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(Mark One)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
þ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2018
or
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 000-50797
MOMENTA PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
04-3561634
(I.R.S. Employer Identification No.)
301 Binney Street, Cambridge, Massachusetts 02142
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (617) 491-9700
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock, $0.0001 par value per share
Name of each exchange on which registered
The Nasdaq Stock Market
(The Nasdaq Global Select Market)
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 þ
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 þ
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 1934
during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes þ
No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be 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 the registrant was required to submit such
files). Yes þ
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
best of 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, a smaller reporting company, or an
emerging growth company. See definitions of "large accelerated filer," "accelerated filer", "smaller reporting company" and "emerging growth company" in
Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
Non-accelerated filer
Emerging growth company
þ
o
o
Accelerated filer
Smaller reporting company
o
o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or
revised financial accounting standards provided pursuant to Section13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o
No þ
The aggregate market value of the registrant's voting shares of Common Stock held by non-affiliates of the registrant on June 29, 2018, based on $20.45 per
share, the last reported sale price of Common Stock on The Nasdaq Global Select Market on that date, was $1,577.3 million .
As of February 11, 2019 , the registrant had 98,509,095 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 2019 Annual
Meeting of Stockholders and are hereby incorporated by reference into this report.
Table of Contents
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
PART I
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
PART II
Item 5.
Item 6.
Item 7.
BUSINESS
RISK FACTORS
UNRESOLVED STAFF COMMENTS
PROPERTIES
LEGAL PROCEEDINGS
MINE SAFETY DISCLOSURES
MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
SELECTED CONSOLIDATED FINANCIAL DATA
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Item 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Item 8.
Item 9.
Item 9A.
Item 9B.
PART III
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
PART IV
Item 15.
Item 16.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
CONTROLS AND PROCEDURES
OTHER INFORMATION
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
EXECUTIVE COMPENSATION
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
PRINCIPAL ACCOUNTANT FEES AND SERVICES
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
FORM 10-K SUMMARY
SIGNATURES
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CAUTIONARY 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 not
statements of historical fact are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. 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 such as "anticipate," "approach," "believe," "can." "contemplate," "continue," "could," "ensure," "hope," "likely," "opportunity,"
"pursue," "target," "project," "goal," "objective," "plan," "potential," "predict," "might," "estimate," "expect," "intend," "may," "seek", "should," "will," "would,"
"look forward" and other similar words or expressions, or the negative of these words or similar words or expressions. These statements include, but are not
limited to, statements regarding our priorities, goals and strategies, including our change in strategic focus toward the discovery and development of our novel
drug candidates for immune-mediated diseases, including M281, M254 and M230 and the advancement of our late stage biosimilar candidates, M923 and M710;
the use, efficacy, safety, potency, convenience, differentiation and commercial potential of our products and product candidates; design, timing and goals of
clinical trials and the availability, timing and announcement of data and results ; estimates of incidence of disease and patient populations, market potential and
acceptance of our products and product candidates; the timing of regulatory filings, reviews and approvals; our expectations regarding the development and
utility of our products and product candidates; development timelines for our product candidates; development, manufacture and commercialization of our
products and product candidates; efforts to seek and manage relationships with collaboration partners, including without limitation for our novel therapeutic and
biosimilar programs; the timing of launch of products and product candidates; market share and product revenues of our products and product candidates,
including GLATOPA and Enoxaparin Sodium Injection; the timing, merits, strategy, impact and outcome of, and decisions regarding, legal proceedings; timing of
biosimilar market formation; collaboration revenues and research and development revenues; manufacturing; the sufficiency of our current capital resources and
projected milestone payments and product revenues for future operations; our future financial position, including but not limited to our future operating losses,
our potential future profitability; our future expenses, including anticipated restructuring charges; the composition and mix of our cash, cash equivalents and
marketable securities; our future revenues and our future liabilities; our funding transactions and our intended uses of proceeds thereof; product candidate
development costs; receipt of contingent milestone payments; accounting policies, estimates and judgments; our estimates regarding the fair value of our
investment portfolio; the market risk of our cash equivalents, marketable securities and derivative, foreign currency and other financial instruments; rights,
obligations, terms, conditions and allocation of responsibilities and decision making under our collaboration agreements; the regulatory pathway for biosimilars;
our strategy, including but not limited to our regulatory strategy, and scientific approach; the importance of key customer distribution arrangements; future
capital requirements; reliance on our collaboration partners and other third parties; the competitive landscape; changes in, impact of and compliance with laws,
rules and regulations; product reimbursement policies and trends; pricing of pharmaceutical products, including our products and product candidates; our stock
price; our intellectual property strategy and position; sufficiency of insurance; attracting and retaining qualified personnel; our internal controls and procedures;
acquisitions or investments in companies, products and technologies; entering into collaboration and/or license arrangements; marketing plans; financing our
planned operating and capital expenditure; the terms and conditions of our facility leases; materials used in our research and development; dilution; royalty rates;
and vesting of equity awards.
Any forward-looking statements in this Annual Report on Form 10-K involve known and unknown risks, uncertainties and other important factors that may
cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by
these forward-looking statements. Important factors that may cause actual results to differ materially from current expectations include, among other things, those
listed 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 undue
reliance on these forward-looking statements. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any
reason, 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 for
certain diseases, including data regarding the estimated size of those markets, and the incidence and prevalence of certain medical conditions. Information that is
based on estimates, forecasts, projections, market research or similar methodologies is inherently subject to uncertainties and actual events or circumstances may
differ materially from events and circumstances reflected in this information. Unless otherwise expressly stated, we obtained this industry, business, market and
other data from reports, research surveys, studies and similar data prepared by market research firms and other third parties, industry, medical and general
publications, government data and similar sources.
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Item 1. BUSINESS
PART I
OUR COMPANY
We are a biotechnology company focused on the discovery and development of novel biologic therapies for the treatment of rare immune-mediated diseases.
Our goal is to develop molecules that drive significant advances in the control over or cure of immune-driven disease. To do this, we draw on our strong analytic
heritage to interrogate immune biology to identify and validate high-priority targets. We then use our protein design expertise to refine the structure of our
biological product candidates to optimize their potency and pharmacokinetics, while minimizing potential toxicities.
Our initial focus in immune biology has been to explore the interaction between antibodies, which are components of the humoral immune system, and the
receptors which bind to the fragment crystallizable (Fc) region of antibodies and modulate the immune cascade. Our objective is to reduce immune driven tissue
damage resulting from autoimmune disease. Specifically, we have been working with the Fc gamma receptor system which controls immune activation, and the
neonatal Fc receptor (FcRn) system which recycles immunoglobulin G (IgG) to preserve its half-life. This work has led to three programs currently in clinical
development, all of which have shown high potency against their respective targets in preclinical studies, and all with unique, differentiated and carefully designed
biologic structures. The targets our programs modulate have the potential to impact core areas of humoral immune activation, and therefore we believe our
programs have the potential to treat a variety of immune-mediated disorders.
Our research platform continues to develop additional programs to build our pipeline. We have two areas of focused research activities. The first area of focus
is to continue to explore immune biology, expanding our efforts beyond the Fc gamma and FcRn systems. This effort has yielded several promising leads which
we hope to add to our development pipeline in the next two years.
The second area of focus seeks to exploit the properties of our uniquely designed product candidates to create molecules that more effectively modulate
established targets. This effort seeks to reduce program risk by pursuing well known biology with well-engineered biologics. We have two areas of focus, based on
two of our technologies used for programs in the clinic:
1. Sialylation Platform - We have optimized our tools for the terminal sialylation of glycans attached to biologic molecules during our development of
M254, our investigational tetra-sialylated IgG program now in the clinic. This technology can be used for the sialylation of other biologics. Most notably,
this technology can be used to create effective sialylation on recombinant versions of blood proteins. This approach has dramatically increased their
observed half-life and we believe could enable recombinant versions of these proteins, if successfully developed and approved, to become viable
products.
2. SIFbody Platform - We are seeking to take advantage of the enhanced Fc gamma receptor binding we have seen in our M230 trimer program to create
more potent versions of antibodies which activate the immune system through their Fc signaling and binding. We have observed significant enhancements
in potency in laboratory models using CD38 SIFbody molecules compared to existing marketed CD38 antibodies. There are over 40 marketed products
whose mechanisms are driven by their Fc activities and which we believe may be enhanced with this technology.
We believe both of these platforms have the potential to yield multiple programs for our own, or potential collaboration partner’s, pipelines in the coming
years.
Our Restructuring and Legacy Business
Prior to 2018, Momenta had the dual focus of developing novel drug candidates and nurturing a portfolio of biosimilar and complex generic products and
product candidates. In the beginning of 2018, we engaged in a strategic review of our business and made the decision that shareholder value could be enhanced by
shifting our future investments to fully support our promising novel drug portfolio. Following this strategic review, we made the decision in September of 2018 to
restructure the company.
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We have terminated all future development of any new or early stage biosimilar and complex generic products. We retained our commercial partnership with
Sandoz AG, or Sandoz, for our generic versions of COPAXONE and LOVENOX, which are approved products. We believe that Sandoz's sales of GLATOPA, our
generic version of COPAXONE, can generate cash flow to help fund our novel pipeline. We have also retained our wholly owned HUMIRA biosimilar, which is
fully developed and for which we are ready to submit an application for approval, subject to finalization of our commercialization strategy. In addition, we are
developing our EYLEA biosimilar, in collaboration with Mylan Ireland Limited, or Mylan, a wholly-owned indirect subsidiary of Mylan N.V., which is currently
in a pivotal clinical trial in patients. We believe both of these programs have the potential to generate revenue in the 2023 time frame to help fund our novel
portfolio. Pursuant to our collaboration agreement with Mylan, we have delivered formal notice of our termination of participation in all other biosimilar programs.
As a result of this restructuring, we announced in October 2018 that we would reduce our workforce by approximately 50%, which reduction was substantially
completed as of the end of 2018.
Today, we have two product development areas: Novel Therapeutic Candidates and Legacy Products, which include biosimilars and complex generics. A
summary of our programs in each area is set forth below.
Our Approach
Novel Therapeutics
We believe that dramatic progress in the treatment of autoimmune disease can be achieved through a combination of focused research which provides a deep
understanding of the pathways of the immune system and a careful design of biologic therapeutics that optimally interact with and influence these pathways. Our
approach to immune biology has yielded insights into the interactions of antibodies and the Fc receptors that modulate the immune system, leading to three
programs we have in the clinic. Our deep experience in protein design has yielded what we believe are best in class drug candidates. We are currently working to
expand our research, and our portfolio of product candidates, into additional areas of immune biology.
Autoimmune Diseases
Many autoimmune diseases are characterized by the formation of autoantibodies that bind self-antigens to form immune complexes. These immune complexes
can recruit and activate immune cells leading to tissue inflammation and damage. Few therapeutic agents exist today that interfere directly with these
autoantibodies or immune complex-immune cell activation processes, or that effectively modulate the immune cascades that result. The most commonly used
treatments for autoantibody-
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driven disease are systemic immunosuppressants, which do not specifically target disease pathogenesis and which carry significant safety risks such as
opportunistic infection and cancer. In addition to these treatments, intravenous immunoglobulin (IVIg), a therapeutic drug product that contains pooled IgG
antibodies purified from blood plasma may be used to treat several inflammatory diseases. We believe that, despite currently available agents that do offer some
relief for patients, there is an unmet medical need in patients with immune-mediated diseases.
There are approximately 45 rare autoimmune disorders driven by autoantibodies, and we estimate there are one to two million patients in the United States
with these rare disorders. We are developing therapeutics for autoimmune diseases with a focus on these diseases. Initially we have applied our complex systems
analysis and biological protein engineering platforms to develop an improved IVIg. We utilized our proprietary sialylation technology, a method to add sialic acid
to protein, to create M254, a high potency alternative to IVIg that we believe improves upon the limitations of that therapeutic approach. By gaining a deeper
understanding of IVIg and immune complex driven autoimmune diseases, we have designed two novel recombinant therapeutic candidates, M281 and M230, to
leverage what we believe are key biologies associated with autoimmune diseases. The discovery of these candidates is based on our analysis of the role of the Fc
region of IgG autoantibodies in maintaining persistence in circulation and in mediating tissue damage and inflammation in rare autoimmune diseases. The design
of these agents is based on our expertise in biological protein engineering and proprietary Fc multimerization technology.
We believe our novel product candidates could be capable of treating a large number of immune-mediated disorders driven by autoantibodies, immune
complexes, and Fc receptor biology.
Our Programs
M281 - Anti-FcRn Candidate
M281 is a fully-human anti-neonatal Fc receptor (FcRn), aglycosylated immunoglobulin G, or IgG1, monoclonal antibody, designed to reduce circulating IgG
antibodies by completely blocking endogenous IgG recycling via FcRn. M281 has exhibited high affinity to human and non-human FcRn in nonclinical studies and
shown selective induction of human and non-human IgG clearance. Based on this data, we believe M281 has the potential for use as an acute and
chronic/intermittent therapies in a broad range of autoantibody driven disease.
A Phase 1 randomized, double-blind, placebo-controlled study to evaluate the safety, tolerability, pharmacokinetics and pharmacodynamics of M281 in
normal healthy volunteers was initiated in June 2016. The full results of the Phase 1 study were published on November 7, 2018. A total of 50 patients were
enrolled in both the single ascending dose and multiple ascending dose portions of the study, both of which showed predictable pharmacokinetics, and
commensurate, controllable and reproducible reductions in circulating IgG. The data showed greater than 80% reduction in circulating IgG antibodies with a mean
reduction of 84%. M281 was well tolerated at all dose levels and no serious adverse events or unexpected safety findings were observed in either portion of the
study.
In the fourth quarter of 2018, we commenced a Phase 2 proof-of-concept clinical trial for M281 in generalized myasthenia gravis, or gMG, and in hemolytic
disease of the fetus and newborn, or HDFN. We estimate that there are approximately 55,000 patients in the United States with gMG and approximately 4,000 to
8,000 patients in the United States with HDFN.
M230 (CSL730) - Recombinant Fc Multimer Candidate
M230 is a novel recombinant trivalent human IgG1 Fc multimer containing three IgG Fc regions joined to maximize activity. Nonclinical data have shown
that M230 enhanced the molecules' avidity for the Fc receptors matching the potency and efficacy of IVIg at significantly lower doses.
Pursuant to the License and Option Agreement, effective February 17, 2017, with CSL Behring Recombinant Facility AG, or CSL, a wholly-owned indirect
subsidiary of CSL Limited, we granted CSL an exclusive worldwide license to research, develop, manufacture and commercialize M230. In August 2017, we
exercised our 50% co-funding option, which is discussed further in Note 9 " Collaboration and License Agreements - CSL License and Option Agreement ". The
terms of our CSL collaboration are further discussed below under " Collaborations and Licenses—CSL. "
CSL's Phase I study in healthy volunteers to evaluate the safety and tolerability of M230 is ongoing and is targeted for completion in 2019.
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M254 - Hyper-sialylated IgG Candidate
M254 is a hyper-sialylated immunoglobulin designed as a high potency alternative to IVIg, a therapeutic drug product that contains pooled, human
immunoglobulin G, or IgG, antibodies purified from blood plasma. IVIg is used to treat several inflammatory diseases, including idiopathic thrombocytopenic
purpura and chronic inflammatory demyelinating polyneuropathy. In nonclinical studies, M254 has been shown to have up to ten times more enhanced anti-
inflammatory activity than IVIg in a variety of animal models of autoimmune disease. If approved, we believe M254 has the potential to remediate the limitations
of IVIg because sialylation of the Fc region of IgG has been seen to augment the anti-inflammatory attributes of IVIg.
We have completed our IND-enabling toxicology study and initiated a Phase 1/2 proof of concept clinical study in normal, healthy volunteers and patients
with idiopathic thrombocytopenic purpura (ITP) in early 2019. We estimate that chronic ITP affects approximately 30,000 to 40,000 patients in the United States.
We continue to identify and explore potential collaboration opportunities to further develop and commercialize this product candidate.
Legacy Products
Our Approach
In October 2018, we announced and later completed a restructuring of our business in order to focus the majority of our resources on our promising new drug
pipeline. Prior to that restructuring, we were heavily involved in developing a portfolio of biosimilar and complex generic products. In connection with the
restructuring, we have terminated all development of early stage biosimilar and complex generic programs, and have only retained our late stage or commercial
products in these business areas. We delivered a formal notice of partial termination to Mylan, our biosimilar partner, in November 2018, as provided for in our
collaboration agreement with Mylan, enabling us to exit ongoing early stage programs. The programs remaining in our portfolio are our wholly owned biosimilar
to HUMIRA, a biosimilar program for ELYEA (the only remaining program in our Mylan collaboration), which is currently in Phase 3, and our marketed complex
generics, GLATOPA, a generic to COPAXONE, and Enoxaparin Sodium Injection, a generic to LOVENOX. Both GLATOPA and Enoxaparin Sodium Injection
are marketed by our collaboration partner, Sandoz. The retained programs, with the exception of Enoxaparin Sodium Injection for which we expect minimal
revenues, provide the potential for revenue to help fund our growing novel drug pipeline and, with the majority of development activities behind us, do not require
a large staff to support.
Our Programs
M923—Biosimilar HUMIRA ® (adalimumab) Candidate
We are developing M923 as a biosimilar of HUMIRA. HUMIRA is a monoclonal antibody that can bind to a substance in the body known as tumor necrosis
factor, or TNF, thereby inhibiting the known effect of TNF as a potent mediator of inflammation. HUMIRA is indicated for the treatment of patients with
rheumatoid arthritis, Crohn's disease, ulcerative colitis and psoriasis, among other diseases. HUMIRA is the largest selling therapeutic in the world. HUMIRA is
marketed globally by AbbVie Inc, or AbbVie. Based on the settlement agreements entered into by AbbVie, with respect to other biosimilar candidates, we expect
that U.S. market formation for biosimilar versions of HUMIRA will likely be in the 2023 time frame, subject to market approval, patent considerations and
litigation timelines.
In November 2016, we announced that the confirmatory, randomized, double-blind, multi-center, global study evaluating the efficacy, safety and
immunogenicity of M923 in adult patients with moderate-to-severe chronic plaque psoriasis met its primary endpoint. Patients received up to 48 weeks of
treatment with M923, HUMIRA, or HUMIRA alternating with M923. The proportion of subjects who achieved the primary endpoint of at least 75% reduction in
the Psoriasis Area and Severity Index, or PASI-75, following 16 weeks of treatment, was equivalent between M923 and HUMIRA.
On November 6, 2018, we executed global licensing agreements with AbbVie with respect to M923, pursuant to which, subject to approval by health
regulatory authorities, we may launch M923 in the United States as early as November 20, 2023 and in Europe following approval by the European Medicines
Agency. We are working on our commercialization strategy, including identifying a commercialization partner for this product candidate.We plan to submit a
biologics license application (BLA) for M923 with the FDA and a market authorization application (MAA) in the European Union, subject to finalization of our
commercialization strategy.
AbbVie reported approximately $19.9 billion in worldwide sales of HUMIRA in 2018, including approximately $13.7 billion in the United States.
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M710—Biosimilar EYLEA ® (aflibercept) Candidate
M710 is being developed as a biosimilar of EYLEA. EYLEA is the market leading vascular endothelial growth factor (VEGF) inhibitor indicated for the
treatment of Neovascular (Wet) Age-related Macular Degeneration (AMD), Macular Edema following Retinal Vein Occlusion (RVO), Diabetic Macular Edema
(DME), and Diabetic Retinopathy (DR) in patients with DME.
M710 is being developed in collaboration with Mylan. Under our collaboration agreement, we and Mylan share equally costs and profits (losses) for M710.
We and Mylan will share development and manufacturing responsibilities, and Mylan will lead commercialization of M710, if approved. The terms of our Mylan
collaboration are further discussed below under " Collaborations and Licenses—Mylan ."
In August 2018, Mylan initiated dosing of patients in the United States in our pivotal clinical trial. This trial is a randomized, double-blind, active-control,
multi-center study in patients with diabetic macular edema to compare the safety, efficacy and immunogenicity of M710 with EYLEA. Mylan has also received
regulatory approval to dose patients in the European Union. Subject to development, marketing approval, patent considerations and litigation timelines, we expect
U.S. market formation for biosimilar versions of EYLEA to be in the 2023 timeframe.
EYLEA is marketed by Regeneron Pharmaceuticals, Inc. in the United States and by Bayer HealthCare in the EU and rest of the world. Regeneron
Pharmaceuticals, Inc. reported approximately $6.7 billion in worldwide sales of EYLEA in 2018, including $4.1 billion in the United States.
GLATOPA ® (glatiramer acetate injection) 20 mg/mL—Generic Once-daily COPAXONE ® (glatiramer acetate injection) 20 mg/mL
GLATOPA 20 mg/mL is a generic version of once-daily COPAXONE 20 mg/mL indicated for the treatment of patients with relapsing forms of multiple
sclerosis, a chronic disease of the central nervous system characterized by inflammation and neurodegeneration. COPAXONE is available in both a once-daily 20
mg/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 20 mg/mL was approved by the FDA in April 2015 and was launched in June 2015. GLATOPA 20 mg/mL, the first "AP" rated, substitutable
generic equivalent of once-daily COPAXONE, was developed and is being commercialized in collaboration with Sandoz, the generic pharmaceuticals division of
Novartis Pharma AG, or Novartis. Under our collaboration agreement, Sandoz is responsible for commercialization of GLATOPA 20 mg/mL, and we earn 50% of
contractually defined profits on GLATOPA 20 mg/mL sales. The terms of our Sandoz collaboration for GLATOPA 20 mg/mL are further discussed below under "
Collaborations and Licenses—Sandoz ."
GLATOPA ® (glatiramer acetate injection) 40 mg/mL—Generic Three-times-weekly COPAXONE ® (glatiramer acetate injection) 40 mg/mL
GLATOPA 40 mg/mL is a generic version of three-times-weekly COPAXONE 40 mg/mL. GLATOPA 40 mg/mL was developed in collaboration with
Sandoz. Under our collaboration agreement, Sandoz is responsible for commercialization of GLATOPA 40 mg/mL and we will earn 50% of contractually defined
profits on GLATOPA 40 mg/mL sales. The terms of our Sandoz collaboration for GLATOPA 40 mg/mL are further discussed below under " Collaborations and
Licenses—Sandoz ."
We announced on February 13, 2018 that GLATOPA 40 mg/mL was approved by the FDA and was launched by our collaborator, Sandoz. Legal
proceedings related to GLATOPA 40 mg/mL are described below under " Item 3. Legal Proceedings -- GLATOPA 40 mg/mL-Related Proceedings. "
GLATOPA refers to GLATOPA 20 mg/mL and our generic product for three-times-weekly COPAXONE 40 mg/mL, GLATOPA 40 mg/mL, collectively.
In October 2017, Mylan N.V. announced the launch of its generic equivalents of once-daily COPAXONE 20 mg/mL and three-times-weekly COPAXONE
40 mg/mL. Following Mylan N.V.’s entry into the market, Sandoz has defended GLATOPA’s share of the 20 mg/mL glatiramer acetate injection market by using
one or more contracting strategies, including but not limited to, lowering its GLATOPA 20 mg/mL pricing or increasing the discounts or rebates it offers for
GLATOPA 20 mg/mL, which has decreased contractual profit share revenue. Since Sandoz’s launch of GLATOPA 40mg/mL in February 2018, Sandoz has
encountered aggressive pricing and contracting tactics from competitors and as a result we expect modest revenues for this product in the future.
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As of the end of 2018, Teva’s three-times-weekly COPAXONE 40 mg/mL and Mylan N.V.’s three-times-weekly generic equivalent product accounted for
approximately 84% of the overall U.S. glatiramer acetate injection market (20 mg/mL and 40 mg/mL) based on volume prescribed. We estimate that the number of
prescriptions for GLATOPA 20 mg/mL currently represents approximately 40% of the once-daily 20 mg/mL U.S. glatiramer acetate market.
Teva reported $1.7 billion and $3.0 billion in U.S. sales of COPAXONE (combined 20 mg/mL and 40 mg/mL) in 2018 and 2017 , 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 the
treatment of acute coronary syndromes. LOVENOX is marketed in the United States by Sanofi. Our Enoxaparin Sodium Injection was developed and is being
commercialized in the United States in collaboration with Sandoz. Under our amended 2003 collaboration agreement with Sandoz, or the 2003 Sandoz Agreement,
Sandoz is responsible for commercialization of Enoxaparin Sodium Injection and we earn 50% of contractually defined profits on Enoxaparin Sodium Injection
sales.
In July 2018, Sandoz notified its customers and the FDA that it will discontinue supplying Enoxaparin Sodium Injection. Sandoz continues to evaluate
alternate acceptable contract manufacturers at a price point that will allow for profitable and competitive sales and may decide to relaunch Enoxaparin Sodium
Injection at a later date following regulatory approval. We expect future revenues from Sandoz' sales of Enoxaparin Sodium Injection, if any, to be minimal .
Legal Proceedings related to Enoxaparin Sodium Injection are described under “Item 3. Legal Proceedings-Enoxaparin Sodium Injection-Related
Proceedings” .
CSL
Collaborations and Licenses
We and CSL Behring Recombinant Facility AG, or CSL, a wholly-owned indirect subsidiary of CSL Limited, entered into a License and Option Agreement,
or the CSL License Agreement, effective February 17, 2017, pursuant to which we granted CSL an exclusive worldwide license to research, develop, manufacture
and commercialize the M230 pre-clinical product candidate, an Fc multimer protein that is a selective immunomodulator of the Fc receptor. The CSL License
Agreement also provides, on an exclusive basis, for us and CSL to conduct research on other Fc multimer proteins, and provides CSL the right to develop,
manufacture, and commercialize these additional research products globally.
Pursuant to the CSL License Agreement, CSL paid us a non-refundable upfront payment of $50 million. On August 28, 2017, we exercised our 50% co-
funding option. This exercise allows us to participate in a cost-and-profit sharing arrangement, under which we fund 50% of global research and development costs
and 50% of U.S. commercialization costs for all products developed, in exchange for a 50% share of U.S. profits. Under this option, sales-based royalty payments
in percentages ranging from a mid-single digit to low-double digits are payable for territories outside of the United States for M230 and a named research stage
product should that enter development and be commercialized. For the development and commercialization of M230 we are also entitled to up to $297.5 million in
contingent clinical, regulatory and sales milestone payments, and additional negotiated milestone payments for a named research stage product should one enter
development. The contract allows us to opt-out of the program in the future at our discretion. If we were to do so, our U.S. profit share would be reduced to sales-
based royalties ranging from mid-single to low double digits and the milestone payments for which we are eligible would be increased by up to $252.5 million,
depending on the timing of our opt-out decision.
Under the CSL License Agreement, we have granted CSL an exclusive license under our intellectual property to research, develop, manufacture and
commercialize product candidates for all therapeutic indications. CSL has granted us a non-exclusive, royalty-free license under CSL’s intellectual property for our
research and development activities pursuant to the CSL License Agreement and our commercialization activities under any co-promotion agreement with CSL.
We and CSL formed a joint steering committee, or JSC, consisting of an equal number of members from Momenta and CSL, to facilitate the research,
development, and commercialization of product candidates.
The term of the CSL License Agreement commenced on February 17, 2017 and continues until the later of (i) the expiration of all payment obligations with
respect to products under the CSL License Agreement, (ii) the date on which we are no longer co-funding development or commercialization of any products and
(iii) the date on which we and CSL are not otherwise collaborating on the development and commercialization of products or product candidates. CSL may
terminate the CSL License Agreement on a product-by-product basis subject to notice periods and certain circumstances related to clinical development. We may
terminate the CSL License Agreement under certain circumstances related to the development of M230
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and if no activities are being conducted under the CSL License Agreement. Either party may terminate the CSL License Agreement (i) on a product-by-product
basis if certain patent challenges are made, (ii) on a product-by-product basis for material breaches, or (iii) due to the other party’s bankruptcy. Upon termination
of the CSL License Agreement, subject to certain exceptions, the licenses granted under the CSL License Agreement terminate. In addition, dependent upon the
circumstances under which the CSL License Agreement is terminated, we or CSL have the right to continue the research, development, and commercialization of
terminated products, including rights to certain data, for the continued development and sale of terminated products and, subject to certain limitations, obligations
to make sales-based royalty payments to the other party.
CSL's obligations under the CSL License Agreement are guaranteed by its parent company, CSL Limited.
Mylan
We and Mylan, entered into a collaboration agreement, or the Mylan Collaboration Agreement, effective February 9, 2016, pursuant to which we and Mylan
agreed to collaborate exclusively, on a worldwide basis, to develop, manufacture and commercialize six of our biosimilar candidates, including M834 and M710.
In November 2018, we delivered a formal notice of the partial termination of the Mylan Collaboration Agreement with respect to five of our collaboration
programs, including M834, a proposed biosimilar to ORENCIA. As a result, we will only continue to advance our late-stage biosimilar candidate M710, our
proposed biosimilar to EYLEA under the Mylan Collaboration Agreement.
Under the terms of the Mylan Collaboration Agreement, Mylan paid us a non-refundable upfront payment of $45 million. In addition, we and Mylan agreed
to share equally costs (including development, manufacturing, commercialization and certain legal expenses) and profits (losses) with respect to such product
candidates, with Mylan funding its share of collaboration expenses incurred by us.
For our remaining product candidate, M710, we and Mylan both have the right to terminate the program at our own convenience. As with the five
discontinued collaboration programs, if one party decides not to continue development, manufacture and commercialization of M710 under the Mylan
Collaboration Agreement, the other party will have the right to continue the development, manufacture and commercialization of such product candidate, and the
terminating party will need to continue to fund it share of expenses for a pre-specified period, depending on the stage of the product at the time of termination.
Under the Mylan Collaboration Agreement, we granted Mylan an exclusive license under our intellectual property rights to develop, manufacture and
commercialize the product candidates for all therapeutic indications, and Mylan has granted us a co-exclusive license under Mylan's intellectual property rights for
us to perform our development and manufacturing activities under the product work plans agreed by the parties, and to perform certain commercialization activities
to be agreed by the Joint Steering Committee, or JSC, for such product candidates if we exercise our co-commercialization option described below. We and Mylan
have established a joint steering committee, or JSC, consisting of an equal number of members from us and Mylan, to oversee and manage the development,
manufacture and commercialization of product candidates under the collaboration. Unless otherwise determined by the JSC, it is anticipated that, in collaboration
with the other party, (a) we will be primarily responsible for nonclinical development activities and initial clinical development activities for the product
candidates; and regulatory activities for the product candidates in the United States through regulatory approval; and (b) Mylan will be primarily responsible for
additional (pivotal or phase 3 equivalent) clinical development activities for the product candidates ; regulatory activities for the product candidates outside the
United States; and regulatory activities for products in the United States after regulatory approval, when all marketing authorizations for the products in the United
States will be transferred to Mylan. As provided in the Mylan Collaboration Agreement, 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 responsibilities for other activities
under the collaboration.
The term of the collaboration will continue throughout the development and commercialization of M710, on a country-by-country basis, until development
and commercialization by or on behalf of us and Mylan pursuant to the Mylan Collaboration Agreement has ceased for a continuous period of two years in a given
country, unless earlier terminated by either party pursuant to the terms of the 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 certain
activities involving competing products or the challenge of certain patents. Other than in the case of a termination for convenience, the terminating party shall have
the right to continue the development, manufacture and commercialization of the terminated products in the terminated countries.
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Sandoz
In 2006 and 2007, we entered into a series of agreements, including a collaboration and license agreement, as amended, or the 2006 Sandoz Collaboration
Agreement, with Sandoz and a stock purchase agreement and an investor rights agreement with Novartis. Under the 2006 Sandoz Collaboration Agreement, we
and Sandoz agreed to exclusively collaborate on the development and commercialization of GLATOPA, among other potential products. Costs, including
development costs and the costs of clinical studies, are borne by the parties in varying proportions depending on the type of expense. For GLATOPA, we were
generally responsible for all of the development costs in the United States. For GLATOPA outside of the United States, we shared development costs in proportion
to our profit sharing interest, unless otherwise agreed. We are reimbursed 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 the extent development costs are born by Sandoz. All commercialization costs are to be borne by Sandoz
as they are incurred for all products.
Under the 2006 Sandoz Collaboration Agreement, as amended in November, 2017, Sandoz has granted us an exclusive license under its intellectual property
rights, and we have granted an exclusive license under our know-how and data to the GLATOPA products and a non-exclusive license under our intellectual patent
rights to develop and commercialize such products for all medical indications in the relevant regions. We have agreed to provide development and related services
on a commercially reasonable best-efforts basis, which includes developing a manufacturing process to make the products, scaling up the process, contributing to
the preparation of regulatory filings, further scaling up the manufacturing process to commercial scale, and related development of intellectual property. We have
the right to participate in a joint steering committee, which is responsible for overseeing development, legal and commercial activities and which prepares and
approves the annual 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 the
products, unless earlier terminated by either party pursuant to the provisions of the agreement. The 2006 Sandoz Collaboration Agreement may be terminated if
either party breaches the 2006 Sandoz Collaboration Agreement or files for bankruptcy.
Sandoz commenced United States sales of GLATOPA 20 mg/mL in June 2015 and of GLATOPA 40 mg/mL in February 2018. Under the 2006 Sandoz
Collaboration Agreement, we earn 50% of contractually defined profits on Sandoz' worldwide net sales of GLATOPA 20 mg/mL and of GLATOPA 40 mg/mL.
Profits on net sales of GLATOPA are calculated by deducting from net sales the costs of goods sold and an allowance for selling, general and administrative costs,
which is a contractual percentage of net sales. With respect to GLATOPA, Sandoz is responsible for funding all of the legal expenses incurred under the 2006
Sandoz Collaboration Agreement, except for our FTE costs with respect to certain legal activities for GLATOPA; however, a portion of certain legal expenses,
including any patent infringement damages, can be offset by Sandoz against the profit-sharing amounts in proportion to our 50% profit sharing interest. In 2015,
we earned a $10 million regulatory milestone payment upon GLATOPA 20 mg/mL receiving sole FDA approval and an additional $10 million milestone payment
upon the first commercial sale of GLATOPA 20 mg/mL. In July 2017, we earned a $10 million commercial milestone payment in connection with GLATOPA 20
mg/mL's being the sole FDA-approved generic of COPAXONE when earned and achieving a certain level of contractually defined profits in the United States, for
which Sandoz was entitled to reduce our contractually defined profits by a corresponding amount. Following FDA approval of Mylan N.V.'s generic equivalents of
COPAXONE 20 mg/mL and 40 mg/mL, which Mylan N.V. announced in October 2017, we are no longer eligible to earn $80 million in future post-launch
commercial milestones; however, we may still be eligible to receive up to $30 million in sales-based milestones for GLATOPA in the United States, although we
believe that it is unlikely the performance based milestones will be achieved. 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.
Patents and Property Rights
Our success depends in part on our ability to obtain and maintain proprietary protection for our technology and product candidates, to operate without
infringing on the proprietary rights of others and to prevent others from infringing our proprietary rights. Our policy is to seek to protect our proprietary position
by, among other methods, filing United States and foreign patent applications related to our proprietary technology and product candidates that are important to the
development of our business. We also rely on trade secrets, know-how, continuing technological innovation and in-licensing opportunities to develop and maintain
our proprietary position.
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We license or own a patent portfolio of around 150 patent families, each of which includes United States patent applications and/or issued patents as well as
foreign counterparts to certain of the United States patents and patent applications. Our patent portfolio includes issued or pending claims covering:
•
•
composition of matter, methods of use, and methods of making novel therapeutics for autoimmune disease, including our novel product candidates
such as M230, M281 and M254;
composition of matter, methods of use, and methods of making certain novel low molecular weight heparins;
• methods and technologies for characterizing complex generics and biosimilars, including our biosimilar HUMIRA candidate;
•
composition of matter and use of certain heparinases, heparinase variants and other enzymes; and
• methods and technologies for the analysis and synthesis of polysaccharides.
The patent positions of companies like ours are generally uncertain and involve complex legal and factual questions. Our ability to maintain and solidify our
proprietary position for our technology will depend on our success in obtaining effective claims and enforcing those claims once granted. We do not know whether
any 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 patented
technology or to commercialize the patented product. Third parties may have blocking patents that could be used to prevent us from commercializing our patented
products 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 similar
technology. Furthermore, our competitors may independently develop similar technologies. For these reasons, we may have competition for our generic, biosimilar
and 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 products can be commercialized, any related patent may expire or remain in force for only a short period following commercialization, thereby
reducing any advantage of the patent.
We may rely, in some circumstances, on trade secrets to protect our technology. However, trade secrets are difficult to protect. We seek to protect our
technology and product candidates, in part, by confidentiality agreements with our employees, consultants, advisors, contractors and collaborators. These
agreements may be breached and we may not have adequate remedies for any breach. In addition, our trade secrets may otherwise become known or be
independently discovered by competitors. To the extent that our employees, consultants, advisors, contractors and collaborators use intellectual property owned by
others 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 commercial scale manufacturing of our products. We do own a process development scale manufacturing facility
used in the development of our biologics. While we have personnel with experience and expertise in manufacturing, as well as process development, analytical
development, quality assurance and quality control, we rely on contract manufacturers and our collaboration partners for manufacturing and supply activities.
Under the 2006 Sandoz Collaboration Agreement, Sandoz is responsible for commercial manufacture of GLATOPA. Under the Mylan Collaboration Agreement,
Mylan is responsible for contracting with contract manufacturers for commercial supply for M710. Under the CSL License Agreement, CSL is responsible for
manufacturing activities, except that we are responsible, at CSL's direction, for contracting with contract manufacturers for certain clinical supply of M230. We
rely on third parties for the manufacture, process development, analytical development, quality assurance and quality control of all our solely-owned novel product
candidates.
We have entered into various agreements with third party contractors for process development, analytical services and manufacturing. In each of our
agreements 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, we
are granted non-exclusive licenses to certain contractor intellectual property for purposes of exploiting the products that are the subject of the agreement and in a
few instances we grant non-exclusive licenses to the contract manufacturers for use outside of our product area. The agreements also typically contain provisions
for both parties to terminate for material breach, bankruptcy and insolvency.
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Sales, Marketing and Distribution
We do not currently have any sales, marketing and distribution capabilities other than strategic sales and marketing expertise, nor do we currently have any
plans to build a sales, marketing and distribution capability to support any of our products. While we have personnel with experience and expertise in sales and
marketing, we rely on our collaboration partners for these activities. In order for us to commercialize any products we would have to either develop a sales,
marketing and distribution infrastructure or collaborate or contract with third parties that have sales, marketing and distribution capabilities. Under the 2006
Sandoz Collaboration Agreement, Sandoz is responsible for commercializing GLATOPA. Under the Mylan Collaboration Agreement, we have an option to
participate in the commercialization of products, in a supporting commercial role, with Mylan in the United States. Under the CSL License Agreement, CSL is
responsible for commercialization of products and we have an option to co-promote products 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 other
things, the research, development, testing, manufacture, labeling, promotion, advertising, distribution, marketing and exporting and importing of products such as
those we are developing.
United States Government Regulation
In the United States, the information that must be submitted to the FDA in order to obtain market approval of a new drug or biologic varies depending on
whether 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 active
ingredient(s) and certain other properties are the same as those of a previously approved drug or biologic, i.e., biosimilar. Approval of new drugs and biologics
follows the new drug application, or NDA, and biologics license application, or 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 approval pathway. Pursuant to the Biologics Price Competition and Innovation Act, or BPCI Act, a
marketing application may also be submitted for a biosimilar to a biologic previously approved under a BLA seeking approval of the biosimilar under the
abbreviated pathway established by Section 351(k) of the Public Health Service Act.
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 the
Public Health Service Act, and implementing regulations. The steps required before a new drug or biologic may be marketed in the United States include:
•
•
•
•
•
•
•
•
•
completion of nonclinical laboratory tests, nonclinical studies and formulation studies under the FDA's good laboratory practices;
completion of developmental chemistry, manufacturing and controls activities and manufacture under current Good Manufacturing Practices, or
cGMP;
submission to the FDA of an Investigational New Drug application, or IND, for human clinical testing, which must become effective before human
clinical trials may begin and must include independent 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 indication
or the safety, purity and potency of the biological product for its intended indication;
submission to the FDA of an NDA or BLA;
satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the product is produced to assess compliance with
cGMPs and to assure that the facilities, methods and controls are adequate to preserve the drug's identity, strength, quality and purity or to meet
standards designed to ensure the biologic's continued safety, purity and potency;
satisfactory completion of FDA inspections of nonclinical and or clinical testing sites;
satisfactory completion of an FDA Advisory Committee review, if applicable; and
FDA review and approval of the NDA or BLA.
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Nonclinical tests include laboratory evaluations of product chemistry, toxicity and formulation, as well as nonclinical studies. An IND sponsor must submit
the results of the nonclinical tests, together with manufacturing information and analytical and stability data, to the FDA as part of the IND. An IND will
automatically 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 of
the 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 can
proceed. 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 the
supervision of qualified investigators in accordance with good clinical practices, or GCPs. Each clinical trial protocol must be submitted to the FDA as part of the
IND, 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 the
phases 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 potential
effectiveness. Phase 2 trials usually involve controlled trials in a limited patient population to evaluate dosage tolerance and appropriate dosage, identify possible
adverse effects and safety risks and evaluate the preliminary efficacy of the drug for specific indications. Phase 3 trials usually test a specific hypothesis to evaluate
clinical efficacy and test further for safety in an expanded patient population, to establish the overall benefit-risk relationship of the product and to provide
adequate information 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 patients
are 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 National
Institutes of Health, or NIH, and are subject to civil money penalties and other civil and criminal sanctions for failing to meet these obligations.
Assuming successful completion of the required clinical testing, the results of the nonclinical studies and of the clinical studies, together with other detailed
information, including information on the chemistry, manufacture and control of the product, are submitted to the FDA in the form of an NDA or BLA requesting
approval 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
for its intended use and whether its manufacturing is cGMP-compliant to assure and preserve the product's identity, strength, quality and purity. The FDA reviews
a BLA 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 meets
standards 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, after
approval, some types of changes to the approved product, such as adding new indications, manufacturing changes and additional labeling claims, are subject to
further FDA review and approval of a new NDA or BLA, or NDA or BLA supplement, before the change can be implemented.
Approval Process for Biosimilars
The BPCI Act created an abbreviated approval pathway for biosimilars. This abbreviated pathway is codified in Section 351(k) of the Public Health Service
Act. The Section 351(k) pathway creates a regulatory and legal pathway to encourage the development of biosimilars, which are defined 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 data
successfully demonstrating the use of a biosimilar for one indication, and submitted to support approval for that indication, may be extrapolated to support
approval for 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
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•
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 between
the use of the interchangeable biologic product and the reference product is no greater than the risk of using the reference product without
switching.
The types of data that would ordinarily be required in an application to show biosimilarity would include:
•
•
•
analytical data and studies to demonstrate similarity to the reference product;
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 for
demonstrating biosimilarity but states that the degree of residual uncertainty that remains following analytical and nonclinical research will determine the nature
and the extent of clinical studies that may be required. 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 biosimilar approval
pathway. It provides for pre-application meetings where the applicant can propose and submit analytical, physicochemical and biologic characterization data along
with a proposed development plan. The proposed development plan may have a reduced scope of clinical development based on the nature and extent of the
characterization data. There are defined time periods for meetings and written advice. Since 2012, the FDA has published a series of draft and final guidance
documents for the development and registration of biosimilars and interchangeable biologics, on topics ranging from demonstrating biosimilarity and
interchangeability, non-proprietary naming, labeling and other scientific and regulatory issues. The draft and final 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 or interchangeable biologic product. In addition, the guidance documents confirm the importance of analytical characterization to demonstrating
biosimilarity and interchangeability in showing the absence of differences from the reference product. Where differences are identified, uncertainty associated with
their clinical meaning or impact is expected to be resolved by nonclinical testing and clinical trials. The greater the similarity, the less uncertainty and the more
likely the FDA will authorize an applicant to conduct targeted clinical trials or use extrapolation in support of demonstrating biosimilarity and interchangeability.
Under Section 351(k), the FDA must wait four years after approval of a biological 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. The BPCI Act also provides for limited regulatory exclusivity for the first FDA-approved interchangeable biologic with respect to each reference product.
This means that the FDA will defer approval of additional interchangeable biologics to the same reference product for defined periods of one year or more.
Upon filing a biosimilar application, an applicant may trigger the patent negotiation and clearance process. Under the BCPI Act provisions, an applicant and
the reference product company are required to share information to seek to resolve any patent disputes prior to regulatory approval and launch. A failure to share
information 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 of
the 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, has
several stages, including defining which patents to include in a pre-approval litigation proceeding, initiating litigation, notice 180 days prior to launch of a
biosimilar, the initiation of a second round of litigation relating to patents the parties did not include in the first round litigation, and, following approval, litigation
on patents brought by the reference product company or other patent holders not involved in the prior patent process.
The BPCI Act is complex and continues to be interpreted and implemented by the FDA. As a result, we believe its ultimate impact, implementation and
meaning will be subject to uncertainty for years to come.
Manufacturing Requirements
Before approving an NDA, BLA, ANDA or Section 351(k) application, the FDA may inspect the facility or the facilities at which the product is
manufactured. The FDA will not approve the product, and may delay an approval of an application, unless or until it determines that the manufacturing processes
and facilities are in compliance with cGMP requirements and adequate to assure consistent production of the product within required specifications. Additionally,
before approving an NDA, BLA, ANDA or Section 351(k) application, the FDA will typically inspect one or more clinical sites to assure compliance with GCPs.
If the FDA determines the application, manufacturing process or manufacturing facilities are not acceptable, it will outline the deficiencies in the submission and
often will request additional testing or information. Notwithstanding the
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submission of any requested additional information, the FDA ultimately may decide that the application does not satisfy the regulatory criteria for approval.
Post-Approval Requirements
After regulatory approval of a product is obtained, we are required to comply with a number of post-approval requirements. For example, as a condition of
approval of an NDA, BLA, ANDA or Section 351(k) application, the FDA may require post-marketing testing and surveillance to further assess and monitor the
product's safety or efficacy after commercialization. Any post-approval regulatory obligations, and the cost of complying with such obligations, could expand in
the future.
In addition, holders of an approved NDA, BLA, ANDA or Section 351(k) approval are required to report, among other things, certain adverse reactions and
production problems to the FDA, to provide updated safety and efficacy information and to comply with requirements concerning advertising and promotional
labeling for their products. Also, quality control and manufacturing procedures must continue to conform to cGMP after approval. The FDA periodically inspects
manufacturing 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 aspects
of 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 an IRB of a clinical hold on or termination of studies, the FDA's refusal to approve pending applications or supplements, license suspension or revocation,
withdrawal of 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 our product candidates under development.
Fraud and Abuse Laws
Pharmaceutical manufacturers are subject to healthcare fraud and abuse laws and other regulations and enforcement by the federal government as well as the
state and foreign governments in which they conduct their business. Such laws include, without limitation, federal and state anti-kickback, false claims, privacy
and security and transparency laws and regulations. Violations of any of such laws or any other governmental regulations may result in penalties, including civil
and criminal penalties, damages, fines, the curtailment or restructuring of operations, the exclusion from participation in federal and state healthcare programs or
similar programs in other countries or jurisdictions, integrity oversight and reporting obligations, and individual imprisonment.
Coverage and Reimbursement
Sales of pharmaceutical products depend, in part, on the availability of coverage and the adequacy of reimbursement by third-party payors, such as
government health care programs, commercial insurance and managed healthcare organizations. Significant uncertainty exists as to the coverage and
reimbursement status of any product and can differ significantly from payor to payor. One third‑party payor’s decision to cover a particular medical product or
service does not ensure that other payors will also provide coverage for the medical product or service, or will provide coverage at an adequate reimbursement rate.
Third-party payors may limit coverage to specific products on an approved list, or formulary, which might not include all of the FDA-approved products for a
particular indication. Payors are also increasingly challenging the price and examining the medical necessity and cost-effectiveness of medical products and
services, in addition to their safety and efficacy. Decreases in third-party reimbursement for pharmaceutical products or a decision by a third-party payor not to
cover a product could reduce physician usage of such product.
Healthcare Reform
A primary trend in the U.S. healthcare industry and elsewhere is cost containment. Government authorities and other third-party payors have attempted to
control costs by limiting coverage and the amount of reimbursement for particular medical products, implementing reductions in Medicare and other healthcare
funding, and applying new payment methodologies. For example, in March 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care
and Education Reconciliation Act, or collectively, the Affordable Care Act, was enacted, which, among other things, increased the minimum Medicaid rebates
owed by most manufacturers under the Medicaid Drug Rebate Program; introduced a new methodology by which rebates owed by manufacturers under the
Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled, implanted or injected; extended the Medicaid Drug Rebate Program to
utilization of prescriptions of individuals enrolled in Medicaid managed care plans; imposed mandatory discounts for certain Medicare Part D beneficiaries as a
condition for manufacturers’ outpatient drugs coverage under Medicare Part D; subjected drug manufacturers to new
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annual fees based on pharmaceutical companies’ share of sales to federal healthcare programs; created a new Patient Centered Outcomes Research Institute to
oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research; and establishment of a Center for
Medicare Innovation at the Centers for Medicare & Medicaid Services, or CMS, to test innovative payment and service delivery models to lower Medicare and
Medicaid spending.
Since its enactment, there have been judicial and Congressional challenges to certain aspects of the Affordable Care Act. We expect that the current
presidential administration and U.S. Congress will likely continue to seek to modify, repeal, or otherwise invalidate all, or certain provisions of, the Affordable
Care Act. Recently, the Tax Cuts and Jobs Act (the “Tax Act”) was enacted, which, among other things, removes penalties for not complying with the Affordable
Care Act’s individual mandate to carry health insurance. On December 14, 2018, a U.S. District Court Judge in the Northern District of Texas, ruled that the
individual mandate is a critical and inseverable feature of the Affordable Care Act, and therefore, because it was repealed as part of the Tax Act, the remaining
provisions of the Affordable Care Act are invalid as well. While the Trump Administration and CMS have both stated that the ruling will have no immediate effect,
it is unclear how this decision, subsequent appeals, if any, will impact the law. Any changes will likely take time to unfold and could have an impact on coverage
and reimbursement for healthcare items and services covered by plans that were authorized by the Affordable Care Act. We cannot predict the ultimate content,
timing or effect of any healthcare reform legislation or the impact of potential legislation on the pharmaceutical industry.
In addition, other legislative changes have been proposed and adopted in the United States since the Affordable Care Act to reduce healthcare expenditures.
These changes include aggregate reductions of Medicare payments to providers of 2% per fiscal year that will remain in effect through 2027 and further reductions
in Medicare payments to several types of providers, including hospitals, imaging centers and cancer treatment centers, and increased the statute of limitations
period for the government to recover overpayments to providers from three to five years. Recently there has been heightened governmental scrutiny over the
manner in which manufacturers set prices for their marketed products, which has resulted in several Congressional inquiries and proposed and enacted legislation
designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs and
reform government program reimbursement methodologies. Individual states in the United States have also become increasingly active in implementing
regulations designed to control pharmaceutical product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product
access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.
Foreign Regulation
In addition to regulations in the United States, we are and will be subject to a variety of foreign regulations governing clinical trials and commercial sales and
distribution of our products in those markets. Whether or not we obtain FDA approval for a product, we must obtain approval of a clinical trial application or
product from the applicable regulatory authorities of foreign countries before we can commence clinical trials or marketing of the product in those countries. The
approval process varies from country to country, and the time may be longer or shorter than that required for FDA approval. The requirements governing the
conduct of clinical trials, product licensing, pricing and reimbursement also vary greatly from country to country.
Under European Union regulatory systems, we may submit marketing authorization applications either under a centralized or decentralized procedure. The
centralized procedure is mandatory for the approval of biotechnology products and many pharmaceutical products and provides for the grant of a single marketing
authorization that is valid for all European Union member states. The decentralized procedure provides for mutual recognition of national approval decisions and is
available at the request of the applicant for products that are not subject to the centralized procedure. Under this procedure, the holder of a national marketing
authorization from one European Union member state (the Reference Member State) may submit an application to the remaining member states. Generally, each
member 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, FDA regulations
and guidance are often revised or reinterpreted by the agency in ways that may significantly affect our business and our products. It is impossible to 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.
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Hazardous Materials
Our research and development processes involve the controlled use of certain hazardous materials and chemicals, including radioactive materials and
equipment. 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 launch
and the development of subsequent therapeutics with different methods of action, efficacy and safety profiles. Many of our competitors, who already market or are
developing products similar to those in our portfolio, have considerable experience in product development, obtaining regulatory approval, and commercializing
pharmaceutical products. Further, certain of these competitive companies have substantially greater financial, marketing, research and development and human
resources 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 efficacious
products, the timing and scope of regulatory approval of our products and those of our competitors, our ability to collaborate with third parties, our ability to
maintain favorable patent protection for our products, our ability to obtain market acceptance of our products and our ability to manufacture sufficient quantities of
our products at commercially acceptable costs.
Novel Therapeutics
Our novel product pipeline will face substantial competition from major pharmaceutical and other biotechnology companies. Our development work focused
on Fc biology has yielded three named product candidates: M230, an Fc multimer, M281, anti-FcRn, and M254, hypersialylated IVIg. These candidates face
competition from a number of companies.
M230
CSL, our collaboration partner, is conducting a Phase 1 normal healthy volunteer study with M230. Pfizer (licensed from Gliknik), and Shire (licensed from
AB Biosciences) have compounds in development that we believe to be mechanistically similar to M230. The Pfizer product recently started a Phase 1 clinical
trial. Shire’s product is preclinical. Once the Phase 1 clinical trial for M230 is completed, we will assess the competitive landscape for M230 based on the selected
disease indication for further development.
M281 Competing FcRn Antagonists
Several companies, including UCB, Immunovant (licensed from HanAll), Alexion (via acquisition of Syntimmune), Affibody and Argenx are developing
FcRn targeted agents. UCB's candidate, an IgG4 monoclonal antibody, completed Phase 2 clinical trials in ITP and myasthenia gravis, and has announced a
planned Phase 2 CIDP trial. Argenx’s candidate, a mutated Fc fragment, is in a Phase 3 trial for MG, a Phase 2 trial for pemphigus vulgaris, has completed a Phase
2 trial in ITP as well as a Phase 1 study with a subcutaneous presentation, and has announced a planned Phase 2 CIDP trial. Alexion’s candidate, an IgG4
monoclonal antibody, is in Phase Ib clinical trials for warm autoimmune hemolytic anemia and pemphigus vulgaris, and has announced a planned pivotal trial in
MG. Immunovant’s candidate, believed to be an IgG1 monoclonal antibody, is in a Phase 1 clinical trial and Immunovant has announced plans to initiate a Phase 2
myasthenia gravis trial in early 2019. Affibody’s candidate is in a Phase 1 trial.
M281 Competing in Disease Indications
Momenta has commenced Phase 2 clinical trials in generalized myasthenia gravis (gMG) and hemolytic disease of the fetus and newborn (HDFN).
Myasthenia gravis (MG) treatment is primarily with the acetylcholinesterase inhibitor, pyridostigmine, and most MG patients also require treatment with
immunosuppressive medications. Some patients may require plasma exchange/plasmapheresis, immunoadsorption, intravenous immunoglobulin (IVIG), or Soliris
(eculizumab), the sole monoclonal antibody approved for gMG by the FDA. Other complement antagonists in development for MG include agents from Alexion
(ALXN1210) and Ra Pharmaceuticals’ zilucoplan. Several other FcRn antagonists are in development for MG. Argenx has initiated a Phase 3 trial, and UCB
announced intentions to initiate a Phase 3 trial in the second half of 2019. Immunovant plans to initiate a Phase 2 trial in early 2019 and Alexion plans to initiate a
pivotal trial in 2019. For HDFN, we are not aware of any other FcRn antagonists in development nor any other novel biologic therapies.
