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
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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
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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.
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here
to
rapidly
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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
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Click
here
to
rapidly
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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