of his or her eligible cash compensation. All payroll deductions collected from the participant during a purchase period areautomatically applied to the purchase of common stock on that period's purchase date provided the participant remains an eligible employee and has not withdrawnfrom the ESPP prior to that date and subject to certain limitations imposed by the ESPP and the Internal Revenue Code. The Company issued 109,506 shares ofcommon stock to employees under the ESPP during the year ended December 31, 2015. As of December 31, 2015, 637,474 shares of common stock have beenissued to the Company's employees under the ESPP, and 387,178 shares remain available for future issuance. The fair value of each ESPP award is estimated onthe first day of the offering period using the Black-Scholes-Merton option-pricing model. The weighted average assumptions the Company used in its fair valuecalculations and the expense recorded are noted in the table above under the heading Share-Based Compensation . The Company recognizes share-basedcompensation expense equal to the fair value of the ESPP awards on a straight-line basis over the offering period. At December 31, 2015, subscriptions wereoutstanding for an estimated 32,533 shares at a fair value of approximately $6.49 per share. The weighted average grant date fair value of the offerings during2015, 2014 and 2013 was $4.05, $4.51 and $4.73 per share, respectively. Cash received from the ESPP for 2015, 2014 and 2013 was approximately $1.0 million,$1.1 million and $0.9 million, respectively.12. Net Loss Per Common Share Since the Company had a net loss for all periods presented, the effect of all potentially dilutive securities is anti-dilutive. Accordingly, basic and diluted netloss per share is the same in those periods. The weighted-average anti-dilutive shares shown in the foregoing table were not included in the computation of dilutednet loss per share. Anti-dilutive shares comprise the impact of the number of shares that would have been dilutive had the Company had net income plus thenumber of common stock equivalents that would be anti-dilutive had the Company had net income. Furthermore, 311,459 performance-based restricted commonstock awards which vest on the one year anniversary of the U.S. Food and Drug Administration, or FDA, approval for GLATOPA in the United States (April 16,2016) were excluded from diluted shares outstanding as the vesting condition for the amended awards, discussed further in Note 11 " Share-Based Payments ," hadnot been met as of December 31, 2015. The following table presents anti-dilutive shares for the years ended December 31, 2015, 2014 and 2013 (in thousands):109 2015 2014 2013 Weighted-average anti-dilutive shares related to: Outstanding stock options 4,148 5,941 4,492 Restricted stock awards 519 847 929 Table of Contents13. Income Taxes Deferred income taxes reflect the tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting and incometax purposes. The Company establishes a valuation allowance when uncertainty exists as to whether all or a portion of the net deferred tax assets will be realized.Components of the net deferred tax (liability) asset at December 31, 2015 and 2014 are as follows, in thousands: A reconciliation of the federal statutory income tax benefit to the Company's actual provision for the years ended December 31, 2015, 2014 and 2013 is asfollows (in thousands): The Company generated U.S. taxable income during the years ended December 31, 2011 and 2010, and as a result, utilized $190.9 million and $26.3 million,respectively, of its historical available federal net operating loss carryforwards that were generated from 2001 to 2009 to offset this income. The Company has evaluated the positive and negative evidence bearing upon the realizability of its deferred tax assets. The Company has concluded, inaccordance with the applicable accounting standards, that it is more likely than not that the Company may not realize the benefit of all of its deferred tax assets.Accordingly, the Company has recorded a full valuation allowance against the deferred tax assets as management believes the assets may not be realized. TheCompany reevaluates the positive and negative evidence on an annual basis. The valuation allowance increased by $31.6 million for the year ended December 31,2015 due primarily to the current period net loss. At December 31, 2015, the Company had federal and state net operating loss carryforwards of $313.6 million and $286.0 million, respectively, available toreduce future taxable income that will expire at various dates through 2035. Of this amount, approximately $15.6 million of federal and state net operating losscarryforwards relate to stock option deductions for which the related tax benefit will be recognized in equity when realized. At December 31, 2015, the Companyhad federal and state110 2015 2014 Deferred tax assets: Federal and state net operating losses $115,583 $80,549 Research credits 23,353 18,773 Deferred compensation 10,031 14,391 Deferred revenue 8,635 12,176 Accrued expenses 3,023 2,851 Intangibles 3,300 3,441 Depreciation 686 838 Unrealized loss on marketable securities 1 6 Total deferred tax assets 164,612 133,025 Valuation allowance (164,612) (133,025)Net deferred tax assets $— $— 2015 2014 2013 Benefit at federal statutory tax rate $(28,323)$(33,521)$(36,856)State taxes, net of federal benefit (4,398) (5,206) (5,724)Share-based compensation 3,634 2,411 2,106 Tax credits (2,652) (5,529) (2,404)Other 42 23 15 Change in valuation allowance 31,697 41,822 42,863 Income tax provision $— $— $— Table of Contentsresearch and development and other credit carryforwards, including the orphan drug credit, of $21.6 million and $10.0 million, respectively, available to reducefuture tax liabilities that expire at various dates through 2035. Ownership changes, as defined in the Internal Revenue Code, may limit the amount of net operatingloss that can be utilized to offset future taxable income or tax liability. A reconciliation of the beginning and ending amount of unrecognized tax benefits for the years ended December 31, 2015 and 2014 is as follows (inthousands): As of December 31, 2015 and 2014, the Company had $5.1 million and $4.1 million of gross unrecognized tax benefits, respectively, of which $4.9 millionand $3.9 million, respectively, if recognized, would not impact the Company's effective tax rate as there is a full valuation allowance on these credits. The Company's policy is to recognize both accrued interest and penalties related to unrecognized tax benefits in income tax expense. The Company has notrecognized any interest and penalties. The Company does not anticipate that it is reasonably possible that the uncertain tax positions will significantly increase or decrease within the next twelvemonths. The Company files income tax returns in the United States federal jurisdiction and in the Massachusetts jurisdiction. The Company is no longer subject to anytax assessment from an income tax examination for years before 2012, except to the extent that in the future it utilizes net operating losses or tax creditcarryforwards that originated before 2012. In March 2012, the Company entered into a Tax Incentive Agreement with the Massachusetts Life Sciences Center, or MLSC, under the MLSC's LifeSciences Tax Incentive Program, or the Program, to expand life sciences-related employment opportunities, promote health-related innovations and