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M254 Competing Immunoglobulins
We are not aware of other companies developing a hypersialylated immunoglobulin. M254 would compete with currently marketed intravenous and
subcutaneous IgG products in the United States, including Octagam 5% and Octagam 10% marketed by Octapharma, Gammagard S/D, Gammagard Liquid 10%,
Cuvitru 20% and HyQvia 10% marketed by Shire, Privigen Liquid 10%, Carimune NF, Hizentra 20% marketed by CSL Behring, Flebogamma 5% DIF, Gamunex-
C, Flebogamma 10% DIF marketed by Grifols, Gammaplex marketed by BPL Holdings, and Bivigam marketed by ADMA Biologics, as well as other intravenous
and subcutaneous IgG products marketed ex-US and those that are currently in development.
M254 Competing in Disease Indications
Momenta has commenced a Phase 1-2 clinical trial in ideopathis thrombocytopenic purpura, or ITP. Current therapies for ITP include IVIg, steroids, TPO
receptor agonists, a syk inhibitor, Tavalisse (fostamatinib), Rituxanr (rituximab) and splenectomy. Several companies are in development with novel agents to treat
ITP patients, including Argenx and UCB with FcRn antagonists, Principia with a BTK inhibitor and Protalex with a form of Staphylococcal protein A.
Biosimilars
If approved, our biosimilar candidates would compete with their applicable branded reference products, other biosimilars to those reference products, as well
as other therapies used to treat the indications for which our biosimilars would be approved. Many of the companies developing biosimilars are significantly larger
than us, have substantially greater financial resources and have significant pre-existing resources to devote to their biosimilars business.
HUMIRA
In the United States, Amgen, Boehringer Ingelheim and Sandoz have received FDA approval for their biosimilars to HUMIRA, and Samsung’s BLA was
accepted for review. In Europe biosimilars to HUMIRA from Amgen, Sandoz, Samsung Bioepis and Mylan launched in October 2018, and Fresenius’s MAA was
accepted for review. Other companies are in development with biosimilar HUMIRA including Coherus, Celltrion, LG Life Sciences, and Pfizer.
EYLEA
Coherus, Formycon, Alteogen, Insight Biopharmaceuticals, and Lupin Limited have announced plans to develop a biosimilar to EYLEA.
GLATOPA
GLATOPA 20 mg/mL is a substitutable generic equivalent for, and competes directly with, Teva's once-daily COPAXONE 20 mg/mL. It also competes with
Teva's three-times-weekly COPAXONE 40 mg/mL. GLATOPA 40 mg/mL is a substitutable generic for, and competes directly with, Teva's three-times-weekly
COPAXONE 40 mg/mL. In October 2017, Mylan N.V. announced the launch of its generic equivalents to once-daily COPAXONE 20 mg/mL and three-times-
weekly COPAXONE 40 mg/mL.
ANDAs for generic versions of COPAXONE 20 mg/mL and/or 40 mg/mL have also been submitted to the FDA by Synthon Pharmaceuticals, Inc.,
Dr. Reddy's Laboratories, Amneal Pharmaceuticals, and Biocon Ltd. Other ANDAs or other regulatory applications may have been submitted or may be submitted
in the future. In addition, GLATOPA 20 mg/mL and GLATOPA 40 mg/mL compete with other FDA approved multiple sclerosis therapies. 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 Gilenya (fingolimod), each marketed by Novartis Pharmaceuticals Corporation; Lemtrada (alemtuzumab), marketed by
Sanofi and Bayer; Aubagio (teriflunomide), marketed by Sanofi; and Ocrevus (ocrelizumab) marketed by Genentech and Roche.
We believe that our success will depend greatly on our ability to identify, attract and retain capable employees. As of December 31, 2018 , we had 131
employees, including 28 employees who hold Ph.D. degrees and 2 employees who hold an M.D. degree. Our employees are not represented by any collective
bargaining group or labor union, and we believe our relations with our employees are good.
Employees
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Research and Development Expenses
Research and development expenses consist of costs incurred in identifying, developing and testing product candidates. 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. Research and development expense for 2018 was $124.0 million , compared with $149.2 million in 2017 and $119.9
million in 2016 .
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 our
revenues from our collaborations. All of our revenues through December 31, 2018 have come from our collaborators and are based solely on activities in the
United States. Our long-lived assets were $23.8 million and $34.0 million at December 31, 2018 , and 2017 , respectively, and are located solely in the United
States. See Part II, Item 6 "Selected Consolidated Financial Information" and the section entitled "Segment Reporting" appearing in Note 2 to our consolidated
financial statements for further information about our segment. The notes to our consolidated financial statements are contained in Part II, Item 8 of this 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 301 Binney 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. The Securities and Exchange Commission maintains a web site (
http://www.sec.gov ) that contains reports, proxy and information statements, and other information regarding issuers that file electronically 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 by
reference into, this Annual Report on Form 10-K.
We make available free of charge on our website at http://ir.momentapharma.com/investor-relations our Annual Reports on Form 10-K, Quarterly Reports
on Form 10-Q, Current Reports on Form 8-K and amendments 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 file such 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 are
the property of their respective holders.
Item 1A. RISK FACTORS
Investing in our securities involves a high degree of risk. You should carefully consider the risks, uncertainties and other important factors described below
in addition to other information included or incorporated by reference in this Annual Report on Form 10-K before purchasing our securities. The risks,
uncertainties and other important factors described below are not the only ones we face. Additional risks, uncertainties and other important factors of which we
are unaware, or that we currently believe are not material, may also affect us. If any of the following risks actually occurs, our business, financial condition or
results of operations would likely suffer.
Our new corporate strategy and restructuring may not be successful.
Risks Relating to Our Business
On October 1, 2018, as a result of the previously disclosed strategic business review, we announced our intention to focus our resources on the discovery and
development of our pipeline of novel drug candidates for immune-mediated diseases and the
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advancement of two of our late stage biosimilar assets, M923, our proposed biosimilar to HUMIRA, and M710, our proposed biosimilar to EYLEA. The success of
this strategic shift will depend on our ability to successfully develop our novel and biosimilar candidates, hire and retain senior management or other highly
qualified personnel, prioritize competing projects and efforts and obtain sufficient resources, including additional capital. The early stage development of novel
drug candidates is highly unpredictable due to the lengthy and expensive process of clinical drug development, potential for safety, efficacy or tolerability
problems with such product candidates, unexpected expenses or inaccurate financial assumptions or forecasts, potential delays or unfavorable decisions of
regulatory agencies and competition for targeted indications or within targeted markets. Our ability to develop our biosimilar candidates depends on our ability to
identify a commercialization partner, litigation efforts by our competitors, potential disputes with collaboration partners and their ability to supply and
commercialize our products. Accordingly, there are no assurances our change in strategic focus will be successful, which may have an adverse effect on our results
of operations or financial condition.
Also on October 1, 2018, as a result of our strategic business review, we restructured our executive team and commenced a reduction of our workforce by
50%, 37% as of October 5, 2018, with an additional 13% reduction in workforce planned over the next two to 12 months. Our executive team and workforce after
these actions may not be sufficient to fully execute our shift to a novel drug biotechnology company, and we may not be able to effectively retain or attract
qualified executive management or employees needed to implement this strategy.
We have incurred $17.8 million in restructuring charges in connection with the reduction in workforce in 2018. We do not expect any material additional
expenses. However, our restructuring activities may also result in unexpected risks or costs, such as termination or other costs relating to restructuring our real
property leases, employee claims and contractual disputes and the risk that the actual financial and other impacts of the reductions could vary materially from the
outcomes anticipated, which may have a material adverse effect on our results of operations or financial condition.
If we or our collaborative partners encounter difficulties in our supply or manufacturing arrangements, including an inability by third party
manufacturers to satisfy FDA quality standards and related regulatory requirements, our development and commercialization efforts 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 collaborators and other
third parties, including sole source suppliers, to provide raw materials meeting FDA quality standards and related regulatory requirements, manufacture the drug
substance, produce the final drug product and provide certain analytical services with respect to our products and product candidates. The FDA and other
regulatory authorities require that our products be manufactured according to current good manufacturing practices, or cGMP, regulations and that proper
procedures are implemented to assure the quality of our sourcing of raw materials and the manufacture of our products. Any failure by us, our collaborators or our
third-party manufacturers to comply with cGMP and/or scale-up manufacturing processes could lead to a delay in, or failure to obtain, regulatory approval of
proposed products or the delay or cessation of commercial sales of our approved products . In addition, such failure could be the basis for action by the FDA to
withdraw approvals for products previously granted to us and for other regulatory action, including product recall or seizure, fines, imposition of operating
restrictions, total or partial suspension of production or injunctions. To the extent 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 such noncompliance may be compromised or delayed. For example, on February 17, 2017, we
announced that Sandoz’ third party fill/finish manufacturer for GLATOPA, Pfizer Inc., received an FDA warning letter. The FDA applied a compliance hold on
the approval of pending drug applications listing the Pfizer Inc. facility, including the ANDA for GLATOPA 40 mg/mL, until satisfactory resolution of the
compliance observations in the FDA warning letter. On January 30, 2018, we announced that the FDA had changed the status of Pfizer’s manufacturing facility to
Voluntary Action Indicated, which lifted the compliance hold and was followed by a marketing approval in February 2018. The FDA delay in ability to approve
GLATOPA 40 mg/mL until satisfactory resolution of the compliance observations in the FDA warning letter greatly increased the risk to us and Sandoz of prior or
contemporaneous competition from other generic versions of COPAXONE 40 mg/mL, limiting revenue potential. Any additional interruption or delay in Pfizer
Inc.'s manufacturing of GLATOPA could have a further material adverse impact on our business, financial position and results of operations and could cause the
market value of our common stock to decline.
Moreover, in order to generate revenue from the sales of Enoxaparin Sodium Injection, GLATOPA 20 mg/mL and GLATOPA 40 mg/mL, sufficient
quantities of such product must also be produced in order to satisfy demand. If these contract manufacturers and suppliers, which include sole source suppliers, are
unable to manufacture sufficient quantities of product or breach or terminate their manufacturing arrangements with us or Sandoz, as applicable, the
commercialization of the affected products could be delayed, which could have a material adverse effect on our business.
We rely upon third parties, including sole source suppliers, to produce material for nonclinical and clinical studies. We cannot be certain that we will be able
to obtain and/or maintain long-term supply and supply arrangements of those materials on acceptable terms, if at all. In addition, some of our third-party
manufacturers are located in countries where the supply of
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materials to us may pose geopolitical risks, including import trade restrictions or significant tariffs or other economic sanctions. If we are unable to arrange for
third-party manufacturing, or to do so on commercially reasonable terms, we may not be able to complete development of our product candidates or market them.
The development and commercialization of our lead biosimilar product candidate, M923, could be delayed or terminated as a result of our inability to
enter into an agreement with a collaboration partner, and our business may be adversely affected.
Our collaboration with Baxter terminated on December 31, 2016 and we have proceeded with the development program with the goal of entering into a new
collaboration agreement to finance the launch and legal clearance of the product. There could be changes or delays in the timing of the M923 program should we
fail to enter into a collaboration agreement with a suitable collaborative partner. In the event we elect to research, develop, manufacture and commercialize M923
by ourselves, we would need to expand our internal capabilities, in connection with which there could be significant delays in the M923 program. In the event we
elect to license M923 to a third party, the terms of such a license and collaboration could be less favorable than those under the former collaboration agreement
with Baxalta Incorporated, Baxalta US Inc. and Baxalta GmbH (collectively, Baxalta), and finding and negotiating a new collaboration could cause significant
delays in the M923 program. Any of the delays described above could prevent us from commercializing M923. In addition, we may need to seek additional
financing to support the research, development and commercialization of M923, or alternatively we may decide to discontinue M923, which could have a material
adverse effect on our business.
The patient populations of the target indications for our novel therapeutic candidates are small and have not been established with precision. If the actual
number of patients are smaller than we estimate, our revenue and ability to achieve profitability with respect to such candidates may be adversely affected.
We estimate that there are approximately 55,000 patients in the United States with generalized myasthenia gravis, or gMG, and approximately 4,000 to 8,000
patients in the United States with hemolytic disease of the fetus and newborn, or HDFN, both potential indications for our product candidate M281. We estimate
that chronic idiopathic thrombocytopenic purpura, or ITP, a potential indication for our product candidate M230, affects approximately 30,000 to 40,000 patients in
the United States. Our estimates of the size of these patient populations are based on published studies as well as internal analyses. If these studies or our analyses
of them do not accurately reflect the number of patients with gMG, HDFN or ITP our assessment of the market may be inaccurate, making it difficult or impossible
for us to meet our revenue goals if and when any of our product candidates receive regulatory approval, or to obtain or maintain profitability. The small population
of gMG, HDFN or ITP patients may also delay the enrollment of patients in our clinical trials, especially in light of competing clinical trials.
Since these candidates target small patient populations, the per-patient drug pricing must be higher in order to recover our development and manufacturing
costs, fund adequate patient support programs, fund additional research and achieve profitability. Many of the other novel therapeutic product candidates will have
indications in rare immune-mediated diseases and face similar risks. We may be unable to maintain or obtain sufficient sales volume at a price high enough to
justify our product development efforts and our sales, marketing and manufacturing expenses.
We rely on third parties to conduct our clinical trials, and if they fail to fulfill their obligations, our development plans may be adversely affected.
We rely on independent clinical investigators, contract research organizations, or CROs, and other third-party services providers to assist us in managing,
monitoring and otherwise carrying out our clinical trials. We have contracted, and we plan to continue to contract with, certain third-parties to provide certain
services, including site selection, enrollment, monitoring, auditing and data management services. Although we depend heavily on these parties, we control only
certain aspects of their activity and therefore, we cannot be assured that these third parties will adequately perform all of their contractual obligations to us in
compliance with regulatory and other legal requirements and our internal policies and procedures. Nevertheless, we are responsible for ensuring that each of our
studies is conducted in accordance with the applicable protocol, legal, regulatory, and scientific standards, and our reliance on third parties does not relieve us of
our regulatory responsibilities, We and our CROs are required to comply with GCP requirements, which are regulations and guidelines enforced by the FDA and
comparable foreign regulatory authorities for all of our product candidates in clinical development. Regulatory authorities enforce these GCP requirements through
periodic inspections of trial sponsors, principal investigators and trial sites. If we or any of our CROs fail to comply with applicable GCP requirements, the clinical
data generated in our clinical trials may be deemed unreliable and the FDA or comparable foreign regulatory authorities may require us to perform additional
clinical trials before approving our marketing applications. We cannot assure you that upon inspection by a given regulatory authority, such regulatory authority
will determine that any of our clinical trials comply with GCP regulations.
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If our third-party service providers cannot adequately and timely fulfill their obligations to us, or if the quality and accuracy of our clinical trial data is
compromised due the failure by such third-party to adhere to our protocols or regulatory requirements or if such third parties otherwise fail to meet deadlines, our
development plans and/or regulatory reviews for marketing approvals may be delayed or terminated. As a result, our results of operations and the commercial
prospects for our product candidates would be harmed, our costs could increase and our ability to generate revenues could be delayed.
GLATOPA 40 mg/mL was launched prior to final resolution of product-related patent infringement litigation in our favor, which may cause us to incur
significant damages.
Sandoz had the sole right to decide the timing and scope of the launch of GLATOPA 40 mg/mL and has commenced marketing the product prior to a final
judicial resolution of product-related patent infringement litigation in our and Sandoz’ favor. Accordingly, we and Sandoz may be subject to claims for patent
infringement damages. Damages for infringement may in some instances exceed the amount of revenue earned by the infringing product. If Teva subsequently
succeeds in any such litigation, we and Sandoz may be liable for significant damages. Our collaboration with Sandoz provides that our fifty (50) percent share of
such damages would be payable from any contractual profits due to us from sales of GLATOPA. Our payment of such damages could have a material adverse
effect on our business, financial position and results of operations and could cause the market value of our common stock to decline.
Sandoz may be prevented from marketing and selling GLATOPA 40 mg/mL if Teva is successful in obtaining injunctive relief.
A court may issue a temporary or permanent injunction pending the outcome of any GLATOPA 40 mg/mL-related patent infringement litigation or as a
remedy if Teva prevails in any GLATOPA 40 mg/mL-related patent infringement litigation, although this remedy is unlikely. An injunction would prevent us and
Sandoz from manufacturing and selling GLATOPA 40 mg/mL and/or prohibit the use of previously manufactured GLATOPA 40 mg/mL for commercial sale until
we and Sandoz prevail in litigation or the relevant patents expire. If Teva is successful in obtaining injunctive relief for any GLATOPA 40 mg/mL-related patents,
Sandoz’ ability to successfully commercialize GLATOPA 40 mg/mL would be significantly impaired, which could have a material adverse effect on our business,
financial position and results of operations and could cause the market value of our common stock to decline.
Our current and near term 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’ ability to continue to successfully manufacture and
profitably commercialize GLATOPA.
Our near-term ability to generate GLATOPA product revenue also depends in large part on Sandoz' ability to maintain market share and favorable pricing
levels for GLATOPA 20 mg/mL and achieve profitable sales and market share for GLATOPA 40 mg/mL. In October 2017, Mylan N.V. announced the launch of
its generic equivalents of COPAXONE 20 mg/mL and 40 mg/mL. Following Mylan N.V.’s entry into the market, Sandoz has defended GLATOPA’s share of the
20 mg/mL glatiramer acetate injection market by using one or more contracting strategies, including but not limited to, lowering its GLATOPA 20 mg/mL price or
increasing the discounts or rebates it offers for GLATOPA 20 mg/mL, which has decreased contractual profit share revenue. Since Sandoz’s launch of Glatopa
40mg in February, Sandoz has encountered aggressive pricing and contracting tactics from competitors and as a result we expect modest sales for the product in the
future. Our near-term ability to generate GLATOPA 40 mg/mL product revenue will depend on Sandoz' ability to compete with Teva's three-times-weekly
COPAXONE 40 mg/mL product and any generic equivalents. As of the end of 2018, 40 mg/mL glatiramer acetate injection accounted for approximately 84% of
the overall U.S. glatiramer acetate injection market (20 mg/mL and 40 mg/mL) based on volume prescribed. If other competitors receive approval to market
generic versions of the 20 mg/mL or 40 mg/mL formulations of COPAXONE, our product revenue and profits would be further impacted, and as a result, our
business, including our near-term financial results and our ability to utilize GLATOPA revenue to fund future discovery and development programs, may suffer.
Any future Enoxaparin Sodium Injection product revenue is dependent on Sandoz being able to identify an acceptable contract manufacturer for
enoxaparin injection at a price point that will allow for the successful manufacture and competitive commercialization of Enoxaparin Sodium Injection .
In July 2018, Sandoz notified its customers and the FDA that it will discontinue production of Enoxaparin Sodium Injection. Sandoz continues to evaluate
alternate acceptable contract manufacturers at a price point that will allow for profitable and competitive sales and may decide to relaunch Enoxaparin Sodium
Injection at a later date following regulatory approval of any such contract manufacturer. Sandoz has faced increasing competition and pricing pressure from brand,
authorized generic and other currently-approved generic competitors, which has and will continue to impact Sandoz’ net sales and profits from
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Enoxaparin Sodium Injection, and therefore our profit share and product revenue, which is based on a fifty-percent contractual profit share. Due to these
circumstances, the resulting market price for our Enoxaparin Sodium Injection product has substantially decreased and may decrease further. Sandoz did not record
any profit on sales of Enoxaparin Sodium Injection in the three months ended December 31, 2018. We expect future revenues from Sandoz's sales of Enoxaparin
Sodium Injection, if any, to be minimal .
If our appeal in the patent litigation against Amphastar related to Enoxaparin Sodium Injection is not successful or Amphastar or third parties are
successful in antitrust litigation against us relating to Enoxaparin Sodium Injection, we may be liable for damages and our business may be materially
harmed.
The District Court trial in our patent litigation against Amphastar related to Enoxaparin Sodium Injection was held in July 2017, and the jury verdict found
our patent to be infringed by Amphastar, but invalid and unenforceable. In February 2018, the District Court confirmed the jury’s opinion that the patent was
infringed but invalid, and narrowed the jury’s recommendation on unenforceability by finding our patent to be unenforceable against only one of the two infringing
methods used by Amphastar. We and Sandoz are considering all other available legal options to overturn the portions of the verdict that found our patent to be
invalid and partially unenforceable, including a potential appeal to the U.S. Court of Appeals for the Federal Circuit, or CAFC. On March 20, 2018 the District
Court entered its final judgment affirming its February 2018 rulings. On March 27, 2018 we and Sandoz filed a notice of appeal of the final judgment with the
CAFC. The appeal has been docketed and our opening brief was filed July 30, 2018.
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 a
result of the preliminary injunction preventing it from selling its Enoxaparin product in the United States, we could be liable for up to $35.0 million of the security
bond for such damages. We posted 36.1 million as collateral for the security bond and classified the collateral as restricted cash in our consolidated balance sheet.
On March 23, 2018, Amphastar filed a motion to enforce liability on the security bond with the District Court. On April 3, 2018, we and Sandoz filed an
emergency motion to defer consideration of Amphastar's motion to enforce liability on the security bond pending exhaustion of appeals. On July 16, 2018, the
District Court denied Amphastar's motion to enforce liability on the security bond and allowed the Company's and Sandoz' motion to defer consideration.
Moreover, if Amphastar or third parties are successful in antitrust litigation against us for asserting our Enoxaparin patent rights, they may be able to recover
damages incurred as a result of enforcement of our patent rights, thereby negatively affecting our financial condition and results of operations.
If we or our collaborators are unable to establish and maintain key customer distribution arrangements, sales of our products, and therefore revenue,
would be adversely impacted.
Drug products and biologics are sold through various channels, including retail, mail order, and to hospitals through group purchasing organizations,
or GPOs. The distribution of such products is also managed by pharmacy benefit management firms, or PBMs, such as Express Scripts or CVS. These GPOs and
PBMs rely on competitive bidding, discounts and rebates across their purchasing arrangements. We believe that we, in collaboration with commercial collaboration
partners, will need to maintain adequate drug supplies, remain price competitive, comply with FDA regulations and provide high-quality products to establish and
maintain relationships with GPOs and PBMs. The GPOs, PBMs and other customers with whom we or our collaborators have established contracts may also have
relationships with our competitors and may decide to contract for or otherwise prefer products other than ours, limiting access of products to certain market
segments. Our sales could also be negatively affected by any rebates, discounts or fees that are required by, or offered to, GPOs, PBMs, and customers, including
wholesalers, distributors, retail chains or mail order services, to gain and retain market acceptance for our or our competitors’ products. For example, if PBMs,
distributors and other customers contracted with Teva for net price discounts or rebates on COPAXONE 20 mg/mL and 40 mg/mL, or with Mylan N.V. for net
price discounts or rebates on its generic equivalents of COPAXONE 20 mg/mL and 40 mg/mL, in exchange for exclusivity or preferred status for COPAXONE
prior to the February 2018 approval and launch of GLATOPA 40 mg/mL, our opportunity to capture market share would be significantly restricted for the term of
these contracts. If we or our collaborators are unable to establish and maintain competitive distribution arrangements with all of these customers, sales of our
products, our revenue and our profits would suffer.
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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 our
products by patients, physicians and third-party payers. Acceptance of our products will be a function of our products being clinically useful, being cost effective
and demonstrating sameness, in the case of our generic product candidate, and biosimilarity or interchangeability, in the case of our biosimilar product candidates,
with an acceptable side effect profile as compared to existing or future treatments. In addition, even if our 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 testing of our complex generic products and biosimilarity or interchangeability testing of
our biosimilar products;
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.
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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 recently restructured our management team and are dependent on the current members of our team for our business to succeed. In the restructuring we
terminated a number of senior executives and many of the new members of our current management team have not had previous experience in senior executive
positions and have duties that are in addition to those of our prior senior executives, all of which may affect our ability to further our business success. Our
employment arrangements with our executive officers are terminable 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 our executive officers would result in a significant loss in the knowledge and experience that we, as an
organization, possess and could cause significant delays, or outright failure, in the development and approval of our product candidates. In addition, there is intense
competition from numerous pharmaceutical and biotechnology companies, universities, governmental entities and other research institutions, for human resources,
including qualified executives and management, in the technical fields in which we operate, and we may not be able to attract and retain qualified personnel
necessary for the successful development and commercialization of our product candidates. Another component of retention is the intrinsic value of equity awards,
including stock options. Stock options granted to our executives and employees may be under pressure given the volatility of our stock performance and at such
times may not always provide a retentive effect. In addition, our recent restructuring may negatively affect employee morale and our corporate culture, which may
have a negative impact on retention and recruitment. If we lose key members of our management team, or are unable 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
against us 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
therapeutic products. Product liability claims could delay or prevent completion of our development programs. If we succeed in marketing products, such claims
could result in a recall of our products or a change in the approved
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indications for which they may be used. We cannot be sure that the product liability insurance coverage we maintain will be adequate to cover any incident or all
incidents. Furthermore, clinical trial and product liability insurance is becoming increasingly expensive. As a result, 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 operations rely on the secure processing, storage and transmission of confidential and other information in our and our third party contractors' computer
systems and networks. Our internal computer systems are vulnerable to breakdown or breach, including as a result of computer viruses, security breaches by
individuals with authorized access, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures. The increased use of
mobile and cloud technologies can heighten these and other operational risks. Moreover, systems breaches are increasing in their frequency, sophistication and
intensity, and are becoming increasingly difficult to detect. Any breakdown or breach by employees or others may pose a risk that sensitive data, including clinical
trial data, intellectual property, 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 an event were to occur and cause interruptions in our operations, it could result in a material disruption of our development programs and our
business operations. For example, the loss of clinical trial data from completed or future clinical trials could result in delays in our regulatory approval efforts and
significantly increase our costs to recover or reproduce the data. Likewise, we rely on third parties to manufacture and commercialize our products and conduct
clinical trials, and similar events 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 to result in a loss of, or damage to, our data or applications, or inappropriate disclosure of confidential or proprietary information, we could
incur liability, the further development and commercialization of our products and product candidates could be delayed, we could suffer reputational harm, we
could be subject to regulatory action, and the trading price of our common stock could be adversely affected. In addition, our liability insurance may not be
sufficient in type or amount to cover us against claims related to breakdown or breach of our computer systems and other related breaches.
As we continue to evolve from a company primarily involved in discovery and development of pharmaceutical products into one that is also involved in the
commercialization of multiple 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 operations
expand, we expect that we will need to manage additional relationships with various collaborative partners, suppliers and other organizations.
In addition, our ability to manage our operations and growth requires us to continue to improve our operational, financial and management controls, reporting
systems and procedures. For example, some jurisdictions, such as the District of Columbia, have imposed licensing requirements for sales representatives. In
addition, the District of Columbia and the Commonwealth of Massachusetts, as well as the federal government, by way of the Sunshine Act provisions of the
Patient Protection and Affordable Care Act of 2010, have established reporting requirements that would require public reporting of consulting and research fees to
health care professionals. Because the reporting requirements vary in each jurisdiction, compliance can be complex and expensive and may create barriers to
entering the commercialization phase. The need to build new systems as part of our growth could place a strain on our administrative and operational
infrastructure. We may not be able to make improvements to our management information and control systems in an efficient or timely manner and may discover
deficiencies in existing systems and controls. Such requirements may also impact our opportunities to collaborate with physicians at academic research centers as
new restrictions on academic-industry relationships are put in place. In the past, collaborations between academia and industry have led to important new
innovations, but the new laws may have an effect on these activities. While we cannot predict whether any legislative or regulatory changes will have negative or
positive effects, they could have a 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
technologies without 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 human
resources. We may focus our efforts and resources on potential programs and product candidates that ultimately prove to be unsuccessful.
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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 that economic
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 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.
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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 a
larger acquisition or multiple acquisitions in 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 in significant 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 in
which the consideration included cash, we could be required to use a substantial portion of our available cash to consummate any acquisition. To the extent we
issue 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 other
intangible 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
our stock price and our business.
Our efforts to comply with Section 404 of the Sarbanes-Oxley Act of 2002, as amended, and the related regulations regarding our required assessment of our
internal controls 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 become
inadequate because of changed conditions, and fraud. If we are unable to maintain effective internal controls, we may not have adequate, accurate or timely
financial 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 the
Sarbanes-Oxley Act of 2002, as amended. This could result in a restatement of our financial statements, the imposition of sanctions, including the inability of
registered broker dealers 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 our reporting requirements or comply with legal and regulatory requirements or by disclosure of an accounting, reporting or control issue could adversely
affect the trading price of our stock and our business.
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We have incurred a cumulative loss since inception. If we do not generate significant revenue, we may not return to profitability.
Risks Relating to Our Financial Position and Need for Additional Capital
We have incurred significant losses since our inception in May 2001. At December 31, 2018 , our accumulated deficit was $743.8 million . We may incur
annual operating losses over the next several years as we expand our product development, commercialization and discovery efforts. In addition, we must
successfully develop and obtain regulatory approval for our product candidates, and effectively manufacture, market and sell any products we successfully
develop. Accordingly, we may 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 products with significant market potential. This will
require us and our collaborative partners to be successful in a range of challenging activities: developing product candidates, completing nonclinical testing and
clinical trials of our product candidates; obtaining regulatory approval for product candidates 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 of the 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 generate revenues that are significant enough to achieve profitability. Even if we achieve
profitability in the future, we may not be able to sustain profitability in subsequent periods. Our failure to become or remain profitable would depress our market
value and could impair our ability to raise capital, expand our business, discover or develop other therapeutic candidates or continue our operations. A decline in
the value of our company could cause our shareholders to lose all or part of their investment.
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 to
delay, limit or cease our product development efforts or other operations. If we are unable to fund our obligations under our collaboration and license
agreements, we may breach those agreements and our collaboration partners could terminate those agreements.
As of December 31, 2018 , we had cash, cash equivalents and marketable securities totaling approximately 449.4 million . For the twelve months ended
December 31, 2018 , we had a net loss of $176.1 million and our operations used cash of $155.6 million . We will continue to require substantial funds to conduct
research and development, process development, manufacturing, nonclinical testing and clinical trials of our product candidates, as well as funds necessary to
manufacture and market products that are approved for commercial sale. Because successful development and commercialization of our product candidates is
uncertain, we are unable to estimate the actual funds 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 cost of advancing our product candidates and funding our development programs, including the costs of nonclinical and clinical studies, obtaining
reference product for nonclinical and clinical studies, manufacturing nonclinical and clinical supply material, and obtaining regulatory approvals;
the level of sales of GLATOPA 20 mg/mL and of GLATOPA 40 mg/mL;
the successful commercialization of our other product candidates;
the impact of prior or contemporaneous competition on our products and product candidates, such as Mylan N.V.'s generic equivalents of COPAXONE
20 mg/mL and 40 mg/mL on GLATOPA 20 mg/mL and GLATOPA 40 mg/mL;
the receipt of milestone payments under our CSL License Agreement;
the ability to enter into a strategic alliance for commercialization of M923 and the continuation without disruption of development and manufacturing
activities of M923;
the timing of FDA approval of the products of our competitors;
the cost of litigation maintaining and enforcing our intellectual property rights and defending intellectual property related claims, including with
Amphastar relating to Enoxaparin Sodium Injection, that is not otherwise covered by
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our collaboration agreements, or potential patent litigation with others, as well as any damages, including possibly treble damages, that may be owed to
third parties should we be unsuccessful in such litigation;
the ability to enter into additional strategic alliances for our non-partnered programs, as well as the terms and timing of any milestone, royalty or profit
share payments thereunder;
the scope, progress, results and costs of 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.
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We expect to finance and manage our planned operating and capital expenditure requirements principally through our current cash, cash equivalents and
marketable securities, capital raised through our collaboration and license agreements and equity financings, contingent milestone payments, continuation and
milestone payments and product revenues under existing collaboration and license agreements. We believe that these funds will be sufficient to meet our operating
requirements through at least the end of 2020. We may seek additional funding in the future through third-party collaborations and licensing arrangements, public
or private debt financings or from other sources. Additional funds may not be available to us on acceptable terms or at all. 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 or more of our collaboration and license 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.
Raising additional capital by issuing securities or through collaboration and licensing arrangements may cause dilution to existing stockholders, restrict
our operations or require us to relinquish proprietary rights.
We may seek to raise the additional capital necessary to fund our operations through public or private equity offerings, debt financings, and collaboration and
licensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, our stockholders’ ownership interest
will be diluted, and the terms of such securities may include liquidation or other preferences that adversely affect our stockholders’ rights or, in the case of debt
securities, require us to pay interest that would reduce our cash flows from operations or comply with certain covenants that could restrict our operations. If we
raise additional funds through collaboration and licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies or product
candidates, or grant licenses on terms that are not favorable to us.
Results of preclinical studies and early clinical trials may not be predictive of results of future clinical trials.
Risks Relating to Development and Regulatory Approval
The outcome of preclinical studies and early clinical trials may not be predictive of the success of later clinical trials, and interim results of clinical trials do
not necessarily predict success in future clinical trials. Many companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in
late-stage clinical trials after achieving positive results in earlier development, and we could face similar setbacks. The design of a clinical trial can determine
whether its results will support approval of a product and flaws in the design of a clinical trial may not become apparent until the clinical trial is well advanced. In
addition, preclinical and clinical data are often susceptible to varying interpretations and analyses. Many companies that believed their product candidates
performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain marketing approval for the product candidates. Even if we, or our
collaborators, believe that the results of clinical trials for our product candidates warrant marketing approval, the FDA or comparable foreign regulatory authorities
may disagree and may not grant marketing approval of our product candidates.
If nonclinical studies and clinical trials are required for regulatory approval of our product candidates and are delayed or are not successful, we may
incur additional costs, experience delays in obtaining, or ultimately be unable to obtain regulatory 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
clinical trials that our product candidates are safe and effective. Nonclinical studies and clinical trials of novel product candidates are lengthy and expensive and
there is a high probability of significant delays to or failure of novel product candidates during nonclinical studies or clinical trials.
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To obtain regulatory approval for the commercial sale of our biosimilar product candidates, the BPCI Act requires nonclinical studies and clinical trials to
demonstrate biosimilarity, unless the FDA in its discretion determines such studies and trials are not necessary.
A delay or failure of one of our product candidates during nonclinical studies or clinical trials, if required, can occur at any stage of testing. For example, we
announced on November 1, 2017 that the results of the Phase I clinical trial for M834 indicated that it did not meet its primary pharmacokinetic endpoints,
requiring an evaluation of next steps for the program, which will delay any future development and cause us to incur additional costs. We may experience
numerous unforeseen events during, or as a result of, nonclinical studies and clinical trials, if required, that could delay or prevent our ability to receive regulatory
approval or commercialize our product candidates, including:
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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 nonclinical studies 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 trials at 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, including noncompliance
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 product candidates may not be the desired effects or may include undesirable side effects or our product candidates may have other
unexpected 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 and medical
practice, warranting a revision to our clinical development plan.
The results from nonclinical studies of a product candidate and in initial human clinical studies of a product candidate may not predict the results that will be
obtained in subsequent human clinical trials, if required. If we are required by regulatory authorities to conduct additional clinical trials or other testing of our
product candidates that we did not anticipate, if we are unable to successfully complete our clinical trials or other tests, or if the results of these trials are not
positive or are only modestly positive, we may be delayed in obtaining marketing approval for our product candidates or we may not be able to obtain marketing
approval at all. Our product development costs will also increase if we experience delays in testing or approvals. Significant clinical trial delays could allow our
competitors to bring products to market before we do and impair our ability to commercialize our product candidates. If any of these events occur, our business
will be materially harmed.
Our product candidates may cause serious adverse events or undesirable side effects or have other properties which may delay or prevent their regulatory
approval, limit the commercial profile of an approved label, or, result in significant negative consequences following marketing approval, if any.
Serious adverse events or undesirable side effects caused our product candidates could cause us or regulatory authorities to interrupt, delay or halt clinical
trials and could result in a more restrictive label or the delay or denial of regulatory approval by the FDA or other comparable foreign authorities. Results of our
clinical trials could reveal a high and unacceptable severity and prevalence of side effects or unexpected characteristics. If unacceptable side effects arise in the
development of our product candidates, we, the FDA, the IRBs at the institutions in which our studies are conducted, or the data safety monitoring board, or
DSMB, could suspend or terminate our clinical trials or the FDA or comparable foreign regulatory authorities could order us to cease clinical trials or deny
approval of our product candidates for any or all targeted indications. Treatment-related side effects could also affect patient recruitment or the ability of enrolled
patients to complete the trial or result in potential product liability claims. In addition, these side effects may not be appropriately recognized or managed by the
treating medical staff. Any of these occurrences may harm our business, financial condition and prospects significantly.
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If any of our product candidates receives marketing approval, and we or others later identify undesirable side effects caused by such products, a number of
potentially significant negative consequences could result, including:
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regulatory authorities may withdraw approvals of such product;
we may be required to recall a product or change the way such product is administered to patients;
additional restrictions may be imposed on the marketing of the particular product or the manufacturing processes for the product;
regulatory authorities may require additional warnings on the label, such as a “black box” warning or contraindication;
we may be required to implement a Risk Evaluation and Mitigation Strategy, or REMS, or create a medication guide outlining the risks of such side
effects for distribution to patients;
the product could become less competitive;
we could be sued and held liable for harm caused to patients; and
our reputation may suffer.
Any of these events could prevent us from achieving or maintaining market acceptance of the particular product candidate, if approved, and could
significantly harm our business, results of operations and prospects.
Interim, top-line and preliminary data from our clinical trials that we announce or publish from time to time may change as more patient data become
available and are subject to audit and verification procedures that could result in material changes in the final data.
From time to time, we may publish interim, top-line or preliminary data from our clinical studies. Interim data from clinical trials that we may complete are
subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment continues and more patient data become available.
Preliminary or “top-line” data also remain subject to audit and verification procedures that may result in the final data being materially different from the
preliminary data we previously published. As a result, interim and preliminary data should be viewed with caution until the final data are available. Adverse
differences between preliminary or interim data and final data could significantly harm our business prospects.
Even if we successfully complete necessary preclinical studies and clinical trials, provide evidence of therapeutic equivalence or provide evidence of
biosimilarity or interchangeability, the marketing approval process is expensive, time-consuming and uncertain and may prevent us from obtaining approvals
for the commercialization of some or all of our product candidates. If we or our collaborators are not able to obtain, or if there are delays in obtaining,
required regulatory approvals, we or they will not be able to commercialize, or will be delayed in commercializing, our product candidates, and our ability to
generate revenue will be materially impaired.
Our product candidates and the activities associated with their development and commercialization, including their design, testing, manufacture, safety,
efficacy, recordkeeping, labeling, storage, approval, advertising, promotion, sale and distribution, export and import, are subject to comprehensive regulation by
the FDA and other regulatory agencies in the United States and by the EMA and comparable regulatory authorities in other countries. With the exception of our
generic Enoxaparin Sodium Injection, GLATOPA 20 mg/mL and GLATOPA 40 mg/mL, we and our collaborators have not received approval to market any of our
product candidates from regulatory authorities in any jurisdiction. Failure to obtain marketing approval for a product candidate will prevent us from
commercializing the product candidate.
Securing marketing approval requires the submission of extensive preclinical and clinical data; strength, quality, purity, identity and therapeutic equivalence
data; or biosimilarity or interchangeability data, as applicable, and supporting information to the various regulatory authorities for each therapeutic indication to
establish the product candidate’s safety and efficacy. Securing regulatory approval also requires the submission of information about the product manufacturing
process to, and inspection of manufacturing facilities by, the relevant regulatory authority. Our product candidates may not be effective, may be only moderately
effective or may prove to have undesirable or unintended side effects, toxicities or other characteristics that may preclude our obtaining marketing approval or
prevent or limit commercial use.
The process of obtaining marketing approvals, both in the United States and abroad, is expensive, may take many years if additional clinical trials are
required, if approval is obtained at all, and can vary substantially based upon a variety of factors,
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including the type, complexity and novelty of the product candidates involved. Changes in marketing approval policies during the development period, changes in
or the enactment of additional statutes or regulations, or changes in regulatory review for each submitted product application, may cause delays in the approval or
rejection of an application. The FDA and comparable authorities in other countries have substantial discretion in the approval process and may refuse to accept any
application we submit, or may decide that our data is insufficient for approval and require additional preclinical, clinical or other studies. In addition, varying
interpretations of the data obtained from preclinical and clinical testing could delay, limit or prevent marketing approval of a product candidate. Any marketing
approval we or our collaborators ultimately obtain may be limited or subject to restrictions or post-approval commitments that render the approved medicine not
commercially viable.
Accordingly, if we or our collaborators experience delays in obtaining approval or if we or they fail to obtain approval of our product candidates, the
commercial prospects for our product candidates may be harmed and our ability to generate revenue will be materially impaired.
Although the BPCI Act establishes a regulatory pathway for the approval by the FDA of biosimilars, the standards for determining biosimilarity and
interchangeability for biosimilars are only just being implemented by the FDA under recently developed and developing guidance. Therefore, substantial
uncertainty remains about the potential value of our scientific approach and regulatory strategy for biosimilar development.
The regulatory climate in the United States for biosimilar versions of biologic and complex protein products remains uncertain, even following the enactment
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 has issued a series of draft and final guidance documents on certain matters concerning approval of biosimilars, interchangeable biologics, non-
proprietary naming and labeling, as well as quality and scientific considerations. Experience will develop as the number of products and applications increase. The
pathway contemplates approval of two categories of follow-on biologic products: (1) biosimilar products, which are highly similar to the existing reference
product, notwithstanding minor differences in clinically inactive components, and for which there are no clinically meaningful differences from the reference
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 the reference product. Only interchangeable biosimilar products would be considered substitutable at the retail
pharmacy level without the intervention of a physician. The legislation authorizes but does not require the FDA to establish standards or criteria for determining
biosimilarity and interchangeability, and also authorizes the FDA 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
engineering platform technology provides a level of scientific assurance that facilitates determinations of biosimilarity and/or interchangeability, reduces the need
for large scale clinical trials or other testing, and raises the scientific quality requirements for our competitors to demonstrate that their products are highly similar
to a reference 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 FDA to
consider our approach within the context of the biosimilar meeting and application review process. In addition, the FDA will likely require significant new
resources and expertise to review biosimilar applications, and the timeliness of 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 to reduce and target clinical requirements by relying on analytical and functional
nonclinical data may not be successful or may take longer than strategies that rely more 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, the information in
its abbreviated pathway application with the reference product company’s and patent owner’s counsel;
the inclusion of multiple potential patent rights in the patent clearance process; and
a grant to each reference product company of 12 years of marketing exclusivity following the reference product approval.
•
•
•
Furthermore, the regulatory pathway creates the risk that the reference product company, during its 12-year marketing exclusivity period, will develop and
replace its product with a non-substitutable or modified product that may also qualify for an additional 12-year marketing exclusivity period, reducing the
opportunity for substitution at the retail pharmacy level for interchangeable biosimilars. Finally, the legislation also creates the risk that, as reference product and
biosimilar companies
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gain experience with the regulatory pathway, subsequent FDA determinations or court rulings could create additional areas for potential disputes and resulting
delays in biosimilars approval.
In addition, there is reconsideration and legislative debate that could lead to the repeal or amendment of the healthcare legislation. If the legislation is
significantly 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. While proposals to repeal the Affordable Care Act do not appear to
include proposals to repeal the BPCI Act, there is still some uncertainty about that possibility. Depending on the timing and the extent of these funding, meeting
and 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 development
expertise 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 synthesized
drugs. 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 also
have greater structural complexity. Protein molecules differ from one another primarily in their sequence of amino acids, which results in folding of the protein
into a specific three-dimensional structure that determines its activity. Although the sequence of amino acids in a protein is consistently replicated, there are a
number of changes that 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 essential and poses significant scientific and technical challenges. Furthermore, it is often challenging to consistently manufacture proteins with complex
glycosylation profiles, especially on a commercial scale. Protein-based therapeutics are inherently heterogeneous and their structure is highly dependent on the
production process 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 of
biologics creates significant technical and scientific challenges in their replication as biosimilar products. Accordingly, the technical complexity involved and
expertise and technical skill required to successfully develop and manufacture biosimilars poses significant barriers to entry. Any difficulties encountered in
developing and producing, or any inability to develop and produce, biosimilars could adversely affect our business, financial condition and results of operations.
Even if we are able to obtain regulatory approval for biosimilar product candidates as interchangeable, state pharmacy boards or agencies may conclude
that our products are not substitutable at the pharmacy level for the corresponding reference product. If our generic or biosimilar products are not
substitutable at the pharmacy level for the corresponding reference product, this could materially reduce sales of our products and our business would suffer.
While a designation of interchangeability is a finding by the FDA that a biosimilar can be substituted at the pharmacy without physician intervention or
prescription, reference product pharmaceutical companies are lobbying state legislatures and the FDA to enact physician prescription requirements, or in the
absence of a prescription, physician and patient notification requirements, special labeling requirements and unique naming requirements for biosimilars which if
enacted could create barriers to substitution and adoption rates of interchangeable biologics as well as non-interchangeable biosimilars. Should this occur with
respect to one of our biosimilars or interchangeable biologic product candidates in a discriminatory manner, it could materially reduce sales in those states which
would substantially harm our business. To date, the FDA has adopted a non-discriminatory policy that would apply the same non-proprietary naming requirements
to reference products.
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 market
our products in the European Union and many other foreign jurisdictions, we must obtain separate regulatory approvals and comply with the numerous and varying
regulatory requirements of each jurisdiction. The approval procedure and requirements vary among countries, and can require, among other things, conducting
additional testing in each jurisdiction. The time required to obtain approval abroad may differ from that required to obtain FDA approval. The foreign regulatory
approval 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 at
all. Approval by the FDA does not ensure approval by regulatory authorities in other countries, and approval by one foreign regulatory authority does not ensure
approval 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 may
not receive necessary approvals to commercialize our products in any market outside of the United States. The failure to obtain these approvals could materially
adversely affect our business, financial condition, and results of operations.
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Even if we obtain regulatory approvals, our marketed products will be subject to ongoing regulatory review. If we fail to comply with continuing United
States and foreign regulations, we could lose our approvals to market products and our business would be seriously harmed.
Even after approval, any pharmaceutical products we develop will be subject to ongoing regulatory review, including the review of clinical results that are
reported after our products are made commercially available. Any regulatory approvals that we obtain for our product candidates may also be subject to limitations
on the approved indicated uses for which the product may be marketed or to the conditions of approval, or contain requirements for potentially costly post-
marketing testing, including Phase 4 clinical trials, and surveillance to monitor the safety and efficacy of the product candidate. In addition, the manufacturer and
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 and make
other periodic reports to the FDA. The discovery of any new or previously unknown problems with the product, manufacturer or facility may result in restrictions
on the product or manufacturer or facility, including withdrawal of the product from the market. Certain changes to an approved product, including in the 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 applicable FDA
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 of
products, 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 and
regulations governing relationships with health care providers, we could also be subject to substantial fines and penalties, criminal prosecution and debarment or
exclusion from participation in the Medicare, Medicaid, or other government reimbursement programs. Additionally, we may be subject to federal and state health
information privacy, security and data breach notification laws, which govern the collection, use, disclosure and protection of health-related and other personal
information. State laws may be more stringent, broader in scope or offer greater individual rights with respect to protected health information than federal privacy
laws, and state laws may differ from each other, which may complicate compliance efforts.
Non-compliance with EU requirements regarding safety monitoring or pharmacovigilance can also result in significant financial penalties. Similarly, failure
to comply with the EU requirements regarding the protection of personal information can also lead to significant penalties and sanctions.
In addition, the FDA’s policies may change and additional government regulations may be enacted that could prevent, limit, or delay regulatory approval of
our product candidates. For example, in December 2016, the 21st Century Cures Act, or Cures Act, was signed into law. The Cures Act, among other things, is
intended to modernize the regulation of drugs, and to spur innovation. If we are slow or unable to adapt to changes in existing requirements or the adoption of new
requirements or policies, or if we are 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.
We also cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative or executive action,
either in the United States or abroad. For example, certain policies of the current administration may impact our business and industry. Namely, the current
administration has taken several executive actions, including the issuance of a number of Executive Orders, that could impose significant burdens on, or otherwise
materially delay, FDA’s ability to engage in routine regulatory and oversight activities such as implementing statutes through rulemaking, issuance of guidance,
and review and approval of marketing applications. It is difficult to predict how these Executive Orders will be implemented, and the extent to which they will
impact the FDA’s ability to exercise its regulatory authority. If these executive actions impose constraints on FDA’s ability to engage in oversight and
implementation activities in the normal course, our business may be negatively impacted.
Changes in funding for the FDA and other government agencies could hinder their ability to hire and retain key leadership and other personnel, or
otherwise prevent new products and services from being developed or commercialized in a timely manner, which could negatively impact our business.
The ability of the FDA to review and approve new products can be affected by a variety of factors, including government budget and funding levels, ability to
hire and retain key personnel and accept the payment of user fees, and statutory, regulatory, and policy changes. Average review times at the agency have
fluctuated in recent years as a result. In addition, government funding of other government agencies that fund research and development activities is subject to the
political process, which is inherently fluid and unpredictable.
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Disruptions at the FDA and other agencies may also slow the time necessary for new drugs to be reviewed and/or approved by necessary government
agencies, which would adversely affect our business. For example, over the last several years, including for 35 days beginning on December 22, 2018, the U.S.
government has shut down several times and certain regulatory agencies, such as the FDA, have had to furlough critical FDA employees and stop critical activities.
If a prolonged government shutdown occurs, it could significantly impact the ability of the FDA to timely review and process our regulatory submissions, which
could have a material adverse effect on 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 and
profits 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 from
governmental 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 of
factors, 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;
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 that
could 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 data
sufficient to gain acceptance with respect to coverage and reimbursement. There is substantial uncertainty whether any particular payer will reimburse the use of
any product incorporating new technology. Even when a payer determines that a product is eligible for reimbursement, the payer may impose coverage limitations
that preclude payment for some uses that are approved by the FDA or comparable authority. Moreover, eligibility for coverage does not imply that any product 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, may also 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 setting in 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 other products or
services, and may reflect budgetary constraints and/or imperfections in Medicare, Medicaid or other data used to calculate these rates. Net prices for products may
be reduced by mandatory discounts or rebates required by government health care programs or by any future relaxation of laws that restrict imports of 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, which
may affect payments for our products. The Centers for Medicare and Medicaid Services, or CMS, frequently change product descriptors, coverage policies, product
and service codes, payment methodologies and reimbursement values. Third-party payers often follow Medicare coverage policy and payment limitations in setting
their own reimbursement rates, and both CMS and other third-party payers may have sufficient market power to demand significant price reductions. Due in part to
actions by third-party payers, the health care industry is experiencing a trend toward containing or reducing costs through various means, including lowering
reimbursement 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. In the 2016
Physician Fee Schedule Final Rule, CMS made it clear that the payment amount for a biosimilar is based on the average sales price of all products included within
the same billing and payment code. In general, this means that CMS will group biosimilar products that rely on a common reference product’s biologics license
application into the same payment calculation, and these products will share a common payment limit and billing code. In the 2018 Physician Fee Schedule Final
Rule, CMS reversed course and instead of classifying biosimilars with the same reference product in the same Healthcare Common Procedural System (“HCPCS”)
code, CMS will establish a unique code for each biosimilar product; and instead of calculating a single blended payment rate, starting January 1, 2018, CMS
calculates a payment rate specific to each biosimilar product. In addition, for qualifying biosimilars, instead of considering only the first biosimilar product for the
reference product for OPPS pass-through payment status, each biosimilar is now eligible. It is unclear what effect, if any,
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CMS's changes this will have on private payers. 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 a
material adverse effect on our operating results and our overall financial condition.
Federal 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.
Healthcare reform legislation known as the Affordable Care Act that was enacted in 2010 could significantly change the United States health care system 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 for pharmaceuticals
and biological products. The law contains provisions that will affect companies in the pharmaceutical industry and other healthcare-related industries by imposing
additional costs and changes to business practices. Provisions affecting pharmaceutical companies include an increase to the mandatory rebates for pharmaceutical
products sold into the Medicaid program, an extension of the rebate requirement to pharmaceutical products used in risk-based Medicaid managed care plans, an
extension of mandatory discounts for pharmaceutical products sold to certain critical access hospitals, cancer hospitals and other covered entities, and discounts
and fees applicable to brand-name pharmaceutical products. Although many of these provisions may not apply directly to us, they may change business practices in
our industry and, assuming our products are approved for commercial sale, such changes could adversely impact our profitability.
In 2017, members of Congress and the President sought to repeal and replace the Affordable Care Act, and, while those efforts did not succeed, it is possible
that similar efforts will be made in the future. Recently, the Tax Cuts and Jobs Act (the “Tax Act”) was enacted, which, among other things, removes penalties for
not complying with the Affordable Care Act’s individual mandate to carry health insurance. It is uncertain whether regulatory changes to the implementation of the
Affordable Care Act will restrict patient access to affordable insurance and impact their access to novel, biosimilar and complex generic products. The full effects
of any repeal and replacement of the Affordable Care Act, or regulatory changes to its implementation cannot be known until a new law is implemented through
regulations or guidance is issued by the CMS and other federal and state health care agencies. Any legislative or regulatory changes could have a material adverse
effect on our business, financial condition and potential profitability. In addition, litigation may prevent some or all of the legislation from taking effect. For
example, on December 14, 2018, a U.S. District Court Judge in the Northern District of Texas, ruled that the individual mandate is a critical and inseverable feature
of the Affordable Care Act, and therefore, because it was repealed as part of the Tax Act, the remaining provisions of the Affordable Care Act are invalid as well.
While the Trump Administration and the Centers for Medicare & Medicaid Services have both stated that the ruling will have no immediate effect, it is unclear
how this decision, subsequent appeals, if any, will impact the law. In 2019 and beyond, we may face additional uncertainties as a result of likely federal and
administrative efforts to repeal, substantially modify or invalidate some or all of the provisions of the Affordable Care Act. There is no assurance that the
Affordable Care Act, as amended in the future, will not adversely affect our business and financial results, and we cannot predict how future federal or state
legislative or administrative changes relating to healthcare reform will affect our business.
Moreover, increasing efforts by governmental and third-party payers, in the United States and abroad, to cap or reduce healthcare costs or introduce price
controls or price negotiation may cause the government or other organizations to limit both coverage and level of reimbursement for approved products and, as a
result, they may not cover or provide adequate payment for our products and product candidates. We expect to experience pricing pressures in connection with the
sale of any of our products and product candidates due to the trend toward managed healthcare, the increasing influence of health maintenance organizations and
additional legislative changes. The downward pressure on healthcare costs in general, particularly prescription drugs, surgical procedures and other treatments, has
become very intense. As a result, increasingly high barriers are being erected to the entry of new products.
Additionally, the BPCI Act establishes an abbreviated regulatory pathway for the approval of biosimilars and provides that reference products may receive 12
years of market exclusivity, with a possible six-month extension for pediatric products. By creating a new approval pathway for biosimilars and adjusting
reimbursement for biosimilars, the new law could promote the development and commercialization of biosimilars. However, given the uncertainty of how the 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 in the law,
such as the comparative effectiveness provisions, may ultimately impact positively or negatively both brand and biosimilars products alike depending on an
applicant’s clinical data, effectiveness and cost profile. If a reference product cannot be shown to provide a benefit over other therapies, then it might receive
reduced coverage and reimbursement. While this might increase market share for biosimilars based on cost savings, it could also have the effect of reducing
biosimilars’ market share.
