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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549  
______________________________________________
Form 10-K  
  ______________________________________________
x
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2015
 
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 001-35006
______________________________________________
SPECTRUM PHARMACEUTICALS, INC.
(Exact Name of Registrant as Specified in its Charter)
______________________________________________
 
Delaware
 
93-0979187
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
11500 South Eastern Avenue, Suite 240
Henderson, Nevada 89052
(Address of principal executive offices)
(702) 835-6300
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
 
Title of Each Class
 
Name of Each Exchange on Which Registered
Common Stock, $0.001 par value
Rights to Purchase Series B Junior Participating Preferred Stock
 
The NASDAQ Stock Market, LLC
Securities registered pursuant to Section 12(g) of the Act:
None  
______________________________________________
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes   ¨     No   x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes   ¨     No   x
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   x     No   ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted 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 and post such files).    Yes   x     No   ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 232.405 of this chapter) 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   x
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
 
Large accelerated filer
 
¨
  
Accelerated filer
x
 
 
 
 
Non-accelerated filer
 
¨  (Do not check if a smaller reporting company)
  
Smaller reporting company
¨
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes   ¨     No   x
As of June 30, 2015, the aggregate market value of the voting and non-voting common equity held by non-affiliates of the Registrant was $459,959,918 (based upon the $6.84 per share closing sale price for shares of the Registrant’s Common Stock as reported by the NASDAQ Global Select Market on June 30, 2015, the last trading date of the Registrant’s most recently completed second fiscal quarter).
As of February 29, 2016 , approximately 68,163,483 shares of the Registrant’s Common Stock, $0.001 par value, were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s Proxy Statement for the registrant’s 2016 Annual Meeting of Stockholders, to be filed on or before April 29, 2016, are incorporated by reference into Part III, Items 10-14 of this Annual Report on Form 10-K.

 
 
 
 
 



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TABLE OF CONTENTS
 
 
 
 
Page
PART I
 
 
 
 
 
 
 
PART II
 
 
 
 
 
 
 
 
 
PART III
 
 
 
 
 
 
PART IV
 

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Cautionary Note Concerning Forward-Looking Statements
This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934 as amended (the “Exchange Act”), in reliance upon the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, without limitation, statements regarding our future product development activities and costs, the revenue potential (licensing, royalty and sales) of our products and product candidates, the success, safety and efficacy of our drug products, revenues, development timelines, product acquisitions, liquidity and capital resources and trends, and other statements containing forward-looking words, such as, “believes,” “may,” “could,” “will,” “expects,” “intends,” “estimates,” “anticipates,” “plans,” “seeks,” “continues,” or the negative thereof or variation thereon or similar terminology (although not all forward-looking statements contain these words). Such forward-looking statements are based on the reasonable beliefs of our management as well as assumptions made by and information currently available to our management. Readers should not put undue reliance on these forward-looking statements. Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified; therefore, our actual results may differ materially from those described in any forward-looking statements. Factors that might cause such a difference include, but are not limited to, those discussed elsewhere in this Annual Report on Form 10-K, and the following factors:
 
•
our ability to successfully develop, obtain regulatory approval for and market our products;
•
our ability to continue to grow sales revenue of our marketed products;
•
risks associated with doing business internationally;
•
our ability to generate and maintain sufficient cash resources to fund our business;
•
our ability to enter into strategic alliances with partners for manufacturing, development and commercialization;
•
efforts of our development partners;
•
the ability of our manufacturing partners to meet our timelines;
•
the ability to timely deliver product supplies to our customers;
•
our ability to identify new product candidates and to successfully integrate those product candidates into our operations;
•
the timing and/or results of pending or future clinical trials, and our reliance on contract research organizations;
•
our ability to protect our intellectual property rights;
•
competition in the marketplace for our drugs;
•
delay in approval of our products or new indications for our products by the U.S. Food and Drug Administration, or the “FDA”;
•
actions by the FDA and other regulatory agencies, including international agencies;
•
securing positive reimbursement for our products;
•
the impact of any product liability, or other litigation to which we are, or may become a party;
•
the impact of legislative or regulatory reform of the healthcare industry and the impact of recently enacted healthcare reform legislation;
•
the availability and price of acceptable raw materials and components from third-party suppliers, and their ability to meet our demands;
•
our ability, and that of our suppliers, development partners, and manufacturing partners, to comply with laws, regulations and standards, and the application and interpretation of those laws, regulations and standards, that govern or affect the pharmaceutical and biotechnology industries, the non-compliance with which may delay or prevent the development, manufacturing, regulatory approvals and sale of our products;
•
defending against claims relating to improper handling, storage or disposal of hazardous chemical, radioactive or biological materials which could be time consuming and expensive;
•
our ability to maintain the services of our key executives and technical and sales and marketing personnel;

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•
the difficulty in predicting the timing or outcome of product development efforts and regulatory approvals; and
•
demand and market acceptance for our approved products.
All subsequent written and oral forward-looking statements attributable to us or by persons acting on our behalf are expressly qualified in their entirety by these cautionary statements.
In addition, past financial or operating performance is not necessarily a reliable indicator of future performance, and you should not use our historical performance to anticipate results or future period trends. We can give no assurances that any of the events anticipated by the forward-looking statements will occur or, if any of them do, what impact they will have on our results of operations and financial condition. Except as required by law, we do not undertake to update any such forward-looking statements and expressly disclaim any duty to update the information contained in this Annual Report on Form 10-K.
Unless the context otherwise requires, all references in this Annual Report on Form 10-K to the “Company”, “we,” “us,” “our,” “Spectrum” and “Spectrum Pharmaceuticals” refer to Spectrum Pharmaceuticals, Inc. and its subsidiaries and other consolidated entities, as a consolidated entity. We primarily conduct our business activities as Spectrum Pharmaceuticals.
***
Spectrum Pharmaceuticals, Inc. ® , FUSILEV ® , FOLOTYN ® , ZEVALIN ® , MARQIBO ® , BELEODAQ ® , EVOMELA ™ , EOQUIN ® , and RenaZorb ® are registered trademarks of Spectrum Pharmaceuticals, Inc. and its subsidiaries. Redefining Cancer Care ™ , Turning Insights Into Hope ™ , RIT Oncology, LLC ™ , RIT ™ , RRZ ™ , and our logos are trademarks owned by Spectrum Pharmaceuticals, Inc. and its subsidiaries. All other trademarks and trade names are the property of their respective owners.

PART I
ITEM 1. BUSINESS
Company Overview and Business Strategy
Our primary strategy is comprised of acquiring, developing, and commercializing a broad and diverse pipeline of late-stage clinical and commercial products. In addition to an efficient in-house clinical development organization with regulatory and data management capabilities, we have established a commercial infrastructure for our marketed products. Currently, we have six approved oncology/hematology products that target different types of non-Hodgkin's lymphoma ("NHL"), advanced metastatic colorectal cancer, acute lymphoblastic leukemia ("ALL"), and multiple myeloma ("MM").
We also have two drugs in late stage development:
• SPI-2012, is being developed for chemotherapy-induced neutropenia in patients with breast cancer.
•
EOQUIN® (previously referred to as APAZIQUONE for intravesical instillation), is being developed for immediate intravesical instillation post-transurethral resection of bladder tumors in patients with non-muscle invasive bladder cancer.
Our passion to identify, develop and deliver important options for patients suffering from cancer is behind every action we take. We are committed to excellence and strive to make a difference in the lives of patients every day.
Cancer Background and Market Size
Cancer is a group of diseases characterized by the uncontrolled growth and spread of abnormal cells, which can result in death. The development of cancer is multi-factorial and includes both external factors (tobacco, infectious organisms, chemicals, and radiation) and internal factors (inherited mutations, hormones, immune conditions, and mutations that occur from exposure to environmental factors or errors in making DNA (deoxyribonucleic acid) during normal cell division). These causal factors may act together or in sequence to initiate or promote the development of cancer. Ten or more years often pass between exposure to these factors and the development of detectable cancer. Cancer is treated through surgery, radiation, chemotherapy, hormone therapy, immune therapy, and/or targeted drug therapy.
According to the American Cancer Society’s publication Cancer Facts & Figures 2015 , cancer is the second leading cause of death in the U.S. (only behind heart disease). In the U.S., approximately 1.7 million new cancer cases were expected to be diagnosed in 2015 and over 589,000 persons were expected to die from the disease. Anyone can develop cancer. Since the

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risk of being diagnosed with cancer increases with age, most cases occur in adults who are middle aged or older. About 77% of all cancers are diagnosed in people 55 years of age and older. In the U.S., men have slightly less than a 1 in 2 lifetime risk of developing cancer; for women, the risk is a little more than 1 in 3. These probabilities are estimated based on the overall experience of the general population. Individuals within the population may have higher or lower risk because of differences in exposures (e.g., smoking), and/or genetic susceptibility. In addition, currently available treatments are variably effective in the different cancers and individual patients. Together these patients’ risks and the treatment limitations suggest a significant current and long-term demand for improved and novel cancer treatments.
Product Portfolio
We have a product portfolio consisting of both commercial stage and development stage products that address various cancer types (see “Research & Development” section below for our pipeline of cancer therapeutics that are in various development stages). We remain committed to growing the sales of our currently marketed products, as we strive to maintain a robust development pipeline.
Commercialized Products
Our commercialized drug products (or pending commercial launch in the case of EVOMELA), and their approved indications, are summarized in the following table:
 
FUSILEV
FUSILEV (levoleucovorin), a novel folate analog and the pharmacologically active isomer (the levo -isomer) of the racemic compound, calcium leucovorin. Leucovorin is a mixture of equal part of both isomers: the pharmacologically active levo -isomer and the inactive dextro -isomer. Preclinical studies have demonstrated that the inactive dextro -isomer may compete with the active levo -isomer for uptake at the cellular level. By removing the inactive dextro form, the dosage of FUSILEV is one-half that of leucovorin and patients are spared the administration of an inactive substance. FUSILEV is approved as a ready-to-use solution, and as freeze-dried powder. FUSILEV has the following indications for use:
 
•
in combination chemotherapy with 5-fluorouracil in the palliative treatment of patients with advanced metastatic colorectal cancer, or mCRC.
•
for rescue after high-dose methotrexate therapy in osteosarcoma; and
•
to diminish the toxicity and counteract the effects of impaired methotrexate elimination and of inadvertent over dosage of folic acid antagonists.
FOLOTYN
FOLOTYN (pralatrexate injection), a folate analogue metabolic inhibitor, was discovered by Memorial Sloan-Kettering Cancer Center, SRI International and Southern Research Institute and developed by Allos Therapeutics, Inc. (“Allos”). In September 2009, the FDA granted accelerated approval for FOLOTYN for use as a single agent for the treatment of patients

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with relapsed or refractory PTCL. FOLOTYN was the first chemotherapy approved by the FDA, under its accelerated approval program, for the treatment of relapsed or refractory PTCL and has been available to patients in the U.S. since October 2009.
According to the Lymphoma Research Foundation, lymphoma is the most common blood cancer. Hodgkin’s lymphoma and non-Hodgkin’s lymphoma (“NHL”) are the two main forms of lymphoma. Lymphoma occurs when lymphocytes, a type of white blood cell, grow abnormally and accumulate in one or more lymph nodes or lymphoid tissues. The body has two main types of lymphocytes that can develop into lymphomas: B-lymphocytes (B-cells) and T-lymphocytes (T-cells). PTCL comprises a group of rare and aggressive NHLs that develop from mature T-cells. PTCL accounts for approximately 5 to 15% of all NHL cases in the U.S and Europe.
Based on preclinical studies, we believe that FOLOTYN selectively enters cells expressing reduced folate carrier ("RFC"), a protein that is frequently over expressed on cancer cells compared to normal cells. Once inside cancer cells, FOLOTYN is efficiently polyglutamylated, which makes it less susceptible to efflux-based drug resistance and leads to high intracellular drug retention compared to other antifolates. Inside the cell, FOLOTYN targets the inhibition of dihydrofolate reductase ("DHFR"), an enzyme critical in the folate pathway, thereby interfering with DNA and RNA synthesis and triggering cancer cell death.
We are exploring additional settings for FOLOTYN where methotrexate (“MTX”), a drug in the same category as FOLOTYN, has been successfully used for decades in the treatment of breast cancer, bladder cancer, and lung cancer. We plan to test FOLOTYN’s benefits in these settings because FOLOTYN is designed to provide greater activity than MTX. In addition to its use alone as a single agent, we are evaluating FOLOTYN as part of different chemotherapy combinations.
ZEVALIN
ZEVALIN (ibritumomab tiuxetan) injection for intravenous use is a prescription medication that is part of a three step treatment regimen consisting of: two treatments of rituximab and one treatment of Yttrium-90 (Y-90) ZEVALIN. The National Cancer Institute (“NCI”) estimated 72,000 new cases of NHL in the U.S. in 2015. Rituximab is used to reduce the number of B-cells in the blood and Y-90 ZEVALIN is then given to treat NHL. It is currently approved in the U.S. and more than 40 countries outside the U.S. including countries in Europe, Latin America and Asia for (i) treatment of patients with recurring, low-grade or follicular B-cell NHL, after other anticancer drugs are no longer working, and (ii) newly diagnosed follicular NHL following a response to initial anticancer therapy.

MARQIBO
MARQIBO is a novel, sphingomyelin/cholesterol liposome-encapsulated formulation of the FDA-approved anticancer drug vincristine. MARQIBO’s approved indication is for the treatment of adult patients with ALL in second or greater relapse or whose disease has progressed following two or more lines of anti-leukemia therapy. In the U.S., approximately 6,000 patients per year are diagnosed with ALL, of which approximately 1,600 can be categorized as ALL in second or greater relapse.
MARQIBO is also currently being explored for the treatment of the broader ALL indication as well as in NHL in addition to its approved treatment for Philadelphia chromosome-negative ALL.
BELEODAQ
BELEODAQ (belinostat) is a histone deacytelase, (“HDAC”) inhibitor for the treatment of patients with relapsed or refractory PTCL. This indication was FDA approved in July 2014 under its accelerated approval program, based on tumor response rate and duration of response. BELEODAQ's anticancer effect is thought to be mediated through multiple mechanisms of action, including the inhibition of cell proliferation, induction of apoptosis (programmed cell death), inhibition of angiogenesis, induction of differentiation, and the activity in tumors that had become resistant to anticancer agents such as the platinums, taxanes and topoisomerase II inhibitors.
BELEODAQ is differentiated from other HDAC inhibitors that selectively inhibit a single class of HDAC enzymes because it inhibits all three classes of the zinc-dependent HDAC enzymes (Class I, Class II and Class IV); this leads to different alterations in histone and non-histone protein acetylation that, in turn, could importantly influence chromatin accessibility, gene transcription, and activity in different cancer patients, including those who develop drug resistant disease.

BELEODAQ has many attributes that separate it from other currently marketed HDACs, including efficacy when used alone and in combination, less toxicities (when compared to the reported rates of some adverse events with the other currently-

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marketed HDACs), including less bone marrow toxicity, and a lack of other severe side effects, such as mucositis, that may enable full dose combinations of this drug with several other cytotoxic agents.
EVOMELA (previously referred to as Captisol-Enabled® MELPHALAN)
EVOMELA is intended for use as a conditioning treatment prior to autologous stem cell transplant for patients with MM. MM is a cancer of plasma cells, a type of white blood cell present mainly in the bone marrow that produces antibodies. In MM, a group of plasma cells (myeloma cells) become cancerous and multiply, raising the number of plasma cells to a higher-than-normal level, which can crowd out normal blood cells and lead to abnormally high proteins in the blood or urine. The NCI estimated 27,000 new cases of MM in the U.S. in 2015, with the incidence of new cases increasing by approximately 1.6% per year. The current intravenous Melphalan market is approximately $100 million annually, with predominant use in stem cell transplants.
The EVOMELA formulation avoids the use of propylene glycol (“PG”), which is required as a co-solvent in the currently-available formulation of this product. PG has been reported to cause adverse renal and cardiac side-effects that limit the ability to deliver higher quantities of intended therapeutic compounds. The use of Captisol technology to reformulate EVOMELA is anticipated to allow for longer administration durations and slower infusion rates, potentially enabling clinicians to avoid reductions, and safely achieve a higher dose intensity for pre-transplant chemotherapy.
EVOMELA was granted Orphan Drug status by the FDA for use as a high-dose conditioning regimen prior to hematopoietic progenitor (stem) cell transplantation. In December 2014, we filed our new drug application (“NDA”) for EVOMELA with the FDA. On October 23, 2015, we received a Complete Response Letter (“CRL”) from the FDA for this NDA that did not identify any clinical deficiencies, and we subsequently resubmitted our NDA. On March 10, 2016, the FDA communicated its approval of our NDA for EVOMELA as a high-dose conditioning treatment prior to hematopoietic progenitor (stem) cell transplantation in patients with MM, and for the palliative treatment of patients with MM for whom oral therapy is not appropriate. We plan to commercially launch EVOMELA as soon as possible.
Product Pipeline
SPI-2012
SPI-2012 is being investigated for the treatment of chemotherapy-induced neutropenia. In January 2012, we entered into a co-development and commercialization agreement for worldwide rights, except for Korea, China, and Japan, with Hanmi Pharmaceutical Co., Ltd. ("Hanmi"), for SPI-2012 based on Hanmi’s proprietary LAPSCOVERY Technology. Chemotherapy can cause myelosuppression and unacceptably low levels of white blood cells, making patients prone to infections, hospitalizations, and interruption of additional chemotherapy treatments.
Granulocyte colony-stimulating factor, or GCSF, stimulates the production of white blood cells by the bone marrow. A recombinant form of GCSF is used in appropriate cancer patients to accelerate recovery from neutropenia after chemotherapy, allowing higher-intensity treatment regimens to be given at full-dose and on schedule. We believe the worldwide annual market opportunity for GCSF-related drugs is over $6 billion.
In September 2014, we announced our decision to advance SPI-2012 to Phase 3 trials due to positive Phase 2 results in our collaboration program with Hanmi, and began discussions with the FDA and the European Medicines Agency (“EMA”) to discuss our Phase 3 design. In December 2015, we reached agreement with the FDA regarding our Phase 3 SPA for SPI-2012. We have designated more than 100 sites for this clinical trial, and initiated this Phase 3 clinical study beginning in January 2016. This trial will evaluate the safety and efficacy of SPI-2012 as a treatment for chemotherapy-induced neutropenia in patients with breast cancer, and will serve as the basis for our Biologics License Application ("BLA") filing.
POZIOTINIB

POZIOTINIB is a novel, oral pan-HER inhibitor that irreversibly blocks signaling through the Epidermal Growth Factor Receptor (EGFR, HER) Family of tyrosine-kinase receptors, including HER1 (erbB1; EGFR), HER2 (erbB2), HER4 (erbB4), and HER receptor mutations. This, in turn, leads to the inhibition of the proliferation of tumor cells that over-express these receptors. Mutations or over-expression/amplification of EGFR family receptors have been associated with a number of different cancers, including non-small cell lung cancer ("NSCLC"), breast cancer, and gastric cancer. POZIOTINIB has shown single agent activity in the treatment of various cancer types, including breast, gastric, colorectal and lung cancers. POZIOTINIB has shown promising early clinical activity in Phase 1 trials in patients who had failed multiple lines of treatment

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including the HER2-directed therapies, trastuzumab and lapatinib. POZIOTINIB is currently being investigated by Hanmi in several mid-stage trials in different solid tumor indications including EGFR-mutant NSCLC, gastric cancer, head and neck cancer and HER2 positive breast cancer.
        In November 2015, we submitted an Investigational New Drug ("IND") application with the FDA. In March 2016 we initiated our Phase 2 Breast Cancer Trial. The Phase 2 study is an open-label study that will enroll approximately 70 patients with HER-2 positive metastatic breast cancer, who have failed at least two HER-2 directed therapies. The dose and schedule of oral POZIOTINIB will be based on clinical experience from the studies in Korea, and in addition include the use of prophylactic therapies to help minimize known side-effects of HER-2 directed therapies.
In February 2015, we executed a global in-license agreement (excluding Korea and China) with Hanmi Pharmaceutical Co., Ltd for POZIOTINIB, a pan-HER inhibitor in Phase 2 clinical trials in return for our upfront payment and future regulatory and sales-dependent milestone payments. POZIOTINIB has shown single agent activity in the treatment of various cancer types, including breast, gastric, colorectal and lung cancers. In the Phase 1 study for this drug, 6 of 10 breast cancer patients demonstrated partial responses; we also believe the safety profile was consistent with similar drug classes, with four patients having a grade 3 diarrhea response.
EOQUIN (previously referred to as APAZIQUONE)
EOQUIN is a bio-reductive alkylating indoloquinone that is enzymatically activated by enzymes that are over expressed by bladder tumors that is being tested in non-muscle invasive bladder ("NMIBC").
The NCI estimates that the 2015 incidence and prevalence of bladder cancer in the U.S. was approximately 74,000 cases. The global presence of bladder cancer is estimated at 2.7 million cases. According to Botteman et al., (PharmacoEconomics 2003), bladder cancer is the most expensive cancer to treat on a lifetime basis. The overall cost of bladder cancer treatment in the U.S. is approximately $3.4 billion annually, most of which is related to the direct treatment of this disease.
The initial treatment of bladder cancer is to attempt a complete surgical removal of the tumor. However, bladder cancer is a highly recurrent disease with approximately 80% of patients recurring within five years, and a majority of patients recurring within two years. This high recurrence rate is attributed to:
 
•
the highly implantable nature of cancer cells that are dispersed during surgery;
•
incomplete tumor resection; and
•
tumors present in multiple locations in the bladder which may be missed or too small to visualize at the time of resection.
Despite evidence in the published literature and guidance from the American and European Urology Associations, instillation of a chemotherapeutic agent immediately following surgery is not a standard clinical practice. Currently, there are no FDA approved drugs for this indication which may, in part, explain the difference between the literature and urology guidelines and actual clinical management of this disease. For more than 30 years, no new drugs have been introduced in the market for treatment of NMIBC. EOQUIN represents much needed therapy for patients and may provide a meaningful opportunity to reduce overall medical costs.
Pharmacokinetic studies have verified that EOQUIN is rarely detectable in the bloodstream of patients when it is administered either after surgical resection or as a part of a delayed multi-instillation protocol. EOQUIN is inactivated in the systemic circulation by the red blood cell fraction. The proposed dose therefore carries a minimal risk of systemic toxicity that could arise from absorption of a drug through the bladder wall into the bloodstream. These features of EOQUIN are distinct from other intravesical agents currently in use for the treatment of recurrent bladder cancer. An immediate instillation of EOQUIN may help by:
 
•
reducing tumor recurrence by destroying dispersed cancer cells that would otherwise re-implant onto the inner lining of the bladder;
•
destroying remaining cancer cells at the site of tumor resection (also known as chemo-resection); and
•
destroying tumors not observed during resection (also known as chemo-ablation).
In August 2015, we reached agreement with the FDA on the Special Protocol Assessment ("SPA") of the planned Phase 3 clinical trial of EOQUIN. This trial commenced with its first patient dosing in October 2015, and is designed to evaluate the intravesical use of this drug for the treatment of patients with NMIBC as one or two instillations, immediately following

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transurethral resection of bladder tumor ("TURBT"). In December 2015, we submitted our NDA for EOQUIN with the FDA, based on the pooled results of a previous Phase 3 program. In February 2016, the FDA accepted the EOQUIN NDA for review and indicated that it plans to hold an advisory committee meeting regarding the NDA and set a target decision date of December 11, 2016.
Manufacturing
We currently do not have internal manufacturing capabilities; therefore, all of our products are manufactured on a contract basis. We expect to continue to contract with third-party providers for manufacturing and packaging services, including active pharmaceutical ingredients (“API”) and finished-dosage products. We believe that our current agreements with third-party manufacturers provide for sufficient operating capacity to support the anticipated commercial demand and clinical requirements for our products. However, we are actively seeking multiple supplier sources for all our drug products in order to mitigate the risk of over-reliance on any one supplier. We attempt to prevent supply disruption through supply agreements, appropriate forecasting, and maintaining base stock levels. We believe that we could quickly enter into another supply or manufacturing agreement on substantially similar terms if we were required to do so.

Sales and Marketing
We presently market and sell our pharmaceutical products through a direct sales force in the U.S., and through distributors in Europe (and previously in Japan). Our U.S. sales team is divided between “corporate accounts” and “oncology accounts.” The primary decision makers for our products are oncologists and hematologists. As of December 31, 2015 , our U.S. sales force (management, representatives, and direct support) numbered 100 employees.
Customers
Our product sales are concentrated to large pharmaceutical distributors (that ship and bill to hospitals and clinics). The customers that represent 10% or more of our total gross product sales in 2015 , 2014 and 2013 are as follows:
 
 
Product Sales
 
2015
 
2014
 
2013
Oncology Supply, a division of ASD Specialty Healthcare, Inc., and its affiliates (excluding ICS)
36.7
%
 
40.4
%
 
35.4
%
McKesson Corporation and its affiliates
34.2
%
 
32.9
%
 
19.8
%
Cardinal Health, Inc. and its affiliates
17.4
%
 
*

 
*

Integrated Commercialization Solutions, Inc. (“ICS”)
*

 
*

 
15.8
%
* Less than 10%
We are exposed to credit risk associated with trade receivables that result from these product sales. We do not require collateral or deposits from our customers due to our assessment of their creditworthiness and our long-standing relationship with them. We maintain reserves for potential bad debt, though credit losses have historically been nominal and within management’s expectations. A summary of our customers that represent 10% or more of our accounts receivables, net, as of December 31, 2015 and 2014 are as follows:  
 
Accounts Receivable, net
 
December 31, 2015
 
December 31, 2014
McKesson Corporation and its affiliates
66.7
%
 
31.9
%
Cardinal Health, Inc. and its affiliates
23.8
%
 
*

Oncology Supply, a division of ASD Specialty Healthcare, Inc., and its affiliates (excluding ICS)
*

 
51.1
%
ICS
*

 
11.9
%
* Less than 10%

Competition
The pharmaceutical industry is characterized by rapidly-evolving biotechnology and intense competition, which we expect will continue. Many companies are engaged in research and development of compounds that are similar to ours – both commercialized and in development. In the event that one or more of our competitor’s programs are successful, the market for

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some of our drug products could be reduced or eliminated. Any product for which we obtain FDA approval must also compete for market acceptance and market share.
Successful marketing of branded products depends primarily on the ability to communicate the effectiveness, safety, and value of the products to healthcare professionals in private practice, group practices, hospitals, academic institutions and managed care organizations. Competition for branded drugs is less driven by price and is more focused on innovation in treatment of disease, advanced drug delivery, and specific clinical benefits over competitive drug therapies. Unless our products are shown to be differentiated, i.e., have a better safety profile, efficacy, and cost-effectiveness, as compared to other alternatives, they may not gain acceptance by medical professionals and may therefore never be commercially successful.
Companies that have products on the market or in research and development that target the same indications as our products include, among others, Astra Zeneca PLC, Bayer AG, Endo International plc, Eli Lilly and Co., Novartis AG, Genentech, Inc. (Roche), Bristol-Myers Squibb Company, GlaxoSmithKline, Biogen-IDEC Pharmaceuticals, Inc., OSI Pharmaceuticals, Inc. (Astellas Pharma), Cephalon, Inc. (Teva Pharmaceuticals), Sanofi-Aventis, Inc., Pfizer, Inc., Genta Incorporated, Merck, Celgene Corporation, BiPar Sciences, Inc., Genzyme Corporation, Shire Pharmaceuticals, AbbVie, Poniard Pharmaceuticals, Inc., and Johnson & Johnson.
Each of the aforementioned companies may be more advanced in development of competing drug products. Many of these competitors are large and well-capitalized companies focusing on a wide range of cancers and drug indications, and have substantially greater resources and expertise than we do.
We believe that the current competitive landscape for each of our commercialized products is as follows:
 
(a)
FUSILEV is the levo-isomeric form of the racemic compound calcium, leucovorin, a product already approved for the same indication as FUSILEV. As there are currently two generic companies approved by the FDA to sell the leucovorin product, we are competing with a lower-cost alternative. In addition, as discussed in Section 1A, Risks Related to Our Business , FUSILEV faces competition from generic levo-leucovorin.

(b)
ZEVALIN has two competitive products for its currently approved indications:

•
Rituxan ® (rituximab), marketed by Genentech and Biogen-IDEC Pharmaceuticals, is indicated for the treatment of patients with relapsed or refractory, low-grade or follicular, CD20-positive, B-cell NHL as a single agent; previously untreated follicular, CD20-positive, B-cell NHL in combination with CVP (cyclophosphamide, vincristine and prednisone combination) chemotherapy; and non-progressing (including stable disease), low-grade, CD20-positive B-cell NHL, as a single agent, after first-line CVP chemotherapy. Rituxan is administered as a part of various chemotherapy regimens and schedules, the vast majority of which, could be used in concert with other therapeutic agents, such as ZEVALIN, as part of a treatment plan.

•
Treanda ® (bendamustine hydrochloride) for Injection, for Intravenous Infusion, marketed by Cephalon, is indicated for the treatment of patients with indolent B-cell NHL that has progressed during or within six months of treatment with rituximab or a rituximab-containing regimen.

(c)
FOLOTYN, the first agent approved by the FDA for treatment of patients with relapsed or refractory PTCL, has two competitive products for its currently approved indications:

•
Romidepsin, marketed by Celgene, Inc., was granted accelerated approval by the FDA in June 2011 for the treatment of patients with PTCL who have received at least one prior therapy. This was the second indication approved for romidepsin, which was initially approved by the FDA in November 2009 for the treatment of patients with CTCL who have received at least one prior systemic therapy.

•
Brentuximab vedotin, marketed by Seattle Genetics, Inc., was also granted accelerated approval by the FDA in August 2011 for two indications, one of which was for the treatment of patients with systemic anaplastic large cell lymphoma (“ALCL”) after failure of at least one prior multi-agent chemotherapy regimen. ALCL is one of the subtypes of PTCL included in the labels of both FOLOTYN and romidepsin.
We are aware of multiple investigational agents that are currently being studied in clinical trials for PTCL, including alisertib, which, if approved, may compete with FOLOTYN in the U.S. Because of the natural history of PTCL with repeated treatment failures, it is likely that many patients would receive treatment with more than one agent (e.g., BELEODAQ and

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FOLOTYN). In addition, there are many existing approaches used in the treatment of relapsed or refractory PTCL, including combination chemotherapy and single agent regimens, which represent competition for FOLOTYN.
 
(d)
MARQIBO is a next generation liposomal form of standard vincristine. In its current indication, MARQIBO is approved for adult patients with relapsed or refractory Ph-ALL who have not responded or relapsed after two prior treatments. Currently, standard vincristine is not approved for the same indication as MARQIBO.

(e) BELEODAQ is a histone deacetylase inhibitor indicated for the treatment of patients with relapsed or refractory PTCL. This indication is approved under accelerated approval based on tumor response rate and duration of response. An improvement in survival or disease-related symptoms has not been established. Continued approval for this indication may be contingent upon verification and description of clinical benefit in the confirmatory trial.
Research and Development
New drug development is the process whereby drug product candidates are tested for the purpose of filing a BLA in the U.S. (or similar filing in other countries). Obtaining marketing approval from the FDA or similar regulatory authorities outside of the U.S. is an inherently uncertain, lengthy and expensive process that requires several phases of clinical trials to demonstrate to the satisfaction of the appropriate regulatory authorities that the products are both safe and effective for their respective indications. Our development focus is primarily based on acquiring and developing late-stage development drugs as compared to new drug discovery, which is particularly uncertain and lengthy.

Our in-development products are summarized below:  
Our research and development expenses for drug development are comprised of our personnel expenses, contracted services with third parties, license fees and milestone payments to third parties, clinical trial costs, laboratory supplies, drug products, and certain allocations of corporate costs. The below table summarizes our research and development expenses by project in 2015 , 2014 and 2013 :

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Research and Development Expenses for the Year Ended December 31,
(in thousands)
 
2015
 
2014
 
2013
EOQUIN (previously APAZIQUONE)
$
4,147

 
$
1,377

 
$
1,078

BELEODAQ
1,320

 
20,911

*
6,733

FUSILEV
885

 
442

 
4,517

FOLOTYN
2,650

 
4,927

 
2,992

ZEVALIN
3,025

 
6,950

 
8,572

SPI-2012
1,133

 
4,141

 
1,403

MARQIBO
4,412

 
6,623

 
4,099

EVOMELA (previously CE-MELPHALAN)
8,568

 
5,966

 
3,400

POZIOTINIB
4,240

 
—

 
—

Other in-development compounds and drugs
633

 
1,967

 
3,632

Total — Direct costs
31,013

 
53,304

 
36,426

Add: General research and development expenses (including personnel costs that correspond to more than one in-development project)
21,571

 
21,073

 
13,335

(Less): Reimbursements from development partners for SPI-2012 and BELEODAQ
(521
)
 
(2,758
)
 
(804
)
(Less): Incurred FOLOTYN study costs that reduce our drug development liability (see Note 16)
(1,297
)
 
(1,957
)
 
(2,287
)
Total research and development expenses
$
50,766

 
$
69,662

 
$
46,670

* Inclusive of 2014 milestone payment of $17.8 million.
Patents and Proprietary Rights
Our Patents and Proprietary Rights
We in-license from third parties certain patent and related intellectual property rights related to our proprietary drug products. Under most of these license arrangements, we are generally responsible for all development, patent filing and maintenance costs, sales, marketing and liability insurance costs related to the drug products.
In addition, these licenses and agreements may require us to make royalty and other payments and to reasonably utilize the underlying technology of applicable patents. If we fail to comply with these and other terms in these licenses and agreements, we could lose the underlying rights to one or more of our potential products, which would adversely affect our product development and harm our business.
The protection, preservation and infringement-free commercial utilization of these patents and related intellectual property rights are very important to the successful execution of our strategy. However, the issuance of a patent is neither conclusive as to its validity nor as to the enforceable scope of the claims of the patent. Accordingly, our patents and the patents we have licensed may not prevent other companies from developing similar or functionally equivalent products or from successfully challenging the validity of our patents. If our patent applications are not allowed or, even if allowed and issued as patents, if such patents or the patents we have in-licensed are circumvented or not upheld by the courts, our ability to competitively utilize our patented products and technologies may be significantly reduced. Also, such patents may or may not provide competitive advantages for their respective products or they may be challenged or circumvented by competitors, in which case our ability to commercially sell these products may be diminished.
From time-to-time, we may need to obtain licenses to patents and other proprietary rights held by third parties to develop, manufacture and market our products. If we are unable to timely obtain these licenses on commercially reasonable terms, our ability to commercially exploit such products may be inhibited or prevented.
We believe that our patents and licenses are critical to operating our business, as summarized below by commercialized and in-development drug products.
FUSILEV: Fusilev had/has orphan drug exclusivity for two indications. These indications are for the treatment of (i) osteosarcoma (which expired on March 7, 2015) and (ii) metastatic colorectal cancer (which expires on April 29, 2018). FUSILEV also had/has a U.S. composition of matter patent that expires in March 2022.

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In February 2015, the U.S. District Court for the District of Nevada found the asserted claims of the patent covering FUSILEV to be invalid, and on October 2, 2015, the Court of Appeals for the Federal Circuit affirmed that decision. On April 27, 2015, we filed suit in the U.S. District Court for the District of Columbia against the FDA seeking a temporary restraining order or preliminary injunction to suspend FDA approval of Sandoz Inc.'s ("Sandoz") Abbreviated New Drug Application ("ANDA"). The Company contends that Sandoz's ANDA should not have been approved until the expiry of our Orphan Drug Exclusivity on April 29, 2018. On April 29, 2015, the court denied the temporary restraining order and on May 27, 2015, the court entered summary judgment in favor of the FDA et al. On June 5, 2015, we filed our Notice of Appeal. Oral argument was held October 22, 2015. The ultimate outcome of this proceeding is uncertain.
ZEVALIN: We have sublicensed U.S. patents that cover the processes and tools for making monoclonal anti-bodies or MABs, in general, licensed U.S. patents that cover the CD-20 MAB in ZEVALIN as well as the use of ZEVALIN to treat NHL, and acquired patents covering the ZEVALIN compounding process (i.e., process of linking the CD-20 MAB to a radioactive isotope to make the patient-ready dosage form of ZEVALIN). These patents expire over a wide range of dates, and the licensed patents covering the CD-20 MAB began to expire in 2015. Additionally, we have U.S. patents covering the compounding process expiring in 2019, and we are considering filing new patent applications.
FOLOTYN: We have a composition of matter patent due to expire in 2022 following a five-year patent term extension in U.S. The composition of matter patent is due to expire in Europe in 2017 but is eligible for a similar patent term extension following regulatory approval in Europe. We also have patents covering the use of FOLOTYN for PTCL that will not expire until 2025. Additionally, we are considering filing new patent applications.
MARQIBO: We have U.S. and European patents covering the use of MARQIBO for leukemia, lymphoma and melanoma, and a U.S. patent covering the MARQIBO kit, all expiring in 2020. We have filed a patent cooperation treaty ("PCT") application claiming a method of encapsulating vincristine sulphate into liposomes. We are presently in the process of developing a “single vial” formulation of MARQIBO, and if we are successful, we believe our U.S. patent coverage could be extended to 2036.
BELEODAQ: The composition of matter patents that cover BELEODAQ and related compounds do not begin to expire until 2027. Currently, there are multiple U.S. and foreign patent applications pending that cover BELEODAQ formulations, uses and manufacturing and synthesis processes. We plan to file additional U.S. and foreign patent applications covering new formulations, uses, and manufacturing and synthesis processes.
EOQUIN: The U.S. formulation patent does not expire until 2022, and method of treatment of bladder cancer using a stabilized formulation that does not expire until 2024. Formulation patents outside the U.S. are due to expire in 2022. We have filed and plan to file additional U.S. and foreign patent applications covering new formulations and/or uses for this product.
SPI-2012: Composition of matter patents covering SPI-2012 are due to expire in 2025 in the U.S. and in 2024 outside the U.S. SPI-2012 is also covered by additional patents claiming various aspects of the technology that are due to expire between 2024 and 2030 and have filed patent applications for its formulation.
EVOMELA: This drug is covered by issued patents claiming improved Captisol ® technology that are due to expire between 2025 and 2029 in the U.S. Outside the U.S., we have issued patents that cover improved Captisol technology that are due to expire in 2025 and pending applications with anticipated expiry in 2029, if issued. We also have filed patent application covering Captisol-based formulation of EVOMELA in the U.S. and a number of other countries.
***
We are constantly evaluating our patent portfolio and are currently assessing and filing patent applications for our drug products and are considering new patent applications in order to maximize the life cycle of each of our products.
While the U.S. and the European Union (the "EU") are currently the largest potential markets for most of our products, we also have patents issued and patent applications pending outside of the U.S. and Europe. Limitations on patent protection in these countries, and the differences in what constitutes patentable subject matter in countries outside the U.S., may limit the protection we have on patents issued or licensed to us outside of the U.S. In addition, laws of foreign countries may not protect our intellectual property to the same extent as would laws in the U.S.
To minimize our costs and expenses and to maintain effective protection, we usually focus our patent and licensing activities within the U.S., the EU, Canada and Japan. In determining whether or not to seek a patent or to license any patent in a certain foreign country, we weigh the relevant costs and benefits, and consider, among other things, the market potential and profitability, the scope of patent protection afforded by the law of the jurisdiction and its enforceability, and the nature of terms

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with any potential licensees. Failure to obtain adequate patent protection for our proprietary drugs and technology would impair our ability to be commercially competitive in these markets.
In conducting our business, we rely upon trade secrets, know-how, and licensing arrangements. We use customary practices for the protection of our confidential and proprietary information such as confidentiality agreements and trade secret protection measures. It is possible that these agreements will be breached or will not be enforceable in every instance, and that we will not have adequate remedies for any such breach. It is also possible that our trade secrets or know-how will otherwise become known or independently developed by competitors. The protection of know-how is particularly important because it is often necessary or useful information that allows us to practice the claims in the patents related to our proprietary drug products.
In addition to the specific intellectual property subjects discussed above, we have trademark protection in the U.S. for Spectrum Pharmaceuticals, Inc. ® , FUSILEV ® , MARQIBO ® , BELEODAQ ® , EOQUIN ® , Spectrum Therapy Access Resources, STAR, ZEVALIN ® , FOLOTYN flower design associated with FOLOTYN and RenaZorb ® . We also have the FOLOTYN trademark and the associated flower design registered in Europe and other countries. Additionally, we have pending U.S. and ex-U.S. trademark applications for other potential marks.

The Patent Process
The U.S. Constitution provides Congress with the authority to provide inventors the exclusive right to their discoveries. Congress codified this right in U.S. Code Title 35, which gave the United States Patent and Trademark Office ("USPTO") the right to grant patents to inventors and defined the process for securing a U.S. patent. This process involves the filing of a patent application that instructs a person having ordinary skill in the respective art how to make and use the invention in clear and concise terms. The invention must be novel (i.e., not previously known) and non-obvious (i.e., not an obvious extension of what is already known). The patent application concludes with a series of claims that specifically describe the subject matter that the patent applicant considers his invention.
The USPTO undertakes an examination process that can take from one to seven years, or more, depending on the complexity of the patent and the problems encountered during examination.
In exchange for disclosing the invention to the public, for all U.S. patent applications filed after 1995, the successful patent applicant is currently provided a right to exclude others from making, using or selling the claimed invention for a period of 20 years from the effective filing date of the patent application.
Under certain circumstances, a patent term may be extended. Patent extensions are most frequently granted in the pharmaceutical and medical device industries under the Drug Price Competition and Pricing Term Restoration Act of 1984, or the Hatch-Waxman Act, to recover some of the time lost during the FDA regulatory process, subject to a number of limitations and exceptions. The patent term may be extended up to a maximum of five years; however, as a general rule, the average extension period granted for a new drug is approximately three years. Only one patent can be extended per FDA approved product, and a patent can only be extended once.
Product Exclusivity
Under the Hatch-Waxman Act, drug products are provided exclusivity whereby the FDA will not accept applications to market a generic form of an innovator reference listed drug product until the end of the prescribed period. A product is granted a five-year period of exclusivity if it contains a chemical entity never previously approved by the FDA either alone or in combination, although generic applications may be submitted after four years if they contain a certification of patent invalidity or non-infringement as further discussed below. A three-year period of exclusivity is granted to a previously approved product based on certain changes (e.g., in strength, dosage form, route of administration or conditions of use), where the application is supported by new clinical investigations that are essential to approval. In addition, in 1997, Congress amended the law to provide an additional six months of exclusivity as a reward for studying drugs in children. This pediatric exclusivity, which can be obtained during the approval process or after approval, effectively delays the approval of a generic application until six months after the expiration of any patent or other exclusivity that would otherwise delay approval, thus providing an additional six months free of generic competition. In order to qualify for pediatric exclusivity, the FDA must make a written request for pediatric studies, the application holder must agree to the request and complete the studies within the required timeframe, and the studies must be accepted by the FDA based on a determination that the studies fairly respond to the request. The provisions were enacted with a five-year sunset date, and have been reauthorized in 2002, 2007 and 2012.
Generic Approval and Patent Certification

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The Hatch-Waxman Act also created the ANDA, approval process, which permits the approval of a generic version of a previously approved branded drug without the submission of a full NDA, and based in part on the FDA’s finding of safety and effectiveness for the reference listed drug. Applicants submitting an NDA are required to list patents associated with the drug product, which are published in the FDA Orange Book, and the timing of an ANDA approval depends in part on patent protection for the branded drug. When an ANDA is filed, the applicant must file a certification for each of the listed patents for the branded drug, stating one of the following: (1) that there is no patent information listed; (2) that such patent has expired; (3) that the patent will expire on a particular date (indicating that the ANDA may be approved on that date); or (4) that the drug for which approval is sought either does not infringe the patent or the patent is invalid, otherwise known as paragraph IV certification. If an ANDA applicant files a paragraph IV certification, it is required to provide the patent holder with notice of that certification. If the patent holder brings suit against the ANDA applicant for patent infringement within 45 days of receiving notice, the FDA may not approve the ANDA until the earlier of (i) 30 months from the patent holder’s receipt of the notice (the 30-month stay) or (ii) the issuance of a final, non-appealed, or non-appealable court decision finding the patent invalid, unenforceable or not infringed.