stimulateresearch and development, manufacturing and commercialization in the life sciences in the Commonwealth of Massachusetts. The Program was established in 2008in order to incentivize life sciences companies to create new sustained jobs in Massachusetts. Under the Tax Incentive Agreement, companies receive an awardfrom the MLSC upon attaining job creation commitment. Jobs must be maintained for at least five years, 2012 - 2016, during which time a portion of the grantproceeds can be recovered by the Massachusetts Department of Revenue if the Company does not maintain its job creation commitments. As the Company attainedits job creation commitment in 2012 and has maintained it since then, it recognized one-fifth of the $1.1 million job creation tax award, or $0.2 million, as otherincome in each year beginning 2012 to 2015. The unearned portion of the award is included in other liabilities in the consolidated balance sheet. The Company willcontinue to recognize an equal portion of the award as other income over the five year period it must maintain its job creation commitments.14. Commitments and ContingenciesOperating Leases The Company leases office space and equipment under various operating lease agreements. Rent expense for office space under operating leases amounted to$16.4 million, $16.3 million and $12.8 million for the years ended December 31, 2015, 2014 and 2013, respectively.111 2015 2014 Balance, beginning of year $4,064 $4,465 Additions for tax positions related to the current year 1,395 940 Reductions of tax positions of prior years (343) (1,341)Balance, end of year $5,116 $4,064 Table of Contents In September 2004, the Company entered into an agreement with Vertex Pharmaceuticals, or Vertex, to lease 53,323 square feet of office and laboratory spacelocated on the fourth and fifth floors at 675 West Kendall Street, Cambridge, Massachusetts, for an initial term of 80 months, or the West Kendall Sublease. InNovember 2005, the Company amended the West Kendall Sublease to lease an additional 25,131 square feet through April 2011. In April 2010, the Companyexercised its right to extend the West Kendall Sublease for one additional term of 48 months. During the extension term, which commenced on May 1, 2011,annual rental payments increased by approximately $1.2 million over the previous annual rental rate. In July 2014, the Company and Vertex entered into anagreement to extend the term of the West Kendall Sublease from May 1, 2015 through April 30, 2018, or such other earlier date as provided in accordance with theWest Kendall Sublease. During the extension term, annual rental payments are approximately $4.8 million. In December 2011, the Company entered into an agreement to lease 68,575 square feet of office and laboratory space located on the first and second floors at320 Bent Street, Cambridge, Massachusetts, for a term of approximately 18 months, or the First Bent Street Sublease. The Company gained access to the subleasedspace in December 2011 and, consequently, the Company commenced expensing the applicable rent on a straight-line basis beginning in December 2011. Annualrental payments due under the First Bent Street Sublease were approximately $2.3 million. On February 5, 2013, the Company and BMR-Rogers Street LLC, or BMR, entered into a lease agreement, or the Second Bent Street Lease, to lease 104,678square feet of office and laboratory space located in the basement and first and second floors at 320 Bent Street, Cambridge, Massachusetts, beginning onSeptember 1, 2013 and ending on August 31, 2016. Annual rental payments due under the Second Bent Street Lease were approximately $6.1 million during thefirst lease year, $6.2 million during the second lease year and $6.3 million during the third lease year. BMR agreed to pay the Company a tenant improvementallowance of $0.7 million for reimbursement of laboratory and office improvements made by the Company (and subsequently reimbursed by BMR). The Companyhas recorded short and long-term liabilities for the construction allowance in its consolidated balance sheet, which is being amortized on a straight-line basisthrough a reduction to rental expense over the term of the lease. Under the Second Bent Street Lease, the Company has two consecutive options to extend the term of the Second Bent Street Lease for one year each at thethen-current fair market value. In addition, the Company has two additional consecutive options to extend the term of the Second Bent Street Lease for five yearseach for the office and laboratory space located in the basement portion of the leased space at the then-current fair market value. On October 27, 2015, the Company exercised its option to extend the term of the Second Bent Street Lease for one year to August 31, 2017. On December 30, 2015, the Company and BMR entered into an amendment ("the Amendment") to Second Bent Street Lease agreement. The Amendmentvoids the October 2015 option exercise and extends the expiration date of the lease term from August 31, 2016 to February 28, 2027. Under the Amendment, theCompany is not required to pay BMR any base rent from September 1, 2016 through February 28, 2017, however the Company is required to pay BMR certainoperating expenses. Beginning on March 1, 2017 and ending on August 31, 2017, the Company is obligated to pay BMR an initial monthly base rent ofapproximately $0.6 million, or $68.00 per square foot. The Company's monthly base rent will increase by three percent of the then-current base rent onSeptember 1 of each year during the extended term of the Lease, beginning on September 1, 2017. During the period from September 1, 2016 through June 30, 2018, BMR has agreed to pay the Company a tenant improvement allowance not to exceed$4.7 million for reimbursement of certain laboratory and office improvements.112Table of Contents Under the Amendment, provided that the Company has not assigned the lease or subleased more than 45 percent of the Premises, the Company will have oneoption to extend the term of the lease beyond the expiration date of the lease by five years at the then-current fair market value. Monthly base rent during the termof the option period may be increased annually in accordance with then-current fair market value. The Amendment also provides the Company with a right of first offer as to all rentable premises in the building located at 320 Bent Street that next becomeavailable and for which BMR is seeking a tenant, subject to certain conditions. In addition, if the tenant of the building located at 301 Binney Street, CambridgeMassachusetts (the "Binney Building") has entered into an agreement with BMR to terminate its lease of the fifth floor of such building prior to the expiration of itslease term, the Company will have a one-time right of first offer with respect to all rentable premises on the fifth floor of the Binney Building that become availablepursuant to the termination agreement. The Amendment deletes the provision of the Lease granting the Company a right of first refusal for certain rentablepremises in the building located at 675 West Kendall Street in Cambridge, Massachusetts ("675 Kendall Building"). If the Company enters into a lease with BMR or an affiliate of BMR for premises totaling more than 175,000 square feet of rentable area in the BinneyBuilding or another building owned by an affiliate of BMR, the Company will be entitled to terminate the lease with respect to the entire