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Lastly, there has been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products, which has resulted in
several Congressional inquiries and proposed and enacted legislation designed to, among other things, bring more transparency to product pricing, review the
relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for medical products. Individual
states in the United States have also become increasingly aggressive active in passing legislation and implementing regulations designed to control pharmaceutical
product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and
transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.
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 to
governmental control. In these countries, pricing negotiations with governmental authorities can take considerable time after the receipt of marketing approval for a
product. To obtain reimbursement or pricing approval in some countries, we may be required to conduct a clinical trial that compares the cost-effectiveness of our
product candidate to other available therapies. If reimbursement of our products is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory
levels, 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 and
related 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 of biohazardous materials. Insurance may not provide adequate coverage against potential liabilities, and we do not maintain insurance for environmental
liability or toxic 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. We may incur substantial costs to comply with, and substantial fines or penalties if we violate, any of these laws or regulations.
Risks Relating to Competition
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 expect
competition to intensify as technological advances are made or new biotechnology products are introduced. New developments by competitors may render our
current or future product candidates and/or technologies non-competitive, obsolete or not economical. Our competitors’ products may be more efficacious or
marketed 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 and
commercialization process;
• more extensive experience in commercializing generic drugs, biosimilars and novel therapeutics, conducting nonclinical studies, conducting clinical trials,
obtaining regulatory approvals, 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.
We face, and will continue to face, competition with regard to our products and, if approved, our product candidates, based on many different factors,
including:
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the safety and effectiveness of our products;
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•
•
•
•
•
•
•
with regard to our generic products and our generic and 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 discounts, rebates and 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
more successful in commercializing their products than we are, which could adversely affect our competitive position and 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,
including GLATOPA 20 mg/mL, GLATOPA 40 mg/mL, M923 and M710, are approved and successfully commercialized, our business would suffer.
Pricing and market share of generic and biosimilar products may decline, often dramatically, as other generics or biosimilars of the same brand name drug or
reference product, respectively, enter the market. Competing generics include brand name manufacturers’ “authorized generics” of their own brand name products.
Generally, earlier-to-market generics and biosimilars are better able to gain significantly greater market share than later-to-market competing generics and
biosimilars, respectively. Accordingly, revenue and profits from our generic products and, if approved, our generic and biosimilar product candidates, may be
significantly reduced based on the timing and number of competing generics and biosimilars, respectively. We expect our generic products and, if approved,
certain of our generic and biosimilar product candidates may face intense and increasing competition from other generics and biosimilars. For example, in October
2017, Mylan N.V. announced the launch of its generic equivalents of COPAXONE 20 mg/mL and 40 mg/mL. Following Mylan N.V.’s entry into the market,
Sandoz has defended GLATOPA’s share of the 20 mg/mL glatiramer acetate injection market by using one or more contracting strategies, including but not limited
to, lowering its GLATOPA 20 mg/mL price or increasing the discounts or rebates it offers for GLATOPA 20 mg/mL, which has decreased contractual profit share
revenue. Since Sandoz’s launch of Glatopa 40mg in February, Sandoz has encountered aggressive pricing and contracting tactics from competitors and as a result
we expect modest sales for the product in the future. In addition, several other companies have submitted ANDAs to the FDA for generic versions of COPAXONE.
A launch of one or more additional generic versions of COPAXONE could further reduce anticipated revenue from GLATOPA 20 mg/mL and GLATOPA 40
mg/mL.
In addition, the first biosimilar determined to be interchangeable with a particular reference product for any condition of use is eligible for a period of market
exclusivity that delays an FDA determination that a second or subsequent biosimilar product is interchangeable with 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 first interchangeable 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 that submitted the application for the first interchangeable product is still
ongoing; or (4) 18 months after approval of the first interchangeable product if the applicant that 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 product is interchangeable with HUMIRA or EYLEA prior to approval of
M923 or M710 may therefore delay any determination that our product is interchangeable with the reference product, which may materially adversely affect our
results of operations and delay, prevent or limit our ability to generate revenue.
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If an alternative version of a reference product, such as COPAXONE, HUMIRA or EYLEA , is developed that has a new product profile and labeling, the
alternative version of the product could significantly reduce the market share of the original reference product, and may cause a significant decline in sales or
potential sales of our corresponding generic or biosimilar product.
Brand companies may develop alternative versions of a reference product as part of a life cycle extension strategy, and may obtain approval of the alternative
version under a supplemental new drug application, for a drug, or biologics license application, for a biologic. The alternative version may offer patients added
benefits such as a more convenient form of administration or dosing regimen. Should the brand company succeed in obtaining an approval of an alternative
product, it may capture a significant share of the collective reference product market and significantly reduce the market for the original reference product and
thereby the potential size of the market for our generic or biosimilar products. For example, as of the end of 2018, Teva’s three-times-weekly COPAXONE 40
mg/mL and Mylan N.V.’s three-times-weekly generic equivalent product accounted for approximately 84% of the overall U.S. glatiramer acetate injection market
(20 mg/mL and 40 mg/mL) based on volume prescribed. As a result, the market potential for GLATOPA 20 mg/mL has decreased, and may decrease further as
additional patients are converted from once-daily COPAXONE or any generic equivalent to three-times-weekly COPAXONE or generic equivalent. In addition,
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 FDA marketing
approval exclusivity, which would prohibit a generic version of the alternative product for some period of time. As a result, our business, including our financial
results and our ability to fund future discovery and development programs, would suffer.
If efforts by manufacturers of reference products to delay or limit the use of generics or biosimilars are successful, our sales of generic and 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 restrict
competition from manufacturers of generic drugs and biosimilars. These efforts have included:
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•
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•
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settling patent lawsuits with generic or biosimilar companies, resulting in such patents remaining an obstacle for generic or biosimilar approval by others;
seeking to restrict biosimilar commercialization options by seeking to delay the right to adjudicate patent rights under Section 351(l) of the Biologics
Price, Competition and Innovation Act or restricting access by biosimilar and generic applicants by litigation or legislative action to the use of inter partes
patent review 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 to delay
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 drug or
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 or biosimilar
applications;
restricting access to reference products for equivalence and biosimilarity testing that interfere with timely generic and biosimilar development plans,
respectively;
conducting medical education with physicians, payers and regulators that claim that generic or biosimilar products are too complex for generic or
biosimilar 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 or through
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 or
interchangeable biologic;
seeking federal reimbursement policies that do not promote adoption of biosimilars and interchangeable biologics;
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•
•
•
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 of
generic 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 Medicare
Prescription 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 Petitions
regarding GLATOPA 20 mg/mL, all of which have been denied, dismissed or withdrawn. Teva also sought reversal of the denial of a Citizen Petition in federal
court. Other third parties may also file Citizen Petitions requesting that the FDA adopt specific approval standards for generic or biosimilar products.
If these efforts to delay or block competition are successful, we may be unable to sell our generic and biosimilar products, if approved, which could have a
material adverse effect on our sales and profitability.
If the market for a reference product, such as COPAXONE, HUMIRA or EYLEA, significantly declines, sales or potential sales of our corresponding
generic and biosimilars product and product candidates may suffer and our business would be materially impacted .
Competition in the biotechnology industry is intense. Reference products face competition on numerous fronts as technological advances are made or new
products are introduced that may offer patients a more convenient form of administration, increased efficacy or improved safety profile. As new products are
approved that compete with the reference product to our generic products and product candidates and our biosimilar product candidates, respectively, sales of
reference products and biosimilar and generics may be significantly and adversely impacted and may render the reference products obsolete.
Current injectable treatments commonly used to treat multiple sclerosis, including COPAXONE, are competing with novel therapeutic products, including
oral therapies. These oral therapies may offer patients a more convenient form of administration than COPAXONE and may provide increased efficacies. If the
market for the reference product is impacted, we in turn may lose significant market share or market potential for our generic or biosimilar products and product
candidates, and the value for our generic or biosimilar pipeline could be negatively impacted. As a result, our business, including our financial results and o ur
ability to fund future discovery and development programs, would suffer.
Risks Relating to Intellectual Property
If we are not able to obtain and enforce patent protection for our discoveries, our ability to successfully commercialize our product candidates will be
harmed, and 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 property
laws of the United States and other countries, so that we can prevent others from using our inventions and proprietary information. Because patent applications in
the 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 of
discoveries in scientific literature lag behind actual discoveries, we cannot be certain that we were the first to make the inventions claimed in issued patents or
pending patent applications, or that we were the 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 to market 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 U.S. PTO, or become involved in opposition, derivation, reexamination, IPR,
or interference proceedings challenging our patent rights or the patent rights of others. For example, several of our European patents are being challenged in
opposition proceedings 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
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compete directly with us, without payment to us, or result in our inability to manufacture 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 we
may 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
issuance of 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, is
generally uncertain and involves complex legal and factual considerations. The standards which the U.S. PTO and its foreign counterparts use to grant patents are
not always applied predictably or uniformly and can change. There is also no uniform, worldwide policy regarding the subject matter and scope of claims granted
or allowable in pharmaceutical or biotechnology patents. The laws of some foreign countries do not protect proprietary information to the same extent as the laws
of the United States, and many companies have encountered significant problems and costs in protecting their proprietary information in these foreign countries.
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 and
cost of patent interference proceedings and/or opposition proceedings, and the risk of infringement litigation. On the other hand, the allowance of narrower claims
may limit the value of our proprietary rights. Our issued patents may not contain claims sufficiently broad to protect us against third parties with similar
technologies or products, or provide us with any competitive advantage. Moreover, once they have issued, our patents and any patent for which we have licensed
or may license rights may be challenged, narrowed, invalidated or circumvented. If our patents are invalidated or otherwise limited, other companies will be better
able to develop products that compete with ours, which could adversely affect our competitive business position, business prospects and financial condition.
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 could
be 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
outcome of which would be uncertain. Any unfavorable outcome of such litigation could have a material adverse effect on our business, financial position and
results of operations.
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 that
could 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 intellectual
property rights, we might be forced to incur expenses to respond to and litigate the claims. Furthermore, we may be ordered to pay damages, potentially including
treble 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 of
litigation, a court could issue a temporary injunction or a permanent injunction preventing us from marketing and selling the patented drug or other technology for
the life of the patent that we have been alleged or deemed to have infringed. Litigation concerning intellectual property and proprietary technologies is widespread
and 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 affected
products, 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 continue
to 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.
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If we remain involved in patent litigation or other proceedings to determine or enforce our intellectual property rights, we could incur substantial costs or
experience delays that could 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
proprietary rights such as trade secrets in jurisdictions where we intend to market our products, including the United States, the European Union, and many other
foreign jurisdictions. The cost to us of any litigation or other proceeding relating to determining the validity of intellectual property rights, or any delays to the
development of our product candidates resulting from such litigation or other proceeding, 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 and resulting development delays associated with complex patent litigation more
effectively than we can because they may have substantially greater resources. Moreover, the failure to obtain a favorable outcome in any litigation in a jurisdiction
where there is a claim of patent infringement could significantly delay the marketing of our products in that particular jurisdiction and could ultimately lead to a
decision to discontinue a program. Counterclaims for damages and other relief may be triggered by such enforcement actions. The costs, uncertainties and
counterclaims resulting from the initiation and continuation of any litigation could limit our ability to continue our operations.
We 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
license rights 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 and
Rockefeller University, which give us rights to intellectual property that may be necessary for certain parts of our business. In addition, we expect to enter into
additional licenses in the future. Our current in-license arrangements impose various diligence, development, royalty and other obligations on us. If we breach our
obligations with regard to our exclusive in-licenses, they could be converted to non-exclusive licenses or the agreements could be terminated, which would result
in our 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 AG fails to adequately perform under this collaboration, or if we or
Sandoz AG terminate all or a portion of this collaboration, the commercialization of some of our products and product candidates, including GLATOPA 20
mg/mL and GLATOPA 40 mg/mL, would be impacted, delayed or terminated and our business would be adversely affected.
Either we or Sandoz AG may terminate the 2006 Sandoz Collaboration Agreement for material uncured breaches or certain events of bankruptcy or
insolvency by the other party. For some of the products, for any termination of the 2006 Sandoz Collaboration Agreement other than a termination by Sandoz AG
due to our uncured breach 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 of Sandoz AG 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 Sandoz AG terminates 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 clinical trials, Sandoz AG would retain the exclusive right to develop and commercialize the applicable product. In that event, we would
no longer have any influence over the development or commercialization strategy of such product. In addition, for other products, if Sandoz AG terminates due to
our uncured breach or bankruptcy, Sandoz AG retains a right to license certain of our intellectual property without the obligation to make any additional payments
for such licenses. For certain products, if the 2006 Sandoz Collaboration Agreement is terminated other than due to our uncured breach or bankruptcy, neither party
will have a license to the other party’s intellectual 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, could cause significant delays that could prevent us from completing the development and commercialization of such product. Any
alternative collaboration could also be on less favorable terms to us. Accordingly, if the 2006 Sandoz Collaboration Agreement is terminated, our introduction of
certain products may be significantly delayed, 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 AG to successfully continue to commercialize GLATOPA 20 mg/mL and GLATOPA 40
mg/mL. We do not fully control Sandoz AG’s commercialization activities or the resources it allocates to our products. While the 2006 Sandoz Collaboration
Agreement contemplates joint decision making and alignment, our interests and Sandoz AG’s interests may differ or conflict from time-to-time or we may disagree
with Sandoz AG’s level of effort or resource allocation. Sandoz AG may internally prioritize our products and product candidates differently
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than we do or it may fail to allocate sufficient resources to effectively or optimally commercialize our products and alignment may only be achieved through
dispute resolution. In the future, we and Sandoz may compete on other products outside of our collaboration, which could negatively impact our ability to work
effectively with one another. If these events were 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
terminate the Mylan Collaboration Agreement, the development and commercialization of our biosimilar candidate, M710, could be delayed or terminated and
our business 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 certain
activities involving competing products or the challenge of certain patents. Other than in the case of a termination for convenience, the terminating party shall have
the right to continue the development, manufacture and commercialization of the terminated products in the terminated countries. In the case of a termination for
convenience, 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 will
terminate for the terminated country. Subject to certain terms and conditions, the party that has the right to continue the development or commercialization of a
given product candidate may retain royalty-bearing licenses to certain intellectual property rights, and rights to certain data, for the continued development and sale
of the applicable product in the country or countries for which termination applies. In October 2018, we announced that we would notify Mylan of our intention to
discontinue participation in five of our collaboration programs, including M834, a proposed biosimilar to ORENCIA, and will only continue to advance our late-
stage biosimilar candidate M710, our proposed biosimilar to EYLEA. We delivered a formal notice of this partial termination to Mylan in November 2018, as
provided for in the collaboration agreement.
If the Mylan Collaboration Agreement were terminated and we had the right to continue the development and commercialization of M710, 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, could cause significant delays that
could prevent us from commercializing those products. Any alternative collaboration could be on less favorable terms to us. In addition, we may need to seek
additional financing to support the development and commercialization of M710, or alternatively we may decide to discontinue M710, which could have a material
adverse effect on our business. If the Mylan Collaboration Agreement were terminated with respect to M710 and Mylan had the right to continue the development
and commercialization of such product, we would have no influence or input into those activities.
Under the Mylan Collaboration Agreement, we are dependent upon Mylan to successfully perform its responsibilities and activities, including conducting
clinical trials for certain products and leading the commercialization of products. We do not control Mylan’s execution of its responsibilities, including
commercialization 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 may
disagree with Mylan’s level of effort or resource allocation. Mylan may internally prioritize our products and product candidates differently than we do or it may
not allocate sufficient resources to effectively or optimally execute its responsibilities or activities. Competition between us and Mylan on other products outside of
our collaboration, such as our respective generic equivalents of COPAXONE, could negatively impact our ability to work effectively with one another. If these
events were to occur, our business would be adversely affected.
The CSL License Agreement is important to our business. If we or CSL fail to adequately perform under the Agreement, or if we or CSL terminate the
Agreement, the development and commercialization of our novel therapeutic, M230, could be delayed or terminated and our business would be adversely
affected.
CSL may terminate the CSL License Agreement on a product-by-product basis subject to notice periods and certain circumstances related to clinical
development. We may terminate the CSL License Agreement under certain circumstances related to the development of M230 and if no activities are being
conducted under the CSL License Agreement. Either party may terminate the Agreement on a product-by-product basis if certain patent challenges are made, on a
product-by-product for material breaches, or due to the other party’s bankruptcy. Upon termination of the CSL License Agreement, subject to certain exceptions,
the licenses granted under the CSL License Agreement terminate. In addition, dependent upon the circumstances under which the CSL License Agreement is
terminated, we or CSL have the right to continue the research, development, and commercialization of terminated products, including rights to certain data, for the
continued development and sale of terminated products and, subject to certain limitations, obligations to make sales-based royalty payments to the other party.
If the CSL License Agreement were terminated and we had the right to continue the research, development, and commercialization of one or more terminated
products, 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, could
cause significant delays that could prevent us from commercializing those products. Any alternative collaboration could be on less favorable terms to us. In
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addition, we may need to seek additional financing to support the research, development and commercialization of any terminated products, or alternatively we
may decide to discontinue one or more terminated products, which could have a material adverse effect on our business. If the CSL License Agreement were
terminated and CSL had the right to continue the development and commercialization of one or more terminated products, we would have no influence or input
into those activities.
Under the CSL License Agreement, we are dependent upon CSL to successfully perform its responsibilities and activities, including the research,
development and commercialization of M230 and research on other Fc multimer proteins. We do not control CSL’s execution of its responsibilities or the
resources it allocates to our products and product candidates. Our interests and CSL’s interests may differ or conflict from time to time, or we may disagree with
CSL’s level of effort or resource allocation. CSL may internally prioritize our products and product candidates differently than we do or it may not allocate
sufficient resources to effectively or optimally execute its responsibilities or activities. If these events were to occur, our business would be adversely affected.
We may need to enter into additional strategic alliances with other companies that can provide capabilities and funds for the development and
commercialization of our product candidates. If we are unsuccessful in forming or maintaining these arrangements on favorable terms, we may have to alter
our development and commercialization plans, and our business could be adversely affected.
Because we have limited internal capabilities for late-stage product development, manufacturing, sales, marketing and distribution, we may need to enter into
strategic alliances with other companies in addition to our current alliances with Sandoz, Mylan and CSL. In such alliances, we would expect our collaboration
partners to provide substantial capabilities in clinical development, manufacturing, regulatory affairs, sales and marketing. We may not be successful in entering
into any such alliances as a result of many factors including the following:
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competition in seeking appropriate collaborators;
restrictions on future strategic alliances in existing strategic alliance agreements;
a reduced number of potential collaborators due to recent business combinations of large pharmaceutical companies;
inability to negotiate strategic alliances on a timely basis; and
inability to negotiate strategic alliances on acceptable terms.
Even if we do succeed in securing such alliances, we may not be able to maintain them or they may be unsuccessful. We may be unable to maintain a
strategic alliance if the development or approval of a product candidate that is the subject of the alliance is delayed or sales of an approved product that is the
subject of the alliance are disappointing. The success of our collaboration agreements will depend heavily on the efforts and activities of our collaborators.
Collaborators generally have significant discretion in determining the efforts and resources that they will apply to these collaborations. Any such alliance would
entail numerous operational and financial risks, including significant integration and implementation challenges that could disrupt our business and divert our
management's time and attention. If we are unable to secure or maintain such alliances or if such alliances are unsuccessful, we may not have the capabilities
necessary to continue 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
additional funding for development and potential commercialization of our product candidates. These arrangements may require us to relinquish rights to some of
our technologies, product candidates or products which we would otherwise pursue on our own. These alliances may also involve the other company purchasing a
significant 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
develop a particular product candidate internally or to bring product candidates to market. Failure to bring our product candidates to market will prevent us from
generating sales revenue, and this may substantially harm our business. Furthermore, any delay in entering into these alliances could delay the development and
commercialization of our product candidates and reduce their competitiveness even if they reach the market. As a result, our business and operating results may be
adversely affected.
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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
be unable 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 risks
involved 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 third parties 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 the success of the efforts of these third parties.
A significant change in the business operations of, a change in the financial condition of, a change in senior executive management within, or a change
in control of our third-party collaborators, or any 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 or licenses with third parties, we do not have sole decision making authority with
respect to commercialization or development of those product candidates. We have built relationships and work collaboratively with our third-party collaborators
and manufacturers to ensure the success of our development and commercialization efforts. A significant change in the senior management team, a change in the
financial condition or a change in the business operations, including a change in control or internal corporate restructuring, of any of our collaboration partners or
third-party manufacturers, could result in delayed 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 or funding allocated to support our programs. For example, in June 2016, Baxalta Incorporated and Shire announced the
completion of a combination of Baxalta Incorporated and Shire, as a result of which Baxalta Incorporated became a wholly-owned subsidiary of Shire. On
September 27, 2016, Baxalta gave us twelve months’ prior written notice of the exercise of its right to terminate for its convenience the collaboration agreement
with us, and on December 31, 2016, we and Baxalta entered into an Asset Return and Termination Agreement pursuant to which the effective date of the
collaboration agreement was December 31, 2016. As a result, there have been changes or delays in the timing of the M923 program in connection with the return
of the M923 program to us. 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, these
provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to
replace members of our board of directors. Because our board of directors is responsible for appointing the members of our management team, these provisions
could in turn affect any attempt by our stockholders to replace current members of our management team. These provisions include:
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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, which
prohibit 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 the
transaction 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 acted
upon at stockholder meetings. These provisions would apply even if the offer may be considered beneficial by some stockholders.
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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 has
been unrelated or disproportionate to the operating performance of these companies. The trading price of our common stock has been, and is likely to continue to
be, volatile. Furthermore, our stock price could be subject to wide fluctuations in response to a variety of factors, including the following:
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delays in achievement of, or failure to achieve, program milestones that are associated with the valuation of our company or significant milestone
revenue;
failure of GLATOPA 20 mg/mL to sustain or GLATOPA 40 mg/mL to achieve profitable sales or market share that meet expectations of securities
analysts;
litigation involving our company or our general industry or both;
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 third parties in antitrust
litigation 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, such as Mylan N.V.'s October 2017 launch of its generic equivalents of
COPAXONE 20 mg/mL and 40 mg/mL;
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adverse FDA decisions regarding the development requirements for one of our biosimilar product candidates or failure of our other product applications
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 to our
biosimilar development strategy;
failure to demonstrate biosimilarity or interchangeability with respect to our biosimilar product candidates such as M923 or M710;
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 of the
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 of other
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 biotechnology company securities specifically.
If any of these factors cause an adverse effect on our business, results of operations or financial condition, the price of our common stock could fall and
investors may not be able to sell their common stock at or above their respective purchase prices.
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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
costs or large judgments against us.
The stock market in general has recently experienced significant price and volume fluctuations. In addition, the market prices of securities of companies in
the biotechnology industry have been extremely volatile and have experienced fluctuations that have often been unrelated or disproportionate to the operating
performance of or other events at these companies. These fluctuations could adversely affect the market price of our common stock. In the past, securities class
action litigation has often 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, operating results and financial condition.
Item 1B. UNRESOLVED STAFF COMMENTS
None.
Item 2. PROPERTIES
As of February 5, 2019, pursuant to our sublease agreements, we lease office and laboratory space in Cambridge, Massachusetts:
Property Location
320 Bent Street
Cambridge, Massachusetts 02141
301 Binney Street, Fifth Floor
Cambridge, Massachusetts 02142
Item 3. LEGAL PROCEEDINGS
GLATOPA 40 mg/mL-Related Proceedings
Approximate Square
Footage
Use
Lease Expiration Date
105,000 Laboratory and Office
80,000 Laboratory and Office
185,000
02/28/2027
06/29/2025
On September 10, 2014, Teva and Yeda filed a suit against us and Sandoz in the United States District Court for the District of Delaware in response to the
filing by Sandoz of the ANDA with a Paragraph IV certification for GLATOPA 40 mg/mL. The suit initially alleged infringement related to two Orange Book-
listed patents for COPAXONE 40 mg/mL, and sought declaratory and injunctive relief prohibiting the launch of our product until the last to expire of these patents.
In April 2015 and November 2015, Teva and Yeda filed additional suits against us and Sandoz in the United States District Court for the District of Delaware
alleging infringement related to additional Orange Book-listed patents for COPAXONE 40 mg/mL, which were consolidated with the initial suit. Teva and Yeda
sought declaratory and injunctive relief prohibiting the launch of GLATOPA 40 mg/mL until the expiration of the patents at issue. On January 30, 2017, the
District Court found the four patents to be invalid due to obviousness. In February 2017, Teva and Yeda appealed the District Court's January 30, 2017 decision to
the U.S. Court of Appeals for the Federal Circuit, or CAFC. On October 12, 2018, the CAFC affirmed the District Court's decision that the four patents were
invalid. The time period for appeal by Teva and Yeda has expired so the CAFC decision is binding.
On January 31, 2017, Teva filed a suit against us and Sandoz in the United States District Court for the District of New Jersey alleging infringement related
to an additional patent for COPAXONE 40 mg/mL, U.S. Patent No. 9,155,775. On January 31, 2017, Teva voluntarily dismissed us from the New Jersey suit for
U.S. Patent No. 9,155,775, maintaining the suit against Sandoz On May 23, 2017, the United States District Court for the District of New Jersey granted our and
Sandoz's motion to transfer the suit to the United States District Court for the District of Delaware. Pursuant to the Court's amended schedule a trial is scheduled to
commence before the United States District Court for the District of Delaware on May 6, 2019.
On February 2, 2017, we filed a complaint in the United States District Court for the District of Delaware seeking a declaration that U.S. Patent No.
9,155,775 is invalid, not infringed or not enforceable against us. In March 2017, Teva filed a motion, which is currently pending, to stay further proceedings in the
Delaware action.
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M834-Related Proceedings
On July 2, 2015, we filed a petition for Inter Partes Review, or IPR, with the Patent Trial and Appeal Board, or PTAB, to challenge the validity of U.S.
Patent No. 8,476,239, a patent for ORENCIA owned by Bristol-Myers Squibb, or BMS. The PTAB issued a decision instituting the IPR proceedings in
January 2016, and BMS filed for a rehearing by the full PTAB. Oral arguments took place in September 2016. On December 22, 2016, the PTAB issued a decision
upholding the validity of the patent. We filed a notice of appeal in the CAFC, on February 22, 2017. The parties have each briefed the CAFC on the question of
whether a non-patent owner challenging a patented claim in IPR has constitutional standing to appeal a decision by the PTAB that the challenged patented claim is
valid. Oral argument before the CAFC was held on December 5, 2017. On February 7, 2019 the CAFC dismissed our appeal of our IPR for lack of standing. We
are in the process of evaluating our options with respect to our IPR.
Enoxaparin Sodium Injection-Related Proceedings
On September 21, 2011, we and Sandoz sued Amphastar and Actavis in the United States District Court for the District of Massachusetts for patent
infringement. Also in September 2011, we filed a request for a temporary restraining order and preliminary injunction to prevent Amphastar and Actavis from
selling their Enoxaparin product in the United States. In October 2011, the District Court granted our motion for a preliminary injunction and entered an order
enjoining Amphastar and Actavis from advertising, offering for sale or selling their Enoxaparin product in the United States until the conclusion of a trial on the
merits 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 the
CAFC and in January 2012, the CAFC stayed the preliminary injunction. In August 2012, the CAFC vacated the preliminary injunction and remanded the case to
the District Court.
In April 2017, we, Sandoz and Actavis, or the Settling Parties, settled and signed reciprocal releases of all claims, and filed a voluntary stipulation with the
District Court, pursuant to which the Settling Parties stipulated and agreed to dismiss with prejudice all claims and counterclaims among the Settling Parties,
without fees or costs to any party, and with the Settling Parties waiving any and all right of appeal. The District Court trial was held in July 2017, and the jury
verdict found our patent to be infringed, but invalid and unenforceable. In February 2018, the District Court confirmed the jury’s opinion that the patent was
infringed but invalid, but narrowed the jury’s recommendation on unenforceability by finding our patent to be unenforceable against only one of the two infringing
methods used by Amphastar. On March 20, 2018, the District Court entered its final judgment affirming its February 2018 rulings. On March 27, 2018, we and
Sandoz filed a notice of appeal of the final judgment with the CAFC. The appeal has been docketed and briefing was completed on November 19, 2018.On
February 20, 2019, we and Sandoz filed with the District Court a motion for relief from judgment with respect to its final judgment. In the event that we are not
successful in further appeal or prosecution or settlement of this action against Amphastar, and Amphastar is able to prove it suffered damages as a result of the
preliminary injunction, we could be liable for damages for up to $35.0 million of the security bond. We posted $36.1 million as collateral for the security bond and
classified the collateral as restricted cash in our consolidated balance sheet. On March 23, 2018, Amphastar filed a motion to enforce liability on the security bond
with the District Court. On April 3, 2018, we and Sandoz filed an emergency motion to defer consideration of Amphastar's motion to enforce liability on the
security bond pending exhaustion of appeals. On July 16, 2018, the District Court denied Amphastar's motion to enforce liability on the security bond and allowed
the Company's and Sandoz' motion to defer consideration. Litigation involves many risks and uncertainties, and there is no assurance that we or Sandoz 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. The
complaint alleges that, in connection with filing the September 2011 patent infringement suit against Amphastar and Actavis, we and Sandoz sought to prevent
Amphastar from selling generic Enoxaparin Sodium Injection and thereby exclude competition for generic Enoxaparin Sodium Injection in violation of federal and
California anti-trust laws and California unfair business laws. Amphastar is seeking unspecified damages and fees. In December 2015, we and Sandoz filed a
motion 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 the court reverse and review
the District Court’s grant of transfer, and in May 2016, the writ requested by Amphastar was denied. On July 27, 2016, our and Sandoz motion to dismiss was
granted by the District Court, and the case was dismissed. On August 25, 2016, Amphastar filed a notice of appeal from the dismissal with the United States Court
of Appeals for the First Circuit. Briefing was completed in December 2016, and oral argument was held on February 9, 2017. On March 6, 2017, the United States
Court of Appeals for the First Circuit reversed the District Court’s dismissal and remanded the case to the District Court for further proceedings. On April 6, 2017,
the District Court held a scheduling conference to provide dates for the remanded case, and on April 20, 2017, we and Sandoz filed our renewed motion to dismiss
which was denied by the District Court on March 20, 2018. A trial is scheduled for September 2019. On February
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19, 2019, Amphastar filed with the District Court a motion for partial summary judgment on issues previously litigated in the patent action.
On October 14, 2015, The Hospital Authority of Metropolitan Government of Nashville and Davidson County, Tennessee, d/b/a Nashville General Hospital,
or 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 of
LOVENOX or generic Enoxaparin Sodium Injection. The complaint alleges that, in connection with filing the September 2011 patent infringement suit against
Amphastar and Actavis, we and Sandoz sought to prevent Amphastar from selling generic Enoxaparin Sodium Injection and thereby exclude competition for
generic Enoxaparin Sodium Injection in violation of federal anti-trust laws. NGH is seeking injunctive relief, disgorgement of profits and unspecified damages and
fees. In December 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. On March 21, 2017, the United States District Court for the Middle District of Tennessee dismissed NGH’s claim for damages against us and
Sandoz, but allowed the case to move forward, in part, for NGH’s claims for injunctive and declaratory relief. In the same opinion, the United States District Court
for the Middle District of Tennessee denied our motion to transfer. On June 9, 2017, NGH filed a motion to amend its complaint to add a new named plaintiff, the
American Federation of State, County and Municipal Employees District Council 37 Health & Security Plan, or DC37. NGH and DC37 seek to assert claims for
damages under the laws of more than 30 different states, on behalf of a putative class of indirect purchasers of Lovenox or generic enoxaparin. On June 30, 2017,
we and Sandoz filed a brief opposing the motion to amend the complaint. On December 14, 2017, the District Court granted NGH's motion to amend. In January
2018, we and Sandoz filed three motions to dismiss the amended complaint. On December 6, 2018 the District Court granted one of the motions, granted one in
part and denied one. As a result the suit will continue pursuant to the surviving portions of the amended complaint. While the outcome of litigation is inherently
uncertain, we believe this suit is without merit, and we intend to vigorously defend ourselves in this litigation.
Item 4. MINE SAFETY DISCLOSURES
Not applicable.
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PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
SECURITIES
Market Information
Our common stock is traded publicly on The Nasdaq Global Select Market under the symbol "MNTA."
Quarter ended
March 31, 2017
June 30, 2017
September 30, 2017
December 31, 2017
March 31, 2018
June 30, 2018
September 30, 2018
December 31, 2018
Holders
$
$
High
Low
19.90 $
18.65
19.25
18.60
19.00 $
24.90
32.20
26.48
13.05
13.05
14.90
11.85
13.40
16.95
20.05
10.10
On February 11, 2019, the approximate number of holders of record of our common stock was 20.
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 earnings
for 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 below in Item 12, Security Ownership of
Certain Beneficial Owners and Management and Related Stockholder Matters” of this Annual Report.
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Stock Performance Graph
The comparative stock performance graph below compares the cumulative total stockholder return (assuming reinvestment of dividends, if any) from
investing $100 on December 31, 2013 through December 31, 2018, in each of (i) our common stock, (ii) The Nasdaq Composite Index and (iii) The Nasdaq
Biotechnology 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 12/31/13 in stock or index, including reinvestment of dividends.
Fiscal year ending December 31.
Momenta Pharmaceuticals, Inc.
Nasdaq Composite
Nasdaq Biotechnology
12/13
12/14
12/15
12/16
12/17
12/18
100.00
100.00
100.00
68.10
113.40
134.10
83.94
119.89
149.42
85.12
128.89
117.02
78.90
165.29
141.66
62.44
158.87
128.45
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 shall
not 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 otherwise
subject 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
Exchange Act.
Item 6. SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data set forth below with respect to our statements of operations and comprehensive loss data for the years ended
December 31, 2018 , 2017 and 2016 and the balance sheet data as of December 31, 2018 and 2017 are derived from our audited financial statements included in
this Annual Report on Form 10-K. The statements of operations and comprehensive loss data for the years ended December 31, 2015 and 2014 and the balance
sheet data as of December 31, 2016 , 2015 and 2014 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 diluted net loss per share. The selected consolidated
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financial data set forth below should be read in conjunction with and is qualified in its entirety by our audited consolidated financial statements and related notes
thereto found under Item 8 " Financial Statements and Supplementary Data " and Item 7 " Management's Discussion and Analysis of Financial Condition and
Results of Operations " included in this Annual Report on Form 10-K.
Momenta Pharmaceuticals, Inc.
Selected Financial Data
Statements of Operations and Comprehensive Loss Data:
Collaboration revenues:
Product revenue
Research and development revenue
Total collaboration revenue
Operating expenses:
Research and development
General and administrative
Other operating expense
Restructuring
Total operating expenses
Operating loss
Interest income
Other (expense) income, net
Net loss
Basic and diluted net loss per share
2018
2017
2016
2015
2014
(in thousands, except per share information)
$
39,684 $
66,803 $
74,648 $
48,503 $
35,905
75,589
72,079
34,971
138,882
109,619
41,147
89,650
19,963
32,287
52,250
124,004
85,105
30,000
17,807
256,916
(181,327)
6,194
(928)
149,226
82,207
119,880
64,466
126,033
48,051
106,482
45,164
—
—
231,433
(92,551)
4,427
28
—
—
184,346
(74,727)
2,226
51,498
—
—
174,084
(84,434)
808
313
—
—
151,646
(99,396)
548
248
(176,061) $
(88,096) $
(21,003) $
(83,313) $
(98,600)
(2.26) $
(1.20) $
(0.31) $
(1.32) $
(1.91)
$
$
Shares used in calculating basic and diluted net loss per share
77,845
73,136
68,656
63,130
51,664
Comprehensive loss
$
(176,008) $
(88,322) $
(20,921) $
(83,293) $
(98,641)
Balance Sheet Data:
Cash and cash equivalents
Marketable securities
Working capital
Total assets
Deferred revenue
Other liabilities
Total liabilities
Accumulated deficit
Total stockholders' equity
2018
2017
2016
2015
2014
As of December 31,
$
248,334 $
73,651 $
150,738 $
61,461 $
201,077
389,912
531,563
5,690
64,865
70,555
306,239
322,439
459,431
33,617
51,660
85,277
202,413
357,324
477,737
38,632
67,197
105,829
288,583
335,926
421,040
21,983
29,081
51,064
61,349
130,180
181,541
256,216
30,998
18,850
49,848
(743,826)
(562,254)
(473,375)
(452,372)
(369,059)
461,008
374,154
371,908
369,976
206,368
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Item 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
the notes to those financial statements appearing elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements that involve
significant 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 on
Form 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 primarily on discovering and developing novel drug candidates for immune-mediated diseases and developing
two of our late stage biosimilar candidates.
Prior to 2018, Momenta had the dual focus of developing novel drug candidates and nurturing a portfolio of biosimilar and complex generic products and
product candidates. In the beginning of 2018, we engaged in a strategic review of our business and made the decision that shareholder value could be enhanced by
shifting our future investments to fully support our promising novel drug portfolio. Following this strategic review, we made the decision in September of 2018 to
restructure the company.
We have terminated all future development of any new or early stage biosimilar and complex generic products. We retained our commercial partnership with
Sandoz AG, or Sandoz, for our generic versions of COPAXONE and LOVENOX, which are approved products. We believe that Sandoz's sales of GLATOPA, our
generic version of COPAXONE, can generate cash flow to help fund our novel pipeline. We have also retained our wholly owned HUMIRA biosimilar, which is
fully developed and for which we are ready to submit an application for approval, subject to finalization of our commercialization strategy. In addition, we are
developing our EYLEA biosimilar, in collaboration with Mylan Ireland Limited, or Mylan, a wholly-owned indirect subsidiary of Mylan N.V., which is currently
in a pivotal clinical trial in patients. We believe both of these programs have the potential to generate revenue in the 2023 time frame to help fund our novel
portfolio. Pursuant to our collaboration agreement with Mylan, we have delivered formal notice of our termination of participation in all other biosimilar programs.
As a result of this restructuring, we announced in October 2018 that we would reduce our workforce by approximately 50%, which reduction was substantially
completed as of the end of 2018.
To date, we have devoted substantially all of our capital resource expenditures to the research and development of our product candidates. Although we were
profitable 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 next
several years as we advance our drug development portfolio. As of December 31, 2018 , we had an accumulated deficit of approximately $743.8 million . We will
need to generate significant revenue to return to profitability. We expect that our return to profitability, if at all, will most likely come from the commercialization
of the products in our drug development portfolio.
Complex Generics
GLATOPA ® (glatiramer acetate injection) 20 mg/mL—Generic Once-daily COPAXONE ® (glatiramer acetate injection) 20 mg/mL
In April 2015, the FDA approved the ANDA for GLATOPA 20 mg/mL, a generic equivalent of once-daily COPAXONE 20 mg/mL. GLATOPA 20 mg/mL
was the first "AP" rated, substitutable generic equivalent of once-daily COPAXONE. Sandoz commenced sales of GLATOPA 20 mg/mL in June 2015. Under our
collaboration agreement with Sandoz, we earn 50% of contractually defined profits on GLATOPA 20 mg/mL sales.
In October 2017, Mylan N.V. announced the launch of its generic equivalents of once-daily COPAXONE 20 mg/mL and three-times-weekly COPAXONE
40 mg/mL. Following Mylan N.V.’s entry into the market, Sandoz has defended GLATOPA’s share of the 20 mg/mL glatiramer acetate injection market by using
one or more contracting strategies, including but not limited to, lowering its GLATOPA 20 mg/mL price or increasing the discounts or rebates it offers for
GLATOPA 20 mg/mL, which has decreased contractual profit share revenue. We estimate that the number of prescriptions for GLATOPA 20 mg/mL currently
represents approximately 40% of the once-daily 20 mg/mL U.S. glatiramer acetate market.
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GLATOPA ® (glatiramer acetate injection) 40 mg/mL—Generic Three-times-weekly COPAXONE® (glatiramer acetate injection) 40 mg/mL
On February 13, 2018, we announced that GLATOPA 40 mg/mL, a generic version of three-times-weekly COPAXONE 40 mg/mL, was approved by the
FDA and launched by our collaborator, Sandoz.
Since Sandoz’s launch of GLATOPA 40mg/mL in February 2018, Sandoz has encountered aggressive pricing and contracting tactics from competitors and
as a result we expect modest revenues for the product in the future. As of the end of 2018, 40 mg/mL glatiramer acetate injection accounted for approximately 84%
of the overall U.S. glatiramer acetate injection market (20 mg/mL and 40 mg/mL) based on volume prescribed.
Legal proceedings related to GLATOPA 40 mg/mL are described under "Item 3. Legal Proceedings - GLATOPA 40 mg/mL-Related Proceedings."
GLATOPA refers to GLATOPA 20 mg/mL and GLATOPA 40 mg/mL, collectively.
Enoxaparin Sodium Injection—Generic LOVENOX®
Under our amended collaboration agreement with Sandoz, Sandoz is obligated to pay us 50% of contractually defined profits on sales of Enoxaparin Sodium
Injection. In July 2018, Sandoz notified its customers and the FDA that it will discontinue supplying Enoxaparin Sodium Injection. Sandoz continues to evaluate
alternate acceptable contract manufacturers at a price point that will allow for profitable and competitive sales and may decide to relaunch Enoxaparin Sodium
Injection at a later date following regulatory approval. We expect any future revenues from Sandoz' sales of Enoxaparin Sodium Injection, if any, to be minimal .
Legal proceedings related to Enoxaparin Sodium Injection are described under "Item 3. Legal Proceedings - Enoxaparin Sodium Injection-Related
Proceedings."
Biosimilars
M923—Biosimilar HUMIRA® (adalimumab) Candidate
In November 2016, following an interim analysis, we announced that the confirmatory, randomized, double-blind, multi-center, global study evaluating the
efficacy, safety and immunogenicity of M923 in adult patients with moderate-to-severe chronic plaque psoriasis met its primary endpoint. Patients received up to
48 weeks treatment with M923, HUMIRA, or HUMIRA alternating with M923. The proportion of subjects who achieved the primary endpoint, at least 75%
reduction in the Psoriasis Area and Severity Index, or PASI-75, following 16 weeks of treatment, was equivalent between M923 and HUMIRA.
On November 6, 2018, we executed global licensing agreements with AbbVie Inc, or AbbVie, with respect to M923, pursuant to which, subject to approval
by health regulatory authorities, we may launch M923 in the United States as early as November 20, 2023 and in Europe upon approval by the European Medicines
Agency. We are working on our commercialization strategy, including identifying a commercialization partner for this product candidate. We plan to submit a
BLA for M923 with the FDA and a MAA in the European Union, subject to finalization of our commercialization strategy. Based on the settlement agreements
entered into by AbbVie with respect to biosimilar candidates, we expect that U.S. market formation for biosimilar versions of HUMIRA will likely be in the 2023
time frame, subject to marketing approval, patent considerations and litigation timelines.
M923 was previously developed in collaboration with Baxalta Incorporated, Baxalta US Inc. and Baxalta GmbH (collectively, Baxalta). In June 2016,
Baxalta became a wholly-owned subsidiary of Shire plc. In September 2016, Baxalta gave us twelve months’ prior written notice of the exercise of its right to
terminate for its convenience our collaboration agreement. On December 31, 2016, we and Baxalta entered into an asset return and termination agreement, or the
Baxalta Termination Agreement, amending certain termination provisions of the Baxalta Collaboration Agreement and making the termination of the Baxalta
Collaboration Agreement effective December 31, 2016. In January 2017, Baxalta paid us a one-time cash payment of $51.2 million, representing the costs Baxalta
would have incurred in performing the activities it would have performed under the Baxalta Collaboration Agreement through the original termination effective
date.
M710—Biosimilar EYLEA ® (aflibercept) Candidate
M710 is being developed in collaboration with Mylan. In August 2018, Mylan initiated dosing of patients in the United States in our pivotal clinical trial.
This trial is randomized, double-blind, active-control, multi-center study in patients with diabetic macular edema to compare the safety, efficacy and
immunogenicity of M710 with EYLEA. Mylan has also received
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regulatory approval to dose patients in the European Union. Subject to development, marketing approval and patent considerations, we expect U.S. market
formation for biosimilar versions of EYLEA will likely be in the 2023 time frame.
Novel Therapeutics
We believe our novel product candidates could be capable of treating a large number of immune-mediated disorders driven by autoantibodies, immune
complexes, and Fc receptor biology.
M281 - Anti-FcRn Candidate
M281 is a fully-human anti-neonatal Fc receptor (FcRn), aglycosylated immunoglobulin G, or IgG1, monoclonal antibody, engineered to reduce circulating
IgG antibodies, by completely blocking endogenous IgG recycling via FcRn.
A Phase 1 randomized, double-blind, placebo-controlled study to evaluate the safety, tolerability, pharmacokinetics and pharmacodynamics of M281 in
normal healthy volunteers was initiated in June 2016. The full data from our Phase 1 study was published on November 7, 2018. A total of 50 patients were
enrolled in both the single ascending dose, or SAD, and multiple ascending dose, or MAD portions of the study, both of which showed predictable
pharmacokinetics, and commensurate, controllable and reproducible reductions in circulating IgG. The data showed greater than 80% reduction in circulating IgG
antibodies with a mean reduction of 84%. M281 was well tolerated at all dose levels and no serious adverse events or unexpected safety findings were observed in
either portion of the study.
In the fourth quarter of 2018, we commenced a Phase 2 proof-of-concept clinical trial for M281 in generalized myasthenia gravis, or gMG, and in hemolytic
disease of the fetus and newborn, or HDFN.
M230 (CSL730) - Recombinant Fc Multimer Candidate
M230 is a novel recombinant trivalent human IgG1 Fc multimer containing three IgG Fc regions joined to maximize activity. Nonclinical data have shown
that M230 enhances the molecules' avidity and affinity for the Fc receptors matching the potency and efficacy of IVIg at significantly lower doses.
Pursuant to the License and Option Agreement with CSL Behring Recombinant Facility AG (CSL), or the CSL License Agreement, effective February 17,
2017, we granted CSL an exclusive worldwide license to research, develop, manufacture and commercialize M230. On August 28, 2017, we exercised our 50% co-
funding option, which is discussed further in Note 9 " Collaboration and License Agreements - CSL License and Option Agreement " to our consolidated financial
statements. CSL's Phase I study in healthy volunteers to evaluate safety and tolerability of M230 is ongoing and is targeted for completion in 2019.
M254 - hsIVIg Candidate
M254 is a hypersialylated immunoglobulin designed as a high potency alternative to IVIg, a therapeutic drug product that contains pooled, human
immunoglobulin G, or IgG, antibodies purified from blood plasma. IVIg is used to treat several inflammatory diseases, including immune thrombocytopenic
purpura (ITP) and chronic inflammatory demyelinating polyneuropathy (CIDP). In nonclinical studies, M254 has been shown to have up to ten times more
enhanced anti-inflammatory activity than IVIg in a variety of animal models of autoimmune disease.
We have completed our IND-enabling toxicology study and initiated a Phase 1/2 proof of concept clinical study in healthy volunteers and patients with ITP in
early 2019.
Results of Operations
Comparison of Years Ended December 31, 2018 , 2017 and 2016
Product revenue includes our contractually defined profits earned on Sandoz’ sales of GLATOPA and Enoxaparin Sodium Injection.
The following data summarizes our collaboration revenues for the periods indicated, in thousands:
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Collaboration revenue:
Product revenue
Research and development revenue
Total collaboration revenue
Product Revenue
GLATOPA
2018
2017
2016
$
$
39,684 $
35,905
75,589 $
66,803 $
72,079
138,882 $
74,648
34,971
109,619
Sandoz commenced sales of GLATOPA 20 mg/mL in the United States in June 2015 and GLATOPA 40 mg/mL in February 2018. We earn 50% of
contractually defined profits on Sandoz’ sales of GLATOPA. Pursuant to the letter agreement dated October 4, 2017 between Sandoz and us, we agreed to reduce
our 50% contractual profit share commencing in the first quarter of 2018 by up to an aggregate of approximately $9.8 million, representing 50% of potential
GLATOPA 40 mg/mL pre-launch inventory costs.
We estimate that the number of prescriptions for GLATOPA 20 mg/mL represented approximately 40% of the once-daily 20 mg/mL U.S. glatiramer acetate
market.
In October 2017, Mylan N.V. announced the launch of its generic equivalents of once-daily COPAXONE 20 mg/mL and three-times-weekly COPAXONE
40 mg/mL. Following Mylan N.V.’s entry into the market, Sandoz has defended GLATOPA’s share of the 20 mg/mL glatiramer acetate injection market by using
one or more contracting strategies, including but not limited to, lowering its GLATOPA 20 mg/mL price or increasing the discounts or rebates it offers for
GLATOPA 20 mg/mL, which has decreased contractual profit share revenue.
Since Sandoz’s launch of Glatopa 40mg/mL in February 2018, Sandoz has encountered aggressive pricing and contracting tactics from competitors and as a
result we expect modest sales for the product in the future. As of the end of 2018, 40 mg/mL glatiramer acetate injection accounted for approximately 84% of the
overall U.S. glatiramer acetate injection market (20 mg/mL and 40 mg/mL) based on volume prescribed.
2018 vs 2017
The decrease in product revenue of $27.1 million , or 41% , from 2017 to 2018 was primarily due to lower net sales of GLATOPA driven by Mylan N.V.'s
entry into the COPAXONE market in October 2017 and a $9.8 million decrease in product revenue in the first quarter of 2018 for our 50% share of GLATOPA 40
mg/mL inventory written off by Sandoz. Offsetting these decreases in product revenue in 2018, was the $10.0 million commercial milestone, included in research
and development revenue, for which Sandoz was entitled to reduce contractual net profit by a corresponding amount, which reduced our product revenue by $5.0
million in 2017.
2017 vs 2016
The decrease in product revenue of $7.8 million , or 11% , from 2016 to 2017 was primarily due to lower net sales from price adjustments relating to Mylan
N.V.'s entry into the COPAXONE market and higher Medicaid deductions as well as the $10.0 million commercial milestone, included in research and
development revenue, earned on July 1, 2017, for which Sandoz was entitled to reduce contractual net profit by a corresponding amount, which reduced our
product revenue by $5.0 million in 2017.
Enoxaparin Sodium Injection—Generic LOVENOX®
Effective April 1, 2015, we began to earn 50% of contractually defined profits on Sandoz' sales of Enoxaparin Sodium Injection. A portion of Enoxaparin
Sodium Injection development expenses and certain legal expenses, which in the aggregate have exceeded a specified amount, are offset against profit-sharing
amounts, royalties and milestone payments.
Due to increased generic competition and resulting decreased market pricing for generic enoxaparin sodium injection products, profit on sales of Enoxaparin
Sodium Injection in the periods presented were immaterial. In July 2018, Sandoz notified its customers and the FDA that it would discontinue production of
Enoxaparin Sodium Injection. Sandoz continues to evaluate alternate acceptable contract manufacturers at a price point that will allow for profitable and
competitive sales and may decide to relaunch Enoxaparin Sodium Injection at a later date following regulatory approval.We expect any future revenues from
Sandoz' sales of Enoxaparin Sodium Injection, if any, to be minimal.
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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
recognition of upfront arrangement consideration.
We expect to recognize revenue from the remaining balance of $5.7 million from Mylan's $45 million upfront payment on a quarterly basis in an amount
commensurate with our progress towards meeting performance obligations with respect to M710 under the Mylan Collaboration Arrangement.
2018 vs 2017
The decrease in research and development revenue of $36.2 million , or 50% , from the 2017 period to the 2018 period was primarily due to the $50.0
million upfront payment from CSL and the $10.0 million commercial milestone from Sandoz, both recognized in 2017, that were non-recurring in 2018. The
Sandoz commercial milestone payment was earned in July 2017 in connection with GLATOPA being the sole FDA-approved generic of COPAXONE and
achieving a certain level of contractually defined profits in the United States. The decrease in research and development revenue from 2017 to 2018 was were
partially offset by an increase in revenue recognized of $28.4 million in 2018 from Mylan's $45 million upfront payment due to the partial termination of the
Mylan Collaboration Agreement and the resulting determination that certain performance obligations under the agreement have been partially satisfied. Additional
details concerning the accounting for the Mylan Collaboration Agreement is contained in Note 9, "Collaboration and License Agreements" included in the
consolidated financial statements.
2017 vs 2016
The increase in research and development revenue of $37.1 million , or 106% , from 2016 to 2017 was primarily due to the $50.0 million upfront payment
from CSL and the $10.0 million commercial milestone from Sandoz recognized in 2017. The increase was partially offset by a decrease of $22.0 million due to the
recognition of the remaining balance of upfront and license payments from Baxalta in 2016 , which was non-recurring in 2017.
Operating Expenses
The following table summarizes our operating expenses for the periods indicated, in thousands and as a percentage of total operating expenses, together with
the changes, in thousands:
Operating expenses:
Research and development
$
General and administrative
Other operating expense
Restructuring
Total operating expenses
$
2018
124,004
85,105
30,000
17,807
256,916
Research and Development Expense
% of Total
Operating
Expenses
2017
% of Total
Operating
Expenses
% of Total
Operating
Expenses
2018
compared to
2017
2017
compared to
2016
2016
Dollar Change
48% $
33%
12%
7%
100% $
149,226
82,207
—
—
231,433
64% $
36%
—%
—%
100% $
119,880
64,466
—
—
184,346
65% $
35%
—%
—%
100% $
(25,222) $
2,898
30,000
17,807
25,483 $
29,346
17,741
—
—
47,087
Research and development expenses consist of costs incurred to conduct research, such as the discovery and development of our product candidates. We
recognize all research and development costs as they are incurred. We track the external research and development costs incurred for each of our product
candidates. 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 our
nonclinical studies and clinical trials are conducted;
costs of acquiring reference comparator materials and manufacturing nonclinical study and clinical trial supplies and other materials from contract
manufacturing organizations, or CMOs, and related costs associated with release and stability testing; and
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•
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 and
amortization of leasehold improvements and equipment and laboratory and other supplies.
For our collaboration arrangements in which the parties share in collaboration expenses for products under the arrangement (cost sharing arrangements), we
record the reimbursement by the collaborator for its share of the development effort as a reduction of research and development expense. Our share of costs
incurred by collaborators are recorded as research and development expense.
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
any delay in obtaining, regulatory approvals would materially adversely affect our product development efforts and our business overall. Accordingly, we cannot
currently 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 their
regulatory approval, if such approval is ever granted. As a result of these uncertainties surrounding the timing and outcome of any approvals, we are currently
unable 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 intangible
assets, for each of our principal development programs for the years ended December 31, 2018 , 2017 and 2016 . The figures in the table include project
expenditures incurred by us and reimbursed by our collaborators, but exclude project expenditures incurred by our collaborators. Although we track and
accumulate personnel effort 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 internal research and development costs preclude us from reporting these costs on a project-by-project basis.
External Costs Incurred by Product Area:
Novel Therapeutics
Biosimilars
Complex Generics
Internal Costs
Total Research and Development Expenses
Phase of Development as of
December 31, 2018
Year Ended December 31,
2018
2017
2016
Various (1)
Various (2)
(3)
58
$
$
39,461 $
9,709
826
74,008
124,004 $
15,557 $
53,186
3,724
76,759
149,226 $
30,501
8,069
2,603
78,707
119,880
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_______________________________________
(1) Our novel therapeutic programs include M281, for which we commenced two proof of concept clinical trials in the fourth quarter of 2018; M230, for which
our licensee's, CSL's, Phase I study in healthy volunteers to evaluate safety and tolerability of M230 is ongoing and is targeted for completion in 2019; M254,
for which we have completed our IND-enabling toxicology study and have initiated a Phase 1/2 clinical study in early 2019; as well as other discovery and
nonclinical stage programs.