The Hatch-Waxman Act also provided an incentive for generic manufacturers to file paragraph IV certifications challenging patents that may be invalid, unenforceable, or not infringed, whereby the first company to successfully challenge a listed patent and receive ANDA approval is protected from competition from subsequent generic versions of the same drug product for up to 180 days after the earlier of (1) the date of the first commercial marketing of the first-filed ANDA applicant’s generic drug or (2) the date of a decision of a court in an action holding the relevant patent invalid, unenforceable, or not infringed. These 180-day exclusivity provisions have been the subject of litigation and administrative review, and the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, or MMA, amended the provisions in several ways, including by providing that an ANDA applicant entitled to 180-day exclusivity may lose such exclusivity if any of the following events occur: (1) failure to market; (2) withdrawal of the ANDA; (3) change in patent certification; (4) failure to obtain tentative approval; (5) illegal settlement agreement; and (6) patent expiration.
With respect to the illegal settlement prong, the MMA amendments require that certain types of settlement agreements entered into between branded and generic pharmaceutical companies related to the manufacture, marketing and sale of generic versions of branded drugs are required to be filed with the Federal Trade Commission and the Department of Justice for review of potential anti-competitive practices. This requirement could affect the manner in which generic drug manufacturers resolve intellectual property litigation and other disputes with branded pharmaceutical companies, and could result generally in an increase in private-party litigation against pharmaceutical companies. The impact of this requirement, and the potential governmental investigations and private-party lawsuits associated with arrangements between brand name and generic drug manufacturers, remains uncertain. In addition, Congress has considered enacting legislation that would prohibit such settlements between brand name and generic drug manufacturers. Such a provision was considered as part of the Patient Protection and Affordable Care Act, or PPACA, signed into law on March 23, 2010. However, Congress removed the provision prior to passage. It is possible that Congress will again consider a ban on such settlements between brand name and generic drug manufacturers in the future.
The PPACA provides exclusivity protections for certain innovator biological products and a framework for FDA review and approval of biosimilar and interchangeable versions of innovator biologic products. The PPACA provides that no application for a biosimilar product may be approved until 12 years after the date on which the innovator product was first licensed, and no application may be submitted until four years after the date of first licensure. Products deemed interchangeable (as opposed to biosimilar) are also eligible for certain exclusivity.
Orphan Drug Designation
Some jurisdictions, including Europe and the U.S., may designate drugs for relatively small patient populations as “orphan” drugs. The FDA may grant orphan drug designation to a drug intended to treat a rare disease or condition that affects fewer than 200,000 individuals in the U.S., and a drug may also be considered an orphan even if the drug treats a disease or condition affecting more than 200,000 individuals in the U.S. Orphan drug designation does not necessarily convey any advantage in, or shorten the duration of, the regulatory review and process for marketing approval. If a product with an orphan drug designation subsequently receives the first FDA approval for the indication for which it has such designation, the product is entitled to seven years of orphan drug exclusivity, during which time the FDA will not approve any other application to market the same drug for the same indication except in limited circumstances, such as a showing of clinical superiority to the product with orphan exclusivity. Also, competitors are not prohibited from receiving approval to market the same drug or biologic for a different indication than that which received orphan approval.
Under EU medicines laws, the criteria for designating an “orphan medicinal product” are similar in principle to those in the U.S. Criteria for orphan designation are set out in Article 3 of Regulation (EC) 141/2000 on the basis of two alternative

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conditions. A medicinal product may be designated as orphan if it is intended for the diagnosis, prevention or treatment of a life-threatening or chronically debilitating condition affecting not more than five in 10,000 persons in the EU, when the application is made. This is commonly known as the “disease prevalence criterion” Alternatively, a product may be so designated if it is intended for the diagnosis, prevention or treatment of a life-threatening, seriously debilitating or serious and chronic condition in the EU and if without incentives it is unlikely that the marketing of the product in the EU would generate sufficient return to justify the necessary investment. This is commonly known as the “insufficient return criterion.”

These two alternative criteria must cumulatively meet the second condition that there exists no satisfactory method of diagnosis, prevention or treatment of the condition in question that has been authorized in the EU, or if such a method exists, the product will be of significant benefit to those affected by the condition. “Significant benefit” is defined in Regulation (EC) 847/2000 as a clinically relevant advantage or a major contribution to patient care.
Upon grant of a marketing authorization, orphan medicinal products are entitled to ten years of market exclusivity in respect of the approved therapeutic indication. Within the period of market exclusivity, no competent authority in the EU is permitted to accept an application for marketing authorization, a variation or a line-extension for the same approved therapeutic indication in respect of a similar medicinal product pursuant to Article 8.1 of Regulation 141/2000 unless one of the derogations set out in Article 8.3 of the same Regulation applies. In order to determine whether two products are considered similar, Regulation 847/2000 requires an assessment of the principal molecular structure and the underlying mode of action. Any minor variation or modification of the principal molecular structure would not ordinarily render the second product dissimilar to the first authorized product.
In order for the second applicant to break the market exclusivity granted to the first authorized similar medicinal product in respect of the same therapeutic indication, the second applicant would principally rely upon data to demonstrate that its product is safer, more efficacious or clinically superior to the first product pursuant to Article 8.3I of Regulation 141/2000. Ordinarily, such an assessment will require a head-to-head comparative clinical trial for the purpose of demonstrating clinical superiority.
The 10-year market exclusivity may be reduced to six years if at the end of the fifth year it is established that the product no longer meets the criteria for orphan designation on the basis of available evidence. To date, each of our five commercialized drugs continues to meet the orphan drug designation requirements.
    FUSILEV had/has been granted orphan drug designations for its use in conjunction with high dose methotrexate in the treatment of osteosarcoma and for its use in combination chemotherapy with the approved agent 5-fluorouracil in the palliative treatment of metastatic adenocarcinoma of the colon and rectum (colorectal cancer). In addition, FOLOTYN has been granted an orphan drug designation for the treatment of T-cell lymphoma and BELEODAQ has been granted an orphan drug designation for PTCL. Lastly, MARQIBO has been granted orphan drug designations for its use in the treatment of adult patients with ALL in second or greater relapse or whose disease has progressed following two or more anti-leukemia therapies, and ZEVALIN has orphan drug designations for the treatment of patients with relapsed or refractory low-grade, follicular, or transformed B-cell NHL, including patients with Rituximab refractory follicular NHL.
Governmental Regulation
The development, production and marketing of our proprietary and generic drug and biologic products are subject to regulation for safety, efficacy and quality by numerous governmental authorities in the U.S. and other countries. In the U.S., drugs and biologics are subject to rigorous regulation. The Federal Food, Drug, and Cosmetic Act, as amended from time to time, and the regulations promulgated there under, as well as other federal and state statutes and regulations, govern, among other things, the development, approval, manufacture, safety, labeling, storage, record keeping, distribution, promotion, and advertising of our products. Product development and approval within this regulatory framework, including for drugs already at a clinical stage of development, can take many years and require the expenditure of substantial resources, and to obtain FDA approval, a product must satisfy mandatory quality, safety and efficacy requirements. In addition, each drug-manufacturing establishment must be registered with the FDA. Domestic manufacturing establishments must comply with the FDA’s current Good Manufacturing Practices (“cGMP”), regulations and are subject to inspections by the FDA. To supply drug ingredients or products for use in the U.S., foreign manufacturing establishments must also comply with cGMP and are subject to inspections by the FDA or by other regulatory authorities in certain countries under reciprocal agreements with the FDA.
General Information about the Drug Approval Process and Post-Marketing Requirements
The U.S. system of new drug and biologics approval is a rigorous process. Only a small percentage of compounds that enter the pre-clinical testing stage are ever approved for commercialization. Our strategy focuses on in-licensing clinical stage

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drug products that are already in or about to enter human clinical trials. A late-stage focus helps us to effectively manage the high cost of drug development by focusing on compounds that have already passed the many hurdles in the pre-clinical and early clinical process.

The following general comments about the drug approval process are relevant to the development activities we are undertaking with our proprietary products.
Pre-clinical Testing:  During the pre-clinical testing stage, laboratory and animal studies are conducted to show biological activity of a drug or biologic compound against the targeted disease. The compound is evaluated for safety. While all of our compounds are currently in clinical trials, it is possible that additional pre-clinical testing could be requested by a regulatory authority for any of our compounds.
Investigational New Drug Application:  After certain pre-clinical studies are completed, an Investigational New Drug (“IND”) application is submitted to the FDA to request the ability to begin human testing of the drug or biologic. An IND becomes effective thirty days after the FDA receives the application (unless the FDA notifies the sponsor of a clinical hold), or upon prior notification by the FDA.
Phase 1 Clinical Trials:  These trials typically involve small numbers of healthy volunteers or patients and usually define a drug candidate’s safety profile, including the safe dosage range.
Phase 2 Clinical Trials:  In Phase 2 clinical trials, controlled studies of human patients with the targeted disease are conducted to assess the drug’s effectiveness. These studies are designed primarily to determine the appropriate dose levels, dose schedules and route(s) of administration, and to evaluate the effectiveness of the drug or biologic on humans, as well as to determine if there are any side effects on humans to expand the safety profile following Phase 1. These clinical trials, and Phase 3 trials discussed below, are designed to evaluate the product’s overall benefit-risk profile, and to provide information for physician labeling.
Phase 3 Clinical Trials:  This phase usually involves a larger number of patients with the targeted disease. Investigators (typically physicians) monitor the patients to determine the drug candidate’s efficacy and to observe and report any adverse reactions that may result from long-term use of the drug on a large, more widespread, patient population. During the Phase 3 clinical trials, typically the drug candidate is compared to either a placebo or a standard treatment for the target disease.
New Drug Application or Biologic License Application:  After completion of all three clinical trial Phases, if the data indicates that the drug is safe and effective, a NDA or BLA is filed with the FDA requesting FDA approval to market the new drug as a treatment for the target disease.
Fast Track and Priority Review:  The FDA has established procedures for accelerating the approval of drugs to be marketed for serious or life threatening diseases for which the manufacturer can demonstrate the potential to address unmet medical needs.
Abbreviated New Drug Application:  An ANDA is an abbreviated new drug application for generic drugs created by the Hatch-Waxman Act. When a company files an ANDA, it must make a patent certification regarding the patents covering the branded product listed in the FDA’s Orange Book. The ANDA drug development process generally takes less time than the NDA drug development process since the ANDA process usually does not require new clinical trials establishing the safety and efficacy of the drug product.
NDA/BLA and ANDA Approval:  The FDA approves drugs and biologics that are subject to NDA and BLA review based on data in the application demonstrating the product is safe and effective in its proposed use(s) and that the product’s benefits outweigh its risks. The FDA will also review the NDA or BLA applicant’s manufacturing process and controls to ensure they are adequate to preserve the drug’s identity, strength, quality, and purity. Finally, the FDA will review and approve the product’s proposed labeling. As for the ANDA approval process, these “abbreviated” applications are generally not required to include preclinical or clinical data to establish safety and effectiveness. Rather, an ANDA must demonstrate both chemical equivalence and bio-equivalence (the rate and extent of absorption in the body) to the innovator drug — unless a bio-equivalence waiver is granted by the FDA.
Phase 4 Clinical Trials:  After a drug has been approved by the FDA, Phase 4 studies may be conducted to explore additional patient populations, compare the drug to a competitor, or to further study the risks, benefits and optimal use of a drug. These studies may be a requirement as a condition of the initial approval of the NDA or BLA.


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Post-Approval Studies Requirements under FDAAA:  The Food and Drug Administration Amendments Act of 2007, or FDAAA, significantly added to the FDA’s authority to require post-approval studies. Under the FDAAA, if the FDA becomes aware of new safety information after approval of a product, they may require us to conduct further clinical trials to assess a known serious risk, signals of serious risk or to identify an unexpected serious risk. If required to conduct a post-approval study, periodic status reports must be submitted to the FDA. Failure to conduct such post-approval studies in a timely manner may result in administrative action being taken by FDA, including substantial civil fines.
Risk Evaluation and Mitigation Strategy Authority under FDAAA:  The FDAAA also gave the FDA new authority to require the implementation of a Risk Evaluation and Mitigation Strategy, or REMS, for a product when necessary to minimize known and preventable safety risks associated with the product. The FDA may require the submission of a REMS before a product is approved, or after approval based on “new safety information,” including new analyses of existing safety information. A REMS may include a medication guide, patient package insert, a plan for communication with healthcare providers, or other elements as the FDA deems are necessary to assure safe use of the product, which could include imposing certain restrictions on distribution or use of a product. A REMS must include a timetable for submission of assessments of the strategy at specified time intervals. Failure to comply with a REMS, including the submission of a required assessment, may result in substantial civil or criminal penalties.

Other Issues Related to Product Safety:  Adverse events that are reported after marketing approval also can result in additional limitations being placed on a product’s use and, potentially, withdrawal of the product from the market. In addition, under the FDAAA, the FDA has authority to mandate labeling changes to products at any point in a product’s lifecycle based on new safety information derived from clinical trials, post-approval studies, peer-reviewed medical literature, or post-market risk identification and analysis systems data.
FDA Enforcement
The development of drug and biologic products, as well as the marketing of approved drugs and biologics, is subject to substantial continuing regulation by the FDA, including regulation of adverse event reporting, manufacturing practices and the advertising and promotion of the product. Failure to comply with the FDA and other governmental regulations can result in fines, unanticipated compliance expenditures, recall or seizure of products, total or partial suspension of production and/or distribution, suspension of the FDA’s review of NDAs, BLAs, ANDAs or other product applications, enforcement actions, injunctions and criminal prosecution. Under certain circumstances, the FDA also has the authority to revoke previously granted drug approvals.
With respect specifically to information submitted to the FDA in support of marketing applications, the FDA, under its Fraud, Untrue Statements of Material Facts, Bribery and Illegal Gratuities Policy, can significantly delay the approval of a marketing application, or seek to withdraw an approved application where it identifies fraud or discrepancies in regulatory submissions. Such actions by the FDA may significantly delay or suspend substantive scientific review of a pending application during validity assessment or remove approved products from the market until the assessment is complete and questions regarding reliability of the data are resolved. In addition, the Generic Drug Enforcement Act of 1992 established penalties for wrongdoing in connection with the development or submission of an ANDA. Under this Act, the FDA has the authority to permanently or temporarily bar companies or individuals from submitting or assisting in the submission of an ANDA, and to temporarily deny approval and suspend applications to market generic drugs. The FDA may also suspend the distribution of all drugs approved or developed in connection with certain wrongful conduct and/or withdraw approval of an ANDA and seek civil penalties.
Healthcare Reform
Continuing studies of the proper utilization, safety and efficacy of pharmaceuticals and other health care products are being conducted by industry, government agencies and others. Such studies, which increasingly employ sophisticated methods and techniques, can call into question the utilization, safety and efficacy of previously marketed products and in some cases have resulted, and may in the future result, in the discontinuance of their marketing.
The Patient Centered Outcomes Research Institute (the "Institute"), a private, non-profit corporation created as a result of the PPACA, is tasked with assisting patients, clinicians, purchasers, and policy-makers in making informed health decisions. One of the Institute’s initiatives will be to conduct comparative clinical effectiveness research, which is defined as “research evaluating and comparing health outcomes and the clinical effectiveness, risks, and benefits of two or more medical treatments, services, and items.” It is important to note that the Institute would not be permitted to mandate coverage, reimbursement, or other policies for any public or private payer, however the outcome of the Institute's initiatives could influence prescriber behavior.

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Foreign Regulation
Whether or not we obtain FDA approval for a product, we must obtain approval of a product by the comparable 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/region to country/region, 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 may vary, sometimes significantly, from country/region to country/region.

Under the EU regulatory systems, we may submit marketing authorization applications either under a centralized procedure or decentralized procedure or the mutual recognition procedure. The centralized procedure is mandatory for medicines produced by a biotechnological process. The procedure is also mandatory for new active substances which are indicated for treatment of several diseases or conditions, including cancer and orphan conditions. Companies may apply for centralized assessment if the product contains a new active substance or the product constitutes significant therapeutic, scientific or technical innovation or the granting of authorization under the centralized procedure is in the interests of the EU patients. A centralized marketing authorization is valid in all EU member states. This marketing authorization is issued in the form of a European Commission decision which is legally binding in its entirety to which it is addressed.
Directive 2004/27/EC introduced two parallel procedures to the centralized procedure to allow a product to be progressively authorized in each of the member states of the EU. They are the decentralized procedure and the mutual recognition procedure. The mutual recognition procedure applies where the product has already been authorized in a member state of the EU that will act as reference member state. The national marketing authorization granted by the reference member state forms the basis for mutual recognition in the member states chosen by the applicant. In the decentralized procedure, the product in question is not authorized in any one the EU member states. In such a situation, the applicant company will request a member state to act as the reference member state to lead the scientific assessment for the benefit/risk balance for agreement by the concerned member states. In both cases, the concerned member states have up to 90 days to accept or raise reasoned objections to the assessment made by the reference member state.
In addition, pricing and reimbursement is subject to negotiation and regulation in most countries outside the U.S. Increasingly, adoption of a new product for use in national health services is subject to health technology assessment under the national rules and regulations to establish the clinical effectiveness and cost-effectiveness of a new treatment. In some countries, in order to contain health care expenditures, reference price is introduced in order for the national healthcare providers to achieve a price comparable to the reference price in the same therapeutic category. We may therefore face the risk that the resulting prices would be insufficient to generate an acceptable return to us.
Third Party Reimbursement and Pricing Controls
In the U.S. and elsewhere, sales of pharmaceutical products depend in significant part on the availability of reimbursement to the consumer from third-party payers, such as government and private insurance plans. Third-party payers are increasingly challenging the prices charged for medical products and services. It is time-consuming and expensive for us to go through the process of seeking reimbursement from Medicare and private payers. Our products may not be considered cost effective, and coverage and reimbursement may not be available or sufficient to allow us to sell our products on a competitive and profitable basis.
The PPACA enacted significant reforms, including revising the definition of “average manufacturer price” for reporting purposes, increasing Medicaid rebates, expanding the 340B drug discount program, and making changes to affect the Medicare Part D coverage gap, or “donut hole.” In the coming years, additional significant changes could be made to governmental healthcare programs, and the U.S. healthcare system as a whole, that may result in significantly increased rebates, decreased pricing flexibility, diminished negotiating flexibility, coverage and reimbursement limitations based upon comparative and cost-effectiveness reviews, and other measures that could significantly impact the success of our products.
In many foreign markets, including the countries in the EU, pricing of pharmaceutical products is subject to governmental control. In the U.S., there have been, and we expect that there will continue to be, a number of federal and state proposals to implement similar governmental pricing control.
Employees
As of December 31, 2015 , we had 212 employees (as compared to 241 employees as of December 31, 2014 ), 10 of whom hold an M.D. degree, and 18 of whom hold a Ph.D. degree. We believe that the success of our business will depend, in part, on

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our ability to attract and retain uniquely qualified personnel. Our employees are not part of any collective bargaining agreements, and we believe that we have good relations with our employees.

General Information
We are a Delaware corporation. We originally incorporated in Colorado in December 1987 as Americus Funding Corporation. We changed our corporate name in August 1996 to NeoTherapeutics, Inc., and reincorporated in Delaware in June 1997. We changed our corporate name in December 2002 to Spectrum Pharmaceuticals, Inc.
Our principal executive office is located at 11500 South Eastern Avenue, Suite 240, Henderson, Nevada 89052. Our telephone number is (702) 835-6300. Our website is located at www.sppirx.com . The information that can be accessed through our website is not incorporated by reference into this Annual Report on Form 10-K and should not be considered to be a part hereof.
We make our proxy statements, annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K (and related amendments to these reports, as applicable) available on our website free of charge as soon as practicable after filing or furnishing with the SEC.
All such reports are also available free of charge via EDGAR through the SEC website at www.sec.gov . In addition, the public may read and copy materials filed by us with the SEC at the SEC’s public reference room located at 100 F Street, NE, Washington, D.C., 20549. Information regarding operation of the SEC’s public reference room can be obtained by calling the SEC at 1-800-732-0330.
 
ITEM 1A. RISK FACTORS

Before deciding to invest in our company, or to maintain or increase your investment, you should carefully consider the risks described below, in addition to the other information contained in this Annual Report on Form 10-K and other reports we have filed with the SEC. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not presently known to us, or that we currently deem immaterial, may also affect our business operations. If any of these risks are realized, our business, financial condition, or results of operations could be seriously harmed and in that event, the market price for our common stock could decline, and you may lose all or part of your investment.
These risk factors should be considered in connection with evaluating the forward-looking statements contained in this Annual Report on Form 10-K. These factors could cause actual results and conditions to differ materially from those projected in our forward-looking statements.
Risks Related to Our Business
Wholesaler actions could increase competitive and pricing pressures on pharmaceutical manufacturers, including us.
We sell certain of our products primarily through wholesalers, who in turn sell to end-users. These wholesalers comprise a significant part of the distribution network for pharmaceutical products in the U.S. A small number of large wholesalers control a significant share of the market, which can increase competitive and pricing pressures on pharmaceutical manufacturers, including us. In addition, wholesalers may apply pricing pressure through their fee-for-service arrangements.
We are aware of several competitors attempting to develop and market products competitive to our products, which may reduce or eliminate our commercial opportunities.
The pharmaceutical and biotechnology industries are intensely competitive and subject to rapid and significant technological changes, and a number of companies are pursuing the development of pharmaceuticals and products that target the same diseases and conditions that our products target, including products currently commercialized. We cannot predict with accuracy the timing or impact of the introduction of potentially competitive products or their possible effect on our sales. Certain potentially competitive products to our products are in various stages of development, some of which have pending applications for approval with the FDA or have been approved by regulatory authorities in other countries. Also, there are many ongoing studies with currently marketed products and other developmental products, which may yield new data that could adversely impact the use of our products in their current and potential future indications. The introduction of competitive products could significantly reduce our sales, which, in turn would adversely impact our financial and operating results.

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We are a small company relative to our principal competitors, and our limited financial resources may limit our ability to develop and market our drug products.
Many companies, both public and private, including well-known pharmaceutical companies and smaller niche-focused companies, are developing products to treat many, if not all, of the diseases we are pursuing or are currently distributing drug products that directly compete with the drugs that we sell or that we intend to develop, market and distribute. Many of these companies have substantially greater financial, research and development, manufacturing, marketing and sales experience and resources than us. As a result, our competitors may be more successful than us in developing their products, obtaining regulatory approvals and marketing their products to consumers.
Competition for branded or proprietary drugs is less driven by price and is more focused on innovation in the treatment of disease, advanced drug delivery and specific clinical benefits over competitive drug therapies. We may not be successful in any or all of our current clinical studies; or if successful, and if one or more of our drug products is approved by the FDA, we may encounter direct competition from other companies who may be developing products for similar or the same indications as our drug products.
Companies that have products on the market or in research and development that target the same indications as our products target include, among others, Astra Zeneca PLC, Bayer AG, Endo International plc, Eli Lilly and Co., Novartis AG, Genentech, Inc. (Roche), Bristol-Myers Squibb Company, GlaxoSmithKline, Biogen-IDEC Pharmaceuticals, Inc., OSI Pharmaceuticals, Inc. (Astellas Pharma), Cephalon, Inc. (Teva Pharmaceuticals), Sanofi-Aventis, Inc., Pfizer, Inc., Genta Incorporated, Merck, Celgene Corporation, BiPar Sciences, Inc., Genzyme Corporation, Shire Pharmaceuticals, AbbVie, Poniard Pharmaceuticals, Inc., and Johnson & Johnson, who may be more advanced in the development of competing drug products or are more established.
Many of our competitors are large and well-capitalized companies focusing on a wide range of diseases and drug indications, and have substantially greater financial, research and development, marketing, human and other resources than we do. Furthermore, large pharmaceutical companies have significantly more experience than we do in pre-clinical testing, human clinical trials and regulatory approval procedures, among other things.
Our dependence on key executives, scientists and sales and marketing personnel could impact the development and management of our business.
We are highly dependent upon our ability to attract and retain qualified scientific, technical sales and marketing and managerial personnel. There is intense competition for qualified personnel in the pharmaceutical and biotechnology industries, and we cannot be sure that we will be able to continue to attract and retain the qualified personnel necessary, particularly as business prospects change, for the development and management of our business. Although we do not believe the loss of one individual would materially harm our business, our business might be harmed by the loss of the services of multiple existing personnel, as well as the failure to recruit additional key scientific, technical and managerial personnel in a timely manner. Much of the know-how we have developed resides in our scientific and technical personnel and is not readily transferable to other personnel. While we have an employment agreement with our Chief Executive Officer, we do not have employment agreements with any of our other key scientific, technical, or managerial employees.
If the distributors that we rely upon to sell our products fail to perform, our business may be adversely affected.
Our success depends on the continued customer support efforts of our network of distributors. In the U.S., we sell our products to a small number of distributors who in turn sell-through to patient health care providers. These distributors also provide multiple logistics services relating to the distribution of our products, including transportation, warehousing, cross-docking, inventory management, packaging and freight-forwarding. We do not promote products to these distributors and they do not set or determine demand for products. The use of distributors involves certain risks, including, but not limited to, risks that these distributors will:
 
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not provide us with accurate or timely information regarding their inventories, the number of patients who are using our products or complaints about our products;
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not purchase sufficient inventory on hand to fulfill end user orders in a timely manner;
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be unable to satisfy financial obligations to us or others; and
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cease operations.

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Any such actions may result in decreased sales of our products, which would harm our business.
Because we have obtained accelerated approval to market FOLOTYN, BELEODAQ and MARQIBO, we are subject to ongoing regulatory obligations and review, including completion of the post-approval requirements.
FOLOTYN and BELEODAQ were approved for the treatment of patients with relapsed or refractory PTCL, and MARQIBO was approved for the treatment of adult patients with Philadelphia chromosome-negative acute lymphoblastic leukemia in second or greater relapse or whose disease has progressed following two or more anti-leukemia therapies, under the FDA’s accelerated approval regulations. These provisions allow the FDA to approve products for cancer or other serious or life threatening diseases based on initial positive data from clinical trials. Under these provisions, we are subject to certain post-approval requirements. Specifically, we are required to conduct Phase 1 dose escalating studies and a Phase 3 randomized study for FOLOTYN and BELEODAQ in patients with PTCL. The FDA also required that we conduct two Phase 1 trials to assess whether FOLOTYN poses a serious risk of altered drug levels resulting from organ impairment as well as additional post-marketing studies with BELEODAQ. For MARQIBO, we are required to conduct a randomized Phase 3 study in patients over 60 years of age with newly diagnosed ALL. Failure to complete the studies or adhere to the timelines established by the FDA could result in penalties, including fines or withdrawal of FOLOTYN, BELEODAQ, and/or MARQIBO from the market.
The FDA may also initiate proceedings to withdraw approval or request that we voluntarily withdraw these drugs from the market if our Phase 3 studies fail to confirm clinical benefit. Further, the FDA may require us to amend these drugs package insert, including by strengthening the warnings and precautions section or institute a REMS based on the results of these studies or clinical experience. We are also subject to additional, continuing post-approval regulatory obligations, including the possibility of additional clinical studies required by the FDA, safety reporting requirements and regulatory oversight of the promotion and marketing of these drugs.
We and our third-party contract manufacturers are subject to inspection by regulatory authorities.
We and our third-party manufacturers are required to adhere to cGMP. The cGMP regulations cover all aspects of the manufacturing, storage, testing, quality control and record keeping relating to our drugs.
We and or our third-party contract manufacturers are subject to periodic inspection by the FDA and foreign regulatory authorities to ensure compliance with cGMP or other applicable government regulations and corresponding foreign standards. We have limited control over a third-party manufacturer’s compliance with these regulations and standards. If we or our third-party manufacturers fail to comply with applicable regulatory requirements, we may be subject to fines, suspension, modification or withdrawal of regulatory approvals, product recalls, seizure of products, operating restrictions and criminal prosecution.
Our collaboration partner, Mundipharma, may not be successful in obtaining regulatory approval for FOLOTYN in a number of countries and FOLOTYN is subject to numerous complex regulatory requirements.
Our collaboration partner, Mundipharma, may not be successful in obtaining regulatory approval for FOLOTYN in a number of countries and FOLOTYN is subject to numerous complex regulatory requirements. Failure to comply with, or changes to, the regulatory requirements that are applicable to FOLOTYN outside the United States may result in a variety of consequences, including the following:
 
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restrictions on FOLOTYN or our manufacturing processes;
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warning letters;
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withdrawal of FOLOTYN from the market;
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voluntary or mandatory recall of FOLOTYN;
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fines against us;
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suspension or withdrawal of regulatory approvals for FOLOTYN;
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suspension or termination of any of our ongoing clinical trials of FOLOTYN;
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refusal to permit import or export of FOLOTYN;
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refusal to approve pending applications or supplements to approved applications that we submit;

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denial of permission to file an application or supplement in a jurisdiction;
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product seizure; and/or
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injunctions, consent decrees, or the imposition of civil or criminal penalties against us.

If actual future payments for allowances, discounts, returns, rebates and chargebacks exceed the estimates we made at the time of the sale of our products, including, without limitation, due to a change in the composition of our sales over time, our financial position, results of operations and cash flows may be materially and negatively impacted.
We recognize product revenue net of estimated allowances for discounts, returns, rebates and chargebacks. Such estimates require our most subjective and complex judgment due to the need to make estimates about matters that are inherently uncertain. Based on industry practice, pharmaceutical companies, including us, have liberal return policies. We are obligated to accept from customers the return of FUSILEV, MARQIBO, and BELEODAQ that have reached their expiration date, and up to six months thereafter. We authorize returns for damaged products and exchanges for expired products in accordance with our return goods policy and procedures. Also, like our competitors, we also give credits for chargebacks to wholesale customers that have contracts with us for their sales to hospitals, group purchasing organizations, pharmacies or other retail customers.
A chargeback is the difference between the price the wholesale customer (in our case, the GPOs) pays (wholesale acquisition cost) and the price that the GPO’s end-customer pays for a product (contracted customer). For instance, our products are subject to certain programs with federal government qualified entities whereby pricing on products is discounted to such entities and results in a chargeback claim to us. To the extent that our sales to discount purchasers, such as federal government qualified entities, increases, our chargebacks will also increase. There may be significant lag time between our original sale to the wholesaler and our receipt of the corresponding government chargeback claims from our wholesalers.
Our products are subject to state government-managed Medicaid programs, whereby rebates for purchases are issued to participating state governments. These rebates arise when the patient treated with our products is covered under Medicaid. Our calculations related to these Medicaid rebate accruals require us to estimate end-user and patient mix to determine which of our sales will likely be subject to these rebates. There is a significant time lag in us receiving these rebate notices (generally several months after our sale is made). Our estimates are based on our historical claims from participating state governments, as supplemented by management’s judgment.
Although we believe that we have sufficient allowances, actual results may differ significantly from our estimated allowances for discounts, returns, rebates and chargebacks. Changes in estimates and assumptions based upon actual results may have a material impact on our financial condition, results of operations and cash flows. Such changes to estimates will be made to the financial statements in the year in which the estimate is changed. In addition, our financial position, results of operations and cash flows may be materially and negatively impacted if actual future payments for allowances, discounts, returns, rebates and chargebacks exceed the estimates we made at the time of the sale of our products.
Reports of adverse events or safety concerns involving our products or similar agents, sold by us or our development partners and/or licensees, could delay or prevent us from obtaining or maintaining regulatory approval or negatively impact sales.
Certain of our products may cause serious adverse events. Discovery of previously unknown problems with a product, including adverse events of unanticipated severity or frequency, could interrupt, delay or halt clinical trials of such products, including the FDA-required post-approval studies, and could result in the FDA or other regulatory authorities denying or withdrawing approval of our products for any or all indications. The FDA, other regulatory authorities or we may suspend or terminate clinical trials at any time. We may also be required to update the package inserts based on reports of adverse events or safety concerns or implement a REMS, which could adversely affect such products acceptance in the market. In addition, the public perception of our products might be adversely affected, which could harm our business and results of operations and cause the market price of our common stock to decline, even if the concern relates to another company’s product or product candidate. Our planned trials to demonstrate efficacy in a variety of indications and to better manage side effect profiles of certain of our products may not be successful.
The marketing and sale of our products may be adversely affected by the marketing and sales efforts of third parties who sell our products or similar products outside of our territories.

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We have only licensed the rights to develop and market our products in limited territories. Other companies market and sell the same products in other parts of the world. If, as a result of other companies’ actions, negative publicity is associated with our products or similar products, our own efforts to successfully market and sell our products in our markets may be adversely impacted.

Our sales depend on coverage and reimbursement from third-party payers and a reduction in the coverage and/or reimbursement for our products could have a material adverse effect on our product sales, business and results of operations.
Sales of our products are dependent on the availability and extent of coverage and reimbursement from third-party payers, including government programs and private insurance plans. Governments and private payers may regulate prices, reimbursement levels and/or access to our products to contain costs or to affect levels of use. We rely in large part on the reimbursement of our products through government programs such as Medicare and Medicaid in the United States, and a reduction in the coverage and/or reimbursement for our products could have a material adverse effect on our product sales, business and results of operations.
A substantial portion of our U.S. business relies on reimbursement from the U.S. federal government under Medicare Part B coverage. Most of our products furnished to Medicare beneficiaries in both a physician office setting and hospital outpatient setting are reimbursed under the Medicare Part B Average Sales Price, or ASP, payment methodology. ASP-based reimbursement of our products under Medicare may be below or could fall below the cost that some medical providers pay for such products, which could materially and adversely affect sales of our products. We also face risks relating to the reporting of pricing data that affect the U.S. reimbursement of and discounts for our products. ASP data are calculated by the manufacturer based on a formula defined by statute and regulation and are then submitted to the Centers for Medicare & Medicaid Services (the "CMS"), the agency responsible for administering the Medicare program, on a quarterly basis.
CMS uses those ASP data to determine the applicable reimbursement rates for our products under Medicare Part B. However, the statute, regulations and CMS guidance do not define specific methodologies for all aspects of the reporting of ASP data. For example, CMS has not provided specific guidance regarding administrative fees paid to group purchasing organizations, or GPOs, in the ASP calculation. CMS directs that manufacturers make “reasonable assumptions” in their calculation of ASP data in the absence of specific CMS guidance on a topic. As a result, we are required to apply our reasonable judgment to certain aspects of calculating ASP data. If our submitted ASP data are incorrect, we may become subject to substantial fines and penalties or other government enforcement actions, which could have a material adverse impact on our business and results of operations.
Servicing our debt requires a significant amount of cash, and we may not have sufficient cash flow from our business to pay our substantial debt.
As of December 31, 2015 , we owed $120 million of principal, from our December 2013 issuance of convertible notes, which mature in December 2018. Any such indebtedness will require the dedication of a portion of our expected cash flow from operations to service our indebtedness, thereby reducing the amount of our cash flow available for other purposes. In addition, our ability to make scheduled payments of the principal, to pay interest on or to refinance our indebtedness, including our convertible notes, depends on our future performance, which is subject to regulatory, economic, financial, competitive and other factors beyond our control, and our ability to raise equity capital.

Our business may not continue to generate cash flow from operations in the future sufficient to service our debt and make necessary capital expenditures. If we are unable to generate such cash flow, we may be required to adopt one or more alternatives, such as selling assets, restructuring debt or obtaining additional equity capital on terms that may be onerous or highly dilutive. Our ability to refinance our indebtedness will depend on the capital markets and our financial condition at such time. We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on our debt obligations.

Clinical trials may fail to demonstrate the safety and efficacy of our drug products, which could prevent or significantly delay obtaining regulatory approval.
Prior to receiving approval to commercialize any of our drug products, we must demonstrate with substantial evidence from well-controlled clinical trials, and to the satisfaction of the FDA, and other regulatory authorities in the U.S. and other countries, that each of the products is both safe and effective. For each drug product, we will need to demonstrate its efficacy and monitor its safety throughout the process. If such development is unsuccessful, our business and reputation would be harmed and our stock price would be adversely affected.

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All of our drug products are prone to the risks of failure inherent in drug development. Clinical trials of new drug products sufficient to obtain regulatory marketing approval are expensive, uncertain, and take years to complete. We may not be able to successfully complete clinical testing within the time frame we have planned, or at all. We may experience numerous unforeseen events during, or as a result of, the clinical trial process that could delay or prevent us from receiving regulatory approval or commercializing our drug products. In addition, the results of pre-clinical studies and early-stage clinical trials of our drug products do not necessarily predict the results of later-stage clinical trials. Later-stage clinical trials may fail to demonstrate that a drug product is safe and effective despite having progressed through initial clinical testing. Even if we believe the data collected from clinical trials of our drug products is promising, data are susceptible to varying interpretations, and such data may not be sufficient to support approval by the FDA or any other U.S. or foreign regulatory approval. Pre-clinical and clinical data can be interpreted in different ways.
Accordingly, FDA officials could interpret such data in different ways than we or our partners do which could delay, limit or prevent regulatory approval. The FDA, other regulatory authorities, our institutional review boards, our contract research organizations, or we may suspend or terminate our clinical trials for our drug products. Any failure or significant delay in completing clinical trials for our drug products, or in receiving regulatory approval for the sale of any drugs resulting from our drug products, may severely harm our business and reputation. Even if we receive FDA and other regulatory approvals, our drug products may later exhibit adverse effects that may limit or prevent their widespread use, may cause the FDA to revoke, suspend or limit their approval, or may force us to withdraw products derived from those drug products from the market.
Moreover, the commencement and completion of clinical trials may be delayed by many factors that are beyond our control, including:
 
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delays obtaining regulatory approval to commence a trial;
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reaching agreement on acceptable terms with contract research organizations, or CROs, and clinical trial sites;
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obtaining institutional review board, or IRB, approval at each site;
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slower than anticipated patient enrollment;
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scheduling conflicts with participating clinicians and clinical institutions;
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lack of funding;
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negative or inconclusive results;
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patient noncompliance with the protocol;
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adverse medical events or side effects among patients during the clinical trials;
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negative or problematic FDA inspections of our clinical operations or manufacturing operations; and
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real or perceived lack of effectiveness or safety.
We could encounter delays if a clinical trial is suspended or terminated by us, the IRBs of the clinical trial sites in which such trials are being conducted, or by the FDA or other regulatory authorities. Such authorities may impose such a suspension or termination due to a number of factors, including failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols, inspection of the clinical trial operations or trial site by the FDA or other regulatory authorities resulting in the imposition of a clinical hold, unforeseen safety issues or adverse side effects, failure to demonstrate a benefit from using a drug, changes in governmental regulations or administrative actions or lack of adequate funding to continue the clinical trial.

Our supply of active pharmaceutical ingredients, or APIs, and drug products will be dependent upon the production capabilities of contract manufacturing organizations, or CMOs, component and packaging supply sources, other third-party suppliers, and other providers of logistical services, some of whom are based overseas and, if these parties are not able to meet our demands and FDA scrutiny, we may be limited in our ability to meet demand for our products, ensure regulatory compliance or maximize profit on the sale of our products.
We have no internal manufacturing capacity for APIs or our drug products, and, therefore, we have entered into agreements with CMOs and other suppliers to supply us with APIs and our finished dose drug products. Success in the development and marketing of our drug products depends, in part, upon our ability to maintain, expand and enhance our existing relationships and establish new sources of supply. Some of the third-party manufacturing facilities used in the production of APIs and our drug products are located outside the U.S. The manufacture of APIs and finished drug products,

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including the acquisition of compounds used in the manufacture of the finished drug product, may require considerable lead times. We have little or no control over the production processes of third-party manufacturers, CMOs or other suppliers.
Our ability to source APIs and drug products is also dependent on providers of logistical services who may be subject to disruptions that we cannot predict or sufficiently plan around. Accordingly, while we do not currently anticipate shortages of supply, circumstances could arise in which we will not have adequate supplies to timely meet our requirements or market demand for a particular drug product could outstrip the ability of our supply source to timely manufacture and deliver the product, thereby causing us to lose sales. In addition, our ability to make a profit on the sale of our drug products depends on our ability to obtain price arrangements that ensure a supply of product at favorable prices.
If problems arise during the production of a batch of our drug products, that batch of product may have to be discarded. This could, among other things, lead to increased costs, lost revenue, damage to customer relations, time and expense spent investigating the cause and, depending on the cause, similar losses with respect to other batches or products. If problems are not discovered before the product is released to the market, recall and product liability costs may also be incurred. To the extent that one of our suppliers experiences significant manufacturing problems, this could have a material adverse effect on our revenues and profitability.
Finally, reliance on CMOs entails risks to which we would not be subject if we manufactured products ourselves, including reliance on the third party for regulatory compliance and adherence to the cGMP, requirements, the possible breach of the manufacturing agreement by the CMO and the possibility of termination or non-renewal of the agreement by the CMO, based on its own business priorities, at a time that is costly or inconvenient for us. Before we can obtain marketing approval for our drug products, our CMO facilities must pass an FDA pre-approval inspection. In order to obtain approval, all of the facility’s manufacturing methods, equipment and processes must comply with cGMP requirements.
The cGMP requirements govern all areas of record keeping, production processes and controls, personnel and quality control. In addition, our CMOs will be subject to on-going periodic inspection by the FDA and corresponding state and foreign agencies for compliance with cGMP regulations, similar foreign regulations and other regulatory standards. We do not have control over our CMOs’ compliance with these regulations and standards. Any failure of our third party manufacturers or us to comply with applicable regulations, including an FDA pre-approval inspection and cGMP requirements, could result in sanctions being imposed on them or us, including warning letters, fines, injunctions, civil penalties, failure of regulatory authorities to grant marketing approval of our products, delay, suspension or withdrawal of approvals, license revocation, seizures or recalls of product, operation restrictions and criminal prosecutions, any of which could significantly and adversely affect our business.
Adverse economic conditions may have material adverse consequences on our business, results of operations and financial condition.
Unpredictable and unstable changes in economic conditions, including recession, inflation, increased government intervention, or other changes, may adversely affect our general business strategy. We rely upon our ability to generate positive cash flow from operations to fund our business. If we are not able to generate positive cash flow from operations, we may need to utilize sources of financing or other sources of cash. We may need to raise additional funds through public or private debt or equity financings in order to fund existing operations or to take advantage of opportunities, including acquisitions of complementary businesses or technologies. In addition, if our business deteriorates, we may not be able to maintain compliance with any covenants or representations and warranties in any such financings which could result in reduced availability of such financings, an event of default under such financings, or could make other sources of financing unavailable to us. Any such event would have a material adverse impact on our business, results of operations and financial condition.
While we believe we have adequate capital resources to meet current working capital and capital expenditure requirements, an economic downturn or an increase in our expenses could require additional financing on less than attractive rates or on terms that are excessively dilutive to existing stockholders. Failure to secure any necessary financing in a timely manner and on favorable terms could have a material adverse effect on our growth strategy, financial performance and stock price and could require us to delay or abandon clinical development plans or plans to acquire additional technology.
Volatile economic conditions may not only limit our access to capital, but may also make it difficult for our customers and us to accurately forecast and plan future business activities, and they could cause businesses to slow spending on our products, which would delay and lengthen sales cycles. Furthermore, during challenging economic times, our customers may face issues gaining timely access to sufficient credit, which could result in an impairment of their ability to make timely

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payments to us. In addition, adverse economic conditions could also adversely impact our suppliers’ ability to provide us with materials which would negatively impact on our business, financial condition and results of operations.
We may not be able to successfully integrate our acquisitions and any additional businesses we may acquire.
We regularly evaluate and, as appropriate, may make selective acquisitions of businesses and intellectual property that we believe complement or augment our existing business. Issues that could delay or prevent integration of the acquired business and/or intellectual property into our own include:
 
•
conforming standards, procedures and policies, business cultures and compensation structures;
•
conforming information technology and accounting systems;
•
consolidating corporate and administrative infrastructures;
•
consolidating sales and marketing operations;
•
retaining existing customers and attracting new customers;
•
retaining key employees;
•
identifying and eliminating redundant and under-performing operations and assets;
•
minimizing the diversion of management’s attention from ongoing business concerns;
•
coordinating geographically dispersed organizations;
•
managing tax costs or inefficiencies associated with integrating operations; and
•
making any necessary modifications to operating control standards to comply with the Sarbanes-Oxley Act of 2002 and the rules and regulations promulgated thereunder.

If we are unable to successfully integrate our acquisitions with our existing business, we may not obtain the advantages that the acquisitions were intended to create, which may materially adversely affect our business, results of operations, financial condition and cash flows, our ability to develop and introduce new products and the market price of our stock. Actual costs and sales synergies, if achieved at all, may be lower than we expect and may take longer to achieve than we anticipate. Furthermore, the products of companies we acquire may overlap with our products or those of our customers, creating conflicts with existing relationships or with other commitments that are detrimental to the integrated businesses.
Our collaborations with outside scientists may be subject to change, which could limit our access to their expertise.
We work with scientific advisors and collaborators at research institutions. These scientists are not our employees and may have other commitments that would limit their availability to us. If a conflict of interest between their work for us and their work for another entity arises, we may lose their services, which could negatively impact our research and development activities.