Premises. TheAmendment deletes the provision in the lease providing for early termination of the lease upon the execution of a lease of certain premises in the 675 KendallBuilding. Total operating lease commitments as of December 31, 2015 are as follows (in thousands):Legal Contingencies The Company is involved in various litigation matters that arise from time to time in the ordinary course of business. The process of resolving matters throughlitigation or other means is inherently uncertain and it is possible that an unfavorable resolution of these matters will adversely affect the Company, its results ofoperations, financial condition and cash flows. The Company's general practice is to expense legal fees as services are rendered in connection with legal matters,and to accrue for liabilities when losses are probable and reasonably estimable. The Company evaluates, on a quarterly basis, developments in legal proceedingsand other matters that could cause an increase or decrease in the amount of any accrual on its consolidated balance sheets.M356-Related Litigation On September 10, 2014, Teva Pharmaceuticals Industries Ltd. and related entities, or Teva, and Yeda Research and Development Co., Ltd., or Yeda, filed suitagainst the Company and Sandoz in the United States Federal District Court in the District of Delaware in response to the filing by Sandoz of the ANDA with aParagraph IV certification for M356. The suit initially alleged infringement related to two Orange Book-listed patents for COPAXONE 40 mg/mL, each expiring in2030, and seeks declaratory and injunctive relief prohibiting the launch of the Company's product until the last to113 Operating Leases 2016 $9,254 2017 11,023 2018 9,193 2019 7,807 2020 8,035 2021 and beyond 54,278 Total future minimum lease payments $99,590 Table of Contentsexpire of these patents. In April 2015, Teva and Yeda filed an additional suit against the Company and Sandoz in the United States District Court for the District ofDelaware alleging infringement related to a third Orange Book-listed patent for COPAXONE 40 mg/mL, which issued in March 2015 and expires in 2030. In May2015, this suit was consolidated with the initial suit filed in September 2014. In November 2015, Teva and Yeda filed a suit against the Company and Sandoz in theUnited States District Court for the District of Delaware alleging infringement related to a fourth Orange Book-listed patent for COPAXONE 40 mg/mL, whichissued in October 2015 and expires in 2030. Teva and Yeda seek declaratory and injunctive relief prohibiting the launch of M356 until the expiration of this patent.In December 2015, this suit was consolidated with the initial suit filed in September 2014. The Company and Sandoz have asserted various defenses and filedcounterclaims for declaratory judgments of non-infringement, invalidity and unenforceability of the COPAXONE 40 mg/mL patents. A pre-trial claim constructionhearing was held in February 2016 and the trial is scheduled to begin in September 2016.Enoxaparin Sodium Injection-related Litigation On September 21, 2011, the Company and Sandoz sued Amphastar, International Medical Systems, Ltd., a wholly owned subsidiary of Amphastar and,together with Amphastar ("Amphastar") and Actavis, Inc. (formerly Watson Pharmaceuticals, Inc.), or Actavis, in the United States District Court for the District ofMassachusetts for infringement of two of the Company's patents. Also in September, 2011, the Company filed a request for a temporary restraining order andpreliminary injunction to prevent Amphastar and Actavis from selling their enoxaparin product in the United States. In October 2011, the District Court granted theCompany's motion for a preliminary injunction and entered an order enjoining Amphastar and Actavis from advertising, offering for sale or selling their enoxaparinproduct in the United States until the conclusion of a trial on the merits and required the Company and Sandoz to post a security bond of $100 million in connectionwith the litigation. Amphastar and Actavis appealed the decision to the Court of Appeals for the Federal Circuit, or CAFC, and in January 2012, the CAFC stayedthe preliminary injunction. In August 2012, the CAFC vacated the preliminary injunction and remanded the case to the District Court. In September 2012, theCompany filed a petition with the CAFC for a rehearing by the full court en banc , which was denied. In February 2013, the Company filed a petition for a writ ofcertiorari for review of the CAFC decision by the United States Supreme Court and in June 2013 the Supreme Court denied the petition. In July 2013, the District Court granted a motion by Amphastar and Actavis for summary judgment. The Company filed a notice of appeal of that decision tothe CAFC. In February 2014, Amphastar filed a motion to the CAFC for summary affirmance of the District Court ruling, which the CAFC denied in May 2014.On November 10, 2015, the CAFC affirmed the District Court summary judgment decision with respect to Actavis, reversed the District Court summary judgmentdecision with respect to Amphastar, and remanded the case against Amphastar to the District Court. On January 11, 2016, Amphastar filed a petition for rehearingby the CAFC, which was denied on February 17, 2016. The collateral for the security bond posted in the litigation remains outstanding. In the event that theCompany is not successful in further prosecution or settlement of this action against Amphastar, and Amphastar is able to prove they suffered damages as a resultof the preliminary injunction, the Company could be liable for damages for up to $35 million of the security bond. Amphastar has filed motions to increase theamount of the security bond, which the Company and Sandoz have opposed. On September 17, 2015, Amphastar filed a complaint against the Company and Sandoz in the United States District Court for the Central District ofCalifornia. The complaint alleges that, in connection with filing the September 2011 patent infringement suit against Amphastar and Actavis, the Company andSandoz sought to prevent Amphastar from selling generic enoxaparin sodium injection and thereby exclude competition for generic enoxaparin sodium injection inviolation of federal and California anti-trust laws and California unfair business laws. Amphastar is seeking unspecified damages114Table of Contentsand fees. In December 2015, the Company and Sandoz filed a motion to dismiss and a motion to transfer the case. In January 2016, the case was transferred to theUnited States District Court for the District of Massachusetts. In February 2016, Amphastar filed a writ of mandamus with the United States Court of Appeals forthe Ninth Circuit requesting the court to reverse and review the District Court's grant of transfer. While the outcome of litigation is inherently uncertain, theCompany believes this suit is without merit, and the Company intends to vigorously defend itself in this litigation. On October 14, 2015, The Hospital Authority of Metropolitan Government of Nashville and Davidson County, Tennessee, d/b/a Nashville General Hospital("NGH") filed a class action suit against the Company and Sandoz in the United States District Court for the Middle District of Tennessee on behalf of certainpurchasers of LOVENOX or generic enoxaparin sodium injection. The complaint alleges that, in connection with filing the September 2011 patent infringementsuit against Amphastar and Actavis, the Company and Sandoz sought to prevent Amphastar from selling generic enoxaparin sodium injection and thereby excludecompetition for generic enoxaparin sodium injection in violation of federal anti-trust laws. NGH is seeking injunctive relief, disgorgement of profits andunspecified damages and fees. In December 2015, the Company and Sandoz filed a motion to dismiss and a motion to transfer the case to the United States DistrictCourt for the District of Massachusetts. These motions are pending before the court. While the outcome of litigation is inherently uncertain, the Company believesthis suit is without merit, and it intends to vigorously defend itself in this litigation.15. 