(2) Biosimilars are M923, a biosimilar candidate of HUMIRA® (adalimumab), and M710, a biosimilar candidate of EYLEA® (aflibercept). We intend to submit
a biologics license application for M923 with the FDA, subject to market formation and our finalization of our commercialization strategy. For M710, Mylan
initiated a pivotal clinical trial in patients in the United States in August 2018. In November 2018, we provided notice to Mylan terminating our participation
in the development of our biosimilar programs other than M710.
(3)
Includes external costs for GLATOPA and Enoxaparin Sodium Injection. In July 2010, the first ANDA for Enoxaparin Sodium Injection was approved by
the FDA, and Sandoz launched the product. In April 2015, the FDA approved the ANDA for once-daily GLATOPA 20 mg/mL. Sandoz launched GLATOPA
20 mg/mL in June 2015. In February 2018, the FDA approved the ANDA for three-times-weekly GLATOPA 40 mg/mL, and Sandoz launched the product.
For more information on GLATOPA 40 mg/mL, see "-Overview-Complex Generics-GLATOPA® 40 mg/mL-Generic Three-times-weekly COPAXONE®
(glatiramer acetate injection) 40 mg/mL."
2018 vs 2017
External costs of our novel therapeutic programs increased by $23.9 million , or 154% , from the 2017 period to the 2018 period, primarily driven by clinical
trial activity for M230, M254 and M281 that is more fully described in note 3 in the above table. External expenditures for our biosimilars programs decreased by
$43.5 million , or 82% , from the 2017 period to the 2018 period, which was primarily due to decreased spending on M923 of $35.9 million as we had substantially
completed development in 2017 in preparation for the filing of the biologic license application with the FDA. External expenditures for complex generics
decreased by $2.9 million , or 78% , from the 2017 period to the 2018 period as support for Sandoz' GLATOPA 40 mg/mL ANDA filing in 2017 was non-
recurring for 2018. Internal costs decreased by $2.8 million , or 4% from the 2017 period to the 2018 period primarily due to decreased personnel costs due in part
to the workforce reduction announced in October 2018.
2017 vs 2016
External costs of our novel therapeutic programs decreased by $14.9 million , or 49% , from the 2016 period to the 2017 period, primarily driven by a $8.4
million reduction in spend on our necuparanib program, which we discontinued in August 2016, and a $5.4 million reduction in spend on M230 as, beginning in
August 2017, these costs are shared with CSL. External expenditures for our biosimilars programs increased by $45.1 million , or 559% , from the 2016 period to
the 2017 period, primarily due to increased spend on M923 of $37.9 million as we assumed responsibility for the development and commercialization of that
program effective December 31, 2016. External expenditures for complex generics increased by $1.1 million , or 43% , from the 2016 period to the 2017 period as
we continued to support our GLATOPA 40 mg/mL ANDA filing. Internal costs decreased by $1.9 million , or 2% , from the 2016 period to the 2017 period
primarily due to the reversal of share-based compensation expense associated with performance-based stock awards that were no longer probable of vesting.
General and Administrative
General and administrative expenses consist primarily of salaries, share-based compensation and other related costs for personnel in general and
administrative functions, professional fees for legal and accounting services, royalty and license fees, insurance costs, and allocated rent, facility and lab supplies,
and depreciation expense.
For our collaboration arrangements in which the parties share in collaboration expenses for products under the arrangement (cost sharing arrangements), we
record the reimbursement by the collaborator for its share of the development effort as a reduction of general and administrative expense. Our share of costs
incurred by collaborators are recorded as general and administrative expense.
We expect our general and administrative expenses, including internal and external legal and business development costs that support our various product
development efforts, to vary from period to period in relation to our commercial, litigation and development activities .
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2018 vs 2017
The increase of $2.9 million , or 4% , from the 2017 period to the 2018 period was driven by the net of increased rent expense of $3.3 million related to
occupancy of new premises, corporate costs of $3.0 million related to our strategic review and depreciation of $3.0 million as we evaluate estimates of the useful
lives of depreciable assets. The increases were partially offset by decreases of $4.6 million in legal costs relating to our ongoing litigation and personnel salaries of
$2.1 million due in part to the recent workforce reduction.
2017 vs 2016
The increase of $17.7 million , or 27% , from the 2016 period to the 2017 period was driven by $15.5 million of increased legal costs primarily relating to
our ongoing litigation and $2.8 million in rent and maintenance of facilities, partially offset by a $0.7 million decrease in other professional fees, driven mainly by
consulting fees.
Other Operating Expense
We recorded an expense of $30.0 million in 2018 in connection with the renegotiation with Human Genome Sciences, Inc., or GSK, of certain contractual
obligations under a manufacturing services agreement. On August 15, 2018, we paid GSK $15.0 million and an additional $15.0 million is due by July 1, 2019.
Restructuring
Restructuring charges consist of severance, bonus, share-based compensation, and impairment of equipment associated with our workforce reduction. See to
Note 14 "Restructuring" in our consolidated financial statements for further discussion.
Interest Income
Interest income was $6.2 million , $4.4 million and $2.2 million for the years ended December 31, 2018 , 2017 and 2016 , respectively. The increases from
2017 to 2018 and from 2016 to 2017 were due to higher invested balances arising from financing activities and the benefit of higher market yields on our
investments.
Other Income, Net
Other income, net includes other items of non-operating income and expense. The 2016 period includes a one-time cash receipt of $51.2 million in
connection with the termination of the Baxalta Collaboration Agreement.
Equity Financings
In April 2015, we entered into an At-the-Market Equity Offering Sales Agreement, or the 2015 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 from
time to time through Stifel, acting as sales agent and/or principal. We were required to pay Stifel a commission of 2.0% of the gross proceeds from the sale of
shares of our common stock under the 2015 ATM Agreement. In the year ended December 31, 2017, we sold approximately 4.5 million shares of common stock,
raising net proceeds of $64.1 million, and concluded sales under the 2015 ATM Agreement.
In December 2018, we sold an aggregate of 20.0 million shares of common stock through an underwritten public offering at a price to the public
of $11.50 per share. As a result of the offering, which includes the exercise in full of the underwriter’s option to purchase additional shares of common stock, we
received aggregate net proceeds of approximately $217.8 million, after deducting underwriting discounts and commissions and other offering expenses.
Liquidity and Capital Resources
At December 31, 2018 , we had $449.4 million in cash, cash equivalents and marketable securities. In addition, we also held $37.9 million in restricted cash,
of which $36.1 million serves as collateral for a security bond posted in the litigation against Amphastar. Our funds at December 31, 2018 were primarily invested
in commercial paper, overnight repurchase agreements, asset-backed securities, corporate debt securities and United States money market funds, directly or
through managed funds, with remaining average maturities of 12 months or less. Our cash is deposited in and invested through highly rated financial institutions in
North America. The composition and mix of cash, cash equivalents and marketable securities may change frequently as a result of our evaluation of conditions in
the financial markets, the maturity of specific investments, and our near term liquidity needs. We do not believe that our cash equivalents and marketable securities
were subject to significant market risk at December 31, 2018 .
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We have funded our operations primarily through the sale of equity securities and payments received under our collaboration and license agreements,
including our share of profits from Sandoz’ sales of Enoxaparin Sodium Injection and GLATOPA. Since our inception through December 31, 2018 , we have
received $920 million through private and public issuances of equity securities. As of December 31, 2018 , we received $469 million in revenues from sales of
Enoxaparin Sodium Injection and milestones, and $255 million in revenues from sales of GLATOPA and milestones. We received $139 million under our
collaboration with Baxalta, including a one-time cash payment of $51.2 million in connection with the termination of the Baxalta Collaboration Agreement. In
addition, we received a $45.0 million upfront payment from Mylan as well as $60.0 million in milestone payments from Mylan which are applied towards Mylan
50% share of development-related collaboration costs. Finally, in February 2017, we received a $50.0 million upfront payment from CSL under the CSL License
and Option Agreement.
We expect to fund our planned operating and expenditure requirements through a combination of current cash, cash equivalents and marketable securities;
equity financings; and milestone payments and product revenues under existing collaboration agreements. We may also seek funding from new collaborations and
strategic alliances, debt financings and other financial arrangements. Future funding transactions may or may not be similar to our prior funding transactions. There
can be no assurance that future funding transactions will be available on favorable terms, or at all. We currently believe that our current capital resources and
projected milestone payments and product revenues will be sufficient to meet our operating requirements through at least the end of 2020.
Net cash (used in) provided by operating activities
Net cash provided by (used in) investing activities
Net cash provided by financing activities
Net increase (decrease) in cash and cash equivalents
Cash (used in) provided by operating activities
Year Ended December 31,
2018
2017
2016
$
$
$
$
(in thousands)
(155,590) $
98,081 $
247,058 $
189,549 $
(29,085) $
(121,079) $
74,348 $
(75,816) $
8,989
80,048
1,341
90,378
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 $155.6 million for the year ended December 31, 2018 reflecting a net loss of $176.1 million , which was partially offset
by non-cash charges of $9.9 million for depreciation of property and equipment, $1.2 million amortization of intangible assets, $21.2 million in share-based
compensation, $33.4 million for research and development revenue associated with the Mylan Collaboration Arrangement and $0.4 million for amortization of
purchased premiums on our marketable securities. The net change in our operating assets and liabilities provided cash of $15.5 million and is primarily due to the
remaining $15.0 million amount due to GSK under our manufacturing services agreement entered into in 2018.
Cash used in operating activities was $29.1 million for the year ended December 31, 2017 reflecting a net loss of $88.1 million, which was partially offset by
non-cash charges of $9.2 million for depreciation and amortization of property, equipment and intangible assets, $16.1 million in share-based compensation and
$0.2 million for amortization of purchased premiums on our marketable securities. The net change in our operating assets and liabilities provided cash of $32.2
million and is primarily due to a one-time cash payment of $51.2 million in connection with the termination of the Baxalta Collaboration Agreement, which was
included in collaboration receivable at December 31, 2016, and reimbursement of tenant improvements by our landlord of $4.1 million, partially offset by the
recovery of $24.7 million from Mylan for its 50% share of development-related collaboration expenses under the cost-sharing provisions of the Mylan
Collaboration Agreement.
Cash provided by operating activities was $9.0 million for the year ended December 31, 2016 reflecting a net loss of $21.0 million, which was partially
offset by non-cash charges of $9.1 million for depreciation and amortization of property, equipment and intangible assets, $18.3 million for share-based
compensation and $0.6 million for amortization of purchased premiums on our marketable securities. The net change in our operating assets and liabilities
provided cash of $0.9 million, primarily due to: a $51.2 million receivable due from Baxalta in connection with the termination of the collaboration agreement; the
collection of $2.1 million in contractual profit on Sandoz' fourth quarter 2015 sales of Enoxaparin Sodium Injection; the receipt of $60.0 million in milestone
payments from Mylan where $27.1 million was used to fund Mylan's 50% share of development-related 2016 collaboration expenses and $32.9 million will be
applied towards the funding of Mylan's 50% share of future development-related collaboration expenses; and the receipt of a $45.0 million upfront payment from
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Mylan of which $6.4 million was recorded as research and development revenue in 2016. In addition, in 2016 we recorded research and development revenue of
$22.0 million representing the remaining unamortized balance of the $40.0 million upfront and license payments from Baxalta.
Cash provided (used in) by investing activities
Cash provided by investing activities of $98.1 million for the year ended December 31, 2018 includes cash inflows of $308.2 million from maturities of
marketable securities and proceeds from the sale of assets of $1.4 million , partially offset by cash outflows of $202.5 million for purchases of marketable
securities and $9.0 million for capital equipment and leasehold improvements.
Cash used in investing activities of $121.1 million for the year ended December 31, 2017 includes cash outflows of $524.9 million for purchases of
marketable securities and $17.1 million for capital equipment and leasehold improvements, partially offset by cash inflows of $420.7 million from maturities of
marketable securities and proceeds from the sale of assets of $0.3 million .
Cash provided by investing activities of $80.0 million for the year ended December 31, 2016 includes cash inflows of $445.7 million from maturities of
marketable securities, partially offset by cash outflows of $360.0 million for purchases of marketable securities and $5.6 million for capital equipment and
leasehold improvements.
Cash provided by financing activities
Cash provided by financing activities of $247.1 million for the year ended December 31, 2018 includes $217.8 million of net proceeds from shares sold in
our public offering of common stock and $29.3 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 $74.3 million for the year ended December 31, 2017 includes $64.1 million net proceeds from our issuance of
common stock under the 2015 ATM facility and $10.3 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 $1.3 million for the year ended December 31, 2016 includes $2.4 million from stock option exercises and purchases
of our common stock through our employee stock purchase plan, partially offset by $1.1 million of cash paid to tax authorities in connection with the vesting of
performance-based restricted stock.
Contractual Obligations
Our major outstanding contractual obligations relate to operating lease obligations as well as license maintenance obligations including royalties payable to
third parties.
The following table summarizes our contractual obligations at December 31, 2018 (in thousands):
Contractual Obligations
License maintenance obligations
Operating lease obligations
Purchase obligations**
Total contractual obligations
_______________________________________
$
$
Total
2019
2020 through 2021 2022 through 2023
465
465 $
233 $
After 2023
*
1,163 $
125,096
50,820
15,418
—
32,138
22,500
33,427 $
44,113
28,320
—
44,113
177,079 $
15,651 $
55,103 $
62,212 $
*
After 2023, the annual obligations, which extend through the life of the patents are approximately $0.2 million per year.
** Reflects minimum purchase obligations under a manufacturing services agreement with GSK.
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 have
been prepared in accordance with United States generally accepted accounting principles, or GAAP. The preparation of these consolidated financial statements
requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the
date of the consolidated financial statements, as well as the reported revenue generated and expenses incurred during the reporting periods. Our estimates are based
on our historical experience and on various other factors that we believe are reasonable under the
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circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other
sources. Actual results may differ from these estimates under different assumptions or conditions. We believe that the accounting policies discussed below are
critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management's judgments and
estimates.
Collaboration and License Arrangements
Effective January 1, 2018, the Company adopted Accounting Standards Codification, or ASC, Topic 606, Revenue from Contracts with Customers , using the
modified retrospective transition method as permissible for all contracts not yet completed as of January 1, 2018. This standard applies to all contracts with
customers, except for contracts that are within the scope of other standards, such as leases, insurance, collaboration arrangements and financial instruments.
Under Topic 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration
that the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within
the scope of Topic 606, the entity performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the
contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or
as) the entity satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that the entity will collect the
consideration it is entitled to in exchange for the goods or services it transfers to the customer.
License Agreements
The Company has entered into license arrangements with pharmaceutical companies for the development and commercialization of product candidates. The
terms of these agreements may include (i) transfer of intellectual property rights (licenses) and (ii) providing research and development services. Payments made
by the customers may include non-refundable upfront license fees, payments for research and development activities, payments based upon the achievement of
defined collaboration objectives and a share of profits on net sales of licensed products.
If the license to the Company’s intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, the
Company recognizes the transaction price allocated to the license as revenue upon transfer of control of the license. The Company evaluates all other promised
goods or services in the license agreement to determine if they are distinct. If they are not distinct, they are combined with other promised goods or services to
create a bundle of promised goods or services that is distinct. Optional future services that reflect their standalone selling prices do not provide the customer with a
material right and, therefore, are not considered performance obligations. If optional future services reflect a significant or incremental discount, they are material
rights, and are accounted for as performance obligations.
The Company utilizes judgment to determine the transaction price. The Company evaluates contingent milestones to estimate the amount which is not
probable of a material reversal to include in the transaction price using the most likely amount method. Milestone payments that are not within the control of the
Company, such as regulatory approvals, are not considered probable of being achieved until those approvals are received. The transaction price is then allocated to
each performance obligation on a relative stand-alone selling price basis, for which the Company recognizes revenue as or when the performance obligations under
the contract are satisfied. At the end of each reporting period, the Company re-evaluates the probability of achieving development milestone payments which may
not be subject to a material reversal, and if necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative
catch-up basis, which would affect research and development revenue and earnings in the period of adjustment.
The Company then determines whether the performance obligations or combined performance obligations are satisfied over time or at a point in time and, if
over time, the appropriate method of measuring progress for purposes of recognizing revenue from non-refundable, upfront fees. The Company evaluates the
measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition.
The Company may earn a contractual percentage of a licensor’s revenues or profits after the successful development and commercialization of a licensed
product. A sales or usage-based royalty on a license of intellectual property where the license is the predominant item to which the royalty relates is eligible for an
exception to the standard revenue recognition model under Topic 606. Under this exception, an entity is permitted to (i) exclude such amounts from the initial
determination of the transaction price (hence no amounts to allocate amongst the performance obligations) and (ii) defer recognition until underlying sales occur.
The amount of net sales and contractual profit is determined based on information provided by the licensor and involves 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
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fees, product returns, and co-payment assistance costs, which could be adjusted based on actual results in the future. Net sales and contractual profit may also
include or exclude other amounts as defined in an agreement. The Company is highly dependent on the licensor for timely and accurate information regarding any
net revenues realized from sales of the licensed products in order to accurately report its results of operations. Sales-based milestones and profit share revenues are
recognized as revenue when sales thresholds are met under the sales or usage-based royalty exception under Topic 606.
Collaborative Arrangements
The Company considers the nature and contractual terms of the arrangement and assesses whether the arrangement involves a joint operating activity
pursuant to which the Company is an active participant and is exposed to significant risks and rewards with respect to the arrangement. If the Company is an active
participant and is exposed to significant risks and rewards with respect to the arrangement, the Company accounts for the arrangement as a collaboration under
Topic 808, Collaborative Arrangements . Topic 808 describes arrangements within its scope and considerations surrounding presentation and disclosure, with
recognition matters subjected to other authoritative guidance, in certain cases by analogy.
With respect to consideration other than cost sharing payments received from a collaboration partner, the Company has applied an accounting policy to
analogize to other accounting guidance concerning revenue recognition, specifically Topic 606. Payments received from a collaboration partner to which this
policy applies may include upfront payments in respect of a license of intellectual property, development milestones, profit share payments, and sales-based
milestones.
The Company classifies the payments received or made under the cost sharing provisions of the arrangement as a component of research and development or
general and administrative expense, respectively, to reflect the joint risk sharing nature of the payment received or made.
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 development
expenses. 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 service
performed 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 to us
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 multiple
research institutions and CROs that conduct and manage clinical trials on our behalf. The financial terms of these agreements vary from contract to contract and
may result in uneven payment flows. Payments under some of these contracts depend on factors such as the successful enrollment of patients and the completion of
clinical 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 each
period. 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
to the 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
the status or conduct of our clinical trials and other research activities.
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Share-Based Compensation
For performance-based restricted stock and restricted unit awards, at each reporting period we assess the probability that the performance condition(s) will be
achieved. We use the accelerated attribution method to expense the awards over the implicit service period based on the probability of achieving the performance
conditions. We estimate an award's implicit service period 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 quarterly basis and will recognize any remaining unrecognized compensation as of the date of an estimate revision
over the revised remaining implicit service period.
New Accounting Standards
Please see Note 2 "Summary of Significant Accounting Policies" to our consolidated financial statements, for a discussion of new accounting standards. The
notes 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 of
United States money market, government-secured, and high-grade corporate securities, directly or through managed funds, with maturities of twenty-four months
or less. Our cash is deposited in and invested through highly rated financial institutions in North America. Our marketable securities are subject to interest rate risk
and will fall in value if market interest rates increase. However, due to the conservative nature of our investments, low prevailing market rates and relatively short
effective maturities of debt instruments, interest rate risk is mitigated. If market interest rates were to increase immediately and uniformly by 10% from levels at
December 31, 2018 , we estimate that the fair value of our investment portfolio would decline by an immaterial amount. We do not own derivative financial
instruments in our investment portfolio. Accordingly, we do not believe that there is any material market risk exposure with respect to derivative, foreign currency
or other financial instruments that would require disclosure under this item.
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Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Stockholders and Board of Directors of Momenta Pharmaceuticals, Inc.
Opinion on the Financial Statements
Report of Independent Registered Public Accounting Firm
We have audited the accompanying consolidated balance sheets of Momenta Pharmaceuticals, Inc. (the Company) as of December 31, 2018 and 2017 , the
related consolidated statements of operations and comprehensive loss, stockholders’ equity and cash flows for each of the three years in the period ended
December 31, 2018 , and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements
present fairly, in all material respects, the financial position of the Company at December 31, 2018 and 2017 , and the results of its operations and its cash flows for
each of the three years in the period ended December 31, 2018 , 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) (PCAOB), the Company’s
internal control over financial reporting as of December 31, 2018 , based on criteria established in Internal Control-Integrated Framework issued by the Committee
of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 22, 2019 expressed an unqualified opinion thereon.
Adoption of ASU No. 2014-09 Revenue from Contracts with Customers (Topic 606)
As discussed in Note 2 to the consolidated financial statements, the Company changed its method of accounting for revenue in 2018 due to the adoption of
Accounting Standard Update (ASU) No. 2014-09, Revenue from Contracts with Customers (Topic 606), and the related amendments.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial
statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in
accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to
assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such
procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the
accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe
that our audits provide a reasonable basis for our opinion.
/s/ Ernst & Young LLP
We have served as the Company‘s auditor since 2002.
Boston, Massachusetts
February 22, 2019
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Assets
Current assets:
Cash and cash equivalents
Marketable securities
Collaboration receivable
Prepaid expenses and other current assets
Assets held-for-sale
Restricted cash
Total current assets
Marketable securities, long-term
Property and equipment, net
Restricted cash
Intangible assets, net
Other long-term assets
Total assets
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable
Accrued expenses
Accrued restructuring
Collaboration liabilities
Deferred revenue
Other current liabilities
Total current liabilities
Deferred revenue, net of current portion
Other long-term liabilities
Total liabilities
Commitments and contingencies (Note 15)
Stockholders' Equity:
MOMENTA PHARMACEUTICALS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
December 31,
2018
2017
$
248,334 $
174,076
11,371
6,318
1,324
—
441,423
27,001
20,944
37,898
2,883
1,414
73,651
269,017
15,048
6,798
—
2,412
366,926
37,222
29,916
20,620
4,036
711
531,563 $
459,431
$
$
9,352 $
14,060
3,235
4,721
3,916
16,227
51,511
1,774
17,270
70,555
11,456
20,528
—
9,258
2,866
379
44,487
30,751
10,039
85,277
8
939,654
(140)
(562,254)
(3,114)
374,154
459,431
Common stock, $0.0001 par value per share; 100,000 shares authorized, 98,694 shares issued and 98,464 shares
outstanding at December 31, 2018 and 76,584 shares issued and 76,355 shares outstanding at December 31, 2017
Additional paid-in capital
Accumulated other comprehensive loss
Accumulated deficit
Treasury stock, at cost, 229 shares
Total stockholders' equity
Total liabilities and stockholders' equity
10
1,208,025
(87)
(743,826)
(3,114)
461,008
$
531,563 $
The accompanying notes are an integral part of these consolidated financial statements.
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MOMENTA PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(in thousands, except per share amounts)
Collaboration revenues:
Product revenue
Research and development revenue
Total collaboration revenue
Operating expenses:
Research and development
General and administrative
Other operating expense
Restructuring
Total operating expenses
Operating loss
Other income (expense):
Interest income
Other income (expense), net
Total other income
Net loss
Net loss per share:
Basic and diluted
Weighted average shares outstanding:
Basic and diluted
Comprehensive loss:
Net loss
Net unrealized holding gains (losses) on available-for-sale marketable securities
Comprehensive loss
Year Ended December 31,
2018
2017
2016
$
39,684 $
66,803 $
35,905
75,589
124,004
85,105
30,000
17,807
256,916
(181,327)
6,194
(928)
5,266
72,079
138,882
149,226
82,207
—
—
231,433
(92,551)
4,427
28
4,455
74,648
34,971
109,619
119,880
64,466
—
—
184,346
(74,727)
2,226
51,498
53,724
$
$
$
$
(176,061) $
(88,096) $
(21,003)
(2.26) $
(1.20) $
(0.31)
77,845
73,136
68,656
(176,061) $
(88,096) $
(21,003)
53
(226)
(176,008) $
(88,322) $
82
(20,921)
The accompanying notes are an integral part of these consolidated financial statements.
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MOMENTA PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands)
Common Stock
Treasury Stock
Balances at December 31, 2015
Issuance of common stock pursuant to the
exercise of stock options and employee stock
purchase plan
Common shares issued to Parivid to settle
milestone payment
Repurchase of common stock pursuant to share
surrender
Issuance of restricted stock
Cancellation/forfeiture of restricted stock
Share-based compensation expense for
employees
Share-based compensation expense for non-
employees
Unrealized gain on marketable securities
Net loss
Shares
69,077 $
Par
Value
7 $
Additional
Paid-In
Capital
824,385 $
Accumulated
Other
Comprehensive
Income (Loss)
4
Accumulated
Deficit
$ (452,372)
Shares Amount
(119) $ (2,048) $
369,976
Total
Stockholders'
Equity
211
—
2,407
—
— —
—
2,407
266
—
3,190
—
2,081
(330)
—
—
—
—
—
—
—
—
18,142
—
—
—
—
—
—
180
—
—
—
—
—
—
—
—
82
— —
—
3,190
—
(110)
(1,066)
(1,066)
— —
— —
—
—
—
—
— —
—
18,142
— —
— —
(21,003) —
—
—
—
180
82
(21,003)
Balances at December 31, 2016
71,305 $
7 $
848,304 $
86
$ (473,375)
(229) $ (3,114) $
371,908
Impact of adopting ASU 2016-09
Net proceeds from issuance of common stock
pursuant to the ATM facilities
Issuance of common stock pursuant to the
exercise of stock options and employee stock
purchase plan
Issuance of restricted stock
Cancellation/forfeiture of restricted stock
Share-based compensation expense
Unrealized loss on marketable securities
Net loss
—
—
783
—
(783)
—
4,537
1
64,089
—
— —
—
64,090
903
145
(306)
—
—
—
—
—
—
—
—
—
10,351
—
—
16,127
—
—
—
—
—
—
(226)
— —
— —
— —
— —
— —
—
(88,096) —
—
—
—
—
—
—
10,351
—
—
16,127
(226)
(88,096)
Balances at December 31, 2017
76,584 $
8 $
939,654 $
(140)
$ (562,254)
(229) $ (3,114) $
374,154
Impact of adopting ASC 606
Net proceeds from issuance of common stock
20,000
—
—
2
—
217,784
—
—
(5,511) —
— —
Issuance of common stock pursuant to the
exercise of stock options and employee stock
purchase plan
Issuance of restricted stock
Cancellation/forfeiture of restricted stock
Share-based compensation expense
Unrealized gain on marketable securities
Net loss
2,080
445
(414)
—
—
—
—
—
—
—
—
—
29,365
—
—
21,222
—
—
—
—
—
—
53
— —
— —
— —
— —
— —
—
(176,061) —
—
—
—
—
—
—
—
—
(5,511)
217,786
29,365
—
—
21,222
53
(176,061)
Balances at December 31, 2018
98,695 $
10 $ 1,208,025 $
(87)
$ (743,826)
(229) $ (3,114) $
461,008
The accompanying notes are an integral part of these consolidated financial statements.
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MOMENTA PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Cash Flows from Operating Activities:
Net loss
Adjustments to reconcile net loss to net cash (used in) provided by
operating activities:
Depreciation and amortization of property and equipment
Impairment of equipment
Share-based compensation expense
Amortization of premium on investments
Amortization of intangibles
Loss on disposal of assets
Changes in operating assets and liabilities:
Collaboration receivable
Prepaid expenses and other current assets
Other long-term assets
Accounts payable
Accrued expenses
Accrued restructuring
Collaboration liabilities
Deferred revenue
Lease incentive
Other current liabilities
Other long-term liabilities
Net cash (used in) provided by operating activities
Cash Flows from Investing Activities:
Purchases of property and equipment
Proceeds from disposal of equipment
Purchases of marketable securities
Proceeds from maturities of marketable securities
Net cash provided by (used in) investing activities
Cash Flows from Financing Activities:
Proceeds from public offering of common stock, net of issuance costs
Net proceeds from issuance of common stock under ATM facility
Proceeds from issuance of common stock under stock plans
Repurchase of common stock pursuant to share surrender
Net cash provided by financing activities
Net increase (decrease) in cash, cash equivalents and restricted cash
Cash, cash equivalents, and restricted cash, beginning of period
Cash, cash equivalents, and restricted cash, end of period
Non-Cash Activities:
Common shares issued to Parivid to settle milestone payment
Purchases of property and equipment included in accounts payable and
accrued expenses
Receivable due from stock option exercises
Impact of adopting ASU 2016-09
Impact of adopting ASC 606
Year Ended December 31,
2018
2017
2016
$
(176,061) $
(88,096) $
(21,003)
9,917
3,608
21,222
(438)
1,153
510
3,677
573
(703)
(1,158)
(6,229)
3,235
(4,537)
(33,438)
5,860
15,182
2,037
(155,590)
(9,019)
1,447
(202,525)
308,178
98,081
217,786
—
29,272
—
247,058
189,549
96,683
8,023
—
16,127
167
1,153
61
55,194
(2,098)
1,229
7,446
(6,253)
—
(23,637)
(5,015)
4,051
(66)
2,629
(29,085)
(17,127)
267
(524,888)
420,669
(121,079)
—
64,090
10,258
—
74,348
(75,816)
172,499
7,593
—
18,322
595
1,529
—
(49,057)
(1,128)
(1,692)
(1,032)
2,043
—
32,895
16,649
—
(449)
3,724
8,989
(5,609)
—
(360,008)
445,665
80,048
—
—
2,407
(1,066)
1,341
90,378
82,121
$
$
$
$
$
$
286,232 $
96,683 $
172,499
— $
43 $
— $
— $
5,511 $
— $
3,190
1,228 $
93 $
783 $
— $
935
—
—
—
The accompanying notes are an integral part of these consolidated financial statements.
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1. The Company
Business Overview
MOMENTA PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Momenta Pharmaceuticals, Inc., referred to as Momenta or the Company, 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 novel therapeutics for autoimmune
diseases and other legacy products including complex generics and biosimilars. The Company presently derives all of its revenue from its collaborations.
2. Summary of Significant Accounting Policies
Consolidation
The accompanying consolidated financial statements reflect the operations of the Company and the Company's wholly-owned subsidiaries, Momenta
Pharmaceuticals Securities Corporation and Momenta Ireland Limited. Intercompany balances and transactions are eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles in the United States, or U.S. GAAP, requires
management to make estimates, judgments and assumptions that may affect the reported amounts of assets and liabilities and the disclosure of contingent assets
and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing
basis, the Company evaluates its estimates and judgments, including those related to revenue recognition, accrued expenses, and share-based payments. The
Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for
making judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates.
Revenue Recognition
Effective January 1, 2018, the Company adopted Accounting Standards Codification, or ASC, Topic 606, Revenue from Contracts with Customers , using the
modified retrospective transition method as permissible for all contracts not yet completed as of January 1, 2018. This standard applies to all contracts with
customers, except for contracts that are within the scope of other standards, such as leases, insurance, collaboration arrangements and financial instruments.
Under Topic 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration
that the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within
the scope of Topic 606, the entity performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the
contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or
as) the entity satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that the entity will collect the
consideration it is entitled to in exchange for the goods or services it transfers to the customer.
License Agreements
The Company has entered into license arrangements with pharmaceutical companies for the development and commercialization of product candidates. The
terms of these agreements may include (i) transfer of intellectual property rights (licenses) and (ii) providing research and development services. Payments made
by the customers may include non-refundable upfront license fees, payments for research and development activities, payments based upon the achievement of
defined collaboration objectives and a share of profits on net sales of licensed products.
If the license to the Company’s intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, the
Company recognizes the transaction price allocated to the license as revenue upon transfer of control of the license. The Company evaluates all other promised
goods or services in the license agreement to determine if they are distinct. If they are not distinct, they are combined with other promised goods or services to
create a bundle of promised goods or services that is distinct. Optional future services that reflect their standalone selling prices do not provide the
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customer with a material right and, therefore, are not considered performance obligations. If optional future services reflect a significant or incremental discount,
they are material rights, and are accounted for as performance obligations.
The Company utilizes judgment to determine the transaction price. The Company evaluates contingent milestones to estimate the amount which is not
probable of a material reversal to include in the transaction price using the most likely amount method. Milestone payments that are not within the control of the
Company, such as regulatory approvals, are not considered probable of being achieved until those approvals are received. The transaction price is then allocated to
each performance obligation on a relative stand-alone selling price basis, for which the Company recognizes revenue as or when the performance obligations under
the contract are satisfied. At the end of each reporting period, the Company re-evaluates the probability of achieving development milestone payments which may
not be subject to a material reversal, and if necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative
catch-up basis, which would affect research and development revenue and earnings in the period of adjustment.
The Company then determines whether the performance obligations or combined performance obligations are satisfied over time or at a point in time and, if
over time, the appropriate method of measuring progress for purposes of recognizing revenue from non-refundable, upfront fees. The Company evaluates the
measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition.
The Company may earn a contractual percentage of a licensor’s revenues or profits after the successful development and commercialization of a licensed
product. A sales or usage-based royalty on a license of intellectual property where the license is the predominant item to which the royalty relates is eligible for an
exception to the standard revenue recognition model under Topic 606. Under this exception, an entity is permitted to (i) exclude such amounts from the initial
determination of the transaction price (hence no amounts to allocate amongst the performance obligations) and (ii) defer recognition until underlying sales occur.
The amount of net sales and contractual profit is determined based on information provided by the licensor and involves 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 fees, product returns, and co-payment assistance costs, which could be adjusted based on actual results in the future. Net sales and
contractual profit may also include or exclude other amounts as defined in an agreement. The Company is highly dependent on the licensor for timely and accurate
information regarding any net revenues realized from sales of the licensed products in order to accurately report its results of operations. Sales-based milestones
and profit share revenues are recognized as revenue when sales thresholds are met under the sales or usage-based royalty exception under Topic 606.
Collaborative Arrangements
The Company considers the nature and contractual terms of the arrangement and assesses whether the arrangement involves a joint operating activity
pursuant to which the Company is an active participant and is exposed to significant risks and rewards with respect to the arrangement. If the Company is an active
participant and is exposed to significant risks and rewards with respect to the arrangement, the Company accounts for the arrangement as a collaboration under
Topic 808, Collaborative Arrangements . Topic 808 describes arrangements within its scope and considerations surrounding presentation and disclosure, with
recognition matters subjected to other authoritative guidance, in certain cases by analogy.
With respect to consideration other than cost sharing payments received from a collaboration partner, the Company has applied an accounting policy to
analogize to other accounting guidance concerning revenue recognition, specifically Topic 606. Payments received from a collaboration partner to which this
policy applies may include upfront payments in respect of a license of intellectual property, development milestones, profit share payments, and sales-based
milestones.
The Company classifies the payments received or made under the cost sharing provisions of the arrangement as a component of research and development or
general and administrative expense, respectively, to reflect the joint risk sharing nature of the payment received or made.
Impact of Adoption
Under the modified retrospective transition method, the Company applied Topic 606 to all contracts within its scope as of January 1, 2018. Under the
practical expedient concerning contract modifications contained in the transitional provisions of Topic 606, the Company has not retrospectively restated its
contracts for modifications prior to the earliest period presented, and instead has reflected the aggregate effect of all modifications when identifying the satisfied
and unsatisfied performance obligations, determining the transaction price and allocating the transaction price. Qualitatively, the effect of applying this practical
expedient is not material to the periods presented in the consolidated financial statements.
As more fully discussed in Note 9, " Collaboration and License Agreements ", only the arrangement with Mylan Ireland Limited, or Mylan, a wholly owned
indirect subsidiary of Myland N.V., was determined to have unsatisfied performance
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obligations as of the adoption date for which the pattern of revenue recognition would change. All other agreements were unaffected by the adoption of Topic 606
in all periods presented in the consolidated financial statements through application of the modified retrospective transition method. As a result of adopting Topic
606, the Company recorded a $ 5.5 million cumulative transition adjustment to the opening balance of accumulated deficit on January 1, 2018 to reflect the use of a
proportional performance method using costs incurred as an input measure of progress in satisfying performance obligations under the Mylan collaboration. The
Company previously applied a straight-line method of recognition through the expected date of the Food and Drug Administration's, or FDA, approval for each
product candidate.
The tables below include the amount by which each financial statement line item was affected as a result of applying or analogizing (with respect to the
Company’s collaboration agreements) to Topic 606 as compared to the previous accounting policy. The amounts in the tables below are in thousands.
Condensed Consolidated Statement of Operations and Comprehensive Loss
Research and development revenue
Loss from operations
Net loss
Comprehensive loss
Condensed Consolidated Balance Sheet
Deferred revenue, current
Deferred revenue, non-current
Accumulated deficit
Condensed Consolidated Statement of Cash Flows
Net loss
Adjustments to reconcile net loss to net cash used in operating
activities:
Deferred revenue
Collaboration Receivable
Collaboration receivable includes:
For the Year Ended December 31, 2018
Topic 606
Topic 605
Change
35,905 $
181,327 $
176,061 $
176,008 $
27,457 $
189,775 $
184,509 $
184,456 $
Balance as of December 31, 2018
Topic 606
Topic 605
Change
3,916 $
1,774 $
743,826 $
6,186 $
2,442 $
746,764 $
8,448
(8,448)
(8,448)
(8,448)
(2,270)
(668)
(2,938)
For the Year Ended December 31, 2018
Topic 606
Topic 605
Change
176,061 $
184,509 $
(8,448)
33,438 $
24,990 $
8,448
$
$
$
$
$
$
$
$
$
•
•
•
Amounts due to the Company for its contractual profit share on Sandoz Inc.’s, or Sandoz', and sales of GLATOPA;
Amounts due to the Company for reimbursement of research and development services and certain external costs primarily under the collaborations with
Sandoz; and
Amounts due from Mylan for its 50% share of certain collaboration expenses under the cost-sharing provisions of the agreement with Mylan, as described
in Note 9, " Collaboration and License Agreements ", that are not funded through the continuation payments.
The Company has not recorded any allowance for uncollectible accounts or bad debt write-offs and it monitors its receivables to facilitate timely payment.
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Collaboration Liability
Collaboration liability includes:
•
•
Advance payments received from Mylan that will be applied to amounts due from Mylan in future periods for the funding of Mylan's 50% share of certain
collaboration expenses under the cost-sharing provisions of the agreement with Mylan; and
Net payable to CSL Behring Recombinant AG, or CSL, for the Company's 50% share of collaboration expenses under the cost-sharing provisions of the
agreement with CSL.
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.
The Company has established guidelines relating to diversification and maturities that allow the Company to manage risk.
The Company invests its excess cash balances in short-term and long-term marketable debt securities. The Company classifies its investments in marketable
debt securities as available-for-sale based on facts and circumstances present at the time it purchased the securities. Purchased premiums or discounts on
marketable debt securities are amortized to interest income through the stated maturities of the debt securities. The Company reports available-for-sale investments
at fair value at each balance sheet date and includes any unrealized holding gains and losses (the adjustment to fair value) in accumulated other comprehensive
income (loss), a component of stockholders' equity. Realized gains and losses are determined using the specific identification method and are included in interest
income. To determine whether an other-than-temporary impairment exists, the Company considers whether it intends to sell the debt security and, if it does not
intend 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 the
recovery of its amortized cost basis. The Company reviewed its investments with unrealized losses and concluded that no other-than-temporary impairment existed
at December 31, 2018 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 the
security before the recovery of its amortized cost basis. The Company did not record any impairment charges related to its marketable securities during the years
ended December 31, 2018 , 2017 and 2016 . Realized gains or losses on marketable securities for each of the years ended December 31, 2018 , 2017 , and 2016
were immaterial. The Company's marketable securities are classified as cash equivalents 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, is in excess of 90 days. The Company's cash equivalents are primarily composed of
money market funds and repurchase agreements carried at fair value, which approximates cost at December 31, 2018 and 2017 .
Fair Value Measurements
The Company measures certain financial assets including cash equivalents and marketable securities at fair value on a recurring basis. These financial assets
are 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) in
active 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 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.
The Company's 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 income and
market based approaches, and observable market inputs to determine value. These observable market inputs include reportable trades, benchmark yields, credit
spreads, broker/dealer quotes, bids, offers, current spot rates and other industry and economic events. The Company validates the prices provided by its third-party
pricing services by reviewing their pricing methods and matrices, obtaining market values from other pricing sources, analyzing pricing data in certain instances
and confirming that the relevant markets are active. The Company did not adjust or override any fair value measurements provided by its pricing services as of
December 31, 2018 and December 31, 2017 .
Concentration of Credit Risk
The Company's primary exposure to credit risk is derived from its cash, cash equivalents, marketable securities and collaboration receivable.
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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 extend
the life of the respective assets are charged to expense. Upon disposal, the related cost and accumulated depreciation or amortization is removed from the accounts
and any resulting gain or loss is included in the consolidated statements of operations and comprehensive loss. Depreciation is computed using the straight-line
method over the estimated useful 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 the related lease payments is recorded as a liability. Assets under capital lease arrangements are depreciated using the straight-line method over
their estimated useful lives. Leasehold improvements are amortized over the estimated useful lives of the assets or related lease terms, whichever is shorter. When
the Company disposes of property and equipment, it removes the associated cost and accumulated depreciation from the related accounts on its consolidated
balance sheet and includes any resulting gain or loss in its consolidated statements of operations and comprehensive loss.
Assets Held-for-Sale
The Company classifies assets as held-for-sale when the following conditions are met: (1) management has committed to a plan to sell, (2) the assets are
available for immediate sale in their present condition, (3) the Company has initiated an active program to identify a buyer, (4) it is probable that a sale will occur
within one year, (5) the assets are actively marketed for sale at a reasonable price in relation to their current fair value, and (6) there is a low likelihood of
significant changes to the plan or that the plan will be withdrawn. If all of the criteria are met as of the balance sheet date, the assets are presented separately in the
balance sheet as held-for-sale at the lower of the carrying amount or fair value less costs to sell. The assets are then no longer depreciated or amortized while
classified as held-for-sale.
Long-Lived Assets
The Company evaluates the recoverability of its property, equipment and intangible assets when circumstances indicate that an event of impairment may
have occurred. The Company recognizes an impairment loss only if the carrying amount of a long-lived asset is not recoverable based on its undiscounted future
cash flows. 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.
Research and Development
Research and development expenses consist of costs incurred to conduct research, such as the discovery and development of the Company's product
candidates. 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.
Non-refundable advance payments for goods or services to be received in the future for use in research and development activities are deferred and
capitalized. The capitalized amounts are expensed as the related goods are delivered or the services are received.
Accounting for Share-Based Compensation
The Company grants awards under its share-based compensation programs, which awards have included stock options, time-based restricted stock awards,
performance-based restricted stock awards, time-based restricted stock units and shares issued under its employee stock purchase plan (ESPP). The Company
charges the estimated fair value of such awards to operating expense in its consolidated statements of operations and comprehensive loss over the requisite service
period, which is generally the vesting period.
The fair values of stock option grants are estimated as of the date of grant using the Black-Scholes Merton option pricing model. The estimated fair values of
the stock options are then expensed over the requisite service period. The Company uses its own historical data to estimate volatility and expected term, which
includes an assessment of option exercise patterns and post-vesting employee termination behavior to arrive at the estimated expected life of an option. The
Company reviews and evaluates 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 the United States Treasury yield curve in effect at the time of grant.
The fair values of restricted stock and restricted stock units are based on the market value of our stock on the date of grant. Compensation expense for time-
based restricted stock and restricted stock units is recognized on a straight-line basis over the applicable service period.
For performance-based restricted stock and restricted stock units, at each reporting period the Company assesses the probability that the performance
condition(s) will be achieved. The Company uses the accelerated attribution method to
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expense the awards over the implicit service period based on the probability of achieving the performance conditions. The Company estimates the implicit service
period based on its best estimate of the period over which an award's vesting condition(s) will be achieved. The Company reviews and evaluates these estimates on
a quarterly basis and will recognize any remaining unrecognized compensation expense as of the date of an estimate revision over the revised remaining implicit
service period.
Prior to 2017, the Company applied an estimated forfeiture rate to period expense to recognize share-based compensation expense only for those stock and
option awards expected to vest. The Company estimated forfeitures based upon historical data, adjusted for known trends, and adjusted its estimate of forfeitures if
actual forfeitures differed. Subsequent changes in estimated forfeitures were recognized through a cumulative adjustment in the period of change. In 2017, the
Company adopted ASU No. 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting and made an
entity-wide accounting policy election to account for award forfeitures as they occur. As a result, the Company recorded a cumulative opening adjustment to
accumulated deficit and additional paid-in capital of $0.8 million .
Net Loss Per Common Share
Basic net loss per common share is calculated by dividing net loss by the weighted average number of common shares outstanding during the period, which
includes common stock issued and outstanding and excludes unvested shares of restricted stock awards and restricted stock units. Diluted net loss per common
share is calculated by dividing net loss by the weighted average number of common shares and potential shares from outstanding stock options and unvested
restricted stock awards and restricted stock units determined by 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 the
differences 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 effect
when the differences are expected to reverse. The Company must then assess the likelihood that the resulting deferred tax assets will be realized. A valuation
allowance 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 and
generated taxable income in 2010 and 2011. Since 2011, the Company has generated operating losses and expects to continue to incur future losses, therefore the
net deferred 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
uncertain income 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
penalties related to income tax matters in income tax expense. The Company had accrued no amounts for interest and penalties in the Company's consolidated
balance sheets at December 31, 2018 and 2017 .
The Company files income tax returns in the United States federal jurisdiction and multiple state jurisdictions. The Company is no longer subject to any tax
assessment from an income tax examination for years before 2015, except to the extent that in the future it utilizes net operating losses or tax credit carry forwards
that originated before 2015. As of December 31, 2018 , the Company was not under examination by the Internal Revenue Service or other jurisdictions for any tax
years.
Comprehensive Loss
Comprehensive income (loss) is the change in equity of a company during a period from transactions and other events and circumstances, excluding
transactions resulting from investments by owners and distributions to owners. Comprehensive income (loss) includes net income (loss) and the change in
accumulated other comprehensive income (loss) for the period. Accumulated other comprehensive income (loss) consists entirely of unrealized gains and losses on
available-for-sale marketable securities for all periods presented.
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 novel therapeutics and its legacy products, which include complex generics
and biosimilars. The product areas correspond with their respective regulatory pathways. However, the Company's portfolio has similar development risk and
market characteristics. The Company does not operate separate lines of business with respect to any of its products or product candidates and the Company does
not prepare discrete financial information with respect to these product areas. Accordingly, the Company views its business as one reportable operating segment—
the discovery, development and commercialization of pharmaceutical products.
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Accounting Pronouncements Adopted
In November 2016, the FASB issued ASU No. 2016-18, Restricted Cash , or ASU 2016-18. The amendments in ASU 2016-18 require an entity to reconcile
and explain the period-over-period change in total cash, cash equivalents and restricted cash within its statements of cash flows. A reporting entity must apply the
amendments in ASU 2016-18 using a full retrospective approach. The retrospective adoption of ASU 2016-18 resulted in $23.0 million and $21.7 million of
restricted cash being included in cash, cash equivalents and restricted cash balances on the statement of cash flows for the period ended December 31, 2017 and
2016, respectively. The Company includes the necessary reconciliation in Note 4, " Cash, Cash Equivalents, and Marketable Securities ".
New Accounting Pronouncements
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board, or FASB, or other standard setting bodies that
the Company adopts as of the specified effective date.
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) . The new standard requires that all lessees recognize the assets and liabilities that
arise from leases on the balance sheet and disclose qualitative and quantitative information about its leasing arrangements. In July 2018, the FASB issued ASU No.
2018-11, which provides entities with an additional transition method to adopt Topic 842. Under the new transition method, an entity initially applies the new lease
requirements at the adoption date, not the earliest period presented, and recognizes a cumulative effect adjustment to the opening balance of retained earnings in
the period of adoption. The Company has elected this transition method at the adoption date of January 1, 2019. The Company has also elected a package of
practical expedients, under which an entity need not reassess whether any expired or existing contracts are or contain leases, the lease classification for any expired
or existing leases, or initial direct costs for any existing leases. The Company is in the process of finalizing the impact of adoption.
In June 2018, the FASB issued ASU No. 2018-07, Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment
Accounting . The new standard largely aligns the accounting for share-based payment awards issued to employees and nonemployees by expanding the scope of
ASC 718 to apply to nonemployee share-based transactions, as long as the transaction is not effectively a form of financing. The new guidance became effective
for the Company on January 1, 2019. The Company does not believe the guidance will have a material impact on its financial statements.
In August 2018, the FASB issued ASU No. 2018-13, F air Value Measurement (Topic 820): Disclosure Requirements for Fair Value Measurement . The new
standard added, modified or removed disclosure requirements under Topic 820 for clarity and consistency. ASU 2018-13 is effective for all entities for fiscal years,
and interim periods within those fiscal years, beginning after December 15, 2019. The Company does not believe the guidance will have a material impact on its
financial statements.
In August 2018, the FASB issued ASU No. 2018-15, Intangibles — Goodwill and Other — Internal-Use Software (Subtopic 350-40): Customer’s Accounting
for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. The amendment updates the accounting for implementation,
setup, and other upfront costs for a customer in a hosting arrangement that is a service contract. The amendment is effective for public business entities for fiscal
years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption of the amendment is permitted, including adoption in any
interim period, for all entities. The amendment may be applied either retrospectively or prospectively to all implementation costs incurred after the date of
adoption. The Company expects to adopt this amendment prospectively when effective, and does not expect the amendment will have a material impact on its
financial statements.
In November 2018, the FASB issued ASU No. 2018-18, Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic
606 . The amendment clarifies that certain transactions between collaborative arrangement participants should be accounted for as revenue under Topic 606 when
the collaborative arrangement participant is a customer in the context of a unit of account. In those situations, all the guidance in Topic 606 should be applied,
including recognition, measurement, presentation, and disclosure requirements. The amendment also adds unit-of-account guidance in Topic 808 to align with the
guidance in Topic 606 (that is, a distinct good or service) when an entity is assessing whether the collaborative arrangement or a part of the arrangement is within
the scope of Topic 606. Lastly, the amendment requires that in a transaction with a collaborative arrangement participant that is not directly related to sales to third
parties, presenting the transaction together with revenue recognized under Topic 606 is precluded if the collaborative arrangement participant is not a customer. For
public business entities, the amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. The
Company is currently evaluating these clarifications in the accounting and presentation for its collaborative arrangements within the scope of Topic 808.
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3. Fair Value Measurements
The tables below present information about the Company's assets that are regularly measured and carried at fair value on a recurring basis at December 31,
2018 and 2017 , and indicate the level within 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, 2018 and 2017 are summarized as follows (in thousands):
Description
Assets:
Cash equivalents:
Money market funds
Marketable securities:
U.S. government-sponsored enterprise securities
Corporate debt securities
Certificates of deposit
Commercial paper obligations
Asset-backed securities
Total
Description
Assets:
Cash equivalents:
Money market funds
Overnight repurchase agreements
Marketable securities:
U.S. government-sponsored enterprise securities
Corporate debt securities
Certificates of deposit
Commercial paper obligations
Asset-backed securities
Total
Balance as of
December 31, 2018
Quoted Prices in
Active Markets
(Level 1)
Significant Other
Observable Inputs
(Level 2)
Significant Other
Unobservable Inputs
(Level 3)
119,955 $
119,955 $
— $
12,424
129,308
3,003
30,935
25,407
321,032 $
—
—
—
—
—
119,955 $
12,424
129,308
3,003
30,935
25,407
201,077 $
—
—
—
—
—
—
—
Balance as of
December 31, 2017
Quoted Prices in
Active Markets
(Level 1)
Significant Other
Observable Inputs
(Level 2)
Significant Other
Unobservable Inputs
(Level 3)
49,204 $
11,250
18,181
148,874
7,794
108,630
22,760
366,693 $
49,204 $
—
—
—
—
—
—
49,204 $
— $
11,250
18,181
148,874
7,794
108,630
22,760
317,489 $
—
—
—
—
—
—
—
—
$
$
$
$
There have been no impairments of the Company’s assets measured and carried at fair value during the years ended December 31, 2018 and 2017 . In
addition, there were no changes in valuation techniques or transfers between Level 1 and Level 2 financial assets during the years ended December 31, 2018 and
2017 . The fair value of Level 2 instruments classified as marketable securities was determined through third party pricing services. The carrying amounts reflected
in the Company’s consolidated balance sheets for cash, collaboration receivable, other current assets, accounts payable and accrued expenses approximate fair
value due to their short-term maturities. Other than assets held-for-sale discussed in Note 5, the Company did not have any non-recurring fair value measurements
on any assets or liabilities at December 31, 2018 and 2017 .
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4. Cash, Cash Equivalents and Marketable Securities
The following tables summarize the Company's cash, cash equivalents and marketable securities as of December 31, 2018 and 2017 (in thousands):
As of December 31, 2018
Cash, money market funds and overnight repurchase agreements
U.S. government-sponsored enterprise securities due in one year or less
Corporate debt securities due in one year or less
Corporate debt securities due in more than one year
Certificates of deposit due in one year or less
Certificates of deposit due in more than one year
Commercial paper obligations due in one year or less
Asset-backed securities due in more than one year
Total
Reported as:
Cash and cash equivalents
Marketable securities
Total
As of December 31, 2017
Cash, money market funds and overnight repurchase agreements
U.S. government-sponsored enterprise securities due in one year or less
Corporate debt securities due in one year or less
Corporate debt securities due in more than one year
Certificates of deposit due in one year or less
Certificates of deposit due in more than one year
Commercial paper obligations due in one year or less
Asset-backed securities due in one year or less
Asset-backed securities due in more than one year
Total
Reported as:
Cash and cash equivalents
Marketable securities
Total
Cash, Cash Equivalents, and Restricted Cash
$
$
$
$
$
$
$
Amortized Cost
Gross Unrealized Gains
Gross Unrealized
Losses
Fair Value
248,334 $
12,428
128,107
1,300
2,702
300
30,911
25,416
449,498 $
248,334 $
201,164
449,498 $
— $
—
16
—
1
—
25
2
44 $
— $
45
45 $
— $
(4)
(110)
(5)
—
—
(1)
(11)
(131)
$
— $
(132)
(132)
$
248,334
12,424
128,013
1,295
2,703
300
30,935
25,407
449,411
248,334
201,077
449,411
Amortized Cost
Gross Unrealized Gains
—
—
3
1
—
—
65
—
—
69 $
73,651
18,186
118,541
30,487
6,501
1,297
108,573
17,307
5,487
380,030 $
73,651 $
306,379
380,030 $
— $
69
69 $
Gross Unrealized
Losses
Fair Value
—
(5)
(115)
(43)
—
(4)
(8)
(30)
(4)
(209)
$
— $
(209)
(209)
$
73,651
18,181
118,429
30,445
6,501
1,293
108,630
17,277
5,483
379,890
73,651
306,239
379,890
The following tables summarize the Company’s cash, cash equivalents and restricted cash as of December 31, 2018 and December 31, 2017 (in thousands):
Cash and cash equivalents
Restricted cash, current portion
Restricted cash, long-term
Total
As of December 31, 2018
As of December 31, 2017
248,334
—
37,898
286,232
$
$
73,651
2,412
20,620
96,683
$
$
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5. Property and Equipment and Assets Held-for-Sale
As of December 31, 2018 and 2017 , property and equipment, net and assets held-for-sale consists of the following (in thousands):
Computer equipment
Software
Office furniture and equipment
Laboratory equipment
Leasehold improvements
Less: accumulated depreciation
Assets held-for-sale
2018
2017
Depreciable Lives
$
$
$
3,189
$
11,076
873
18,348
23,932
(36,474)
20,944
$
3,061
11,062
2,530
51,315
25,356
(63,408)
29,916
1,324
$
—
3 years
3 years
5 to 6 years
7 years
Shorter of asset life or lease term
During 2018 , the Company disposed of property and equipment with a gross carrying amount of $19.0 million and accumulated depreciation of $17.0
million . The Company did not dispose of any property and equipment during 2017. Depreciation and amortization expense amounted to $9.9 million , $8.0 million
, and $7.6 million in the years ended December 31, 2018 , 2017 and 2016 , respectively.