We may rely on contract research organizations and other third parties to conduct clinical trials and, in such cases, we are unable to directly control the timing, conduct and expense of our clinical trials.
We may rely, in full or in part, on third parties to conduct our clinical trials. In such situations, we have less control over the conduct of our clinical trials, the timing and completion of the trials, the required reporting of adverse events and the management of data developed through the trial than would be the case if we were relying entirely upon our own staff. Communicating with outside parties can also be challenging, potentially leading to mistakes as well as difficulties in coordinating activities. Outside parties may have staffing difficulties, may undergo changes in priorities or may become financially distressed, adversely affecting their willingness or ability to conduct our trials. We may experience unexpected cost increases that are beyond our control. Problems with the timeliness or quality of the work of a contract research organization may lead us to seek to terminate the relationship and use an alternative service provider. However, making this change may be costly and may delay our trials, and contractual restrictions may make such a change difficult or impossible. Additionally, it may be impossible to find a replacement organization that can conduct our trials in an acceptable manner and at an acceptable cost.

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We may have conflicts with our third-party development partners that could delay or prevent the development or commercialization of our drug products.
We may have conflicts with our third-party development partners, such as conflicts concerning the interpretation of pre-clinical or clinical data, the achievement of milestones, the interpretation of contractual obligations, payments for services, development obligations or the ownership of intellectual property developed during our collaboration. If any conflicts arise with any of our third-party development partners, such partner may act in a manner that is adverse to our best interests. Any such disagreement could result in one or more of the following, each of which could delay or prevent the development or commercialization of our drug product, and in turn prevent us from generating revenues from such drug product:
 
•
unwillingness on the part of a third-party development partner to pay us milestone payments or royalties that we believe are due to us under a collaboration;
•
uncertainty regarding ownership of intellectual property rights arising from our collaborative activities, which could prevent us from entering into additional collaborations;
•
unwillingness to cooperate in the manufacture of the product, including providing us with product data or materials;
•
unwillingness to keep us informed regarding the progress of its development and commercialization activities or to permit public disclosure of the results of those activities;
•
initiation of litigation or alternative dispute resolution options by either party to resolve the dispute;
•
attempts by either party to terminate the collaboration;
•
our ability to maintain or defend our intellectual property rights may be compromised by our partner’s acts or omissions;
•
a third-party development partner may utilize our intellectual property rights in such a way as to invite litigation that could jeopardize or invalidate our intellectual property rights or expose us to potential liability;
•
a third-party development partner may change the focus of its development and commercialization efforts due to internal reorganizations, mergers, consolidations and otherwise;
•
unwillingness to fully fund or commit sufficient resources to the testing, marketing, distribution or development of our products;
•
unwillingness or ability to fulfill their obligations to us due to the pursuit of alternative products, conflicts of interest that arise or changes in business strategy or other business issues; and/or
•
we may not be able to guarantee supplies of development or marketed products.
Given these risks, it is possible that any collaborative arrangements which we have or may enter into may not be successful.

Our efforts to acquire or in-license and develop additional drug products may fail, which might limit our ability to grow our business.
To remain competitive and grow our business, our long-term strategy includes the acquisition or in-license of additional drug products. We are actively seeking to acquire, or in-license, additional commercial drug products as well as drug products that have demonstrated positive pre-clinical and/or clinical data. We have certain criteria that we are looking for in any drug product acquisition and in-license and we may not be successful in locating and acquiring, or in-licensing, additional desirable drug products on acceptable terms.
To accomplish our acquisition and in-license strategy, we intend to commit efforts, funds and other resources to research and development and business development. Even with acquired and in-licensed drug products, a high rate of failure is inherent in the development of such products. We must make ongoing substantial expenditures without any assurance that our efforts will be commercially successful. Failure can occur at any point in the process, including after significant funds have been invested. For example, promising new drug product candidates may fail to reach the market or may only have limited commercial success because of efficacy or safety concerns, failure to achieve positive clinical outcomes, inability to obtain necessary regulatory approvals, limited scope of approved uses, excessive costs to manufacture, the failure to establish or maintain intellectual property rights or infringement of the intellectual property rights of others.
In addition, many other large and small companies within the pharmaceutical and biotechnology industry seek to establish collaborative arrangements for product research and development, or otherwise acquire products in late-stage clinical

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development, in competition with us. We face additional competition from public and private research organizations, academic institutions and governmental agencies in establishing collaborative arrangements for drug products in late-stage clinical development. Many of the companies and institutions that compete against us have substantially greater capital resources, research and development staffs and facilities than we have, and greater experience in conducting business development activities. These entities represent significant competition to us as we seek to expand our portfolio through the in-license or acquisition of compounds. Finally, while it is not feasible to predict the actual cost of acquiring and developing additional drug products, that cost could be substantial and we may need to raise additional financing for such purpose, which may further dilute existing stockholders.
From time to time we may need to license patents, intellectual property and proprietary technologies from third parties, which may be difficult or expensive to obtain.
We may need to obtain licenses to patents and other proprietary rights held by third parties to successfully develop, manufacture and market our drug products. As an example, it may be necessary to use a third party’s proprietary technology to reformulate one of our drug products in order to improve upon the capabilities of the drug product. If we are unable to timely obtain these licenses on reasonable terms, our ability to commercially exploit our drug products may be inhibited or prevented.
The potential size of the market for our drug products is uncertain.
We often provide estimates of the number of people who suffer from the diseases that our drugs are targeting. However, there is limited information available regarding the actual size of these patient populations. In addition, it is uncertain whether the results from previous or future clinical trials of drug products will be observed in broader patient populations, and the number of patients who may benefit from our drug products may be significantly smaller than the estimated patient populations.
Generic levo-leucovorin product competition could further adversely affect our FUSILEV revenues.
FUSILEV continues to face direct competition from generic levo-leucovorin products as a result of the FDA ANDA approval and competitive product launches by two companies in 2015. As a result, this generic competition is expected to continue to adversely impact our FUSILEV product value including (i) sales, demand and market share, (ii) the price we are able to charge, (iii) the inventory levels that wholesalers maintain, and (iv) product return rates. Additional companies are expected to launch their generic levo-leucovorin products in the future, which could further adversely impact FUSILEV revenues.
On April 27, 2015, we filed suit in the U.S. District Court for the District of Columbia against the FDA seeking a temporary restraining order or preliminary injunction to suspend FDA approval of Sandoz’s ANDA. We have contended that Sandoz’s ANDA should not have been approved until the expiry of our Orphan Drug Exclusivity on April 29, 2018. On April 29, 2015, the court denied the temporary restraining order and on May 27, 2015, the court entered summary judgment in favor of the FDA et al. On June 5, 2015, we filed our Notice of Appeal. Oral argument was held on October 22, 2015. The ultimate outcome of this proceeding and its impact on the market for FUSILEV is uncertain.
Our percentage of revenue and customer concentration for FUSILEV is significant. The loss of, or significant reduction or cancellation in sales to, any one of these customers could adversely affect our results of operations.
There is no assurance that FUSILEV sales will be sustainable, even at their current reduced levels due to generic competition. Our customer concentration of FUSILEV is high. A summary of our customers that represent 10% or more of our gross FUSILEV sales in 2015 , 2014 , and 2013 is as follows:
 
Product Sales
 
2015
 
2014
 
2013
Oncology Supply, a division of ASD Specialty Healthcare, Inc., and its affiliates (excluding ICS)
28.3
%
 
36.2
%
 
32.0
%
McKesson Corporation and its affiliates
18.1
%
 
25.7
%
 
19.8
%
Cardinal Health, Inc. and its affiliates
11.4
%
 
*

 
*

* Less than 10%
We expect significant customer concentration to continue for the foreseeable future. The loss of any large customer, a significant reduction in sales we make to them, any cancellation of orders they have made with us or any failure to pay for the products we have shipped to them could materially and adversely affect our results of operations, as it would likely take time for those sales to transition to another customer.

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Changes in our effective income tax rate could adversely affect our profitability.
We are subject to federal and state income taxes in the U.S. and our tax liabilities are dependent upon the distribution of income among these different jurisdictions. Various factors may have favorable or unfavorable effects on our effective income tax rate. These factors include, but are not limited to:
 
•
interpretations of existing tax laws;
•
the accounting for stock options and other share-based compensation;
•
changes in tax laws and rates;
•
future levels of research and development spending;
•
changes in accounting standards;
•
changes in the mix of earnings in the various tax jurisdictions in which we operate;
•
the outcome of examinations by the Internal Revenue Service and other jurisdictions;
•
the accuracy of our estimates for unrecognized tax benefits;
•
realization of deferred tax assets; and
•
changes in overall levels of pre-tax earnings.
The impact on our income tax provision resulting from the above-mentioned factors may be significant and could have an impact on our profitability.
Earthquakes or other natural or man-made disasters and business interruptions could adversely affect our business.
Our operations are vulnerable to interruption by fire, power loss, floods, telecommunications failure and other events beyond our control. In addition, our operations are susceptible to disruption as a result of natural disasters such as earthquakes. So far we have never experienced any significant disruption of our operations as a result of earthquakes or other natural or man-made disasters. Although we have a contingency recovery plan, any significant business interruption could cause delays in our drug development and future sales and harm our business.
Risks Related to Our Industry
If we are unable to adequately protect our technology or enforce our patent rights, our business could suffer.
Our success with the drug products that we develop will depend, in part, on our ability and the ability of our licensors to obtain and maintain patent protection for these products. We currently have a number of U.S. and foreign patents issued and pending, however, we primarily rely on patent rights licensed from others. Our license agreements generally give us the right and/or obligation to maintain and enforce the subject patents. We may not receive patents for any of our pending patent applications or any patent applications we may file in the future. If our pending and future patent applications are not allowed or, if allowed and issued into patents, if such patents and the patents we have licensed are not upheld in a court of law, our ability to competitively exploit our drug products would be substantially harmed. Also, such patents may or may not provide competitive advantages for their respective products or they may be challenged or circumvented by our competitors, in which case our ability to commercially exploit these products may be diminished.
The patent positions of pharmaceutical and biotechnology companies can be highly uncertain and involve complex legal and factual questions. No consistent policy regarding the breadth of claims allowed in pharmaceutical and biotechnology patents has emerged to date in the U.S. The laws of many countries may not protect intellectual property rights to the same extent as U.S. laws, and those countries may lack adequate rules and procedures for defending our intellectual property rights. Filing, prosecuting and defending patents on all our products or product candidates throughout the world would be prohibitively expensive. Competitors may use our technologies in jurisdictions and may not be covered by any of our patent claims or other intellectual property rights.
Changes in either patent laws or in interpretations of patent laws in the U.S. and other countries may diminish the value of our intellectual property. We do not know whether any of our patent applications will result in the issuance of any patents, and we cannot predict the breadth of claims that may be allowed in our patent applications or in the patent applications we license from others.

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The degree of future protection for our proprietary rights is uncertain because legal means afford only limited protection and may not adequately protect our rights or permit us to gain or keep our competitive advantage. For example:
 
•
in certain jurisdictions, we or our licensors might not have been the first to make the inventions covered by each of our or our licensors’ pending patent applications and issued patents, and we may have to participate in expensive and protracted interference proceedings to determine priority of invention;
•
we or our licensors might not have been the first to file patent applications for these inventions;
•
others may independently develop similar or alternative product candidates or duplicate any of our or our licensors’ product candidates;
•
our or our licensors’ pending patent applications may not result in issued patents;
•
our or our licensors’ issued patents may not provide a basis for commercially viable products or may not provide us with any competitive advantages or may be challenged by third parties;
•
others may design around our or our licensors’ patent claims to produce competitive products that fall outside the scope of our or our licensors’ patents;
•
we may not develop or in-license additional patentable proprietary technologies related to our product candidates; or
•
the patents of others may prevent us from marketing one or more of our product candidates for one or more indications that may be valuable to our business strategy.
An issued patent does not guarantee us the right to practice the patented technology or 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 prevent competitors from marketing related product candidates or could limit the length of the term of patent protection of our product candidates. Our competitors may independently develop similar technologies. In addition, because of the extensive time required for development, testing and regulatory review of a potential product, it is possible that, before any of our product candidates 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 also rely on trade secret protection and contractual protections for our unpatented and proprietary drug compounds. Trade secrets are difficult to protect. While we enter into confidentiality agreements with our employees, consultants and others, these agreements may not successfully protect our trade secrets or other confidential and proprietary information. It is possible that these agreements will be breached, or that they will not be enforceable in every instance, and that we will not have adequate remedies for any such breach. Likewise, although we conduct periodic trade secret audits of certain partners, vendors and contract manufacturers, these trade secret audits may not protect our trade secrets or other confidential and proprietary information. It is possible that despite having certain trade secret audited security measures in place, trade secrets or other confidential and proprietary information may still be leaked or disclosed to a third party. It is also possible that our trade secrets will become known or independently developed by our competitors.
We also rely on trademarks to protect the names of our products. These trademarks may be challenged by others. If we enforce our trademarks against third parties, such enforcement proceedings may be expensive. Some of our trademarks, including ZEVALIN are owned by, or assignable to, our licensors and, upon expiration or termination of the applicable license agreements, we may no longer be able to use these trademarks. If we are unable to adequately protect our technology, trade secrets or proprietary know-how, or enforce our patents and trademarks, our business, financial condition and prospects could suffer.
Intellectual property rights are complex and uncertain and therefore may subject us to infringement claims.
The patent positions related to our drug products are inherently uncertain and involve complex legal and factual issues. We believe that there is significant litigation in the pharmaceutical and biotechnology industry regarding patent and other intellectual property rights. A patent does not provide the patent holder with freedom to operate in a way that infringes the patent rights of others. We may be accused of patent infringement at any time. The coverage of patents is subject to interpretation by the courts, and the interpretation is not always uniform. If we are sued for patent infringement, we would need to demonstrate that our products or methods do not infringe the patent claims of the relevant patent and/or that the patent claims are invalid or unenforceable, and we may not be able to do this. Proving invalidity, in particular, is difficult since it requires a showing of clear and convincing evidence to overcome the presumption of validity enjoyed by issued patents in the U.S.

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Although we are not aware of any infringement by any of our drug products on the rights of any third party, there may be third party patents or other intellectual property rights, including trademarks and copyrights, relevant to our drug products of which we are not aware. Third parties may assert patent or other intellectual property infringement claims against us, or our licensors and collaborators, with products. Any claims that might be brought against us relating to infringement of patents may cause us to incur significant expenses and, if successfully asserted against us, may cause us to pay substantial damages and result in the loss of our use of the intellectual property that is critical to our business strategy.
In the event that we or our partners are found to infringe any valid claim of a patent held by a third party, we may, among other things, be required to:
 
•
pay damages, including up to treble damages and the other party’s attorneys’ fees, which may be substantial;
•
cease the development, manufacture, use and sale of our products that infringe the patent rights of others through a court-imposed sanction such as an injunction;
•
expend significant resources to redesign our products so they do not infringe others’ patent rights, which may not be possible;
•
discontinue manufacturing or other processes incorporating infringing technology; or
•
obtain licenses to the infringed intellectual property, which may not be available to us on acceptable terms, or at all.
Rapid bio-technological advancement may render our drug products obsolete before we are able to recover expenses incurred in connection with their development. As a result, some of our drug products may never become profitable.
The pharmaceutical industry is characterized by rapidly evolving biotechnology. Biotechnologies under development by other pharmaceutical companies could result in treatments for diseases and disorders for which we are developing our own treatments. Several other companies are engaged in research and development of compounds that are similar to our research. A competitor could develop a new biotechnology, product or therapy that has better efficacy, a more favorable side-effect profile or is more cost-effective than one or more of our drug products and thereby cause our drug products to become commercially obsolete. Some of our drug products may become obsolete before we recover the expenses incurred in their development. As a result, such products may never become profitable.
Failure to obtain regulatory approval outside the U.S. will prevent us from marketing our product candidates abroad.
We intend to market certain of our existing and future product candidates in outside of the U.S. In order to market our existing and future product candidates in the EU and many other foreign jurisdictions, we must obtain separate regulatory approvals according to the applicable domestic laws and regulations. We have had limited interactions with foreign regulatory authorities, and the approval procedures vary among countries and can involve additional testing, and the time required to obtain approval may differ from that required to obtain FDA approval. Approval by the FDA does not guarantee approval by regulatory authorities in other countries, and approval by one or more foreign regulatory authorities does not necessarily ensure approval by regulatory authorities in other countries or by the FDA.

A failure or delay in obtaining regulatory approval in one country may have a negative effect on the regulatory approval process in others. The foreign regulatory approval process may include all of the risks associated with obtaining FDA approval as well as other risks specific to the jurisdictions in which we may seek approval. We may not obtain foreign regulatory approvals on a timely basis, if at all. We may not be able to file for foreign regulatory approvals and may not receive necessary approvals to commercialize our existing and future product candidates in any market.
Competition for patients in conducting clinical trials may prevent or delay product development and strain our limited financial resources.
Many pharmaceutical companies are conducting clinical trials involving patients with the disease indications that our drug products target. As a result, we must compete with them for clinical sites, physicians and the limited number of patients who fulfill the stringent requirements for participation in clinical trials. Also, due to the confidential nature of clinical trials, we do not know how many of the eligible patients may be enrolled in competing studies and who are consequently not available to us for our clinical trials. Our clinical trials may be delayed or terminated due to the inability to enroll enough patients. Patient enrollment depends on many factors, including the size of the patient population, the nature of the trial protocol, the proximity of patients to clinical sites and the eligibility criteria for the study. The delay or inability to meet planned patient enrollment

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may result in increased costs and delays or termination of the trial, which could have a harmful effect on our ability to develop products.
Even after we receive regulatory approval to market our drug products, the market may not be receptive to our drug products upon their commercial introduction, which would negatively impact our ability to achieve profitability.
Our drug products may not gain market acceptance among physicians, patients, healthcare payers and the medical community. The degree of market acceptance of any approved drug products will depend on a number of factors, including:
 
•
the effectiveness of the drug product;
•
the prevalence and severity of any side effects;
•
potential advantages or disadvantages over alternative treatments;
•
relative convenience and ease of administration;
•
the strength of marketing and distribution support;
•
the price of the drug product, both in absolute terms and relative to alternative treatments; and
•
sufficient third-party coverage and reimbursement.
If our drug products receive regulatory approval but do not achieve an adequate level of acceptance by physicians, healthcare payers and patients, we may not generate drug product revenues sufficient to attain profitability.
Guidelines and recommendations published by various organizations can reduce the use of our products.
Government agencies, such as the CMS, promulgate regulations, and issue guidelines, directly applicable to us and to our products. In addition, third parties such as professional societies, practice management groups, insurance carriers, physicians, private health/science foundations and organizations involved in various diseases from time to time may publish guidelines or recommendations to healthcare providers, administrators and payers, and patient communities. Recommendations may relate to such matters as utilization, dosage, route of administration and use of related therapies and coverage and reimbursement of our products by government and private payers. Third-party organizations like the above have in the past made recommendations about our products. Recommendations or guidelines that are followed by patients and healthcare providers could result in decreased utilization and/or dosage of our products, any of which could adversely affect our product sales and operating results materially.
The sale of our products is subject to regulatory approvals, and our business is subject to extensive regulatory requirements, and if we are unable to obtain regulatory approval for our product candidates, or if we fail to comply with governmental regulations we will be limited in our ability to commercialize our products and product candidates and/or subject us to penalties.
We are not permitted to market or promote any of our product candidates before we receive regulatory approval from the FDA or comparable foreign regulatory authorities, and we may never receive such regulatory approval for any of our product candidates. Obtaining regulatory approval of a new drug is an uncertain, lengthy and expensive process, and success is never guaranteed. Despite the time, resources and effort expended, failure can occur at any stage. In order to receive approval from the FDA for each product candidate, we must demonstrate that the new drug product is safe and effective for its intended use and that the manufacturing processes for the product candidate comply with the FDA’s cGMPs. cGMPs include requirements related to production processes, quality control and assurance, and recordkeeping. The FDA has substantial discretion in the approval process for human medicines.

The FDA and comparable agencies in foreign countries impose many requirements related to the drug development process through lengthy and rigorous clinical testing and data collection procedures, and other costly and time consuming compliance procedures. While we believe that we are currently in compliance with applicable FDA regulations, if our partners, the contract research organizations or contract manufacturers with which we have relationships, or we fail to comply with the regulations applicable to our clinical testing, the FDA may delay, suspend or cancel our clinical trials, or the FDA might not accept the test results. The FDA, an institutional review board, third party investigators, any comparable regulatory agency in another country, or we, may suspend clinical trials at any time if the trials expose subjects participating in such trials to unacceptable health risks. Further, human clinical testing may not show any current or future drug product to be safe and effective to the satisfaction of the FDA or comparable regulatory agencies, or the data derived from the clinical tests may be unsuitable for submission to the FDA or other regulatory agencies. Once we submit an application seeking approval to market a

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drug product, the FDA or other regulatory agencies may not issue their approvals on a timely basis, if at all. If we are delayed or fail to obtain these approvals, our business and prospects may be significantly damaged. In addition, any regulatory approvals that we receive for our future product candidates may also be subject to limitations on the indicated uses for which they may be marketed or contain requirements for potentially costly post-marketing follow-up studies and surveillance to monitor the safety and efficacy of the product.
If we obtain regulatory approval for our drug products, we, our partners, our manufacturers, and other contract entities will continue to be subject to extensive requirements by a number of national, foreign, state and local agencies. These regulations will impact many aspects of our operations, including testing, research and development, manufacturing, safety, effectiveness, labeling, storage, quality control, adverse event reporting, record keeping, approval, advertising and promotion of our future products. FDA and foreign regulatory authorities strictly regulate the promotional claims that may be made about prescription products and our product labeling, advertising and promotion is subject to continuing regulatory review. Physicians may nevertheless prescribe our product to their patients in a manner that is inconsistent with the approved label, or that is off-label. The FDA and other regulatory agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses, and if we are found to have improperly promoted off-label uses we may be subject to significant sanctions, civil and criminal fines and injunctions prohibiting us from engaging in specified promotional conduct. Moreover, our failure to comply with any applicable regulatory requirements could, among other things, result in:
 
•
warning letters;
•
fines;
•
changes in advertising;
•
revocation or suspension of regulatory approvals of products;
•
product recalls or seizures;
•
delays, interruption, or suspension of product distribution, marketing and sales;
•
civil or criminal sanctions;
•
suspension or termination of ongoing clinical trials;
•
imposition of restrictions on our operations;
•
close the facilities of our contract manufacturers; and
•
refusals to approve new products.
The discovery of previously unknown safety risks with drug products approved to go to market may raise costs or prevent us from marketing such products or change the labeling of our products or take other potentially limiting or costly actions if we or others identify safety risks after our products are on the market.
The later discovery of previously unknown safety risks with our products may result in the imposition of restrictions on distribution or use of the drug product, including withdrawal from the market. The FDA may revisit and change its prior determinations with regard to the safety and efficacy of our products. If the FDA’s position changes, we may be required to change our labeling or to cease manufacture and marketing of the products at issue. Even prior to any formal regulatory action, we could voluntarily decide to cease the distribution and sale or recall any of our products if concerns about their safety or effectiveness develop.

The FDA has significant authority to take regulatory actions in the event previously unknown safety risks are identified or if data suggest that our products may present a risk to safety. For example, the FDA may:
 
•
require sponsors of marketed products to conduct post-approval clinical studies to assess a known serious risk, signals of serious risk or to identify an unexpected serious risk;
•
mandate labeling changes to products, at any point in a product’s lifecycle, based on new safety information; and
•
require sponsors to implement a REMS for a product which could include a medication guide, patient package insert, a communication plan to healthcare providers, or other elements as the FDA deems are necessary to assure safe use of the drug (either prior to approval or post-approval as necessary).

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Failure to comply with a REMS could result in significant civil monetary penalties or other administrative actions by the FDA. Further, regulatory agencies could change existing, or promulgate new, regulations at any time which may affect our ability to obtain or maintain approval of our existing or future products or require significant additional costs to obtain or maintain such approvals.
Legislative or regulatory reform of the healthcare system and pharmaceutical industry related to pricing, coverage or reimbursement may hurt our ability to sell our products profitably or at all.
Our ability to commercialize any products successfully will depend in part on the availability of coverage and reimbursement from third-party payers such as government authorities, private health insurers, health maintenance organizations including pharmacy benefit managers and other health care-related organizations, both in the U.S. and foreign markets. Even if we succeed in bringing one or more products to the market, the amount reimbursed for our products may be insufficient to allow us to compete effectively and could adversely affect our profitability. Coverage and reimbursement by governmental and other third-party payers may depend upon a number of factors, including a governmental or other 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 third-party and governmental 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 obtain coverage and adequate reimbursement.
In both the U.S. and certain foreign jurisdictions, there have been and may continue to be a number of legislative and regulatory proposals related to coverage and reimbursement that could impact our ability to sell our products profitably. The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, collectively referred to as the Healthcare Reform Law, was signed into law on March 30, 2010. The Healthcare Reform Law substantially changed the way healthcare is financed by both governmental and private insurers and significantly impacted the pharmaceutical industry. The Healthcare Reform Law included, among other things, an annual, nondeductible fee on any entity that manufactures or imports specified branded prescription drugs and biologic agents, revisions to the definition of “average manufacturer price” for reporting purposes, increases in the amount of rebates owed by drug manufacturers under the Medicaid Drug Rebate Program, expansion of the 340B drug discount program that mandates discounts to certain hospitals, community centers and other qualifying providers, and changes to affect the Medicare Part D coverage gap, or “donut hole.” The full effects of these provisions will become apparent as these laws are implemented and the CMS and other agencies issue applicable regulations or guidance as required by the Healthcare Reform Law. Moreover, in the coming years, additional changes could be made to governmental healthcare programs that could significantly impact the success of our products.

The high cost of pharmaceuticals continues to generate substantial government interest. It is possible that proposals will be adopted, or existing regulations that affect the coverage and reimbursement of pharmaceutical and other medical products may change, that may impact our products currently on the market and any of our products approved for marketing in the future. Cost control initiatives could decrease the price that we receive for any of our products or product candidates. In addition, third-party payers are increasingly challenging the price and cost-effectiveness of medical products and services. Significant uncertainty exists as to the coverage and reimbursement status of newly-approved pharmaceutical products. Future developments may require us to decrease the price that we charge for our products, thereby negatively affecting our financial results.

In some foreign countries, particularly in the EU, prescription drug pricing is subject to governmental control. Drug pricing may be made against a reference price set by the healthcare providers as a measure for healthcare cost containment. Pricing negotiations with governmental authorities can take considerable time after the receipt of marketing approval for a product. If coverage and reimbursement of our products are unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels for the purpose of adoption of these products in the national health services in these jurisdictions, our profitability will likely be negatively affected.

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If we market products in a manner that violates health care fraud and abuse laws, we may be subject to civil or criminal penalties, including exclusion from participation in government health care programs.
As a pharmaceutical company, even though we do not provide healthcare services or receive payments directly from or bill directly to Medicare, Medicaid or other third-party payers for our products, certain federal and state healthcare laws and regulations pertaining to fraud and abuse are and will be applicable to our business. We are subject to healthcare fraud and abuse laws by both the federal government and the states in which we conduct our business.
The laws that may affect our ability to operate include the federal health care program Anti-Kickback Statute, which prohibits, among other things, knowingly and willfully offering, paying, soliciting, or receiving remuneration to induce or in return for purchasing, leasing, ordering, or arranging for the purchase, lease or order of any health care item or service reimbursable under Medicare, Medicaid or other federally financed health care programs. This statute applies to arrangements between pharmaceutical manufacturers and prescribers, purchasers and formulary managers. Although there are a number of statutory exceptions and regulatory safe harbors protecting certain common activities, the exceptions and safe harbors are drawn narrowly, and practices that involve remuneration intended to induce prescribing, purchases or recommendations may be subject to scrutiny if they do not qualify for an exception or safe harbor.
Federal false claims laws prohibit any person from knowingly presenting, or causing to be presented, a false claim for payment to the federal government, or knowingly making, or causing to be made, a false statement to get a false claim paid. Pharmaceutical companies have been prosecuted under these laws for a variety of alleged promotional and marketing activities, such as providing free product to customers with the expectation that the customers would bill federal programs for the product; reporting to pricing services inflated average wholesale prices that were then used by federal programs to set reimbursement rates; engaging in off-label promotion that caused claims to be submitted to Medicaid for non-covered off-label uses; and submitting inflated best price information to the Medicaid Drug Rebate Program.
The Health Insurance Portability and Accountability Act of 1996 also created prohibitions against health care fraud and false statements relating to health care matters. The health care fraud statute prohibits knowingly and willfully executing a scheme to defraud any health care benefit program, including private payers. The false statements statute prohibits knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for health care benefits, items or services.
In addition, there has been a recent trend of increased federal and state regulation of payments made to physicians. The Healthcare Reform Law imposed new requirements on manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program (with certain exceptions) to report annually to CMS information related to payments or other “transfers of value” made to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors) and teaching hospitals, and applicable manufacturers and group purchasing organizations to report annually to CMS ownership and investment interests held by physicians (as defined above) and their immediate family members and payments or other “transfers of value” to such physician owners and their immediate family members. Manufacturers were required to begin data collection on August 1, 2013 and to report such data to the government by March 31, 2014 and by the 90th calendar day of each year thereafter.

The majority of states also have statutes or regulations similar to these federal laws, which apply to items and services reimbursed under Medicaid and other state programs, or, in several states, apply regardless of the payer. In addition, some states have laws that require pharmaceutical companies to adopt comprehensive compliance programs. For example, under California law, pharmaceutical companies must comply with both the April 2003 Office of Inspector General Compliance Program Guidance for Pharmaceutical Manufacturers and the PhRMA Code on Interactions with Healthcare Professionals, as amended. Certain states also mandate the tracking and reporting of gifts, compensation, and other remuneration paid by us to physicians and other health care providers. We have adopted and implemented a compliance program designed to comply with applicable federal, state and local requirements wherever we operate, including but not limited to the laws of the states of California and Nevada.

Although compliance programs can mitigate the risk of investigation and prosecution for violations of these laws, the risks cannot be entirely eliminated. Any action against us for violation of these laws, even if we successfully defend against it, could cause us to incur significant legal expenses and divert our management’s attention from the operation of our business. Moreover, achieving and sustaining compliance with applicable federal and state laws may prove costly.
Because of the breadth of these laws and the narrowness of the safe harbors, it is possible that some of our business activities could be subject to challenge under one or more of such laws. The Healthcare Reform Law also make several important changes to the federal Anti-Kickback Statute, false claims laws, and health care fraud statute by weakening the intent

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requirement under the anti-kickback and health care fraud statutes that may make it easier for the government, or whistleblowers to charge such fraud and abuse violations. A person or entity no longer needs to have actual knowledge of this statute or specific intent to violate it. In addition, the Health Care Reform Law provides that the government may assert that a claim including items or services resulting from a violation of the federal anti-kickback statute constitutes a false or fraudulent claim for purposes of the false claims statutes. In addition, the Healthcare Reform Law increases penalties for fraud and abuse violations. If our past, present or future operations are found to be in violation of any of the laws described above or other similar governmental regulations to which we are subject, we may be subject to significant civil, criminal and administrative penalties, damages, fines, imprisonment, exclusion from government funded healthcare programs, such as Medicare and Medicaid, and the curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business and negatively impact our financial results.
We may be subject to product liability claims, and may not have sufficient product liability insurance to cover any such claims, which may expose us to substantial liabilities.
We may be held liable if any product we or our partners develop causes injury or is found otherwise unsuitable during product testing, manufacturing, clinical trials, marketing or sale. Regardless of merit or eventual outcome, product liability claims could result in decreased demand for our product candidates, injury to our reputation, withdrawal of patients from our clinical trials, substantial monetary awards to trial participants and the inability to commercialize any products that we may develop. These claims might be made directly by consumers, health care providers, pharmaceutical companies or others selling or testing our products. Although we currently carry product liability insurance in the amount of at least $15 million in the aggregate, it is possible that this coverage will be insufficient to protect us from future claims. Additionally, our insurance may not reimburse us or may not be sufficient to reimburse us for expenses or losses we may suffer. Moreover, if insurance coverage becomes more expensive, we may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against losses due to liability. Failure to maintain sufficient insurance coverage could have a material adverse effect on our business, prospects and results of operations if claims are made that exceed our coverage.
On occasion, juries have awarded large judgments in class action lawsuits for claims based on drugs that had unanticipated side effects. In addition, the pharmaceutical and biotechnology industries, in general, have been subject to significant medical malpractice litigation. A successful product liability claim or series of claims brought against us could harm our reputation and business and financial condition.
We could be adversely affected by violations of the U.S. Foreign Corrupt Practices Act (“FCPA”) and other worldwide anti-bribery laws.
We are subject to the FCPA which prohibits companies and their intermediaries from making payments to non-U.S. government officials for purposes of obtaining or retaining business or securing any other improper advantage. We have policies and procedures in place to ensure that we comply with the FCPA and similar laws; however, there is no assurance that such policies and procedures will protect us against liability under the FCPA or related laws for actions taken by our employees and intermediaries with respect to our business. Failure to comply with the FCPA and related laws could disrupt our business and lead to criminal and civil penalties including fines, suspension of our ability to do business with the federal government and denial of government reimbursement of our products, which could result in a material adverse impact on our business, financial condition, results of operations and cash flows. We could also be adversely affected by any allegation that we violated such laws.
The use of hazardous materials, including radioactive and biological materials, in our research and development and commercial efforts imposes certain compliance costs on us and may subject us to liability for claims arising from the use or misuse of these materials.
Our research and development, manufacturing (including a radiolabeling step for ZEVALIN) and administration of our drugs involves the controlled use of hazardous materials, including chemicals, radioactive and biological materials, such as radioactive isotopes. We are subject to federal, state, local and foreign environmental laws and regulations governing, among other matters, the handling, storage, use and disposal of these materials and some waste products. We cannot completely eliminate the risk of contamination or injury from these materials and we could be held liable for any damages that result, which could exceed our financial resources. We currently maintain insurance coverage for injuries resulting from the hazardous materials we use; however, future claims may exceed the amount of our coverage. Also, we do not have insurance coverage for pollution cleanup and removal. Currently the costs of complying with such federal, state, local and foreign environmental regulations are not significant, and consist primarily of waste disposal expenses. However, they could become expensive, and current or future environmental laws or regulations may impair our research, development, production and commercialization efforts.

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Risks Related to Our Common Stock
There are a substantial number of shares of our common stock eligible for future sale in the public market. The sale of these shares could cause the market price of our common stock to fall. Any future equity issuances by us may have dilutive and other effects on our existing stockholders.
As of December 31, 2015 , there were approximately 68 million shares of our common stock outstanding. Security holders held outstanding options, restricted stock units, warrants, preferred stock and convertible notes which, if vested, exercised or converted, would obligate us to issue up to approximately 26 million additional shares of common stock. A substantial number of those shares, when we issue them upon vesting, conversion or exercise, will be available for immediate resale in the public market. In addition, we have reserved an aggregate of 13 million shares of our common stock for future issuance under our equity compensation plans. We may also sell additional shares of common stock or securities convertible or exercisable into common stock in public or private offerings, which would be available for resale in the market. Certain issuances by us of equity securities may be at or below the prevailing market price of our common stock and may have a dilutive impact on our existing stockholders. These issuances or other dilutive issuances would also cause our net income, if any, per share to decrease in future periods. The market price of our common stock could fall as a result of sales of any of these shares of common stock due to the increased number of shares available for sale in the market.
The convertible note hedge and warrant transactions that we entered into in December 2013 may affect the value of our common stock.
In connection with the pricing of our convertible notes in December 2013, we entered into convertible note hedge transactions and separate warrant transactions with RBC Capital Markets, LLC (“RBC”). The convertible note hedge transactions are expected generally to reduce the potential dilution upon any conversion of the notes and/or offset any cash payments we are required to make in excess of the principal amount of converted notes, as the case may be. The warrant transactions could separately have a dilutive effect to the extent that the market price per share of our common stock exceeds the strike price of the warrants. RBC and/or its affiliates may modify their hedge positions by entering into or unwinding various derivatives with respect to our common stock and/or purchasing or selling our common stock in secondary market transactions prior to the maturity of the convertible notes (and is likely to do so during any observation period related to a conversion of notes). This activity could cause or avoid an increase or a decrease in the market price of our common stock.
In addition, if the convertible note hedge and warrant transactions fail to become effective, through the failure of counterparties to perform or otherwise, RBC and/or its affiliates may unwind its hedge positions with respect to our common stock, which could adversely affect the value of our common stock. The potential effect, if any, of these transactions and activities on the market price of our common stock will depend in part on market conditions and cannot be ascertained at this time. Any of these activities could adversely affect the value of our common stock.
The market price and trading volume of our common stock fluctuate significantly and could result in substantial losses for individual investors.
The stock market from time to time experiences significant price and trading volume fluctuations that are unrelated to the operating performance of particular companies. These broad market fluctuations may cause the market price and trading volume of our common stock to decrease. In addition, the market price and trading volume of our common stock is often highly volatile.
Factors that may cause the market price and volume of our common stock to decrease include:
 
•
recognition on up-front licensing or other fees or revenues;
•
payments of non-refundable up-front or license fees, or payment for cost-sharing expenses, to third parties;
•
adverse results or delays in our clinical trials;
•
fluctuations in our results of operations;
•
timing and announcements of our technological innovations or new products or those of our competitors;
•
developments concerning any strategic alliances or acquisitions we may enter into;

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•
announcements of FDA non-approval of our drug products, or delays in the FDA or other foreign regulatory review process or actions;
•
changes in recommendations or guidelines of government agencies or other third parties regarding the use of our drug products;
•
adverse actions taken by regulatory agencies with respect to our drug products, clinical trials, manufacturing processes or sales and marketing activities;
•
concerns about our products being reimbursed;
•
any lawsuit involving us or our drug products;
•
developments with respect to our patents and proprietary rights;
•
public concern as to the safety of products developed by us or others;
•
regulatory developments in the U.S. and in foreign countries;
•
changes in stock market analyst recommendations regarding our common stock or lack of analyst coverage;
•
the pharmaceutical industry generally and general market conditions;
•
failure of our results of operations to meet the expectations of stock market analysts and investors;
•
sales of our common stock by our executive officers, directors and five percent stockholders or sales of substantial amounts of our common stock;
•
hedging or arbitrage transactions by holders of our convertible notes;
•
changes in accounting principles; and
•
loss of any of our key scientific or management personnel.
Also, certain dilutive securities such as warrants can be used as hedging tools which may increase volatility in our stock and cause a price decline. While a decrease in market price could result in direct economic loss for an individual investor, low trading volume could limit an individual investor’s ability to sell our common stock, which could result in substantial economic loss as well. From January 2, 2015 through February 29, 2016 , the closing price of our common stock ranged between $4.28 and $7.66, and the daily trading volume was as high as 8.2 million shares and as low as 0.2 million shares.
Following periods of volatility in the market price of a company’s securities, a securities class action litigation may be instituted against that company. Regardless of their merit, these types of lawsuits generally result in substantial legal fees and management’s attention and resources being diverted from the operations of a business.
Provisions of our charter, bylaws and stockholder rights plan may make it more difficult for someone to acquire control of us or replace current management even if doing so would benefit our stockholders, which may lower the price an acquirer or investor would pay for our stock.
Provisions of our certificate of incorporation and bylaws, both as amended, may make it more difficult for someone to acquire control of us or replace our current management. These provisions include:
 
•
the ability of our board of directors to amend our bylaws without stockholder approval;
•
the inability of stockholders to call special meetings;
•
the ability of members of the board of directors to fill vacancies on the board of directors;
•
the inability of stockholders to act by written consent, unless such consent is unanimous; and
•
the establishment of advance notice requirements for nomination for election to our board of directors or for proposing matters that can be acted on by stockholders at stockholder meetings.
These provisions may make it more difficult for stockholders to take certain corporate actions and could delay, discourage or prevent someone from acquiring our business or replacing our current management, even if doing so would benefit our stockholders. These provisions could limit the price that certain investors might be willing to pay for shares of our common stock.

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We have a stockholder rights plan pursuant to which we distributed rights to purchase units of our Series B junior participating preferred stock. The rights become exercisable upon the earlier of ten days after a person or group of affiliated or associated persons has acquired 15% or more of the outstanding shares of our common stock or ten business days after a tender offer has commenced that would result in a person or group beneficially owning 15% or more of our outstanding common stock. These rights could delay or discourage someone from acquiring our business, even if doing so would benefit our stockholders. We currently have no stockholders who own 15% or more of the outstanding shares of our common stock.
Our failure to establish and maintain effective internal control over financial reporting could result in material misstatements in our financial statements, our failure to meet our reporting obligations and cause investors to lose confidence in our reported financial information, which in turn could cause the trading price of our common stock to decline.
Maintaining effective internal control over financial reporting is necessary for us to produce reliable financial statements. In connection with our assessment of the effectiveness of internal control over financial reporting and the preparation of our financial statements for the year ended December 31, 2013, we identified a material weakness related to ineffective design and operation of controls over our process of estimating the required period-end accruals for operating expenses, which resulted in net overstated operating expenses and accrued liabilities in multiple reporting periods in, and prior to, 2013. We have remediated this material weakness as of December 31, 2014.

Material weaknesses have adversely affected us in the past and could affect us in the future, and the results of our periodic management evaluations and annual auditor attestation reports regarding the effectiveness of our internal control over financial reporting required by Section 404 of the Sarbanes-Oxley Act of 2002. Any failure to maintain new and more precise monitoring controls and improved detection and communication of financial misstatements across all levels of the organization could result in (i) additional material weaknesses, (ii) material misstatements in our financial statements, requiring restatements of our previously-filed financial statements, and (iii) cause us to fail to meet our timely reporting obligations. These outcomes could cause us to lose public confidence, and could cause the trading price of our common stock to decline. For further information regarding our controls and procedures, see Item 9A , Controls and Procedures to this Annual Report on Form 10-K.
 
ITEM 1B. UNRESOLVED STAFF COMMENTS

None.
 
ITEM 2. PROPERTIES

We lease our principal executive office in Henderson, Nevada under a non-cancelable operating lease expiring April 30, 2019. We also lease our research and development facility in Irvine, California under a non-cancelable operating lease expiring May 31, 2019. In addition, we lease administrative space in Westlake Village, California; Westminster, Colorado; and Mumbai, India. We believe that these leased facilities are adequate to meet our current and planned business needs.
 
ITEM 3. LEGAL PROCEEDINGS
We are involved from time-to-time with various legal matters arising in the ordinary course of business. These claims and legal proceedings are of a nature we believe are normal and incidental to a pharmaceutical business, and may include product liability, intellectual property, employment matters, and other general claims.

We make provisions for liabilities when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Such provisions are assessed at least quarterly and adjusted to reflect the impact of any settlement negotiations, judicial and administrative rulings, advice of legal counsel, and other information and events pertaining to a particular case. Litigation is inherently unpredictable. Although the ultimate resolution of these various matters cannot be determined at this time, we do not believe that such matters, individually or in the aggregate, will have a material adverse effect on our consolidated results of operations, cash flows, or financial condition.

We are presently responding to ANDAs filed by companies seeking to market generic forms of FOLOTYN and FUSILEV. We are also responding to certain stockholder suits that purportedly stem from our March 12, 2013 press release, in which we announced anticipated changes in customer ordering patterns of FUSILEV. These stockholder complaints allege among other things that, as a result of this press release, our stock price declined.

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FUSILEV ANDA Litigation
On January 20, 2012, March 2, 2012, June 18, 2014, January 23, 2015, July 17, 2015 and September 3, 2015 respectively, we filed suit against Sandoz Inc., Innopharma Inc., Ben Venue Laboratories, Inc., Amneal Pharmaceuticals, Inc., and Actavis LLC. respectively, following Paragraph IV certifications in connection with their filing separate ANDAs, to manufacture a generic version of FUSILEV. We filed the lawsuits in the U.S. District Court for the Districts of Nevada and Delaware seeking to enjoin the approval of their ANDAs plus recovery of our litigation fees and costs incurred in such matters. On December 9, 2013, three Mylan entities collaborating with Innopharma were joined to the Innopharma case. On November 24, 2014 the complaint in the Ben Venue case was amended to substitute the original defendant Ben Venue Laboratories, Inc. with successors West-Ward Pharmaceutical Corp. and Eurohealth International SARL.

A trial took place in the Sandoz case from January 12, 2015 through January 20, 2015 in the U.S. District Court for the District of Nevada and on February 20, 2015 the district court found certain of the asserted claims of the patent covering FUSILEV invalid. On February 27, 2015, we filed our Notice of Appeal. On August 4, 2015, the Delaware district court ordered that judgment be entered for Innopharma and Mylan due to the Nevada district court judgment in the Sandoz
action. On October 2, 2015, the U.S. Court of Appeals for the Federal Circuit affirmed the previously reported judgment from the U.S. District Court for the District of Nevada in favor of Sandoz.