401(k) Plan The Company has a defined contribution 401(k) plan available to eligible employees. Employee contributions are voluntary and are determined on anindividual basis, limited by the maximum amounts allowable under federal tax regulations. The Company has discretion to make contributions to the plan. InMarch 2005, the Company's Board of Directors approved a match of 50% of the first 6% contributed by employees, effective for the 2004 plan year and thereafter.The Company recorded $0.9 million, $0.9 million and $0.8 million of such match expense in the years ended December 31, 2015, 2014 and 2013, respectively.16. Equity Financings In May 2015, the Company sold an aggregate of 8,337,500 shares of its common stock through an underwritten public offering at a price to the public of$19.00 per share. As a result of the offering, which included the full exercise of the underwriters' option to purchase additional shares, the Company receivedaggregate net proceeds of approximately $148.4 million, after deducting underwriting discounts and commissions and other offering expenses. The Companyintends to use these proceeds for general corporate purposes, including working capital. In May 2014, the Company entered into an At-the-Market Equity Offering Sales Agreement, or the 2014 ATM Agreement, with Stifel, Nicolaus & Company,Incorporated, or Stifel, under which the Company was authorized to issue and sell shares of its common stock having aggregate sales proceeds of up to $75 millionfrom time to time through Stifel, acting as sales agent and/or principal. The Company paid Stifel a commission of 2.0% of the gross proceeds from the sale ofshares of its common stock under this facility. The offering was conducted by the Company pursuant to an effective shelf registration statement previously filedwith the Securities and Exchange Commission (Reg. No. 333-188227) and a related prospectus supplement. The Company intends to use the net proceeds from thisfacility to advance its development pipeline and for general corporate purposes, including working capital. The Company concluded sales under the 2014 ATMAgreement in April 2015. In the year ended December 31, 2014, the Company sold approximately 1.6 million shares of common stock under the 2014 ATMAgreement, raising aggregate net proceeds of approximately $18.3 million. In the year ended December 31, 2015, the Company sold approximately 3.8 millionshares of common stock under the 2014 ATM Agreement, raising aggregate net proceeds of approximately $55.2 million.115Table of ContentsBetween October 2014 and April 2015, the Company sold approximately 5.4 million shares of common stock under the 2014 ATM Agreement, raising aggregatenet proceeds of approximately $73.5 million. In April 2015, the Company entered into a new ATM Agreement, or the 2015 ATM Agreement, with Stifel, under which the Company is authorized to issueand sell shares of its common stock having aggregate sales proceeds of up to $75 million from time to time through Stifel, acting as sales agent and/or principal.The Company is required to pay Stifel a commission of 2.0% of the gross proceeds from the sale of shares of its common stock under the 2015 ATM Agreement.Sales of common stock under this facility are made pursuant to an effective shelf registration statement previously filed with the Securities and ExchangeCommission (Reg. No. 333-188227) and a related prospectus supplement. In the year December 31, 2015, the Company sold approximately 0.5 million shares ofcommon stock under the 2015 ATM Agreement, raising aggregate net proceeds of approximately $9.3 million.17. Selected Quarterly Financial Data (Unaudited) Basic and diluted net loss per common share amounts for the quarters and full years have been calculated separately. Accordingly, quarterly amounts may notadd to the annual amount because of differences in the weighted-average common shares outstanding during each period principally due to the effect of theCompany issuing shares of its common stock during the year.18. Subsequent Events On January 8, 2016, the Company and Mylan Ireland Limited, a wholly-owned indirect subsidiary of Mylan N.V., or Mylan, entered into a collaborationagreement, or the Mylan Collaboration Agreement, which became effective on February 9, 2016, pursuant to which the Company and Mylan agreed to collaborateexclusively, on a world-wide basis, to develop, manufacture and commercialize six of the Company's biosimilar candidates, including M834. Under the terms of the Mylan Collaboration Agreement, Mylan has agreed to pay the Company a non-refundable upfront payment of $45 million. In addition,the Company and Mylan will share equally costs (including development, manufacturing, commercialization and certain legal expenses) and profits116 Quarter Ended (in thousands, except per share data) March 31 June 30 September 30 December 31 2015 Product revenue $2,722 $19,305 $8,666 $17,810 Research and development revenue $5,840 $25,595 $5,129 $4,583 Total collaboration revenue $8,562 $44,900 $13,795 $22,393 Net loss $(21,877)$(2,222)$(30,050)$(29,164)Comprehensive loss $(21,859)$(2,204)$(30,054)$(29,176)Basic and diluted net loss per common share $(0.40)$(0.04)$(0.44)$(0.43)Shares used in computing basic and diluted net loss per common share 54,492 61,680 68,004 68,138 2014 Product revenue $4,812 $5,690 $4,714 $4,747 Research and development revenue $5,973 $5,260 $4,622 $16,432 Total collaboration revenue $10,785 $10,950 $9,336 $21,179 Net loss $(27,362)$(26,156)$(29,101)$(15,981)Comprehensive loss $(27,378)$(26,119)$(29,127)$(16,017)Basic and diluted net loss per common share $(0.53)$(0.51)$(0.56)$(0.31)Shares used in computing basic and diluted net loss per common share 51,356 51,466 51,545 52,255 Table of Contents(losses) with respect to such product candidates, with Mylan funding its share of collaboration expenses incurred by the Company, in part, through up to sixcontingent early development milestone payments, totaling up to $200 million across the six product candidates. For each product candidate other than M834, at a specified stage of early development, the Company and Mylan will each decide, based on the productcandidate's development progress and commercial considerations, whether to continue the development, manufacture and commercialization of such productcandidate under the collaboration or to terminate the collaboration with respect to such product candidate. Under the Mylan Collaboration Agreement, the Company has granted Mylan an exclusive license under the Company's intellectual property rights to develop,manufacture and commercialize the product candidates for all therapeutic indications, and Mylan has granted the Company a co-exclusive license under Mylan'sintellectual property rights for the Company to