The estimated useful life of certain leasehold improvements was re-evaluated and adjusted to reflect the remaining period the Company would expect to have
use of those leasehold improvements. As a result of this change in estimate, depreciation expense increased approximately $2.4 million , or $0.03 per share, for the
year ended December 31, 2018 as compared to the amount of depreciation expense otherwise calculated based on prior estimates of useful life.
The Company initially recorded certain laboratory equipment asset impairments in the third quarter of 2018 in accordance with ASC 360 Property, Plant and
Equipment for assets held-and-used, as the criteria to classify the laboratory equipment as held-for-sale had not been met. The Company identified an indicator of
impairment related to this held-and-used laboratory equipment as it was more likely than not that some of its laboratory equipment would be sold or otherwise
disposed of significantly before the end of its previously estimated useful life primarily as a result of the restructuring described in Note 14. For the laboratory
equipment where its fair value did not exceed its carrying amount, an impairment was recognized. Fair value was estimated utilizing sales of similar equipment, a
level 2 fair value measurement. In the fourth quarter of 2018, the Company committed to a plan to actively sell certain of its laboratory equipment. Having met all
other criteria, the laboratory equipment met the criteria to classify that equipment as held-for-sale. At December 31, 2018, $1.3 million of laboratory equipment
was classified as held-for-sale as reflected in the consolidated balance sheet. The sale is expected to be complete by the end of the first quarter of 2019. Laboratory
equipment held-for-sale is reflected at the lower of its carrying amount or fair value less the cost to sell, with any excess recorded as an impairment. In aggregate,
impairment losses recognized in connection with laboratory equipment was $3.6 million and included in restructuring costs in the consolidated statement of
operations for the year ended December 31, 2018.
6. Intangible Assets
In April 2007, the Company entered into an asset purchase agreement with Parivid, LLC, or Parivid, a provider of data integration and analysis services, and
S. Raguram, the principal owner of Parivid. Pursuant to the asset purchase agreement, the Company acquired certain of the assets and assumed certain of the
liabilities of Parivid related to the acquired assets in exchange for $2.5 million in cash paid at closing and certain contingent milestone payments in a combination
of cash and/or stock in the manner and on the terms and conditions set forth in the asset purchase agreement if certain milestones were achieved within fifteen
years of the date of the asset purchase agreement. The asset purchase agreement was amended in August 2009 and in July 2011. Between 2009 and 2011, the
Company made cash payments to Parivid of $7.3 million and issued 91,576 shares of its common stock valued at $10.92 per share to Parivid in satisfaction of
certain Enoxaparin Sodium Injection-related milestones under the amended asset purchase agreement. As of June 18, 2016, the one-year anniversary of the
commercial launch of GLATOPA 20 mg/mL, GLATOPA 20 mg/mL remained the sole generic COPAXONE 20 mg/mL product on the U.S. market, triggering the
final milestone payment under the amended asset purchase agreement. In connection with the final milestone, on August 10, 2016, the Company issued 265,605
shares of its common stock to Parivid to satisfy the GLATOPA 20
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mg/mL milestone. The Company recorded $3.2 million as an intangible asset based on the number of shares issued and the closing price of the Company’s
common stock on the date the shares were issued to Parivid.
Intangible assets consist solely of the core developed technology assets acquired from Parivid. The intangible assets are being amortized using the straight-
line method over the estimated useful life of GLATOPA 20 mg/mL of approximately six years through June 2021. As of December 31, 2018 and 2017 , intangible
assets, net of accumulated amortization, are as follows (in thousands):
Total intangible assets for core and developed technology
$
13,617 $
(10,734)
$
13,617 $
(9,581)
2018
2017
Gross Carrying
Amount
Accumulated
Amortization
Gross Carrying
Amount
Accumulated
Amortization
Amortization expense was approximately $1.2 million , $1.2 million , and $1.5 million in the years ended December 31, 2018 , 2017 and 2016 , respectively.
The Company expects to incur amortization expense of approximately $1.2 million per year from 2019 to 2020 and $0.6 million in the final year (2021).
7. Restricted Cash
The Company designated $36.1 million as collateral for a letter of credit that is security for a bond posted in the litigation against Amphastar and
International Medical Systems, Ltd., a wholly owned subsidiary of Amphastar Pharmaceuticals, Inc. Additional information regarding the litigation is discussed
within Note 15, Commitments and Contingencies . The $36.1 million is held on deposit with a bank. The Company classified this restricted cash as long-term as
the timing of a final decision in the Enoxaparin Sodium Injection patent litigation is not known.
The following table summarizes the amounts designated as collateral for letters of credit related to the lease of office and laboratory space in Cambridge,
Massachusetts (collateral amounts are presented in thousands).
Property Location
320 Bent Street
301 Binney Street, Fifth Floor
Total
8. Accrued Expenses and Other Liabilities
Accrued Expenses
Approximate Square
Footage
Lease Expiration Date
Letter of Credit
Amount
Balance Sheet Classification
105,000
80,000
2/28/2027 $
6/29/2025
$
748 Non-Current Asset
1,101 Non-Current Asset
1,849
As of December 31, 2018 and 2017 , accrued expenses consisted of the following (in thousands):
Accrued compensation
Accrued contract research and manufacturing costs
Accrued professional fees
Other
Total accrued expenses
2018
2017
$
$
8,106 $
2,944
2,372
638
14,060 $
8,743
8,843
2,429
513
20,528
Other Liabilities
As of December 31, 2018 and 2017 , other current and long-term liabilities consisted of the following (in thousands):
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Current
Long-Term
Contract liability, current portion
Lease incentive, current
Lease liability, current
Deferred rent, current
Total other current liabilities
Deferred rent, long-term
Lease incentive, long-term
Lease liability, long-term
Total other long-term liabilities
2018
2017
15,000 $
1,052
128
47
16,227 $
2018
2017
8,477 $
7,877
916
17,270 $
—
379
—
—
379
6,498
3,541
—
10,039
$
$
$
$
As of December 31, 2018 , the Company included $15.0 million in other current liabilities in connection with the renegotiation with Human Genome
Sciences, Inc. ("GSK") of certain remaining contractual obligations under a manufacturing services agreement.
9. Collaboration and License Agreements
Contracts with Customers
2003 Sandoz Collaboration Agreement
In 2003, the Company entered into a license agreement with Sandoz, or the 2003 Sandoz Agreement, to jointly develop, manufacture and commercialize
enoxaparin sodium injection, a generic version of LOVENOX® (enoxaparin), in the United States, the licensed product. The Company and Sandoz agreed to
exclusively work with each other to develop and commercialize the enoxaparin sodium injection for any and all medical indications within the United States. In
addition, the Company granted Sandoz an exclusive license under its intellectual property rights to develop and commercialize injectable enoxaparin for all
medical indications within the United States.
The term of the agreement extends throughout the development and commercialization of the products until the last sale of the products, unless earlier
terminated by either party. Either party may terminate the agreement if the other party breaches the agreement or files for bankruptcy. Additionally, Sandoz may
terminate the agreement for commercial viability reasons. Sandoz has agreed to indemnify the Company for various claims, and a certain portion of such costs may
be offset against certain future payments received by the Company.
Sandoz began selling Enoxaparin Sodium Injection in July 2010. In June 2015, the Company and Sandoz amended the Agreement to provide that Sandoz
would pay the Company 50% of contractually defined profits on sales. Due to increased generic competition and resulting decreased market pricing for the
licensed product, Sandoz did not record any profit on sales of the licensed product for the year ended December 31, 2018 and 2017, and therefore the Company did
not record product revenue for the licensed product in those periods. The Company is no longer eligible to receive milestones under the agreement.
The Company concluded that the license agreement is within the scope of Topic 606. As of January 1, 2018, the Company had completed its performance
obligations under the contract. The Company continues to be eligible to receive contractual profit share on Sandoz’ sales of the licensed product, which is recorded
as product revenue. The Company recognizes revenue for profit share in the period the related sales occur. The Company recognizes research and development
revenue related to on-going commercial services under the contract as those services are delivered, as they represent customer options for future services that
reflect their standalone selling price. The adoption of Topic 606 had no impact on the accounting for this license agreement.
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In July 2018, Sandoz notified its customers and the FDA that it would discontinue supplying the licensed product. The Company expects any future revenues
from Sandoz' sales of the licensed product, if any, to be minimal .
2006 Sandoz Agreement
In 2006 and 2007, the Company entered into a series of agreements with Sandoz, or the 2006 Sandoz Agreement, where the Company and Sandoz agreed to
exclusively collaborate on the development and commercialization of GLATOPA, a generic version of COPAXONE, among other potential products. Costs,
including development costs and the costs of clinical studies, will be borne by the parties in varying proportions depending on the type of expense. For GLATOPA,
the Company is generally responsible for all of the development costs in the United States. For GLATOPA outside of the United States, the Company shares
development costs in proportion to its profit sharing interest. The Company is reimbursed for personnel costs and external costs incurred in the development of
products to the extent development costs are borne by Sandoz, as described above. All commercialization costs are borne by Sandoz. Sandoz is responsible for
funding legal expenses, except for personnel costs with respect to certain legal activities for GLATOPA; however 50% of legal expenses, including any patent
infringement damages, can be offset against the profit-sharing amounts. Development costs, commercialization costs and legal costs have defined meanings under
the agreement.
The term of the agreement extends throughout the development and commercialization of the products until the last sale of the products, unless earlier
terminated by either party. The agreement may be terminated if either party breaches the agreement or files for bankruptcy, or, on a region-by-region basis, in the
event clinical studies are needed in order to obtain marketing approval. Sandoz has agreed to indemnify the Company for various claims, and a certain portion of
such costs may be offset against certain future payments received by the Company.
Sandoz commenced sales of GLATOPA 20 mg/mL in the United States in June 2015 and of GLATOPA 40 mg/mL in the United States in February 2018.
Under the agreement, the Company earns 50% of contractually defined profits on Sandoz' worldwide net sales of GLATOPA. Profits on net sales of GLATOPA
are calculated by deducting from net sales the costs of goods sold and an allowance for selling, general and administrative costs, which is a contractual percentage
of GLATOPA net sales, and post-launch commercial milestones achieved.
Following FDA approval of Mylan N.V.'s generic equivalents of COPAXONE 20 mg/mL and 40 mg/mL, which Mylan N.V. announced in October 2017,
the Company is no longer eligible to earn $80 million in future post-launch commercial milestones payments. The Company is still eligible to receive up to $30
million in performance-based milestone payments for GLATOPA in the United States, although the Company believes it is not likely that the performance-based
milestones will be achieved. None of these payments, once received, is refundable and there are no general rights of return.
On October 4, 2017, the Company and Sandoz entered into a letter agreement, pursuant to which the Company agreed to reduce its 50% share of
contractually defined profits on worldwide net sales of GLATOPA by up to an aggregate of approximately $9.8 million , commencing in the first quarter of 2018,
representing 50% of potential GLATOPA 40 mg/mL pre-launch inventory costs. In the first quarter of 2018, the Company's product revenue was reduced by $9.8
million for the Company's 50% share of GLATOPA 40 mg/mL written off by Sandoz.
The Company concluded that the license agreement is within the scope of Topic 606. As of January 1, 2018, the Company had completed its performance
obligations under the contract. The Company continues to be eligible to receive contractual profit share on Sandoz’ sales of GLATOPA, which is recorded as
product revenue. The Company recognizes revenue for profit share in the period the related sales occur. The Company recognizes research and development
revenue related to on-going commercial services under the agreement as those services are delivered, as they represent customer options for future services that
reflect their standalone selling price. The adoption of Topic 606 had no impact on the accounting for this license agreement.
Baxalta Agreement
The Company and Baxalta U.S. Inc., Baxalta GmbH and Baxalta Incorporated, collectively referred to as Baxalta, entered into a global collaboration and
license agreement, or the Baxalta Agreement, effective February 2012, to develop and commercialize biosimilars, including M923, the Company's biosimilar
HUMIRA® (adalimumab) candidate.
On September 27, 2016, Baxalta gave the Company twelve months’ prior written notice of the exercise of its right to terminate for its convenience the
Baxalta Agreement. On December 31, 2016, the Company and Baxalta entered into the Baxalta Termination Agreement, amending certain termination provisions
of the Baxalta Agreement. The termination of the Baxalta Agreement was made effective December 31, 2016. Baxalta was relieved of its obligations to continue to
perform activities for M923 after December 31, 2016, except for certain on-going clinical and regulatory activities that were completed in 2017, and in January
2017, Baxalta paid the Company a one-time cash payment of $51.2 million representing the costs
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Baxalta would have incurred in performing the activities it would have performed under Baxalta Agreement through the original termination date.
As a result of termination, the Company's performance period for M923 ended on December 31, 2016; therefore, the Company recognized the remaining
balance of deferred revenue of $22.0 million as research and development revenue in the year ended December 31, 2016. In addition, the Company recorded the
$51.2 million asset return payment in other income in the fourth quarter of 2016.
Collaborative Agreements
Mylan Collaboration Agreement
The Company and Mylan entered into a collaboration agreement, or the Mylan Collaboration Agreement, effective February 9, 2016, pursuant to which the
Company and Mylan agreed to collaborate exclusively, on a worldwide basis, to develop, manufacture and commercialize six of the Company’s biosimilar
candidates, including M710.
In November 2018, the Company delivered formal notice of the partial termination of the Mylan Collaboration Agreement with respect to five of the
collaboration programs. As a result, the Company will only continue to advance its late-stage biosimilar candidate M710, our proposed biosimilar to EYLEA under
the Mylan Collaboration Agreement.
Under the terms of the Mylan Collaboration Agreement, Mylan paid the Company a non-refundable upfront payment of $45 million . In addition, the
Company and Mylan equally share costs (including development, manufacturing, commercialization and certain legal expenses) and profits (losses) with respect to
such product candidates. Mylan funded its share of collaboration expenses incurred by the Company, in part, through milestone payments totaling $60 million ,
which the Company received in 2016.
For the Company's remaining product candidate, M710, the Company and Mylan both have the right to terminate the program at each party's convenience. If
one party decides not to continue development, manufacture and commercialization of this product candidate under the Mylan Collaboration Agreement, the other
party will have the right to continue the development, manufacture and commercialization of such product candidate, and the terminating party will need to
continue to fund its share of expenses for a pre-specified period, depending on the stage of the product at the time of termination.
Under the Mylan Collaboration Agreement, the Company 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 granted the Company a co-exclusive license under Mylan’s
intellectual property rights for the Company to perform its development and manufacturing activities under the product work plans agreed by the parties, and to
perform certain commercialization activities to be agreed by the joint steering committee for such product candidates if the Company exercises its co-
commercialization option described below.
The Company and Mylan established a joint steering committee, or JSC, consisting of an equal number of members from the Company and Mylan to oversee
and manage the development, manufacture and commercialization of product candidates under the collaboration. Unless otherwise determined by the JSC, it is
anticipated that, in collaboration with the other party, (a) the Company will be primarily responsible for nonclinical development activities and initial clinical
development activities for product candidates; and regulatory activities for product candidates in the United States through regulatory approval; and (b) Mylan will
be primarily responsible for additional (pivotal or Phase 3 equivalent) clinical development activities for product candidates; regulatory activities for the product
candidates outside the United States; and regulatory activities for products in the United States after regulatory approval, when all marketing authorizations for the
products in the United States will be transferred 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 is responsible for allocating responsibilities for other
activities under the collaboration.
The term of the collaboration will continue throughout the development and commercialization of M710 on a country-by-country basis until development
and commercialization by or on behalf of the Company and Mylan pursuant to the Mylan Collaboration Agreement has 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 of the 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 certain
activities involving competing products or the challenge of certain patents. Other than in the case of a termination for convenience, the terminating party will have
the right to continue the development, manufacture and commercialization of the terminated products in the terminated countries.
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The Mylan Collaboration Agreement is accounted for as a collaboration arrangement pursuant to Topic 808. The Company’s accounting policy for
collaborations analogizes to Topic 606, primarily in determining the appropriate recognition for the upfront license fee and other consideration.
Upfront Payments for License of Intellectual Property
The Company identified the following material promises under the contract: (i) licenses to develop, manufacture and commercialize the named product
candidates (six product candidates in total) and (ii) research and development services through FDA approval for each of the six product candidates. The
Company’s participation in the joint steering committee was assessed as immaterial in the context of the contract. As the licenses for each of the products and the
related research and development services for each of the product candidates are not capable of being distinct and are not distinct within the context of the contract,
the Company concluded that each of the six bundles of a product license and the related research and development services through FDA approval should be
combined as performance obligations. The Company next assessed whether each of the six bundles of a particular product license and the related research and
development services is distinct from each other. The Company concluded that each of the six license and research and development services bundles is capable of
being distinct, as Mylan can obtain benefit from each separately, and each is distinct within the context of the contract. Therefore, each of the six license and
service bundles individually represent distinct performance obligations.
The Company determined that the upfront payment constituted the entirety of the consideration to be included in the transaction price to be allocated to the
performance obligations at contract inception based on the stand-alone selling prices for each of the six license and service performance obligations. For the
licenses, the relative stand-alone selling prices were based on an analysis of its existing license arrangements and other available data, with consideration given to
the products’ stage of development at the time the licenses were delivered. The stand-alone selling prices of the research and development services were based on
the nature and extent of the research and development services to be performed. Changes in the key assumptions used to determine the relative stand-alone selling
prices would not have a significant effect on the allocation of the transaction price to the performance obligations. Of the $45.0 million upfront payment, $8.2
million was allocated to the M834, $7.1 million was allocated to M710, and between $5.7 million and $9.0 million to the four additional performance obligations.
The Company considered both input and output methods to determine a method that depicts its performance in transferring control of the goods and services
promised. The Company concluded that costs incurred to date, as a proportion of the total estimated costs to bring each product candidate through FDA approval,
depict the performance of the research and development services as a measure of proportionate performance. The pattern of recognition differs from the
Company’s previous accounting policy. Refer to Note 2, "Summary of Significant Accounting Policies" , for disclosure of the quantification and impact of this
change as a result of adopting Topic 606.
As a result of providing a notice of partial termination of the Mylan Collaboration Agreement in November 2018, specifically the five biosimilar programs
other than M710, the Company concluded that it had changed the enforceable rights and obligations under the agreement, and therefore had modified the Mylan
Collaboration Agreement. Since the remaining services to be performed prior to the effective date of termination for the five biosimilar programs are not distinct,
the Company concluded that each represented a performance obligation that is partially satisfied as of the date the Company provided the notice of partial
termination. Accordingly, the Company updated its calculation of proportional performance in the fourth quarter of 2018, which resulted in revenue recognition of
$31.5 million . As a result, as of December 31, 2018 , $5.7 million of the transaction price remains allocated to unsatisfied performance obligations and is included
in deferred revenue in the consolidated balance sheet. The license and related research and development services performance obligations are expected to be
delivered over a period through estimated FDA approval for M710 and through the termination date of the remaining product candidates.
Development milestones, sales-based milestones, and profit share related to the license of intellectual property will be recognized by analogy to the
Company’s revenue accounting policies.
Collaboration Costs and Reimbursements
Collaboration costs incurred by the parties are subject to quarterly reconciliation such that the final amount of expense included in the Company's statement
of operations is equal to its 50% share of the total collaboration costs. The Company classifies the payments received or made under the cost sharing provisions of
the arrangement as a component of research and development or general and administrative expense, accordingly, to reflect the joint risk sharing nature of the
arrangement, Mylan funds its 50% share of development-related collaboration costs through contingent milestone payments of up to $200.0 million across the six
product candidates, while other shared collaboration costs are reconciled by the parties with the owing party reimbursing the other party by making quarterly
payments. The Company records a contract asset to reflect a receivable
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due from Mylan for Mylan's 50% share of other shared collaboration costs and a contract liability to reflect the balance of any advance payment from Mylan to be
applied towards Mylan's 50% share of future development-related collaboration costs.
CSL License and Option Agreement
The Company and CSL, a wholly owned indirect subsidiary of CSL Limited, entered into a License and Option Agreement, or the CSL License Agreement,
effective February 17, 2017, pursuant to which the Company granted CSL an exclusive worldwide license to research, develop, manufacture and commercialize
the M230 pre-clinical product candidate, an Fc multimer protein that is a selective immunomodulator of the Fc receptor. The agreement also provides, on an
exclusive basis, for the Company and CSL to conduct research on other Fc multimer proteins, and provides CSL the right to develop, manufacture and
commercialize these additional research products globally. CSL's obligations under the agreement are guaranteed by its parent company, CSL Limited.
Pursuant to the CSL License Agreement, CSL paid the Company a non-refundable upfront payment of $50.0 million . On August 28, 2017, the Company
exercised a 50% co-funding option. This exercise allows the Company to participate in a cost-and-profit sharing arrangement, under which the Company funds
50% of global research and development costs and 50% of U.S. commercialization costs for all products developed, in exchange for a 50% share of U.S. profits.
Under this option, sales-based royalty payments in percentages ranging from a mid-single digit to low-double digits are payable for territories outside of the United
States. The Company is also entitled to up to $297.5 million in contingent clinical, regulatory and sales milestone payments, and additional negotiated milestone
payments for a named research stage product should that enter development. The contract allows the Company to opt-out of the program in the future at the
Company's discretion. If the Company were to do so, the Company's U.S. profit share would be reduced to sales-based royalties ranging from mid-single to low
double digits and the milestone payments for which the Company is eligible would be increased by up to $252.5 million , depending on the timing of the opt-out
decision.
Under the agreement, the Company granted CSL an exclusive license under its intellectual property to research, develop, manufacture and commercialize
product candidates for all therapeutic indications. CSL granted the Company a non-exclusive, royalty-free license under CSL’s intellectual property for the
Company's research and development activities pursuant to the agreement and the Company's commercialization activities under any co-promotion agreement with
CSL.
The Company and CSL formed a joint steering committee consisting of an equal number of members from the Company and CSL, to facilitate the research,
development, and commercialization of product candidates.
Unless earlier terminated, the term of the agreement commences on February 17, 2017, and continues until the later of (i) the expiration of all payment
obligations with respect to products under the agreement, (ii) the Company is no longer co-funding development or commercialization of any products and (iii) the
Company and CSL are not otherwise collaborating on the development and commercialization of products or product candidates. CSL may terminate the
agreement on a product-by-product basis subject to notice periods and certain circumstances related to clinical development. The Company may terminate the
agreement under certain circumstances related to the development of M230 and if no activities are being conducted under the agreement. Either party may
terminate the agreement (i) on a product-by-product basis if certain patent challenges are made, (ii) on a product-by-product basis for material breaches, or (iii) due
to the other party’s bankruptcy.
Upon termination of the agreement, subject to certain exceptions, the licenses granted under the agreement terminate. In addition, dependent upon the
circumstances under which the agreement is terminated, the Company or CSL has the right to continue the research, development, and commercialization of
terminated products, including rights to certain data, for the continued development and sale of terminated products and, subject to certain limitations, obligations
to make sales-based royalty payments to the other party.
After the Company exercised its co-funding option for s 50% share of U.S. profits, the Company has accounted for the CSL agreement as a collaboration
arrangement pursuant to Topic 808. The Company’s accounting policy for collaborations analogizes to Topic 606, primarily in determining the appropriate
recognition for the upfront license fee and other consideration.
Upfront Payments for License of Intellectual Property
The Company identified the following material promises under the contract: (i) license to research, develop, manufacture and commercialize M230 and (ii) to
perform a technology transfer to CSL. The Company’s participation in the joint steering committee and other promises were assessed as immaterial in the context
of the contract. As the licenses and technology transfer are not capable of being distinct and are not distinct within the context of the contract, the Company
concluded that the bundle of the licenses and technology transfer should be combined as one performance obligation. The combined performance
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obligation was delivered in 2017. As the $50 million upfront payment reflected the transaction price at contract inception, all revenue related to the single
performance obligation was recognized prior to the date of adoption of Topic 606. Development milestones, sales-based milestones, and profit share related to the
license of intellectual property will be recognized by analogy to the Company’s revenue accounting policies. No transition adjustment was recognized as a result of
adopting Topic 606.
Co-funding Costs and Reimbursements
The co-funding arrangement with CSL is a cost-sharing arrangement. Reimbursement by CSL for its share of the development effort is presented as a
reduction of operating expenses, and reimbursement by the Company for its share of the development effort is recorded as an incremental operating expense,
consistent with the Company’s accounting policy for collaboration arrangements. Such amounts are settled quarterly amongst the parties.
Summary
The following tables provide amounts by year indicated and by line item included in the Company's accompanying consolidated financial statements
attributable to transactions arising from its license arrangements. The dollar amounts in the tables below are in thousands.
2003 Sandoz
Agreement
2006 Sandoz
Agreement
Mylan
Collaboration
Agreement
CSL Collaboration
Agreement
Total
Contract assets
Collaboration receivables:
Opening - January 1, 2018
Revenue / cost recovery
Receipts
Ending - December 31, 2018
Contract liabilities
Deferred revenue:
Opening - January 1, 2018
Recognition of deferred revenue
Ending - December 31, 2018
Less: current portion
Deferred revenue, net of current portion -
December 31, 2018
Collaboration liabilities:
Opening - January 1, 2018
Payments
Net collaboration costs incurred in the period
Ending - December 31, 2018
$
$
406
7
(413)
$
14,219
$
—
—
—
—
—
—
—
—
—
— $
42,145
(45,083)
11,281
—
—
—
—
—
—
—
—
— $
87
$
423
550
(883)
90
39,128
(33,438)
5,690
(3,916)
1,774
— $
— $
— $
—
—
—
—
—
—
8,245
—
(6,833)
1,412
$
1,013
(7,369)
9,665
3,309
$
15,048
42,702
(46,379)
11,371
39,128
(33,438)
5,690
(3,916)
1,774
9,258
(7,369)
2,832
4,721
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Product revenue
Research and development revenue
Total collaboration revenue
Operating expenses:
Research and development expense
General and administrative expense
Net amount (recovered from) / payable to
collaborators
Total operating expenses
Product revenue
Research and development revenue
Total collaboration revenue
Operating expenses:
Research and development expense
General and administrative expense
Net amount (recovered from) collaborators
Total operating expenses
Product revenue
Research and development revenue
Total collaboration revenue
Operating expenses:
Research and development expense
General and administrative expense
Net amount (recovered from) collaborators
Total operating expenses
2003 Sandoz
Agreement
2006 Sandoz
Agreement
Mylan
Collaboration
Agreement
CSL Collaboration
Agreement
Total
For the Year Ended December 31, 2018
— $
7 $
7 $
— $
13,709 $
— $
13,709 $
39,684 $
2,461 $
42,145 $
826 $
152 $
— $
978 $
— $
33,437 $
33,437 $
25,932 $
1,978 $
(7,383) $
20,527 $
— $
— $
— $
875 $
31 $
9,665 $
10,571 $
39,684
35,905
75,589
27,633
15,870
2,282
45,785
2003 Sandoz
Agreement
2006 Sandoz
Agreement
Mylan
Collaboration
Agreement
CSL Collaboration
Agreement
Total
For the Year Ended December 31, 2017
313 $
2,856 $
3,169 $
1,958 $
15,426 $
— $
17,384 $
66,490 $
12,142 $
78,632 $
1,766 $
494 $
— $
2,260 $
— $
5,015 $
5,015 $
62,049 $
3,617 $
(25,835) $
39,831 $
— $
52,066 $
52,066 $
8,179 $
124 $
(3,320) $
4,983 $
66,803
72,079
138,882
73,952
19,661
(29,155)
64,458
2003 Sandoz
Agreement
2006 Sandoz
Agreement
Mylan
Collaboration
Agreement
Baxalta Agreement
Total
For the Year Ended December 31, 2016
— $
345 $
345 $
692 $
7 $
— $
699 $
74,648 $
2,545 $
77,193 $
1,911 $
470 $
— $
2,381 $
— $
6,368 $
6,368 $
55,147 $
3,009 $
(27,770) $
30,386 $
— $
25,713 $
25,713 $
1,196 $
187 $
— $
1,383 $
74,648
34,971
109,619
58,946
3,673
(27,770)
34,849
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
10. Preferred, Common and Treasury Stock
Preferred Stock
The Company is authorized to issue 5 million shares of preferred stock in one or more series and to fix the powers, designations, preferences and relative
participating, option or other rights thereof, including dividend rights, conversion rights, voting rights, redemption terms, liquidation preferences and the number of
shares constituting any series, without any further vote or action by the Company's stockholders. As of December 31, 2018 and 2017 , the Company had no shares
of preferred stock issued or outstanding.
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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 assets
legally 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 of the 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 by the stockholders of the Company.
Treasury Stock
Treasury stock represents common stock currently owned by the Company as a result of shares withheld from the vesting of performance-based restricted
common stock to satisfy minimum tax withholding requirements.
11. Share-Based Payments
Incentive Award Plans
The 2013 Incentive Award Plan, or the 2013 Plan, initially became effective on June 11, 2013. 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 be granted 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.
On March 7, 2018, the Company's Board of Directors approved the amendment and restatement of the Company’s 2013 Plan. At the Company’s 2018 Annual
Meeting of Stockholders, held on June 20, 2018, stockholders approved the amended and restated 2013 Plan. The amended and restated 2013 Plan, among other
things, increased the number of shares of common stock available for issuances under the plan by 1,000,000 shares.
Incentive stock options are granted only to employees of the Company. Incentive stock options granted to employees who own more than 10% of the total
combined 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 the
date of grant. Incentive stock options generally vest ratably over four years . Non-statutory stock options, restricted stock and restricted stock units may be granted
to employees, consultants, and members of the Company's board of directors. Non-statutory stock options granted have varying vesting schedules. Time-based
restricted stock awards and restricted stock units have been granted to employees and generally vest ratably over four years . Time-based restricted stock and
restricted stock units have been granted to board members and generally vest on the one year anniversary of the grant date. Performance-based restricted stock or
restricted stock units are granted to employees and vest in connection with the attainment of certain company milestones as described in more detail below.
Incentive and non-statutory stock options generally expire ten years after the date of grant. As of December 31, 2018 , there were 5,320,929 shares available for
issuance under the 2013 Plan.
Equity Award Retirement Policy
In December 2016, the Company's board of directors adopted a policy to provide for the treatment of time-based options and restricted stock units upon a
participant’s qualifying retirement from the Company. Under the policy, following the qualifying retirement of any employee of the Company or non-employee
member of the board of directors, the participant’s then-outstanding time-based options and restricted stock units will continue to vest during the one year period
following the retirement date. In addition, the participant will have until the first anniversary of the retirement date (or 90 days following the date an option
becomes first exercisable if such date is within the 90 days preceding the first anniversary of the retirement date) to exercise any vested options, except that no
option may be exercised following the date upon which it would have expired under the applicable option award agreement if the participant had remained in
service with the Company.
As the policy amended the terms of certain existing grants of time-based options effective January 11, 2017, the Company recorded incremental compensation
expense of $0.4 million related to the modification of those options in the consolidated statement of operations for the year ended December 31, 2017. Of that
expense, $0.3 million was included in the general administrative expense and $0.1 million was included in research and development expense.
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Share-Based Compensation
The Company records compensation cost for all share-based payment arrangements, including employee, director and consultant stock options, restricted
stock, and restricted stock units and the employee stock purchase plan.
The table below presents share-based compensation expense for research and development as well as general and administrative expense, both of which are
included in operating expenses, in the years ended December 31, 2018 , 2017 and 2016 (in thousands):
Research and development
General and administrative
Restructuring
Total share-based compensation expense
2018
2017
2016
$
6,383 $
5,699 $
7,558
11,031
10,428
10,764
3,808
—
—
$ 21,222 $ 16,127 $ 18,322
The following table summarizes share-based compensation expense recorded in each of the years ended December 31, 2018 , 2017 and 2016 (in thousands):
Stock options
Restricted stock awards and restricted stock units
Employee stock purchase plan
Restructuring
Total share-based compensation expense
Stock Options
2018
$
7,081 $
2017
10,036 $
10,032
5,608
301
3,808
483
—
2016
9,831
8,064
427
—
$
21,222 $
16,127 $
18,322
During the year ended December 31, 2018 , the Company granted 372,690 stock options to its employees and board members. The average grant date fair
value of options granted was calculated using the Black-Scholes-Merton option-pricing model and the weighted average assumptions are 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:
Expected volatility
Expected dividends
Expected life (years)
Risk-free interest rate
Weighted Average Assumptions
Stock Options
Employee Stock Purchase Plan
2018
2017
2016
2018
2017
2016
48%
—
6.1
2.8%
53%
—
5.9
2.1%
58%
—
6.1
1.6%
49%
—
0.5
1.6%
55%
—
0.5
0.7%
57%
—
0.5
0.4%
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The following table presents stock option activity for the year ended December 31, 2018 :
Outstanding at December 31, 2017
Granted
Exercised
Forfeited
Expired
Outstanding at December 31, 2018
Exercisable at December 31, 2018
Vested or expected to vest at December 31, 2018
Number of Stock
Options (in thousands)
Weighted Average
Exercise Price
Weighted Average
Remaining
Contractual Term (in
years)
Aggregate Intrinsic
Value (in thousands)
7,117 $
373
(1,995)
(476)
(61)
4,958 $
3,662 $
4,837 $
14.71
19.63
14.12
15.53
16.39
15.22
14.65
15.16
4.86 $
4.03 $
4.76 $
407,629
339,688
404,503
The weighted average grant date fair value of option awards granted during 2018 , 2017 and 2016 was $9.66 , $9.05 , and $6.04 per option, respectively. The
total intrinsic value of options exercised during 2018 , 2017 and 2016 was $13.9 million , $4.6 million , and $0.2 million , respectively. At December 31, 2018 , the
total remaining unrecognized compensation cost related to nonvested stock option awards amounted to $8.0 million , which will be recognized over the weighted
average remaining requisite service period of 2.18 years . The total fair value of options vested during 2018 , 2017 and 2016 was $10.5 million , $9.3 million , and
$9.9 million , respectively.
Cash received from option exercises for 2018 , 2017 and 2016 was $28.2 million , $9.2 million , and $1.4 million , respectively.
Restricted Stock and Restricted Stock Units
The Company has also made awards of time-based restricted stock and restricted stock units and performance-based restricted stock to its employees and
time-based restricted stock and restricted stock units to board members.
As of December 31, 2018 , the total remaining unrecognized compensation cost related to all nonvested restricted stock and restricted stock unit awards
amounted to $13.7 million , which is expected to be recognized over the weighted average remaining requisite service period of approximately 3.0 years .
Time-based Restricted Stock and Restricted Stock Units
During the year ended December 31, 2018 , the Company awarded 1,357,505 shares of time-based restricted stock units to its employees and board
members. The time-based restricted stock units awarded to employees vest as to 25% on the one year anniversary of the grant date and as to 6.25% quarterly over
three years that follow the grant date while the restricted stock units awarded to board members vest as to 100% on the one year anniversary of the grant date.
Time-based awards are generally forfeited if the employment or service relationship terminates with the Company prior to vesting, except as provided in the
Retirement Policy.
2011 Performance-Based Restricted Stock
Between 2011 and through early 2013, the Company awarded 949,620 shares of performance-based restricted stock to its employees. The performance-
based restricted stock was scheduled to vest upon FDA approval of the GLATOPA 20 mg/mL Abbreviated New Drug Application, or ANDA, on or before the
performance deadline date of March 28, 2015 according to the following schedule: 50% of the shares vest upon FDA approval and 50% vest upon the one year
anniversary of FDA approval. The Company had modified the awards to extend the performance deadline in periods prior to the earliest period presented in these
financial statements. FDA approval was attained on April 16, 2015. On that date the first 50% of the awards vested. The remaining 50% vested on April 16, 2016,
whereby compensation expense associated with this portion of the award was recognized through the vesting date.
2016 Performance-Based Restricted Stock
Since April 2016, the Company has awarded 1,785,600 shares of performance-based restricted stock to its employees. The vesting of these shares is subject
to the Company achieving up to two of three possible performance milestones on or before April 13, 2019. Upon achieving each of the first and second milestones,
25% of the shares will vest on the later of the milestone achievement date and the first anniversary of the grant date, and an additional 25% of the shares will vest
on the one
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year anniversary of such achievement date. Each quarter, the Company evaluates the probability of achieving the milestones on or before April 13, 2019, and its
estimate of the implicit service period over which the fair value of the awards will be recognized and expensed. At December 31, 2017 and through December 31,
2018, the Company concluded that two of the performance milestones were not probable of achievement by April 13, 2019. One performance milestone had been
achieved in February 2018. For the year ended December 31, 2018 , the Company recognized approximately $1.1 million of stock compensation costs related to
these awards .
2018 Performance-Based Restricted Stock Units
Since October 2018, the Company has awarded 1,812,758 shares of performance-based restricted stock units to its employees. The vesting of these units
are subject to the Company for achieving three possible milestones related to the Company's active novel programs. One sixth of the units will vest upon
achievement of each milestone and one sixth shall vest on the one year anniversary of that date. At December 31, 2018, the Company concluded that all of the
performance milestones were not probable of achievement. For the year ended December 31, 2018 , the Company recognized no stock compensation costs related
to these awards.
A summary of the status of nonvested shares of restricted stock and restricted stock units as of December 31, 2018 and the changes during the year then
ended are presented below (in thousands, except fair values):
Nonvested at January 1, 2018
Granted
Vested
Forfeited
Nonvested at December 31, 2018
Number of Shares
Weighted Average
Grant Date Fair Value
12.60
1,995 $
3,170
(959)
(707)
3,499 $
14.83
14.03
13.25
14.10
Nonvested shares of restricted stock and restricted stock units that have time-based vesting schedules and restricted stock that have performance-based
vesting schedules as of December 31, 2018 are summarized below (in thousands):
Vesting Schedule
Time-based
Performance-based
Nonvested at December 31, 2018
Nonvested Shares
1,142
2,357
3,499
The total fair value of shares of restricted stock and restricted stock units vested during 2018 , 2017 and 2016 was $13.6 million , $3.7 million , and $7.6
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 2,424,652 shares of common stock
have 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 participants
purchase 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 day
and 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 dates
occurring on the final business day of the given purchase period. To pay for the shares, each participant authorizes periodic payroll deductions of up to 15% of his
or her eligible cash compensation. All payroll deductions collected from the participant during a purchase period are automatically applied to the purchase of
common stock on that period's purchase date provided the participant remains an eligible employee and has not withdrawn from the ESPP prior to that date and
subject to certain limitations imposed by the ESPP and the Internal Revenue Code.
The Company issued 85,374 shares of common stock to employees under the ESPP during the year ended December 31, 2018 . As of December 31, 2018 ,
927,612 shares of common stock have been issued to the Company's employees under the ESPP, and 1,497,040 shares remain available for future issuance.
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The fair value of each ESPP award is estimated on the first day of the offering period using the Black-Scholes-Merton option-pricing model. The weighted
average assumptions the Company used in its fair value calculations and the expense recorded are noted in the table above under the heading Share-Based
Compensation . The Company recognizes share-based compensation expense equal to the fair value of the ESPP awards on a straight-line basis over the offering
period. At December 31, 2018 , subscriptions were outstanding for an estimated 38,694 shares at a fair value of approximately $8.22 per share. The weighted
average grant date fair value of the offerings during 2018 , 2017 and 2016 was $5.80 , $4.62 , and $4.32 per share, respectively. Cash received from the ESPP for
2018 , 2017 and 2016 was approximately $1.2 million , $1.2 million , and $1.1 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 net
loss 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 diluted
net 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 the
number of common stock equivalents that would be anti-dilutive had the Company had net income.
The following table presents anti-dilutive shares for the years ended December 31, 2018 , 2017 and 2016 (in thousands):
Weighted-average anti-dilutive shares related to:
Outstanding stock options
Restricted stock awards
13. Income Taxes
2018
2017
2016
2,975
868
5,671
1,064
6,569
1,202
In 2018, the Company adopted ASC 606, using the modified retrospective transition method as permissible for all contracts not yet completed as of January
1, 2018. This created approximately $1.5 million of deferred tax liabilities relating to federal and state deferred revenue temporary differences that are fully offset
by a corresponding decrease in the valuation allowance. As a result, there was no cumulative adjustment for income taxes to accumulated deficit upon adoption of
ASC 606.
The Tax Cuts and Jobs Act of 2017 (the 2017 Tax Act), which was signed into law on December 22, 2017, has resulted in significant changes to the U.S.
corporate income tax system. These changes include a federal statutory tax rate reduction from 35% to 21%, which reduced the Company's deferred tax assets and
corresponding valuation allowance.
On December 22, 2017, the SEC staff issued Staff Accounting Bulletin No. 118, or SAB 118, to address the application of U.S. GAAP in situations when a
registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for
certain income tax effects of the Tax Reform Act. The Company had recognized the provisional tax impacts related to the revaluation of the deferred tax assets and
liabilities in the financial statements of prior periods. The accounting was completed in the year ended December 31, 2018, with the finalization and filing of the
Company's 2017 U.S. corporate income tax return, with no adjustment to provisional amounts.
Deferred income taxes reflect the tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting and
income tax purposes. The Company reevaluates the positive and negative evidence bearing upon the realizability of its deferred tax assets on an annual basis. Since
the Company has generated operating losses and expects to continue to incur future losses, the Company has concluded, in accordance 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.
Components of the net deferred tax assets at December 31, 2018 and 2017 are as follows (in thousands):
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Deferred tax assets:
Federal and state net operating losses
Research credits
Deferred compensation
Deferred revenue
Accrued expenses
Intangibles
Unrealized loss on marketable securities
Total deferred tax assets
Deferred tax liabilities:
Depreciation
Total deferred tax liabilities
Valuation allowance
Net deferred tax assets
2018
2017
$
154,164 $
39,222
7,605
1,555
6,960
1,800
24
99,252
36,819
8,274
9,184
4,977
2,020
13
211,330
160,539
$
$
$
(1,470) $
(1,470)
(802)
(802)
(209,860) $
(159,737)
— $
—
A reconciliation of the federal statutory income tax benefit to the Company's actual provision for the years ended December 31, 2018 , 2017 and 2016 is as
follows (in thousands):
Benefit at federal statutory tax rate
State taxes, net of federal benefit
Share-based compensation
Tax credits
Other
Change in valuation allowance
Federal statutory rate change
Income tax provision
2018
2017
2016
$
(36,967) $
(29,941) $
(11,720)
(613)
(2,321)
3
51,618
—
— $
(4,713)
1,370
(2,733)
492
(17,817)
53,342
— $
$
(7,137)
(1,108)
5,148
(4,120)
272
6,945
—
—
At December 31, 2018 , the Company had federal and state net operating loss carryforwards of $569.0 million and $548.5 million , respectively, available to
reduce future taxable income that will expire at various dates through 2038 . At December 31, 2018 , the Company had federal and state research and development
and other credit carryforwards, including the orphan drug credit, of $37.9 million and $12.2 million , respectively, available to reduce future tax liabilities. Federal
and state research and development and other credit carryforwards expire at various dates through 2038 , while the orphan drug credit does not expire. Ownership
changes, as defined in the Internal Revenue Code, may limit the amount of net operating loss 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, 2018 2017 and 2016 is as follows (in
thousands):
Balance, beginning of year
Additions for tax positions related to the current year
Reductions of tax positions of prior years
Balance, end of year
2018
2017
2016
$
$
7,940 $
6,678 $
639
—
1,262
—
8,579 $
7,940 $
5,116
1,602
(40)
6,678
As of December 31, 2018 and 2017 , the Company had $8.6 million and $7.9 million of gross unrecognized tax benefits, respectively, of which $8.4 million
and $7.8 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 does not anticipate that it is reasonably possible that the uncertain tax positions will significantly increase or decrease within the next twelve
months .
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The Company files income tax returns in the United States federal jurisdiction and in the Massachusetts state jurisdiction. The Company is no longer subject
to any tax assessment from an income tax examination for years before 2015, except to the extent that in the future it utilizes net operating losses or tax credit
carryforwards that originated before 2015.
14. Restructuring
On September 26, 2018, following the completion of a strategic review of its business, the Company's Board of Directors approved a plan, or the Workforce
Reduction, to reduce its workforce headcount by approximately 50% . As of December 31, 2018, the Company has substantially completed executing the
Workforce Reduction. The Company evaluated the related employee severance and other benefits to employees in connection with the Workforce Reduction to
determine whether the benefits were within the scope of ASC 712, Compensation - Non-retirement Post-employment Benefits , or within the scope of ASC 420,
Exit or Disposal Cost Obligations, depending on the nature of the benefit and whether it is part of an on-going benefit arrangement under ASC 712 or a one-time
termination benefit unique to the Workforce Reduction. The Company recorded restructuring expense of $8.6 million pursuant to ASC 712 and $1.8 million
pursuant to ASC 420 for the year ended December 31, 2018. The Company also recorded incremental stock-based compensation charges of $3.8 million associated
with the accelerated vesting of certain awards and extended exercisability of options previously issued to the Company’s executives that were part of the
Workforce Reduction. In addition, the Company recorded certain asset impairment charges of $3.6 million in accordance with ASC 360 Property, Plant and
Equipment, associated with certain laboratory equipment. The Company classified $1.3 million of such laboratory equipment as held-for-sale at December 31,
2018. The Company does not expect to record significant restructuring charges associated with the Workforce Reduction in future periods.
The following table outlines the components of the restructuring charges for the year ended December 31, 2018 included in the consolidated statement of
operations, and the ending liability recorded in accrued restructuring in the balance sheet as at December 31, 2018:
Restructuring charges
in the year ended
December 31, 2018
Amount paid through
December 31, 2018
Less: non-cash
charges in the year
ended December 31,
2018
Remaining liability at
December 31, 2018
$
$
$
$
10,391 $
3,808 $
3,608 $
17,807 $
(7,156) $
— $
— $
(7,156) $
— $
(3,808) $
(3,608) $
(7,416) $
3,235
—
—
3,235
Employee severance, bonus and other
Acceleration of stock-based compensation
Impairment of equipment
Total restructuring charges
15. Commitments and Contingencies
Operating Leases
The Company leases office space and equipment under various operating lease agreements. Rent expense for office space under operating leases amounted
to $26.8 million , $19.3 million and $18.5 million for the years ended December 31, 2018 , 2017 and 2016 , respectively.
The Company leased approximately 78,500 square feet of office and laboratory space at 675 West Kendall Street in Cambridge, Massachusetts. The lease
expired on April 30, 2018 .
In February 2013, the Company entered into a lease agreement to lease approximately 105,000 square feet of office and laboratory space at 320 Bent Street
in Cambridge, Massachusetts. Annual rental payments are approximately $8.1 million and are subject to annual rent escalation. The lease expires on February 28,
2027 .
In July 2017, the Company entered into a lease agreement to lease approximately 52,000 square feet of office and laboratory space on the fourth floor of 301
Binney Street in Cambridge, Massachusetts. On August 2, 2018, the Company amended its lease agreement terminate the lease with respect to the premises,
effective August 6, 2018. The Company incurred a $1.1 million termination fee.
In September 2016, the Company leased approximately 80,000 square feet of office and laboratory space on the fifth floor of 301 Binney Street in
Cambridge, Massachusetts. Annual rental payments are approximately $6.1 million and are subject to annual rent escalations. The lease expires on June 29, 2025.
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The Company was provided allowances from the landlord totaling approximately $9.9 million as reimbursement of certain laboratory and office
improvements that could be spent among the premises.
The Company records rent expense, inclusive of the escalating rent payments and free rent periods, on a straight-line basis over the terms of the lease. Tenant
reimbursement amounts are recorded upon payment as deferred rent on the consolidated balance sheets and are amortized as a reduction to rent expense over the
lease term. The Company capitalizes the cost of normal tenant improvements as leasehold improvements as the costs are incurred.
Total operating lease commitments as of December 31, 2018 are as follows (in thousands):
Operating lease commitments
2019
2020
2021
2022
2023
2024 and beyond
Total future minimum lease payments
Purchase Obligations
$
Total
15,418
15,872
16,266
16,644
16,783
44,113
$
125,096
In June 2018, the Company amended a supply manufacturing agreement with GSK to provide for minimum purchase obligations of approximately $22.5
million during calendar years 2019 and 2020 and $28.3 million during calendar years 2021 and 2022.
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 through
litigation or other means is inherently uncertain and it is possible that an unfavorable resolution of these matters will adversely affect the Company, its results of
operations, 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 proceedings
and other matters that could cause an increase or decrease in the amount of any accrual on its consolidated balance sheets.
GLATOPA 40 mg/mL-Related Litigation
On September 10, 2014, Teva and Yeda filed a suit against us and Sandoz in the United States District Court for the District of Delaware in response to the
filing by Sandoz of the ANDA with a Paragraph IV certification for GLATOPA 40 mg/mL. The suit initially alleged infringement related to two Orange Book-
listed patents for COPAXONE 40 mg/mL, and sought declaratory and injunctive relief prohibiting the launch of our product until the last to expire of these patents.
In April 2015 and November 2015, Teva and Yeda filed additional suits against us and Sandoz in the United States District Court for the District of Delaware
alleging infringement related to additional Orange Book-listed patents for COPAXONE 40 mg/mL, which were consolidated with the initial suit. Teva and Yeda
sought declaratory and injunctive relief prohibiting the launch of GLATOPA 40 mg/mL until the expiration of the patents at issue. On January 30, 2017, the
District Court found the four patents to be invalid due to obviousness. In February 2017, Teva and Yeda appealed the District Court's January 30, 2017 decision to
the U.S. Court of Appeals for the Federal Circuit, or CAFC. On October 12, 2018, the CAFC affirmed the District Court's decision that the four patents were
invalid. The time period for appeal by Teva and Yeda has expired so the CAFC decision is binding.
On January 31, 2017, Teva filed a suit against us and Sandoz in the United States District Court for the District of New Jersey alleging infringement related
to an additional patent for COPAXONE 40 mg/mL, U.S. Patent No. 9,155,775. On January 31, 2017, Teva voluntarily dismissed us from the New Jersey suit for
U.S. Patent No. 9,155,775, maintaining the suit against Sandoz On May 23, 2017, the United States District Court for the District of New Jersey granted our and
Sandoz's motion to transfer the suit to the United States District Court for the District of Delaware. Pursuant to the Court's amended schedule a trial is scheduled to
commence before the United States District Court for the District of Delaware on May 6, 2019.
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On February 2, 2017, the Company filed a complaint in the United States District Court for the District of Delaware seeking a declaration that U.S. Patent No.
9,155,775 is invalid, not infringed or not enforceable against the Company. In March 2017, Teva filed a motion, which is currently pending, to stay further
proceedings in the Delaware action.
M834-Related Proceedings
On July 2, 2015, the Company filed a petition for Inter Partes Review, or IPR, with the Patent Trial and Appeal Board, or PTAB, to challenge the validity of
U.S. Patent No. 8,476,239, a patent for ORENCIA owned by Bristol-Myers Squibb, or BMS. The PTAB issued a decision instituting the IPR proceedings in
January 2016, and BMS filed for a rehearing by the full PTAB. Oral arguments took place in September 2016. On December 22, 2016, the PTAB issued a decision
upholding the validity of the patent. The Company filed a notice of appeal in the CAFC, on February 22, 2017. The parties have each briefed the CAFC on the
question of whether a non-patent owner challenging a patented claim in IPR has constitutional standing to appeal by the PTAB that the challenged patented claim
is valid. Oral argument before the Federal Circuit was held on December 5, 2017. On February 7, 2019 the CAFC dismissed the appeal of the IPR for lack of
standing. The Company is in the process of evaluating its options with respect to the IPR.
Enoxaparin Sodium Injection-related Litigation
On September 21, 2011, the Company and Sandoz sued Amphastar and Actavis in the United States District Court for the District of Massachusetts for patent
infringement. Also in September 2011, the Company filed a request for a temporary restraining order and preliminary injunction to prevent Amphastar and Actavis
from selling their Enoxaparin product in the United States. In October 2011, the District Court granted the Company's motion for a preliminary injunction and
entered an order enjoining Amphastar and Actavis from advertising, offering for sale or selling their Enoxaparin product 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 connection with the litigation. Amphastar and Actavis
appealed the decision to the CAFC, and in January 2012, the CAFC stayed the preliminary injunction. In August 2012, the CAFC vacated the preliminary
injunction and remanded the case to the District Court.
In April 2017, the Company, Sandoz and Actavis, or the Settling Parties, settled and signed reciprocal releases of all claims, and filed a voluntary stipulation
with the District Court, pursuant to which the Settling Parties stipulated and agreed to dismiss with prejudice all claims and counterclaims among the Settling
Parties, without fees or costs to any party, and with the Settling Parties waiving any and all right of appeal. The District Court trial was held in July 2017, and the
jury verdict found the Company's patent to be infringed, but invalid and unenforceable. In February 2018, the District Court confirmed the jury’s opinion that the
patent was infringed but invalid, and narrowed the jury’s recommendation on unenforceability by finding the patent to be unenforceable against only one of the
two infringing methods used by Amphastar. On March 20, 2018, the District Court entered its final judgment affirming its February 2018 rulings. On March 27,
2018, the Company and Sandoz filed a notice of appeal of the final judgment with the CAFC. The appeal has been docketed and briefing was completed on
November 19, 2018. On February 20, 2019, the Company and Sandoz filed with the District Court a motion for relief from judgment with respect to its final
judgment.In the event that the Company is not successful in further appeal or prosecution or settlement of this action against Amphastar, and Amphastar is able to
prove they suffered damages as a result of the preliminary injunction, the Company could be liable for damages for up to $35.0 million of the security bond. The
Company posted $36.1 million as collateral for the security bond and classified the collateral as restricted cash in its consolidated balance sheet. On March 23,
2018, Amphastar filed a motion to enforce liability on the security bond with the District Court. On April 3, 2018, the Company and Sandoz filed an emergency
motion to defer consideration of Amphastar's motion to enforce liability on the security bond pending exhaustion of appeals. On July 16, 2018, the District Court
denied Amphastar's motion to enforce liability on the security bond and allowed the Company's and Sandoz' motion to defer consideration. Litigation involves
many risks and uncertainties, and there is no assurance that the Company or Sandoz will prevail in this patent enforcement suit.
On September 17, 2015, Amphastar filed a complaint against the Company and Sandoz in the United States District Court for the Central District of
California. The complaint alleges that, in connection with filing the September 2011 patent infringement suit against Amphastar and Actavis, the Company and
Sandoz sought to prevent Amphastar from selling generic Enoxaparin Sodium Injection and thereby exclude competition for generic Enoxaparin Sodium Injection
in violation of federal and California anti-trust laws and California unfair business laws. Amphastar is seeking unspecified damages and 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 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 the court reverse and review the District Court's grant of transfer and in May 2016, the writ requested by Amphastar was denied. On July 27, 2016, the
Company's and Sandoz' motion to dismiss was granted by the District Court, and the case was dismissed. On August 25, 2016, Amphastar filed a notice of appeal
from the dismissal with the United States Court of Appeals for the First Circuit. Briefing was completed in December 2016, and oral argument was held on
February 9, 2017. On March 6, 2017, the United States Court
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of Appeals for the First Circuit reversed the District Court’s dismissal and remanded the case to the District Court for further proceedings. On April 6, 2017, the
District Court held a scheduling conference to provide dates for the remanded case, and on April 20, 2017, the Company and Sandoz filed a renewed motion to
dismiss which was denied by the District Court on March 20, 2018. A trial is scheduled for September 2019. On February 19, 2019, Amphastar filed with the
District Court a motion for partial summary judgment on issues previously litigated in the patent action.