On April 27, 2015, we filed suit in the U.S. District Court for the District of Columbia against the FDA seeking a temporary restraining order or preliminary injunction to suspend FDA approval of Sandoz’s ANDA. The Company contends that Sandoz’s ANDA should not have been approved until the expiry of our Orphan Drug Exclusivity on April 29, 2018. On April 29, 2015, the court denied the temporary restraining order and on May 27, 2015, the court entered summary judgment in favor of the FDA et al. On June 5, 2015, we filed our Notice of Appeal. Oral argument was held October 22, 2015. The ultimate
outcome of this proceeding is uncertain.
FOLOTYN ANDA Litigation

On June 19, 2014, we filed a lawsuit against five parties resulting from Paragraph IV certifications in connection with four separate ANDAs to manufacture a generic version of FOLOTYN: (1)Teva Pharmaceuticals USA, Inc., (2) Sandoz Inc., (3) Fresenius Kabi USA, LLC, (4) Dr. Reddy’s Laboratories, Ltd., and (5) Dr. Reddy’s Laboratories, Inc. We filed the lawsuit in the U.S. District Court for the District of Delaware seeking to enjoin the approval of their ANDAs plus recovery of our litigation fees and costs. The litigation is stayed with respect to the Dr. Reddy's entities pending resolution of the case against the other FOLOTYN ANDA filers. A trial date of September 12, 2016 has been set in the FOLOTYN lawsuit in the U.S. District Court for the District of Delaware. While we believe our patent rights are strong, the ultimate outcome of such action is uncertain.

Stockholder Litigation

John Perry v. Spectrum Pharmaceuticals, Inc. et al. (Filed March 14, 2013 in United States District Court, District of Nevada; Case Number 2:2013-cv-00433-LDG-CWH). This putative consolidated class action raises substantially identical claims and allegations against defendants Spectrum Pharmaceuticals, Inc., Dr. Rajesh C. Shrotriya, Brett L. Scott, and Joseph Kenneth Keller. The alleged class period is August 8, 2012 to March 12, 2013. The lawsuits allege a violation
Section 10(b) of the Securities Exchange Act of 1934 against all defendants and control person liability, as a violation of Section 20(b) of the Securities Exchange Act of 1934, against the individual defendants. The claims purportedly stem from the our March 12, 2013 press release, in which it announced that it anticipated a change in ordering patterns of FUSILEV. The complaints allege that, as a result of the March 12, 2013 press release, our stock price declined. The complaints further allege that during the putative class period certain defendants made misleadingly optimistic statements about FUSILEV sales, which inflated the trading price of our stock. The lawsuits seek relief in the form of monetary damages, costs and fees, and any other equitable or injunctive relief that the court deems appropriate. On March 21, 2014, the Court entered an order appointing Arkansas Teacher Retirement System as lead plaintiff. On May 20, 2014, Arkansas Teacher Retirement System filed a consolidated amended class action complaint. On July 18, 2014, we filed a motion to dismiss the consolidated amended class action complaint. On March 26, 2015, the court denied the motion to dismiss. On June 15, 2015, the Court ordered a stay of the
proceedings pending the outcome of mediation between the parties. On October 27, 2015, we reached a $7 million settlement in principle with the lead plaintiff (which involved our insurance carrier, as the reimbursing party in full), subject to preliminary and final court approval. We have included this settlement amount, along with $0.1 million of reimbursable legal expenses for this matter, on our accompanying Consolidated Balance Sheets as of December 31, 2015 within "other receivables" and "accounts payable and other accrued liabilities." On January 26, 2016, the Court preliminarily approved the settlement.  The Court has scheduled a hearing on final approval of the settlement for June 13, 2016.

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Timothy Fik v. Rajesh C. Shrotriya, et al. (Filed April 11, 2013 in United States District Court, District of Nevada; Case Number 2:2013-cv-00624-JCM-CWH); Christopher J. Watkins v. Rajesh C. Shrotriya, et al. (Filed April 22, 2013 in United States District Court, District of Nevada; Case Number 2:2013-cv-00684-JCM-VCF); and Stefan Muenchhagen v. Rajesh C. Shrotriya, et al. (Filed May 28, 2013; Case Number 2:2013-cv-00942-APG-PAL). These derivative complaints are brought by the respective purported stockholders on behalf of nominal plaintiff Spectrum against certain current and former directors and officers. The complaints generally allege breaches of fiduciary based on conduct relating to the events alleged in the consolidated Perry action. The complaints seek compensatory damages, corporate g overnance reforms, restitution and disgorgement of defendants’ alleged profits, and costs and fees. These actions are stayed pending resolution of the federal securities class action. Settlement discussions are ongoing, and accordingly, no agreement has yet been reached to resolve these derivative complaints. If a settlement were reached, we believe it would be reimbursable by our insurance carrier. However, the value of a potential settlement cannot be reasonably estimated given its highly uncertain nature.
Hardik Kakadia v. Rajesh C. Shrotriya, et al. (Filed April 23, 2013 in the Eighth Judicial District Court of the State of Nevada in and for Clark County; Case Number A-13-680643-B); and Joel Besner v. Rajesh C. Shrotriya, et al. (Filed May 31, 2013; Case Number A-13-682668-C) (collectively the “State Derivative Actions”). These consolidated State Derivative Actions are brought by the respective purported stockholders on behalf of nominal plaintiff Spectrum Pharmaceuticals, Inc. and are substantially similar to the consolidated federal derivative actions. These actions are stayed pending resolution of the federal securities class action. Settlement discussions are ongoing, and accordingly, no agreement has yet been reached to resolve these derivative complaints. If a settlement were reached, it would be reimbursable by our insurance carrier. However, the value of a potential settlement cannot be reasonably estimated given its highly uncertain nature.
Ira Gains v. Spectrum Pharmaceuticals, Inc. and Rajesh C. Shrotriya was filed in the United States District Court, District of Nevada on November 3, 2015. This putative class action was brought against defendants Spectrum Pharmaceuticals, Inc., and Dr. Rajesh C. Shrotriya.  The alleged class period was May 7, 2015 to October 23, 2015.  The complaint alleged a violation of Section 10(b) of the Securities Exchange Act of 1934 against all defendants and control person liability, as a violation of Section 20(a) of the Securities Exchange Act of 1934, against Dr. Rajesh C. Shrotriya.  The claims purportedly stemmed from our October 23, 2015 press release in which we announced that the FDA issued a Complete Response Letter indicating that the FDA would not approve our NDA for EVOMELA in its present form.  The complaint alleged that, as a result of the October 23, 2015 press release, our stock price declined.  The complaint further alleged that during the putative class period defendants made misleadingly optimistic statements about the progress of the NDA for EVOMELA with the FDA, our expectations regarding FDA approval of the NDA, and EVOMELA’s potential as a future driver of our revenue, which inflated the trading price of our stock.  The complaint sought relief in the form of monetary damages, costs and fees, and any other relief that the Court deemed appropriate. On December 11, 2015, plaintiff voluntarily dismissed the action without prejudice.
SEC Subpoena
On April 1, 2013, we received a subpoena from the SEC for documents pursuant to a formal order of investigation. The subpoena followed our March 12, 2013 announcement that we anticipated a change in customer ordering patterns of FUSILEV. We have cooperated with the SEC throughout its investigation, and on November 30, 2015, we received a notice that the SEC does not intend to recommend an enforcement action against our company.
Notice from HRSA

We received a notice on October 10, 2014 from the U.S. Health Resources and Services Administration, Office of Pharmacy Affairs (“HRSA”). In this notice HRSA asserted that, for at least one of our products with an “orphan drug” designation under section 526 of the Federal Food, Drug, and Cosmetic Act, we did not make the product(s) available for purchase by certain categories of providers at the applicable 340B price.  The 340B price is a discounted price for covered outpatient drugs that manufacturers participating in Medicaid (which includes us) agree to make available to providers that participate in the 340B drug pricing program (“Covered Entities”).  HRSA’s notice asserted that, by not selling our product(s) to certain categories of Covered Entities at 340B prices, we were overcharging them, and that we owed certain undefined refunds to those Covered Entities based on our previously made and reported product sales.
On October 14, 2015, the U.S. District Court for the District of Columbia issued a decision in the case of Pharmaceutical Research and Manufacturers of America v. United States Department of Health and Human Services, et al., invalidating HRSA’s July 21, 2014 “interpretive rule” relating to orphan drug pricing under the 340B drug pricing program.  Because HRSA’s October 10, 2014 notice to us reflected the same interpretation of relevant orphan drug pricing statutes as the interpretation overturned by the District Court in the Pharmaceutical Research and Manufacturers of America decision, we believe the decision supports the propriety of our pricing to Covered Entities. Since we only make provisions for liabilities

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when it is both probable that a liability has been incurred, and the amount can be reasonably estimated, we have not recorded a liability for this pending matter as of December 31, 2015 .

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.
 
PART II.

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Our common stock is traded on the NASDAQ Global Market under the symbol “SPPI.” The high and low closing sale prices of our common stock reported by NASDAQ during each quarter ended in 2015 and 2014 were as follows:
 
 
High
 
Low
Year Ended December 31, 2015:
 
 
 
First Quarter
$
7.66

 
$
5.95

Second Quarter
7.37

 
5.65

Third Quarter
7.60

 
5.92

Fourth Quarter
6.93

 
5.07

Year Ended December 31, 2014:
 
 
 
First Quarter
$
10.24

 
$
7.72

Second Quarter
8.68

 
6.65

Third Quarter
8.90

 
6.89

Fourth Quarter
8.24

 
6.75


On February 29, 2016 , the closing price of our common stock on the NASDAQ Global Select Market was $4.52 per share, and there were 418 holders of record of our common stock.

During the year ended December 31, 2015, we repurchased an aggregate of 103,754 shares of common stock surrendered by our employees and members of our board of directors to satisfy their tax withholding obligations of restricted stock awards (at prices ranging from $5.15 to $7.41 per share). Such shares have been canceled by the transfer agent and returned to our authorized pool of common stock for issuance.
Stock Performance Graph (1)
The graph below compares the cumulative total stockholder return on $100 invested, assuming the reinvestment of all dividends, on December 31, 2010, the last trading day before our 2010 fiscal year, through the end of fiscal 2015 with the cumulative total return on $100 invested for the same period in the Russell 2000 index and our Peer Group.


41
Table of Contents


The New Peer Group (which we believe more closely reflects our operations and business characteristics than the Old Peer Group) consists of the following publicly-traded companies:
 
•
Acorda Therapeutics, Inc.
•
Aegerion Pharmaceuticals, Inc.
•
Auxilium Pharmaceuticals, Inc.
•
Dendreon Corp.
•
DepoMed Inc.
•
Emergent BioSolutions, Inc.
•
Genomic Health Inc.
•
Hyperion Therapeutics, Inc.
•
INSYS Therapeutics, Inc.
•
Sagent Pharmaceuticals, Inc.
•
SciClone Pharmaceuticals, Inc.
•
Sucampo Pharmaceuticals, Inc.
•
Supernus Pharmaceuticals, Inc.
•
The Medicines Company
•
VIVUS Inc.

The Old Peer Group consisted of the following publicly-traded companies:

42
Table of Contents


•
Acorda Therapeutics, Inc.
•
Alkermes plc
•
Amarin Corporation plc
•
Auxilium Pharmaceuticals, Inc.
•
BioMarin Pharmaceutical Inc.
•
Dendreon Corporation
•
Halozyme Therapeutics, Inc.
•
Incyte Corporation
•
Isis Pharmaceuticals, Inc.
•
Jazz Pharmaceuticals plc
•
The Medicines Company
•
Momenta Pharmaceuticals, Inc.
•
NPS Pharmaceuticals, Inc.
•
Salix Pharmaceuticals, Ltd
•
SciClone Pharmaceuticals, Inc.
•
Theravance Biopharma, Inc.
•
Vertex Pharmaceuticals Incorporated
 
12/31/2010
 
12/31/2011
 
12/31/2012
 
12/31/2013
 
12/31/2014
 
12/31/2015
Spectrum Pharmaceuticals, Inc.
$
100

 
$
213

 
$
165

 
$
131

 
$
102

 
$
89

Russell 2000
$
100

 
$
96

 
$
111

 
$
155

 
$
162

 
$
155

Old Peer Group
$
100

 
$
108

 
$
130

 
$
244

 
$
337

 
$
390

New Peer Group
$
100

 
$
100

 
$
114

 
$
159

 
$
148

 
$
168

 
(1)
The information in this section is not “soliciting material,” is not deemed “filed” with the SEC and is not to be incorporated by reference in any filing of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing.
Dividend Policy
We currently intend to retain all earnings, if any, for use in the expansion of our business and therefore do not anticipate paying any dividends in the foreseeable future. However, the payment of dividends, if any, will be at the discretion of the Board of Directors and subject to compliance at such time with any applicable restrictions contained in our various agreements.


ITEM 6. SELECTED FINANCIAL DATA
The following selected consolidated financial data has been derived from our audited Consolidated Financial Statements. The audited Consolidated Financial Statements for the fiscal years ended December 31, 2015 , 2014 , and 2013 are included elsewhere in this Annual Report on Form 10-K. The information set forth below should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 and the Consolidated Financial Statements and Notes thereto in Item 8 . The information set forth below is not necessarily indicative of our future financial condition or results of operations.
 

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Table of Contents


 
Year ended December 31,
Selected Statement of Operations Data:
2015
 
2014
 
2013
 
2012
 
2011
 
(In thousands, except per share data)
Total revenues
$
162,556

 
$
186,830


$
155,854

 
$
267,707

 
$
192,963

Operating costs and expenses:

 

 
 
 

 

Cost of product sales (excludes amortization and impairment of intangible assets)
27,689

 
27,037

 
28,580

 
46,633

 
33,838

Selling, general and administrative
86,514

 
97,412

 
99,315

 
89,922

 
72,197

Research and development
50,766

 
69,662

 
46,670

 
41,560

 
26,662

Amortization and impairment of intangible assets
38,319

 
24,288

 
20,074

 
8,818

 
3,720

(Loss) Income from operations
(40,732
)
 
(31,569
)
 
(38,785
)
 
80,774

 
56,546

Change in fair value of common stock warrant liability
—

 
—

 
—

 
—

 
(3,488
)
Change in fair value of contingent consideration related to acquisition
676

 
987

 
2,871

 
—

 
—

Other (expense) income, net
(10,323
)
 
(12,951
)
 
(722
)
 
(844
)
 
577

(Loss) income before provision for income taxes
(50,379
)
 
(43,533
)
 
(36,636
)
 
79,930

 
53,635

(Provision) benefit for income taxes
(406
)
 
(2,186
)
 
(25,498
)
 
14,271

 
(3,704
)
Net (loss) income
$
(50,785
)
 
$
(45,719
)
 
$
(62,134
)
 
$
94,201

 
$
49,931

Net (loss) income per share—basic
$
(0.78
)
 
$
(0.71
)
 
$
(1.02
)
 
$
1.61

 
$
0.94

Net (loss) income per share—diluted
$
(0.78
)
 
$
(0.71
)
 
$
(1.02
)
 
$
1.46

 
$
0.86


 
As of December 31,
Selected Balance Sheet Data:
2015
 
2014
 
2013
 
2012
 
2011
 
(In thousands)
Working capital (current assets minus  current liabilities)
$
114,981

 
$
113,030

 
$
145,206

 
$
141,630

 
$
151,443

Total assets
$
421,220

 
$
490,033

 
$
499,155

 
$
504,955

 
$
280,780

Long term obligations, less current portion
$
132,020

 
$
126,040

 
$
127,565

 
$
93,031

 
$
14,336

Total stockholders’ equity
$
212,857

 
$
254,554

 
$
281,606

 
$
288,681

 
$
192,086

 

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with “Selected Financial Data” and our consolidated financial statements and the related notes included in this Annual Report on Form 10-K. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in the forward-looking statements as a result of various factors including the risks we discuss in Item 1A of Part I, “Risk Factors” and elsewhere in this Annual Report on Form 10-K.
OVERVIEW
Our Business
Our primary strategy is comprised of acquiring, developing, and commercializing a broad and diverse pipeline of late-stage clinical and commercial products. In addition to an efficient in-house clinical development organization with regulatory and data management capabilities, we have established a commercial infrastructure for our marketed products. Currently, we have six oncology/hematology products approved that target different types of NHL, ALL, and MM.
We also have two drugs in late stage development:
• SPI-2012, is being developed for chemotherapy-induced neutropenia in patients with breast cancer.
•
EOQUIN® (previously referred to as APAZIQUONE for intravesical instillation), is being developed for immediate intravesical instillation post-transurethral resection of bladder tumors in patients with non-muscle invasive bladder cancer.

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Table of Contents


Our passion to identify, develop and deliver important options for patients suffering from cancer is behind every action we take. We are committed to excellence and strive to make a difference in the lives of patients every day.
See Item 1 , “Business,” for our discussion of:
 
•
Company Overview
•
Cancer Background and Market Size
•
Product Portfolio
•
Manufacturing
•
Sales and Marketing
•
Customers
•
Competition
•
Research and Development
Recent Highlights of Our Business, Product Development Initiatives, and Regulatory Approvals
During the year ended December 31, 2015 and through the filing date of this Annual Report on Form 10-K, we accomplished various critical business objectives, which included:
 
•
POZIOTINIB : In November 2015, we submitted an Investigational New Drug ("IND") application with the FDA. In March 2016 we initiated our Phase 2 Breast Cancer Trial. The Phase 2 study is an open-label study that will enroll approximately 70 patients with HER-2 positive metastatic breast cancer, who have failed at least two HER-2 directed therapies. The dose and schedule of oral POZIOTINIB will be based on clinical experience from the studies in Korea, and in addition include the use of prophylactic therapies to help minimize known side-effects of HER-2 directed therapies.
In February 2015, we executed a global in-license agreement (excluding Korea and China) with Hanmi Pharmaceutical Co., Ltd for POZIOTINIB, a pan-HER inhibitor in Phase 2 clinical trials in return for our upfront payment and future regulatory and sales-dependent milestone payments. POZIOTINIB has shown single agent activity in the treatment of various cancer types, including breast, gastric, colorectal and lung cancers. In the Phase 1 study for this drug, 6 of 10 breast cancer patients demonstrated partial responses; we also believe the safety profile was consistent with similar drug classes, with four patients having a grade 3 diarrhea response.
•
EOQUIN (formerly referred to as APAZIQUONE): In August 2015, we reached agreement with the FDA on the SPA of the planned Phase 3 clinical trial of EOQUIN. This trial commenced with its first patient dosing in October 2015 and is designed to evaluate the intravesical use of this drug for the treatment of patients with non-muscle invasive bladder cancer (NMIBC) as one or two instillations, immediately following transurethral resection of bladder tumor (TURBT). Due to the high rate of recurrence for NMIBC, there is a significant unmet medical need and the overall cost of bladder cancer treatment in the U.S. is $3.4 billion annually, most of which is related to the direct treatment of this disease. Accordingly, this drug represents much-needed therapy for patients and provides a meaningful opportunity to reduce overall medical costs. In December 2015, we submitted our NDA for EOQUIN with the FDA, and in February 2016, the FDA communicated its acceptance of this NDA with a target decision date of December 11, 2016.
•
EVOMELA (formerly referred to as Captisol-Enabled MELPHALAN): On October 23, 2015, we received a Complete Response Letter ("CRL") from the FDA for our EVOMELA NDA. A CRL is a standard communication from the FDA that informs companies that an application cannot be approved in its present form. Nonclinical deficiencies were identified, however, the FDA did not identify any clinical deficiencies for this drug in the CRL, and we subsequently resubmitted our NDA. On March 10, 2016, the FDA communicated its NDA approval for EVOMELA as a high-dose conditioning treatment prior to hematopoietic progenitor (stem) cell transplantation in patients with MM, and for the palliative treatment of patients with MM for whom oral therapy is not appropriate.. We plan to commercially launch EVOMELA as soon as possible.
•
SPI 2012 : In March 2015 positive Phase 2 data for this drug was presented at our Analyst Day, demonstrating non-inferiority and superiority to pegfilgrastim. In December 2015, we reached agreement with the FDA regarding our Phase 3 SPA for SPI-2012 and initiated the Phase 3 clinical study. We have designated more than 100 sites (with additional sites to be named) where patients are presently being dosed with SPI-2012 as part of this study.

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Table of Contents


•
Sales Force Contracting Arrangement : On November 4, 2015, we executed a contract with Eagle Pharmaceuticals, Inc. ("Eagle") whereby designated members of our sales force will concurrently market (beginning January 2016) up to six of Eagle's pharmaceutical products, along with our products, in return for aggregate fixed proceeds of $12.8 million that will be paid over the 18-month service period. We are also eligible to receive variable, performance-based payments for sales of Eagle's products that exceed certain thresholds.
•
ZEVALIN Ex-U.S. out-licenses :
◦
In November 2015, we entered into an out-license agreement with Mundipharma International Corporation Limited for their commercialization of ZEVALIN in Asia (excluding India and Greater China), Australia, New Zealand, Africa, the Middle East, and Latin America (including the Caribbean). In return, we received (i) $18 million (comprised of $15 million received in December 2015 and $3 million in January 2016), and (ii) unsecured notes aggregating $3.1 million.
◦
On January 8, 2016, we entered into a strategic partnership with Servier Canada, Inc. for the out-licenses of ZEVALIN, FOLOTYN, BELEODAQ, and MARQIBO. We will receive $6 million in upfront payments, development milestone payments if/when achieved, and a high single-digit royalty on their sales of these products.
CHARACTERISTICS OF OUR REVENUE AND EXPENSES
The below summarizes the nature of our revenue and operating expense line items within our Consolidated Statements of Operations:
Revenue
The majority of our revenue is derived from sales of our drug products to large pharmaceutical wholesalers and distributors upon title transfer (which is typically at time of delivery), provided our other revenue recognition criteria have been met. To a lesser extent we also derive revenue from (i) license fees and royalties from out-licensing our drug products in named territories, and (ii) service revenue for our research and development activities conducted for the benefit of third parties.
Cost of Goods Sold (Excluding Amortization of Intangible Assets)
Cost of goods sold includes production and packaging materials, contract manufacturer fees, allocated personnel costs (excluding nominal stock-based compensation expense), shipping expenses, and royalty fees.
Selling, General and Administrative
Selling, general and administrative expenses primarily consist of compensation (including stock-based compensation) and benefits for our sales force and personnel that support our sales and marketing operations, and our general operations such as information technology, executive management, financial accounting, and human resources. It also includes costs attributable to marketing our products to our customers and prospective customers, patent and legal fees, financial statement audit fees, insurance coverage fees, bad debt expense, personnel recruiting fees, and other professional services.
Research and Development
Our research and development activities primarily relate to the development and testing of new drugs, and conducting studies in order to gain regulatory approval for the commercialization of our drug products. These expenses consist of compensation (including stock-based compensation) and benefits for research and development and clinical and regulatory personnel, materials and supplies, consultants, and regulatory and clinical payments related to studies. In addition, we include within research and development expense, technology transfer costs and manufacture qualification costs – prior to FDA approval of the product, its formulation, and/or its manufacturing sites.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation and presentation of financial statements in conformity with generally accepted accounting principles in the United States of America (“GAAP”) requires management to establish policies and make estimates and assumptions that affect (i) the amounts of assets and liabilities as of the date presented on the accompanying Consolidated Balance Sheets and (ii) the amounts of revenue and expenses for each year presented in the accompanying Consolidated Statements of Operations.


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Table of Contents


Our management believes its estimates and assumptions are supportable, reasonable, and consistently applied. Nonetheless, estimates are inherently uncertain. As a result, our financial position and operating results could materially differ from the amounts reported within the accompanying Consolidated Financial Statements if management’s estimates require prospective adjustment. Our critical accounting policies and estimates arise in conjunction with the following accounts:
 
•
Revenue recognition
•
Inventories – lower of cost or market
•
Fair value of acquired assets and assumed liabilities
•
Goodwill and intangible assets – impairment evaluations
•
Income taxes
•
Stock-based compensation
•
Litigation accruals (as required)
Revenue Recognition
Product Sales : We recognize revenue from product sales when all of the following criteria are met:
 
(i)
Appropriate evidence of a binding arrangement exists with our customer;
(ii)
Price is substantially fixed and determinable;
(iii)
Collection from our customer is reasonably assured;
(iv)
Our customer’s obligation to pay us is not contingent on resale of the product;
(v)
We do not have significant obligations for future performance to directly bring about the resale of our product; and
(vi)
We have a reasonable basis to estimate future returns.
Our product sales are reduced by our gross-to-net (“GTN”) estimates, resulting in our reported “Product sales, net” in the accompanying Consolidated Statements of Operations. We defer revenue recognition in full if/when these estimates are not reasonably determinable at the time of sale.
Our GTN estimates reduce revenue in the same period that the related sale is recorded and include the following major categories:
 
(i)
Product Returns Allowances
(ii)
Government Chargebacks
(iii)
Discounts
(iv)
Rebates
(v)
Medicaid Rebates
(vi)
Distribution and Data Fees
Product Returns Allowances : Our FUSILEV, MARQIBO, and BELEODAQ customers are permitted to return purchased product beginning at its expiration date, and within six months thereafter. Returned product is generally not resold. Returns for expiry of ZEVALIN and FOLOTYN are not contractually, or customarily, allowed. We estimate potential returns based on historical rates of return.
Government Chargebacks : Our products are subject to pricing limits under certain federal government programs. Qualifying entities (end-users) purchase product from our wholesalers at their qualifying discounted price. The chargeback amount we incur represents the difference between our original sales price to the wholesaler, and the end-user’s applicable discounted purchase price. There may be significant lag time between our original sale to the wholesaler and our receipt of the corresponding government chargeback claims from our wholesalers.


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Table of Contents


Prompt Pay Discounts : Discounts for prompt payment are estimated at the time of sale, based on our eligible customers’ prompt payment history and the contractual discount percentage.
Commercial Rebates : Rebates are estimated based on our customers’ actual purchase level during the quarterly or annual rebate purchase period, and the corresponding contractual rebate tier we expect each customer to achieve.
Medicaid Rebates : Our products are subject to state government-managed Medicaid programs, whereby rebates for purchases are issued to participating state governments. These rebates arise when the patient treated with our products is covered under Medicaid. Our calculations related to these Medicaid rebate accruals require us to estimate end-user and patient mix to determine which of our sales will likely be subject to these rebates. There is a significant time lag in us receiving these rebate notices (generally several months after our sale is made). Our estimates are based on our historical claims, as supplemented by management’s judgment.
Distribution, Data, and GPO Administrative Fees : Distribution, data, and group purchasing organization (GPO) administrative fees are paid to authorized wholesalers of our products (except for U.S. sales of ZEVALIN) for various services, including: contract administration, inventory management, end-user sales data, and product returns processing. These fees are based on a contractually determined percentage of applicable sales.
License Fees : We recognize revenue for our licensing of intellectual property to third parties (i.e., out-licenses), based on the contractual terms of each agreement. This revenue may be associated with upfront license fees, milestone payments from our licensees’ sales or regulatory achievements, and royalties from our licensees’ sales in applicable territories.
Service Revenue : We receive fees under certain arrangements for research and development activities, sales and marketing activities, clinical trial management, and supply chain services. Payment may be triggered by the successful completion of a phase of development, results from a clinical trial, regulatory approval events, or completion of product or service delivery in our capacity as an agent or principal in such arrangement. We recognize revenue when the corresponding milestone is achieved, or the revenue is otherwise earned through our on-going activities.
Inventories – Lower of Cost or Market
We adjust our inventory value for estimated amounts of excess, obsolete, or unmarketable items. Such assumptions involve projections of future customer demand, as driven by economic and market conditions, and the product’s shelf life. If actual demand, or economic or market conditions are less favorable than those projected by us, incremental inventory write-downs may be required and could be significant.
Fair Value of Acquired Assets and Assumed Liabilities
The accounting for business combinations and asset acquisitions requires extensive use of estimates and judgments to measure the fair value of the identifiable tangible and intangible assets acquired, including in-process research and development, and liabilities assumed. Additionally, we must determine whether the acquisition meets the criteria for business combination accounting (rather than asset acquisition accounting), because in a business combination, the excess of the purchase price over the fair value of net assets acquired can only be recognized as “goodwill.”
The fair value of acquired tangible and identifiable intangible assets and liabilities assumed, are based on their estimated fair values at the acquisition date and requires extensive use of accounting estimates, judgments, and assumptions, including but not limited to: likelihood, timing, and costs to complete the in-process projects, probability of achieving regulatory approvals, cash flows to be derived from the acquired assets, and the application of appropriate discount rates. For each acquisition, we engage an independent third-party valuation specialist to assist management in determining the fair value of in-process research and development, identifiable intangible assets, and any contingent consideration.
In connection with certain of our acquisitions, we must record a contingent consideration liability for cash or stock payments upon the completion of certain future performance milestones. In these cases, a liability is recorded on the acquisition date for an estimate of the acquisition date fair value of the contingent consideration by applying the income approach utilizing variable inputs such as probability of achievement and risk-free adjusted discount rates. Any change in the fair value of the contingent consideration subsequent to the acquisition date is recognized in earnings.

Goodwill and Intangible Assets – Impairment Evaluations

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Goodwill and other intangible assets with indefinite lives are not subject to amortization, but are evaluated for impairment annually as of October 1, or whenever events or changes in circumstance indicate that the asset might be impaired. We evaluate the possible impairment (i) if/when events or changes in circumstances occur that indicate that the carrying value of assets may not be recoverable; or (ii) in the case of goodwill and indefinite lived intangible assets, our annual impairment assessment date of October 1. These evaluations require significant judgment by our management in forecasting net cash flows to be derived by these intangible assets through our on-going operations. The discounted value of such cash flows (or our market capitalization in the case of goodwill) are compared to each asset’s carrying value to assess whether there is an indication of impairment and resulting charges to record.
Income Taxes
Our consolidated balance sheets reflect net deferred tax assets (net of a valuation allowance) that primarily represent the tax benefit of net operating loss and tax credit carryforwards, and credits and timing differences between book and tax. When it is more likely than not that all or some portion of deferred tax assets may not be realized, we establish a valuation allowance for the amount that may not be realized. Each quarter, we evaluate the need to retain all or a portion of the valuation allowance on our net deferred tax assets. Our evaluation considers historical earnings, estimated future taxable income and ongoing prudent and feasible tax planning strategies. Adjustments to the valuation allowance increase or decrease net income or loss in the period such adjustments are made. If our estimates require adjustments, it could have a significant impact on our consolidated financial statements.
Stock-Based Compensation
Stock-based compensation expense for equity awards granted to our employees and members of our board of directors is recognized on a straight-line basis over the award’s vesting period. Recognized compensation expense is net of an estimated forfeiture rate, which estimates those shares expected to be forfeited prior to vesting. We use the Black-Scholes option pricing model to determine the fair value of stock options (as of the date of grant) which carry service conditions for vesting. We use the Monte Carlo valuation model to value equity awards (as of the date of grant) which carry combined market conditions and service conditions for vesting. From time to time we issue stock warrants to non-employees. These awards are also valued using the Black-Scholes option pricing model, then are marked-to-market at each reporting period until fully vested.
Calculating stock-based compensation expense requires the input of highly subjective assumptions, including the pre-vesting forfeiture rate, expected term of the stock-based awards, stock price volatility, and risk-free interest rates. We estimate the expected term of options granted based on our employees’ historical exercise patterns, which we believe will be representative of their future behavior. We estimate the volatility of our common stock on the date of grant based on historical volatility of our common stock for a look-back period that corresponds with the expected term. We estimate the risk-free interest rate based upon the U.S. Treasury yields in effect at award grant, for a period equaling the stock option's expected term.
Litigation Accruals
From time-to-time, we are involved in various claims and legal proceedings of a nature considered normal and incidental to our business. These matters may include product liability, intellectual property, employment, and other general claims. We accrue for contingent liabilities when it is probable that a liability has been incurred and the amount can be reasonably estimated. The accruals are adjusted periodically as assessments change or as additional information becomes available.

RESULTS OF OPERATIONS
Operations Overview – 2015 , 2014 , and 2013

49

 
Year Ended December 31,
 
2015
 
2014
 
2013
 
($ in thousands)
Total revenues
$
162,556

 
100.0
 %
 
$
186,830

 
100.0
 %
 
$
155,854

 
100.0
 %
Operating costs and expenses:

 

 

 

 

 

Cost of product sales (excludes amortization and impairment of intangible assets)
27,689

 
17.0
 %
 
27,037

 
14.5
 %
 
28,580

 
18.3
 %
Selling, general and administrative
86,514

 
53.2
 %
 
97,412

 
52.1
 %
 
99,315

 
63.7
 %
Research and development
50,766

 
31.2
 %
 
69,662

 
37.4
 %
 
46,670

 
29.9
 %
Amortization and impairment of intangible assets
38,319

 
23.6
 %
 
24,288

 
13.0
 %
 
20,074

 
12.9
 %
Total operating costs and expenses
203,288

 
>100.0
 %
 
218,399

 
>100.0
 %
 
194,639

 
>100.0
 %
Loss from operations
(40,732
)
 
(25.1
)%
 
(31,569
)
 
(16.9
)%
 
(38,785
)
 
(24.9
)%
Interest expense, net
(9,074
)
 
(5.6
)%
 
(8,584
)
 
(4.6
)%
 
(2,192
)
 
(1.4
)%
Change in fair value of contingent consideration related to acquisitions
676

 
0.4
 %
 
987

 
0.1
 %
 
2,871

 
1.8
 %
Other (expense) income, net
(1,249
)
 
(0.8
)%
 
(4,367
)
 
(2.3
)%
 
1,470

 
0.1
 %
Loss before income tax
(50,379
)
 
(31.0
)%
 
(43,533
)
 
(23.3
)%
 
(36,636
)
 
(23.5
)%
Provision for income taxes
(406
)
 
(0.2
)%
 
(2,186
)
 
(1.1
)%
 
(25,498
)
 
(16.4
)%
Net loss
$
(50,785
)
 
(31.2
)%
 
$
(45,719
)
 
(24.5
)%
 
$
(62,134
)
 
(39.9
)%


YEAR ENDED DECEMBER 31, 2015 VERSUS DECEMBER 31, 2014
Total Revenues
 
 
Year Ended December 31,
 
 
 
 
 
2015
 
2014
 
$ Change
 
% Change
 
($ in millions)
 
 
 
 
Product sales, net:

 

 

 

FUSILEV
$
60.7

 
$
105.6

 
$
(44.9
)
 
(42.5
)%
FOLOTYN
40.6

 
47.6

 
(7.0
)
 
(14.7
)%
ZEVALIN
17.5

 
22.1

 
(4.6
)
 
(20.8
)%
MARQIBO
8.0

 
6.3

 
1.7

 
27.0
 %
BELEODAQ
10.1

 
4.9

 
5.2

 
>100.0
 %

136.9

 
186.5

 
(49.6
)
 
(26.6
)%
License fees and service revenue
25.7

 
0.3

 
25.4

 
>100.0
 %
Total revenues
$
162.6

 
$
186.8

 
$
(24.2
)
 
(13.0
)%
Product sales, net : To derive net product sales, gross product revenues in each period are reduced by management's latest estimated provisions for (i) product returns, (ii) government chargebacks, (iii) prompt pay discounts, (iv) commercial rebates, (v) Medicaid rebates, and (vi) distribution, data, and GPO administrative fees. Management considers various factors in the determination of these provisions, which are described in more detail within “Critical Accounting Policies and Estimates” above.
FUSILEV revenue decrease is primarily due to a significant decline in our unit sales to customers, as well as a decrease in our net average sales price per unit. This unit sales and price decline is due to the competitive launch in April 2015 of generic levo-leucovorin product (see Note 3(g) ).
FOLOTYN revenue decrease is primarily due to moderate decline in units sold during the period, partially offset by a slight increase in our net average sales price per unit.
ZEVALIN revenue decrease is primarily due to moderate decline in units sold during the period in the U.S. and ex-U.S. territories, as well as a moderate decrease in our net average sales price per unit, specifically in ex-U.S. territories.

50


MARQIBO revenue increase is due to a moderate increase in units sold during the period, and a moderate increase in our net average sales price per unit.
BELEODAQ revenue increased as a result of units sold in the current period, in comparison to its commercial launch in the third quarter of 2014. The average net sales price per unit remained unchanged between the periods.
License fees and service revenue: In 2015 , we recognized $25.7 million of license fees and service revenue which includes the following: (i) $9.7 million for the out-licenses of ZEVALIN, MARQIBO, and EVOMELA for the China territory (see Note 11 ), (ii) $15 million for our ZEVALIN out-license agreement with Mundipharma (see Note 12 ), and (iii) $0.8 million from our out-license royalties, all derived from FOLOTYN sales in Mundipharma’s (our co-development partner – see Note 16 ) territories.

Operating Expenses
 
 
Year Ended December 31,
 
 
 
 
 
2015
 
2014
 
$ Change
 
% Change
 
($ in millions)
 
 
 
 
Operating expenses:

 

 

 

Cost of product sales (excludes amortization and impairment of intangible assets)
$
27.7

 
$
27.0

 
$
0.7

 
2.6
 %
Selling, general and administrative
86.5

 
97.4

 
(10.9
)
 
(11.2
)%
Research and development
50.8

 
69.7

 
(18.9
)
 
(27.1
)%
Amortization and impairment of intangible assets
38.3

 
24.3

 
14.0

 
57.6
 %
Total operating costs and expenses
$
203.3

 
$
218.4

 
$
(15.1
)
 
(6.9
)%
Cost of Product Sales . Cost of product sales increased, despite product revenue decline, primarily due to (i) $2.4 million for stability testing of ZEVALIN antibody for strategic supply stock in the current period, and (ii) recognition of $1.3 million of product cost associated with FUSILEV deferred revenue for shipments to our customers in the fourth quarter of 2015.
Selling, General and Administrative . Selling, general and administrative expenses decreased by $10.9 million , largely driven by our various 2015 operating expense reduction initiatives, as well as a $2.1 million reimbursement from our directors and officers insurance carrier, which was recognized as a reduction to current year expenses when these proceeds were received.
Research and Development. Research and development expenses decreased primarily due to the non-recurrence of our $17.8 million aggregate payment (in the form of cash and stock) in the first quarter of 2014, upon FDA milestone achievement associated with BELEODAQ. In addition, our clinical trial expenses in the current period have decreased, as we narrow our focus to certain drug development clinical studies. These reductions were partially offset by our upfront payment related to the POZIOTINIB in-license agreement (see Note 17 (b)(xii) ) and technical transfer costs related to future ZEVALIN commercial production at a new contract manufacturer.
Amortization and Impairment of Intangible Assets. Amortization expense increased $14.0 million in the current year due to (i) $7.2 million impairment charge (non-cash) in the first quarter of 2015 for our FUSILEV distribution rights (See Note 3(g) ), (ii) $3.7 million of accelerated amortization expense that was recorded in conjunction with the sale of certain ex-U.S. ZEVALIN rights to Mundipharma (see Note 12 ), and (iii) recognition of a full year of BELEODAQ amortization expense, which began in the third quarter of 2014 with its initial commercialization.
Total Other Expense
 
 
Year Ended December 31,
 
 
 
 
 
2015
 
2014
 
$ Change
 
% Change
 
($ in millions)
 
 
 
 
Total other expense
$
(9.6
)
 
$
(12.0
)
 
$
2.4

 
20.0
%

51


Total other expenses decreased by $2.4 million due to multiple offsetting components. These items included (i) a decrease of $5.9 million related to foreign exchange loss adjustments on the value of intercompany loans, which are now recorded in "accumulated other comprehensive loss" in the Consolidated Balance Sheets, beginning April 1, 2015 (see Note 2 (ix)), (ii) $2.2 million related to a gain on the sale of certain stock holdings in 2014 that did not recur, (iii) $0.3 million increase in contingent consideration expense related to the acquisition of our MARQIBO and EVOMELA rights (see Note 10 ), (iv) a $0.5 million increase in interest expense on our 2018 Convertible Notes, and (v) $0.7 million increase in executive deferred compensation expense due to changes in the fair value of plan assets.

Provision for Income Taxes
 
 
Year Ended December 31,
 
 
 
 
 
2015
 
2014
 
$ Change
 
% Change
 
($ in millions)
 
 
 
 
Provision for income taxes
$
(0.4
)
 
$
(2.2
)
 
$
1.8

 
81.8
%
In 2015 , we recognized an income tax provision of $0.4 million , representing our minimum tax obligations and the impact of applied research and development tax credits in 2015. In 2014 our income tax provision primarily represented an adjustment to our prior year estimate of the benefit from the carryback of our 2013 federal net operating loss against 2012 taxes and an increase in the valuation allowance on deferred tax assets at January 1, 2014.
YEAR ENDED DECEMBER 31, 2014 VERSUS DECEMBER 31, 2013
Revenue
 
 
Year Ended December 31,
 
 

 
 

 
2014
 
2013
 
$ Change
 
% Change
 
($ in millions)
 
 
 
 
Product sales, net
 
 
 
 
 
 
 
FUSILEV
$
105.6

 
$
68.4

 
$
37.2

 
54.4
 %
FOLOTYN
47.6

 
44.4

 
3.2

 
7.2
 %
ZEVALIN
22.1

 
29.4

 
(7.3
)
 
(24.8
)%
MARQIBO
6.3

 
1.3

 
5.0

 
>100.0
 %
BELEODAQ
4.9

 
—

 
4.9

 
100.0
 %
 
186.5

 
143.5

 
43.0

 
30.0
 %
License fees and service revenue
0.3

 
12.4

 
(12.1
)
 
(97.6
)%
Total revenues
$
186.8

 
$
155.9

 
$
30.9

 
19.8
 %
Product sales, net : Gross product revenues are reduced by estimated provisions for product returns, sales discounts and rebates, distribution and data fees, and chargebacks established at the time revenues are recognized to arrive at product sales, net. Management considers various factors in the determination of such provisions, which are described in more detail within “Critical Accounting Policies and Estimates” above.
FUSILEV revenue increase was primarily due to (i) an increase in our average net price per unit as a result of certain non-recurring GTN adjustments that we experienced in the prior year period, and (ii) an increase in unit sales to our wholesalers during the current period, to satisfy end-user demand.
FOLOTYN revenue increase was due to an increase in unit sales to satisfy end-user demand, as well as a $1.0 million purchase by a new wholesaler in the first half of 2014; this resulted from the modification of our FOLOTYN distribution model and a bulk purchase by this wholesaler to fulfill anticipated end-user demand.
ZEVALIN revenue decrease was attributable to decreased end-user demand in the U.S. market, partially offset by an increase in our average net sales price per unit in 2014 versus 2013.
MARQIBO revenue increase was a result of our acquisition of Talon in July 2013 (and the product’s launch in late September 2013), as discussed in Note 10(a) . In addition, during the third quarter of 2014, we modified the timing of our

52


revenue recognition model for this product from end-user receipt to wholesaler receipt, based on sufficient history of MARQIBO customer returns which provided a reasonable basis to estimate expected returns. This change had a one-time $0.4 million favorable impact in 2014 (i.e., representing units that had been shipped to our wholesalers in the second quarter of 2014 and earlier periods, but such revenue had been deferred through June 30, 2014).
BELEODAQ revenue was a result of its FDA approval and our subsequent commercial launch in the third quarter of 2014.
License fees and service revenue: In 2014, we recognized $0.3 million from our out-license royalties, all derived from FOLOTYN sales in Mundipharma’s (our co-development partner – see Note 16 ) territories. In 2013, we recognized $12.4 million from the amortization of deferred revenue that corresponded with our contracted research and development services. This revenue is associated with a $41.5 million upfront payment we received from Allergan in 2008, and an aggregate of $16.0 million in upfront payments we received from Nippon Kayaku and Handok in 2010.