perform its development and manufacturing activities under the product work plans agreed by the parties, and toperform certain commercialization activities to be agreed by the joint steering committee, or JSC, for such product candidates if the Company exercises its co-commercialization option described below. The Company and Mylan have established a JSC consisting of an equal number of members from the Company andMylan, to oversee and manage the development, manufacture and commercialization of product candidates under the collaboration. Unless otherwise determinedby the JSC, it is anticipated that, in collaboration with the other party, (a) the Company will be primarily responsible for nonclinical development activities andinitial clinical development activities for product candidates; additional (pivotal or phase 3 equivalent) clinical development activities for M834; and regulatoryactivities for product candidates in the United States through regulatory approval; and (b) Mylan will be primarily responsible for additional (pivotal or phase 3equivalent) clinical development activities for product candidates other than M834; regulatory activities for the product candidates outside the United States; andregulatory activities for products in the United States after regulatory approval, when all marketing authorizations for the products in the United States will betransferred to Mylan. Mylan will commercialize any approved products, with the Company having an option to co-commercialize, in a supporting commercial role,any approved products in the United States. The JSC will allocate responsibilities for other activities under the collaboration. The term of the collaboration will continue throughout the development and commercialization of the product candidates, on a product-by-product andcountry-by-country basis, until development and commercialization by or on behalf of the Company and Mylan pursuant to the Mylan Collaboration Agreementhas ceased for a continuous period of two years for a given product candidate in a given country, unless earlier terminated by either party pursuant to the terms ofthe Mylan Collaboration Agreement. The Mylan Collaboration Agreement may be terminated by either party for breach by, or bankruptcy of, the other party; for its convenience; or for certainactivities involving competing products or the challenge of certain patents. Other than in the case of a termination for convenience, the terminating party shall havethe right to continue the development, manufacture and commercialization of the terminated products in the terminated countries. In the case of a termination forconvenience, the other party shall have the right to continue. If a termination occurs, the licenses granted to the non-continuing party for the applicable product willterminate for the terminated country. Subject to certain terms and conditions, the party that has the right to continue the development or commercialization of agiven product candidate may retain royalty-bearing licenses to certain intellectual property rights, and rights to certain data, for the continued development and saleof the applicable product in the country or countries for which termination applies.117Table of ContentsItem 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.Item 9A. CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls andprocedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of December 31, 2015. Our management recognizes that any controls andprocedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies itsjudgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on this evaluation, our Chief Executive Officer and Chief FinancialOfficer concluded that, as of December 31, 2015, our disclosure controls and procedures were effective at the reasonable assurance level.Management's Annual Report on Internal Control Over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15(f) or 15d-15(f)promulgated under the Exchange Act. Our management, including the supervision and participation of our Chief Executive Officer and Chief Financial Officer, assessed the effectiveness of ourinternal control over financial reporting as of December 31, 2015, based on the criteria set forth in the Committee of Sponsoring Organizations of the TreadwayCommission (COSO)'s updated 2013 framework entitled "Internal Control—Integrated Framework." Based on its assessment, our management concluded that, asof December 31, 2015, our internal control over financial reporting was effective. The independent registered public accounting firm that audited our financial statements included in this Annual Report on Form 10-K has issued its report onthe effectiveness of our internal control over financial reporting. This report appears below.Report of Independent Registered Public Accounting Firm The Board of Directors and Stockholders of Momenta Pharmaceuticals, Inc. We have audited Momenta Pharmaceuticals, Inc.'s internal control over financial reporting as of December 31, 2015, based on criteria established in InternalControl—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria).Momenta Pharmaceuticals, Inc.'s management is responsible for maintaining effective internal control over financial reporting and for its assessment of theeffectiveness of internal control over financial reporting included in the accompanying Management's Annual Report on Internal Control over Financial Reporting.Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that weplan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluatingthe design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in thecircumstances. We believe that our audit provides a reasonable basis for our opinion.118Table of Contents A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting andthe preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control overfinancial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect thetransactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation offinancial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only inaccordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection ofunauthorized acquisition, use or disposition of the company's assets that could have a material 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 compliance withthe policies or procedures may deteriorate. In our opinion, Momenta Pharmaceuticals, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31,2015, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheetsof Momenta Pharmaceuticals, Inc. as of December 31, 2015 and 2014, and the related consolidated statements of comprehensive loss, stockholders' equity, andcash flows for each of the three years in the period ended December 31, 2015 of Momenta Pharmaceuticals, Inc. and our report dated February 26, 2016 expressedan unqualified opinion thereon./s/ Ernst & Young LLPBoston, Massachusetts February 26, 2016Changes in Internal Control Over Financial Reporting There was no change in our internal control over financial reporting during the quarter ended December 31, 2015 that has materially affected, or is reasonablylikely to materially affect, our internal control over financial reporting.Item 9B. OTHER INFORMATION None.119Table of ContentsPART III Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE The information relating to our directors, nominees for election as directors and executive officers under the headings "Election of Directors," "Momenta'sCorporate