On October 14, 2015, The Hospital Authority of Metropolitan Government of Nashville and Davidson County, Tennessee, d/b/a Nashville General Hospital,
or 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 certain
purchasers of LOVENOX or generic Enoxaparin Sodium Injection. The complaint alleges that, in connection with filing the September 2011 patent infringement
suit against Amphastar and Actavis, the Company and Sandoz sought to prevent Amphastar from selling generic Enoxaparin Sodium Injection and thereby exclude
competition for generic Enoxaparin Sodium Injection in violation of federal anti-trust laws. NGH is seeking injunctive relief, disgorgement of profits and
unspecified 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 District
Court for the District of Massachusetts. On March 21, 2017, the United States District Court for the Middle District of Tennessee dismissed NGH’s claim for
damages against the Company and Sandoz, but allowed the case to move forward, in part, for NGH’s claims for injunctive and declaratory relief. In the same
opinion, the United States District Court for the Middle District of Tennessee denied the Company's motion to transfer. On June 9, 2017, NGH filed a motion to
amend its complaint to add a new named plaintiff, the American Federation of State, County and Municipal Employees District Council 37 Health & Security Plan,
or DC37. NGH and DC37 seek to assert claims for damages under the laws of more than 30 different states, on behalf of a putative class of indirect purchasers of
LOVENOX or generic Enoxaparin. On June 30, 2017, the Company and Sandoz filed a brief opposing the motion to amend the complaint. On December 14, 2017,
the District Court granted NGH's motion to amend. In January 2018, the Company and Sandoz filed three motions to dismiss the amended complaint. On
December 6, 2018 the District Court granted one of the motions, granted one in part and denied one. As a result the suit will continue pursuant to the surviving
portions of the amended complaint. While the outcome of litigation is inherently uncertain, the Company believes this suit is without merit, and intends to
vigorously defend itself in this litigation.
16. 401(k) Plan
The Company has a defined contribution 401(k) plan available to eligible employees. Employee contributions are voluntary and are determined on an
individual basis, limited by the maximum amounts allowable under federal tax regulations. The Company has discretion to make contributions to the plan. The
Company matches 50% of the first 6% contributed by employees. The Company recorded $0.9 million , $1.1 million and $1.0 million of such match expense in the
years ended December 31, 2018 , 2017 and 2016 , respectively.
17. Equity Financings
In April 2015, the Company entered into an ATM Agreement, or the 2015 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 $75.0 million from 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 of shares of its common stock
under the 2015 ATM Agreement. The Company concluded sales under the 2015 ATM Agreement in May 2017. In the year ended December 31, 2017, the
Company sold approximately 4.5 million shares of common stock pursuant to an effective shelf registration statement filed with the SEC (Reg. No. 333-209813)
and a related prospectus supplement, raising net proceeds of $64.1 million .
In December 2018, the Company sold an aggregate of 20 million shares of its common stock through an underwritten public offering at a price to the public
of $11.50 per share. As a result of the offering, which includes the exercise in full of the underwriter’s option to purchase additional shares of common stock, the
Company received aggregate net proceeds of approximately $217.8 million , after deducting underwriting discounts and commissions and other offering expenses.
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18. Selected Quarterly Financial Data (Unaudited)
(in thousands, except per share data)
2018
Product revenue
Research and development revenue
Total collaboration revenue
Operating loss
Net loss
Comprehensive loss
Net loss per share:
Basic
Diluted
Shares used in calculating net loss per share:
Basic
Diluted
2017
Product revenue
Research and development revenue
Total collaboration revenue
Operating (loss) income
Net (loss) income
Comprehensive (loss) income
Net (loss) income per share:
Basic
Diluted
Shares used in calculating net (loss) income per share:
Basic
Diluted
March 31
June 30
September 30
December 31
Quarter Ended
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
3,521 $
1,331 $
4,852 $
(49,002) $
(47,631) $
(48,066) $
(0.63) $
(0.63) $
75,454
75,454
23,404 $
3,210 $
26,614 $
(32,592) $
(31,759) $
(31,825) $
(0.46) $
(0.46) $
69,711
69,711
11,779 $
1,252 $
13,031 $
(70,840) $
(69,885) $
(69,611) $
(0.91) $
(0.91) $
76,543
76,543
19,140 $
4,430 $
23,570 $
(38,065) $
(36,908) $
(36,933) $
(0.50) $
(0.50) $
73,379
73,379
13,621 $
1,263 $
14,884 $
(51,815) $
(50,300) $
(50,163) $
(0.65) $
(0.65) $
77,229
77,229
10,890 $
13,200 $
24,090 $
(34,527) $
(33,188) $
(33,136) $
(0.44) $
(0.44) $
74,611
74,611
10,763
32,059
42,822
(9,670)
(8,245)
(8,168)
(0.10)
(0.10)
82,087
82,087
13,369
51,239
64,608
12,633
13,759
13,572
0.18
0.18
74,770
75,033
Basic and diluted net loss per common share amounts for the quarters and full years have been calculated separately. Accordingly, quarterly amounts may
not add to the annual amount because of differences in the weighted-average common shares outstanding during each period principally due to the effect of the
Company issuing shares of its common stock during the year.
Item 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
and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of December 31, 2018 . Our management recognizes that any controls and
procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its
judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on this evaluation, our Chief Executive
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Table of Contents
Officer and Chief Financial Officer concluded that, as of December 31, 2018 , 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 our
internal control over financial reporting as of December 31, 2018 , based on the criteria set forth in the Committee of Sponsoring Organizations of the Treadway
Commission's (COSO) updated 2013 framework entitled "Internal Control—Integrated Framework." Based on its assessment, our management concluded that, as
of December 31, 2018 , 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 on
the effectiveness of our internal control over financial reporting. This report appears below.
Changes in Internal Control Over Financial Reporting
We use a cloud-based enterprise resource management system provided by an outside service provider for which a service auditor has issued a System and
Organization Controls Report (SOC-1) report concerning certain internal controls at the service provider. Upon issuance of the SOC-1 report in January 2019, we
learned that the service provider had ineffective information technology change management controls during the period from April 1, 2018 to September 30, 2018,
which would have permitted unauthorized changes to be made to production application systems by certain employees of the service provider (the “Deficiency”).
After the issuance of the initial SOC-1 report, the service auditor issued a general use attestation report that determined that certain compensating controls that had
not previously been tested by the service auditor operated effectively from October 1, 2018 to December 31, 2018, and therefore the Deficiency was remediated
and the service provider’s change management controls were operating effectively as of December 31, 2018. The subsequent report indicated that no unauthorized
changes were made to data or systems.
As a result of the Deficiency at the service provider, and due to the extent that our own internal controls and financial reporting processes are impacted by
the service provider’s enterprise resource management system, in the first quarter of 2019 we determined that we had an interim material weakness in our internal
control over financial reporting, which was remediated as of October 1, 2018 due to compensating controls with respect to change management that operated
effectively. Apart from the foregoing, there was no change in our internal control over financial reporting during the quarter ended December 31, 2018 that has
materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Report of Independent Registered Public Accounting Firm
The Stockholders and Board of Directors of Momenta Pharmaceuticals, Inc.
Opinion on Internal Control over Financial Reporting
We have audited Momenta Pharmaceuticals, Inc.’s (the “Company”) internal control over financial reporting as of December 31, 2018 , based on criteria
established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the
COSO criteria). In our opinion, Momenta Pharmaceuticals, Inc. (the “Company”) maintained, in all material respects, effective internal control over financial
reporting as of December 31, 2018 , based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated
balance sheets of the Company as of December 31, 2018 and 2017 , the related consolidated statements of operations and comprehensive loss, stockholders’
equity, and cash flows for each of the three years in the period ended December 31, 2018 , and the related notes and our report dated February 22, 2019 expressed
an unqualified opinion thereon.
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Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness 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 are a public accounting firm registered
with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan 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
evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary
in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over
financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in
accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of
unauthorized 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 of
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with
the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
Boston, Massachusetts
February 22, 2019
Item 9B. OTHER INFORMATION
None.
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Table of Contents
Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
PART III
The information relating to our directors, nominees for election as directors and executive officers under the headings "Election of Directors," "Momenta's
Corporate Governance—Our Executive Officers," "Momenta's Corporate Governance—Board Committees" and "Security Ownership of Certain Beneficial
Owners and Management—Section 16(a) Beneficial Ownership Reporting Compliance" in our definitive proxy statement for our 2019 Annual Meeting of
Stockholders is incorporated 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 and ethics 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 of business conduct and ethics that is required to be publicly disclosed pursuant to rules of the Securities and Exchange Commission and The NASDAQ
Global Select Market by 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 2019 Annual Meeting of Stockholders is incorporated
herein 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 2019
Annual Meeting of Stockholders is incorporated herein by reference to such proxy statement. Information required by this Item relating to securities authorized for
issuance under equity compensation plans is contained in our definitive proxy statement for our 2019 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 of
Independence" in our definitive proxy statement for our 2019 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 our
2019 Annual Meeting of Stockholders is incorporated herein by reference to such proxy statement.
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Table of Contents
PART 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:
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets at December 31, 2018 and 2017
Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31, 2018,
2017 and 2016
Consolidated Statements of Stockholders' Equity for the years ended December 31, 2018, 2017 and 2016
Consolidated Statements of Cash Flows for the years ended December 31, 2018, 2017 and 2016
Notes to Consolidated Financial Statements
Page number in
this report
66
67
68
69
70
71
2.
3.
All schedules are omitted as the information required is either inapplicable or is presented in the financial statements and/or the related notes.
The exhibits listed on the Exhibit Index beginning on the page that follows, which is incorporated herein by reference, are filed or furnished as part of
this report or are incorporated into this report by reference.
103
Table of Contents
EXHIBIT INDEX
Exhibit
Number
Exhibit Description
Articles of Incorporation and By-Laws
3.1 Third Amended and Restated Certificate of Incorporation.
3.2
3.3
3.4
Certificate of Amendment to Third Amended and Restated Certificate of
Incorporation
Certificate of Designations of Series A Junior Participating Preferred Stock of
the Registrant.
Fourth Amended and Restated By-Laws of the Registrant, adopted on March 14,
2017.
Incorporated by Reference to
Form or
Schedule
Exhibit No.
Filing Date with
SEC
SEC File Number
S-3
8-K
8-K
8-K
3.1
3.1
3.1
3.1
4/30/2013
1/30/2019
333-188227
000-50797
11/8/2005
000-50797
3/17/2017
000-50797
Instrument 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
10.1
10.2
10.3†
10.3.1
Material Contracts—Collaboration and License Agreements
Letter Agreement dated January 29, 2007 between Sandoz AG and the
Registrant.
Letter Agreement dated February 1, 2007 between Sandoz AG and the
Registrant.
Collaboration and License Agreement, dated June 13, 2007, by and between
Sandoz AG and the Registrant.
Amendment No. 1, dated April 25, 2008, to the Collaboration and License
Agreement, dated June 13, 2007, by and between Sandoz AG and the Registrant.
10.3.2†
Amendment No. 2, dated December 14, 2009, to the Collaboration and License
Agreement, dated June 13, 2007, by and between Sandoz AG and the Registrant.
10.3.3
Amendment No. 3, dated April 1, 2011, to the Collaboration and License
Agreement dated June 13, 2007 by and between Sandoz AG and the Registrant.
10.3.4†
Amendment No. 4, dated May 26, 2016, to the Collaboration and License
Agreement, dated June 13, 2007, by and between Sandoz AG and the Registrant,
as amended.
10.3.5†
Amendment No. 5, dated November 30, 2017, to the Collaboration and License
Agreement, dated June 13, 2007, by and between Sandoz AG and the Registrant,
as amended.
10.4
Letter Agreement dated November 8, 2011 by and between the Registrant,
Sandoz AG and Sandoz Inc.
Letter agreement by and between Sandoz AG and the Registrant, executed as of
October 4, 2017.
10-K
10.16
3/15/2007
000-50797
10-Q
10-Q/A
10-Q
10.2
10.1
10.1
5/10/2007
000-50797
12/16/2016
000-50797
5/9/2008
000-50797
10-K
10.18
3/12/2010
000-50797
10-Q
10-Q
10.1
10.1
8/5/2011
000-50797
8/5/2016
000-50797
10-K
10.3.5
2/26/2018
000-50797
10-K
10.20
2/28/2012
000-50797
10-Q
10.2
11/1/2017
000-50797
Collaboration Agreement, by and between Momenta Pharmaceuticals, Inc. and
Mylan Ireland Limited, executed as of January 8, 2016.
License and Option Agreement, by and between the Registrant and CSL Behring
Recombinant Facility AG, dated as of January 4, 2017.
10-Q/A
10.2
2/3/2017
000-50797
10-Q
10.1
5/5/2017
000-50797
Letter to the Registrant from CSL Limited, dated as of January 4, 2017.
10-Q
10.2
5/5/2017
000-50797
104
10.5†
10.6†
10.7†
10.8†
Table of Contents
10.9†
Letter Amendment, dated as of June 27, 2017, to License and Option
Agreement, by and between the Registrant and CSL Behring Recombinant
Facility AG, dated as of January 4, 2017.
10-Q
10.1
8/4/2017
000-50797
10.10†
Asset Return and Termination Agreement, effective as of December 31, 2016,
by and between the Registrant and Baxalta Incorporated, Baxalta US Inc. and
Baxalta GmbH.
10.10.1†
Amendment No. 1 to Asset Return and Termination Agreement, effective as of
March 20, 2017, to Asset Return and Termination Agreement, effective as of
December 31, 2016, by and between the Registrant and Baxalta Incorporated,
Baxalta US Inc. and Baxalta GmbH.
10-K
10.7
2/24/2017
000-50797
10-Q
10.3
5/5/2017
000-50797
Material Contracts—Management Contracts and Compensation Plans
10.11# Amended and Restated 2002 Stock Incentive Plan.
10.12# 2004 Stock Incentive Plan, as amended.
10.13#
10.14#
Form of Incentive Stock Option Agreement Granted Under 2004 Stock Incentive
Plan.
Form of Nonstatutory Stock Option Agreement Granted Under 2004 Stock
Incentive Plan.
10.15# Form of Restricted Stock Agreement Under 2004 Stock Incentive Plan.
Momenta Pharmaceuticals, Inc. 2004 Employee Stock Purchase Plan (as
amended and restated).
10.16#
10.17#
10-K
10-K
10-Q
10-Q
8-K
10-Q
10.17
10.18
10.1
10.2
10.2
10.6
3/15/2007
3/15/2007
8/16/2004
000-50797
000-50797
000-50797
8/16/2004
000-50797
2/28/2008
8/4/2017
000-50797
000-50797
Non-Employee Director Compensation Policy.
10-Q
10.4
8/4/2017
000-50797
10.18#
Employment Agreement, dated August 22, 2006, between Craig Wheeler and
the Registrant.
10.18.1#
Amendment effective December 16, 2010 to the Employment Agreement, dated
August 22, 2006, between Craig Wheeler and the Registrant.
10.19#
Restricted Stock Agreement, dated August 22, 2006, between Craig Wheeler and
the Registrant.
10.19.1#
Nonstatutory Stock Option Agreement, dated August 22, 2006, between Craig
Wheeler and the Registrant.
10.20#
Incentive Stock Option Agreement, dated August 22, 2006, between Craig
Wheeler and the Registrant.
10.21# Form of Employment Agreement for executive officers.
10.22#
10.23#
10.24#
10.25#
10.26#
10.27#
10.28#
10.29#
Second Amended and Restated Employment Agreement, dated April 28, 2008,
by the Registrant and Ganesh Venkataraman.
Form of Amendment to the Employment Agreement for executive officers dated
December 15, 2010.
Amendment No. 1 to the Restricted Stock Agreement made on January 17, 2007
between the Registrant and Craig A. Wheeler dated November 4, 2009.
Momenta Pharmaceuticals, Inc. 2013 Incentive Award Plan (as amended and
restated).
Form of Stock Option Agreement under the Momenta Pharmaceuticals, Inc.
2013 Incentive Award Plan.
Form of Restricted Stock Agreement under the Momenta Pharmaceuticals, Inc.
2013 Incentive Award Plan.
Form of Restricted Stock Unit Agreement under the Momenta Pharmaceuticals,
Inc. 2013 Incentive Award Plan.
Executive Employment Agreement, effective as of October 27, 2016, by and
between the Registrant and Scott M. Storer.
10-Q
10.7
11/8/2006
000-50797
10-K
10.28
3/10/2011
000-50797
10-Q
10-Q
10.8
10.9
11/8/2006
000-50797
11/8/2006
000-50797
10-Q
10.10
11/8/2006
000-50797
10-Q
10-Q
10.3
10.4
5/9/2008
5/9/2008
000-50797
000-50797
10-K
10.39
3/10/2011
000-50797
10-Q
10-Q
8-K
8-K
10.1
10.1
10.1
10.2
11/5/2009
000-50797
8/9/2018
000-50797
6/13/2013
000-50797
6/13/2013
000-50797
10-K
10.27
2/24/2017
000-50797
10-K
10.29
2/24/2017
000-50797
105
Table of Contents
10.30#
10.31#
10.32#
10.33#
Industry Consulting Agreement, dated as of December 30, 2016, by and between
the Registrant and Richard P. Shea.
10-K
10.30
2/24/2017
000-50797
Momenta Pharmaceuticals, Inc. Equity Award Retirement Policy.
10-Q
10.4
5/5/2017
000-50797
Agreement and General Release, by and between the Registrant and Matthew
Ottmer, dated as of May 4, 2017.
10-Q
10.2
8/4/2017
000-50797
Form of Amendment to the Executive Employment Agreements between the
Registrant and each of Scott M. Storer, Ganesh V. Kaundinya and Bruce A.
Leicher, effective as of June 21, 2017.
10-Q
10.3
8/4/2017
000-50797
10.34#
Form of Amendment to the Executive Employment Agreements between the
Registrant and each of Young Kwon, Anthony Manning, Jo-Ann Beltramello,
Ian Fier and Santiago Arroyo, effective as of June 29, 2017.
*10.35#
*10.36#
*10.37#
*10.38#
*10.39#
10.40†
10.40.1
10.40.2
10.40.3
10.40.4
10.40.5
Separation and Release Agreement between the Registrant and Scott M. Storer,
dated November 5, 2018.
Separation and Release Agreement between the Registrant and Ganesh V.
Kaundinya, dated October 5, 2018.
Separation and Release Agreement between the Registrant and Bruce A.
Leicher, dated October 5, 2018.
Employment Agreement, as amended, effective as of May 29, 2017, by and
between the Registrant and Michelle Robertson.
Employment Agreement, as amended, effective as of August 10, 2017, by and
between the Registrant and Alejandra Carvajal.
Material Contracts—Leases
Sublease Agreement, dated September 14, 2004, by and between Vertex
Pharmaceuticals Incorporated and the Registrant.
First Amendment to Sublease (regarding Sublease Agreement, dated
September 14, 2004), dated September 7, 2005, between Vertex Pharmaceuticals
Incorporated and the Registrant.
Second Amendment to Sublease (regarding Sublease Agreement, dated
September 14, 2004, as amended), effective as of November 21, 2005, between
Vertex Pharmaceuticals Incorporated and the Registrant.
Third Amendment to Sublease (regarding Sublease Agreement, dated
September 14, 2004, as amended), effective as of January 27, 2006, between
Vertex Pharmaceuticals Incorporated and the Registrant.
Letter Agreement (regarding Sublease Agreement, dated September 14, 2004, as
amended), dated June 29, 2006, between Vertex Pharmaceuticals Incorporated
and the Registrant.
Fourth Amendment to Sublease (regarding Sublease Agreement, dated
September 14, 2004, as amended), effective as of July 14, 2014, between Vertex
Pharmaceuticals Incorporated and the Registrant.
10-Q
10.3
8/4/2017
000-50797
10-Q
10-Q
10.9
10.3
11/12/2004
000-50797
11/14/2005
000-50797
10-K
10.47
3/16/2006
000-50797
10-K
10.48
3/16/2006
000-50797
10-Q
10.1
8/9/2006
000-50797
8-K
10.1
7/18/2014
000-50797
10.41
Lease, dated February 5, 2013, by and between BMR-Rogers Street LLC and the
Registrant.
10.41.1
10.41.2
10.41.3
First Amendment dated March 21, 2013 to the Lease dated February 5, 2013 by
and between BMR-Rogers Street LLC and the Registrant.
Second Amendment to the Lease, dated May 24, 2013, by and between BMR-
Rogers Street LLC and the Registrant.
Third Amendment to the Lease, dated December 30, 2015, by and between
BMR-Rogers Street LLC and the Registrant.
10-Q
10-Q
10-Q
8-K
10.1
10.2
10.4
10.1
5/10/2013
000-50797
5/10/2013
000-50797
8/6/2013
000-50797
1/5/2016
000-50797
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Table of Contents
10.41.4
10.41.5
*10.41.6
10.41.7
10.42
Fourth Amendment dated July 24, 2017 to the Lease dated February 5, 2013 by
and between BMR-Rogers Street LLC and the Registrant.
Letter agreement dated November 15, 2017 to the Lease dated February 5, 2013
by and between BMR-Rogers Street LLC and the Registrant.
Fifth Amendment dated April 24, 2018 to the Lease dated February 5, 2013 by
and between BMR-Rogers Street LLC and the Registrant.
Sixth Amendment dated August 2, 2018 to the Lease dated February 5, 2013 by
and between BMR-Rogers Street LLC and the Registrant.
Sublease, between Biogen MA Inc. and the Registrant, dated September 14,
2016.
10-Q
10.1
11/1/2017
000-50797
10-K
10.37.5
2/26/2018
000-50797
10-Q
10.2
8/9/2018
000-50797
10-Q
10.1
11/4/2016
000-50797
Additional Exhibits
*21 List of Subsidiaries
*23.1 Consent of Independent Registered Public Accounting Firm
*31.1
*31.2
Certification of Chief Executive Officer pursuant to Exchange Act Rules 13a-14
or 15d-14, as adopted pursuant to Section 302 of Sarbanes-Oxley Act of 2002
Certification of Chief Financial Officer pursuant to Exchange Act Rules 13a-14
or 15d-14, as adopted pursuant to Section 302 of Sarbanes-Oxley Act of 2002
**32.1 Certification of Chief Executive Officer and Chief Financial Officer pursuant to
Exchange Act Rules 13a-14(b) or 15d-14(b) and 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of Sarbanes-Oxley Act of 2002
*101.INS XBRL Instance Document.
*101.SCH XBRL Taxonomy Extension Schema Document.
*101.CAL XBRL Taxonomy Extension Calculation Linkbase Document.
*101.DEF XBRL Taxonomy Extension Definition Linkbase Document.
*101.LAB XBRL Taxonomy Extension Label Linkbase Document.
*101.PRE XBRL Taxonomy Extension Presentation Linkbase Document.
_______________________________________
*
Filed herewith.
**
Furnished herewith
†
#
Confidential treatment requested as to certain portions, which portions are omitted and filed separately with the Securities and Exchange Commission.
Management contract or compensatory plan or arrangement.
The following financial information from Momenta Pharmaceuticals, Inc.'s Annual Report on Form 10-K for the period ended December 31, 2018 , filed
with the SEC on February 22, 2019 , formatted in Extensible Business Reporting Language (XBRL): (i) the Consolidated Statements of Operations and
Comprehensive Loss for the years ended December 31, 2018 , 2017 and 2016 , (ii) the Consolidated Balance Sheets as of December 31, 2018 and 2017 , (iii) the
Consolidated Statements of Cash Flows for the years ended December 31, 2018 , 2017 and 2016 , (iv) the Consolidated Statements of Stockholders' Equity for the
years ended December 31, 2018 , 2017 and 2016 and (v) Notes to Consolidated Financial Statements.
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Table of Contents
Item 16. FORM 10-K SUMMARY
None.
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
behalf by the undersigned, thereunto duly authorized.
SIGNATURES
Date: February 22, 2019
MOMENTA PHARMACEUTICALS, INC.
By:
/s/ CRAIG A. WHEELER
Craig A. Wheeler
President and Chief Executive Officer
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 registrant
and in the capacities and on the dates indicated.
Signature
Title
Date
/s/ CRAIG A. WHEELER
President, Chief Executive Officer and Director (Principal
February 22, 2019
Craig A. Wheeler
Executive Officer)
/s/ MICHELLE ROBERTSON
Senior Vice President and Chief Financial Officer (Principal
February 22, 2019
Michelle Robertson
Financial and Accounting Officer)
/s/ BRUCE DOWNEY
Bruce Downey
Chairman of the Board of Directors
February 22, 2019
/s/ GEORGES GEMAYEL, Ph.D.
Director
February 22, 2019
Georges Gemayel, Ph.D.
/s/ JAMES SULAT
James Sulat
Director
February 22, 2019
/s/ THOMAS KOESTLER, Ph.D.
Director
February 22, 2019
Thomas Koestler, Ph.D.
/s/ COREY N. FISHMAN
Director
February 22, 2019
Corey N. Fishman
/s/ ELIZABETH STONER, M.D.
Director
February 22, 2019
Elizabeth Stoner, M.D.
/s/ STEVEN C. GILMAN, Ph.D.
Director
February 22, 2019
Steven C. Gilman, Ph.D.
/s/ JOSE-CARLOS GUTIERREZ-RAMOS, Ph.D.
Director
February 22, 2019
Jose-Carlos Gutierrez-Ramos, Ph.D.
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Exhibit 10.35
Execution Copy
AGREEMENT AND GENERAL RELEASE
This Agreement and General Release (hereinafter “Agreement” or “Agreement and General Release”) is made by and between Momenta
Pharmaceuticals, Inc. (“Momenta” or the “Company”) and Scott Storer (“Employee”). In order to resolve all matters relating to Employee’s employment,
including but not limited to issues relating to the cessation of Employee’s employment, Momenta and Employee (collectively referred to as “the Parties”),
voluntarily agree that:
1.
Last Day of Employment . Employee’s last day of employment with Momenta was October 5, 2018, referred to as the “date of termination.”
Payment of all salary ceased as of Employee’s last day of employment, as did his right to participate in Momenta benefit programs unless otherwise required by
law or provided for in this Agreement. Payment of all final pay for time worked through October 5, 2018, and payment for all accrued but unused vacation time
Employee was made on October 5, 2018.
2.
Consideration . In consideration for Employee signing this Agreement and General Release, and complying with its terms, Momenta agrees
to provide the following separation benefits in accordance with and pursuant to the Executive Employment Agreement between Employee and the Company dated
as of October 27, 2016 (as amended, the “Employment Agreement”):
(a)
Four hundred twenty thousand dollars ($420,000), representing an amount equal to twelve (12) months of Employee’s gross base salary as of
the date of termination, less lawful deductions, to be paid in equal ratable installments in accordance with the Company’s regular payroll practices over the twelve
(12) month period beginning on the next payroll date following the 60th day after the date of termination;
(b)
One hundred sixty eight thousand dollars ($168,000), less lawful deductions, representing the greater of (i) the annual discretionary target
bonus for Employee for fiscal year 2018 and (ii) the annual bonus paid to the Employee for fiscal year 2017, to be paid in one lump sum on the next payroll date
following the 60th day after the date of termination;
(c)
if Employee is eligible for and timely elects to continue his medical, dental and/or vision health insurance coverage pursuant to COBRA, the
Company shall continue to contribute, until the earlier of twelve (12) months following the date of termination or the date on which Employee becomes eligible to
receive group medical, dental and/or vision insurance coverage through a new employer (the “Contribution Period”), toward the cost of Employee’s COBRA
premiums the same amount that it pays on behalf of active and similarly situated employees receiving the same type of coverage. The remaining balance of any
premium costs, and all premium costs after the Contribution Period, shall be paid by Employee on a monthly basis. After the Contribution Period, Employee may
continue receiving coverage under COBRA at his own cost if and to the extent that he remains eligible for COBRA continuation. Employee agrees that he shall
notify the Company in writing immediately following the date on which he becomes eligible for group medical and/or dental insurance coverage through another
employer;
(d)
the Company shall continue to provide benefits to Employee in accordance with any applicable life insurance, accident and/or disability
plans under which he was eligible as of the date of termination consistent with such benefits as may be provided to active and similarly situated employees covered
by such plans, until the earlier of (i) twelve (12) months following the date of termination or (ii) the date on which Employee becomes eligible to receive
substantially comparable coverage through a new employer (the “Extended Benefits Period”); provided, however, that if such plans do not permit continued
coverage of Employee following the date of termination, the Company shall instead reimburse Employee for the reasonable cost of purchasing substantially
comparable coverage during the Extended Benefits Period, payable in accordance with Section 10(d). Employee agrees that he shall notify the Company in writing
immediately following the date on which he becomes eligible for life insurance, accident and/or disability coverage through a new employer;
(e)
Employee shall be entitled to continued vesting of any unvested stock options outstanding as of the date of termination (collectively, the
“Outstanding Stock Options”) for a period of twelve (12) months from the date of termination (the “Extended Vesting Date”) regardless of whether Employee
maintains a continuous service relationship with the Company during such time and, subject to the terms of the applicable equity plan and award agreement, the
right to exercise any Outstanding Stock Options shall terminate on the earlier of three months after the Extended Vesting Date and the original expiration date of
the Outstanding Stock Option (assuming no termination of employment occurred); provided that, if Employee maintains a continuous service relationship with the
Company after the Extended Vesting Date, Employee will be eligible for continued vesting and exercisability of any Outstanding Stock Options as described in,
and subject to the terms of, the documents governing the Outstanding Stock Option. Employee shall also be entitled to immediate vesting, on the date of
termination, of any restricted stock awards and restricted stock unit awards with underlying shares that (i) vest solely through the passage of time (i.e., service-
based vesting) and not upon the achievement of specified conditions or milestones (i.e., nonce-based vesting) or (ii) accelerate in
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accordance with their terms in connection with Employee’s termination without cause (collectively, “Outstanding Restricted Stock Awards”), in each case that
would have vested during the period of twelve (12) months from the date of termination; provided that, if any such awards constitute “non-qualified deferred
compensation” subject to Section 409A (as defined in Section 10), then such awards will vest on the date of termination and will be paid or settled, as applicable,
in accordance with the schedule that applies to such awards notwithstanding the accelerated vesting provisions of this Section to the extent necessary to avoid a
prohibited distribution under Section 409A. For the avoidance of doubt and notwithstanding the contrary terms of any Outstanding Restricted Stock Award,
Employee will not continue vesting in any Outstanding Restricted Stock Awards by reason of Employee’s continued service to the Company following the date of
termination and Employee shall have no further rights with respect to any Outstanding Restricted Stock Awards that remain unvested after taking into account the
vesting provisions set forth in this Section 2(e); and
(f)
The gross amount of two hundred thirty seven thousand two hundred eighty dollars ($237,280), less lawful deductions, to be paid in equal
ratable installments in accordance with the Company’s regular payroll practices over the twelve (12) month period beginning on the next payroll date following the
60th day after the date of termination; provided, however that (i) if Employee enters into a written agreement for full-time employment with a new employer on or
before February 22, 2019, then any remaining unpaid amounts under this Section 2(f) will be forfeited and will not be paid to Employee or (ii) if Employee does
not enter into a written agreement for full-time employment with a new employer on or before February 22, 2019, then any remaining unpaid amounts under this
Section 2(f) will be paid to Employee in a single lump sum on the Company’s first regular payroll date that occurs after February 22, 2019 (and in all events no
later than March 15, 2019).
3.
No Consideration Absent Execution of this Agreement . Employee understands and agrees that he would not receive the monies and/or
benefits specified in Section 2 above, except for his signing of this Agreement and the fulfillment of the promises contained herein.
4.
Employee General Release, Claims Not Released and Related Provisions . In exchange for the mutual promises made in this Agreement
and in the Employment Agreement, Employee agrees:
(a)
Employee General Release of All Claims . Employee on behalf of himself, his heirs, executors, representatives, agents, insurers,
administrators, successors and assigns knowingly and voluntarily and to the maximum extent permitted by law releases and forever discharges, Momenta
Pharmaceuticals, Inc., any and all past, present or future companies, parent companies, partners, divisions, subsidiaries, affiliates, trustees, corporations under
common control or ownership, business partners, and each of its and their current and former officers, directors, insurers, shareholders, officers, members,
attorneys, insurers, agents and current/former employees, and each of their predecessors, successors, and assigns, and all related persons, individually and in their
corporate capacities, and their employee benefit plans and programs and their administrators and fiduciaries (all individually and collectively referred to throughout
the remainder of this Agreement as “the Released Parties”) of and from any and all claims, demands, actions, causes of actions, obligations, judgments, rights, fees,
damages, debts, obligations, liabilities and expenses (inclusive of attorneys’ fees) of any kind whatsoever, known and unknown, asserted or unasserted, that
Employee has, had or may have against the Released Parties (whether individually or collectively) as of the date Employee signs this Agreement, including, but not
limited to (i) any claims under any federal, state, local or foreign law arising out of, or in any way related to Employee’s employment, benefits, employment and
end of employment with Momenta, and all claims arising under Title VII of the Civil Rights Act of 1964, as amended; Sections 1981 through 1988 of Title 42 of
the United States Code; The Civil Rights Act of 1991; The Age Discrimination In Employment Act, as amended (“ADEA”); The Older Workers Benefit Protection
Act; The Genetic Information Nondiscrimination Act of 2008 (“GINA”), The Employee Retirement Income Security Act of 1974, as amended (“ERISA”) (except
for any vested benefits under any tax qualified benefit plan); The Immigration Reform and Control Act; The Americans with Disabilities Act of 1990; The Family
and Medical Leave Act; The Equal Pay Act, as amended; The Worker Adjustment and Retraining Notification Act, as amended; The Uniform Services
Employment and Reemployment Rights Act, as amended; The Massachusetts Law Against Discrimination/Fair Employment Practices Act, G.L. c. 151B; The
Massachusetts Parental Leave Law; The Massachusetts Privacy Statute, G.L. c. 214, § 1B; The Massachusetts Wage Payment Statute, G.L. c. 149, §§ 148, 148A,
148B, 149, 150150A-150C, 151, 152, 152A, et seq.; the Massachusetts Wage and Hour laws, G.L. c. 151§1A et seq.; The Massachusetts Sexual Harassment
Statute, G.L. c. 214 § 1C; The Massachusetts Consumer Protection Act, G.L. c. 93A; The Massachusetts Civil Rights Act, G.L. c. 12, §11; The Massachusetts paid
sick leave law; The Massachusetts Equal Rights Act, G.L. c. 93; The Massachusetts Equal Pay law; any and all Massachusetts whistleblower protection laws; all
other Massachusetts wage and hour laws; (ii) any and all claims for compensation of any type whatsoever, including but not limited to claims for bonuses,
commissions, stock grants, stock option grants, or any claims for incentive compensation of any type (but not including any claims for compensation or benefits as
provided for in this Agreement above), whether under common law or Momenta policy or contract, and any other federal, state or local human rights, civil rights,
wage-hour, whistleblower, pension or labor laws, rules and/or regulations, public policy; (iii) any claim for breach of contract, contract or tort laws; (iv) any claim
arising under common law, such as claims for malicious prosecution, misrepresentation, defamation, false imprisonment, libel, slander, invasion of privacy,
negligence, claims based on theories of strict liability or respondeat superior, infliction of emotional distress, or otherwise; (v) any
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and all claims for monetary or equitable relief, including but not limited to attorneys’ fees, back pay, front pay, reinstatement, experts’ fees, medical fees or
expenses, costs and disbursements; or (vi) any other action or grievance against the Released Parties based upon any conduct, up to and including the date of the
Agreement, and shall not, from any source or proceeding, seek or accept any additional award or settlement therefrom.
(b)
Employee Claims Not Released . Employee is not waiving any rights he may have to: (a) his own vested employee benefits under
Momenta’s health, welfare including but not limited to his rights to long-term disability benefits, or vested retirement benefit plans as of the date of termination;
(b) benefits and/or the right to seek benefits under applicable workers’ compensation and/or unemployment compensation statutes; (c) pursue claims which by law
cannot be waived by signing this Agreement; (d) enforce this Agreement; (e) challenge the validity of this Agreement; (f) indemnification rights provided for in
ARTICLE EIGHTH of the Third Amended and Restated Certificate of Incorporation of the Company contract, related directors’ and officers’ liability insurance or
applicable law; and/or (g) vested equity securities of Momenta.
(c)
Eligibility Requirement, Acknowledgment . Employee’s termination of employment results from Momenta’s 2018 Reduction in Force
Program (the “Program”), which was prompted by a significant change in the focus of the Company’s business to one centered on the development of novel
therapeutics, while substantially exiting the biosimilar business. In order to participate in the Program, an employee must have been employed by, and not
previously submitted his/her voluntary resignation to, Momenta in any capacity as of October 1, 2018. Selection of eligible employees for separation under the
Program was based on various business considerations, including but not limited to, the Company’s revised corporate strategies, the responsibilities and functions
of each position, employees’ specific training, experience, expertise and cross trainable skill sets, the product candidate(s) supported by employees, and the
employees’ historical job performance; relative seniority and/or other business and technical needs. Attached as Exhibit A is a list of the job titles and ages (as of
October 1, 2018), of all eligible employees selected and not selected for separation and whether he/she was/will be offered severance in exchange for signing a
release of claims.
(d)
Governmental Agencies . Nothing in this Agreement prohibits or prevents Employee from filing a charge with or participating, testifying, or
assisting in any investigation, hearing, or other proceeding before any federal, state, or local government agency. However, to the maximum extent permitted by
law, Employee agrees that if such an administrative claim is made, he shall not be entitled to recover any individual monetary relief or other individual remedies.
(e)
Other Agreements . Employee acknowledges and agrees that the provisions of Sections 8-10 of the Employment Agreement remain in full
force and effect following the date of termination and are incorporated herein by reference, and Employee reaffirms his obligations under Sections 8-10 of the
Employment Agreement. The Company acknowledges and agrees that the rights of indemnification to which Employee may be entitled pursuant to the Company’s
certificate of incorporation, as amended from time to time (the “Certificate of Incorporation”), shall remain in full force and effect in accordance with, and to the
extent provided under, the Certificate of Incorporation.
5.
Company General Release, Claims Not Released . In exchange for the mutual promises made in this Agreement and in the Employment
Agreement, the Company agrees:
(a)
Company General Release of all Claims . The Company, on its own behalf and on behalf of all other Released Parties, knowingly and
voluntarily and to the maximum extent permitted by law, releases and forever discharges Employee and any and all of Employee’s affiliates, successors and
assigns (collectively, the “Employee Released Parties”) of and from any and all claims, demands, actions, causes of actions, obligations, judgments, rights, fees,
damages, debts, obligations, liabilities and expenses (inclusive of attorneys’ fees) of any kind whatsoever, known and unknown, asserted or unasserted, that the
Company has, had or may have against the Employee Released Parties (whether individually or collectively) as of the date the Company signs this Agreement.
(b)
Company Claims Not Released . The Company is not waiving any rights the Company may have to: (a) pursue claims against Employee
relating to fraud or criminal conduct; (b) pursue claims which by law cannot be waived by signing this Agreement; (c) enforce this Agreement; and/or
(d) challenge the validity of this Agreement.
6.
Acknowledgments and Affirmations .
(a)
Employee affirms that he has not filed, caused to be filed, or presently is a party to any claim against Momenta, Inc. or the Released Parties.
Employee also affirms that he has been paid and/or has received all compensation, wages, bonuses, commissions, and/or benefits to which he may be entitled,
except for those contemplated by this Agreement. Employee further acknowledges and agrees that by signing this Agreement and General Release, he shall not be
eligible to receive any bonuses or other incentive or discretionary compensation except as specifically provided under Section 2 above. Employee affirms that he
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has been granted any leave to which he was entitled under the Family and Medical Leave Act or related state or local leave or disability accommodation laws.
Employee further affirms that he has no known workplace injuries or occupational diseases.
(b)
By signing this Agreement, Employee affirms that he has not divulged any proprietary or confidential information of Momenta and will, to
the maximum extent permitted by law, continue to maintain the confidentiality of such information consistent with Momenta’s policies and/or common law.
(c)
Employee further affirms that he has not been retaliated against for reporting any allegations of wrongdoing by Momenta or its officers,
including any allegations of corporate fraud. Both Parties acknowledge that this Agreement does not limit either party’s right, where applicable, to file or
participate in an investigative proceeding of any federal, state or local governmental agency. To the extent permitted by law, Employee agrees that, as set forth
above, if such an administrative claim is made, Employee shall not be entitled to recover any individual monetary relief or other individual remedies.
7.
Non-Disparagement . Employee agrees that to the maximum extent permitted by law, he shall not make any statement, whether written or
oral, that is willfully disparaging of the Company, the members of its Board of Directors, and its senior management team. The Company agrees that it shall
instruct its senior management team with knowledge of this Agreement and members of its Board of Directors not to make any statement that is willfully
disparaging of Employee. Nothing in this paragraph shall prohibit or limit the ability of the Parties (and in the case of the Company, its current and former
employees and members of its Board of Directors) from enforcing the terms of this Agreement or testifying truthfully (including opinion testimony) in any legal
proceeding, and/or in response to a valid subpoena issued in connection with a legitimate Court or administrative proceeding, including but not limited to
depositions.
8.
Confidentiality and Return of Property .
(a)
Employee agrees that to the maximum extent permitted by law, he shall not disclose to any other person or entity (including but not limited to
social networking web sites and/or members of the press/media), any information regarding the underlying facts leading up to this Agreement, except to his
spouse/significant other, tax advisor, and/or an attorney with whom he chooses to consult regarding his consideration of this Agreement and General Release, or to
enforce any provision of this Agreement or as otherwise permitted by law. Further, he may share this agreement with taxing authorities, the office of
unemployment and his long-term insurance carrier if requested to do so.
(b)
Notwithstanding the foregoing, nothing in this Agreement, the Employment Agreement prohibits Employee from reporting possible
violations of federal law or regulation to any United States governmental agency or entity in accordance with the provisions of and rules promulgated under
Section 21F of the Securities Exchange Act of 1934 or Section 806 of the Sarbanes-Oxley Act of 2002, or any other whistleblower protection provisions of state or
federal law or regulation (including the right to receive an award for information provided to any such government agencies). Furthermore, in accordance with 18
U.S.C. § 1833, notwithstanding anything to the contrary in this Agreement, the Employment Agreement: (A) Employee shall not be in breach of this Agreement,
the Employment Agreement, and shall not be held criminally or civilly liable under any federal or state trade secret law (x) for the disclosure of a trade secret that
is made in confidence to a federal, state, or local government official or to an attorney solely for the purpose of reporting or investigating a suspected violation of
law, or (y) for the disclosure of a trade secret that is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal;
and (B) if Employee files a lawsuit for retaliation by the Company for reporting a suspected violation of law, Employee may disclose the trade secret to
Employee’s attorney, and may use the trade secret information in the court proceeding, if Employee files any document containing the trade secret under seal, and
does not disclose the trade secret, except pursuant to court order.
(c)
Employee affirms that he will return/has returned all of Momenta’s property, documents, and/or any confidential information in his
possession or control, unless otherwise agreed by the parties.
9.
Governing Law and Interpretation . This Agreement and General Release shall be governed and conformed in accordance with the laws of
the Commonwealth of Massachusetts without regard to its conflict of laws provision that would result in the application of any other laws, and where applicable
the laws of the United States. In the event of a breach of any provision of this Agreement and General Release, either party may institute an action specifically to
enforce any term or terms of this Agreement and General Release and/or to seek any damages for breach. Should any provision of this Agreement and General
Release be declared illegal or unenforceable by any court of competent jurisdiction and cannot be modified to be enforceable, excluding the general release
language, such provision shall immediately become null and void, leaving the remainder of this Agreement and General Release in full force and effect. The
Company and Employee each hereby irrevocably waive any right to a trial by jury in any action, suit or other legal proceeding arising under or relating to any
provision of this Agreement.
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10.
Section 409A .
(a)
Although the Company does not guarantee the tax treatment of any payments under the Agreement, the intent of the Company is that the
payments and benefits under this Agreement be exempt from, or comply with, Section 409A of the Internal Revenue Code of 1986, as amended, and all Treasury
Regulations and guidance promulgated thereunder (“Section 409A”) and to the maximum extent permitted the Agreement shall be limited, construed and
interpreted in accordance with such intent. In no event whatsoever shall the Company or its affiliates or their respective officers, directors, employees or agents be
liable for any additional tax, interest or penalties that may be imposed on Employee by Section 409A or damages for failing to comply with Section 409A.
(b)
It is intended that each installment of the payments and benefits provided under Section 2 above shall be treated as a separate “payment” for
purposes of Section 409A.
(c)
Notwithstanding anything in this Agreement to the contrary, any payments or benefits under Section 2 that constitute non-qualified deferred
compensation subject to Section 409A shall begin only upon the date of a “separation from service” (within the meaning of Section 409A) which occurs on or after
the date of termination. If, as of the date of the “separation from service” of the Employee from the Company within the meaning of Section 409A, the Employee is
a “specified employee” (within the meaning of Section 409A), then:
i.
Each installment of the payments and benefits due under Section 2 above that, in accordance with the dates and terms set forth herein, will in
all circumstances, regardless of when the separation from service occurs, be paid within the Short-Term Deferral Period (as defined under Section 409A) shall be
treated as a short-term deferral within the meaning of Treasury Regulation Section 1.409A-1(b)(4) to the maximum extent permissible under Section 409A and
shall be paid at the time and in the manner set forth in the Agreement; and
ii.
Each installment of the payments and benefits due under Section 2 above that is not described in Section 10(c)(i) and that would, absent this
subsection, be paid within the six-month period following the “separation from service” of the Employee from the Company shall not be paid until the date that is
six months and one day after such separation from service (or, if earlier, the Employee’s death), with any such installments that are required to be delayed being
accumulated during the six-month period and paid in a lump sum on the date that is six months and one day following the Employee’s separation from service and
any subsequent installments, if any, being paid in accordance with the dates and terms set forth herein; provided, however, that the preceding provisions of this
sentence shall not apply to any installment of payments and benefits if and to the maximum extent that that such installment is deemed to be paid under a
separation pay plan that does not provide for a deferral of compensation by reason of the application of Treasury Regulation 1.409A‑1(b)(9)(iii) (relating to
separation pay upon an involuntary separation from service). Any installments that qualify for the exception under Treasury Regulation Section 1.409A-1(b)(9)(iii)
must be paid no later than the last day of the Employee’s second taxable year following the Employee’s taxable year in which the separation from service occurs.
The determination of whether and when a separation from service has occurred shall be made and in a manner consistent with, and based on the presumptions set
forth in, Treasury Regulation Section 1.409A-1(h).
(d)
To the extent that any reimbursements under this Agreement are subject to Section 409A, any such reimbursements payable to Employee
shall be paid to Employee no later than December 31 of the year following the year in which the expense was incurred, the amount of expenses reimbursed in one
year shall not affect the amount eligible for reimbursement in any subsequent year and Employee’s right to reimbursement under this Agreement will not be
subject to liquidation or exchange for another benefit.
11.
Section 280G . For the avoidance of doubt, all payments and benefits under this Agreement shall be subject to the provisions of Section 5.3
of the Employment Agreement, which will apply, mutatis mutandis, to this Agreement.
12.
Cooperation . Employee agrees to cooperate with the Company in connection with any matter or event relating to Employee’s employment
or events that occurred during Employee’s employment, including, without limitation, in the defense or prosecution of any claims or actions which may be brought
or threatened in the future against or on behalf of the Company. Employee’s cooperation in connection with such matters, actions and claims shall include, without
limitation, being available, upon reasonable notice to meet with the Company regarding matters in which Employee has been involved, and any contract matters or
audits; to prepare for, attend and participate in any proceeding (including, without limitation, depositions, consultation, discovery or trial); to provide affidavits; to
assist with any audit, inspection, proceeding or other inquiry; and to act as a witness in connection with any litigation or other legal proceeding affecting the
Company.
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13.
Non-admission of Wrongdoing . The Parties agree that neither this Agreement nor the furnishing of the consideration for this Agreement
shall be deemed or construed at any time for any purpose as an admission by the Released Parties or the Employee Released Parties of wrongdoing or evidence of
any liability or unlawful conduct of any kind.
14.
Amendment . This Agreement may not be modified, altered or changed except in writing and signed by both Parties wherein specific
reference is made to this Agreement.
15.
Entire Agreement . This Agreement sets forth the entire agreement between the Parties hereto, and fully supersedes any prior agreements or
understandings between the Parties, except to the extent such agreements/understandings are incorporated in whole or in part by reference, including all equity
agreements and relevant plan documents or otherwise adopted by this Agreement. Employee acknowledges that he has not relied on any representations, promises,
or agreements of any kind made to him in connection with his decision to accept this Agreement, except for those set forth in this Agreement and General Release.
This Agreement is binding on the Company’s successors and assigns. Further, if Employee dies before receiving his full payments owed herein, the balance of the
payments will be paid to his spouse. If his spouse is not alive at the time, the balance will be paid to his estate.
EMPLOYEE IS ADVISED THAT HE HAS UP TO FORTY-FIVE (45) CALENDAR DAYS TO CONSIDER THIS AGREEMENT AND GENERAL
RELEASE. EMPLOYEE IS ADVISED TO CONSULT WITH AN ATTORNEY BEFORE SIGNING THIS AGREEMENT AND GENERAL RELEASE. IN
ORDER TO RECEIVE THE PROMISES AND BENEFITS AND PAYMENTS UNDER SECTION 2 OF THIS AGREEMENT, EMPLOYEE MUST ACCEPT
THIS AGREEMENT BY SIGNING THIS AGREEMENT (AND NOT THEREAFTER REVOKING HIS ACCEPTANCE) WITHIN THAT FORTY-FIVE
CALENDAR DAY PERIOD.
EMPLOYEE MAY REVOKE THIS AGREEMENT AND GENERAL RELEASE FOR A PERIOD OF SEVEN (7) CALENDAR DAYS FOLLOWING
THE DAY HE SIGNS THIS AGREEMENT AND GENERAL RELEASE. ANY REVOCATION WITHIN THIS PERIOD MUST BE SUBMITTED, IN
WRITING, TO JO-ANN BELTRAMELLO, SENIOR VICE PRESIDENT OF HUMAN RESOURCES, MOMENTA PHARMACEUTICALS, INC., 301
BINNEY STREET, CAMBRIDGE, MA 02142 AND STATE, “I HEREBY REVOKE MY ACCEPTANCE OF OUR AGREEMENT AND GENERAL
RELEASE.” THE REVOCATION MUST BE PERSONALLY DELIVERED, OR MAILED AND POSTMARKED WITHIN SEVEN (7) CALENDAR DAYS
AFTER EMPLOYEE SIGNS THIS AGREEMENT AND GENERAL RELEASE. THIS AGREEMENT WILL BECOME EFFECTIVE ON THE FIRST DAY
AFTER THE EXPIRATION OF THE EMPLOYEE’S REVOCATION PERIOD PROVIDED THAT EMPLOYEE HAS NOT PREVIOUSLY REVOKED THIS
AGREEMENT AS SET FORTH HEREIN.
EMPLOYEE AGREES THAT ANY MODIFICATIONS, MATERIAL OR OTHERWISE, MADE TO THIS AGREEMENT AND GENERAL
RELEASE, DO NOT RESTART OR AFFECT IN ANY MANNER THE ORIGINAL FORTY-FIVE (45) CALENDAR DAY CONSIDERATION PERIOD.
EMPLOYEE FREELY AND KNOWINGLY, AND AFTER DUE CONSIDERATION, ENTERS INTO THIS AGREEMENT AND GENERAL
RELEASE INTENDING TO WAIVE, SETTLE AND RELEASE ALL CLAIMS HE HAS OR MIGHT HAVE AGAINST THE RELEASED PARTIES, AS
DEFINED ABOVE, WHETHER INDIVIDUALLY OR COLLECTIVELY, INCLUDING ANY CLAIMS EMPLOYEE MAY HAVE UNDER THE ADEA.
The Parties knowingly and voluntarily sign this Agreement and General Release as of the date(s) set forth below:
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AGREEMENT AND GENERAL RELEASE
This Agreement and General Release (hereinafter “Agreement” or “Agreement and General Release”) is made by and between Momenta
Pharmaceuticals, Inc. (“Momenta” or the “Company”) and Ganesh Kaundinya (“Employee”). In order to resolve all matters relating to Employee’s employment,
including but not limited to issues relating to the cessation of Employee’s employment, Momenta and Employee (collectively referred to as “the Parties”),
voluntarily agree that:
1.
Last Day of Employment . Employee’s last day of employment with Momenta was October 5, 2018, referred to as the “date of termination.”
Payment of all salary ceased as of Employee’s last day of employment, as did his right to participate in Momenta benefit programs unless otherwise required by
law or provided for in this Agreement. Payment of all final pay for time worked through October 5, 2018, and payment for all accrued but unused vacation time
Employee was made on October 5, 2018.
2.
Consideration . In consideration for Employee signing this Agreement and General Release, and complying with its terms, Momenta agrees
to provide the following separation benefits in accordance with and pursuant to the Executive Employment Agreement between Employee and the Company dated
as of April 28, 2008 (as amended, the “Employment Agreement”):
(a)
Four hundred ninety two thousand dollars ($492,000), representing an amount equal to twelve (12) months of Employee’s gross base salary
as of the date of termination, less lawful deductions, to be paid in equal ratable installments in accordance with the Company’s regular payroll practices over the
twelve (12) month period beginning on the next payroll date following the 60th day after the date of termination;
(b)
Two hundred forty six thousand dollars ($246,000), less lawful deductions, representing the greater of (i) the annual discretionary target
bonus for Employee for fiscal year 2018 and (ii) the annual bonus paid to the Employee for fiscal year 2017, to be paid in one lump sum on the next payroll date
following the 60th day after the date of termination;
(c)
if Employee is eligible for and timely elects to continue his medical, dental and/or vision health insurance coverage pursuant to COBRA, the
Company shall continue to contribute, until the earlier of twelve (12) months following the date of termination or the date on which Employee becomes eligible to
receive group medical, dental and/or vision insurance coverage through a new employer (the “Contribution Period”), toward the cost of Employee’s COBRA
premiums the same amount that it pays on behalf of active and similarly situated employees receiving the same type of coverage. The remaining balance of any
premium costs, and all premium costs after the Contribution Period, shall be paid by Employee on a monthly basis. After the Contribution Period, Employee may
continue receiving coverage under COBRA at his own cost if and to the extent that he remains eligible for COBRA continuation. Employee agrees that he shall
notify the Company in writing immediately following the date on which he becomes eligible for group medical and/or dental insurance coverage through another
employer;
(d)
the Company shall continue to provide benefits to Employee in accordance with any applicable life insurance, accident and/or disability
plans under which he was eligible as of the date of termination consistent with such benefits as may be provided to active and similarly situated employees covered
by such plans, until the earlier of (i) twelve (12) months following the date of termination or (ii) the date on which Employee becomes eligible to receive
substantially comparable coverage through a new employer (the “Extended Benefits Period”); provided, however, that if such plans do not permit continued
coverage of Employee following the date of termination, the Company shall instead reimburse Employee for the reasonable cost of purchasing substantially
comparable coverage during the Extended Benefits Period, payable in accordance with Section 10(d). Employee agrees that he shall notify the Company in writing
immediately following the date on which he becomes eligible for life insurance, accident and/or disability coverage through a new employer; and
(e)
Employee shall be entitled to continued vesting of any unvested stock options outstanding as of the date of termination (collectively, the
“Outstanding Stock Options”) for a period of twelve (12) months from the date of termination (the “Extended Vesting Date”) regardless of whether Employee
maintains a continuous service relationship with the Company during such time and, subject to the terms of the applicable equity plan and award agreement, the
right to exercise any Outstanding Stock Options shall terminate on the earlier of three months after the Extended Vesting Date and the original expiration date of
the Outstanding Stock Option (assuming no termination of employment occurred); provided that, if Employee maintains a continuous service relationship with the
Company after the Extended Vesting Date, Employee will be eligible for continued vesting and exercisability of any Outstanding Stock Options as described in,
and subject to the terms of, the documents governing the Outstanding Stock Option. Employee shall also be entitled to immediate vesting, on the date of
termination, of any restricted stock awards and restricted stock unit awards with underlying shares that (i) vest solely through the passage of time (i.e., service-
based vesting) and not upon the achievement of specified conditions or milestones (i.e., performance-based vesting) or (ii) accelerate in
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accordance with their terms in connection with Employee’s termination without cause (collectively, “Outstanding Restricted Stock Awards”), in each case that
would have vested during the period of twelve (12) months from the date of termination; provided that, if any such awards constitute “non-qualified deferred
compensation” subject to Section 409A (as defined in Section 10), then such awards will vest on the date of termination and will be paid or settled, as applicable,
in accordance with the schedule that applies to such awards notwithstanding the accelerated vesting provisions of this Section to the extent necessary to avoid a
prohibited distribution under Section 409A. For the avoidance of doubt and notwithstanding the contrary terms of any Outstanding Restricted Stock Award,
Employee will not continue vesting in any Outstanding Restricted Stock Awards by reason of Employee’s continued service to the Company following the date of
termination and Employee shall have no further rights with respect to any Outstanding Restricted Stock Awards that remain unvested after taking into account the
vesting provisions set forth in this Section 2(e).