Operating Expenses
Our operating expenses are summarized in the following table:
 
 
Year Ended December 31,
 
 
 
 
 
2014
 
2013
 
$ Change
 
% Change
 
($ in millions)
 
 
 
 
Operating expenses:
 
 
 
 
 
 
 
Cost of product sales (excludes amortization and impairment of intangible assets)
$
27.0

 
$
28.6

 
$
(1.6
)
 
(5.6
)%
Selling, general and administrative
97.4

 
99.3

 
(1.9
)
 
(1.9
)%
Research and development
69.7

 
46.6

 
23.1

 
49.6
 %
Amortization and impairment of purchased intangible assets
24.3

 
20.1

 
4.2

 
20.9
 %
Total operating costs and expenses
$
218.4

 
$
194.6

 
$
23.8

 
12.2
 %
Cost of Product Sales . Despite our large increase in product sales, net, in 2014 as compared to 2013, our cost of product sales decreased 5.6%. This decrease was driven by a large inventory charge in 2013 for FUSILEV that did not recur in the current year, related to our program abandonment of a new vial size, as well as certain royalty adjustments from our in-license contract amendments in 2013 that did not recur in the current year.
Selling, General and Administrative . Selling, general and administrative expenses decreased due to the non-recurrence of $5.7 million of Talon acquisition expenses incurred in 2013, partially offset by increases in personnel expenses due to increased revenue, travel costs, and professional service fees as we continue to expand our sales and marketing activities.
Research and Development. Research and development expenses increased primarily due to the following: (i) an aggregate of $17.8 million from our cash payment and stock issuance to TopoTarget, upon the February 2014 contractual milestone achievement of the FDA acceptance of our new drug application for the PTCL indication of BELEODAQ; (ii) a $2.3 million increase in Phase 2 clinical study costs related to SPI-2012; (iii) a $1 million increase in new manufacturer technology transfer and qualification costs for our ZEVALIN product; and (iv) an increase in project consulting expenses of $1.2 million.
Amortization and Impairment of Intangible Assets. The amortization and impairment of intangible assets increased $4.2 million during 2014, primarily due to (i) the amortization of definite-lived intangible assets from the acquisition of Talon in July 2013 (through which we acquired MARQIBO distribution rights) and (ii) the commencement of the amortization of BELEODAQ distribution rights in August 2014.
Total Other Income (Expense)
 
Year Ended December 31,
 
 
 
 
 
2014
 
2013
 
$ Change
 
% Change
 
($ in millions)
 
 
 
 
Total other income (expense)
$
(12.0
)
 
$
2.1

 
$
(14.1
)
 
>100.0%

53


Total other income (expenses) increased by $14.1 million primarily due to (i) a $6.4 million increase in interest expense attributable to our convertible senior notes issued in December 2013; (ii) a $8.0 million increase in unrealized loss from intercompany borrowings denominated in currencies other than the U.S. dollar; and (iii) a $1.9 million net increase in “acquisition-related contingent obligations” liability to the former stockholders of Talon and Ligand in the 2014 period, which resulted in an equal charge recognized within “change in fair value of contingent consideration related to acquisitions”. These amounts were partially offset by a $2.2 million gain on our sale of certain stock holdings during 2014.
Provision for Income Taxes
 
Year Ended December 31,
 
 
 
 
 
2014
 
2013
 
$ Change
 
% Change
 
($ in millions)
 
 
 
 
Provision for income taxes
$
(2.2
)
 
$
(25.5
)
 
$
23.3

 
91.4%
In 2014, we recognized an income tax provision of $2.2 million. This provision for income taxes primarily represents an adjustment to our prior year estimate of the benefit from the carryback of our 2013 federal net operating loss against 2012 taxes and an increase in the valuation allowance on deferred tax assets at January 1, 2014. In 2013, we recognized an income tax provision of $25.5 million. This provision was due to the recording of a full valuation allowance against our deferred tax assets.
LIQUIDITY AND CAPITAL RESOURCES
 
 
December 31,
 
2015
 
2014
 
(in thousands, except financial
metrics data)
Cash and cash equivalents
$
139,741

 
$
129,942

Marketable securities
$
245

 
$
3,306

Accounts receivable, net
$
30,384

 
$
70,758

Total current assets
$
191,324

 
$
222,469

Total current liabilities
$
76,343

 
$
109,439

Working capital surplus (a)
$
114,981

 
$
113,030

Days sales outstanding (“DSO”) (b)
56

 
126

Current ratio (c)
2.5

 
2.0

 
(a)
Total current assets at period end minus total current liabilities at period end.
(b)
Net accounts receivable at period end divided by revenue, net for the fourth quarter multiplied by 92 days.
(c)
Total current assets at period end divided by total current liabilities at period end.
Net Cash Provided By (Used In) Operating Activities
Cash provided by operating activities was $6.7 million in 2015 , as compared to $3.6 million of cash used in the prior year period.
For the years ended December 31, 2015 and 2014 , our cash collections from customers totaled $237.2 million and $242.5 million, respectively, representing 146% and 129% of reported net revenue for the same years.
For the years ended December 31, 2015 and 2014 , cash payments to our employees and vendors for products, services, and rebates totaled $252.8 million and $279.5 million, respectively.
Net Cash Provided By (Used In) Investing Activities
Net cash provided by investing activities of $2.8 million  is primarily due to $3.1 million from the redemption of mutual funds, partially offset by $0.2 million of purchases related to property, plant and equipment. This compares to cash used in investing activities of $21.8 million in the prior year, primarily related to the $25 million milestone payment due upon the FDA approval of BELEODAQ, partially offset by $4.1 million of proceeds from our sale of certain security holdings.

54


Net Cash Provided By Financing Activities
Net cash provided by financing activities of $1.5 million in 2015 , as compared to $0.8 million in the prior year period. The cash provided by financing activities relates to (i) $1.5 million of proceeds from the issuance of common stock as a result of the exercise of employee stock options, and (ii) $0.6 million of proceeds from employee stock purchases under our employee stock purchase plan. These amounts were partially offset by our $0.6 million purchase and retirement of restricted stock at our employees’ election, in order to fund their corresponding minimum employee tax obligations at the time of vesting.

Convertible Senior Notes Due 2018
On December 17, 2013, we entered into an agreement for the sale of $120 million aggregate principal amount of 2.75% Convertible Senior Notes due December 2018 (the “2018 Convertible Notes”). The 2018 Convertible Notes are convertible into shares of our common stock at a conversion rate of 95 shares per $1,000 principal amount of the 2018 Convertible Notes, totaling 11.4 million common shares if fully converted. The in-the-money conversion price is equivalent to $10.53 per common share. The conversion rate and conversion price are subject to adjustment under certain limited circumstances. As of December 31, 2015 , we may settle conversions of the 2018 Convertible Notes by paying or delivering, as the case may be, cash, shares of our common stock, or a combination of cash and shares, at our election.
The 2018 Convertible Notes bear interest at a rate of 2.75% per year, payable semiannually in arrears on June 15 and December 15 of each year, beginning on June 15, 2014. The 2018 Convertible Notes will mature and become payable on December 15, 2018, subject to earlier conversion into common stock at the holders’ option.
The sale of the 2018 Convertible Notes closed on December 23, 2013 and our net proceeds were $115.4 million, after deducting banker and professional fees of $4.6 million. We used a portion of these proceeds to simultaneously enter into “bought call” and “sold warrant” transactions with Royal Bank of Canada (collectively, the “Note Hedge”). We recorded the Note Hedge on a net cost basis of $13.1 million, as a reduction to “additional paid-in capital” in our accompanying Consolidated Balance Sheets. Under GAAP, the Note Hedge transaction is not expected to be marked-to-market through earnings or comprehensive income in future reporting periods.
Retired Credit Facility
On September 5, 2012, we entered into a credit agreement with Bank of America, N.A., as the administrative agent and an initial lender and Wells Fargo Bank, National Association, as an initial lender (the “Credit Agreement”). The Credit Agreement provided us with a committed $50 million revolving line of credit facility (the “Credit Facility”). The Credit Facility was to expire on September 5, 2014, but was repaid in full and canceled by us on December 20, 2013.
The Credit Facility bore interest, at our election, at a rate equal to the London Interbank Offer Rate (LIBOR), plus an applicable margin (2.75% to 4.25%, dependent on a defined liquidity ratio).
We recognized $1.2 million in 2013, within “interest expense” for this retired credit facility on the accompanying Consolidated Statement of Operations.
Future Capital Requirements
We believe that the future growth of our business will depend on our ability to successfully develop and acquire new drugs for the treatment of cancer and successfully bring these drugs to market.
The timing and amount of our future capital requirements will depend on many factors, including:  
•
the need for additional capital to fund future development programs;
•
the need for additional capital to fund strategic acquisitions;
•
the need for additional capital to fund licensing arrangements;
•
our requirement for additional information technology infrastructure and systems; and
•
adverse outcomes from potential litigation and the cost to defend such litigation.
We believe that our $140 million in aggregate cash and equivalents, and marketable securities as of December 31, 2015 will allow us to fund our current and planned operations for at least the next twelve months. However, we may seek additional capital through the sale of debt or equity securities, if necessary, especially in conjunction with opportunistic acquisitions or

55


licensing arrangements. We may be unable to obtain such additional capital when needed, or on terms favorable to us or our current stockholders and convertible senior note holders.

Contractual Obligations
The following table summarizes our contractual financial commitments as of December 31, 2015 :
 
 
Total
 
Less than
1 Year
 
1-3 Years
 
3-5 Years
 
After
5 Years
 
(in thousands)
Operating lease obligations (1)
$
4,124

 
$
1,283

 
$
2,381

 
$
460

 
$
—

Purchase obligations (2)
39,421

 
32,916

 
6,345

 
118

 
42

Contingent milestone obligations (3)
1,193,413

 
6,000

 
13,200

 
15,529

 
1,158,684

Drug development liability (4)
14,685

 
259

 
735

 
—

 
13,691

Debt obligations (5)
129,753

 
3,300

 
126,453

 
—

 
—

Total
$
1,381,396

 
$
43,758

 
$
149,114

 
$
16,107

 
$
1,172,417

 
(1)
The operating lease obligations are primarily related to the facility lease for our corporate headquarters in Henderson, Nevada, expiring April 30, 2019; and our research and development and administrative facility in Irvine, California, expiring May 31, 2019.
(2)
Purchase obligations represent the amount of open purchase orders and contractual commitments to vendors for products and services that have not been delivered, or rendered, as of December 31, 2015 .
(3)
Milestone obligations are payable contingent upon successfully reaching certain development and regulatory milestones. Given the unpredictability of the drug development process, and the impossibility of predicting the success of current and future clinical trials, these values assume that all development and regulatory milestones under all of our license agreements are successfully met, and represent our best estimate of each achievement date. In the event that the milestones are met, we believe it is likely that the increase in the potential value of the related drug product will exceed the amount of the milestone obligation.
(4)
Research and development services under the Mundipharma Collaboration Agreement (see Note 16 to the accompanying Consolidated Financial Statements) over the period required to complete the jointly agreed-upon clinical development activities.
(5)
Debt obligations represent amount due under our 2018 Convertible Notes issued in December 2013, inclusive of interest payments over its full term (see Note 15 to the accompanying Consolidated Financial Statements).
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements (except for operating leases) that provide financing, liquidity, market or credit risk support, or involve derivatives. In addition, we have no arrangements that may expose us to liability that are not expressly reflected in the accompanying Consolidated Financial Statements and/or notes thereto.
As of December 31, 2015 , we did not have any relationships with unconsolidated entities or financial partnerships, often referred to as “structured finance” or “special purpose entities,” established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. As such, we are not subject to any material financing, liquidity, market or credit risk that could arise if we had engaged in such relationships.

Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
In the normal course of business, our operations are exposed to risks associated with fluctuations in interest rates and foreign currency exchange rates.
The primary objective of our investment activities is to preserve principal, while at the same time maximizing yields without significantly increasing risk. We do not utilize hedging contracts or similar instruments. Because of our ability to generally redeem these investments at par at short notice and without penalty, changes in interest rates would have an immaterial effect on the fair value of these investments. If a 10% change in interest rates were to have occurred on

56
Table of Contents


December 31, 2015 , any decline in the fair value of our investments would not be material in the context of our accompanying Consolidated Financial Statements. In addition, we are exposed to certain market risks associated with credit ratings of corporations whose corporate bonds we may purchase from time to time. If these companies were to experience a significant detrimental change in their credit ratings, the fair market value of such corporate bonds may significantly decrease. If these companies were to default on these corporate bonds, we may lose part or all of our principal. We believe that we effectively manage this market risk by diversifying our investments, and investing in highly rated securities.
We are exposed to foreign currency exchange rate fluctuations relating to payments we make to vendors, suppliers and license partners using foreign currencies. In particular, some of our obligations are incurred in Euros. We mitigate such risk by maintaining a limited portion of our cash in Euros and other currencies.

57
Table of Contents


SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized.
 
Spectrum Pharmaceuticals, Inc.
 
 
By:
 
/s/ R AJESH  C. S HROTRIYA , M.D.
 
 
Rajesh C. Shrotriya, M.D.
 
 
Chairman of the Board, Chief Executive Officer
Date: March 14, 2016
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints each of Rajesh C. Shrotriya and Kurt A. Gustafson as his attorney-in-fact, with full power of substitution, for him in any and all capacities, to sign any amendments to this Form 10-K, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each attorney-in-fact, or his substitute, may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:
 
Signature
Title
Dates
 
 
 
/s/ RAJESH C. SHROTRIYA, M.D.
Chairman of the Board and Chief Executive Officer
March 14, 2016
Rajesh C. Shrotriya, M.D.
 
 
 
 
 
/s/ KURT A. GUSTAFSON
Executive Vice President and Chief Financial Officer
March 14, 2016
Kurt A. Gustafson
 
 
 
 
 
/s/ DOLOTRAI M. VYAS, PH.D.
Director
March 14, 2016
Dolatrai M. Vyas, Ph.D.
 
 
 
 
 
/s/ LUIGI LENAZ, M.D.
Director
March 14, 2016
Luigi Lenaz, M.D.
 
 
 
 
 
/s/ STUART M. KRASSNER, SC.D., PSY.D
Director
March 14, 2016
Stuart M. Krassner, Sc.D., Psy.D.
 
 
 
 
 
/s/ ANTHONY E. MAIDA, III, M.A.,  M.B.A., PH.D.
Director
March 14, 2016
Anthony E. Maida, III, M.A., M.B.A., Ph.D.
 
 
 
 
 
/s/ RAYMOND W. COHEN
Director
March 14, 2016
Raymond W. Cohen
 
 
 
 
 
/s/ GILLES GAGNON
Director
March 14, 2016
Gilles Gagnon, M.Sc., M.B.A
 
 

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Table of Contents



ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
SPECTRUM PHARMACEUTICALS, INC.
FORM 10-K ANNUAL REPORT
For the Fiscal Year Ended December 31, 2015
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 
 
 
 
 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


Table of Contents


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
Spectrum Pharmaceuticals, Inc.
Henderson, Nevada
We have audited the accompanying consolidated balance sheets of Spectrum Pharmaceuticals, Inc. and subsidiaries (the “Company”) as of December 31, 2015 and 2014 , and the related consolidated statements of operations, comprehensive loss, stockholders’ equity, and cash flows for each of the two years in the period ended December 31, 2015 . Our audits also included the financial statement schedule listed in the Index at Item 15. These consolidated financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on the consolidated financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2015 and 2014 , and the results of their operations and their cash flows for each of the two years in the period ended December 31, 2015 , in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2015 , based on the criteria established in Internal Control — Integrated Framework (2013)  issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 14, 2016 expressed an unqualified opinion on the Company’s internal control over financial reporting.
/s/ Deloitte & Touche LLP
Costa Mesa, California
March 14, 2016

F-2


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders of
Spectrum Pharmaceuticals, Inc.


We have audited the accompanying consolidated statements of operations, comprehensive loss, stockholders’ equity, and cash flows for the year ended December 31, 2013. Our audit also included the financial statement schedule listed in the Index at Item 15(a). These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated results of operations and cash flows of Spectrum Pharmaceuticals, Inc. for the year ended December 31, 2013, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

/s/ Ernst & Young LLP
Irvine, California
March 12, 2014


F-3


SPECTRUM PHARMACEUTICALS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and par value amounts)
 
December 31,
 
2015
 
2014
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
139,741

 
$
129,942

Marketable securities
245

 
3,306

Accounts receivable, net of allowance for doubtful accounts of $120 and $120, respectively
30,384

 
70,758

Other receivables
12,572

 
5,489

Inventories
4,176

 
9,200

Prepaid expenses and other assets
4,206

 
3,774

Total current assets
191,324

 
222,469

Property and equipment, net of accumulated depreciation
918

 
1,405

Intangible assets, net of accumulated amortization
190,335

 
230,100

Goodwill
17,960

 
18,195

Other assets
20,683

 
17,864

Total assets
$
421,220

 
$
490,033

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable and other accrued liabilities
$
56,539

 
$
84,994

Accrued payroll and benefits
8,188

 
8,444

Deferred revenue
6,130

 
9,959

Drug development liability
259

 
1,141

Acquisition-related contingent obligations
5,227

 
4,901

Total current liabilities
76,343

 
109,439

Drug development liability, less current portion
14,427

 
14,644

Deferred revenue, less current portion
383

 
—

Acquisition-related contingent obligations
1,439

 
2,441

Deferred tax liability
6,779

 
6,569

Other long-term liabilities
7,444

 
6,088

Convertible senior notes
101,548

 
96,298

Total liabilities
208,363

 
235,479

Commitments and contingencies

 

Stockholders’ equity:
 
 
 
Preferred stock, $0.001 par value; 5,000,000 shares authorized
 
 
 
Series B Junior Participating Preferred Stock, $0.001 par value; 1,500,000 shares authorized: no shares issued and outstanding
—

 
—

Series E Convertible Voting Preferred Stock, $0.001 par value and $10,000 stated value; 2,000 shares authorized; 20 shares issued and outstanding at December 31, 2015 and 2014, respectively (convertible into 40,000 shares of common stock, with aggregate liquidation value of $240)
123

 
123

Common stock, $0.001 par value; 175,000,000 shares authorized; 68,228,935 and 65,969,699 issued and outstanding at December 31, 2015 and 2014, respectively
68

 
66

Additional paid-in capital
552,108

 
538,553

Accumulated other comprehensive loss
(5,319
)
 
(850
)
Accumulated deficit
(334,123
)
 
(283,338
)
Total stockholders’ equity
212,857

 
254,554

Total liabilities and stockholders’ equity
$
421,220

 
$
490,033

See accompanying notes to these consolidated financial statements.

F-4
Table of Contents


SPECTRUM PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share amounts)
 
Year Ended December 31,
 
2015
 
2014
 
2013
Revenues:
 
 
 
 
 
Product sales, net
$
136,851

 
$
186,537

 
$
143,475

License fees and service revenue
25,705

 
293

 
12,379

Total revenues
162,556

 
186,830

 
155,854

Operating costs and expenses:
 
 
 
 
 
Cost of product sales (excludes amortization and impairment of intangible assets)
27,689

 
27,037

 
28,580

Selling, general and administrative
86,514

 
97,412

 
99,315

Research and development
50,766

 
69,662

 
46,670

Amortization and impairment of intangible assets
38,319

 
24,288

 
20,074

Total operating costs and expenses
203,288

 
218,399

 
194,639

Loss from operations
(40,732
)
 
(31,569
)
 
(38,785
)
Other (expense) income:
 
 
 
 
 
Interest expense, net
(9,074
)
 
(8,584
)
 
(2,192
)
Change in fair value of contingent consideration related to acquisitions
676

 
987

 
2,871

Other (expense) income, net
(1,249
)
 
(4,367
)
 
1,470

Total other (expense) income
(9,647
)
 
(11,964
)
 
2,149

Loss before income taxes
(50,379
)
 
(43,533
)
 
(36,636
)
Provision for income taxes
(406
)
 
(2,186
)
 
(25,498
)
Net loss
$
(50,785
)
 
$
(45,719
)
 
$
(62,134
)
Net loss per share:
 
 
 
 
 
Basic
$
(0.78
)
 
$
(0.71
)
 
$
(1.02
)
Diluted
$
(0.78
)
 
$
(0.71
)
 
$
(1.02
)
Weighted average shares outstanding:
 
 
 
 
 
Basic
64,882,417

 
64,708,163

 
60,729,128

Diluted
64,882,417

 
64,708,163

 
60,729,128

See accompanying notes to these consolidated financial statements.

F-5
Table of Contents


SPECTRUM PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In thousands)
 
Year Ended December 31,
 
2015
 
2014
 
2013
Net loss
$
(50,785
)
 
$
(45,719
)
 
$
(62,134
)
Other comprehensive (loss) income, net of tax:
 
 
 
 
 
Unrealized (loss) gain on available-for-sale securities
(1,429
)
 
(1,122
)
 
690

Adjustment for realized gain on available-for-sale securities, and included in net income
—

 
(2,217
)
 
—

Foreign currency translation adjustments
(3,040
)
 
1,595

 
(69
)
Other comprehensive (loss) income, net
(4,469
)
 
(1,744
)
 
621

Total comprehensive loss
$
(55,254
)
 
$
(47,463
)
 
$
(61,513
)
See accompanying notes to these consolidated financial statements.

F-6
Table of Contents


SPECTRUM PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands, except share data)
 
Preferred Stock
 
Common Stock
 
Additional Paid-In Capital
 
Accumulated
Other Comprehensive Income (Loss)
 
Accumulated
Deficit
 
Treasury Stock
 
Total
Stockholders' Equity
 
Shares
 
Amount
 
Shares
 
Amount
 
 
 
 
Shares
 
Amount
 
Balance as of December 31, 2012
20

 
$
123

 
60,026,675

 
$
60

 
$
463,710

 
$
273

 
$
(175,485
)
 
—

 
$
—

 
$
288,681

Net income
—

 
—

 
—

 
—

 
—

 
—

 
(62,134
)
 
—

 
—

 
(62,134
)
Other comprehensive income, net
—

 
—

 
—

 
—

 
—

 
621

 
—

 
—

 
—

 
621

Issuance of common stock to 401(k) plan
—

 
—

 
99,359

 
—

 
860

 
—

 
—

 
—

 
—

 
860

Issuance of common stock for ESPP
—

 
—

 
74,925

 
—

 
495

 
—

 
—

 
—

 
—

 
495

Issuance of common stock upon exercise of stock options
—

 
—

 
825,884

 
1

 
3,576

 
—

 
—

 
—

 
—

 
3,577

Share-based compensation expense and common stock issued (net of forfeitures)
—

 
—

 
471,875

 
—

 
11,193

 
—

 
—

 
—

 
—

 
11,193

Repurchase of shares to satisfy employee tax withholding
—

 
—

 
(159,545
)
 
—

 
(1,509
)
 
—

 
—

 
—

 
—

 
(1,509
)
Purchase of treasury stock
—

 
—

 
—

 
—

 
—

 
—

 
—

 
235,000

 
(1,651
)
 
(1,651
)
Retirement of treasury stock
—

 
—

 
(235,000
)
 
—

 
(1,651
)
 
—

 
—

 
(235,000
)
 
1,651

 
—

Issuance of common stock for Talon acquisition
—

 
—

 
3,000,000

 
3

 
26,307

 
—

 
—

 
—

 
—

 
26,310

Issuance of 2018 Convertible Notes
—

 
—

 
—

 
—

 
14,443

 
—

 
—

 
—

 
—

 
14,443

Balance as of December 31, 2013
20

 
$
123

 
64,104,173

 
$
64

 
$
518,144

 
$
894

 
$
(237,619
)
 
—

 
$
—

 
$
281,606

Net loss
—

 
—

 
—

 
—

 
—

 
—

 
(45,719
)
 
—

 
—

 
(45,719
)
Other comprehensive loss, net
—

 
—

 
—

 
—

 
—

 
(1,744
)
 
—

 
—

 
—

 
(1,744
)
Issuance of common stock to 401(k) plan
—

 
—

 
133,734

 
—

 
1,028

 
—

 
—

 
—

 
—

 
1,028

Issuance of common stock for ESPP
—

 
—

 
99,551

 
—

 
639

 
—

 
—

 
—

 
—

 
639

Issuance of common stock upon exercise of stock options
—

 
—

 
485,260

 
1

 
1,905

 
—

 
—

 
—

 
—

 
1,906

Share-based compensation expense and common stock issued (net of forfeitures)
—

 
—

 
396,083

 
—

 
10,781

 
—

 
—

 
—

 
—

 
10,781

Repurchase of shares to satisfy employee tax withholding
—

 
—

 
(249,102
)
 


 
(1,733
)
 
—

 
—

 
—

 
—

 
(1,733
)
Issuance of common stock to TopoTarget for milestone achievement
—

 
—

 
1,000,000

 
1

 
7,789

 
—

 
—

 
—

 
—

 
7,790

Balance as of December 31, 2014
20

 
$
123

 
65,969,699

 
$
66

 
$
538,553

 
$
(850
)
 
$
(283,338
)
 
—

 
$
—

 
$
254,554

Net loss
—

 
—

 
—

 
—

 
—

 
—

 
(50,785
)
 
—

 
—

 
(50,785
)
Other comprehensive loss, net
—

 
—

 
—

 
—

 
—

 
(4,469
)
 
—

 
—

 
—

 
(4,469
)
Issuance of common stock to 401(k) plan
—

 
—

 
179,865

 
—

 
1,124

 
—

 
—

 
—

 
—

 
1,124

Issuance of common stock for ESPP
—

 
—

 
114,578

 
—

 
627

 
—

 
—

 
—

 
—

 
627

Issuance of common stock upon exercise of stock options
—

 
—

 
456,082

 
—

 
1,482

 
—

 
—

 
—

 
—

 
1,482

Warrant modification
—

 
—

 
—

 
—

 
568

 
—

 
—

 
—

 
—

 
568

Share-based compensation expense and common stock issued (net of forfeitures)
—

 
—

 
1,613,553

 
2

 
10,392

 
—

 
—

 
—

 
—

 
10,394

Repurchase of shares to satisfy employee tax withholding
—

 
—

 
(104,842
)
 


 
(638
)
 
—

 
—

 
—

 
—

 
(638
)
Balance as of December 31, 2015
20

 
$
123

 
68,228,935

 
$
68

 
$
552,108

 
$
(5,319
)
 
$
(334,123
)
 
—

 
$
—

 
$
212,857



See accompanying notes to these consolidated financial statements.

F-7
Table of Contents


SPECTRUM PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands
 
Year Ended December 31,
 
2015
 
2014
 
2013
Cash Flows From Operating Activities:
 
 
 
 
 
Net loss
$
(50,785
)
 
$
(45,719
)
 
$
(62,134
)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:

 

 

Amortization of deferred revenue
—

 
—

 
(12,400
)
Depreciation and amortization
31,869

 
25,352

 
22,096

Stock-based compensation
12,084

 
11,809

 
12,423

Change in fair value of common stock warrants issued to non-employees
—

 
—

 
356

Accretion of debt discount, recorded to interest expense on 2018 Convertible Notes (Note 15)
5,250

 
4,818

 
43

Amortization of deferred financing costs, recorded to interest expense on 2018 Convertible Notes (Note 15)
662

 
599

 
101

Bad debt (recovery) expense
—

 
(85
)
 
127

Non-cash foreign currency exchange loss (income)
(157
)
 
6,033

 
1,222

Impairment of intangible assets (Note 3(g))
7,160

 
—

 
1,023

Change in fair value of contingent consideration related to Talon and EVOMELA acquisitions (Note 9)
(676
)
 
(987
)
 
(2,871
)
Change in fair value of Allos deferred development costs and deferred payment contingency (Note 16)
—

 
—

 
(2,869
)
Research and development expense recognized for BELEODAQ in-license milestone achievement (Note 17(b)(x))
—

 
7,790

 
—

Changes in operating assets and liabilities:

 

 

Accounts receivable, net
40,245

 
(21,671
)
 
42,559

Other receivables
(7,017
)
 
2,070

 
—

Inventories
1,863

 
4,253

 
1,570

Prepaid expenses and current portion of other assets
(446
)
 
(718
)
 
(359
)
Deferred tax assets
—

 
1,724

 
33,252

Other assets
(1,731
)
 
(13,161
)
 
(8,989
)
Accounts payable and other accrued obligations
(28,298
)
 
5,304

 
(23,897
)
Accrued payroll and benefits
(233
)
 
1,594

 
425

Drug development liability
(1,100
)
 
(1,957
)
 
(5,917
)
Deferred revenue
(3,511
)
 
9,803

 
—

Deferred tax liability
210

 
(602
)
 
—

Other long-term liabilities
1,355

 
124

 
2,153

Net cash provided by (used in) operating activities
6,744

 
(3,627
)
 
(2,086
)
Cash Flows From Investing Activities:
 
 
 
 
 
Purchases of property and equipment
(223
)
 
(934
)
 
(161
)
Proceeds from sale of available-for-sale securities
3,061

 
4,093

 
—

Capitalized milestone payment upon FDA approval of BELEODAQ
—

 
(25,000
)
 
—

Acquisition of EVOMELA (Note 10)
—

 
—

 
(3,000
)
Acquisition of Talon, net of cash acquired (Note 10)
—

 
—

 
(11,169
)
Net cash provided by (used in) investing activities
2,838

 
(21,841
)
 
(14,330
)
Cash Flows From Financing Activities:
 
 
 
 
 
Proceeds from Mundipharma related to FOLOTYN collaboration (Note 16)
—

 
—

 
7,000

Proceeds from exercise of stock options
1,482

 
1,906

 
3,576

Proceeds from sale of stock under employee stock purchase plan
627

 
639

 
495

Purchase of treasury stock
—

 
—

 
(1,651
)
Purchase and retirement of restricted stock to satisfy employee tax liability at vesting
(638
)
 
(1,733
)
 
(1,509
)
Proceeds from revolving line of credit (Note 14)
—

 
—

 
100,000

Repayment of revolving line of credit (Note 14)
—

 
—

 
(175,000
)
Proceeds from 2018 Convertible Notes (Note 15)
—

 
—

 
120,000

Deferred financing costs (Note 15)
—

 
—

 
(4,573
)
Proceeds from sale of common stock warrants for 2018 Convertible Notes issuance (Note 15)
—

 
—

 
12,612

Purchase of common stock call options related to 2018 Convertible Notes issuance (Note 15)
—

 
—

 
(25,692
)
Net cash provided by financing activities
1,471

 
812

 
35,258

Effect of exchange rates on cash and equivalents
(1,254
)
 
(1,708
)
 
(2,235
)
Net (decrease) increase in cash and equivalents
9,799

 
(26,364
)
 
16,608

Cash and equivalents — beginning of year
129,942

 
156,306

 
139,698

Cash and equivalents — end of year
$
139,741

 
$
129,942

 
$
156,306

Supplemental Disclosure of Cash Flow Information:
 
 
 
 
 
Cash paid for income taxes
$
335

 
$
329

 
$
—

Cash paid for interest
$
3,300

 
$
3,227

 
$
1,200

Retirement of treasury shares
$
—

 
$
—

 
$
1,652

Common stock issued for Talon acquisition
$
—

 
$
—

 
$
26,310


See accompanying notes to these consolidated financial statements.

F-8

Notes to Consolidated Financial Statements
(all tabular amounts presented in thousands, except share, per share, per unit, and number of years)




1. DESCRIPTION OF BUSINESS, BASIS OF PRESENTATION, AND OPERATING SEGMENT
(a) Description of Business
Spectrum Pharmaceuticals, Inc. (“Spectrum”, the “Company”, “we”, “our”, or “us”) is a biotechnology company, with a primary strategy comprised of acquiring, developing, and commercializing a broad and diverse pipeline of late-stage clinical and commercial products. In addition to an in-house clinical development organization with regulatory and data management capabilities, we have established a commercial infrastructure for our marketed products. Currently, we have six approved oncology/hematology products that target different types of non-Hodgkin's lymphoma ("NHL"), advanced metastatic colorectal cancer, acute lymphoblastic leukemia ("ALL"), and multiple myeloma ("MM").
We also have two drugs in late stage development:
• SPI-2012, is being developed for chemotherapy-induced neutropenia in patients with breast cancer.
•
EOQUIN® (previously referred to as APAZIQUONE for intravesical instillation), is being developed for immediate intravesical instillation post-transurethral resection of bladder tumors in patients with non-muscle invasive bladder cancer.
(b) Basis of Presentation
Principles of Consolidation
The accompanying Consolidated Financial Statements in this Annual Report on Form 10-K have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) and with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). These financial statements include the financial position, results of operations, and cash flows of Spectrum and its subsidiaries, all of which are wholly-owned (except for SPC, as discussed below). All inter-company accounts and transactions among these legal entities have been eliminated in consolidation.
Variable Interest Entity
We own fifty -percent of Spectrum Pharma Canada (“SPC”), a legal entity organized in Quebec, Canada in January 2008. Certain of our drug clinical studies are conducted through this “variable interest entity” (as defined under applicable GAAP) and we fund all of SPC’s operating costs. Since we carry the full risks and rewards of SPC, we meet the applicable GAAP criteria as being its “primary beneficiary.” Accordingly, SPC’s balance sheets and statements of operations are included in our Consolidated Financial Statements as if it were a wholly-owned subsidiary for all periods presented.
(c) Operating Segment
We operate in one reportable operating segment that is focused exclusively on developing and commercializing oncology and hematology drug products. For the years ended December 31, 2015 , 2014 , and 2013 , all of our revenue and related expenses were solely attributable to these activities. Substantially all of our assets (excluding our cash held in certain foreign bank accounts and our ZEVALIN distribution rights for the Ex-U.S. territory) are held in the U.S.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND USE OF ESTIMATES
The preparation of financial statements in conformity with GAAP requires our management to make informed estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. However, actual values may materially differ, since estimates are inherently uncertain. On an on-going basis, our management evaluates its estimates and assumptions, including those related to (i) gross-to-net revenue adjustments; (ii) the timing of revenue recognition; (iii) the collectability of customer accounts; (iv) whether the cost of inventories can be recovered; (v) the fair value of goodwill and intangible assets; (vi) the realization of tax assets and estimates of tax liabilities; (vii) the likelihood of payment and value of contingent liabilities; (viii) the fair value of investments; (ix) the valuation of stock options and the periodic expense recognition of stock-based compensation; and (x) the potential outcome of ongoing or threatened litigation.
The estimates and assumptions that most significantly impact the presented amounts within these Consolidated Financial Statements are further described below:

F-9

Notes to Consolidated Financial Statements
(all tabular amounts presented in thousands, except share, per share, per unit, and number of years)




(i) Revenue Recognition
(a) Product Sales : We sell our products to wholesalers/distributors (i.e., our customers), except for our U.S. sales of ZEVALIN in which case the end-user (i.e., clinic or hospital) is our customer. Our wholesalers distributors in turn sell our products directly to clinics, hospitals, and private oncology-based practices. Revenue from product sales is recognized when title and risk of loss have transferred to our customer, and the following additional criteria are met:
 
(1)
appropriate evidence of a binding arrangement exists with our customer;
(2)
price is substantially fixed and determinable;
(3)
collection from our customer is reasonably assured;
(4)
our customer’s obligation to pay us is not contingent on resale of the product;
(5)
we do not have significant continued performance obligations to our customer; and
(6)
we have a reasonable basis to estimate returns.
Our gross revenue is reduced by our gross-to-net (“GTN”) estimates each period, resulting in our reported “product sales, net” in the accompanying Consolidated Statements of Operations. We defer revenue recognition in full if these estimates are not reasonably determinable at the time of sale. These estimates are based upon information received from external sources (such as written and oral information obtained from our customers with respect to their period-end inventory levels and their sales to end-users during the period), in combination with management’s informed judgments. Due to the inherent uncertainty of estimates, the actual amount we incur may be materially different than our GTN estimates, and require prospective revenue adjustments in periods after the initial sale was recorded.
Our GTN estimates are comprised of the following categories:
Product Returns Allowances : Our FUSILEV, MARQIBO, and BELEODAQ customers are permitted to return purchased products beginning at its expiration date and within six months thereafter. Returned product is generally not resold. Returns for expiry of ZEVALIN and FOLOTYN are not contractually, or customarily, allowed. We estimate expected returns based on historical return rates.
Government Chargebacks : Our products are subject to pricing limits under certain federal government programs (e.g., Medicare and 340B Drug Pricing Program). Qualifying entities (i.e., end-users) purchase products from our customers at their qualifying discounted price. The chargeback amount we incur represents the difference between our contractual sales price to our customer, and the end-user’s applicable discounted purchase price under the government program. There may be significant lag time between our reported net product sales and our receipt of the corresponding government chargeback claims from our customers.
Prompt Pay Discounts : Discounts for prompt payment are estimated at the time of sale, based on our eligible customers’ prompt payment history and the contractual discount percentage.
Commercial Rebates : Commercial rebates are based on (i) our estimates of end-user purchases through a group purchasing organization ("GPO"), (ii) the corresponding contractual rebate percentage tier we expect each GPO to achieve, and (iii) our estimates of the impact of any prospective rebate program changes made by us.
Medicaid Rebates : Our products are subject to state government-managed Medicaid programs, whereby rebates are issued to participating state governments. These rebates arise when a patient treated with our product is covered under Medicaid, resulting in a discounted price for our product under the applicable Medicaid program. Our Medicaid rebate accrual calculations require us to project the magnitude of our sales, by state, that will be subject to these rebates. There is a significant time lag in us receiving rebate notices from each state (generally several months or longer after our sale is recognized). Our estimates are based on our historical claim levels by state, as supplemented by management’s judgment.
Distribution, Data, and GPO Administrative Fees : Distribution, data, and GPO administrative fees are paid to authorized wholesalers/distributors of our products (except for U.S. sales of ZEVALIN) for various commercial services, including: contract administration, inventory management, delivery of end-user sales data, and product returns processing. These fees are based on a contractually-determined percentage of our applicable sales.

F-10

Notes to Consolidated Financial Statements
(all tabular amounts presented in thousands, except share, per share, per unit, and number of years)




(b) License Fees : We recognize revenue for our licensing of intellectual property to third-parties (out-licenses), based on the contractual terms of each agreement and our application of pertinent GAAP. This revenue may be associated with upfront license fees, milestone payments from our licensees’ sales or regulatory achievements, and royalties from our licensees’ sales in applicable territories.
(c) Service Revenue : We receive fees from third-parties under certain arrangements for our research and development activities, sales and marketing activities, clinical trial management, and supply chain services. Payment may be triggered by the successful completion of a phase of development, results from a clinical trial, regulatory approval events, or completion of product or service delivery in our capacity as an agent or principal in such arrangement. We recognize revenue when the corresponding milestone is achieved, or the revenue is otherwise earned and due to us through our on-going activities.
(d) New Revenue Recognition Standard : On April 1, 2015, the FASB voted for a one-year deferral of the effective date of the new revenue recognition standard, ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”). ASU 2014-09 is now effective for us beginning January 1, 2018, requiring revenue recognition in a manner that reasonably reflects the delivery of our goods or services to customers in return for expected consideration. To achieve this core principle, the guidance provides the following steps: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when (or as) the entity satisfies a performance obligation.
We intend to apply the cumulative effect transition method of ASU 2014-09, and we continue to evaluate the impact of this new standard to our current revenue recognition models for product sales , license fees , and service revenue , as described above.
(ii) Cash and Cash Equivalents
Cash and cash equivalents consist of bank deposits and highly liquid investments with maturities of three months or less from the purchase date.
(iii) Marketable Securities
Our marketable securities consist of our holdings in mutual funds and bank certificates of deposit. Since we classify these securities as “available-for-sale” under applicable GAAP, any unrealized gains or losses from their change in value is reflected in “unrealized (loss) gain on securities” on the accompanying Consolidated Statements of Comprehensive Loss. Realized gains and losses on available-for-sale securities are included in “other (expense) income, net” on the accompanying Consolidated Statements of Operations.
(iv) Accounts Receivable
Our accounts receivables are derived from our product sales, license fees, and service revenue, and do not bear interest. The allowance for doubtful accounts is management’s best estimate of the amount of probable credit losses in existing accounts receivable. Account balances are charged off against the allowance after appropriate collection efforts are exhausted.
(v) Inventories
We value inventory at the lower of (i) the actual cost of its purchase or manufacture, or (ii) its current market value. Inventory cost is determined on the first-in, first-out method (FIFO). We regularly review our inventory quantities in process of manufacture and on hand. When appropriate, we record a provision for obsolete and excess inventory to derive its new cost basis, which takes into account our sales forecast by product and corresponding expiry dates.
Direct and indirect manufacturing costs related to the production of inventory prior to U.S. Food and Drug Administration ("FDA") approval are expensed through “research and development,” rather than being capitalized to inventory cost.
(vi) Property and Equipment
Our property and equipment is stated at historical cost, and is depreciated on a straight-line basis over an estimated useful life that corresponds with its designated asset category. We evaluate the recoverability of “long-lived assets” (which includes

F-11

Notes to Consolidated Financial Statements
(all tabular amounts presented in thousands, except share, per share, per unit, and number of years)




property and equipment) whenever events or changes in circumstances in our business indicate that the asset’s carrying amount may not be recoverable through on-going operations.
(vii) Goodwill and Intangible Assets
Our goodwill represents the excess of our business acquisition cost over the estimated fair value of the net assets acquired in the corresponding transaction. Goodwill has an indefinite accounting life and is therefore not amortized. Instead, goodwill is evaluated for impairment on an annual basis (as of each October 1st), unless we identify impairment indicators that would require earlier testing.
We evaluate the recoverability of indefinite-lived intangible assets at least annually, or whenever events or changes in our business indicate that an intangible asset’s (whether indefinite or definite-lived) carrying amount may not be recoverable. Such circumstances could include, but are not limited to the following:
(a) a significant decrease in the market value of an asset;
(b) a significant adverse change in the extent or manner in which an asset is used; or
(c) an accumulation of costs significantly in excess of the amount originally expected for the acquisition of an asset.
Intangible assets with finite useful lives are amortized over their estimated useful lives on a straight-line basis. We review these assets for potential impairment if/when facts or circumstances suggest that the carrying value of these assets may not be recoverable.
(viii) Stock-Based Compensation
Stock-based compensation expense for equity awards granted to our employees and members of our board of directors is recognized on a straight-line basis over each award's vesting period. Recognized compensation expense is net of an estimated forfeiture rate, representing the percentage of awards that are expected to be forfeited (by termination of employment or service) prior to vesting. We use the Black-Scholes option pricing model to determine the fair value of stock options (as of the date of grant) which carry service conditions for vesting. We use the Monte Carlo valuation model to value equity awards (as of the date of grant) which carry combined market conditions and service conditions for vesting.
The calculation of the fair value of stock options and the recognition of stock-based compensation expense requires uncertain assumptions, including (a) the pre-vesting forfeiture rate of the award, (b) the expected term of the stock option, (c) the stock price volatility over the term of the stock option, and (d) the risk-free interest rate over the term of the stock option.
We estimate forfeiture rates based on our employees’ overall forfeiture history, which we believe will be representative of future results. We estimate the expected term of stock options granted based on our employees’ historical exercise patterns, which we believe will be representative of their future behavior. We estimate the volatility of our common stock on the date of grant based on historical volatility of our common stock for a look-back period that corresponds with the expected term. We estimate the risk-free interest rate based upon the U.S. Treasury yields in effect at award grant, for a period equaling the stock options’ expected term.
(ix) Foreign Currency Translation
We translate the assets and liabilities of our foreign subsidiaries that are stated in their functional currencies (i.e., local operating currencies), to U.S. dollars at the rates of exchange in effect at the reported balance sheet date. Revenues and expenses are translated using the monthly average exchange rates during the reported period. Unrealized gains and losses from the translation of our subsidiaries’ financial statements (that are initially denominated in the corresponding functional currency) are included as a separate component of “accumulated other comprehensive loss” in the Consolidated Balance Sheets.
We record foreign currency transactions, when initially denominated in a currency other than the respective functional currency of our subsidiary, at the prevailing exchange rate on the date of the transaction. Resulting unrealized foreign exchange gains and losses from transactions with third parties are included in “accumulated other comprehensive loss” in the Consolidated Balance Sheets.
Beginning April 1, 2015, all unrealized foreign exchange gains and losses associated with our intercompany loans were included in "accumulated other comprehensive loss" in the Consolidated Balance Sheets, as these loans with our foreign subsidiaries are no longer expected to be settled in the "foreseeable future." For the period January 1, 2015 through March 31, 2015, unrealized foreign exchange gains and losses associated with our intercompany loans were included in "accumulated

F-12

Notes to Consolidated Financial Statements
(all tabular amounts presented in thousands, except share, per share, per unit, and number of years)




other comprehensive loss" in the Consolidated Balance Sheets and in "other expense (income), net" in the Consolidated Statements of Operations. In periods prior to January 1, 2015, all unrealized foreign exchange gains and losses associated with intercompany loans were included in “other expense (income), net” in the Consolidated Statements of Operations.
(x) Basic and Diluted Net (Loss) Income per Share
We calculate basic and diluted net (loss) income per share using the weighted average number of common shares outstanding during the periods presented. In periods of a net loss, basic and diluted loss per share are the same. For the diluted earnings per share calculation, we adjust the weighted average number of common shares outstanding to include only dilutive stock options, warrants, and other common stock equivalents outstanding during the period.
(xi) Income Taxes
Deferred tax assets and liabilities are recorded based on the estimated future tax effects of temporary differences between the tax basis of assets and liabilities and amounts reported in the financial statements, as well as operating losses and tax credit carry forwards using enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse. Realization of deferred tax assets is dependent upon future earnings, the timing and amount of which are uncertain.
We have recorded a valuation allowance to reduce our net deferred tax assets, because we believe that, based upon a weighting of positive and negative factors, it is more likely than not that these deferred tax assets will not be realized. If/when we were to determine that our deferred tax assets are realizable, an adjustment to the corresponding valuation allowance would increase our net income in the period that such determination was made.
In the event that we are assessed interest and/or penalties from taxing authorities that have not been previously accrued, such amounts would be included in “Provision for income taxes” within the Consolidated Statements of Operations in the period the notice was received.
(xii) Research and Development Costs
Research and development costs are expensed as incurred, or as certain milestone payments become due, generally triggered by contractual clinical or regulatory events.
(xiii) Fair Value Measurements
We determine measurement-date fair value based on the proceeds that would be received through the sale of the asset, or that we would pay to settle or transfer the liability, in an orderly transaction between market participants. We utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. Fair value measurements are based on a three-tier hierarchy that prioritizes the inputs used to measure fair value. These tiers include the following:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that are publicly accessible at the measurement date.
Level 2: Observable prices that are based on inputs not quoted on active markets, but that are corroborated by market data. These inputs may include quoted prices for similar assets or liabilities or quoted market prices in markets that are not active to the general public.
Level 3: Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs.