Governance—Our Executive Officers," "Momenta's Corporate Governance—Board Committees" and "Security Ownership of Certain Beneficial Ownersand Management—Section 16(a) Beneficial Ownership Reporting Compliance" in our definitive proxy statement for our 2016 Annual Meeting of Stockholders isincorporated herein by reference to such proxy statement. We have adopted a written code of business conduct and ethics that applies to our directors, officers and employees, including our principal executive officer,principal financial officer, principal accounting officer or controller, or persons performing similar functions. We make available our code of business conduct andethics free of charge through our website which is located at www.momentapharma.com . We intend to disclose any amendment to, or waiver from, our code ofbusiness conduct and ethics that is required to be publicly disclosed pursuant to rules of the Securities and Exchange Commission and the NASDAQ Global Marketby posting it on our website.Item 11. EXECUTIVE COMPENSATION The information under the headings or subheadings "Executive Compensation," "Compensation of Directors," "Compensation Committee Report" and"Compensation Committee Interlocks and Insider Participation" in our definitive proxy statement for our 2016 Annual Meeting of Stockholders is incorporatedherein by reference to such proxy statement.Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS The information under the heading "Security Ownership of Certain Beneficial Owners and Management" in our definitive proxy statement for our 2016Annual Meeting of Stockholders is incorporated herein by reference to such proxy statement. Information required by this Item relating to securities authorized forissuance under equity compensation plans is contained in our definitive proxy statement for our 2016 Annual Meeting of Stockholders under the subheading"Equity Compensation Plan Information" and is incorporated herein by reference.Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE The discussion under the headings "Certain Relationships and Related Transactions" and "Momenta's Corporate Governance—Board Determination ofIndependence" in our definitive proxy statement for our 2016 Annual Meeting of Stockholders is incorporated herein by reference to such proxy statement.Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES The discussion under the heading "Ratification of Appointment of Independent Registered Public Accounting Firm" in our definitive proxy statement for our2016 Annual Meeting of Stockholders is incorporated herein by reference to such proxy statement.120Table of ContentsPART IV Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) The following documents are included as part of this Annual Report on Form 10-K. 1. Financial Statements: 2. All schedules are omitted as the information required is either inapplicable or is presented in the financial statements and/or the related notes. 3. The Exhibits listed in the Exhibit Index immediately preceding the Exhibits are filed as a part of this Annual Report on Form 10-K.121 Page number in this report Report of Independent Registered Public Accounting Firm 82 Consolidated Balance Sheets at December 31, 2015 and 2014 83 Consolidated Statements of Comprehensive Loss for the years ended December 31, 2015, 2014 and 2013 84 Consolidated Statements of Stockholders' Equity for the years ended December 31, 2015, 2014 and 2013 85 Consolidated Statements of Cash Flows for the years ended December 31, 2015, 2014 and 2013 86 Notes to Consolidated Financial Statements 87 Table of ContentsSIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalfby the undersigned, thereunto duly authorized. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrantand in the capacities and on the dates indicated.122 MOMENTA PHARMACEUTICALS, INC.Date: February 26, 2016 By: /s/ CRAIG A. WHEELER Craig A. Wheeler President and Chief Executive OfficerSignature Title Date /s/ CRAIG A. WHEELER Craig A. Wheeler President, Chief Executive Officer and Director(Principal Executive Officer) February 26, 2016/s/ RICHARD P. SHEA Richard P. Shea Senior Vice President and Chief FinancialOfficer (Principal Financial and AccountingOfficer) February 26, 2016/s/ JAMES SULAT James Sulat Chairman of the Board of Directors February 26, 2016/s/ GEORGES GEMAYEL Georges Gemayel Director February 26, 2016/s/ BRUCE DOWNEY Bruce Downey Director February 26, 2016/s/ MARSHA H. FANUCCI Marsha H. Fanucci Director February 26, 2016/s/ THOMAS KOESTLER, Ph.D. Thomas Koestler, Ph.D. Director February 26, 2016/s/ BENNETT M. SHAPIRO, M.D. Bennett M. Shapiro, M.D., Director February 26, 2016/s/ ELIZABETH STONER, M.D. Elizabeth Stoner, M.D., Director February 26, 2016Table of ContentsEXHIBIT INDEX 123 Incorporated by Reference toExhibit Number Description Form or Schedule Exhibit No. Filing Date with SEC SEC File Number Articles of Incorporation and By-Laws 3.1 Third Amended and Restated Certificate of Incorporation S-3 3.1 4/30/2013 333-188227 3.2 Certificate of Designations of Series A Junior ParticipatingPreferred Stock of the Registrant 8-K 3.1 11/8/2005 000-50797 3.4 Third Amended and Restated By-Laws 8-K 3.1 12/15/2014 000-50797 Instruments Defining the Rights of Security Holders 4.1 Specimen Certificate evidencing shares of common stock S-1/A 4.1 6/15/2004 333-113522 4.2 Investor Rights Agreement, dated as of July 25, 2006, by andbetween Novartis Pharma AG and the Registrant 10-Q 10.2 11/8/2006 000-50797 Material Contracts—License Agreements 10.1† Collaboration and License Agreement, dated November 1,2003, by and among Biochemie West Indies, N.V., GenevaPharmaceuticals, Inc. and the Registrant S-1/A 10.4 5/11/2004 333-113522 10.1.1† Amendment to Collaboration and License Agreement, datedApril 1, 2015, by and between Sandoz AG (f/k/a BiochemieWest Indies, N.V.), Sandoz Inc. (f/k/a GenevaPharmaceuticals, Inc.), and the Registrant 8-K 10.1 6/19/2015 000-50797 10.2 Letter Agreement dated January 29, 2007 between SandozAG and the Registrant 10-K 10.16 3/15/2007 000-50797 10.3 Letter Agreement dated February 1, 2007 between SandozAG and the Registrant 10-Q 10.2 5/10/2007 000-50797 10.4† Collaboration and License Agreement, dated June 13, 2007,by and among Sandoz AG and the Registrant 10-Q 10.1 8/9/2007 000-50797 10.4.1 Amendment No. 1, dated April 25, 2008, to the Collaborationand License Agreement, dated June 13, 2007, by and amongSandoz AG and the Registrant 10-Q 10.1 5/9/2008 000-50797 10.4.2† Amendment No. 2, dated December 14, 2009, to theCollaboration and License Agreement, dated June 13, 2007,by and among Sandoz AG and the Registrant 10-K 10.18 3/12/2010 000-50797 10.4.3 Amendment No. 3, dated April 1, 2011, to the Collaborationand License Agreement dated June 13, 2007 by and amongSandoz AG and the Registrant. 