3.
No Consideration Absent Execution of this Agreement . Employee understands and agrees that he would not receive the monies and/or
benefits specified in Section 2 above, except for his signing of this Agreement and the fulfillment of the promises contained herein.
4.
Employee General Release, Claims Not Released and Related Provisions . In exchange for the mutual promises made in this Agreement
and in the Employment Agreement, Employee agrees:
(a)
Employee General Release of All Claims . Employee on behalf of himself, his heirs, executors, representatives, agents, insurers,
administrators, successors and assigns knowingly and voluntarily and to the maximum extent permitted by law releases and forever discharges, Momenta
Pharmaceuticals, Inc., any and all past, present or future companies, parent companies, partners, divisions, subsidiaries, affiliates, trustees, corporations under
common control or ownership, business partners, and each of its and their current and former officers, directors, insurers, shareholders, officers, members,
attorneys, insurers, agents and current/former employees, and each of their predecessors, successors, and assigns, and all related persons, individually and in their
corporate capacities, and their employee benefit plans and programs and their administrators and fiduciaries (all individually and collectively referred to throughout
the remainder of this Agreement as “the Released Parties”) of and from any and all claims, demands, actions, causes of actions, obligations, judgments, rights, fees,
damages, debts, obligations, liabilities and expenses (inclusive of attorneys’ fees) of any kind whatsoever, known and unknown, asserted or unasserted, that
Employee has, had or may have against the Released Parties (whether individually or collectively) as of the date Employee signs this Agreement, including, but not
limited to (i) any claims under any federal, state, local or foreign law arising out of, or in any way related to Employee’s employment, benefits, employment and
end of employment with Momenta, and all claims arising under Title VII of the Civil Rights Act of 1964, as amended; Sections 1981 through 1988 of Title 42 of
the United States Code; The Civil Rights Act of 1991; The Age Discrimination In Employment Act, as amended (“ADEA”); The Older Workers Benefit Protection
Act; The Genetic Information Nondiscrimination Act of 2008 (“GINA”), The Employee Retirement Income Security Act of 1974, as amended (“ERISA”) (except
for any vested benefits under any tax qualified benefit plan); The Immigration Reform and Control Act; The Americans with Disabilities Act of 1990; The Family
and Medical Leave Act; The Equal Pay Act, as amended; The Worker Adjustment and Retraining Notification Act, as amended; The Uniform Services
Employment and Reemployment Rights Act, as amended; The Massachusetts Law Against Discrimination/Fair Employment Practices Act, G.L. c. 151B; The
Massachusetts Parental Leave Law; The Massachusetts Privacy Statute, G.L. c. 214, § 1B; The Massachusetts Wage Payment Statute, G.L. c. 149, §§ 148, 148A,
148B, 149, 150150A-150C, 151, 152, 152A, et seq.; the Massachusetts Wage and Hour laws, G.L. c. 151§1A et seq.; The Massachusetts Sexual Harassment
Statute, G.L. c. 214 § 1C; The Massachusetts Consumer Protection Act, G.L. c. 93A; The Massachusetts Civil Rights Act, G.L. c. 12, §11; The Massachusetts paid
sick leave law; The Massachusetts Equal Rights Act, G.L. c. 93; The Massachusetts Equal Pay law; any and all Massachusetts whistleblower protection laws; all
other Massachusetts wage and hour laws; (ii) any and all claims for compensation of any type whatsoever, including but not limited to claims for bonuses,
commissions, stock grants, stock option grants, or any claims for incentive compensation of any type (but not including any claims for compensation or benefits as
provided for in this Agreement above), whether under common law or Momenta policy or contract, and any other federal, state or local human rights, civil rights,
wage-hour, whistleblower, pension or labor laws, rules and/or regulations, public policy; (iii) any claim for breach of contract, contract or tort laws; (iv) any claim
arising under common law, such as claims for malicious prosecution, misrepresentation, defamation, false imprisonment, libel, slander, invasion of privacy,
negligence, claims based on theories of strict liability or respondeat superior, infliction of emotional distress, or otherwise; (v) any and all claims for monetary or
equitable relief, including but not limited to attorneys’ fees, back pay, front pay, reinstatement, experts’ fees, medical fees or expenses, costs and disbursements; or
(vi) any other action or grievance against the Released Parties based upon any conduct, up to and including the date of the Agreement, and shall not, from any
source or proceeding, seek or accept any additional award or settlement therefrom.
(b)
Employee Claims Not Released . Employee is not waiving any rights he may have to: (a) his own vested accrued employee benefits under
Momenta’s health, welfare, or retirement benefit plans as of the date of termination; (b) benefits and/or the right to seek benefits under applicable workers’
compensation and/or unemployment compensation statutes; (c) pursue claims which by law cannot be waived by signing this Agreement; (d) enforce this
Agreement; (e) challenge the validity of this Agreement;
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(f) indemnification rights provided for in ARTICLE EIGHTH of the Third Amended and Restated Certificate of Incorporation of the Company contract, related
directors’ and officers’ liability insurance or applicable law; and/or (g) vested equity securities of Momenta.
(c)
Eligibility Requirement, Acknowledgment . Employee’s termination of employment results from Momenta’s 2018 Reduction in Force
Program (the “Program”), which was prompted by a significant change in the focus of the Company’s business to one centered on the development of novel
therapeutics, while substantially exiting the biosimilar business. In order to participate in the Program, an employee must have been employed by, and not
previously submitted his/her voluntary resignation to, Momenta in any capacity as of October 1, 2018. Selection of eligible employees for separation under the
Program was based on various business considerations, including but not limited to, the Company’s revised corporate strategies, the responsibilities and functions
of each position, employees’ specific training, experience, expertise and cross trainable skill sets, the product candidate(s) supported by employees, and the
employees’ historical job performance; relative seniority and/or other business and technical needs. Attached as Exhibit A is a list of the job titles and ages (as of
October 1, 2018), of all eligible employees selected and not selected for separation and whether he/she was/will be offered severance in exchange for signing a
release of claims.
(d)
Governmental Agencies . Nothing in this Agreement prohibits or prevents Employee from filing a charge with or participating, testifying, or
assisting in any investigation, hearing, or other proceeding before any federal, state, or local government agency. However, to the maximum extent permitted by
law, Employee agrees that if such an administrative claim is made, he shall not be entitled to recover any individual monetary relief or other individual remedies.
(e)
Other Agreements . Employee acknowledges and agrees that the provisions of Sections 8-10 of the Employment Agreement remain in full
force and effect following the date of termination and are incorporated herein by reference, and Employee reaffirms his obligations under Sections 8-10 of the
Employment Agreement. The Company acknowledges and agrees that the rights of indemnification to which Employee may be entitled pursuant to the Company’s
certificate of incorporation, as amended from time to time (the “Certificate of Incorporation”), shall remain in full force and effect in accordance with, and to the
extent provided under, the Certificate of Incorporation.
5.
Company General Release, Claims Not Released . In exchange for the mutual promises made in this Agreement and in the Employment
Agreement, the Company agrees:
(a)
Company General Release of all Claims . The Company, on its own behalf and on behalf of all other Released Parties, knowingly and
voluntarily and to the maximum extent permitted by law, releases and forever discharges Employee and any and all of Employee’s affiliates, successors and
assigns (collectively, the “Employee Released Parties”) of and from any and all claims, demands, actions, causes of actions, obligations, judgments, rights, fees,
damages, debts, obligations, liabilities and expenses (inclusive of attorneys’ fees) of any kind whatsoever, known and unknown, asserted or unasserted, that the
Company has, had or may have against the Employee Released Parties (whether individually or collectively) as of the date the Company signs this Agreement.
(b)
Company Claims Not Released . The Company is not waiving any rights the Company may have to: (a) pursue claims against Employee
relating to fraud or criminal conduct; (b) pursue claims which by law cannot be waived by signing this Agreement; (c) enforce this Agreement; and/or
(d) challenge the validity of this Agreement.
6.
Acknowledgments and Affirmations .
(a)
Employee affirms that he has not filed, caused to be filed, or presently is a party to any claim against Momenta, Inc. or the Released Parties.
Employee also affirms that he has been paid and/or has received all compensation, wages, bonuses, commissions, and/or benefits to which he may be entitled,
except for those contemplated by this Agreement. Employee further acknowledges and agrees that by signing this Agreement and General Release, he shall not be
eligible to receive any bonuses or other incentive or discretionary compensation except as specifically provided under Section 2 above. Employee affirms that he
has been granted any leave to which he was entitled under the Family and Medical Leave Act or related state or local leave or disability accommodation laws.
Employee further affirms that he has no known workplace injuries or occupational diseases.
(b)
By signing this Agreement, Employee affirms that he has not divulged any proprietary or confidential information of Momenta and will, to
the maximum extent permitted by law, continue to maintain the confidentiality of such information consistent with Momenta’s policies and/or common law.
(c)
Employee further affirms that he has not been retaliated against for reporting any allegations of wrongdoing by Momenta or its officers,
including any allegations of corporate fraud. Both Parties acknowledge that this Agreement does not limit
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either party’s right, where applicable, to file or participate in an investigative proceeding of any federal, state or local governmental agency. To the extent
permitted by law, Employee agrees that, as set forth above, if such an administrative claim is made, Employee shall not be entitled to recover any individual
monetary relief or other individual remedies.
7.
Non-Disparagement . Employee agrees that to the maximum extent permitted by law, he shall not make any statement, whether written or
oral, that is willfully disparaging of the Company, the members of its Board of Directors, and its senior management team. The Company agrees that it shall
instruct its senior management team with knowledge of this Agreement and members of its Board of Directors not to make any statement that is willfully
disparaging of Employee. Nothing in this paragraph shall prohibit or limit the ability of the Parties (and in the case of the Company, its current and former
employees and members of its Board of Directors) from enforcing the terms of this Agreement or testifying truthfully (including opinion testimony) in any legal
proceeding, and/or in response to a valid subpoena issued in connection with a legitimate Court or administrative proceeding, including but not limited to
depositions.
8.
Confidentiality and Return of Property .
(a)
Employee agrees that to the maximum extent permitted by law, he shall not disclose to any other person or entity (including but not limited to
social networking web sites and/or members of the press/media), any information regarding the underlying facts leading up to this Agreement, except to his
spouse/significant other, tax advisor, and/or an attorney with whom he chooses to consult regarding his consideration of this Agreement and General Release, or to
enforce any provision of this Agreement or as otherwise permitted by law.
(b)
Notwithstanding the foregoing, nothing in this Agreement, the Employment Agreement prohibits Employee from reporting possible
violations of federal law or regulation to any United States governmental agency or entity in accordance with the provisions of and rules promulgated under
Section 21F of the Securities Exchange Act of 1934 or Section 806 of the Sarbanes-Oxley Act of 2002, or any other whistleblower protection provisions of state or
federal law or regulation (including the right to receive an award for information provided to any such government agencies). Furthermore, in accordance with 18
U.S.C. § 1833, notwithstanding anything to the contrary in this Agreement, the Employment Agreement: (A) Employee shall not be in breach of this Agreement,
the Employment Agreement, and shall not be held criminally or civilly liable under any federal or state trade secret law (x) for the disclosure of a trade secret that
is made in confidence to a federal, state, or local government official or to an attorney solely for the purpose of reporting or investigating a suspected violation of
law, or (y) for the disclosure of a trade secret that is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal;
and (B) if Employee files a lawsuit for retaliation by the Company for reporting a suspected violation of law, Employee may disclose the trade secret to
Employee’s attorney, and may use the trade secret information in the court proceeding, if Employee files any document containing the trade secret under seal, and
does not disclose the trade secret, except pursuant to court order.
(c)
Employee affirms that he will return/has returned all of Momenta’s property, documents, and/or any confidential information in his
possession or control, unless otherwise agreed by the parties.
9.
Governing Law and Interpretation . This Agreement and General Release shall be governed and conformed in accordance with the laws of
the Commonwealth of Massachusetts without regard to its conflict of laws provision that would result in the application of any other laws, and where applicable
the laws of the United States. In the event of a breach of any provision of this Agreement and General Release, either party may institute an action specifically to
enforce any term or terms of this Agreement and General Release and/or to seek any damages for breach. Should any provision of this Agreement and General
Release be declared illegal or unenforceable by any court of competent jurisdiction and cannot be modified to be enforceable, excluding the general release
language, such provision shall immediately become null and void, leaving the remainder of this Agreement and General Release in full force and effect. The
Company and Employee each hereby irrevocably waive any right to a trial by jury in any action, suit or other legal proceeding arising under or relating to any
provision of this Agreement.
10.
Section 409A.
(a)
Although the Company does not guarantee the tax treatment of any payments under the Agreement, the intent of the Company is that the
payments and benefits under this Agreement be exempt from, or comply with, Section 409A of the Internal Revenue Code of 1986, as amended, and all Treasury
Regulations and guidance promulgated thereunder (“Section 409A”) and to the maximum extent permitted the Agreement shall be limited, construed and
interpreted in accordance with such intent. In no event whatsoever shall the Company or its affiliates or their respective officers, directors, employees or agents be
liable for any additional tax, interest or penalties that may be imposed on Employee by Section 409A or damages for failing to comply with Section 409A.
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(b)
It is intended that each installment of the payments and benefits provided under Section 2 above shall be treated as a separate “payment” for
purposes of Section 409A.
(c)
Notwithstanding anything in this Agreement to the contrary, any payments or benefits under Section 2 that constitute non-qualified deferred
compensation subject to Section 409A shall begin only upon the date of a “separation from service” (within the meaning of Section 409A) which occurs on or after
the date of termination. If, as of the date of the “separation from service” of the Employee from the Company within the meaning of Section 409A, the Employee is
a “specified employee” (within the meaning of Section 409A), then:
(i)
Each installment of the payments and benefits due under Section 2 above that, in accordance with the dates and terms set forth herein, will in
all circumstances, regardless of when the separation from service occurs, be paid within the Short-Term Deferral Period (as defined under Section 409A) shall be
treated as a short-term deferral within the meaning of Treasury Regulation Section 1.409A-1(b)(4) to the maximum extent permissible under Section 409A and
shall be paid at the time and in the manner set forth in the Agreement; and
(ii)
Each installment of the payments and benefits due under Section 2 above that is not described in Section 10(c)(i) and that would, absent this
subsection, be paid within the six-month period following the “separation from service” of the Employee from the Company shall not be paid until the date that is
six months and one day after such separation from service (or, if earlier, the Employee’s death), with any such installments that are required to be delayed being
accumulated during the six-month period and paid in a lump sum on the date that is six months and one day following the Employee’s separation from service and
any subsequent installments, if any, being paid in accordance with the dates and terms set forth herein; provided , however , that the preceding provisions of this
sentence shall not apply to any installment of payments and benefits if and to the maximum extent that that such installment is deemed to be paid under a
separation pay plan that does not provide for a deferral of compensation by reason of the application of Treasury Regulation 1.409A‑1(b)(9)(iii) (relating to
separation pay upon an involuntary separation from service). Any installments that qualify for the exception under Treasury Regulation Section 1.409A-1(b)(9)(iii)
must be paid no later than the last day of the Employee’s second taxable year following the Employee’s taxable year in which the separation from service occurs.
The determination of whether and when a separation from service has occurred shall be made and in a manner consistent with, and based on the presumptions set
forth in, Treasury Regulation Section 1.409A-1(h).
(d)
To the extent that any reimbursements under this Agreement are subject to Section 409A, any such reimbursements payable to Employee
shall be paid to Employee no later than December 31 of the year following the year in which the expense was incurred, the amount of expenses reimbursed in one
year shall not affect the amount eligible for reimbursement in any subsequent year and Employee’s right to reimbursement under this Agreement will not be
subject to liquidation or exchange for another benefit.
11.
Section 280G . For the avoidance of doubt, all payments and benefits under this Agreement shall be subject to the provisions of Section 5.3
of the Employment Agreement, which will apply, mutatis mutandis, to this Agreement.
12.
Cooperation . Employee agrees to cooperate with the Company in connection with any matter or event relating to Employee’s employment
or events that occurred during Employee’s employment, including, without limitation, in the defense or prosecution of any claims or actions which may be brought
or threatened in the future against or on behalf of the Company. Employee’s cooperation in connection with such matters, actions and claims shall include, without
limitation, being available, upon reasonable notice to meet with the Company regarding matters in which Employee has been involved, and any contract matters or
audits; to prepare for, attend and participate in any proceeding (including, without limitation, depositions, consultation, discovery or trial); to provide affidavits; to
assist with any audit, inspection, proceeding or other inquiry; and to act as a witness in connection with any litigation or other legal proceeding affecting the
Company.
13.
Non-admission of Wrongdoing . The Parties agree that neither this Agreement nor the furnishing of the consideration for this Agreement
shall be deemed or construed at any time for any purpose as an admission by the Released Parties or the Employee Released Parties of wrongdoing or evidence of
any liability or unlawful conduct of any kind.
14.
Amendment . This Agreement may not be modified, altered or changed except in writing and signed by both Parties wherein specific
reference is made to this Agreement.
15.
Entire Agreement . This Agreement sets forth the entire agreement between the Parties hereto, and fully supersedes any prior agreements or
understandings between the Parties, except to the extent such agreements/understandings are incorporated in whole or in part by reference or otherwise adopted by
this Agreement. Employee acknowledges that he has not
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relied on any representations, promises, or agreements of any kind made to him in connection with his decision to accept this Agreement, except for those set forth
in this Agreement and General Release.
EMPLOYEE IS ADVISED THAT HE HAS UP TO FORTY-FIVE (45) CALENDAR DAYS TO CONSIDER THIS AGREEMENT AND GENERAL
RELEASE. EMPLOYEE IS ADVISED TO CONSULT WITH AN ATTORNEY BEFORE SIGNING THIS AGREEMENT AND GENERAL RELEASE. IN
ORDER TO RECEIVE THE PROMISES AND BENEFITS AND PAYMENTS UNDER SECTION 2 OF THIS AGREEMENT, EMPLOYEE MUST ACCEPT
THIS AGREEMENT BY SIGNING THIS AGREEMENT (AND NOT THEREAFTER REVOKING HIS ACCEPTANCE) WITHIN THAT FORTY-FIVE
CALENDAR DAY PERIOD.
EMPLOYEE MAY REVOKE THIS AGREEMENT AND GENERAL RELEASE FOR A PERIOD OF SEVEN (7) CALENDAR DAYS FOLLOWING
THE DAY HE SIGNS THIS AGREEMENT AND GENERAL RELEASE. ANY REVOCATION WITHIN THIS PERIOD MUST BE SUBMITTED, IN
WRITING, TO JO-ANN BELTRAMELLO, SENIOR VICE PRESIDENT OF HUMAN RESOURCES, MOMENTA PHARMACEUTICALS, INC., 301
BINNEY STREET, CAMBRIDGE, MA 02142 AND STATE, “I HEREBY REVOKE MY ACCEPTANCE OF OUR AGREEMENT AND GENERAL
RELEASE.” THE REVOCATION MUST BE PERSONALLY DELIVERED, OR MAILED AND POSTMARKED WITHIN SEVEN (7) CALENDAR DAYS
AFTER EMPLOYEE SIGNS THIS AGREEMENT AND GENERAL RELEASE. THIS AGREEMENT WILL BECOME EFFECTIVE ON THE FIRST DAY
AFTER THE EXPIRATION OF THE EMPLOYEE’S REVOCATION PERIOD PROVIDED THAT EMPLOYEE HAS NOT PREVIOUSLY REVOKED THIS
AGREEMENT AS SET FORTH HEREIN.
EMPLOYEE AGREES THAT ANY MODIFICATIONS, MATERIAL OR OTHERWISE, MADE TO THIS AGREEMENT AND GENERAL
RELEASE, DO NOT RESTART OR AFFECT IN ANY MANNER THE ORIGINAL FORTY-FIVE (45) CALENDAR DAY CONSIDERATION PERIOD.
EMPLOYEE FREELY AND KNOWINGLY, AND AFTER DUE CONSIDERATION, ENTERS INTO THIS AGREEMENT AND GENERAL
RELEASE INTENDING TO WAIVE, SETTLE AND RELEASE ALL CLAIMS HE HAS OR MIGHT HAVE AGAINST THE RELEASED PARTIES, AS
DEFINED ABOVE, WHETHER INDIVIDUALLY OR COLLECTIVELY, INCLUDING ANY CLAIMS EMPLOYEE MAY HAVE UNDER THE ADEA.
The Parties knowingly and voluntarily sign this Agreement and General Release as of the date(s) set forth below:
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AGREEMENT AND GENERAL RELEASE
This Agreement and General Release (hereinafter “Agreement” or “Agreement and General Release”) is made by and between Momenta
Pharmaceuticals, Inc. (“Momenta” or the “Company”) and Bruce Leicher (“Employee”). In order to resolve all matters relating to Employee’s employment,
including but not limited to issues relating to the cessation of Employee’s employment, Momenta and Employee (collectively referred to as “the Parties”),
voluntarily agree that:
1.
Last Day of Employment . Employee’s last day of employment with Momenta was October 5, 2018, referred to as the “date of termination.”
Payment of all salary ceased as of Employee’s last day of employment, as did his right to participate in Momenta benefit programs unless otherwise required by
law or provided for in this Agreement. Payment of all final pay for time worked through October 5, 2018, and payment for all accrued but unused vacation time
Employee was made on October 5, 2018.
2.
Consideration . In consideration for Employee signing this Agreement and General Release, and complying with its terms, Momenta agrees
to provide the following separation benefits in accordance with and pursuant to the Executive Employment Agreement between Employee and the Company dated
as of June 18, 2008 (as amended, the “Employment Agreement”):
(a)
Four hundred fifty thousand six hundred twenty six dollars ($450,626), representing an amount equal to twelve (12) months of Employee’s
gross base salary as of the date of termination, less lawful deductions, to be paid in equal ratable installments in accordance with the Company’s regular payroll
practices over the twelve (12) month period beginning on the next payroll date following the 60th day after the date of termination;
(b)
One hundred eighty thousand two hundred fifty dollars ($180,250), less lawful deductions, representing the greater of (i) the annual
discretionary target bonus for Employee for fiscal year 2018 and (ii) the annual bonus paid to the Employee for fiscal year 2017, to be paid in one lump sum on the
next payroll date following the 60th day after the date of termination;
(c)
if Employee is eligible for and timely elects to continue his medical, dental and/or vision health insurance coverage pursuant to COBRA, the
Company shall continue to contribute, until the earlier of twelve (12) months following the date of termination or the date on which Employee becomes eligible to
receive group medical, dental and/or vision insurance coverage through a new employer (the “Contribution Period”), toward the cost of Employee’s COBRA
premiums the same amount that it pays on behalf of active and similarly situated employees receiving the same type of coverage. The remaining balance of any
premium costs, and all premium costs after the Contribution Period, shall be paid by Employee on a monthly basis. After the Contribution Period, Employee may
continue receiving coverage under COBRA at his own cost if and to the extent that he remains eligible for COBRA continuation. Employee agrees that he shall
notify the Company in writing immediately following the date on which he becomes eligible for group medical and/or dental insurance coverage through another
employer;
(d)
the Company shall continue to provide benefits to Employee in accordance with any applicable life insurance, accident and/or disability
plans under which he was eligible as of the date of termination consistent with such benefits as may be provided to active and similarly situated employees covered
by such plans, until the earlier of (i) twelve (12) months following the date of termination or (ii) the date on which Employee becomes eligible to receive
substantially comparable coverage through a new employer (the “Extended Benefits Period”); provided, however, that if such plans do not permit continued
coverage of Employee following the date of termination, the Company shall instead reimburse Employee for the reasonable cost of purchasing substantially
comparable coverage during the Extended Benefits Period, payable in accordance with Section 10(d). Employee agrees that he shall notify the Company in writing
immediately following the date on which he becomes eligible for life insurance, accident and/or disability coverage through a new employer; and
(e)
Employee shall be entitled to continued vesting of any unvested stock options outstanding as of the date of termination (collectively, the
“Outstanding Stock Options”) for a period of twelve (12) months from the date of termination (the “Extended Vesting Date”) regardless of whether Employee
maintains a continuous service relationship with the Company during such time and, subject to the terms of the applicable equity plan and award agreement, the
right to exercise any Outstanding Stock Options shall terminate on the earlier of three months after the Extended Vesting Date and the original expiration date of
the Outstanding Stock Option (assuming no termination of employment occurred); provided that, if Employee maintains a continuous service relationship with the
Company after the Extended Vesting Date, Employee will be eligible for continued vesting and exercisability of any Outstanding Stock Options as described in,
and subject to the terms of, the documents governing the Outstanding Stock Option. Employee shall also be entitled to immediate vesting, on the date of
termination, of any restricted stock awards and restricted stock unit awards with underlying shares that (i) vest solely through the passage of time (i.e., service-
based vesting) and not upon the achievement of specified conditions or milestones (i.e., performance-based vesting) or (ii) accelerate in
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accordance with their terms in connection with Employee’s termination without cause (collectively, “Outstanding Restricted Stock Awards”), in each case that
would have vested during the period of twelve (12) months from the date of termination; provided that, if any such awards constitute “non-qualified deferred
compensation” subject to Section 409A (as defined in Section 10), then such awards will vest on the date of termination and will be paid or settled, as applicable,
in accordance with the schedule that applies to such awards notwithstanding the accelerated vesting provisions of this Section to the extent necessary to avoid a
prohibited distribution under Section 409A. For the avoidance of doubt and notwithstanding the contrary terms of any Outstanding Restricted Stock Award,
Employee will not continue vesting in any Outstanding Restricted Stock Awards by reason of Employee’s continued service to the Company following the date of
termination and Employee shall have no further rights with respect to any Outstanding Restricted Stock Awards that remain unvested after taking into account the
vesting provisions set forth in this Section 2(e).
3.
No Consideration Absent Execution of this Agreement . Employee understands and agrees that he would not receive the monies and/or
benefits specified in Section 2 above, except for his signing of this Agreement and the fulfillment of the promises contained herein.
4.
Employee General Release, Claims Not Released and Related Provisions . In exchange for the mutual promises made in this Agreement
and in the Employment Agreement, Employee agrees:
(a)
Employee General Release of All Claims . Employee on behalf of himself, his heirs, executors, representatives, agents, insurers,
administrators, successors and assigns knowingly and voluntarily and to the maximum extent permitted by law releases and forever discharges, Momenta
Pharmaceuticals, Inc., any and all past, present or future companies, parent companies, partners, divisions, subsidiaries, affiliates, trustees, corporations under
common control or ownership, business partners, and each of its and their current and former officers, directors, insurers, shareholders, officers, members,
attorneys, insurers, agents and current/former employees, and each of their predecessors, successors, and assigns, and all related persons, individually and in their
corporate capacities, and their employee benefit plans and programs and their administrators and fiduciaries (all individually and collectively referred to throughout
the remainder of this Agreement as “the Released Parties”) of and from any and all claims, demands, actions, causes of actions, obligations, judgments, rights, fees,
damages, debts, obligations, liabilities and expenses (inclusive of attorneys’ fees) of any kind whatsoever, known and unknown, asserted or unasserted, that
Employee has, had or may have against the Released Parties (whether individually or collectively) as of the date Employee signs this Agreement, including, but not
limited to (i) any claims under any federal, state, local or foreign law arising out of, or in any way related to Employee’s employment, benefits, employment and
end of employment with Momenta, and all claims arising under Title VII of the Civil Rights Act of 1964, as amended; Sections 1981 through 1988 of Title 42 of
the United States Code; The Civil Rights Act of 1991; The Age Discrimination In Employment Act, as amended (“ADEA”); The Older Workers Benefit Protection
Act; The Genetic Information Nondiscrimination Act of 2008 (“GINA”), The Employee Retirement Income Security Act of 1974, as amended (“ERISA”) (except
for any vested benefits under any tax qualified benefit plan); The Immigration Reform and Control Act; The Americans with Disabilities Act of 1990; The Family
and Medical Leave Act; The Equal Pay Act, as amended; The Worker Adjustment and Retraining Notification Act, as amended; The Uniform Services
Employment and Reemployment Rights Act, as amended; The Massachusetts Law Against Discrimination/Fair Employment Practices Act, G.L. c. 151B; The
Massachusetts Parental Leave Law; The Massachusetts Privacy Statute, G.L. c. 214, § 1B; The Massachusetts Wage Payment Statute, G.L. c. 149, §§ 148, 148A,
148B, 149, 150150A-150C, 151, 152, 152A, et seq.; the Massachusetts Wage and Hour laws, G.L. c. 151§1A et seq.; The Massachusetts Sexual Harassment
Statute, G.L. c. 214 § 1C; The Massachusetts Consumer Protection Act, G.L. c. 93A; The Massachusetts Civil Rights Act, G.L. c. 12, §11; The Massachusetts paid
sick leave law; The Massachusetts Equal Rights Act, G.L. c. 93; The Massachusetts Equal Pay law; any and all Massachusetts whistleblower protection laws; all
other Massachusetts wage and hour laws; (ii) any and all claims for compensation of any type whatsoever, including but not limited to claims for bonuses,
commissions, stock grants, stock option grants, or any claims for incentive compensation of any type (but not including any claims for compensation or benefits as
provided for in this Agreement above), whether under common law or Momenta policy or contract, and any other federal, state or local human rights, civil rights,
wage-hour, whistleblower, pension or labor laws, rules and/or regulations, public policy; (iii) any claim for breach of contract, contract or tort laws; (iv) any claim
arising under common law, such as claims for malicious prosecution, misrepresentation, defamation, false imprisonment, libel, slander, invasion of privacy,
negligence, claims based on theories of strict liability or respondeat superior, infliction of emotional distress, or otherwise; (v) any and all claims for monetary or
equitable relief, including but not limited to attorneys’ fees, back pay, front pay, reinstatement, experts’ fees, medical fees or expenses, costs and disbursements; or
(vi) any other action or grievance against the Released Parties based upon any conduct, up to and including the date of the Agreement, and shall not, from any
source or proceeding, seek or accept any additional award or settlement therefrom.
(b)
Employee Claims Not Released . Employee is not waiving any rights he may have to: (a) his own vested accrued employee benefits under
Momenta’s health, welfare, or retirement benefit plans as of the date of termination; (b) benefits and/or the right to seek benefits under applicable workers’
compensation and/or unemployment compensation statutes; (c) pursue claims which by law cannot be waived by signing this Agreement; (d) enforce this
Agreement; (e) challenge the validity of this Agreement;
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(f) indemnification rights provided for in ARTICLE EIGHTH of the Third Amended and Restated Certificate of Incorporation of the Company contract, related
directors’ and officers’ liability insurance or applicable law; and/or (g) vested equity securities of Momenta.
(c)
Eligibility Requirement, Acknowledgment . Employee’s termination of employment results from Momenta’s 2018 Reduction in Force
Program (the “Program”), which was prompted by a significant change in the focus of the Company’s business to one centered on the development of novel
therapeutics, while substantially exiting the biosimilar business. In order to participate in the Program, an employee must have been employed by, and not
previously submitted his/her voluntary resignation to, Momenta in any capacity as of October 1, 2018. Selection of eligible employees for separation under the
Program was based on various business considerations, including but not limited to, the Company’s revised corporate strategies, the responsibilities and functions
of each position, employees’ specific training, experience, expertise and cross trainable skill sets, the product candidate(s) supported by employees, and the
employees’ historical job performance; relative seniority and/or other business and technical needs. Attached as Exhibit A is a list of the job titles and ages (as of
October 1, 2018), of all eligible employees selected and not selected for separation and whether he/she was/will be offered severance in exchange for signing a
release of claims.
(d)
Governmental Agencies . Nothing in this Agreement prohibits or prevents Employee from filing a charge with or participating, testifying, or
assisting in any investigation, hearing, or other proceeding before any federal, state, or local government agency. However, to the maximum extent permitted by
law, Employee agrees that if such an administrative claim is made, he shall not be entitled to recover any individual monetary relief or other individual remedies.
(e)
Other Agreements . Employee acknowledges and agrees that the provisions of Sections 8-10 of the Employment Agreement remain in full
force and effect following the date of termination and are incorporated herein by reference, and Employee reaffirms his obligations under Sections 8-10 of the
Employment Agreement. The Company acknowledges and agrees that the rights of indemnification to which Employee may be entitled pursuant to the Company’s
certificate of incorporation, as amended from time to time (the “Certificate of Incorporation”), shall remain in full force and effect in accordance with, and to the
extent provided under, the Certificate of Incorporation.
5.
Company General Release, Claims Not Released . In exchange for the mutual promises made in this Agreement and in the Employment
Agreement, the Company agrees:
(a)
Company General Release of all Claims . The Company, on its own behalf and on behalf of all other Released Parties, knowingly and
voluntarily and to the maximum extent permitted by law, releases and forever discharges Employee and any and all of Employee’s affiliates, successors and
assigns (collectively, the “Employee Released Parties”) of and from any and all claims, demands, actions, causes of actions, obligations, judgments, rights, fees,
damages, debts, obligations, liabilities and expenses (inclusive of attorneys’ fees) of any kind whatsoever, known and unknown, asserted or unasserted, that the
Company has, had or may have against the Employee Released Parties (whether individually or collectively) as of the date the Company signs this Agreement.
(b)
Company Claims Not Released . The Company is not waiving any rights the Company may have to: (a) pursue claims against Employee
relating to fraud or criminal conduct; (b) pursue claims which by law cannot be waived by signing this Agreement; (c) enforce this Agreement; and/or
(d) challenge the validity of this Agreement.
6.
Acknowledgments and Affirmations .
(a)
Employee affirms that he has not filed, caused to be filed, or presently is a party to any claim against Momenta, Inc. or the Released Parties.
Employee also affirms that he has been paid and/or has received all compensation, wages, bonuses, commissions, and/or benefits to which he may be entitled,
except for those contemplated by this Agreement. Employee further acknowledges and agrees that by signing this Agreement and General Release, he shall not be
eligible to receive any bonuses or other incentive or discretionary compensation except as specifically provided under Section 2 above. Employee affirms that he
has been granted any leave to which he was entitled under the Family and Medical Leave Act or related state or local leave or disability accommodation laws.
Employee further affirms that he has no known workplace injuries or occupational diseases.
(b)
By signing this Agreement, Employee affirms that he has not divulged any proprietary or confidential information of Momenta and will, to
the maximum extent permitted by law, continue to maintain the confidentiality of such information consistent with Momenta’s policies and/or common law.
(c)
Employee further affirms that he has not been retaliated against for reporting any allegations of wrongdoing by Momenta or its officers,
including any allegations of corporate fraud. Both Parties acknowledge that this Agreement does not limit
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either party’s right, where applicable, to file or participate in an investigative proceeding of any federal, state or local governmental agency. To the extent
permitted by law, Employee agrees that, as set forth above, if such an administrative claim is made, Employee shall not be entitled to recover any individual
monetary relief or other individual remedies.
7.
Non-Disparagement . Employee agrees that to the maximum extent permitted by law, he shall not make any statement, whether written or
oral, that is willfully disparaging of the Company, the members of its Board of Directors, and its senior management team. The Company agrees that it shall
instruct its senior management team with knowledge of this Agreement and members of its Board of Directors not to make any statement that is willfully
disparaging of Employee. Nothing in this paragraph shall prohibit or limit the ability of the Parties (and in the case of the Company, its current and former
employees and members of its Board of Directors) from enforcing the terms of this Agreement or testifying truthfully (including opinion testimony) in any legal
proceeding, and/or in response to a valid subpoena issued in connection with a legitimate Court or administrative proceeding, including but not limited to
depositions.
8.
Confidentiality and Return of Property .
(a)
Employee agrees that to the maximum extent permitted by law, he shall not disclose to any other person or entity (including but not limited to
social networking web sites and/or members of the press/media), any information regarding the underlying facts leading up to this Agreement, except to his
spouse/significant other, tax advisor, and/or an attorney with whom he chooses to consult regarding his consideration of this Agreement and General Release, or to
enforce any provision of this Agreement or as otherwise permitted by law.
(b)
Notwithstanding the foregoing, nothing in this Agreement, the Employment Agreement prohibits Employee from reporting possible
violations of federal law or regulation to any United States governmental agency or entity in accordance with the provisions of and rules promulgated under
Section 21F of the Securities Exchange Act of 1934 or Section 806 of the Sarbanes-Oxley Act of 2002, or any other whistleblower protection provisions of state or
federal law or regulation (including the right to receive an award for information provided to any such government agencies). Furthermore, in accordance with 18
U.S.C. § 1833, notwithstanding anything to the contrary in this Agreement, the Employment Agreement: (A) Employee shall not be in breach of this Agreement,
the Employment Agreement, and shall not be held criminally or civilly liable under any federal or state trade secret law (x) for the disclosure of a trade secret that
is made in confidence to a federal, state, or local government official or to an attorney solely for the purpose of reporting or investigating a suspected violation of
law, or (y) for the disclosure of a trade secret that is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal;
and (B) if Employee files a lawsuit for retaliation by the Company for reporting a suspected violation of law, Employee may disclose the trade secret to
Employee’s attorney, and may use the trade secret information in the court proceeding, if Employee files any document containing the trade secret under seal, and
does not disclose the trade secret, except pursuant to court order.
(c)
Employee affirms that he will return/has returned all of Momenta’s property, documents, and/or any confidential information in his
possession or control, unless otherwise agreed by the parties.
9.
Governing Law and Interpretation . This Agreement and General Release shall be governed and conformed in accordance with the laws of
the Commonwealth of Massachusetts without regard to its conflict of laws provision that would result in the application of any other laws, and where applicable
the laws of the United States. In the event of a breach of any provision of this Agreement and General Release, either party may institute an action specifically to
enforce any term or terms of this Agreement and General Release and/or to seek any damages for breach. Should any provision of this Agreement and General
Release be declared illegal or unenforceable by any court of competent jurisdiction and cannot be modified to be enforceable, excluding the general release
language, such provision shall immediately become null and void, leaving the remainder of this Agreement and General Release in full force and effect. The
Company and Employee each hereby irrevocably waive any right to a trial by jury in any action, suit or other legal proceeding arising under or relating to any
provision of this Agreement.
10.
Section 409A.
(a)
Although the Company does not guarantee the tax treatment of any payments under the Agreement, the intent of the Company is that the
payments and benefits under this Agreement be exempt from, or comply with, Section 409A of the Internal Revenue Code of 1986, as amended, and all Treasury
Regulations and guidance promulgated thereunder (“Section 409A”) and to the maximum extent permitted the Agreement shall be limited, construed and
interpreted in accordance with such intent. In no event whatsoever shall the Company or its affiliates or their respective officers, directors, employees or agents be
liable for any additional tax, interest or penalties that may be imposed on Employee by Section 409A or damages for failing to comply with Section 409A.
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(b)
It is intended that each installment of the payments and benefits provided under Section 2 above shall be treated as a separate “payment” for
purposes of Section 409A.
(c)
Notwithstanding anything in this Agreement to the contrary, any payments or benefits under Section 2 that constitute non-qualified deferred
compensation subject to Section 409A shall begin only upon the date of a “separation from service” (within the meaning of Section 409A) which occurs on or after
the date of termination. If, as of the date of the “separation from service” of the Employee from the Company within the meaning of Section 409A, the Employee is
a “specified employee” (within the meaning of Section 409A), then:
(i)
Each installment of the payments and benefits due under Section 2 above that, in accordance with the dates and terms set forth herein, will in
all circumstances, regardless of when the separation from service occurs, be paid within the Short-Term Deferral Period (as defined under Section 409A) shall be
treated as a short-term deferral within the meaning of Treasury Regulation Section 1.409A-1(b)(4) to the maximum extent permissible under Section 409A and
shall be paid at the time and in the manner set forth in the Agreement; and
(ii)
Each installment of the payments and benefits due under Section 2 above that is not described in Section 10(c)(i) and that would, absent this
subsection, be paid within the six-month period following the “separation from service” of the Employee from the Company shall not be paid until the date that is
six months and one day after such separation from service (or, if earlier, the Employee’s death), with any such installments that are required to be delayed being
accumulated during the six-month period and paid in a lump sum on the date that is six months and one day following the Employee’s separation from service and
any subsequent installments, if any, being paid in accordance with the dates and terms set forth herein; provided , however , that the preceding provisions of this
sentence shall not apply to any installment of payments and benefits if and to the maximum extent that that such installment is deemed to be paid under a
separation pay plan that does not provide for a deferral of compensation by reason of the application of Treasury Regulation 1.409A‑1(b)(9)(iii) (relating to
separation pay upon an involuntary separation from service). Any installments that qualify for the exception under Treasury Regulation Section 1.409A-1(b)(9)(iii)
must be paid no later than the last day of the Employee’s second taxable year following the Employee’s taxable year in which the separation from service occurs.
The determination of whether and when a separation from service has occurred shall be made and in a manner consistent with, and based on the presumptions set
forth in, Treasury Regulation Section 1.409A-1(h).
(d)
To the extent that any reimbursements under this Agreement are subject to Section 409A, any such reimbursements payable to Employee
shall be paid to Employee no later than December 31 of the year following the year in which the expense was incurred, the amount of expenses reimbursed in one
year shall not affect the amount eligible for reimbursement in any subsequent year and Employee’s right to reimbursement under this Agreement will not be
subject to liquidation or exchange for another benefit.
11.
Section 280G . For the avoidance of doubt, all payments and benefits under this Agreement shall be subject to the provisions of Section 5.3
of the Employment Agreement, which will apply, mutatis mutandis, to this Agreement.
12.
Cooperation . Employee agrees to cooperate with the Company in connection with any matter or event relating to Employee’s employment
or events that occurred during Employee’s employment, including, without limitation, in the defense or prosecution of any claims or actions which may be brought
or threatened in the future against or on behalf of the Company. Employee’s cooperation in connection with such matters, actions and claims shall include, without
limitation, being available, upon reasonable notice to meet with the Company regarding matters in which Employee has been involved, and any contract matters or
audits; to prepare for, attend and participate in any proceeding (including, without limitation, depositions, consultation, discovery or trial); to provide affidavits; to
assist with any audit, inspection, proceeding or other inquiry; and to act as a witness in connection with any litigation or other legal proceeding affecting the
Company.
13.
Non-admission of Wrongdoing . The Parties agree that neither this Agreement nor the furnishing of the consideration for this Agreement
shall be deemed or construed at any time for any purpose as an admission by the Released Parties or the Employee Released Parties of wrongdoing or evidence of
any liability or unlawful conduct of any kind.
14.
Amendment . This Agreement may not be modified, altered or changed except in writing and signed by both Parties wherein specific
reference is made to this Agreement.
15.
Entire Agreement . This Agreement sets forth the entire agreement between the Parties hereto, and fully supersedes any prior agreements or
understandings between the Parties, except to the extent such agreements/understandings are incorporated in whole or in part by reference or otherwise adopted by
this Agreement. Employee acknowledges that he has not
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relied on any representations, promises, or agreements of any kind made to him in connection with his decision to accept this Agreement, except for those set forth
in this Agreement and General Release.
EMPLOYEE IS ADVISED THAT HE HAS UP TO FORTY-FIVE (45) CALENDAR DAYS TO CONSIDER THIS AGREEMENT AND GENERAL
RELEASE. EMPLOYEE IS ADVISED TO CONSULT WITH AN ATTORNEY BEFORE SIGNING THIS AGREEMENT AND GENERAL RELEASE. IN
ORDER TO RECEIVE THE PROMISES AND BENEFITS AND PAYMENTS UNDER SECTION 2 OF THIS AGREEMENT, EMPLOYEE MUST ACCEPT
THIS AGREEMENT BY SIGNING THIS AGREEMENT (AND NOT THEREAFTER REVOKING HIS ACCEPTANCE) WITHIN THAT FORTY-FIVE
CALENDAR DAY PERIOD.
EMPLOYEE MAY REVOKE THIS AGREEMENT AND GENERAL RELEASE FOR A PERIOD OF SEVEN (7) CALENDAR DAYS FOLLOWING
THE DAY HE SIGNS THIS AGREEMENT AND GENERAL RELEASE. ANY REVOCATION WITHIN THIS PERIOD MUST BE SUBMITTED, IN
WRITING, TO JO-ANN BELTRAMELLO, SENIOR VICE PRESIDENT OF HUMAN RESOURCES, MOMENTA PHARMACEUTICALS, INC., 301
BINNEY STREET, CAMBRIDGE, MA 02142 AND STATE, “I HEREBY REVOKE MY ACCEPTANCE OF OUR AGREEMENT AND GENERAL
RELEASE.” THE REVOCATION MUST BE PERSONALLY DELIVERED, OR MAILED AND POSTMARKED WITHIN SEVEN (7) CALENDAR DAYS
AFTER EMPLOYEE SIGNS THIS AGREEMENT AND GENERAL RELEASE. THIS AGREEMENT WILL BECOME EFFECTIVE ON THE FIRST DAY
AFTER THE EXPIRATION OF THE EMPLOYEE’S REVOCATION PERIOD PROVIDED THAT EMPLOYEE HAS NOT PREVIOUSLY REVOKED THIS
AGREEMENT AS SET FORTH HEREIN.
EMPLOYEE AGREES THAT ANY MODIFICATIONS, MATERIAL OR OTHERWISE, MADE TO THIS AGREEMENT AND GENERAL
RELEASE, DO NOT RESTART OR AFFECT IN ANY MANNER THE ORIGINAL FORTY-FIVE (45) CALENDAR DAY CONSIDERATION PERIOD.
EMPLOYEE FREELY AND KNOWINGLY, AND AFTER DUE CONSIDERATION, ENTERS INTO THIS AGREEMENT AND GENERAL
RELEASE INTENDING TO WAIVE, SETTLE AND RELEASE ALL CLAIMS HE HAS OR MIGHT HAVE AGAINST THE RELEASED PARTIES, AS
DEFINED ABOVE, WHETHER INDIVIDUALLY OR COLLECTIVELY, INCLUDING ANY CLAIMS EMPLOYEE MAY HAVE UNDER THE ADEA.
The Parties knowingly and voluntarily sign this Agreement and General Release as of the date(s) set forth below:
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EMPLOYMENT AGREEMENT
Exhibit 10.38
THIS EMPLOYMENT AGREEMENT (the "Agreement"), made this 29 day of May, 2017, is entered into by Momenta Pharmaceuticals, Inc., a Delaware
corporation with its principal place of business at 675 West Kendall Street, Cambridge, Massachusetts (the "Company"), and Michelle Robertson, an individual
residing at 197 Abbott Street, North Andover, Massachusetts 01845 (the "Employee").
In consideration of the mutual covenants and promises contained herein, and other good and valuable consideration, the receipt and sufficiency of which
are acknowledged by the parties hereto, the parties agree as follows:
1. Term of Employment . The Employee commenced employment with the Company on May 8, 2017 (the "Commencement Date"). The Employee's
employment, commencing on the Commencement Date, shall be upon the terms set forth in this Agreement. There shall be no definite term of employment, and
the Employee's employment shall be at-will, such that both the Company and the Employee shall be free to end the employment relationship for any reason, at any
time, with or without notice.
2. Title and Capacity . The Employee shall serve as Vice President of Financial Planning and Analysis, Finance and shall report to the Company's Chief
Financial Officer. The Employee shall be based at the Company's headquarters in Cambridge, Massachusetts. The Employee hereby accepts such employment and
agrees to undertake the duties and responsibilities inherent in such position and such other duties and responsibilities as the Company shall from time to time
reasonably assign to the Employee. The Employee agrees to devote his/her entire business time, attention and energies to the business and interests of the
Company. The Employee agrees to abide by the rules, regulations, instructions, personnel practices and policies of the Company and any changes therein that may
be adopted from time to time by the Company.
3. Compensation and Benefits.
annualized rate of $280,000. Such salary shall be subject to adjustment thereafter, as determined by the Board or a committee or designee thereof.
3.1 Base Salary . The Company shall pay the Employee, in accordance with the Company's regular payroll practices, a base salary at the
3.2 Annual Discretionary Bonus . If the Company's Board, in its sole discretion, approves an annual bonus for calendar year 2017 or any
calendar year thereafter, the Employee will be eligible for a discretionary bonus award. The annual target for the Employee's bonus will be at 30% of the
Employee's annualized base salary. The Company will determine, in its sole discretion, whether (and in what amount) a bonus award is payable to the Employee.
In determining whether a bonus award in any given year shall be granted, the Company will review whether it has achieved its annually approved corporate goals
as well as whether the Employee has achieved his/her personal objectives as established by the Company. In order to be eligible for any bonus hereunder, the
Employee must be an active employee of the Company on the date such bonus is distributed.
3.3 Employee Benefits . Subject to the provisions of this Section 3 .3, the Employee shall be entitled to participate in all benefit plans and
programs that the Company establishes and makes available to its employees to the extent that the Employee is eligible under (and subject to the provisions of) the
plan documents governing those programs. The Employee shall be entitled to twenty (20) days of paid vacation time per year (pro-rated for any partial year
worked), to be accrued and administered in accordance with Company policy.
3.4 Reimbursement of Expenses . The Company shall reimburse the Employee for all reasonable travel, entertainment and other expenses
incurred or paid by the Employee in connection with, or related to, the performance of his/her duties, responsibilities or services under this Agreement, upon
presentation by the Employee of documentation, expense statements, vouchers and/or such other supporting information in a form reasonably acceptable to the
Company as the Company may reasonably request; provided, however, that the amount available for such travel, entertainment and other expenses may be fixed in
advance by the Company.
3.5 Withholding . All salary, bonus and other compensation or benefits payable to the Employee shall be subject to applicable withholdings
and taxes.
4. Termination Following Change of Control.
4.1 Key Definitions . As used herein, the following terms shall have the following respective meanings:
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(a) " Change in Control " means an event or occurrence set forth in any one or more of subsections (i) through (iv) below (including
an event or occurrence that constitutes a Change in Control under one of such subsections but is specifically exempted from another such subsection), provided that
such event or occurrence also constitutes a change in ownership or effective control of the Company or in the ownership of a substantial portion of the assets of the
Company, each within the meaning of Section 409A (as defined below):
(i) the acquisition by an individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership of any capital stock of the Company if, after such acquisition, such
Person beneficially owns (within the meaning of Rule 13d-3 promulgated under the Exchange Act) 50% or more of either (x) the then-outstanding shares of
common stock of the Company (the "Outstanding Company Common Stock") or (y) the combined voting power of the then-outstanding securities of the Company
entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); provided, however, that for purposes of this subsection (i),
the following acquisitions shall not constitute a Change in Control: (a) any acquisition directly from the Company (excluding an acquisition pursuant to the
exercise, conversion or exchange of any security exercisable for, convertible into or exchangeable for common stock or voting securities of the Company, unless
the Person exercising, converting or exchanging such security acquired such security directly from the Company or an underwriter or agent of the Company), (b)
any acquisition by the Company, (c) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation
controlled by the Company, or (d) any acquisition by any corporation pursuant to a transaction which complies with clauses (x) and (y) of subsection (iii) of this
Section 4.1; or
(ii) such time as the Continuing Directors (as defined below) do not constitute a majority of the Board (or, if applicable, the
Board of Directors of a successor corporation to the Company), where the term "Continuing Director" means at any date a member of the Board (x) who was a
member of the Board on the date of the execution of this Agreement or (y) who was nominated or elected subsequent to such date by at least a majority of the
directors who were Continuing Directors at the time of such nomination or election or whose election to the Board was recommended or endorsed by at least a
majority of the directors who were Continuing Directors at the time of such nomination or election; provided, however, that there shall be excluded from this
clause (y) any individual whose initial assumption of office occurred as a result of an actual or threatened election contest with respect to the election or removal of
directors or other actual or threatened solicitation of proxies or consents, by or on behalf of a person other than the Board; or
(iii) the consummation of a merger, consolidation, reorganization, recapitalization or statutory share exchange involving the
Company or a sale or other disposition of all or substantially all of the assets of the Company, in one or a series of transactions (a "Business Combination"), unless,
immediately following such Business Combination, each of the following two conditions is satisfied: (x) all or substantially all of the individuals and entities who
were the beneficial owners of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business
Combination beneficially own, directly or indirectly, more than 50% of the then-outstanding shares of common stock and the combined voting power of the then-
outstanding securities entitled to vote generally in the election of directors, respectively, of the resulting or acquiring corporation in such Business Combination
(which shall include, without limitation, a corporation which as a result of such transaction owns the Company or substantially all of the Company's assets either
directly or through one or more subsidiaries) (such resulting or acquiring corporation is referred to herein as the "Acquiring Corporation") in substantially the same
proportions as their ownership, immediately prior to such Business Combination, of the Outstanding Company Common Stock and Outstanding Company Voting
Securities, respectively; and (y) no Person (excluding any employee benefit plan (or related trust) maintained or sponsored by the Company or by the Acquiring
Corporation) beneficially owns, directly or indirectly, 50% or more of the then outstanding shares of common stock of the Acquiring Corporation, or of the
combined voting power of the then-outstanding securities of such corporation entitled to vote generally in the election of directors (except to the extent that such
ownership existed prior to the Business Combination); or
(iv) approval by the stockholders of the Company of a complete liquidation or dissolution of the Company.
(b) " Change in Control Date " means the first date during the period of time the Employee is employed pursuant to this Agreement
on which a Change in Control occurs. Anything in this Agreement to the contrary notwithstanding, if (a) a Change in Control occurs, (b) the Employee's
employment with the Company is terminated prior to the date on which the Change in Control occurs, and (c) it is reasonably demonstrated by the Employee that
such termination of employment (i) was at the request of a third party who has taken steps reasonably calculated to effect a Change in Control or (ii) otherwise
arose in connection with or in anticipation of a Change in Control, then for all purposes of this Agreement the "Change in Control Date" shall mean the date
immediately prior to the date of such termination of employment.