3. BALANCE SHEET ACCOUNT DETAIL
The composition of selected financial statement captions that comprise the accompanying Consolidated Balance Sheets are summarized below:
(a) Cash and Cash Equivalents and Marketable Securities

F-13

Notes to Consolidated Financial Statements
(all tabular amounts presented in thousands, except share, per share, per unit, and number of years)




As of December 31, 2015 and December 31, 2014 , our holdings included in “cash and cash equivalents” and “marketable securities” were at major financial institutions.
Our investment policy requires that investments in marketable securities be in only highly-rated instruments, which are primarily U.S. treasury bills or U.S. treasury-backed securities, and limited investments in securities of any single issuer. We maintain cash balances in excess of federally insured limits with reputable financial institutions. To a limited degree, the Federal Deposit Insurance Corporation (FDIC) and other third parties insure these investments. However, these investments are not insured against the possibility of a complete loss of earnings or principal and are inherently subject to the credit risk related to the continued credit worthiness of the underlying issuer and general credit market risks. We manage such risks on our portfolio by investing in highly liquid, highly rated instruments, and limit investing in long-term maturity instruments.
The carrying amount of our equity securities, money market funds, bank certificate of deposits (“Bank CDs”), and mutual funds approximates their fair value (utilizing Level 1 or Level 2 inputs – see Note 2 (xiii) ) because of our ability to immediately convert these instruments into cash with minimal expected change in value.
The following is a summary of our presented “cash and cash equivalents” and “marketable securities”:
 
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Estimated
fair Value
 
Cash and
equivalents
 
Marketable Securities
 
Current
 
Long
Term
December 31, 2015

 

 

 

 

 

 

Bank deposits
$
59,625

 
$
—

 
$
—

 
$
59,625

 
$
59,625

 
$
—

 
$
—

Money market funds
80,116

 
—

 
—

 
80,116

 
80,116

 
—

 
—

Bank certificate of deposits
245

 
—

 
—

 
245

 
—

 
245

 
—

Total cash and equivalents and marketable securities
$
139,986

 
$
—

 
$
—

 
$
139,986

 
$
139,741

 
$
245

 
$
—

December 31, 2014

 

 

 

 

 

 

Bank deposits
$
62,997

 
$
—

 
$
—

 
$
62,997

 
$
62,997

 
$
—

 
$
—

Money market funds
66,945

 
—

 
—

 
66,945

 
66,945

 
—

 
—

Bank certificate of deposits
244

 
—

 
—

 
244

 
—

 
244

 
—

Mutual funds
3,062

 
—

 
—

 
3,062

 
—

 
3,062

 
—

Total cash and equivalents and marketable securities
$
133,248

 
$
—

 
$
—

 
$
133,248

 
$
129,942

 
$
3,306

 
$
—

As of December 31, 2015 , none of these securities had been in a continuous unrealized loss position longer than one year.

(b) Property and Equipment
“Property and equipment, net of accumulated depreciation” consist of the following:
 
 
December 31,
 
2015
 
2014
Computers hardware and software
$
3,785

 
$
3,616

Laboratory equipment
608

 
643

Office furniture
355

 
344

Leasehold improvements
2,872

 
2,847

Property and equipment, at cost
7,620

 
7,450

(Less): Accumulated depreciation
(6,702
)
 
(6,045
)
Property and equipment, net of accumulated depreciation
$
918

 
$
1,405


F-14

Notes to Consolidated Financial Statements
(all tabular amounts presented in thousands, except share, per share, per unit, and number of years)




Depreciation expense (included within “total operating costs and expenses” in the accompanying Consolidated Statements of Operations) for the years ended December 31, 2015 , 2014 , and 2013 was $0.7 million , $1.1 million , and $1.2 million , respectively.
(c) Inventories
“Inventories” consist of the following:
 
December 31,
 
2015
 
2014
Raw materials
$
1,606

 
$
1,507

Work in process*
4,228

 
3,979

Finished goods
1,498

 
3,714

(Less:) Non-current portion of inventories included within "other assets" **
$
(3,156
)
 
$
—

Inventories
$
4,176

 
$
9,200

    
*Our work-in-process inventory at December 31, 2015 includes $0.8 million of packaged but unlabeled ZEVALIN vials with expiry in December 2017 (with possible extensions thereafter). In addition to the amounts presented at December 31, 2015, we received $3.4 million of ZEVALIN antibody materials in January 2016 for its future manufacture (representing strategic long-term supply). We expect to sell our existing and committed ZEVALIN inventory over the next few years. However, if our production strategy changes in our transition to a new contract manufacturer, it could result in a charge in that period to “cost of product sales (excludes amortization of intangible assets)” within the Consolidated Statements of Operations.

** The non-current portion of inventories included within "other assets" at December 31, 2015 of $3.2 million , represents inventories we don't expect to sell within the next twelve months based on current estimates.
(d) Accounts receivables, net of allowance for doubtful accounts
“Accounts receivables, net” consists of trade receivables from our customers. We are exposed to credit risk associated with trade receivables that result from these product sales. We do not require collateral or deposits from our customers due to our assessment of their creditworthiness and our long-standing relationship with them. We maintain reserves for potential bad debt, though credit losses have historically been nominal and within management’s expectations. A summary of our customers that represent 10% or more of our accounts receivables as of December 31, 2015 and 2014 are as follows:
 
 
Year Ended December 31,
 
2015
 
2014
McKesson Corporation and its affiliates
$
20,281

 
66.7
%
 
$
22,534

 
31.9
%
Cardinal Health, Inc. and its affiliates
7,241

 
23.8
%
 
8,432

 
11.9
%
Oncology Supply, a division of ASD Specialty Healthcare, Inc., and its affiliates (excluding ICS)
*

 
—
%
 
36,154

 
51.1
%
All other customers
2,862

 
9.4
%
 
3,638

 
5.1
%
Total Accounts Receivables, net
$
30,384

 
100.0
%
 
$
70,758

 
100.0
%
 
*
Less than 10%

(e) Prepaid expenses and other assets
“Prepaid expenses and other assets” consist of the following:
 
December 31,
 
2015
 
2014
Prepaid operating expenses
$
3,507

 
$
3,112

2018 Convertible Notes issuance costs (current portion)
699

 
662

Prepaid expenses and other assets
$
4,206

 
$
3,774


F-15

Notes to Consolidated Financial Statements
(all tabular amounts presented in thousands, except share, per share, per unit, and number of years)




(f) Other receivables
“Other receivables” consist of the following:
 
December 31,
 
2015
 
2014
Income tax receivable
$
1,301

 
$
1,387

Insurance receivable
7,100

 
—

Mundipharma promissory note
2,215

 
—

Research and development expenses - reimbursements due
1,699

 
4,102

Other miscellaneous receivables
257

 
—

Other receivables
$
12,572

 
$
5,489

(g) Intangible Assets and Goodwill
“Intangible assets, net of accumulated amortization” consist of the following:
 
 
 
 
December 31, 2015
 
Historical
Cost
 
Accumulated
Amortization
 
Foreign
Currency
Translation
 
Impairment
 
Net Amount
 
Full
Amortization
Period
(months)
 
Remaining
Amortization
Period
(months)
MARQIBO IPR&D (NHL indication)
$
17,600

 
$
—

 
$
—

 
$
—

 
$
17,600

 
n/a
 
n/a
EVOMELA IPR&D
7,700

 
—

 
—

 
—

 
7,700

 
n/a
 
n/a
BELEODAQ distribution rights
25,000

 
(2,812
)
 
—

 
—

 
22,188

 
160
 
142
MARQIBO distribution rights
26,900

 
(8,544
)
 
—

 
—

 
18,356

 
81
 
51
FOLOTYN distribution rights
118,400

 
(29,474
)
 
—

 
—

 
88,926

 
152
 
113
ZEVALIN distribution rights – U.S.
41,900

 
(30,608
)
 
—

 
—

 
11,292

 
123
 
39
ZEVALIN distribution rights – Ex-U.S.
23,490

 
(12,632
)
***
(4,353
)
 
—

 
6,505

 
96
 
51
FUSILEV distribution rights*
16,778

 
(9,618
)
 
—

 
(7,160
)
 
—

 
56
 
0
FOLOTYN out-license**
27,900

 
(9,109
)
 
—

 
(1,023
)
 
17,768

 
110
 
79
Total intangible assets
$
305,668

 
$
(102,797
)
 
$
(4,353
)
 
$
(8,183
)
 
$
190,335

 

 

 
*
On February 20, 2015, the U.S. District Court for the District of Nevada found the patent covering FUSILEV to be invalid, which was upheld on appeal. On April 24, 2015, Sandoz began to commercialize a generic version of FUSILEV. This represented a “triggering event” under applicable GAAP in evaluating the value of our FUSILEV distribution rights as of March 31, 2015, resulting in a $7.2 million impairment charge (non-cash) in the first quarter of 2015. We accelerated amortization expense recognition for the remaining net book value of FUSILEV distribution rights.

**
On May 29, 2013, we amended our FOLOTYN collaboration agreement with Mundipharma. As a result of the amendment, Europe and Turkey were excluded from Mundipharma’s commercialization territory, and their royalty rates and milestone payments to us were modified. This constituted a change under which we originally valued the FOLOTYN out-license as part of business combination accounting, resulting in an impairment charge (non-cash) of $1.0 million resulted from this amendment.

***
This value is inclusive of $3.7 million of accelerated amortization expense, recorded in the fourth quarter of 2015, which specifically relates to our allocation of the historical cost of certain ZEVALIN ex-U.S. rights out-licensed to Mundipharma (see Note 12 ) at that time.

Our annual impairment evaluation (as of October 1 st ) of our indefinite-lived intangible assets was completed by our management, with no resulting impairment. The assets under review included MARQIBO IPR&D and EVOMELA IPR&D, which we carry on our accompanying Consolidated Balance Sheet as of December 31, 2015 , at $17.6 million and $7.7 million , respectively.

F-16

Notes to Consolidated Financial Statements
(all tabular amounts presented in thousands, except share, per share, per unit, and number of years)




 
 
 
December 31, 2014
 
Historical
Cost
 
Accumulated
Amortization
 
Foreign
Currency
Translation
 
Impairment
 
Net Amount
MARQIBO IPR&D (NHL indications)
$
17,600

 
$
—

 
$
—

 
$
—

 
$
17,600

EVOMELA IPR&D
7,700

 
—

 
—

 
—

 
7,700

BELEODAQ distribution rights
25,000

 
(937
)
 
—

 
—

 
24,063

MARQIBO distribution rights
26,900

 
(4,225
)
 
—

 
—

 
22,675

FOLOTYN distribution rights
118,400

 
(20,030
)
 
—

 
—

 
98,370

ZEVALIN distribution rights – U.S.
41,900

 
(27,134
)
 
—

 
—

 
14,766

ZEVALIN distribution rights – Ex-U.S.
23,490

 
(7,402
)
 
(2,162
)
 
—

 
13,926

FUSILEV distribution rights
16,778

 
(6,270
)
 
—

 
—

 
10,508

FOLOTYN out-license
27,900

 
(6,385
)
 
—

 
(1,023
)
 
20,492

Total intangible assets
$
305,668

 
$
(72,383
)
 
$
(2,162
)
 
$
(1,023
)
 
$
230,100


Intangible asset amortization and impairment expense recognized in 2015 , 2014 , and 2013 was $38.3 million , $24.3 million , and $21.2 million , respectively.

Estimated intangible asset amortization expense (excluding incremental amortization from the reclassification of IPR&D to developed technology) for the five succeeding years and thereafter is as follows:
Years Ending December 31
 
2016
$
23,360

2017
23,368

2018
23,368

2019
20,762

2020
15,505

2021 and thereafter
58,672


$
165,035

“Goodwill” is comprised of the following:

December 31,

2015
 
2014
Acquisition of Talon
$
10,526

 
$
10,526

Acquisition of ZEVALIN Ex-U.S. distribution rights
2,525

 
2,525

Acquisition of Allos
5,346

 
5,346

Foreign currency exchange translation effects
(437
)
 
(202
)
Goodwill
$
17,960

 
$
18,195

(h) Other assets
“Other assets” are comprised of the following:

F-17

Notes to Consolidated Financial Statements
(all tabular amounts presented in thousands, except share, per share, per unit, and number of years)




 
December 31,
 
2015
 
2014
Equity securities and secured promissory note (see Note 11 )*
$
6,689

 
$
8,501

Supplies and deposits
185

 
234

2018 Convertible Notes issuance costs (excluding current portion)**
1,472

 
2,171

Executive officer life insurance – cash surrender value
9,181

 
6,958

Inventories - non-current portion
$
3,156

 
$
—

Other assets
$
20,683

 
$
17,864

* These equity securities were excluded from “marketable securities” (see Note 3(a) ) due to our intent to hold these securities for at least one year beyond December 31, 2015 , as discussed in Note 11 . Unrealized losses from these equity securities were recognized through “unrealized (loss) gain on available-for-sale securities" within the Consolidated Statements of Comprehensive Loss, and were $1.4 million for the year ended December 31, 2015 .

** In April 2015, the FASB issued Accounting Standards Update 2015-03, Simplifying the Presentation of Debt Issuance Costs (“ASU 2015-03”). ASU 2015-03 requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability. However, ASU 2015-03 does not impact the recognition and measurement guidance for debt issuance costs. ASU 2015-03 is effective for our annual and interim reporting periods beginning January 1, 2016. Accordingly, we will record a reclassification of our 2018 Convertible Notes issuance costs, from “other assets” to “convertible senior notes” within our Consolidated Balance Sheets, beginning January 1, 2016.
(i) Accounts payable and other accrued obligations
Accounts payable and other accrued obligations are comprised of the following:
 
December 31,
 
2015
 
2014
Trade accounts payable and other accrueds
$
26,684

 
$
24,571

Accrued rebates
18,166

 
41,782

Accrued product royalty
4,908

 
5,182

Allowance for returns
1,394

 
1,135

Accrued data and distribution fees
1,830

 
3,952

Accrued GPO administrative fees
1,058

 
3,222

Inventory management fee
498

 
1,110

Allowance for chargebacks
2,001

 
4,040

Accounts payable and other accrueds
$
56,539

 
$
84,994


Amounts presented within “accounts payable and other accrued liabilities” in the accompanying Consolidated Balance Sheets for GTN estimates (see Note 2(i) ) were as follows:
Description
Rebates and
Chargebacks
 
Data and
Distribution,
GPO Fees, and
Inventory
Management
Fees
 
Returns
Balance as of December 31, 2013
$
33,967

 
$
5,373

 
$
2,900

Add: provisions (recovery)
76,636

 
21,330

 
(78
)
(Less): credits or actual allowances
(64,781
)
 
(18,419
)
 
(1,687
)
Balance as of December 31, 2014
45,822

 
8,284

 
1,135

Add: provisions
75,498

 
15,928

 
1,486

(Less): credits or actual allowances
(101,153
)
 
(20,826
)
 
(1,227
)
Balance as of December 31, 2015
$
20,167

 
$
3,386

 
$
1,394


F-18

Notes to Consolidated Financial Statements
(all tabular amounts presented in thousands, except share, per share, per unit, and number of years)




(j) Deferred revenue
Deferred revenue (including current and long-term) is comprised of the following:
 
December 31,
 
2015
 
2014
CASI out-license (see Note 11)
$
—

 
$
9,959

FUSILEV deferred revenue*
6,083

 
—

Dr. Reddy's out-license (see Note 17(b)(iii))
430

 
—

Deferred revenue
$
6,513

 
$
9,959

* During the third quarter 2015, we deferred revenue recognition related to certain FUSILEV product shipments that did not meet our revenue recognition criteria (see Note 2(i)(a) ), aggregating $9.9 million . Specifically, this deferral is a result of our inability to estimate future rebate values (with requisite precision) offered to our customers in order to compete with generic products. During the fourth quarter of 2015, we recognized $3.8 million for these third quarter shipments within "Product sales, net." As of December 31, 2015 , $6.1 million of these third quarter 2015 shipments remains deferred.
(k) Other long-term liabilities
Other long-term liabilities are comprised of the following:
 
 
December 31,
 
2015
 
2014
Accrued executive deferred compensation
$
6,458

 
$
4,694

Deferred rent (non-current portion)
248

 
364

Business acquisition liability
—

 
300

Other tax liabilities
738

 
730

Other long-term liabilities
$
7,444

 
$
6,088



4. GROSS-TO-NET PRODUCT SALES
The below table presents a GTN product sales reconciliation for the accompanying Consolidated Statement of Operations:

2015
 
2014
 
2013
Gross product sales
$
215,136

 
$
284,685

 
$
224,301

Commercial rebates and government chargebacks
(61,283
)
 
(76,636
)
 
(63,610
)
Distribution, data, and GPO administrative fees
(15,613
)
 
(21,330
)
 
(19,067
)
Prompt pay discounts
(16
)
 
(260
)
 
(183
)
Product returns allowances
(1,373
)
 
78

 
2,034

Product sales, net
$
136,851

 
$
186,537

 
$
143,475


5. NET PRODUCT SALES BY GEOGRAPHIC REGION, PRODUCT LINE, AND GROSS PRODUCT SALES BY SIGNIFICANT CUSTOMERS
The below table presents our net product sales by geography for the years ended December 31, 2015 , 2014 , and 2013 :
Net Product Sales by Geographic Region

F-19

Notes to Consolidated Financial Statements
(all tabular amounts presented in thousands, except share, per share, per unit, and number of years)




 
Year Ended December 31,
 
2015
 
2014
 
2013
United States
$
130,432

 
95.3
%
 
$
177,979

 
95.4
%
 
$
133,462

 
93.0
%
International:

 

 

 

 

 

Europe (ZEVALIN and FOLOTYN only)
2,234

 
1.6
%
 
3,357

 
1.8
%
 
3,953

 
2.8
%
Asia Pacific (ZEVALIN only)
4,185

 
3.1
%
 
5,201

 
2.8
%
 
6,060

 
4.2
%
Total International
6,419

 
4.7
%
 
8,558

 
4.6
%
 
10,013

 
7.0
%
Net product sales
$
136,851

 
100
%
 
$
186,537

 
100.0
%
 
$
143,475

 
100.0
%
Net Sales by Product
The below table presents our net product sales by product for the years ended December 31, 2015 , 2014 , and 2013 :
 
Year Ended December 31,
 
2015
 
2014
 
2013
FUSILEV
$
60,710

 
44.4
%
 
$
105,608

 
56.6
%
 
$
68,397

 
47.7
%
FOLOTYN
40,606

 
29.7
%
 
47,556

 
25.5
%
 
44,370

 
30.9
%
ZEVALIN
17,457

 
12.8
%
 
22,169

 
11.9
%
 
29,393

 
20.5
%
MARQIBO
8,006

 
5.9
%
 
6,328

 
3.4
%
 
1,315

 
0.9
%
BELEODAQ
10,072

 
7.4
%
 
4,876

 
2.6
%
 
—

 
—
%
Net product sales
$
136,851

 
100.0
%
 
$
186,537

 
100.0
%
 
$
143,475

 
100.0
%
Gross Product Sales by Customer
The below table presents the customers that represent 10% or more of our gross product sales in 2015 , 2014 , and 2013 :
 
Year Ended December 31,
 
2015
 
2014
 
2013
Oncology Supply, a division of ASD Specialty Healthcare, Inc., and its affiliates (excluding ICS)
$
78,989

 
36.7
%
 
$
115,079

 
40.4
%
 
$
79,497

 
35.4
%
McKesson Corporation and its affiliates
73,577

 
34.2
%
 
93,656

 
32.9
%
 
44,350

 
19.8
%
Integrated Commercialization Solutions, Inc. (“ICS”)
*

 
—
%
 
*

 
—
%
 
35,548

 
15.8
%
Cardinal Health, Inc. and its affiliates
37,414

 
17.4
%
 
*

 
—
%
 
*

 
—
%
All Other Customers
25,156

 
11.7
%
 
75,950

 
26.7
%
 
64,906

 
29.0
%
Gross product sales
$
215,136

 
100.0
%
 
$
284,685

 
100.0
%
 
$
224,301

 
100.0
%
*
Less than 10%

6. STOCK-BASED COMPENSATION
2009 Stock Incentive Plan Overview
We have one active stockholder-approved stock-based compensation plan, the 2009 Incentive Award Plan (the “2009 Plan”), which replaced our former stockholder-approved plans. We may grant incentive stock options, non-qualified options, restricted stock awards, and stock appreciation rights under the 2009 Plan.
The maximum number of our common stock available for issuance under the 2009 Plan at inception was 10 million shares. Beginning on January 1, 2010, and each January 1st thereafter, the number of shares of common stock available for issuance under the 2009 Plan automatically increases by the greater of (i)  2.5 million shares or (ii) a number of shares such that the total number of shares of common stock available for issuance under the 2009 Plan shall equal 30% of the then number of shares of common stock issued and outstanding. As of December 31, 2015 , 8.6 million shares were available for grant. It is our

F-20

Notes to Consolidated Financial Statements
(all tabular amounts presented in thousands, except share, per share, per unit, and number of years)




policy that before stock is issued through the exercise of stock options, we must first receive all required cash payment for such shares (whether through an upfront cash exercise or net-settlement exercise).
Stock-based awards are governed by agreements between us and the recipients. Incentive stock options and nonqualified stock options may be granted under the 2009 Plan at an exercise price of not less than 100% of the closing fair market value of our common stock on the respective date of grant. The grant date is generally the date the award is approved by the Compensation Committee of the Board of Directors, though for aggregate awards of 50,000 or less in each quarter, the grant date is the date the award is approved by our Chief Executive Officer.
Stock-based awards generally vest 25% on the first anniversary of the date of grant, or for new hires, the first anniversary of their initial date of employment. Awards generally vest monthly thereafter on a straight-line basis over three years. Stock options must be exercised, if at all, no later than 10 years from the date of grant. Upon termination of employment, vested stock options may be exercised within 90 days from the last date of employment. In the event of an optionee’s death, disability, or retirement, the exercise period is 365 days from the last date of employment.
Employee Stock Purchase Plan
Under the terms of our 2009 Employee Stock Purchase Plan (the “ESPP”), eligible employees can purchase common stock through payroll deductions. The purchase price is equal to the closing price of our common stock on the first or last day of the offering period (whichever is less), minus a 15% discount. We use the Black-Scholes option-pricing model, in combination with the discounted employee price, in determining the value of ESPP expense to be recognized during each offering period. A participant may purchase a maximum of 50,000  shares of common stock during a six -month offering period, not to exceed $25,000 worth of stock on the offering date during each plan year.
A total of 4.3 million shares of common stock are authorized for issuance under the ESPP. Beginning on January 1, 2010, and each January 1st thereafter, the number of shares of common stock available for issuance under the ESPP shall automatically increase by an amount equal to the lesser of (i)  one million  shares or (ii) an amount determined by the ESPP administrator. However, in no event shall the number of shares of common stock available for future sale under the ESPP exceed 10 million  shares, subject to capitalization adjustments occurring due to dividends, splits, dissolution, liquidation, mergers, or changes in control.
Stock-Based Compensation Expense Summary
We classify our stock-based compensation expense (inclusive of our incentive stock plan, employee stock purchase plan, and 401(k) contribution matching program) in the accompanying Consolidated Statements of Operations, based on the department to which the recipient belongs. Stock-based compensation expense included within “Total operating costs and expenses” for years ended December 31, 2015 , 2014 and 2013 was as follows:
 
 
Year Ended December 31,
 
2015
 
2014
 
2013
Cost of product sales
$
62

 
$
—

 
$
—

Selling, general and administrative
10,049

 
10,053

 
10,762

Research and development
1,973

 
1,756

 
2,017

Total
$
12,084

 
$
11,809

 
$
12,779

Employee stock-based compensation expense for the years ended December 31, 2015 , 2014 and 2013 was recognized (reduced for estimated forfeitures) on a straight-line basis over the vesting period. Forfeitures are estimated at the time of grant and prospectively revised if actual forfeitures differ from those estimates. We estimate forfeitures of stock options using the historical exercise behavior of our employees. For purposes of this estimate, we have applied an estimated forfeiture rate of 11% , 8% , and 8% for the years ended December 31, 2015 , 2014 and 2013 .
Valuation Assumptions – Restricted Stock and Stock Options

F-21

Notes to Consolidated Financial Statements
(all tabular amounts presented in thousands, except share, per share, per unit, and number of years)




The grant-date fair value per share for restricted stock awards was based upon the closing market price of our common stock on the award grant-date.
The fair value of stock options granted was estimated at the date of grant using the Black-Scholes option-pricing model. The following assumptions were used to determine fair value for the stock awards granted in the applicable year:
 
Year Ended December 31,
 
2015
 
2014
 
2013
Expected option life (in years) (a)
5.43
 
4.95
 
4.95
Risk-free interest rate (b)
1.25% - 1.68%
 
0.58% - 1.52%
 
0.35% - 0.78%
Volatility (c)
48.0% - 50.2%
 
48.9% - 62.1%
 
58.3% -71.5%
Dividend yield (d)
—%
 
—%
 
—%
Weighted-average grant-date fair value per stock option
$2.85
 
$3.49
 
$4.66
 
(a)
Determined by the historical stock option exercise behavior of our employees (maximum term is 10 years).
(b)
Based upon the U.S. Treasury yields in effect during the period which the options were granted (for a period equaling the stock options’ expected term).
(c)
Measured using our historical stock price for a period equal to stock options’ expected term.
(d)
We do not expect to declare any cash dividends in the foreseeable future.

Stock Option Activity
Stock option activity during the years ended December 31, 2015 , 2014 and 2013 is as follows:

Number of
Shares
 
Weighted-
Average
Exercise
Price/Share
 
Weighted-
Average
Remaining
Contractual
Term (Years)
 
Aggregate
Intrinsic
Value
 

Outstanding — December 31, 2012
10,399,265

 
$
6.57

 

 

 

Granted
2,041,300

 
8.92

 

 

 

Exercised
(825,884
)
 
4.40

 

 
$
3,435

 
(1
)
Forfeited
(202,882
)
 
8.22

 

 

 

Expired
(82,581
)
 
8.91

 

 

 

Outstanding — December 31, 2013
11,329,218

 
7.10

 

 

 

Granted
2,576,292

 
7.60

 

 

 

Exercised
(485,260
)
 
4.77

 

 
$
1,629

 
(1
)
Forfeited
(557,109
)
 
9.65

 

 

 

Expired
(214,039
)
 
10.70

 

 

 

Outstanding — December 31, 2014
12,649,102

 
7.12

 

 

 

Granted
2,219,587

 
6.04

 

 

 

Exercised
(456,082
)
 
4.45

 

 
$
977

 
(1
)
Forfeited
(296,162
)
 
8.06

 

 

 

Expired
(279,594
)
 
9.05

 

 

 

Outstanding — December 31, 2015
13,836,851

 
$
6.97

 
6.34
 
$
7,516

 
(2
)
Vested (exercisable) — December 31, 2015
10,235,721

 
$
6.94

 
5.40
 
$
7,159

 
(2
)
Unvested (unexercisable) — December 31, 2015
3,601,130

 
$
7.06

 
9.00
 
$
357

 
(2
)

(1)
Represents the total difference between our closing stock price at the time of exercise and the stock option exercise price, multiplied by the number of options exercised.

F-22

Notes to Consolidated Financial Statements
(all tabular amounts presented in thousands, except share, per share, per unit, and number of years)




(2)
Represents the total difference between our closing stock price on the last trading day of 2015 and the stock option exercise price, multiplied by the number of in-the-money options as of December 31, 2015 . The amount of intrinsic value will change based on the fair market value of our stock.
The following table summarizes information with respect to stock option grants as of December 31, 2015 :
 
Outstanding
 
Exercisable
Exercise Price
Granted Stock
Options
Outstanding
 
Weighted-
Average
Remaining
Contractual
Life (Years)
 
Weighted-
Average
Exercise
Price
 
Granted
Stock
Options
Exercisable
 
Weighted-
Average
Exercise
Price
$0.92 - 3.15
1,090,385

 
2.49
 
$
2.18

 
1,090,385

 
$
2.18

$3.16 - 4.95
1,378,444

 
4.29
 
4.24

 
1,378,444

 
4.24

$4.96 - 6.9
4,394,294

 
6.14
 
6.08

 
2,999,511

 
6.22

$6.91 - 8.99
4,500,895

 
7.61
 
7.78

 
2,595,943

 
7.95

$9.00 - 16.32
2,472,833

 
7.21
 
10.71

 
2,171,438

 
10.83


13,836,851

 
6.34
 
$
6.97

 
10,235,721

 
$
6.94

As of December 31, 2015 , there was unrecognized compensation expense of $8.8 million related to unvested stock options, which we expect to recognize over a weighted average period of 2.41  years.
Restricted Stock Award Activity
A summary of restricted stock award activity is as follows:
 
Number of
Restricted Stock
Awards
 
Weighted Average
Fair Value per
Share at Grant
Date
Unvested — December 31, 2012
1,034,604

 
$
11.00

Granted
523,800

 
8.74

Vested
(501,660
)
 
9.72

Forfeited
(49,625
)
 
10.60

Unvested — December 31, 2013
1,007,119

 
10.09

Granted
581,194

 
7.52

Vested
(578,985
)
 
10.24

Forfeited
(185,111
)
 
9.88

Unvested — December 31, 2014
824,217

 
8.22

Granted
1,948,585

 
6.32

Vested
(364,507
)
 
8.47

Forfeited
(234,313
)
 
7.32

Unvested — December 31, 2015
2,173,982

 
$
6.58

 

2015
 
2014
 
2013
Restricted stock expense
$
4,006

 
$
3,830

 
$
4,202

As of December 31, 2015 , there was approximately $9.8 million of unrecorded expense related to issued restricted stock that will be recognized over an estimated weighted average period of 2.29  years. These unvested shares are included in our issued and outstanding common stock as of December 31, 2015 .
401(k) Plan – Stock Matching Contribution

F-23

Notes to Consolidated Financial Statements
(all tabular amounts presented in thousands, except share, per share, per unit, and number of years)




We issued shares of common stock to our employees in connection with our 401(k) program, partially matching our employees’ annual 401(k) contributions, as summarized below:

2015
 
2014
 
2013
Shares of common stock issued
179,865

 
133,734

 
99,359

Match contribution value*
$
1,124

 
$
1,028

 
$
860

*
Represents our stock price on the date of the common stock issuance multiplied by the number of shares of common stock issued.

7. STOCKHOLDERS’ EQUITY
Authorized Stock
On December 13, 2010, we filed the Certificate of Designation of Rights, Preferences and Privileges of Series B Junior Participating Preferred Stock with the Delaware Secretary of State which authorized 1.5 million shares to be designated as Series B Junior Participating Preferred Stock. On June 13, 2011, our stockholders approved an amendment to our Certificate of Incorporation to increase the authorized number of shares of our common stock from 100 million  shares to 175 million  shares. The amendment was filed with the Delaware Secretary of State on June 24, 2011. As of December 31, 2015 , we also had five million shares of preferred stock authorized, of which 1.5 million shares were designated as Series B Junior Participating Preferred Stock and 2,000 shares were designated as Series E Convertible Voting Preferred Stock.
Stockholder Rights Agreement
On November 29, 2010, our Board of Directors approved a replacement rights agreement, effective December 13, 2010, that replaced the stockholder rights agreement which was originally adopted in 2000. This replacement rights agreement will extend until December 13, 2020 . A stockholder rights agreement is designed to deter coercive, unfair, or inadequate takeovers and other abusive tactics that might be used in an attempt to gain control of our company. A stockholder rights agreement will not prevent takeovers at a full and fair price, but rather is designed to deter coercive takeover tactics and to encourage anyone attempting to acquire our company to first negotiate with our Board of Directors.
Under the terms of the new Stockholder Rights Agreement, the rights become exercisable upon the earlier of 10  days after a person or group of affiliated or associated persons has acquired 15% or more of the outstanding shares of our common stock or 10 business days after a tender offer has commenced that would result in a person or group beneficially owning 15% or more of our outstanding common stock. These rights could delay or discourage someone from acquiring our company, even if doing so would potentially benefit our stockholders.
We currently have no stockholders who own 15% or more of the outstanding shares of our common stock. five days after the rights become exercisable, each right, other than rights held by the person or group of affiliated persons whose acquisition of more than 15% of our outstanding common stock caused the rights to become exercisable, will entitle its holder to buy, in lieu of shares of Series B Preferred Stock, a number of shares of our common stock having a market value of two times the exercise price of the rights. After the rights become exercisable, if we are a party to certain merger or business combination transactions or transfers 50% or more of our assets or earnings power (as defined in the Stockholder Rights Agreement), each right will entitle its holder to buy a number of shares of common stock of the acquiring or surviving entity having a market value of twice the exercise price of the right.
Series E Preferred Stock
In September 2003, we received gross cash proceeds of $20 million in exchange for the issuance of 2,000  shares of our Series E Convertible Voting Preferred Stock, convertible into four million shares of common stock. As of December 31, 2015 and 2014 , 20  shares of Series E Preferred Stock were outstanding. No dividends are payable on the Series E Preferred Stock. Pursuant to certain provisions of the Certificate of Designation, Rights and Preferences of the Series E Preferred Stock, we have the option to redeem all of the unconverted Series E Preferred Stock outstanding at the end of a 20 -day trading period if, among other things, in that period our common stock trades above $12.00 per share.
In the event we are the subject of any voluntary or involuntary liquidation, dissolution or winding up, before any distribution of our assets shall be made to the common stockholders, the holders of the Series E Preferred Stock shall be entitled to receive a liquidation preference in an amount equal to 120% of the stated value per share plus any declared and unpaid dividends thereon.

F-24

Notes to Consolidated Financial Statements
(all tabular amounts presented in thousands, except share, per share, per unit, and number of years)




Common Stock Issuable
As of December 31, 2015 , 26 million shares of our common stock were issuable upon conversion, or exercise of rights granted (regardless of whether in or out-of-the-money), as summarized below:
Conversion of Series E Preferred Stock
40,000

2018 Convertible Notes
11,401,284

Exercise of issued employee stock options
13,836,851

Exercise of issued warrants
445,000

Management incentive plan restricted stock units
260,000

Total common shares
25,983,135


Warrant Activity
We typically issue warrants to purchase shares of our common stock to investors as part of a financing transaction or in connection with services rendered by placement agents or consultants. Our outstanding warrants expire on varying dates through December 2020 . A summary of warrant activity is as follows:

Number of
Shares
 
Weighted
Average
Exercise Price
Outstanding — December 31, 2012
395,000

 
$
5.45

Granted
50,000

 
7.51

Outstanding — December 31, 2013
445,000

 
$
6.39

Granted
—

 
—

Outstanding — December 31, 2014
445,000

 
$
6.39

Granted
—

 
—

Outstanding — December 31, 2015
445,000

 
$
6.78

Exercisable — December 31, 2015
445,000

 
$
6.78


8. NET LOSS PER SHARE
Net loss per share was computed by dividing net loss by the weighted average number of common shares outstanding for the years ended December 31, 2015 , 2014 , and 2013 :
 
Year Ended December 31,
 
2015
 
2014
 
2013
Net loss
$
(50,785
)
 
$
(45,719
)
 
$
(62,134
)
Weighted average shares—basic
64,882,417

 
64,708,163

 
60,729,128

Net loss per share—basic
$
(0.78
)
 
$
(0.71
)
 
$
(1.02
)
Weighted average shares—diluted
64,882,417

 
64,708,163

 
60,729,128

Net loss income per share—diluted
$
(0.78
)
 
$
(0.71
)
 
$
(1.02
)

F-25

Notes to Consolidated Financial Statements
(all tabular amounts presented in thousands, except share, per share, per unit, and number of years)




The below outstanding securities were excluded from the above calculation of net loss per share because their impact would have been anti-dilutive due to net loss per share, for the years ended, as summarized below:
 
Year Ended December 31,
 
2015
 
2014
 
2013
2018 Convertible Notes
11,401,284

 
11,401,284

 
343,600

Common stock options
1,441,086

 
2,173,916

 
2,934,625

Restricted stock awards
2,173,615

 
824,217

 
1,007,119

Common stock warrants
9,357

 
120,702

 
160,816

Preferred stock
40,000

 
40,000

 
40,000

Total
15,065,342

 
14,560,119

 
4,486,160


9. FAIR VALUE MEASUREMENTS
The table below summarizes certain asset and liability fair values that are included within our accompanying Consolidated Balance Sheets, and their designations among three fair value measurement categories:
 
December 31, 2015
Fair Value Measurements
 
Level 1
 
Level 2
 
Level 3
 
Total
Assets:

 

 

 

Bank certificates of deposits
$
—

 
$
245

 
$
—

 
$
245

Money market currency funds
—

 
80,116

 
—

 
80,116

Equity securities
5,189

 
—

 
—

 
5,189

Mutual funds
—

 
—

 
—

 
—

Deferred compensation investments, including life insurance cash surrender value
—

 
9,181

 
—

 
9,181


$
5,189

 
$
89,542

 
$
—

 
$
94,731

Liabilities:

 

 

 

Deferred executive compensation liability
—

 
6,458

 
—

 
6,458

Deferred drug development liability
—

 
—

 
14,686

 
14,686

Ligand Contingent Consideration
—

 
—

 
5,227

 
5,227

Talon CVR
—

 
—

 
1,377

 
1,377

Corixa Liability
—

 
—

 
62

 
62


$
—

 
$
6,458

 
$
21,352

 
$
27,810

 

F-26

Notes to Consolidated Financial Statements
(all tabular amounts presented in thousands, except share, per share, per unit, and number of years)




 
December 31, 2014
Fair Value Measurements
 
Level 1
 
Level 2
 
Level 3
 
Total
Assets:

 

 

 

Bank certificates of deposits
$
—

 
$
244

 
$
—

 
$
244

Money market currency funds
—

 
66,945

 
—

 
66,945

Equity securities
7,191

 
—

 
—

 
7,191

Mutual funds
—

 
3,062

 
—

 
3,062

Deferred compensation investments, including life insurance cash surrender value
—

 
6,958

 
—

 
6,958


$
7,191

 
$
77,209

 
$
—

 
$
84,400

Liabilities:

 

 

 

Deferred executive compensation liability
—

 
4,694

 
—

 
4,694

Deferred development liability
—

 
—

 
15,785

 
15,785

Ligand Contingent Consideration
—

 
—

 
4,901

 
4,901

Talon CVR
—

 
—

 
2,379

 
2,379

Corixa Liability
—

 
—

 
62

 
62


$
—

 
$
4,694

 
$
23,127

 
$
27,821

We did not have any transfers between Levels 1 and 2 for all periods presented. The following presents a roll forward of our liabilities for which we utilize Level 3 inputs in determining period-end value. These liabilities are included on our Consolidated Balance Sheets within “acquisition related contingent obligations” and “drug development liability”. The basis of the various Level 3 valuation inputs are discussed in the Notes to these accompanying Consolidated Financial Statements.
Our carrying amounts of financial instruments such as cash equivalents, accounts receivable, prepaid expenses, accounts payable, and accrued liabilities, excluding acquisition related contingent consideration liabilities, approximate their related fair values due to their short-term nature.

Fair Value Measurements of
Unobservable Inputs
( Level 3 )
Balance at December 31, 2013
$
26,071

Deferred development costs (see Note 16)
(1,957
)
Ligand Contingent Consideration (see Note 10(b))
901

Talon CVR (see Note 10(a))
(1,950
)
Corixa Liability (see Note 17(b)(i))
62

Balance at December 31, 2014
$
23,127

Deferred development costs (see Note 16)
(1,099
)
Ligand Contingent Consideration (see Note 10(b))
326

Talon CVR (see Note 10(a))
(1,002
)
Corixa Liability (see Note 17(b)(i))
—

Balance at December 31, 2015
$
21,352


10. BUSINESS COMBINATIONS AND CONTINGENT CONSIDERATION
(a) Acquisition of Talon Therapeutics, Inc.
Talon Acquisition Overview

F-27

Notes to Consolidated Financial Statements
(all tabular amounts presented in thousands, except share, per share, per unit, and number of years)




On July 17, 2013 , we purchased all of the outstanding shares of common stock of Talon Therapeutics, Inc. (“Talon”). Through the acquisition of Talon, we gained worldwide rights to MARQIBO. The Talon purchase consideration comprised of (i) an aggregate upfront cash amount of $11.3 million , (ii) issuance of 3.0 million shares of our common stock, then equivalent to $26.3 million (based on a closing price of $8.77 per share on July 17, 2013), and (iii) the issuance of contingent value rights (“CVR”) initially valued at $6.5 million .
The CVR was valued using a valuation model that probability-weights expected outcomes (ranging from 50% to 100% ) and discounts those amounts to their present value, using an appropriate discount rate (these represent unobservable inputs and are therefore classified as Level 3 inputs – see Note 2 (xiii) ). The CVR has a maximum payout of $195.0 million if all sales and regulatory approval milestones are achieved, as summarized below:
 
•
$5.0 million upon the achievement of net sales of MARQIBO in excess of $30.0 million in any calendar year
•
$10.0 million upon the achievement of net sales of MARQIBO in excess of $60.0 million in any calendar year
•
$25.0 million upon the achievement of net sales of MARQIBO in excess of $100.0 million in any calendar year
•
$50.0 million upon the achievement of net sales of MARQIBO in excess of $200.0 million in any calendar year
•
$100.0 million upon the achievement of net sales of MARQIBO in excess of $400.0 million in any calendar year
•
$5.0 million upon receipt of marketing authorization from the FDA regarding Menadione Topical Lotion
Talon CVR Fair Value as of December 31, 2015 and December 31, 2014
The CVR fair value will continue to be evaluated on a quarterly basis. Current and future changes in its fair value results from the likelihood and timing of milestone achievement and/or the corresponding discount rate applied thereon. Adjustments to CVR fair value are recognized within “change in fair value of contingent consideration related to acquisitions” in the accompanying Consolidated Statements of Operations.

Fair Value
of Talon
CVR
December 31, 2014
$
2,379

Fair value adjustment for the year ended December 31, 2015
(1,002
)
December 31, 2015
$
1,377

(b) Acquisition of Rights to EVOMELA and Related Contingent Consideration
Overview of Acquisition of Rights to EVOMELA
In March 2013, we completed the acquisition of exclusive global development and commercialization rights to Captisol-enabled ® , propylene glycol-free MELPHALAN (which we recently branded as “EVOMELA”) for use as a conditioning treatment prior to autologous stem cell transplant for patients with MM. We acquired these rights from CyDex Pharmaceuticals, Inc. a wholly-owned subsidiary of Ligand Pharmaceuticals Incorporated (“Ligand”) for an initial license fee of $3.0 million .
We accounted for this transaction as a business combination, which requires that assets acquired and liabilities assumed be recognized on the balance sheet at their fair values as of the transaction date.
We are required to pay Ligand additional amounts up to an aggregate $66.0 million , upon the achievement of certain regulatory milestones and net sales thresholds, and we also assumed full financial responsibility for its ongoing clinical and regulatory development program. We also must pay royalties of 20% on our future net sales of EVOMELA in all territories.
Consideration Transferred
The acquisition-date fair value of the consideration transferred consisted of the following:

F-28

Notes to Consolidated Financial Statements
(all tabular amounts presented in thousands, except share, per share, per unit, and number of years)




Cash consideration
$
3,000

Ligand Contingent Consideration
4,700

Total purchase consideration
$
7,700

Fair Value Estimate of Asset Acquired and Liability Assumed
The total purchase consideration is allocated to the acquisition of the net tangible and intangible assets based on their estimated fair values as of the closing date. The allocation of the total purchase price to the net assets acquired is as follows:
IPR&D EVOMELA rights
$
7,700

We estimated the fair value of the in-process research and development using the income approach. The income approach uses valuation techniques to convert future amounts to a single present amount (discounted). Our measurement is based on the value indicated by current market expectations about those future amounts. The fair value estimate took into account our estimates of future incremental earnings that may be achieved upon regulatory approval, promotion, and distribution associated with the rights, and included estimated cash flows of approximately 10 years and a discount rate of approximately 25% .
The fair value of the contingent consideration liability assumed was determined using the probability of success and the discounted cash flow method of the income approach (representing unobservable inputs and therefore represent Level 3 values - see Note 2(xiii), which assumed that FDA approval of EVOMELA will occur on or about May 9, 2016 (on March 10, 2016, the FDA communicated its approval of this drug; however, under GAAP this event does not affect our reported liability estimate as of December 31, 2015). Upon receipt of FDA approval, we are contractually obligated to make a $6.0 million milestone payment to Ligand within 30 days ("Ligand Contingent Consideration"); accordingly, this payment is due no later than April 9, 2016.
Ligand Contingent Consideration Fair Value as of December 31, 2015 and December 31, 2014
The Ligand Contingent Consideration fair value will continue to be evaluated on a quarterly basis. Any changes in its fair value results from the likelihood and timing of milestone achievement and/or the corresponding discount rate applied thereon. Adjustments to Ligand Contingent Consideration fair value are recognized within “change in fair value of the contingent consideration related to acquisitions” in the accompanying Consolidated Statements of Operations.
 