10-Q 10.1 8/5/2011 000-50797 10.5 Letter Agreement dated November 8, 2011 by and betweenthe Registrant, Sandoz AG and Sandoz Inc. 10-K 10.20 2/28/2012 000-50797Table of Contents124 Incorporated by Reference toExhibit Number Description Form or Schedule Exhibit No. Filing Date with SEC SEC File Number 10.6† Development, License and Option Agreement by andbetween the Registrant and Baxter International Inc., BaxterHealthcare Corporation and Baxter Healthcare SA datedDecember 22, 2011 10-K 10.21 2/28/2012 000-50797 Material Contracts—Management Contracts andCompensation Plans 10.7# Amended and Restated 2002 Stock Incentive Plan 10-K 10.17 3/15/2007 000-50797 10.8# 2004 Stock Incentive Plan, as amended 10-K 10.18 3/15/2007 000-50797 10.9# Form of Incentive Stock Option Agreement Granted Under2004 Stock Incentive Plan 10-Q 10.1 8/16/2004 000-50797 10.10# Form of Nonstatutory Stock Option Agreement GrantedUnder 2004 Stock Incentive Plan 10-Q 10.2 8/16/2004 000-50797 10.11# Form of Restricted Stock Agreement Under 2004 StockIncentive Plan 8-K 10.2 2/28/2008 000-50797 10.12# 2004 Employee Stock Purchase Plan (as amended andrestated) 8-K 10.2 6/17/2014 000-50797 *10.13# Non-Employee Director Compensation Summary 10.14# Employment Agreement, dated August 22, 2006, betweenCraig Wheeler and the Registrant 10-Q 10.7 11/8/2006 000-50797 10.14.1# Amendment dated December 16, 2010 to the EmploymentAgreement, dated August 22, 2006, between Craig Wheelerand the Registrant 10-K 10.28 3/10/2011 000-50797 10.15# Restricted Stock Agreement, dated August 22, 2006, betweenCraig Wheeler and the Registrant 10-Q 10.8 11/8/2006 000-50797 10.16# Nonstatutory Stock Option Agreement, dated August 22,2006, between Craig Wheeler and the Registrant 10-Q 10.9 11/8/2006 000-50797 10.17# Incentive Stock Option Agreement, dated August 22, 2006,between Craig Wheeler and the Registrant 10-Q 10.10 11/8/2006 000-50797 10.18# Restricted Stock Agreement, dated December 15, 2006,between John E. Bishop and the Registrant 10-K 10.56 3/15/2007 000-50797 10.19# Restricted Stock Agreement, dated December 14, 2007,between John E. Bishop and the Registrant 10-K 10.35 3/10/2008 000-50797 10.20# Restricted Stock Agreement, dated August 15, 2007, betweenRichard P. Shea and the Registrant 10-Q 10.1 11/08/2007 000-50797 10.21# Form of Employment Agreement for executive officers 10-Q 10.3 5/9/2008 000-50797 10.22# Second Amended and Restated Employment Agreement,dated April 28, 2008, by the Registrant and GaneshVenkataraman 10-Q 10.4 5/9/2008 000-50797Table of Contents125 Incorporated by Reference toExhibit Number Description Form or Schedule Exhibit No. Filing Date with SEC SEC File Number 10.23# Form of Amendment to Employment Agreement, datedMay 28, 2008, by the Registrant and each of John E. Bishopand James Roach 10-Q 10.1 8/5/2008 000-50797 10.24# Form of Amendment to the Employment Agreement forexecutive officers dated December 15, 2010 10-K 10.39 3/10/2011 000-50797 10.25# Amendment No. 1 to the Restricted Stock Agreement madeon January 17, 2007 between the Registrant and Craig A.Wheeler dated November 4, 2009. 10-Q 10.1 11/5/2009 000-50797 10.26# Form of Restricted Stock Agreement 8-K 10.1 4/1/2011 000-50797 10.27# Momenta Pharmaceuticals, Inc. 2013 Incentive Award Plan(as amended and restated) 8-K 10.1 6/17/2014 000-50797 10.28# Form of Stock Option Agreement under the MomentaPharmaceuticals, Inc. 2013 Incentive Award Plan 8-K 10.1 6/13/2013 000-50797 10.29# Form of Restricted Stock Agreement under the MomentaPharmaceuticals, Inc. 2013 Incentive Award Plan 8-K 10.2 6/13/2013 000-50797 Material Contracts—Leases 10.30† Sublease Agreement, dated September 14, 2004, by andbetween Vertex Pharmaceuticals Incorporated and theRegistrant 10-Q 10.9 11/12/2004 000-50797 10.30.1 First Amendment to Sublease (regarding SubleaseAgreement, dated September 14, 2004), dated September 7,2005, between Vertex Pharmaceuticals Incorporated and theRegistrant 10-Q 10.3 11/14/2005 000-50797 10.30.2 Second Amendment to Sublease (regarding SubleaseAgreement, dated September 14, 2004, as amended),effective as of November 21, 2005, between VertexPharmaceuticals Incorporated and the Registrant 10-K 10.47 3/16/2006 000-50797 10.30.3 Third Amendment to Sublease (regarding SubleaseAgreement, dated September 14, 2004, as amended),effective as of January 27, 2006, between VertexPharmaceuticals Incorporated and the Registrant 10-K 10.48 3/16/2006 000-50797 10.30.4 Letter Agreement (regarding Sublease Agreement, datedSeptember 14, 2004, as amended), dated June 29, 2006,between Vertex Pharmaceuticals Incorporated and theRegistrant 10-Q 10.1 8/9/2006 000-50797 10.30.5 Fourth Amendment to Sublease (regarding SubleaseAgreement, dated September 14, 2004, as amended),effective as of July 14, 2014, between VertexPharmaceuticals Incorporated and the Registrant 8-K 10.1 7/18/2014 000-50797Table of Contents126 Incorporated by Reference toExhibit Number Description Form or Schedule Exhibit No. Filing Date with SEC SEC File Number 10.31 Sublease Agreement, dated February 5, 2013, by and betweenBMR-Rogers Street LLC and the Registrant 10-Q 10.1 5/10/2013 000-50797 10.31.1 First Amendment dated March 21, 2013 to the SubleaseAgreement dated February 5, 2013 by and between BMR-Rogers Street LLC and the Registrant 10-Q 10.2 5/10/2013 000-50797 10.31.2 Second Amendment to Sublease Agreement, dated May 24,2013, by and between BMR-Rogers Street LLC and theRegistrant 10-Q 10.4 8/6/2013 000-50797 10.31.3 Third Amendment to Sublease Agreement, datedDecember 30, 2015, by and between BMR-RogersStreet LLC and the Registrant 8-K 10.1 1/5/2016 000-50797 Material Contracts—Stock Purchase Agreement 10.32 Stock Purchase Agreement, dated July 25, 2006, by andbetween Novartis Pharma AG and the Registrant 10-Q 10.1 11/8/2006 000-50797 Material Contracts—Asset Purchase Agreement 10.33 Asset Purchase Agreement dated as of April 20, 2007 by andamong Parivid, LLC, S. Raguram and the Registrant 10-Q 10.3 5/10/2007 000-50797 10.33.1 Amendment No. 1 to the April 20, 2007 Asset PurchaseAgreement between Parivid LLC, S. Raguram and theRegistrant dated August 4, 2009. 10-Q 10.2 8/6/2009 000-50797 10.33.2 Amendment No. 2 to the April 20, 2007 Asset PurchaseAgreement between Parivid LLC, S. Raguram and theRegistrant dated July 18, 2011 10-Q 10.2 8/5/2011 000-50797 Material Contracts—At-the-Market Facility 10.34 At-The-Market Equity Offering Sales Agreement, dated as ofMay 6, 2014, by and between the Registrant and Stifel,Nicolaus & Company, Incorporated 8-K 10.1 5/06/2014 000-50797 10.35 At-The-Market Equity Offering Sales Agreement, dated as ofApril 21, 2015, by and between the Registrant and Stifel,Nicolaus & Company, Incorporated 8-K 10.1 4/21/2015 000-50797 Additional Exhibits *21 List of Subsidiaries *23.1 Consent of Independent Registered Public Accounting Firm *31.1 Certification of Chief Executive Officer pursuant toExchange Act Rules 13a-14 or 15d-14, as adopted pursuant toSection 302 of Sarbanes-Oxley Act of 2002 *31.2 Certification of Chief Financial Officer pursuant to ExchangeAct Rules 13a-14 or 15d-14, as adopted pursuant toSection 302 of Sarbanes-Oxley Act of 2002 Table of Contents The following financial information from Momenta Pharmaceuticals, Inc.'s Annual Report on Form 10-K for the period ended December 31, 2015, filed withthe SEC on February 26, 2016, formatted in Extensible Business Reporting Language (XBRL): (i) the Consolidated Statements of Comprehensive Loss for theyears ended December 31, 2015, 2014 and 2013, (ii) the Consolidated Balance Sheets as of December 31, 2015 and 2014, (iii) the Consolidated Statements of CashFlows for the years ended December 31, 2015, 2014 and 2013, (iv) the Consolidated Statements of Stockholders' Equity for the years ended December 31, 2015,2014 and 2013 and (v) Notes to Consolidated Financial Statements.127 Incorporated by Reference toExhibit Number Description Form or Schedule Exhibit No. Filing Date with SEC SEC File Number **32.1 Certification of Chief Executive Officer and Chief FinancialOfficer pursuant to Exchange Act Rules 13a-14(b) or 15d-14(b) and 18 U.S.C. Section 