(c) " Cause " means: (i) a good faith finding by no fewer than two-thirds of the members of the
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Board (excluding the Employee, if applicable) of (a) the Employee's failure to (1) perform reasonably assigned lawful duties or (2) comply with a lawful
instruction of the Board, Chief Executive Officer or such other executive officer with direct supervisory authority over the Employee so long as, in the case of (2),
the instruction is consistent with the scope and responsibilities of the Employee's position, or (b) the Employee's dishonesty, willful misconduct or gross
negligence, or (c) the Employee's substantial and material failure or refusal to perform according to, or to comply with, the policies, procedures or practices
established by the Company or the Board and, in the case of (a) or (c), the Employee has had ten (I0) days written notice to cure his/her failure to so perform or
comply; or (ii) the Employee's indictment, or the entering of a guilty plea or plea of "no contest" with respect to, a felony or any crime involving moral turpitude.
(d) " Good Reason " means the occurrence, without the Employee's written consent, of any of the events or circumstances set forth in
clauses (i) through (iv) below, provided, however, that an event described in clauses (i) through (iv) below shall not constitute Good Reason unless it is
communicated in writing, within 90 days of the event giving rise to the claim, by the Employee to the Company or its successor and unless it is not corrected by the
Company or its successor and the Employee has not been reasonably compensated for any loss or damages resulting therefrom within thirty (30) days of the
Company's or successor's receipt of such written notice:
(i) the assignment to the Executive of duties inconsistent in any material respect with the Executive's position (including
status, offices, titles and reporting requirements), authority or responsibilities, or any other action or omission by the Company which results in a material
diminution in such position, authority or responsibilities;
(ii) a material breach of this Agreement by the Company;
(iii) a material reduction in the Employee's base salary; or
(iv) a change by the Company in the location at which the Employee performs his/her principal duties for the Company to a
new location that is both (i) outside a radius of 50 miles from the Employee's principal residence and (ii) more than 30 miles from the location at which the
Employee performed his/her principal duties for the Company.
(e) Change of Control Termination occurs where the Employee is terminated without Cause or resigns for Good Reason, in either
case within twelve (12) months following the Change in Control Date. In addition, any termination of the Employee's employment that occurs within twelve (12)
months following the Change in Control Date shall be communicated by a written notice to the other party (the "Notice of Termination"), given in accordance with
Section 8 hereof. Any such Notice of Termination shall: (i) indicate the specific termination provision of this Agreement relied upon by the party giving such
notice, (ii) in the case of a termination by the Company for Cause or by the Employee for Good Reason, set forth in reasonable detail the facts and circumstances
claimed to provide a basis for such Cause or Good Reason, and (iii) specify the Date of Termination (as defined below). The effective date of an employment
termination (the "Date of Termination") shall be the close of business on the date specified in the Notice of Termination, may not be less than 15 days or more than
120 days after the date of delivery of such Notice of Termination. In the event the Company fails to satisfy the requirements of this Section 4.1(e) regarding a
Notice of Termination, the purported termination of the Employee's employment pursuant to such Notice of Termination shall not be effective for purposes of this
Agreement.
4.2 Benefits to Employee Upon a Change of Control Termination . In the event of a Change of Control Termination, the Employee shall be
entitled to all accrued and unpaid base salary and any accrued but unused vacation through the date of termination and the Employee shall be eligible to receive the
following separation benefits:
(a) an amount equal to the sum of (i) twelve (12) months of the Employee's base salary as of the date of termination (which amount
shall be payable in one lump sum on the next payroll date following the 30th day after the date of termination), and (ii) the greater of (x) the annual discretionary
target bonus established by the Board (or any other person or persons having authority with respect thereto) for the Employee for the fiscal year in which the date
of termination occurs or (y) the annual bonus paid to the Employee for the most recently completed fiscal year (which amount shall be payable in one lump sum on
the next payroll date following the 30th day after the date of termination);
(b) the Company shall, if the Employee is eligible for and elects to continue his/her medical and/or dental health insurance coverage
pursuant to COBRA, continue to contribute for a period of twelve (12) months following the Date of Termination (the "Extended Benefits Period") toward the cost
of the Employee's monthly COBRA premiums the same amount that it pays on behalf of active and similarly situated employees receiving the same type of
coverage. The remaining balance of any monthly premium costs, and all premium costs after the Extended Benefits Period, shall be paid by the Employee on a
monthly basis. In the event that Employee fails to timely pay his/her portion of the monthly COBRA premium during the Extended Benefits Period, the Company
shall have no further obligation to pay any portion of the monthly COBRA premium for
3
any remaining portion of the Extended Benefits Period and, in that event, Employee shall be solely responsible for paying the entire monthly COBRA premium for
the remaining portion of the Extended Benefits Period. After the Extended Benefits Period, the Employee may continue receiving coverage under COBRA at
his/her own sole cost if and to the extent that he/she remains eligible for COBRA continuation. The Employee agrees that he/she shall notify the Company in
writing immediately following the date on which he/she becomes eligible for group medical and/or dental insurance coverage through another employer; and
(c) during the Extended Benefits Period defined above, the Company shall continue to provide benefits to the Employee in
accordance with any applicable life insurance, accident and/or disability plans under which the Employee was eligible as of the date of termination consistent with
such benefits as may be provided to active and similarly situated employees covered by such plans; provided, however, that if such plans do not permit continued
coverage of the Employee following the date of termination, the Company shall instead reimburse the Employee for the reasonable cost of purchasing substantially
comparable coverage during the Extended Benefits Period. The Employee agrees that she shall notify the Company in writing immediately following the date on
which she becomes eligible for life insurance, accident and/or disability coverage through another employer. The benefits provided and/or payments made under
this subsection shall be in installments in accordance with the Company's regular payroll practices, beginning with the payroll date following the 30'" day after the
date of termination; and
(d) the Employee shall be entitled to immediate vesting of any option shares, restricted shares and any other equity grants awarded to
the Employee prior to the Date of Termination, in each case that are unvested as of the Date of Termination. All such equity awards (whether stock options,
restricted stock grants or otherwise) will remain exercisable in accordance with the applicable stock option plan or grant agreement.
4.3 Injunctive Relief . The Company and the Employee agree that any breach of Section 4 of this Agreement by the Company is likely to
cause the Employee substantial and irrevocable damage and therefore, in the event of any such breach, in addition to such other remedies which may be available,
the Employee shall have the right to specific performance and injunctive relief.
5. Mitigation . The Employee shall not be required to mitigate the amount of any payment or benefits provided for in Section 4 by seeking other
employment or otherwise except with regard to medical and dental coverage if new employment is obtained.
6. Survival . The provisions of Sections 4, 7 and 8 shall survive the termination of this Agreement for any reason.
7. Non-Competition, Non-Solicitation, Confidential Information and Developments . The Employee hereby restates and reaffirms all of his/her
obligations pursuant to the Employee Nondisclosure, Noncompetition and Assignment of lnventions Agreement dated as of May 3, 2017 between the Company
and the Employee and attached hereto as Exhibit A (the "Nondisclosure Agreement") and acknowledges that the Nondisclosure Agreement remains in full force
and effect and is incorporated fully herein.
8. Notices . Any notice delivered under this Agreement shall be deemed duly delivered three (3) business days after it is sent by registered or certified
mail, return receipt requested, postage prepaid, or one (I) business day after it is sent for next-business day delivery signature required via a reputable nationwide
overnight courier service, in each case to the address of the recipient set forth in the introductory paragraph hereto. Either party may change the address to which
notices are to be delivered by giving notice of such change to the other party in the manner set forth in this Section 8.
9. Entire Agreement . This Agreement and any exhibits hereto constitute the entire agreement between the parties and supersedes all prior agreements
and understandings, whether written or oral, relating to the subject matter of this Agreement.
10. Amendment . This Agreement may be amended or modified only by a written instrument executed by both the Company and the Employee.
11. Governing Law . This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts (without
reference to the conflict of laws provisions thereof). Any action, suit or other legal proceeding arising under or relating to any provision of this Agreement shall be
commenced only in a court of the Commonwealth of Massachusetts (or, if appropriate, a federal court located within the Commonwealth of Massachusetts), and
the Company and the Employee each consents to the jurisdiction of such a court. The Company and the Employee each hereby irrevocably waive any right to a
trial by jury in any action, suit or other legal proceeding arising under or relating to any provision of this Agreement.
12. Successors and Assigns . The Company shall require any successor (whether direct or indirect, by purchase,
4
merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company as expressly to assume and agree to perform this Agreement
to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of the Company to obtain an assumption of this
Agreement upon the effectiveness of any succession shall be a breach of this Agreement and shall constitute Good Reason if the Employee elects to terminate
employment, except that for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of
Termination. As used in this Agreement, "Company" shall mean the Company as defined above and any successor to its business or assets as aforesaid which
assumes and agrees to perform this Agreement, by operation of law or otherwise. This Agreement shall be binding upon and inure to the benefit of both parties and
their respective successors and assigns; provided, however, that the obligations of the Employee are personal and shall not be assigned by the Employee.
13. Acknowledgment . The Employee states and represents that he/she has had an opportunity to fully discuss and review the terms of this Agreement
with an attorney. The Employee further states and represents that he/she has carefully read this Agreement, understands the contents herein, freely and voluntarily
assents to all of the terms and conditions hereof, and signs his/her name of his/her own free act.
14. Section 409A .
14.1 Distributions . Subject to this Section 14.1, any payments or benefits under Section 4.2 that are subject to Section 409A of the U.S.
Internal Revenue Code of 1986, as amended, and any related regulations or other guidance issued thereunder ("Section 409A") shall begin only upon the date of a
"separation from service" as defined below which occurs on or after the date of Change of Control Termination. The following rules shall apply with respect to
distribution of the payments and benefits, if any, to be provided to the Employee under Section 4.2:
(a) It is intended that each installment of the payments and benefits provided under section 4.2 shall be treated as a separate
"payment" for purposes of Section 409A. Neither the Company nor the Employee shall have the right to accelerate or defer the delivery of any such payments or
benefits except to the extent specifically permitted or required by Section 409A;
(b) Notwithstanding any other provision of this Agreement to the contrary, if at the time of Employee's separation from service (as
defined in Section 409A), Employee is a "specified employee" (as defined below), then the Company will defer the payment or commencement of any
nonqualified deferred compensation subject to Section 409A payable upon "separation from service" (without any reduction in such payments or benefits
ultimately paid or provided to Employee) until the date that is six (6) months following separation from service or, if earlier, the earliest other date as is permitted
under Section 409A (and any amounts that otherwise would have been paid during this deferral period will be paid in a lump sum on the day after the expiration of
the six (6) month period or such shorter period, if applicable). Employee will be a "specified employee" for purposes of this Agreement if, on the date of
Employee's "separation from service," Employee is an individual who is, under the method of determination adopted by the Company is designated as, or within
the category of employees deemed to be, a "specified employee" within the meaning and in accordance with Treasury Regulation Section l .409A l(i). The
Company shall determine in its sole discretion all matters relating to who is a "specified employee" and the application of and effects of the change in such
determination.
based on the presumptions set forth in, Treasury Regulation Section l.409A-l(h).
14.2 The determination of whether and when a "separation from service" has occurred shall be made and in a manner consistent with, and
14.3 Notwithstanding any other provision of this Agreement to the contrary, to the extent that any reimbursement of expenses or provision of
in-kind benefits constitutes "deferred compensation" under Section 409A, such reimbursement and benefits shall be provided no later than December 31 of the year
following the year in which the expense was incurred. The amount of expenses reimbursed in one year shall not affect the amount eligible for reimbursement in
any subsequent year. The amount of any in-kind benefits provided in one year shall not affect the amount of in-kind benefits provided in any other year.
14.4 Although the Company does not guarantee the tax treatment of any payments under the Agreement, the intent of the Company is that the
payments and benefits under this Agreement be exempt from, or comply with, Section 409A and to the maximum extent permitted the Agreement shall be limited,
construed and interpreted in accordance with such intent. In no event whatsoever shall the Company or its affiliates or their respective officers, directors,
employees or agents be liable for any additional tax, interest or penalties that may be imposed on Employee by Section 409A or damages for failing to comply with
Section 409A.
15. Miscellaneous .
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15.1 No delay or omission by the Company in exercising any right under this Agreement shall operate as a waiver of that or any other right. A
waiver or consent given by the Company on any one occasion shall be effective only in that instance and shall not be construed as a bar to or waiver of any right on
any other occas10n.
substance of any section of this Agreement.
15.2 The captions of the sections of this Agreement are for convenience of reference only and in no way define, limit or affect the scope or
the remaining provisions shall in no way be affected or impaired thereby.
15.3 In case any provision of this Agreement shall be invalid , illegal or otherwise unenforceable , the validity, legality and enforceability of
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year set forth above.
6
AMENDMENT NO. 1
THIS AMENDMENT NO. 1 (the “ Amendment ”), made this 20th day of November, 2017 is entered into by Momenta Pharmaceuticals, Inc., a
Delaware corporation with its principal place of business at 675 West Kendall Street, Cambridge, Massachusetts (the “ Company ”), and Michelle Robertson (the
“ Employee ”).
Whereas, the Company and Employee are parties to an Employment Agreement effective as of May 29, 2017 (the “ Agreement ”), pursuant to which the
parties agreed to certain terms and conditions of Employee’s employment with the Company; and
Whereas, the Company and Employee desire to amend the Agreement in connection with a highly confidential strategy project concerning the strategic
plan for the Company (the “ Project ”).
Now, therefore, in consideration of the mutual covenants and promises contained herein, and other good and valuable consideration, the receipt and
sufficiency of which are acknowledged by the parties hereto, the parties agree as follows:
1. Employee has been asked to participate in the Project which may include changes in the Company’s program strategy, strategic transactions and
workforce planning. Employee was chosen to participate, in part, as a reflection of Employee’s ability to make a key contribution to the future of the Company in
this Project, and the trust the Company has in Employee to maintain discretion and confidentiality. As set forth more fully below, if Employee signs this
Agreement, Employee will be provided a severance commitment from the Company designed to provide Employee with the security to participate and work on
this Project.
2. Employee understands that as part of the Project, Employee will receive information on a need to know basis and that Employee should only share
information with others who have previously been identified to Employee in writing as being a participant in the Project and who have a need to know the
information to perform their duties for the Company. Attached as Exhibit A is a list of individuals who have been engaged on this Project and who have been
identified as persons with a need to know the information. An updated Exhibit A may be given to Employee from time to time by the Company.
3. Employee also acknowledges that the foregoing may constitute material non-public information of the Company and restrict Employee’s ability to
trade the Company’s securities under applicable law and the Company’s policies to which Employee is subject. Until otherwise notified in writing by the
Company, Employee must clear all Company securities transactions with the Company’s legal department.
4. By signing below, Employee affirms and confirms Employee’s willingness and commitment to hold the information Employee learns relating to or
arising from the Project and Employee’s participation in the Project strictly confidential. Employee further affirms and confirms that the obligations Employee is
assuming under this Amendment are a material condition of Employee’s continued employment and a condition precedent to receiving the severance benefit
described below. Employee also restates and reaffirms all of his/her obligations pursuant to the Nondisclosure Agreement (as defined in the Agreement) and
acknowledges that the Nondisclosure Agreement remains in full force and effect. Any violation of these obligations will constitute grounds for immediate
termination for Cause (as defined in the Agreement) and forfeiture the severance benefits described in this Amendment.
5. In exchange for Employee’s commitments and promises under this Amendment, the Company agrees that if, on or before February 28, 2019,
Employee’s employment with the Company is terminated by the Company without Cause or if Employee voluntarily resigns for Good Reason (as defined in the
Agreement), in any case, other than in a Change in Control Termination (as defined in the Agreement) (a “ Qualifying Termination ”), then (x) Employee shall be
paid all accrued and unpaid base salary and any accrued but unused vacation through the date of termination and (y) in addition, subject to and contingent upon
Employee’s execution and non-revocation of a binding severance and mutual release agreement in a form provided by and satisfactory to the Company
(hereinafter, a “ Severance Agreement ”), which Severance Agreement must be executed and any applicable revocation period with respect thereto must have
expired within sixty (60) days of the date of termination, Employee shall be eligible to receive the following separation benefits:
other withholdings and paid in a lump sum on the next payroll date following the sixtieth (60th) day after the date of termination; and
(a) an amount equal to the sum of twelve (12) months of Employee’s gross base salary as of the date of termination, less all applicable tax and
(b) if Employee is eligible for and elects to continue his/her medical, vision and/or dental insurance coverage pursuant to the Consolidated
Omnibus Budget Reconciliation Act of 1985 (“ COBRA ”), the Company shall continue to contribute, until the earlier of (1) twelve (12) months following the date
of termination; or (2) the date on which Employee becomes eligible
7
to receive group medical, vision and/or dental insurance coverage through a new employer (the “ Contribution Period ”), toward the cost of Employee’s COBRA
premiums the same amount that it pays on behalf of active and similarly situated employees receiving the same type of coverage. The remaining balance of any
premium costs, and all premium costs after the Contribution Period, shall be paid by Employee on a monthly basis. In the event that Employee fails to timely pay
his/her portion of the monthly COBRA premium during the Contribution Period, the Company shall have no further obligation to pay any portion of the monthly
COBRA premium for any remaining portion of the Contribution Period and, in that event, Employee shall be solely responsible for paying the entire monthly
COBRA premium for the remaining portion of the Contribution Period. After the Contribution Period, Employee may continue receiving coverage under COBRA
at his/her own cost if and to the extent that he/she remains eligible for COBRA continuation. Employee agrees that he/she shall notify the Company in writing
immediately following the date on which he/she becomes eligible for group medical, vision and/or dental insurance coverage through another employer.
Any termination of Employee’s employment that occurs on or before February 28, 2019 (other than a termination that occurs within twelve (12) months following
the Change in Control Date) shall be communicated by a written notice to the other party given in accordance with Section 8 of the Agreement. Any such notice of
termination shall: (i) in the case of a termination by the Company for Cause or by Employee for Good Reason, set forth in reasonable detail the facts and
circumstances claimed to provide a basis for such Cause or Good Reason and (ii) specify the effective date of employment termination. The effective date of such
an employment termination shall be the close of business on the date specified in the notice of termination, which in the event of a resignation for Good Reason,
may not be less than 15 days or more than 120 days after the date of delivery of such notice of termination.
6. Nothing in this Amendment modifies or amends the terms of the Agreement relating to a termination of Employee’s employment following a Change
of Control, as set forth in Section 4 of the Agreement.
7. The definition of “Cause” in the Agreement is hereby amended by adding the following clause, at the end of Section 4.1(c): “, or (iii) Employee’s
violation of paragraphs (2), (3) or (4) of Amendment No. 1 to this Agreement or of the Nondisclosure Agreement.”
8. The first sentence of Section 14.1 is hereby amended by deleting the words “which occurs on or after the date of Change in Control Termination”
therefrom.
9. Except as explicitly set forth in this Amendment, the Agreement remains in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first set forth above.
8
EMPLOYMENT AGREEMENT
Exhibit 10.39
THIS EMPLOYMENT AGREEMENT (the "Agreement"), made this 10th day of August, 2017, is entered into by Momenta Pharmaceuticals, Inc., a
Delaware corporation with its principal place of business at 675 West Kendall Street, Cambridge, Massachusetts (the "Company"), and Alejandra Carvajal, an
individual residing at 12 Wyman Street Waban, MA 02468 (the "Employee").
In consideration of the mutual covenants and promises contained herein, and other good and valuable consideration, the receipt and sufficiency of which
are acknowledged by the parties hereto, the parties agree as follows:
1. Term of Employment . The Employee commenced employment with the Company on June 26, 2017 (the "Commencement Date"). The Employee's
employment, commencing on the Commencement Date, shall be upon the terms set forth in this Agreement. There shall be no definite term of employment, and
the Employee's employment shall be at-will, such that both the Company and the Employee shall be free to end the employment relationship for any reason, at any
time, with or without notice.
2. Title and Capacity . The Employee shall serve as Vice President, Deputy General Counsel and shall report to the Company's General Counsel. The
Employee shall be based at the Company's headquarters in Cambridge, Massachusetts. The Employee hereby accepts such employment and agrees to undertake the
duties and responsibilities inherent in such position and such other duties and responsibilities as the Company shall from time to time reasonably assign to the
Employee. The Employee agrees to devote his/her entire business time, attention and energies to the business and interests of the Company. The Employee agrees
to abide by the rules, regulations, instructions, personnel practices and policies of the Company and any changes therein that may be adopted from time to time by
the Company.
3. Compensation and Benefits .
annualized rate of $300,000. Such salary shall be subject to adjustment thereafter, as determined by the Board or a committee or designee thereof.
3.1 Base Salary . The Company shall pay the Employee, in accordance with the Company's regular payroll practices, a base salary at the
3.2 Annual Discretionary Bonus . If the Company's Board, in its sole discretion, approves an annual bonus for calendar year 2017 or any
calendar year thereafter, the Employee will be eligible for a discretionary bonus award. The annual target for the Employee's bonus will be at 30% of the
Employee's annualized base salary. The Company will determine, in its sole discretion, whether (and in what amount) a bonus award is payable to the Employee.
In determining whether a bonus award in any given year shall be granted, the Company will review whether it has achieved its annually approved corporate goals
as well as whether the Employee has achieved his/her personal objectives as established by the Company. In order to be eligible for any bonus hereunder, the
Employee must be an active employee of the Company on the date such bonus is distributed.
3.3 Employee Benefits . Subject to the provisions of this Section 3.3, the Employee shall be entitled to participate in all benefit plans and
programs that the Company establishes and makes available to its employees to the extent that the Employee is eligible under (and subject to the provisions of) the
plan documents governing those programs. The Employee shall be entitled to twenty (20) days of paid vacation time per year (pro-rated fm·any partial year
worked), to be accrued and administered in accordance with Company policy.
3.4 Reimbursement of Expenses . The Company shall reimburse the Employee for all reasonable travel, entertainment and other expenses
incurred or paid by the Employee in connection with, or related to, the performance of his/her duties, responsibilities or services under this Agreement, upon
presentation by the Employee of documentation, expense statements, vouchers and/or such other supporting information in a form reasonably acceptable to the
Company as the Company may reasonably request; provided, however, that the amount available for such travel, entertainment and other expenses may be fixed in
advance by the Company.
3.5 Withholding . All salary, bonus and other compensation or benefits payable to the Employee shall be subject to applicable withholdings
and taxes.
4. Termination Following Change of Control .
4.1 Key Definitions . As used herein, the following terms shall have the following respective meanings:
(a) " Change in Control " means an event or occurrence set forth in any one or more of subsections
1
(i) through (iv) below (including an event or occurrence that constitutes a Change in Control under one of such subsections but is specifically exempted from
another such subsection), provided that such event or occurrence also constitutes a change in ownership or effective control of the Company or in the ownership of
a substantial portion of the assets of the Company, each within the meaning of Section 409A (as defined below):
(i) the acquisition by an individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership of any capital stock of the Company if, after such acquisition, such
Person beneficially owns (within the meaning of Rule 13d-3 promulgated under the Exchange Act) 50% or more of either (x) the then-outstanding shares of
common stock of the Company (the "Outstanding Company Common Stock") or (y) the combined voting power of the then-outstanding securities of the Company
entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); provided, however, that for purposes of this subsection (i),
the following acquisitions shall not constitute a Change in Control: (a) any acquisition directly from the Company (excluding an acquisition pursuant to the
exercise, conversion or exchange of any security exercisable for, convertible into or exchangeable for common stock or voting securities of the Company, unless
the Person exercising, converting or exchanging such security acquired such security directly from the Company or an underwriter or agent of the Company), (b)
any acquisition by the Company, (c) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation
controlled by the Company, or (d) any acquisition by any corporation pursuant to a transaction which complies with clauses (x) and (y) of subsection (iii) of this
Section 4.1; or
(ii) such time as the Continuing Directors (as defined below) do not constitute a majority of the Board (or, if applicable, the
Board of Directors of a successor corporation to the Company), where the term "Continuing Director" means at any date a member of the Board (x) who was a
member of the Board on the date of the execution of this Agreement or (y) who was nominated or elected subsequent to such date by at least a majority of the
directors who were Continuing Directors at the time of such nomination or election or whose election to the Board was recommended or endorsed by at least a
majority of the directors who were Continuing Directors at the time of such nomination or election; provided, however, that there shall be excluded from this
clause (y) any individual whose initial assumption of office occurred as a result of an actual or threatened election contest with respect to the election or removal of
directors or other actual or threatened solicitation of proxies or consents, by or on behalf of a person other than the Board; or
(iii) the consummation of a merger, consolidation, reorganization, recapitalization or statutory share exchange involving the
Company or a sale or other disposition of all or substantially all of the assets of the Company, in one or a series of transactions (a "Business Combination"), unless,
immediately following such Business Combination, each of the following two conditions is satisfied: (x) all or substantially all of the individuals and entities who
were the beneficial owners of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business
Combination beneficially own, directly or indirectly, more than 50% of the then-outstanding shares of common stock and the combined voting power of the then-
outstanding securities entitled to vote generally in the election of directors, respectively, of the resulting or acquiring corporation in such Business Combination
(which shall include, without limitation, a corporation which as a result of such transaction owns the Company or substantially all of the Company's assets either
directly or through one or more subsidiaries) (such resulting or acquiring corporation is referred to herein as the "Acquiring Corporation") in substantially the same
proportions as their ownership, immediately prior to such Business Combination, of the Outstanding Company Common Stock and Outstanding Company Voting
Securities, respectively; and (y) no Person (excluding any employee benefit plan (or related trust) maintained or sponsored by the Company or by the Acquiring
Corporation) beneficially owns, directly or indirectly, 50% or more of the then outstanding shares of common stock of the Acquiring Corporation, or of the
combined voting power of the then-outstanding securities of such corporation entitled to vote generally in the election of directors (except to the extent that such
ownership existed prior to the Business Combination); or
(iv) approval by the stockholders of the Company of a complete liquidation or dissolution of the Company.
(b) " Change in Control Date " means the first date during the period of time the Employee is employed pursuant to this Agreement
on which a Change in Control occurs. Anything in this Agreement to the contrary notwithstanding, if (a) a Change in Control occurs, (b) the Employee's
employment with the Company is terminated prior to the date on which the Change in Control occurs, and (a) it is reasonably demonstrated by the Employee that
such termination of employment (i) was at the request of a third party who has taken steps reasonably calculated to effect a Change in Control or (ii) otherwise
arose in connection with or in anticipation of a Change in Control, then for all purposes of this Agreement the "Change in Control Date" shall mean the date
immediately prior to the date of such termination of employment.
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(c) " Cause " means: (i) a good faith finding by no fewer than two-thirds of the members of the Board (excluding the Employee, if
applicable) of (a) the Employee's failure to (1) perform reasonably assigned lawful duties or (2) comply with a lawful instruction of the Board, Chief Executive
Officer or such other executive officer with direct supervisory authority over the Employee so long as, in the case of (2), the instruction is consistent with the scope
and responsibilities of the Employee's position, or (b) the Employee's dishonesty, willful misconduct or gross negligence, or (c) the Employee's substantial and
material failure or refusal to perform according to, or to comply with, the policies, procedures or practices established by the Company or the Board and, in the
case of (a) or (c), the Employee has had ten (10) days written notice to cure his/her failure to so perform or comply; or (ii) the Employee's indictment, or the
entering of a guilty plea or plea of "no contest" with respect to, a felony or any crime involving moral turpitude.
(d) " Good Reason " means the occurrence, without the Employee's written consent, of any of the events or circumstances set forth in
clauses (i) through (iv) below, provided, however, that an event described in clauses (i) through (iv) below shall not constitute Good Reason unless it is
communicated in writing, within 90 days of the event giving rise to the claim, by the Employee to the Company or its successor and unless it is not corrected by the
Company or its successor and the Employee has not been reasonably compensated for any loss or damages resulting therefrom within thirty (30) days of the
Company's or successor's receipt of such written notice:
(i) the assignment to the Executive of duties inconsistent in any material respect with the Executive's position (including
status, offices, titles and reporting requirements), authority or responsibilities, or any other action or omission by the Company which results in a material
diminution in such position, authority or responsibilities;
(ii) a material breach of this Agreement by the Company;
(iii) a material reduction in the Employee's base salary; or
(iv) a change by the Company in the location at which the Employee performs his/her principal duties for the Company to a
new location that is both (i) outside a radius of 50 miles from the Employee's principal residence and (ii) more than 30 miles from the location at which the
Employee performed his/her principal duties for the Company.
(a) Change of Control Termination occurs where the Employee is terminated without Cause or resigns for Good Reason, in either
case within twelve (12) months following the Change in Control Date. In addition, any termination of the Employee's employment that occurs within twelve (12)
months following the Change in Control Date shall be communicated by a written notice to the other party (the "Notice of Termination"), given in accordance with
Section 8 hereof. Any such Notice of Termination shall: (i) indicate the specific termination provision of this Agreement relied upon by the party giving such
notice, (ii) in the case of a termination by the Company for Cause or by the Employee for Good Reason, set forth in reasonable detail the facts and circumstances
claimed to provide a basis for such Cause or Good Reason, and (iii) specify the Date of Termination (as defined below). The effective date of an employment
termination (the "Date of Termination") shall be the close of business on the date specified in the Notice of Termination, may not be less than 15 days or more than
120 days after the date of delivery of such Notice of Termination. In the event the Company fails to satisfy the requirements of this Section 4.I (e) regarding a
Notice of Termination, the purported termination of the Employee's employment pursuant to such Notice of Termination shall not be effective for purposes of this
Agreement.
4.2 Benefits to Employee Upon a Change of Control Termination . In the event of a Change of Control Termination, the Employee shall be
entitled to all accrued and unpaid base salary and any accrued but unused vacation through the date of termination and the Employee shall be eligible to receive the
following separation benefits:
(a) an amount equal to the sum of (i) twelve (12) months of the Employee's base salary as of the date of termination (which amount
shall be payable in one lump sum on the next payroll date following the 30'" day after the date of termination), and (ii) the greater of (x) the annual discretionary
target bonus established by the Board (or any other person or persons having authority with respect thereto) for the Employee for the fiscal year in which the date
of termination occurs or (y) the annual bonus paid to the Employee for the most recently completed fiscal year (which amount shall be payable in one lump sum on
the next payroll date following the 30th day after the date of termination);
(b) the Company shall, if the Employee is eligible for and elects to continue his/her medical and/or dental health insurance coverage
pursuant to COBRA, continue to contribute for a period of twelve (12) months following the Date of Termination (the "Extended Benefits Period") toward the cost
of the Employee's monthly COBRA premiums the same amount that it pays on behalf of active and similarly situated employees receiving the same type of
coverage. The remaining balance of any monthly premium costs, and all premium costs after the Extended Benefits Period, shall be paid by the Employee on a
monthly basis. In the event that Employee fails to timely pay his/her portion of the monthly COBRA premium during the
3
Extended Benefits Period, the Company shall have no further obligation to pay any portion of the monthly COBRA premium for any remaining portion of the
Extended Benefits Period and, in that event, Employee shall be solely responsible for paying the entire monthly COBRA premium for the remaining portion of the
Extended Benefits Period. After the Extended Benefits Period, the Employee may continue receiving coverage under COBRA at his/her own sole cost if and to the
extent that he/she remains eligible for COBRA continuation. The Employee agrees that he/she shall notify the Company in writing immediately following the date
on which he/she becomes eligible for group medical and/or dental insurance coverage through another employer; and
(c) during the Extended Benefits Period defined above, the Company shall continue to provide benefits to the Employee in
accordance with any applicable life insurance, accident and/or disability plans under which the Employee was eligible as of the date of termination consistent with
such benefits as may be provided to active and similarly situated employees covered by such plans; provided, however, that if such plans do not permit continued
coverage of the Employee following the date of termination, the Company shall instead reimburse the Employee for the reasonable cost of purchasing substantially
comparable coverage during the Extended Benefits Period. The Employee agrees that she shall notify the Company in writing immediately following the date on
which she becomes eligible for life insurance, accident and/or disability coverage through another employer. The benefits provided and/or payments made under
this subsection shall be in installments in accordance with the Company's regular payroll practices, beginning with the payroll date following the 30'h day after the
date of termination; and
(d) the Employee shall be entitled to immediate vesting of any option shares, restricted shares and any other equity grants awarded to
the Employee prior to the Date of Termination, in each case that are unvested as of the Date of Termination. All such equity awards (whether stock options,
restricted stock grants or otherwise) will remain exercisable in accordance with the applicable stock option plan or grant agreement.
4.3 Injunctive Relief . The Company and the Employee agree that any breach of Section 4 of this Agreement by the Company is likely to
cause the Employee substantial and irrevocable damage and therefore, in the event of any such breach, in addition to such other remedies which may be available,
the Employee shall have the right to specific performance and injunctive relief.
5. Mitigation . The Employee shall not be required to mitigate the amount of any payment or benefits provided for in Section 4 by seeking other
employment or otherwise except with regard to medical and dental coverage if new employment is obtained.
6. Survival . The provisions of Sections 4, 7 and 8 shall survive the termination of this Agreement for any reason.
7. Non-Competition, Non-Solicitation, Confidential Information, and Developments . The Employee hereby restates and reaffirms all of his/her
obligations pursuant to the Employee Nondisclosure, Noncompetition and Assignment of Inventions Agreement dated as of July 11, 2017 between the Company
and the Employee and attached hereto as Exhibit A (the "Nondisclosure Agreement") and acknowledges that the Nondisclosure Agreement remains in full force
and effect and is incorporated fully herein.
8. Notices . Any notice delivered under this Agreement shall be deemed duly delivered three (3) business days after it is sent by registered or certified
mail, return receipt requested, postage prepaid, or one (1) business day after it is sent for next-business day delivery signature required via a reputable nationwide
overnight courier service, in each case to the address of the recipient set forth in the introductory paragraph hereto. Either party may change the address to which
notices are to be delivered by giving notice of such change to the other party in the manner set fmth in this Section 8.
9. Entire Agreement . This Agreement and any exhibits hereto constitute the entire agreement between the parties and supersedes all prior agreements
and understandings, whether written or oral, relating to the subject matter of this Agreement.
10. Amendment . This Agreement may be amended or modified only by a written instrument executed by both the Company and the Employee.
11. Governing Law . This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts (without
reference to the conflict of laws provisions thereof). Any action, suit or other legal proceeding arising under or relating to any provision of this Agreement shall be
commenced only in a court of the Commonwealth of Massachusetts (or, if appropriate, a federal court located within the Commonwealth of Massachusetts), and
the Company and the Employee each consents to the jurisdiction of such a court. The Company and the Employee each hereby irrevocably waive any right to a
trial by jury in any action, suit or other legal proceeding arising under or relating to any provision of this Agreement.
4
12. Successors and Assigns . The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business or assets of the Company as expressly to assume and agree to perform this Agreement to the same extent that the Company
would be required to perform it if no such succession had taken place. Failure of the Company to obtain an assumption of this Agreement upon the effectiveness of
any succession shall be a breach of this Agreement and shall constitute Good Reason if the Employee elects to terminate employment, except that for purposes of
implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination. As used in this Agreement,
"Company" shall mean the Company as defined above and any successor to its business or assets as aforesaid which assumes and agrees to perform this
Agreement, by operation of law or otherwise. This Agreement shall be binding upon and inure to the benefit of both parties and their respective successors and
assigns; provided, however, that the obligations of the Employee are personal and shall not be assigned by the Employee.
13. Acknowledgment . The Employee states and represents that he/she has had an opportunity to fully discuss and review the terms of this Agreement
with an attorney. The Employee further states and represents that he/she has carefully read this Agreement, understands the contents herein, freely and voluntarily
assents to all of the terms and conditions hereof, and signs his/her name of his/her own free act.
14. Section 409A .
14.1 Distributions. Subject to this Section 14.1, any payments or benefits under Section 4.2 that are subject to Section 409A of the U.S.
Internal Revenue Code of 1986, as amended, and any related regulations or other guidance issued thereunder ("Section 409A") shall begin only upon the date of a
"separation from service" as defined below which occurs on or after the date of Change of Control Termination. The following rules shall apply with respect to
distribution of the payments and benefits, if any, to be provided to the Employee under Section 4.2:
(a) It is intended that each installment of the payments and benefits provided under section 4.2 shall be treated as a separate
"payment" for purposes of Section 409A. Neither the Company nor the Employee shall have the right to accelerate or defer the delivery of any such payments or
benefits except to the extent specifically permitted or required by Section 409A;
(b) Notwithstanding any other provision of this Agreement to the contrary, if at the time of Employee's separation from service (as
defined in Section 409A), Employee is a "specified employee" (as defined below), then the Company will defer the payment or commencement of any
nonqualified deferred compensation subject to Section 409A payable upon "separation from service" (without any reduction in such payments or benefits
ultimately paid or provided to Employee) until the date that is six (6) months following separation from service or, if earlier, the earliest other date as is permitted
under Section 409A (and any amounts that otherwise would have been paid during this deferral period will be paid in a lump sum on the day after the expiration of
the six (6) month period or such shorter period, if applicable). Employee will be a "specified employee" for purposes of this Agreement if, on the date of
Employee's "separation from service," Employee is an individual who is, under the method of determination adopted by the Company is designated as, or within
the category of employees deemed to be, a "specified employee" within the meaning and in accordance with Treasury Regulation Section l .409A-l (i). The
Company shall determine in its sole discretion all matters relating to who is a "specified employee" and the application of and effects of the change in such
determination.
based on the presumptions set forth in, Treasury Regulation Section I.409A-l(h).
14.2 The determination of whether and when a "separation from service" has occurred shall be made and in a manner consistent with, and
14.3 Notwithstanding any other provision of this Agreement to the contrary, to the extent that any reimbursement of expenses or provision of
in-kind benefits constitutes "deferred compensation" under Section 409A, such reimbursement and benefits shall be provided no later than December 31 of the year
following the year in which the expense was incurred. The amount of expenses reimbursed in one year shall not affect the amount eligible for reimbursement in
any subsequent year. The amount of any in-kind benefits provided in one year shall not affect the amount of in-kind benefits provided in any other year.
14.4 Although the Company does not guarantee the tax treatment of any payments under the Agreement, the intent of the Company is that the
payments and benefits under this Agreement be exempt from, or comply with, Section 409A and to the maximum extent permitted the Agreement shall be limited,
construed and interpreted in accordance with such intent. In no event whatsoever shall the Company or its affiliates or their respective officers, directors,
employees or agents be liable for any additional tax, interest or penalties that may be imposed on Employee by Section 409A or damages for failing to comply with
5
Section 409A.
15. Miscellaneous .
15.1 No delay or omission by the Company in exercising any right under this Agreement shall operate as a waiver of that or any other right. A
waiver or consent given by the Company on any one occasion shall be effective only in that instance and shall not be construed as a bar to or waiver of any right on
any other occasion.
substance of any section of this Agreement.
15.2 The captions of the sections of this Agreement are for convenience of reference only and in no way define, limit or affect the scope or
remaining provisions shall in no way be affected or impaired thereby.
15.3 In case any provision of this Agreement shall be invalid, illegal or otherwise unenforceable, the validity, legality and enforceability of the
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year set forth above.
6
AMENDMENT NO. 1
THIS AMENDMENT NO. 1 (the “ Amendment ”), made this 20th day of November, 2017 is entered into by Momenta Pharmaceuticals, Inc., a
Delaware corporation with its principal place of business at 675 West Kendall Street, Cambridge, Massachusetts (the “ Company ”), and Alejandra Carvajal (the “
Employee ”).
Whereas, the Company and Employee are parties to an Employment Agreement effective as of August 10, 2017 (the “ Agreement ”), pursuant to which
the parties agreed to certain terms and conditions of Employee’s employment with the Company; and
Whereas, the Company and Employee desire to amend the Agreement in connection with a highly confidential strategy project concerning the strategic
plan for the Company (the “ Project ”).
Now, therefore, in consideration of the mutual covenants and promises contained herein, and other good and valuable consideration, the receipt and
sufficiency of which are acknowledged by the parties hereto, the parties agree as follows:
1. Employee has been asked to participate in the Project which may include changes in the Company’s program strategy, strategic transactions and
workforce planning. Employee was chosen to participate, in part, as a reflection of Employee’s ability to make a key contribution to the future of the Company in
this Project, and the trust the Company has in Employee to maintain discretion and confidentiality. As set forth more fully below, if Employee signs this
Agreement, Employee will be provided a severance commitment from the Company designed to provide Employee with the security to participate and work on
this Project.
2. Employee understands that as part of the Project, Employee will receive information on a need to know basis and that Employee should only share
information with others who have previously been identified to Employee in writing as being a participant in the Project and who have a need to know the
information to perform their duties for the Company. Attached as Exhibit A is a list of individuals who have been engaged on this Project and who have been
identified as persons with a need to know the information. An updated Exhibit A may be given to Employee from time to time by the Company.
3. Employee also acknowledges that the foregoing may constitute material non-public information of the Company and restrict Employee’s ability to
trade the Company’s securities under applicable law and the Company’s policies to which Employee is subject. Until otherwise notified in writing by the
Company, Employee must clear all Company securities transactions with the Company’s legal department.
4. By signing below, Employee affirms and confirms Employee’s willingness and commitment to hold the information Employee learns relating to or
arising from the Project and Employee’s participation in the Project strictly confidential. Employee further affirms and confirms that the obligations Employee is
assuming under this Amendment are a material condition of Employee’s continued employment and a condition precedent to receiving the severance benefit
described below. Employee also restates and reaffirms all of his/her obligations pursuant to the Nondisclosure Agreement (as defined in the Agreement) and
acknowledges that the Nondisclosure Agreement remains in full force and effect. Any violation of these obligations will constitute grounds for immediate
termination for Cause (as defined in the Agreement) and forfeiture the severance benefits described in this Amendment.
5. In exchange for Employee’s commitments and promises under this Amendment, the Company agrees that if, on or before February 28, 2019,
Employee’s employment with the Company is terminated by the Company without Cause or if Employee voluntarily resigns for Good Reason (as defined in the
Agreement), in any case, other than in a Change in Control Termination (as defined in the Agreement) (a “ Qualifying Termination ”), then (x) Employee shall be
paid all accrued and unpaid base salary and any accrued but unused vacation through the date of termination and (y) in addition, subject to and contingent upon
Employee’s execution and non-revocation of a binding severance and mutual release agreement in a form provided by and satisfactory to the Company
(hereinafter, a “ Severance Agreement ”), which Severance Agreement must be executed and any applicable revocation period with respect thereto must have
expired within sixty (60) days of the date of termination, Employee shall be eligible to receive the following separation benefits:
other withholdings and paid in a lump sum on the next payroll date following the sixtieth (60th) day after the date of termination; and
(a) an amount equal to the sum of twelve (12) months of Employee’s gross base salary as of the date of termination, less all applicable tax and
(b) if Employee is eligible for and elects to continue his/her medical, vision and/or dental insurance coverage pursuant to the Consolidated
Omnibus Budget Reconciliation Act of 1985 (“ COBRA ”), the Company shall continue to contribute, until the earlier of (1) twelve (12) months following the date
of termination; or (2) the date on which Employee becomes eligible
7
to receive group medical, vision and/or dental insurance coverage through a new employer (the “ Contribution Period ”), toward the cost of Employee’s COBRA
premiums the same amount that it pays on behalf of active and similarly situated employees receiving the same type of coverage. The remaining balance of any
premium costs, and all premium costs after the Contribution Period, shall be paid by Employee on a monthly basis. In the event that Employee fails to timely pay
his/her portion of the monthly COBRA premium during the Contribution Period, the Company shall have no further obligation to pay any portion of the monthly
COBRA premium for any remaining portion of the Contribution Period and, in that event, Employee shall be solely responsible for paying the entire monthly
COBRA premium for the remaining portion of the Contribution Period. After the Contribution Period, Employee may continue receiving coverage under COBRA
at his/her own cost if and to the extent that he/she remains eligible for COBRA continuation. Employee agrees that he/she shall notify the Company in writing
immediately following the date on which he/she becomes eligible for group medical, vision and/or dental insurance coverage through another employer.
Any termination of Employee’s employment that occurs on or before February 28, 2019 (other than a termination that occurs within twelve (12) months following
the Change in Control Date) shall be communicated by a written notice to the other party given in accordance with Section 8 of the Agreement. Any such notice of
termination shall: (i) in the case of a termination by the Company for Cause or by Employee for Good Reason, set forth in reasonable detail the facts and
circumstances claimed to provide a basis for such Cause or Good Reason and (ii) specify the effective date of employment termination. The effective date of such
an employment termination shall be the close of business on the date specified in the notice of termination, which in the event of a resignation for Good Reason,
may not be less than 15 days or more than 120 days after the date of delivery of such notice of termination.
6. Nothing in this Amendment modifies or amends the terms of the Agreement relating to a termination of Employee’s employment following a Change
of Control, as set forth in Section 4 of the Agreement.
7. The definition of “ Cause ” in the Agreement is hereby amended by adding the following clause, at the end of Section 4.1(c): “, or (iii) Employee’s
violation of paragraphs (2), (3) or (4) of Amendment No. 1 to this Agreement or of the Nondisclosure Agreement.”
8. The first sentence of Section 14.1 is hereby amended by deleting the words “which occurs on or after the date of Change in Control Termination”
therefrom.
9. Except as explicitly set forth in this Amendment, the Agreement remains in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first set forth above.
8
FIFTH AMENDMENT TO LEASE
Exhibit 10.41.6
THIS FIFTH AMENDMENT TO LEASE (this "Amendment”) is entered into as of this 24th day of April, 2018 (the "Amendment Execution Date"), by
and between BMR-ROGERS STREET LLC, a Delaware limited liability company ("Landlord "), and MOM ENTA PHARMACEU TICALS, INC., a Delaware
corporation ("Tenant").
RECITALS
A. WHEREAS, Landlord and Tenant are parties to that certain Lease dated as of February 5, 2013 (the "Original Lease"), as amended by that certain
First Amendment to Lease dated as of March 2 1, 20 13, as further amended by that ce1tain Second Amendment to Lease dated as of May 24, 2013, as further
amended by that certain Third Amendment to Lease dated as of December 30, 2015, as further amended by that certain Fourth Amendment to Lease dated as of
July 24, 2017 (the "Fourth Amendment") (collectively, and as the same may have been fu1ther amended, amended and restated, supplemented or modified from
time to time, the "Existing Lease"), whereby Tenant leases certain premises (the "Bent Premises") from Landlord in the building at 320 Bent Street, Cambridge,
Massachusetts (the "Bent Building");
B. WHEREAS, Landlord and Tenant desire to extend the Binney TI Deadline (as defined in the Fourth Amendment); and
C. WHEREAS, Land lord and Tenant desire to modify and amend the Existing Lease only in the respects and on the conditions hereinafter stated.
AGREEMENT
NOW, THEREFORE, Landlord and Tenant, in consideration of the mutual promises contained herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound, agree as follows:
1. Definitions . For purposes of this Amendment, capitalized terms shall have the meanings ascribed to them in the Existing Lease unless otherwise defined
herein. The Existing Lease, as amended by this Amendment, is referred to collectively herein as the "Lease." From and after the date hereof, the term " Lease ,"
as used in the Existing Lease, shall mean the Existing Lease, as amended by this Amendment.
2. Binney TI Deadline . The definition of Binney TI Deadline set forth in Section 5.4 of the Fou1th Amendment shall be amended by deleting "the date that is
fifteen (15) months after the Binney Term Commencement Date" and replacing it with "the date that is twenty-one (21) months after the Binney Term
Commencement Date (i.e., July 1, 2019).'"
3. Broker . Tenant represents and warrants that it has not dealt with any broker or agent in the negotiation for or the obtaining of this Amendment, and agrees
to reimburse, indemnify, save, defend (at Land lord's option and with counsel reasonably acceptable to Landlord, at Tenant's sole cost and expense) and hold
harm less the Landlord Indemnitees for, from and against any and all cost or liability for compensation claimed by any such broker or agent employed or engaged
by it or claiming to have been employed or engaged by it.
4. No Default . Each of Landlord and Tenant represent, warrant and covenant to the other that, to the best of its knowledge, Landlord and Tenant are not in
default of any of their respective obligations under the Existing Lease and no event has occurred that, with the passage of time or the giving of notice (or both)
would constitute a default by either Landlord or Tenant thereunder.
5. Notices . Tenant confirms that, notwithstanding anything in the Lease to the contrary, notices delivered to Tenant pursuant to the Lease should be sent to:
Momenta Pharmaceutical s, Inc. 301 Binney Street
Cambridge, Massachusetts 02141
Attn: Alejandra Carvajal, Vice President and Deputy General Counsel Email: acarvajal@monentapharma.com
With a copy to:
Momenta Pharmaceuticals, Inc. 301 Binney Street
Cambridge, Massachusetts 02141
Attn: Scott Storer, Senior Vice President and Chief Financial Officer Email: sstorer@momentapharma.com
Momenta Pharmaceuticals, Inc. 301 Binney Street
Cambridge, Massachusetts 02141
Attn: Robert Vassallo, Associate Director, Site Services Email: bvassallo@momentapharm a.com
6. Effect of Amendment . Except as modified by this Amendment, the Existing Lease and all the covenants, agreements, terms, provisions and conditions
thereof shall remain in full force and effect and are hereby ratified and affirmed. In the event of any conflict between the terms contained in this Amendment and
the Existing Lease, the terms herein contained shall supersede and control the obligations and liabilities of the parties.
7. Successors and Assigns . Each of the covenants, conditions and agreements contained in this Amendment shall inure to the benefit of and shall apply to and
be binding upon the parties hereto and their respective heirs, legatees, devisees, executors, administrators and permitted successors and assigns and sublessees.
Nothing in this section shall in any way alter the provisions of the Lease restricting assignment or subletting.
8. Miscellaneous . This Amendment becomes effective only upon execution and delivery hereof by Landlord and Tenant. The captions of the paragraphs and
subparagraphs in this Amendment are inse1ted and included solely for convenience and shall not be considered or given any effect in construing the provisions
hereof. All exhibits hereto are incorporated herein by reference. Submission of this instrument for examination or signature by Tenant does not constitute a
reservation of or option for a lease, and shall not be effective as a lease, lease amendment or otherwise until execution by and delivery to both Landlord and
Tenant.
9. Authority . Tenant guarantees, warrants and represents that the individual or individuals signing this Amendment have the power, authority and legal
capacity to sign this Amendment on behalf of and to bind all entities, corporations, partnerships, limited liability companies, joint venturers or other organizations
and entities on whose behalf such individual or individuals have signed. Landlord guarantees, warrants and represents that the individual or individuals signing
this Amendment have the power, authority and legal capacity to sign this Amendment on behalf of and to bind all entities, corporations, partnerships, limited
liability companies, joint venturers or other organizations and entities on whose behalf such individual or individuals have signed.
10. Counterparts; Facsimile and PDF S ignatures. This Amendment may be executed in one or more counterparts, each of which, when taken together, shall
constitute one and the same document. A facsimile or portable document format (PDF) signature on this Amendment shall be equivalent to, and have the same
force and effect as, an original signature.
(Signature page follows)
IN WITNESS WHEREOF, Landlord and Tenant have executed this Amendment as a sealed Massachusetts instrument as of the date and year first above
written.
SUBSIDIARIES OF MOMENTA PHARMACEUTICALS, INC.
Exhibit 21
Name of Subsidiary
Jurisdiction of Organization
Momenta Pharmaceuticals Securities Corporation
Momenta Ireland Limited
Massachusetts
Dublin, Ireland
Exhibit 23.1
We consent to the incorporation by reference in the following Registration Statements:
Consent of Independent Registered Public Accounting Firm
1. Registration Statement (Form S-8, File No. 333-117173) pertaining to the 2002 Stock Incentive Plan of Momenta Pharmaceuticals, Inc., 2004 Stock
Incentive Plan of Momenta Pharmaceuticals, Inc., and 2004 Employee Stock Purchase Plan of Momenta Pharmaceuticals, Inc.;
2. Registration Statements (Form S-8, Files No. 333-140760, 333-149253, 333-157275, 333-164892, 333-172155, and 333-179760) pertaining to the 2004
Stock Incentive Plan, as amended, of Momenta Pharmaceuticals, Inc.;
3. Registration Statement (Form S-8, File No. 333-190394) pertaining to the 2013 Incentive Award Plan of Momenta Pharmaceuticals, Inc.;
4. Registration Statement (Form S-8, File No. 333-197582) pertaining to the 2013 Incentive Award Plan, as amended, of Momenta Pharmaceuticals, Inc.
and 2004 Employee Stock Purchase Plan, as amended, of Momenta Pharmaceuticals, Inc.;
5. Registration Statement (Form S-8, File No. 333-206112) pertaining to the 2013 Incentive Award Plan, as amended, of Momenta Pharmaceuticals, Inc.;
6. Registration Statement (Form S-8, File No. 333-212991) pertaining to the 2013 Incentive Award Plan, as amended and restated, of Momenta
Pharmaceuticals, Inc.;
7. Registration Statement (Form S-8, File No. 333-219764) pertaining to the 2013 Incentive Award Plan, as amended and restated, of Momenta
Pharmaceuticals, Inc. and 2004 Employee Stock Purchase Plan, as amended, of Momenta Pharmaceuticals, Inc.;
8. Registration Statement (Form S-8, File No. 333-226759) pertaining to the 2013 Incentive Award Plan, as amended and restated, of Momenta
Pharmaceuticals, Inc.;
9. Registration Statement (Form S-3, File No. 333-209813) and related Prospectus of Momenta Pharmaceuticals, Inc. for the registration of common stock,
preferred stock, debt securities, and warrants;
of our reports dated February 22, 2019, with respect to the consolidated financial statements of Momenta Pharmaceuticals, Inc., and the effectiveness of internal
control over financial reporting of Momenta Pharmaceuticals, Inc., included in this Annual Report (Form 10-K) for the year ended December 31, 2018.
/s/ Ernst & Young LLP
Boston, Massachusetts
February 22, 2019
Exhibit 31.1
I, Craig A. Wheeler, certify that:
CERTIFICATIONS
1.
2.
3.
4.
I have reviewed this Annual Report on Form 10-K of Momenta Pharmaceuticals, Inc.;
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 the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange
Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have:
a)
b)
c)
d)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being prepared;
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent
fiscal quarter (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 the
registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a)
b)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control
over financial reporting.
Dated: February 22, 2019
/s/ CRAIG A. WHEELER
Craig A. Wheeler
President and Chief Executive Officer
Exhibit 31.2
I, Michelle Robertson, certify that:
CERTIFICATIONS
1.
2.
3.
4.
I have reviewed this Annual Report on Form 10-K of Momenta Pharmaceuticals, Inc.;
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 the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange
Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have:
a)
b)
c)
d)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being prepared;
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent
fiscal quarter (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 the
registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a)
b)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control
over financial reporting.
Dated: February 22, 2019
/s/ MICHELLE ROBERTSON
Michelle Robertson
Senior Vice President and Chief Financial Officer
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
In connection with the Annual Report on Form 10-K of Momenta Pharmaceuticals, Inc. (the "Company") for the period ended December 31, 2018 as filed
with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned, Craig A. Wheeler, President and Chief Executive Officer of the
Company, and Michelle Robertson, Senior Vice President and Chief Financial Officer of the Company, each hereby certifies, pursuant to 18 U.S.C. Section 1350,
that:
(1)
(2)
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Dated: February 22, 2019
Dated: February 22, 2019
/s/ CRAIG A. WHEELER
Craig A. Wheeler
President and Chief Executive Officer
/s/ MICHELLE ROBERTSON
Michelle Robertson
Senior Vice President and Chief Financial Officer