Fair Value of
Ligand
Contingent
Consideration
December 31, 2014
$
4,901

Fair value adjustment for year ended December 31, 2015
326

December 31, 2015
$
5,227


(c) Allos Acquisition
We acquired Allos Therapeutics, Inc. (“Allos”) on September 5, 2012, which was accounted for as a business combination. Our total cash consideration for this acquisition was $205.2 million , through which we acquired FOLOTYN distribution rights. We have no contingent consideration obligations as part of this transaction.

11. OUT-LICENSE OF MARQIBO, ZEVALIN, & EVOMELA IN CHINA TERRITORY
Overview of CASI Out-License
On September 17, 2014, we executed three product out-license agreements with a perpetual term (collectively, the “CASI Out-License”) with CASI Pharmaceuticals, Inc. (“CASI”), a publicly-traded biopharmaceutical company (NASDAQ: CASI) with a primary focus on the China market. Under the CASI Out-License, we granted CASI the exclusive rights to distribute two of our commercialized oncology drugs, ZEVALIN and MARQIBO, and our Phase 3 drug candidate, EVOMELA (“CASI Out-Licensed Products”) in greater China (which includes Taiwan, Hong Kong and Macau). In return, we received CASI equity for the rights related to ZEVALIN and EVOMELA and a secured promissory note for the rights related to MARQIBO.

F-29

Notes to Consolidated Financial Statements
(all tabular amounts presented in thousands, except share, per share, per unit, and number of years)




Additionally, under certain conditions which generally expire on September 17, 2019 , we have a right to receive additional CASI common stock in order to maintain our post-investment ownership percentage if CASI issues additional securities.
CASI will be responsible for the development and commercialization of these three drugs, including the submission of import drug registration applications to regulatory authorities and conducting any confirmatory clinical studies in greater China. We will provide CASI with future commercial supply of the CASI Out-Licensed Products under typical market terms.
Proceeds Received
The proceeds we received, and its fair value on the CASI Out-License execution date, consisted of the following:
CASI common stock (5.4 million shares)
$
8,649

(a)
CASI secured promissory note due March 17, 2016 (since extended to March 17, 2017), net of fair value discount ($1.5 million face value and 0.5% annual coupon)
1,310

(b)
Total consideration received, net of fair value discount
$
9,959

(c)
 
(a)
Value determined based on the September 17, 2014 closing price of 5.4 million shares of CASI common stock on the NASDAQ Capital Market of $1.60 per share. Our current intention is to hold these securities on a long-term basis. Accordingly, we have presented its value of $5.2 million as of December 31, 2015 within “other assets” (rather than “marketable securities”) on our accompanying Consolidated Balance Sheets. The change in the value of these securities is reported within “unrealized (loss) gain on available-for-sale securities” on the accompanying Consolidated Statement of Comprehensive Loss.

(b)
Value estimated using the terms of the $1.5 million promissory note, and the application of a synthetic debt rating based on CASI’s publicly-available financial information, and the prevailing interest yields on similar public debt securities as of September 17, 2014. The face value of the promissory note as of December 31, 2015 is included within "other assets" on the accompanying Consolidated Balance Sheets.

(c)
Presented within “license fees and service revenue” in the accompanying Consolidated Statement of Operations as of December 31, 2015 .
In addition, CASI will be responsible for paying any royalties or milestones that we are obligated to pay to our third-party licensors resulting from the achievement of certain milestones and/or sales of CASI Out-Licensed Products, but only to the extent of the greater China portion of such royalties or milestones.
Recognition of Proceeds – License Fee Revenue in 2015
The $9.7 million value (undiscounted, and net of certain foreign exchange adjustments) of the upfront proceeds that we received from CASI were recognized in the second quarter of 2015 within “license fees and service revenue” through our Consolidated Statements of Operations. The timing of this revenue recognition corresponds with the execution of supply agreements with CASI for ZEVALIN, MARQIBO, and EVOMELA. These agreements allow CASI to procure CASI Out-Licensed Products directly from approved third parties, and in such case, do not require our future involvement for their supply.

12. OUT-LICENSE OF ZEVALIN IN CERTAIN EX-U.S. TERRITORIES

Out-License of ZEVALIN to Mundipharma

On November 16, 2015, we entered into an out-license agreement with Mundipharma International Corporation Limited for their commercialization of ZEVALIN in Asia (excluding India and Greater China), Australia, New Zealand, Africa, the Middle East, and Latin America (including the Caribbean). In return, we received $18 million (comprised of $15 million received in December 2015 and $3 million received in January 2016), of which $15 million is included within "license fees and service revenue" on our accompanying Consolidated Statement of Operations. Revenue for the $3 million payment from January 2016 will be deferred and recognized within "license fees and service revenue" on a per unit basis with Mundipharma's future sales of ZEVALIN kits. We are also eligible to receive an additional $2 million upon Mundipharma's achievement of a specified sales milestone, that if/when achieved, will also be reported within "license fees and service revenue".


F-30

Notes to Consolidated Financial Statements
(all tabular amounts presented in thousands, except share, per share, per unit, and number of years)




In connection with this out-license, on November 16, 2015, we concurrently sold to Mundipharma K.K., all common stock of Spectrum Pharmaceuticals GK (the legal entity through which we previously sold ZEVALIN in Japan) for $2.2 million (in the form of an unsecured note, payable no later than May 2016), representing its net asset value (excluding inventory) as of November 16, 2015.

13. CO-PROMOTION ARRANGEMENT WITH EAGLE PHARMACEUTICALS, INC.
On November 4, 2015, we executed an agreement with Eagle Pharmaceuticals, Inc. ("Eagle") whereby designated members of our sales force will concurrently market up to six of Eagle's pharmaceutical products along with our products, in return for fixed monthly payments over the initial 18 month contract term through June 30, 2017, aggregating $12.8 million (the "Eagle Agreement"). We are also eligible to receive milestone payments of up to $5 million for sales made in 2016 that exceed certain thresholds, and up to $4 million for sales made in the first half 2017 that exceed certain thresholds. In addition, for performance above such sales thresholds in 2016, and in the first half of 2017, we are eligible to receive certain further payments if specified targets for annual net sales of Eagle's products are exceeded. The fixed payments to us, as well as costs for certain marketing activities that we coordinate with third parties, will be recognized within "license fees and service revenue" on our accompanying Consolidated Statement of Operations, beginning January 2016 (variable payments to us will be recognized in the period earned). An allocation of our corresponding sales personnel costs, and reimbursable costs for marketing activities will be recognized within a new caption on our Consolidated Statement of Operations, "cost of service revenue."
Eagle may extend the initial term of this agreement by six months to December 31, 2017 at its sole election. Any extensions after December 31, 2017 require mutual consent and will be for six months per extension. The Eagle Agreement may be terminated by either party for uncured material breaches and certain other events following a change of control or insolvency of either party, and solely by Eagle for convenience with 60 days written notice, subject to an established termination fee, as calculated within the Eagle Agreement.

14. REVOLVING LINE OF CREDIT
We entered into a credit agreement on September 5, 2012 with Bank of America, N.A, as the administrative agent and Wells Fargo Bank, N.A, as an initial lender (the “Credit Agreement”). The Credit Agreement provided us with a committed $50 million revolving line of credit facility (the “Credit Facility”). The Credit Facility was repaid in full, then immediately terminated, on December 20, 2013 in connection with the sale and issuance of our 2018 Convertible Senior Notes (see Note 15 ). We recognized $1.2 million within “interest expense, net” in 2013, for this retired Credit Facility on the accompanying Consolidated Statement of Operations.

15. CONVERTIBLE SENIOR NOTES
Overview
On December 17, 2013, we entered into an agreement for the sale of $120 million aggregate principal amount of 2.75% Convertible Senior Notes due December 2018 (the “2018 Convertible Notes”). The 2018 Convertible Notes are convertible into shares of our common stock at a conversion rate of 95 shares per $1,000 principal amount of the 2018 Convertible Notes, equating to 11.4 million common shares if fully converted. The in-the-money conversion price is equivalent to $10.53 per common share. The conversion rate and conversion price is subject to adjustment under certain limited circumstances. The 2018 Convertible Notes bear interest at a rate of 2.75%  per year, payable semiannually in arrears on June 15 and December 15 of each year. The 2018 Convertible Notes will mature and become payable on December 15, 2018 , subject to earlier conversion into common stock at the holders’ option.
The sale of the 2018 Convertible Notes closed on December 23, 2013 and our net proceeds were $115.4 million , after deducting banker and professional fees of $4.6 million . We used a portion of these net proceeds to simultaneously enter into “bought call” and “sold warrant” transactions with Royal Bank of Canada (collectively, the “Note Hedge”). We recorded the Note Hedge on a net cost basis of $13.1 million , as a reduction to “additional paid-in capital” in our accompanying Consolidated Balance Sheets. Under applicable GAAP, the Note Hedge transaction is not expected to be marked-to-market through earnings or comprehensive income in future reported periods.
Conversion Hedge

F-31

Notes to Consolidated Financial Statements
(all tabular amounts presented in thousands, except share, per share, per unit, and number of years)




We entered into Note Hedge transactions to reduce the potential dilution to our stockholders and/or offset any cash payments that we are required to make in excess of the principal amount, upon conversion of the 2018 Convertible Notes (in the event that the market price of our common stock is greater than the conversion price). The strike price of the “bought call” is equal to the conversion price and conversion rate of the 2018 Convertible Notes, matching the 11.4 million common shares the 2018 Convertible Notes may be converted into. The strike price of our “sold warrant” is $14.03 per share of our common stock, and is also for 11.4 million common shares.
Conversion Events
On and after June 15, 2018, and until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert all or a portion of their 2018 Convertible Notes. Prior to June 15, 2018, holders may convert all or a portion of their 2018 Convertible Notes only under any of the following circumstances: (1) during any fiscal quarter (and only during such fiscal quarter), if, for at least 20 trading days (whether or not consecutive) during the 30 consecutive trading day period ending on the last trading day of the immediately preceding fiscal quarter, the last reported sale price of our common stock on such trading day is greater than or equal to 130% of the applicable conversion price on such trading day; (2) during the five consecutive business day period immediately following any five consecutive trading day period in which, for each trading day of that measurement period, the trading price per $1,000 principal amount of 2018 Convertible Notes for such trading day was less than 98% of the product of (i) the last reported sale price of our common stock on such trading day and (ii) the applicable conversion rate on such trading day; (3) upon the occurrence of certain corporate transactions; and (4) at any time prior to our stockholders’ approval to settle the 2018 Convertible Notes in our common shares and/or cash.
As of December 31, 2015 , the 2018 Convertible Notes are not eligible to be converted into common as none of the above elements (1) through (4) were met. Our stockholders’ approval of "flexible settlement" occurred at our Annual Meeting of Stockholders on June 29, 2015. As a result, we may (at our election) settle any future conversions of the 2018 Convertible Notes by paying or delivering cash, shares of common stock, or a combination of cash and shares of common stock. However, if the holders of the Convertible Notes do not elect any conversion into our common stock, our December 2018 obligation to repay the principal amount of $120 million in cash, plus any accrued and unpaid interest, is unchanged.
Carrying Value and Fair Value
The carrying value of the 2018 Convertible Notes as of December 31, 2015 is summarized as follows:
Principal amount
$
120,000

(Less): Unamortized debt discount (amortized through December 2018)
(18,452
)
December 31, 2015
$
101,548


As of December 31, 2015 and December 31, 2014 , the estimated aggregate fair value of the 2018 Notes is $105.1 million and $113.2 million , respectively. These fair value estimates are less than the principal amount of $120 million , largely since the conversion feature of the 2018 Notes was, and remains, out-of-the money. These estimated fair values represent a Level 2 measurement (see Note 2(xiii) ), based upon the 2018 Convertible Notes' quoted bid price at each date in a thinly-traded market.
Components of Interest Expense on 2018 Convertible Notes
The following table sets forth the components of interest expense recognized in the accompanying Consolidated Statements of Operations for the 2018 Convertible Notes for the years ended December 31, 2015 and 2014 :
 
Year Ended December 31,
 
2015
 
2014
Contractual coupon interest expense
$
3,300

 
$
3,300

Amortization of debt issuance costs
662

 
599

Accretion of debt discount
5,250

 
4,818

Total
$
9,212

 
$
8,717

Effective interest rate
8.66
%
 
8.66
%


F-32

Notes to Consolidated Financial Statements
(all tabular amounts presented in thousands, except share, per share, per unit, and number of years)




16. MUNDIPHARMA AGREEMENT
As the result of our acquisition of Allos Therapeutics, Inc. on September 5, 2012 (through which we obtained distribution rights for FOLOTYN), we assumed its obligations under an active strategic collaboration agreement with a third-party, Mundipharma (the “Mundipharma Collaboration Agreement”). Under the Mundipharma Collaboration Agreement, we retained full commercialization rights for FOLOTYN in the U.S. and Canada, with Mundipharma having exclusive rights to commercialize FOLOTYN in all other countries in the world (the “Mundipharma Territories”).
On May 29, 2013, the Mundipharma Collaboration Agreement was amended and restated (the “Amended Mundipharma Collaboration Agreement”), in order to modify: (i) the scope of the licensed territory, (ii) milestone payments, (iii) royalty rates, and (iv) drug development obligations. In connection with the Amended Mundipharma Collaboration Agreement, we received a one-time $7.0 million payment from Mundipharma for certain research and development activities to be performed by us.
As a result of the Amended Mundipharma Collaboration Agreement, (a) Europe and Turkey were excluded from Mundipharma’s commercialization territory, (b) we may receive regulatory milestone payments of up to $16.0 million , and commercial progress and sales-dependent milestone payments of up to $107.0 million , (c) we will receive tiered double-digit royalties based on net sales of FOLOTYN within Mundipharma’s licensed territories, and (d) we and Mundipharma will bear our own FOLOTYN development costs.
On May 29, 2015 and effective as of May 1, 2015, we entered into an amendment to the Amended Mundipharma Collaboration Agreement (the “Amendment”). Pursuant to the Amendment, among other things, the parties revised the conditions to our exercise of the option to gain commercialization rights in Switzerland from Mundipharma, and also revised tiered double digit royalties payable by Mundipharma on net sales in Switzerland.
The fair value of this liability is included in the current and long-term portions of “drug development liability” within the accompanying Consolidated Balance Sheets, and it includes our assumptions about personnel needed to perform these research and development activities, third party costs for projected clinical trial enrollment, and patient treatment-related follow up through approximately 2031.
The fair value of our “drug development liability” within our accompanying Consolidated Balance Sheets was estimated using the discounted income approach model. The unobservable inputs (i.e., Level 3 inputs - see Note 2(xiii) ) in this valuation model that have the most significant effect on these liabilities include (i) estimates of research and development personnel costs needed to perform the research and development services, (ii) estimates of expected cash outflows to third parties for services and supplies during the expected period of performance through 2031, and (iii) an appropriate discount rate for these expenditures. These inputs are reviewed by management on a quarterly basis for continued applicability.
We assess this liability at each reporting date and record its adjustment through “research and development” expense in our accompanying Consolidated Statements of Operations.  

Year Ended December 31,

Drug
Development
Liability,
Current –
FOLOTYN
 
Drug
Development
Liability,
Long Term –
FOLOTYN
 
Total Drug
Development
Liability –
FOLOTYN
Balance at December 31, 2014
$
1,141

 
$
14,644

 
$
15,785

Transfer from long term to current in 2015
217

 
(217
)
 
—

(Less): Expenses incurred in 2015
(1,099
)
 
—

 
(1,099
)
Balance at December 31, 2015
$
259

 
$
14,427

 
$
14,686


17. COMMITMENTS AND CONTINGENCIES
(a) Facility and Equipment Leases
We lease our principal executive office in Henderson, Nevada under a non-cancelable operating lease expiring April 30, 2019 . We also lease our research and development and administrative facility in Irvine, California under a non-cancelable operating lease expiring May 31, 2019 , in addition to several other administrative office leases. Each lease agreement contains

F-33

Notes to Consolidated Financial Statements
(all tabular amounts presented in thousands, except share, per share, per unit, and number of years)




scheduled rent increases which are accounted for on a straight-line basis. Our total rental expense in 2015 , 2014 , and 2013 was $1.7 million , $1.9 million , and $1.2 million , respectively.
Our future minimum lease payments are as follows:
Year ending December 31,
Operating Lease
Minimum
Payments
2016
$
1,283

2017
1,172

2018
1,209

2019
460

2020
—

 
$
4,124

(b) Licensing Agreements, Co-Development Agreements and Milestone Payments
Our drug candidates are being developed pursuant to license agreements that provide us with territory-specific rights to its manufacture, sublicense, and sale. We are generally responsible for all development costs, patent filings and maintenance costs, sales and marketing costs, and liability insurance costs. We are also obligated to make certain milestone payments to third parties upon the achievement of regulatory and sales milestones that are specified in these license agreements. We estimate and present a corresponding liability on our Consolidated Balance Sheets when amounts are probable and reasonably estimable. In addition, we are obligated to pay royalties based on our current and future net sales of in-licensed products.
Our most significant of these agreements are listed and summarized below:
(i) ZEVALIN U.S.: In-Licensing and development in the U.S.
In December 2008, we acquired rights to commercialize and develop ZEVALIN in the U.S. as the result of a transaction with Cell Therapeutics, Inc. (“CTI”) through our wholly-owned subsidiary, RIT Oncology LLC (“RIT”). We assumed certain agreements with various third parties related to ZEVALIN intellectual property for its manufacture, use, and sale in the U.S.
In accordance with the terms of assumed contracts, we are required to meet specified payment obligations, including a milestone payment to Corixa Corporation of $5.0 million based on ZEVALIN sales in the U.S. (the “Corixa Liability”). This milestone has not yet been met, and $0.1 million for this potential milestone achievement is included within “acquisition-related contingent obligations” in our accompanying Consolidated Balance Sheet as of December 31, 2015 and December 31, 2014 , respectively. Our U.S. net sales-based royalties are in the low to mid-single digits to Genentech, Inc. and mid-teens to Biogen.
(ii) ZEVALIN Ex-U.S.: In-License and Asset Purchase Agreement with Bayer Pharma
In April 2012, through our wholly-owned subsidiary, Spectrum Pharmaceuticals Cayman, L.P., we completed the acquisition of licensing rights to market ZEVALIN outside of the U.S. from Bayer Pharma AG (“Bayer”). ZEVALIN is currently approved in approximately 40 countries outside the U.S. for the treatment of B-cell non-Hodgkin lymphoma, including countries in Europe, Latin America and Asia.
In consideration for the rights granted under the agreement, concurrent with the closing, we paid Bayer a one-time fee of €19.0 million . Our ex-U.S. net sales-based royalty to Bayer ranges between the single digits to mid-teens. Unless earlier terminated, the term of the agreement continues until the expiration of the last-to-expire patent covering the sale of a licensed product in the relevant country, or 15  years from the date of first commercial sale of the licensed product in such country, whichever is longer.
(iii) ZEVALIN Ex-U.S.: Out-License Agreement with Dr. Reddy’s
Effective June 27, 2014, we executed an exclusive License Agreement with Dr. Reddy’s Laboratories Ltd. (“Dr. Reddy’s”), for the distribution rights of ZEVALIN within India. The agreement term is 15 years from the receipt of pending approval of ZEVALIN from the Drug Controller General of India. On December 17, 2014, upon the execution of a supply agreement, an upfront and non-refundable payment of $0.5 million was triggered and was paid to us in February 2015. This recognition of this upfront payment is reported on a straight line basis, within “license fee and service revenue” on the Consolidated Statement of Operations over a 10 -year term through December 2024. Additionally, sales and regulatory

F-34

Notes to Consolidated Financial Statements
(all tabular amounts presented in thousands, except share, per share, per unit, and number of years)




milestones (aggregating $3 million ) will become payable to us when achieved by Dr. Reddy’s, as well as a 20% royalty on net sales of ZEVALIN in India.
(iv) FUSILEV: Amended and Restated In-License Agreement with Merck & Cie AG
In May 2006, we amended and restated a license agreement with Merck & Cie AG (“Merck”), which we assumed in connection with our March 2006 acquisition of the assets of Targent, Inc. Pursuant to the license agreement with Merck, we obtained the exclusive license to use regulatory filings related to FUSILEV and a non-exclusive license under certain patents and know-how to develop, manufacture, use, and sell FUSILEV in the field of oncology in North America in return for a royalty percentage (in the mid-single digits) of net sales. Merck is eligible to receive a $0.2 million payment from us upon the achievement of a FDA approval of an oral form of FUSILEV. This milestone has not yet been met, and no amounts have been accrued in our accompanying Consolidated Balance Sheets for its potential achievement.
(v) FOLOTYN: In-License Agreement with Sloan-Kettering Institute, SRI International and Southern Research Institute
In December 2002, Allos entered into the FOLOTYN License Agreement with Sloan-Kettering Institute for Cancer Research, SRI International, and Southern Research Institute. As a result of Allos becoming our wholly owned subsidiary in September 2012, we are bound by the FOLOTYN License Agreement under which we obtained exclusive worldwide rights to a portfolio of patents and patent applications related to FOLOTYN and its uses. Under the terms of the FOLOTYN License Agreement, we are required to fund all development programs and have sole responsibility for all commercialization activities. In addition, we pay graduated royalties to our licensors based on our (including sub licensees) worldwide annual net sales of FOLOTYN. Royalties are 8% of annual worldwide net sales up to $150 million ; 9% of annual worldwide net sales of $150 million through $300 million ; and 11% of annual worldwide net sales in excess of $300 million .
(vi) EVOMELA: In-License Agreement with Cydex Pharmaceuticals, Inc.
In March 2013, we completed the acquisition of exclusive global development and commercialization rights to EVOMELA from Ligand (see Note 10(b) ). We filed an NDA with the FDA in December 2015 for its use as a conditioning treatment prior to autologous stem cell transplant for patients with MM. On March 10, 2016, the FDA communicated its approval of our NDA for EVOMELA. Upon receipt of FDA approval, we are contractually obligated to make a $6.0 million milestone payment to Ligand within 30 days ("Ligand Contingent Consideration"); accordingly, this payment is due no later than April 9, 2016.
We are required to pay Ligand amounts of up to $66 million (inclusive of the $6.0 million milestone for FDA approval), upon achievement of certain regulatory milestones and net sales thresholds, which we have valued at $5.2 million and $4.9 million within “acquisition-related contingent obligations” in our accompanying Consolidated Balance Sheets as of December 31, 2015 and December 31, 2014 , respectively. We will also pay royalties of 20% on our net sales of licensed products in all territories.
(vii) MARQIBO: Contingent Consideration Agreement with Talon Therapeutics, Inc.
In July 2013, we completed the acquisition of Talon, through which we obtained exclusive global development and commercialization rights to MARQIBO (see Note 10(a) ). As part of this acquisition, we issued the former Talon stockholders contingent value rights (“CVR”) that we have valued and presented on our accompanying Consolidated Balance Sheets as a $1.4 million and $2.4 million liability within “acquisition-related contingent obligations” as of December 31, 2015 and December 31, 2014 , respectively. The CVR has a maximum payout value of $195 million if all sales and regulatory approval milestones are achieved.
(viii) EOQUIN (previously referred to as APAZIQUONE): License Agreement with Allergan, Inc. and NDDO Research Foundation
In October 2008, we entered into an exclusive development and commercialization collaboration agreement with Allergan for EOQUIN. Pursuant to the terms of the agreement, Allergan paid us an up-front non-refundable fee of $41.5 million at closing (which we have amortized through revenue within “license fees and service revenue” in full as of December 31, 2013). In October 2008, pursuant to a letter agreement with NDDO Research Foundation (“NDDO”), we agreed to pay NDDO the following in relation to EOQUIN milestones: (a) upon FDA acceptance of the NDA, the issuance of 25,000 of our common shares and (b) upon FDA approval of the drug (its target decision date is set for December 11, 2016), a one-time payment of $0.3 million .

F-35

Notes to Consolidated Financial Statements
(all tabular amounts presented in thousands, except share, per share, per unit, and number of years)




In January 2013, we entered into a second amendment to the license, development, supply and distribution agreement with Allergan to amend the agreement and reacquire the rights originally licensed to Allergan in the U.S., Europe, and other territories in exchange for a tiered single-digit royalty on net sales of certain products containing EOQUIN, and relieved Allergan of its development and commercialization obligations.
(ix) EOQUIN: Collaboration Agreement with Nippon Kayaku Co. LTD.
In November 2009, we entered into a collaboration agreement with Nippon Kayaku Co., LTD. (“Nippon Kayaku”) for the development and commercialization of EOQUIN in Asia, except North and South Korea (the “Nippon Kayaku Territory”). In addition, Nippon Kayaku received exclusive rights to EOQUIN for the treatment of non-muscle invasive bladder cancer in Asia (other than North and South Korea), including Japan and China. Nippon Kayaku will conduct EOQUIN clinical trials in the Nippon Kayaku Territory pursuant to a development plan. Further, Nippon Kayaku will be responsible for all expenses relating to the development and commercialization of EOQUIN in the Nippon Kayaku Territory.
Under the terms of this agreement, Nippon Kayaku paid us an upfront fee of $15 million (which we have amortized through revenue within “license fees and service revenue” in full as of December 31, 2013). Nippon Kayaku is also obligated to make additional payments to us based on the achievement of certain development, regulatory and commercialization milestones. Under the terms of the agreement, we are entitled to payment of $10 million and $126 million upon achievement of certain regulatory and commercialization milestones, respectively. Also, Nippon Kayaku has agreed to pay us royalties based on a percentage of net sales of the subject products in the defined territory in the mid-teen digits.
(x) BELEODAQ: In-Licensing and Collaboration Agreement with TopoTarget
In February 2010, we entered into a licensing and collaboration agreement with TopoTarget A/S (now Onxeo SA) (“TopoTarget”), as amended in October 2013, for the development and commercialization of BELEODAQ. The agreement provides that we have the exclusive right to manufacture, develop, and commercialize BELEODAQ in North America and India, with an option for China. Pursuant to the terms of this agreement, we paid TopoTarget an upfront fee of $30 million in 2010.
Under continuing terms, all development, including studies, will be conducted under a joint development plan, which we will fund 70% of such costs, and TopoTarget will fund 30% . We have final decision-making authority for all developmental activities in North America and India (and China upon exercise of our option). TopoTarget has final decision-making authority for all developmental activities in all other jurisdictions. In February 2014, upon FDA acceptance of our new drug application, we issued one million  shares of our common stock, and made a $10 million milestone payment to TopoTarget. The aggregate payout value of this first milestone at achievement was $17.8 million , and is recognized within “research and development” of the accompanying Consolidated Statement of Operations during the first quarter of 2014.
In July 2014, we received approval from the FDA for BELEODAQ’s use for injection and treatment of relapsed or refractory PTCL. As a result, we paid a second milestone payment to TopoTarget of $25 million in November 2014, which we capitalized as an amortizable intangible asset. Other potential milestone payments due upon BELEODAQ regulatory achievements and sales thresholds (aggregating $278 million ) are not included within “total liabilities” in our accompanying Consolidated Balance Sheets.
We will pay TopoTarget future royalties in the mid-teen digits based on our net sales of BELEODAQ. The agreement will continue until the expiration of the last royalty payment period in the last country in the defined territory with certain provisions surviving, unless earlier terminated in accordance with its terms.
(xi) SPI-2012: Co-Development and Commercialization Agreement with Hanmi Pharmaceutical Company
In January 2012 (and as amended in March 2014 and October 2014), we entered into a License, Development and Supply Agreement with Hanmi Pharmaceutical Co., Ltd. (“Hanmi”), for SPI-2012, formerly known as “LAPS-GCSF”, a drug based on Hanmi’s proprietary LAPSCOVERY™ technology for the treatment of chemotherapy induced neutropenia. Under the terms of the agreement, as amended, we have primary financial responsibility for the SPI-2012 development plan. We have worldwide rights for SPI-2012, except for Korea, China, and Japan. We will also be responsible for milestone payments related to SPI-2012 Phase 3 clinical trial commencement (resulting in a triggered $3 million milestone payment, based on initial patient dosing in January 2016; we intend to settle this liability through the issuance of our stock to Hanmi by March 2016), regulatory approvals, and sales thresholds (aggregating $238 million ), which are not included within “total liabilities” in our accompanying Consolidated Balance Sheets. We will pay Hanmi royalties in the mid-teen digits on our net sales of SPI-2012.

F-36

Notes to Consolidated Financial Statements
(all tabular amounts presented in thousands, except share, per share, per unit, and number of years)





(xii) POZIOTINIB: In-License Agreement with Hanmi
In February 2015, we executed an in-license agreement with Hanmi Pharmaceutical Co., Ltd for POZIOTINIB, a pan-HER inhibitor in Phase 2 clinical trials, requiring our upfront payment for these rights. This drug has shown single agent activity in the treatment of various cancer types during Phase I studies, including breast, gastric, colorectal and lung cancers.
Under the terms of this agreement, we received the exclusive rights to commercialize POZIOTINIB, excluding Korea and China. Hanmi, and its development partners, will bear full responsibility for the on-going Phase 2 trials in Korea. We will bear full financial responsibility for all other clinical studies. We will pay Hanmi future regulatory and sales-dependent milestones (aggregating $358 million ), which are not included within “total liabilities” in our accompanying Consolidated Balance Sheets. We will pay Hanmi royalties in the low to mid-teen digits on our net sales of POZIOTINIB.
(c) Service Agreements
In connection with the research and development of our drug products, we have entered into contracts with numerous third party service providers, such as radio-pharmacies, distributors, clinical trial centers, clinical research organizations, data monitoring centers, and with drug formulation, development and testing laboratories. The financial terms of these agreements are varied and generally obligate us to pay in stages, depending on achievement of certain events specified in the agreements, such as contract execution, reservation of service or production capacity, actual performance of service, or the successful accrual and dosing of patients.
At each period end, we accrue for all services received, with such accruals based on factors such as estimates of work performed, patient enrollment, completion of patient studies and other events. Should we decide to discontinue and/or slow-down the work on any project, the associated costs for those projects would be limited to the extent of the work completed. Generally, we are able to terminate these contracts due to the discontinuance of the related project(s) and thus avoid paying for the services that have not yet been rendered.
(d) Supply Agreements
We have entered into certain supply agreements, or have issued purchase orders, which require us to make minimum purchases from vendors for the manufacture of our products. These commitments do not exceed our planned commercial requirements, and the contracted prices do not exceed their fair market value.
(e) Employment Agreements
We have entered into an employment agreement with our Chief Executive Officer under which cash compensation and benefits would become payable in the event of termination by us for any reason other than cause, his resignation for good reason, or upon a change in control of our Company.
(f) Deferred Compensation Plan
The Spectrum Pharmaceuticals, Inc. Deferred Compensation Plan (the “DC Plan”) is administered by the Compensation Committee of our Board of Directors and is intended to comply with the requirements of Section 409A of the Internal Revenue Code of 1986, as amended.
The DC Plan is maintained to provide deferred compensation benefits for a select group of our employees (the “DC Participants”). Under the DC Plan, we provide the DC Participants with the opportunity to make annual elections to defer up to a specified amount or percentage of their eligible cash compensation, and we have the option to make discretionary contributions. At December 31, 2015 and December 31, 2014 , this DC Plan liability was $6.5 million and $4.7 million , respectively, and is included within “other long-term liabilities” in the accompanying Consolidated Balance Sheets.
(g) Litigation
We are involved from time-to-time with various legal matters arising in the ordinary course of business. These claims and legal proceedings are of a nature we believe are normal and incidental to a pharmaceutical business, and may include product liability, intellectual property, employment matters, and other general claims.
We make provisions for liabilities when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Such provisions are assessed at least quarterly and adjusted to reflect the impact of any settlement

F-37

Notes to Consolidated Financial Statements
(all tabular amounts presented in thousands, except share, per share, per unit, and number of years)




negotiations, judicial and administrative rulings, advice of legal counsel, and other information and events pertaining to a particular case. Litigation is inherently unpredictable. Although the ultimate resolution of these various matters cannot be determined at this time, we do not believe that such matters, individually or in the aggregate, will have a material adverse effect on our consolidated results of operations, cash flows, or financial condition.
We are presently responding to ANDAs filed by companies seeking to market generic forms of FOLOTYN. We are also responding to certain stockholder suits that purportedly stem from our March 12, 2013 press release, in which we announced anticipated changes in customer ordering patterns of FUSILEV. These complaints allege that, as a result of this press release, our stock price declined.
FUSILEV ANDA Litigation
On January 20, 2012, March 2, 2012, June 18, 2014, January 23, 2015, July 17, 2015 and September 3, 2015 respectively, we filed suit against Sandoz Inc., Innopharma Inc., Ben Venue Laboratories, Inc., Amneal Pharmaceuticals, Inc., and Actavis LLC. respectively, following Paragraph IV certifications in connection with their filing separate ANDAs, to manufacture a generic version of FUSILEV. We filed the lawsuits in the U.S. District Court for the Districts of Nevada and Delaware seeking to enjoin the approval of their ANDAs plus recovery of our litigation fees and costs incurred in such matters. On December 9, 2013, three Mylan entities collaborating with Innopharma were joined to Innopharma case. On November 24, 2014, the complaint in the Ben Venue case was amended to substitute the original defendant Ben Venue Laboratories, Inc. with successors West-Ward Pharmaceutical Corp. and Eurohealth International SARL.
A trial took place in the Sandoz case from January 12, 2015 through January 20, 2015 in the U.S. District Court for the District of Nevada and on February 20, 2015 the district court found certain of the asserted claims of the patent covering FUSILEV invalid. On February 27, 2015, we filed our Notice of Appeal. On August 4, 2015 the Delaware district court ordered that judgment be entered for Innopharma and Mylan due to the Nevada district court judgment in the Sandoz action. On October 2, 2015, the U.S. Court of Appeals for the Federal Circuit affirmed the previously reported judgment from the U.S. District Court for the District of Nevada in favor of Sandoz Inc.
On April 27, 2015, we filed suit in the U.S. District Court for the District of Columbia against the FDA seeking a temporary restraining order or preliminary injunction to suspend FDA approval of Sandoz’s ANDA. The Company contends that Sandoz’s ANDA should not have been approved until the expiry of the Company’s Orphan Drug Exclusivity on April 29, 2018. On April 29, 2015, the court denied the temporary restraining order and on May 27, 2015, the court entered summary judgment in favor of the FDA et al. On June 5, 2015, we filed our Notice of Appeal. Oral argument was held October 22, 2015. The ultimate outcome of this proceeding is uncertain.
FOLOTYN ANDA Litigation
On June 19, 2014, we filed a lawsuit against five parties resulting from Paragraph IV certifications in connection with four separate ANDAs to manufacture a generic version of FOLOTYN: (1)Teva Pharmaceuticals USA, Inc., (2) Sandoz Inc., (3) Fresenius Kabi USA, LLC, (4) Dr. Reddy’s Laboratories, Ltd., and (5) Dr. Reddy’s Laboratories, Inc. We filed the lawsuit in the U.S. District Court for the District of Delaware seeking to enjoin the approval of their ANDAs plus recovery of our litigation fees and costs. The litigation is stayed with respect to the Dr. Reddy's entities pending resolution of the case against the other FOLOTYN ANDA filers. A trial date of September 12, 2016 has been set in the FOLOTYN lawsuit in the U.S. District Court for the District of Delaware. While we believe our patent rights are strong, the ultimate outcome of such action is uncertain.
Stockholder Litigation
John Perry v. Spectrum Pharmaceuticals, Inc. et al. (Filed March 14, 2013 in United States District Court, District of Nevada; Case Number 2:2013-cv-00433-LDG-CWH). This putative consolidated class action raises substantially identical claims and allegations against defendants Spectrum Pharmaceuticals, Inc., Dr. Rajesh C. Shrotriya, Brett L. Scott, and Joseph Kenneth Keller. The alleged class period is August 8, 2012 to March 12, 2013. The lawsuits allege a violation of Section 10(b) of the Securities Exchange Act of 1934 against all defendants and control person liability, as a violation of Section 20(b) of the Securities Exchange Act of 1934, against the individual defendants. The claims purportedly stem from the Company’s March 12, 2013 press release, in which it announced that it anticipated a change in ordering patterns of FUSILEV. The complaints allege that, as a result of the March 12, 2013 press release, the Company’s stock price declined. The complaints further allege that during the putative class period certain defendants made misleadingly optimistic statements about FUSILEV sales, which inflated the trading price of Company stock. The lawsuits seek relief in the form of monetary damages, costs and fees, and any other equitable or injunctive relief that the court deems appropriate. On March 21, 2014, the Court entered an order appointing Arkansas Teacher Retirement System as lead plaintiff. On May 20, 2014, Arkansas Teacher Retirement System filed a

F-38

Notes to Consolidated Financial Statements
(all tabular amounts presented in thousands, except share, per share, per unit, and number of years)




consolidated amended class action complaint. On July 18, 2014, we filed a motion to dismiss the consolidated amended class action complaint. On March 26, 2015, the court denied the motion to dismiss. On June 15, 2015, the Court ordered a stay of the proceedings pending the outcome of mediation between the parties. On October 27, 2015, we reached a $7 million settlement in principle with the lead plaintiff (which involved our insurance carrier, as the reimbursing party in full), subject to preliminary and final court approval. We have included this settlement amount, along with $0.1 million of reimbursable legal expenses for this matter, on our accompanying Consolidated Balance Sheets as of December 31, 2015 within "other receivables" and "accounts payable and other accrued liabilities." On January 26, 2016, the Court preliminarily approved the settlement.  The Court has scheduled a hearing on final approval of the settlement for June 13, 2016.
Timothy Fik v. Rajesh C. Shrotriya, et al. (Filed April 11, 2013 in United States District Court, District of Nevada; Case Number 2:2013-cv-00624-JCM-CWH); Christopher J. Watkins v. Rajesh C. Shrotriya, et al. (Filed April 22, 2013 in United States District Court, District of Nevada; Case Number 2:2013-cv-00684-JCM-VCF); and Stefan Muenchhagen v. Rajesh C. Shrotriya, et al. (Filed May 28, 2013; Case Number 2:2013-cv-00942-APG-PAL). These derivative complaints are brought by the respective purported stockholders on behalf of nominal plaintiff Spectrum against certain current and former directors and officers. The complaints generally allege breaches of fiduciary based on conduct relating to the events alleged in the consolidated Perry action. The complaints seek compensatory damages, corporate governance reforms, restitution and disgorgement of defendants’ alleged profits, and costs and fees. These actions are stayed pending resolution of the federal securities class action. Settlement discussions are ongoing, and accordingly, no agreement has yet been reached to resolve these derivative complaints. If a settlement were reached, we believe it would be reimbursable by our insurance carrier. However, the value of a potential settlement cannot be reasonably estimated given its highly uncertain nature.
Hardik Kakadia v. Rajesh C. Shrotriya, et al. (Filed April 23, 2013 in the Eighth Judicial District Court of the State of Nevada in and for Clark County; Case Number A-13-680643-B); and Joel Besner v. Rajesh C. Shrotriya, et al. (Filed May 31, 2013; Case Number A-13-682668-C) (collectively the “State Derivative Actions”). These consolidated State Derivative Actions are brought by the respective purported stockholders on behalf of nominal plaintiff Spectrum Pharmaceuticals, Inc. and are substantially similar to the consolidated federal derivative actions. These actions are stayed pending resolution of the federal securities class action. Settlement discussions are ongoing, and accordingly, no agreement has yet been reached to resolve these derivative complaints. If a settlement were reached, it would be reimbursable by our insurance carrier. However, the value of a potential settlement cannot be reasonably estimated given its highly uncertain nature.
Ira Gains v. Spectrum Pharmaceuticals, Inc. and Rajesh C. Shrotriya was filed in the United States District Court, District of Nevada on November 3, 2015. This putative class action was brought against defendants Spectrum Pharmaceuticals, Inc., and Dr. Rajesh C. Shrotriya.  The alleged class period was May 7, 2015 to October 23, 2015.  The complaint alleged a violation of Section 10(b) of the Securities Exchange Act of 1934 against all defendants and control person liability, as a violation of Section 20(a) of the Securities Exchange Act of 1934, against Dr. Rajesh C. Shrotriya.  The claims purportedly stemmed from our October 23, 2015 press release in which we announced that the FDA issued a Complete Response Letter indicating that the FDA would not approve our NDA for EVOMELA in its present form.  The complaint alleged that, as a result of the October 23, 2015 press release, our stock price declined.  The complaint further alleged that during the putative class period defendants made misleadingly optimistic statements about the progress of the NDA for EVOMELA with the FDA, our expectations regarding FDA approval of the NDA, and EVOMELA’s potential as a future driver of our revenue, which inflated the trading price of our stock.  The complaint sought relief in the form of monetary damages, costs and fees, and any other relief that the Court deemed appropriate.  On December 11, 2015, plaintiff voluntarily dismissed the action without prejudice.
(h) SEC Subpoena
On April 1, 2013, we received a subpoena from the SEC for documents pursuant to a formal order of investigation. The subpoena followed our March 12, 2013 announcement that we anticipated a change in customer ordering patterns of FUSILEV. We have cooperated with the SEC throughout its investigation, and on November 30, 2015, we received a notice from that the SEC does not intend to recommend an enforcement action against our company.
(i) Notice from HRSA

We received a notice on October 10, 2014 from the U.S. Health Resources and Services Administration, Office of Pharmacy Affairs (“HRSA”). In this notice HRSA asserted that, for at least one of our products with an “orphan drug” designation under section 526 of the Federal Food, Drug, and Cosmetic Act, we did not make the product(s) available for purchase by certain categories of providers at the applicable 340B price.  The 340B price is a discounted price for covered outpatient drugs that manufacturers participating in Medicaid (which includes us) agree to make available to providers that participate in the 340B drug pricing program (“Covered Entities”).  HRSA’s notice asserted that, by not selling our product(s) to

F-39

Notes to Consolidated Financial Statements
(all tabular amounts presented in thousands, except share, per share, per unit, and number of years)




certain categories of Covered Entities at 340B prices, we were overcharging them, and that we owed certain undefined refunds to those Covered Entities based on our previously made and reported product sales.

On October 14, 2015, the U.S. District Court for the District of Columbia issued a decision in the case of Pharmaceutical Research and Manufacturers of America v. United States Department of Health and Human Services, et al., invalidating HRSA’s July 21, 2014 “interpretive rule” relating to orphan drug pricing under the 340B drug pricing program.  Because HRSA’s October 10, 2014 notice to us reflected the same interpretation of relevant orphan drug pricing statutes as the interpretation overturned by the District Court in the Pharmaceutical Research and Manufacturers of America decision, we believe the decision supports the propriety of our pricing to Covered Entities. Since we only make provisions for liabilities when it is both probable that a liability has been incurred, and the amount can be reasonably estimated, we have not recorded a liability for this pending matter as of December 31, 2015 or any earlier period.