1350, as adopted pursuant toSection 906 of Sarbanes-Oxley Act of 2002 *101.INS XBRL Instance Document. *101.SCH XBRL Taxonomy Extension Schema Document. *101.CAL XBRL Taxonomy Calculation Linkbase Document. *101.LAB XBRL Taxonomy Label Linkbase Document. *101.PRE XBRL Taxonomy Presentation Linkbase Document. *101.DEF XBRL Taxonomy Extension Definition Linkbase Document. *101.REF XBRL Taxonomy Reference Linkbase Document. *Filed herewith. †Confidential treatment requested as to certain portions, which portions are omitted and filed separately with the Securities and ExchangeCommission. #Management contract or compensatory plan or arrangement. **Furnished herewithExhibit 10.13 Non-Employee Director Compensation Summary The compensation program for non-employee directors of Momenta Pharmaceuticals, Inc. (the “Company”) is summarized as follows: Grant of Options Upon Appointment Each new non-employee director receives an option to purchase 30,000 shares of the Company’s common stock upon election or appointment to theCompany’s Board of Directors (the “Board”), with 1/3 of such option vesting on the first anniversary of the date of election or appointment and an additional 81/3% vesting at the end of every three-month period thereafter, subject to the director’s continued service to the Company. Each such option is granted pursuant to,and subject to the terms of, the Company’s incentive award plan and a stock option award agreement in substantially the form of the Company’s standard stockoption agreement approved by the Board. Grant of Additional Stock Options Each non-employee director who served as a director in the previous year receives an option to purchase 17,750 shares of the Company’s common stockon the date of each annual meeting of the Company’s stockholders, such option vests in full on the first anniversary of the grant date, subject to the director’scontinued service to the Company. Each such option is granted pursuant to, and subject to the terms of, the Company’s incentive award plan and a stock optionaward agreement in substantially the form of the Company’s standard stock option agreement approved by the Board. Payment of Retainer Fee; Reimbursement of Travel and Other Expenses Each non-employee director is entitled to receive an annual retainer for his or her service on the Board as well as additional fees for committee service asfollows: Position FeesAnnual Retainer $40,000Non-Employee Chairman of the Board $30,000Audit Committee Chair $20,000Audit Committee Members (other than the Chair) $10,000Compensation Committee Chair $15,000Compensation Committee Members (other than the Chair) $7,500Nominating and Corporate Governance Committee Chair $12,000Nominating and Corporate Governance Committee Members (other than the Chair) $6,000Science Committee Chair $10,000Science Committee Members $7,500Additional Payments to Science Committee Chair and Members $3,000 for each all day session attended (up to amaximum of $15,000 per year) that is inaddition to the standard quarterly meetings ofthe Scientific Committee All retainer amounts are paid quarterly in arrears during the fiscal year. Non-employee directors also receive reimbursement for reasonable travel and otherexpenses in connection with attending Board meetings. QuickLinks -- Click here to rapidly navigate through this documentEXHIBIT 21 SUBSIDIARIES OF MOMENTA PHARMACEUTICALS, INC. Name of Subsidiary Jurisdiction of OrganizationMomenta Pharmaceuticals Securities Corporation MassachusettsQuickLinks EXHIBIT 21 SUBSIDIARIES OF MOMENTA PHARMACEUTICALS, INC. QuickLinks -- Click here to rapidly navigate through this documentExhibit 23.1 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We consent to the incorporation by reference in the Registration Statements (Form S-3 Nos. 333-188227 and 333-161414 and Form S-8 Nos. 333-206112,333-197582, 333-190394, 333-179760, 333-172155, 333-164892, 333-157275, 333-149253, 333-140760 and 333-117173) of Momenta Pharmaceuticals, Inc. andof our reports dated February 26, 2016, with respect to the consolidated financial statements of Momenta Pharmaceuticals, Inc., and the effectiveness of internalcontrol over financial reporting of Momenta Pharmaceuticals, Inc., included in this Annual Report (Form 10-K) for the year ended December 31, 2015./s/ Ernst & Young LLPBoston, Massachusetts February 26, 2016QuickLinks Exhibit 23.1 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM QuickLinks -- Click here to rapidly navigate through this documentExhibit 31.1 CERTIFICATIONS I, Craig A. Wheeler, certify that:1.I have reviewed this Annual Report on Form 10-K of Momenta Pharmaceuticals, Inc.; 2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for theregistrant and have: a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within thoseentities, particularly during the period in which this report is being prepared; b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for externalpurposes in accordance with generally accepted accounting principles; c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectivenessof the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscalquarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect,the registrant's internal control over financial reporting; and 5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control overfinancial reporting.Dated: February 26, 2016 /s/ CRAIG A. WHEELER Craig A. Wheeler President and Chief Executive OfficerQuickLinks Exhibit 31.1 CERTIFICATIONS QuickLinks -- Click here to rapidly navigate through this documentExhibit 31.2 CERTIFICATIONS I, Richard P. Shea, certify that:1.I have reviewed this Annual Report on Form 10-K of Momenta Pharmaceuticals, Inc.; 2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for theregistrant and have: a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within thoseentities, particularly during the period in which this report is being prepared; b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for externalpurposes in accordance with generally accepted accounting principles; c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectivenessof the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscalquarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect,the registrant's internal control over financial reporting; and 5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control overfinancial reporting.Dated: February 26, 2016 /s/ RICHARD P. SHEA Richard P. Shea Senior Vice President and Chief Financial OfficerQuickLinks Exhibit 31.2 CERTIFICATIONS QuickLinks -- Click here to rapidly navigate through this documentExhibit 32.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report on Form 10-K of Momenta Pharmaceuticals, Inc. (the "Company") for the period ended December 31, 2015 as filedwith the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned, Craig A. Wheeler, President and Chief Executive Officer of theCompany, and Richard P. Shea, Senior Vice President and Chief Financial Officer of the Company, each hereby certifies, pursuant to 18 U.S.C. Section 1350, that:(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.Dated: February 26, 2016 /s/ CRAIG A. WHEELER Craig A. Wheeler President and Chief Executive OfficerDated: February 26, 2016 /s/ RICHARD P. SHEA Richard P. Shea Senior Vice President and Chief Financial OfficerQuickLinks Exhibit 32.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 

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