18. INCOME TAXES
The components of loss before provision for income taxes are as follows:

For the Years Ended
December 31,

2015
 
2014
 
2013
United States
$
(56,554
)
 
$
(37,327
)
 
$
(30,437
)
Foreign
6,175

 
(6,205
)
 
(6,199
)
Total
$
(50,379
)
 
$
(43,532
)
 
$
(36,636
)

The provision for income taxes consist of the following:
 
For the Years Ended
December 31,
 
2015
 
2014
 
2013
Current:

 

 

Federal
$
113

 
$
1,529

 
$
(8,357
)
State
5

 
126

 
(691
)
Foreign
148

 
29

 
—


$
266

 
$
1,684

 
$
(9,048
)
Deferred:

 

 

Federal
114

 
495

 
36,183

State
26

 
7

 
(1,637
)
Foreign
—

 
—

 
—


140

 
502

 
34,546

Total income tax provision
$
406

 
$
2,186

 
$
25,498

The 2014 income tax provision includes $1.5 million related to the correction of our prior year estimates of carryback of federal net operating losses, book tax differences on acquisition-related liabilities, and credits ineligible for offset against federal income taxes. Management has evaluated the materiality of these adjustments quantitatively and qualitatively, and has concluded that the corrections are immaterial to the accompanying Consolidated Financial Statements, taken as a whole.
The income tax provision differs from that computed using the federal statutory rate applied to income before taxes as follows:
 

F-40

Notes to Consolidated Financial Statements
(all tabular amounts presented in thousands, except share, per share, per unit, and number of years)





2015
 
2014
 
2013
Tax provision computed at the federal statutory rate
$
(17,619
)
 
$
(15,236
)
 
$
(12,822
)
State tax, net of federal benefit
232

 
66

 
(246
)
Research credits
(2,974
)
 
(2,134
)
 
(2,254
)
FIN 48 uncertain tax positions
—

 
—

 
—

Change in tax credit carryforwards
(4,965
)
 
—

 
—

Transaction costs
—

 
(11
)
 
880

Officers compensation
1,577

 
1,895

 
2,178

Stock based compensation
535

 
299

 
501

Permanent items and other
(487
)
 
21,742

 
(1,080
)
Domestic manufacturing deduction
—

 
(630
)
 
767

Tax differential on foreign earnings
1,435

 
1,570

 
1,123

Change in tax rate
(903
)
 
(519
)
 
(283
)
Valuation allowance
23,575

 
(4,856
)
 
36,734

Income tax provision
$
406

 
$
2,186

 
$
25,498

The Protecting Americans from Tax Hikes Act of 2015, which President Obama signed into law on December 18, 2015, reinstated the research and development credit for 2015 and included a permanent extension of the research credit under Section 41. We recorded a $0.4 million benefit, before impact of valuation allowance, related to the research and development credit in 2015.
Significant components of our deferred tax assets as of December 31, 2015 and 2014 are presented below. A valuation allowance has been recognized to offset the net deferred tax assets as realization of such deferred tax assets no longer meets the “more-likely-than-not” threshold under GAAP.
 
2015
 
2014
Deferred tax assets:

 

Net operating loss carry forwards
$
41,251

 
$
40,505

Research credits
22,082

 
9,045

Stock based compensation
4,828

 
3,703

Deferred revenue
2,280

 
1,893

Development costs
5,504

 
5,950

Returns and allowances
1,363

 
4,161

Other, net
9,887

 
9,082

Total deferred tax assets before valuation allowance
87,195

 
74,339

Valuation allowance
(71,815
)
 
(45,983
)
Total deferred tax assets
15,380

 
28,356

Deferred tax liabilities:

 

Basis difference in debt
(713
)
 
(907
)
Depreciation and amortization differences
(21,446
)
 
(34,088
)
Net deferred tax liability
$
(6,779
)
 
$
(6,639
)
At December 31, 2015 and 2014 , we recorded a valuation allowance of $71.8 million and $46.0 million , respectively. The valuation allowance increased by $25.8 million and decreased by $3.6 million , during 2015 and 2014 , respectively. The increase in the valuation allowance in 2015 was due to increased research & development and orphan drug credits and the decrease in deferred tax liabilities. The decrease in valuation allowance in 2014 was due to a $17.2 million adjustment to write off deferred tax assets acquired from Talon that were determined not to be realizable.
At December 31, 2015 , we had federal and state net operating loss carryforwards of approximately $111.5 million and $92.7 million , respectively. We have approximately $8.9 million  of foreign loss carryforwards that will begin to expire in 2022 . The federal and state loss carry forwards will begin to expire in 2018 and 2016, respectively, unless previously utilized. At

F-41

Notes to Consolidated Financial Statements
(all tabular amounts presented in thousands, except share, per share, per unit, and number of years)




December 31, 2015 , we had federal and state tax credits of approximately $22.9 million and $3.0 million , respectively. The federal tax credit carryovers begin to expire in 2027 unless previously utilized. The state research and development credit carryforwards have an indefinite carryover period.
As a result of the prior ownership changes, the utilization of certain net operating loss and research and development tax credit carryforwards including those acquired in connection with the acquisition of Allos and Talon are subject to annual limitations under Sections 382 and 383 of the Internal Revenue Code of 1986 and similar state provisions. Any net operating losses or credits that would expire unutilized as a result of Section 382 and 383 limitations have been removed from the table of deferred tax assets and the accompanying disclosures of net operating loss and research and development carryforwards.
Accounting guidance clarifies the accounting for uncertain tax positions and prescribes a recognition threshold and measurement process for recording in the financial statements uncertain tax positions taken or expected to be taken in a tax return. Additionally, the authoritative guidance addresses the de-recognition, classification, accounting in interim periods and disclosure requirements for uncertain tax positions. Only tax positions that meet the more-likely-than-not recognition threshold at the effective date may be recognized.
In November 2015, the FASB issued ASU 2015-17, Balance Sheet Classification of Deferred Taxes , which requires companies to classify all deferred tax assets and liabilities as noncurrent on the balance sheet instead of separating deferred taxes into current and noncurrent amounts by jurisdiction. For public business entities, the guidance is effective for financial statements issued for annual periods beginning after December 15, 2016. We decided to early adopt these provision on a prospective basis as of December 31, 2015, and the adoption did not have a material impact on the accompanying Consolidated Financial Statements.
The following tabular reconciliation summarizes activity related to unrecognized tax benefits:
 
2015
 
2014
 
2013
Balance at beginning of year
$
1,944

 
$
2,212

 
$
5,482

Adjustments related to prior year tax positions
1,318

 
(915
)
 
(200
)
Increases related to current year tax positions
1,236

 
647

 
648

Decreases due to settlements
—

 
—

 
(1,227
)
Decreases related to prior year tax positions
—

 
—

 
(2,491
)
Balance at end of year
$
4,498

 
$
1,944

 
$
2,212

We continue to believe that our tax positions meet the more-likely-than-not standard required under the recognition phase of the authoritative guidance. However, we consider the amounts and probabilities of the outcomes that can be realized upon ultimate settlement with the tax authorities and determined unrecognized tax benefits primarily related to credits should be established as noted in the summary rollforward above.
Approximately $0.7 million , $0.7 million , and $0.3 million of the total unrecognized tax benefits as of December 31, 2015, 2014, and 2013, respectively, would reduce our annual effective tax rate if recognized. Additional amounts in the summary rollforward could impact our effective tax rate if we did not maintain a full valuation allowance on our net deferred tax assets.
We do not expect our unrecognized tax benefits to change significantly over the next 12 months . With a few exceptions, we are no longer subject to U.S. federal, state and local income tax examinations for years before 2009. Our policy is to recognize interest and/or penalties related to unrecognized tax benefits in income tax expense in the consolidated statements of operations.
19. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
Selected quarterly financial data (unaudited) for the year ended December 31, 2015 and 2014 is presented below:
 

F-42

Notes to Consolidated Financial Statements
(all tabular amounts presented in thousands, except share, per share, per unit, and number of years)




 
Quarter Ended (Unaudited)
 
March 31
 
June 30
 
September 30
 
December 31
2015

 

 

 

Total revenues
$
38,618

 
$
44,982

 
$
28,627

 
$
50,329

Operating loss
$
(21,661
)
 
$
(34
)
 
$
(16,074
)
 
$
(2,963
)
Net loss
$
(25,562
)
 
$
(2,346
)
 
$
(18,724
)
 
$
(4,153
)
Net loss per share, basic
$
(0.39
)
 
$
(0.04
)
 
$
(0.28
)
 
$
(0.07
)
Net loss per share, diluted
$
(0.39
)
 
$
(0.04
)
 
$
(0.28
)
 
$
(0.07
)
2014

 

 

 

Total revenues
$
40,124

 
$
46,855

 
$
47,990

 
$
51,861

Operating loss
$
(24,414
)
 
$
(1,396
)
 
$
(4,127
)
 
$
(1,632
)
Net loss
$
(27,641
)
 
$
(3,563
)
 
$
(11,539
)
 
$
(2,976
)
Net loss per share, basic
$
(0.44
)
 
$
(0.06
)
 
$
(0.18
)
 
$
(0.05
)
Net loss per share, diluted
$
(0.44
)
 
$
(0.06
)
 
$
(0.18
)
 
$
(0.05
)
Net loss per basic and diluted shares are computed independently for each of the quarters presented based on basic and diluted shares outstanding per quarter and, therefore, may not sum to the totals for the year.

20. SUBSEQUENT EVENTS
Out-License of ZEVALIN, FOLOTYN, BELEODAQ, and MARQIBO in Canada
On January 8, 2016, we entered into a strategic partnership with Servier Canada, Inc. for the out-licenses of ZEVALIN, FOLOTYN, BELEODAQ, and MARQIBO. We will receive $6 million in upfront payments, development milestone payments if/when achieved, and a high single-digit royalty on their sales of these products.
FDA Approval of EVOMELA
On March 10, 2016, the FDA communicated its approval of our NDA for EVOMELA. Upon receipt of FDA approval, we are contractually obligated to make a $6.0 million milestone payment to Ligand Pharmaceuticals Incorporated within 30 days (see Note 10(b) ); accordingly, this payment is due no later than April 9, 2016.


Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None

Item 9A. Controls and Procedures
Our principal executive officer and principal financial officer have provided certifications filed as Exhibits 31.1 and 32.1 , and 31.2 , and 32.2 , respectively. Such certifications should be read in conjunction with the information contained in this Item 9A for a more complete understanding of the matters covered by those certifications.
(a) 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) of the Securities Exchange Act of 1934 (the “Exchange Act”). Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of the financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. This process includes those policies and procedures (i) that pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (ii) that receipts and expenditures are being made only in accordance with authorizations of our management and directors; (iii) that provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on

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our financial statements; and (iv) that provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of the internal control over financial reporting to future periods are subject to risk that the internal control may become inadequate because of changes in conditions, or that the degree of compliance with policies or procedures may deteriorate. Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2015 . In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework (2013 framework) (“2013 COSO”).
Based on our management’s assessment, we have concluded that as of December 31, 2015 , our internal control over financial reporting was effective, as evaluated under the 2013 COSO criteria. Our independent registered public accounting firm, Deloitte & Touche LLP, has issued a report on our internal control over financial reporting. Deloitte & Touche LLP’s report appears within Item 9A in this Annual Report on Form 10-K and expresses an unqualified opinion on the effectiveness of our internal control over financial reporting.
(b) Disclosure Controls and Procedures
We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures as of December 31, 2015 , pursuant to Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures, as of such date, were effective.
(c) Changes in Internal Control Over Financial Reporting
There have been no changes in our internal control over financial reporting during the fiscal fourth quarter of the year ended December 31, 2015 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
Spectrum Pharmaceuticals, Inc.
Henderson, Nevada

We have audited the internal control over financial reporting of Spectrum Pharmaceuticals, Inc. and subsidiaries (the “Company”) as of December 31, 2015 , based on the criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. 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 conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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.

A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel 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 the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2015 , based on the criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements and financial statement schedule as of and for the year ended December 31, 2015 of the Company and our report dated March 14, 2016 expressed an unqualified opinion on those consolidated financial statements and financial statement schedule.
/s/ Deloitte & Touche LLP
Costa Mesa, California
March 14, 2016


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Item 9B. Other Information
None.
 
PART III
Item 10. Directors, Executive Officers and Corporate Governance
The information required under this item is incorporated by reference from our definitive proxy statement related to our 2016 Annual Meeting of Stockholders, or the Proxy Statement, to be filed pursuant to Regulation 14A, on or before April 29, 2016.

Item 11. Executive Compensation
The information required under this item is incorporated herein by reference from the Proxy Statement.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The information required under this item is incorporated herein by reference from the Proxy Statement.

Item 13. Certain Relationships and Related Transactions, and Director Independence.
The information required under this item is incorporated herein by reference from the Proxy Statement.

Item 14. Principal Accountant Fees and Services
The information required under this item is incorporated herein by reference from the Proxy Statement.  

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Part IV

Item 15. Exhibits and Financial Statement Schedules
 
(a)
Financial Statements and Schedules
The following financial statements and schedules listed below are included in this Annual Report on Form 10-K:
Financial Statements
Reports of Independent Registered Public Accounting Firms
Consolidated Balance Sheets as of December 31, 2015 and 2014
Consolidated Statements of Operations for the years ended December 31, 2015 , 2014 , and 2013
Consolidated Statements of Comprehensive Loss for the years ended December 31, 2015 , 2014 , and 2013
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2015 , 2014 , and 2013
Consolidated Statements of Cash Flows for the years ended December 31, 2015 , 2014 , and 2013
Notes to the Consolidated Financial Statements
Schedule II – Valuation and Qualifying Accounts for the years ended December 31, 2015 , 2014 , and 2013
(All other schedules are omitted, as required information is either not applicable or the information is presented in the consolidated financial statements).

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SCHEDULE II – VALUATION AND QUALIFYING ACCOUNTS
Years Ended December 31, 2015 , 2014 , and 2013
 
 
 
 
Additions
(Reductions)
 
 
 
 
Description
Balance at
Beginning of
Period
 
Additions
(Recovery)
to Bad Debt
Expense
 
Charged
to Other
Accounts
 
Deductions (1)
 
Balance at
End of
Period

(in thousands)
December 31, 2015

 

 

 

 

Allowance for doubtful accounts
$
120

 
$
—

 
$
—

 
$
—

 
$
120

December 31, 2014

 

 

 

 

Allowance for doubtful accounts
$
206

 
$
(85
)
 
$
—

 
$
(1
)
 
$
120

December 31, 2013

 

 

 

 

Allowance for doubtful accounts
$
228

 
$
11

 
$
—

 
$
(33
)
 
$
206


(1)
Deductions represent the actual write-off of accounts receivable balances.

(b) Exhibits
The following is a list of exhibits required by Item 601 of Regulation S-K filed as part of this Annual Report on Form 10-K. For exhibits that previously have been filed, the Company incorporates those exhibits herein by reference. The exhibit table below includes the Form Type and Filing Date of the previous filing and the original exhibit number in the previous filing which is being incorporated by reference herein.
 
Exhibit No.
  
Description
 
 
2.1
  
Asset Purchase Agreement, dated August 15, 2007, by and between Cell Therapeutics, Inc. and Biogen Idec Inc. (Filed as Exhibit 10.1 to Cell Therapeutics, Inc.’s Form 8-K, No. 001-12465, as filed with the Securities and Exchange Commission on August 21, 2007, and incorporated herein by reference.)
 
 
2.2
  
First Amendment to Asset Purchase Agreement, dated December 9, 2008, by and between Cell Therapeutics, Inc. and Biogen Idec Inc. (Filed as Exhibit 10.48 to Cell Therapeutics, Inc.’s Form 10K, No. 001-12465, as filed with the Securities and Exchange Commission on March 16, 2009, and incorporated herein by reference.)
 
 
2.3#
  
License and Asset Purchase Agreement, dated January 23, 2012, by and between Spectrum Pharmaceuticals Cayman, L.P. and Bayer Pharma AG. (Filed as Exhibit 2.1 to Form 10-Q, No. 001-35006, as filed with the Securities and Exchange Commission on April 27, 2012, and incorporated herein by reference.)
 
 
2.4
  
Agreement and Plan of Merger, dated as of April 4, 2012, by and among Spectrum Pharmaceuticals, Inc., Sapphire Acquisition Sub, Inc. and Allos Therapeutics, Inc., including a Form of Contingent Value Rights Agreement and a Form of Tender and Voting Agreement. (Filed as Exhibits 2.1, 2.2 and 2.3, respectively, to Form 8-K, No. 001-35006, as filed with the Securities and Exchange Commission on April 5, 2012, and incorporated herein by reference.)
 
 
2.5
  
Securities Purchase Agreement, dated July 16, 2013, by and among Spectrum Pharmaceuticals, Inc., Eagle Acquisition Merger Sub, Inc., certain entities affiliated with Warburg Pincus & Co. and certain entities affiliated with Deerfield Management, LLC. (Filed as Exhibit 2.1 to Form 8-K, No. 001-35006, as filed with the Securities and Exchange Commission on July 19, 2013, and incorporated herein by reference.)
 
 
2.6
  
Stock Purchase Agreement, dated July 16, 2013, by and among Spectrum Pharmaceuticals, Inc., Eagle Acquisition Merger Sub, Inc. and Talon Therapeutics, Inc. (Filed as Exhibit 2.2 to Form 8-K, No. 001-35006, as filed with the Securities and Exchange Commission on July 19, 2013, and incorporated herein by reference.)
 
 
2.7
  
Contingent Value Rights Agreement, dated July 16, 2013, by and among Spectrum Pharmaceuticals, Inc., Talon Therapeutics, Inc. and Corporate Stock Transfer Inc. as rights agent. (Filed as Exhibit 2.3 to Form 8-K, No. 001-35006, as filed with the Securities and Exchange Commission on July 19, 2013, and incorporated herein by reference.)
 
 

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2.8
  
Exchange Agreement, dated July 16, 2013, by and among Talon Therapeutics, Inc. and certain entities affiliated with Deerfield Management, LLC, including the Registration Rights Agreement by and among Spectrum Pharmaceuticals, Inc. and certain entities affiliated with Deerfield Management, LLC, as Exhibit A thereto. (Filed as Exhibit 2.4 to Form 8-K, No. 001-35006, as filed with the Securities and Exchange Commission on July 19, 2013, and incorporated herein by reference.)
 
 
 
3.1
 
Certificate of Incorporation, as amended through June 24, 2011. (Filed as Exhibit 3.1 to Form 10-K, No. 001-35006, as filed with the Securities and Exchange Commission on March 2, 2012, and incorporated herein by reference.)
 
 
 
3.2
 
Second Amended and Restated Bylaws of Spectrum Pharmaceuticals, Inc. (Filed as Exhibit 3.2 to Form 8-K, No. 001-35006, as filed with the Securities and Exchange Commission on August 8, 2012, and incorporated herein by reference.)
 
 
 
4.1
 
Rights Agreement, dated as of December 13, 2010, between Spectrum Pharmaceuticals, Inc. and ComputerShare Trust Company, N.A. (formerly U.S. Stock Transfer Corporation), as Rights Agent, which includes as Exhibit A thereto the form of Certificate of Designation for the Series B Junior Participating Preferred Stock, as Exhibit B thereto the Form of Rights Certificate and as Exhibit C thereto a Summary of Rights of Stockholder Rights Plan. (Filed as Exhibit 4.1 to Form 8-K, No. 000-28782, as filed with the Securities and Exchange Commission on December 13, 2010, and incorporated herein by reference.)
 
 
 
4.2
 
Registration Rights and Stockholder Agreement, dated as of February 2, 2010, by and between Spectrum Pharmaceuticals, Inc. and Topotarget A/S. (Filed as Exhibit 4.2 to Form 10-K, No. 001-35006, as filed with the Securities and Exchange Commission on March 12, 2014, and incorporated herein by reference.)
 
 
 
4.3
 
Indenture, dated as of December 23, 2013, by and between Spectrum Pharmaceuticals, Inc. and Wilmington Trust, National Association, dated as of December 23, 2013. (Filed as Exhibit 4.1 to Form 8-K, No. 001-35006, as filed with the Securities and Exchange Commission on December 23, 2013, and incorporated herein by reference.)
 
 
 
4.4
 
Form of Note for Spectrum Pharmaceuticals, Inc.’s 2.75% Convertible Senior Notes due 2018. (Filed as Exhibit 4.2 to Form 8-K, No. 001-35006, as filed with the Securities and Exchange Commission on December 23, 2013, and incorporated herein by reference.)
 
 
 
10.1
 
Sublease Agreement, dated as of December 2, 2010, between Spectrum Pharmaceuticals, Inc. and Del Webb Corporation. (Filed as Exhibit 10.1 to Form 10-K, No. 001-35006, as filed with the Securities and Exchange Commission on March 10, 2011, and incorporated herein by reference.)
 
 
 
10.2
 
First Amendment to Sublease Agreement, dated November 16, 2011, between Spectrum Pharmaceuticals, Inc. and Del Webb Corporation. (Filed as Exhibit 10.2 to Form 10-K, No. 001-35006, as filed with the Securities and Exchange Commission on March 2, 2012, and incorporated herein by reference.)
 
 
 
10.3
 
Second Amendment to Sublease Agreement, dated November 12, 2012, between Spectrum Pharmaceuticals, Inc. and Del Webb Corporation. (Filed as Exhibit 10.10 to Form 10-K, No. 001-35006, as filed with the Securities and Exchange Commission on February 28, 2013, and incorporated herein by reference.)
 
 
 
10.4
 
Industrial Lease Agreement, dated as of January 16, 1997, between Spectrum Pharmaceuticals, Inc. and the Irvine Company. (Filed as Exhibit 10.11 to Form 10-KSB, No. 000-28782, as filed with the Securities and Exchange Commission on March 31, 1997, and incorporated herein by reference.)
 
 
 
10.5
 
First Amendment, dated March 25, 2004, to Industrial Lease Agreement dated as of January 16, 1997 by and between Spectrum Pharmaceuticals, Inc. and the Irvine Company. (Filed as Exhibit 10.1 to Form 10-Q, No. 000-28782, as filed with the Securities and Exchange Commission on May 17, 2004, and incorporated herein by reference.)
 
 
 
10.6
 
Second Amendment, dated March 7, 2006, to Industrial Lease Agreement dated as of January 16, 1997 by and between Spectrum Pharmaceuticals, Inc. and the Irvine Company. (Filed as Exhibit 10.6 to Form 10-K, No. 001-35006, as filed with the Securities and Exchange Commission on March 12, 2014, and incorporated herein by reference.)
 
 
 
10.7
 
Third Amendment, dated February 12, 2006, to Industrial Lease Agreement dated as of January 16, 1997 by and between Spectrum Pharmaceuticals, Inc. and the Irvine Company. (Filed as Exhibit 10.7 to Form 10-K, No. 001-35006, as filed with the Securities and Exchange Commission on March 12, 2014, and incorporated herein by reference.)
 
 
 
10.8
 
Fourth Amendment, dated July 29, 2009, to Industrial Lease Agreement dated as of January 16, 1997 by and between Spectrum Pharmaceuticals, Inc. and the Irvine Company. (Filed as Exhibit 10.29 to Form 10-K, 000-28782, as filed with the Securities and Exchange Commission on April 5, 2010, and incorporated herein by reference.)
 
 
 

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10.9
 
Fifth Amendment, dated November 21, 2013, to Industrial Lease Agreement dated as of January 16, 1997 by and between Spectrum Pharmaceuticals, Inc. and the Irvine Company. (Filed as Exhibit 10.9 to Form 10-K, No. 001-35006, as filed with the Securities and Exchange Commission on March 12, 2014, and incorporated herein by reference.)
 
 
 
10.10
 
Sixth Amendment, dated January 31, 2014, to Industrial Lease Agreement dated as of January 16, 1997 by and between Spectrum Pharmaceuticals, Inc. and the Irvine Company. (Filed as Exhibit 10.10 to Form 10-K, No. 001-35006, as filed with the Securities and Exchange Commission on March 12, 2014, and incorporated herein by reference.)
 
 
 
10.11
 
Lease Agreement, dated April 7, 2014, by and between Spectrum Pharmaceuticals, Inc. and 11500 South Eastern Avenue, LLC. (Filed as Exhibit 10.1 to Form 10-Q, No. 001-35006, as filed with the Securities and Exchange Commission on August 8, 2014 and incorporated herein by reference.)
 
 
 
10.12
 
Preferred Stock and Warrant Purchase Agreement, dated as of September 26, 2003, by and among Spectrum Pharmaceuticals, Inc. and the purchasers listed on Schedule 1 attached thereto. (Filed as Exhibit 10.1 to Form 8-K, 000-28782, as filed with the Securities and Exchange Commission on September 30, 2003, and incorporated herein by reference.)
 
 
 
10.13*
 
Form of Stock Option Agreement under the 2003 Amended and Restated Incentive Award Plan. (Filed as Exhibit 10.1 to Form 8-K, 000-28782, as filed with the Securities and Exchange Commission on December 17, 2004, and incorporated herein by reference.)
 
 
 
10.14*
 
Form of Non-Employee Director Stock Option Agreement under the 2003 Amended and Restated Incentive Award Plan. (Filed as Exhibit 10.5 to Form 10-Q, 000-28782, as filed with the Securities and Exchange Commission on May 10, 2005, and incorporated herein by reference.)
 
 
 
10.15*
 
2003 Amended and Restated Incentive Award Plan. (Filed as Exhibit 10.1 to Form 8-K, 000-28782, as filed with the Securities and Exchange Commission on July 2, 2009, and incorporated herein by reference.)
 
 
 
10.16*
 
Amendment No. 1 to 2003 Amended and Restated Incentive Award Plan. (Filed as Exhibit 10.1 to Form 10-Q, 001-35006, as filed with the Securities and Exchange Commission on November 6, 2015, and incorporated herein by reference.)

 
 
 
10.17*
 
Long-Term Retention and Management Incentive Plan. (Filed as Exhibit 10.36 to Form 10-Q, 001-35006, as filed with the Securities and Exchange Commission on August 4, 2011, and incorporated herein by reference.)
 
 
 
10.18*
 
Deferred Compensation Plan (Filed as Exhibit 4.1 to Form S-8, Reg. No. 333-176681, as filed with the Securities and Exchange Commission on September 6, 2011, and incorporated herein by reference).
 
 
10.19*
 
Executive Employment Agreement by and between Spectrum Pharmaceuticals, Inc. and Rajesh C. Shrotriya, M.D., entered into June 20, 2008 and effective as of January 2, 2008. (Filed as Exhibit 10.1 to Form 8-K, 000-28782, as filed with the Securities and Exchange Commission on June 26, 2008, and incorporated herein by reference.)
 
 
10.20*
 
First Amendment to Executive Employment Agreement, dated as of April 17, 2014, by and between Spectrum Pharmaceuticals, Inc. and Dr. Rajesh C. Shrotriya. (Filed as Exhibit 10.2 to Form 10-Q, 001-35006, as filed with the Securities and Exchange Commission on August 8, 2014 and incorporated herein by reference.
 
 
10.21*
 
Form of Change in Control Severance Agreement. (Filed as Exhibit 10.1 to Form 8-K, 001-35006 as filed with the Securities and Exchange Commission on March 31, 2014, and incorporated herein by reference.)
 
 
10.22+*
 
First Amendment to Change in Control Severance Agreement, dated February 18, 2015, by and between Spectrum Pharmaceuticals, Inc. and Joseph W. Turgeon.


10.23*
 
Second Amendment to Change in Control Severance Agreement, dated August 6, 2015, by and between Spectrum Pharmaceuticals, Inc. and Joseph W. Turgeon. (Filed as Exhibit 10.2 to Form 10-Q, 001-35006, as filed with the Securities and Exchange Commission on August 7, 2015, and incorporated herein by reference.)

 
 
 
10.24*
 
Form of Indemnity Agreement of Spectrum Pharmaceuticals, Inc. (Filed as Exhibit 10.32 to Form 10-K, 000-28782, as filed with the Securities and Exchange Commission on March 31, 2009, and incorporated herein by reference.)
 
 
10.25*
 
2009 Employee Stock Purchase Plan. (Filed as Exhibit 99.1 to Form S-8, Reg. No. 333-160312, as filed with the Securities and Exchange Commission on June 29, 2009, and incorporated herein by reference.)
 
 
10.26*
 
2009 Incentive Award Plan. (Filed as Exhibit 99.2 to Form S-8, Reg. No. 333-160312, as filed with the Securities and Exchange Commission on June 29, 2009, and incorporated herein by reference.)
 
 

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10.27*
 
Term Sheet for 2009 Incentive Award Plan Stock Option Award. (Filed as Exhibit 10.8 to Form 10-Q, 000-28782, as filed with the Securities and Exchange Commission on August 13, 2009, and incorporated herein by reference.)
 
 
10.28*
 
Term Sheet for 2009 Incentive Award Plan, Nonqualified Stock Option Award Awarded to Non-Employee Directors (Revised July 2012). (Filed as Exhibit 10.2 to Form 10-Q, 001-35006, as filed with the Securities and Exchange Commission on November 9, 2012, and incorporated herein by reference.)
 
 
10.29*
 
Term Sheet for 2009 Incentive Award Plan, Restricted Stock Award. (Filed as Exhibit 10.10 to Form 10-Q, 000-28782, as filed with the Securities and Exchange Commission on August 13, 2009, and incorporated herein by reference.)
 
 
10.30*
 
Amendment No. 1 to 2009 Incentive Award Plan. (Filed as Exhibit 10.2 to Form 10-Q, 001-35006, as filed with the Securities and Exchange Commission on November 6, 2015, and incorporated herein by reference.)

 
 
 
10.31#
 
License and Collaboration Agreement, dated February 2, 2010, by and between Spectrum Pharmaceuticals, Inc. and Topotarget A/S. (Filed as Exhibit 10.37 to Form 10-K, 000-28782, as filed with the Securities and Exchange Commission on April 5, 2010, and incorporated herein by reference.)
 
 
10.32#
 
Amendment to License and Collaboration Agreement, dated October 3, 2013, by and between Spectrum Pharmaceuticals, Inc. and Topotarget A/S. (Filed as Exhibit 99.1 to Form 8-K/A, 001-35006, as filed with the Securities and Exchange Commission on November 18, 2013, and incorporated herein by reference.)
 
 
10.33#
 
License Agreement for 10-Propargyl-10-Deazaaminopterin “PDX” dated December 23, 2002 and amended May 9, 2006 between Allos Therapeutics, Inc. and SRI International, Sloan-Kettering Institute for Cancer Research and Southern Research Institute. (Filed as Exhibit 10.1 to Allos Therapeutics, Inc.’s Form 10-Q/A, File No. 000-29815, as filed with the Securities and Exchange Commission on August 17, 2012, and incorporated herein by reference.)
 
 
 
10.34#
 
Second Amendment to License Agreement for 10-Propargyl-10-Deazaaminopterin “PDX” dated November 6, 2007 between Allos Therapeutics, Inc. and SRI International, Sloan-Kettering Institute for Cancer Research and Southern Research Institute. (Filed as Exhibit 10.13.1 to Allos Therapeutics, Inc.’s Form 10-K, File No. 000-29815, as filed with the Securities and Exchange Commission on March 1, 2010, and incorporated herein by reference.)
 
 
10.35#
 
Third Amendment to License Agreement for 10-Propargyl-10-Deazaaminopterin “PDX” dated May 10, 2011 between Allos Therapeutics, Inc. and SRI International, Sloan-Kettering Institute for Cancer Research and Southern Research Institute. (Filed as Exhibit 10.3 to Allos Therapeutics, Inc.’s Form 10-Q, File No. 000-29815, as filed with the Securities and Exchange Commission on August 4, 2011, and incorporated herein by reference.)
 
 
10.36#
 
Amended and Restated License, Development and Commercialization Agreement, dated May 29, 2013, by and between Allos Therapeutics, Inc. and Mundipharma International Corporation Limited (Filed as Exhibit 10.1 to Form 10-Q, 001-35006, as filed with the Securities and Exchange Commission on August 9, 2013, and incorporated herein by reference.)
 
 
10.37#
 
First Amendment to Amended and Restated License, Development and Commercialization Agreement, dated May 29, 2015, by and between Allos Therapeutics, Inc. and Mundipharma International Corporation Limited. (Filed as Exhibit 10.1 to Form 10-Q, 001-35006, as filed with the Securities and Exchange Commission on August 7, 2015, and incorporated herein by reference.)

 
 
 
10.38#
 
Amended and Restated Supply Agreement, dated May 29, 2013, by and between Allos Therapeutics, Inc. and Mundipharma Medical Company (Filed as Exhibit 10.2 to Form 10-Q, File No. 001-35006, as filed with the Securities and Exchange Commission on August 9, 2013, and incorporated herein by reference.)
 
 
 
10.39
 
License Agreement, dated December 21, 2007, by and between Biogen Idec Inc. and Cell Therapeutics, Inc. (Filed as Exhibit 10.8 to Form 10-Q, 001-35006, as filed with the Securities and Exchange Commission on November 9, 2012, and incorporated herein by reference.)
 
 
10.40
 
License-Back Agreement, dated December 21, 2007, by and between Biogen Idec Inc. and Cell Therapeutics, Inc. (Filed as Exhibit 10.9 to Form 10-Q, 001-35006, as filed with the Securities and Exchange Commission on November 9, 2012, and incorporated herein by reference.)
 
 
10.41#
 
Sublicense Agreement, dated December 21, 2007, by and among Cell Therapeutics, Inc., Biogen Idec Inc., SmithKline Beecham Corporation d/b/a GlaxoSmithKline and Glaxo Group Limited. (Filed as Exhibit 10.11 to Form 10-Q, 001-35006, as filed with the Securities and Exchange Commission on November 9, 2012, and incorporated herein by reference.)
 
 

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10.42#
 
Sublicense Agreement, dated December 21, 2007, by and among Cell Therapeutics, Inc., Biogen Idec Inc., Corixa Corporation, Coulter Pharmaceutical, Inc., The Regents of the University of Michigan and SmithKline Beecham Corporation d/b/a GlaxoSmithKline. (Filed as Exhibit 10.12 to Form 10-Q, 001-35006, as filed with the Securities and Exchange Commission on November 9, 2012, and incorporated herein by reference.)
 
 
10.43
 
Security Agreement, dated December 15, 2008, by and between RIT Oncology, LLC and Biogen Idec Inc. (Filed as Exhibit 10.35 to Form 10-K, 001-35006, as filed with the Securities and Exchange Commission on March 10, 2011, and incorporated herein by reference.)
 
 
10.44#
 
Omnibus Amendment to Zevalin Supply Arrangements, dated October 1, 2012, by and between Biogen Idec US Corporation and RIT Oncology, LLC, a wholly-owned subsidiary of Spectrum Pharmaceuticals, Inc.. (Filed as Exhibit 10.14 to Form 10-Q, 001-35006, as filed with the Securities and Exchange Commission on November 9, 2012, and incorporated herein by reference.)
 
 
10.45
 
License Agreement, dated May 23, 2006, by and between Merck Eprova AG and Spectrum Pharmaceuticals, Inc. (Filed as Exhibit 10.16 to Form 10-Q, 001-35006, as filed with the Securities and Exchange Commission on November 9, 2012, and incorporated herein by reference.)
 
 
10.46
 
First Amendment to License Agreement, dated as of June 20, 2014, by and between Spectrum Pharmaceuticals, Inc. and Merck Eprova AG. (Filed as Exhibit 99.1 to Form 8-K, 001-35006, as filed with the Securities and Exchange Commission on June 26, 2014, and incorporated herein by reference).
 
 
10.47
 
Manufacturing and Supply Agreement, dated May 23, 2006, by and between Merck Eprova AG and Spectrum Pharmaceuticals, Inc. (Filed as Exhibit 10.17 to Form 10-Q, 001-35006, as filed with the Securities and Exchange Commission on November 9, 2012, and incorporated herein by reference.)
 
 
10.48#
 
License Agreement, dated March 8, 2013, by and between Spectrum Pharmaceuticals, Inc. and CyDex Pharmaceuticals, Inc. (Filed as Exhibit 10.1 to Form 10-Q, 001-35006, as filed with the Securities and Exchange Commission on May 9, 2013, and incorporated herein by reference.)
 
 
10.49
 
Purchase Agreement, dated as of December 17, 2013, by and among Spectrum Pharmaceuticals, Inc., Jefferies LLC and RBC Capital Markets, LLC. (Filed as Exhibit 10.1 to Form 8-K, 001-35006, as filed with the Securities and Exchange Commission on December 23, 2013, and incorporated herein by reference.)
 
 
10.50
 
Base Call Option Transaction Confirmation, dated as of December 17, 2013, by and between Spectrum Pharmaceuticals, Inc. and Royal Bank of Canada. (Filed as Exhibit 10.2 to Form 8-K, 001-35006, as filed with the Securities and Exchange Commission on December 23, 2013, and incorporated herein by reference.)
 
 
 
10.51
 
Base Warrant Transaction Confirmation, dated as of December 17, 2013, by and between Spectrum Pharmaceuticals, Inc. and Royal Bank of Canada. (Filed as Exhibit 10.3 to Form 8-K, 001-35006, as filed with the Securities and Exchange Commission on December 23, 2013, and incorporated herein by reference.)
 
 
 
10.52
 
Additional Call Option Transaction Confirmation, dated as of December 20, 2013, by and between Spectrum Pharmaceuticals, Inc. and Royal Bank of Canada. (Filed as Exhibit 10.4 to Form 8-K, 001-35006, as filed with the Securities and Exchange Commission on December 23, 2013, and incorporated herein by reference.)
 
 
 
10.53
 
Additional Warrant Transaction Confirmation, dated as of December 20, 2013, by and between Spectrum Pharmaceuticals, Inc. and Royal Bank of Canada. (Filed as Exhibit 10.5 to Form 8-K, 001-35006, as filed with the Securities and Exchange Commission on December 23, 2013, and incorporated herein by reference.)
 
 
 
10.54+#
 
Co-Promotion Agreement between Eagle Pharmaceuticals, Inc. and Spectrum Pharmaceuticals, Inc., dated November 4, 2015.

 
 
 
10.55+#
 
License and Asset Purchase Agreement by and between Spectrum Pharmaceuticals Cayman, L.P. and Mundipharma International Corporation Limited, dated November 16, 2015.

 
 
 
10.56+#
 
Supply Agreement by and between Spectrum Pharmaceuticals Cayman, L.P. and Mundipharma Medical Company, dated November 16, 2015.

 
 
 
10.57
 
At Market Issuance Sales Agreement dated as of December 23, 2015, by and among Spectrum Pharmaceuticals, Inc., FBR Capital Markets & Co., MLV & Co. LLC and H.C. Wainwright & Co., LLC. (Filed as Exhibit 1.2 to Form S-3, Reg. No. 333-208760, as filed with the Securities and Exchange Commission on December 23, 2015, and incorporated herein by reference.)

 
 
 
21.1+
 
Subsidiaries of Registrant.
 
 
 
23.1+
 
Consent of Independent Registered Public Accounting Firm (Deloitte & Touche LLP).
 
 
 
23.2+
 
Consent of Independent Registered Public Accounting Firm (Ernst & Young LLP).
 
 
 
24.1
 
Power of Attorney (included in the signature page.)
 
 
 

F-52
Table of Contents


31.1+
 
Certification of Principal Executive Officer, pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934.
 
 
 
31.2+
 
Certification of Principal Financial Officer, pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934.
 
 
 
32.1+
 
Certification of Principal Executive Officer, pursuant to Rule 13a-14(b)/15d-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350.
 
 
 
32.2+
 
Certification of Principal Financial Officer, pursuant to Rule 13a-14(b)/15d-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350.
 
 
 
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

* Indicates a management contract or compensatory plan or arrangement.
# Confidential portions omitted and filed separately with the U.S. Securities and Exchange Commission pursuant to Rule 24b-2 promulgated under the Securities Exchange Act of 1934, as amended.
+ Filed herewith.




 





 

F-53

EXHIBIT 10.22

AMENDMENT NO. 1
TO
CHANGE IN CONTROL SEVERANCE AGREEMENT
This AMENDMENT NO. 1 TO CHANGE IN CONTROL SEVERANCE AGREEMENT (the “ Amendment ”) is entered into as of February 18, 2015 , by and between Spectrum Pharmaceuticals, Inc., a Delaware corporation (the “ Company ,” which term shall include any successor by merger, consolidation, sale of substantially all of the Company’s assets or otherwise), and Joseph W. Turgeon (“ Employee ”). All capitalized terms that have not been defined herein shall have the meanings ascribed to such terms in the Change in Control Severance Agreement (the “ Agreement ”) dated March 28, 2014, by and between the Company and Employee.
RECITALS
WHEREAS, the Company and Employee previously entered into the Agreement, which provides for the payment of certain benefits in connection with Employee’s termination of employment with the Company in certain circumstances following a Change in Control; and
WHEREAS, the Company and Employee desire to amend Section 3(a)(ii) of the Agreement to extend the Base Salary portion of the severance benefits from a period of twelve (12) months to a period of twenty-four (24) months following such termination, subject to the provisions of the Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing, of the mutual promises contained herein and of other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and the Employee hereby agree as follows:
1. Section 3(a)(ii) of the Agreement is hereby amended and restated in its entirety to read as follows:
“(ii)    An amount equal to the Employee’s monthly Base Salary rate (but not as an employee), paid monthly for a period of twenty-four (24) months following such termination; provided that to the extent that the payment of any amount constitutes “nonqualified deferred compensation” for purposes of Code Section 409A, any such payment scheduled to occur during the first sixty (60) days following such termination shall not be paid until the sixtieth (60 th ) day following such termination and shall include payment of any amount that was otherwise scheduled to be paid prior thereto.”
2. Except as expressly amended herein, all terms, covenants and provisions of the Agreement are and shall remain in full force and effect and all references therein to such Agreement shall henceforth refer to the Agreement as amended by this Amendment. This Amendment shall be deemed incorporated into, and a part of, the Agreement.
3. This Amendment may be executed in counterparts, each of which shall be deemed to be an original but together which will constitute one and the same instrument.




IN WITNESS WHEREOF, the parties have executed this Amendment as of the day and year set forth above.
“COMPANY”

SPECTRUM PHARMACEUTICALS, INC., a Delaware corporation





By:
 
 
 
Name:
 
 
 
Title:
 
 
 
“EMPLOYEE”





Joseph W. Turgeon













[ Signature Page to Amendment No. 1 to Change in Control Severance Agreement ]


EXHIBIT 10.54

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT MARKED WITH [***] HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT, AS AMENDED.



CO-PROMOTION AGREEMENT
This Co-Promotion Agreement (this “ Agreement ”) is entered into as of November 4, 2015 (the “ Effective Date ”), by and between Eagle Pharmaceuticals, Inc., a corporation organized under the laws of Delaware with offices at 50 Tice Blvd., Suite 315, Woodcliff Lake, NJ 07677 (“ Eagle ”) and Spectrum Pharmaceuticals, Inc., a corporation organized under the laws of Delaware with offices at 11500 South Eastern Avenue, Suite 240, Henderson, Nevada 89052 (“ Spectrum ”). Each of Eagle and Spectrum is sometimes referred to individually herein as a “ Party ” and collectively as the “ Parties .”
WHEREAS , Eagle has developed the Products (as defined below) and anticipates obtaining FDA approval to market one or more of the Products in the Territory (as defined below), with FDA approval of the first Product in the Territory anticipated to occur on or around February 1, 2016;
WHEREAS , Spectrum has significant experience with the promotion of pharmaceutical products in the Territory;
WHEREAS , Eagle wishes to engage Spectrum for certain promotional services related to the Products in the Territory, in accordance with the terms and conditions set forth herein; and
WHEREAS , Spectrum desires to perform such promotional services, in accordance with the terms and conditions set forth herein.
NOW, THEREFORE , in consideration of the mutual covenants contained herein, and for other good and valuable consideration, the Parties hereto, intending to be legally bound, hereby agree as follows:


ARTICLE I

DEFINITIONS
Whenever used in this Agreement with an initial capital letter, the terms defined in this Agreement shall have the respective meanings ascribed to them herein.

1.1    “ Affiliate ” means, with respect to any Party, any entity Controlling, Controlled by or under common Control with such Party. For purposes of this Section 1.1, “ Control ” means: (i) in the case of a corporate entity, direct or indirect ownership of more than fifty percent (50%) of the stock or shares having the right to vote for the election of directors of such entity; and (ii) in the case of an entity that is not a corporate entity, the possession, directly or indirectly, of the similar power to affirmatively direct, or cause the direction of, the management and policies of such entity, whether through the ownership of voting securities, by contract, or otherwise.

1.2    “ Applicable Laws ” means the laws, statutes, rules, or regulations applicable to a Party’s activities to be performed under this Agreement including, but not limited to, the FDCA, the federal Anti-Kickback Statute (42 U.S.C. § 1320a-7b(b)), the Federal Civil Monetary Penalties Law (42 U.S.C. § 1320a-7a), the civil False Claims Act (31 U.S.C. §§ 3729 et seq.), the criminal False Claims Law (42 U.S.C.


[***]: CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION.


§ 1320a- 7b(a)), the criminal Health Care Fraud laws (18 U.S.C. §§ 286, 287, 1347, 1349), the PDMA, the Patient Protection and Affordable Care Act of 2010 (42 U.S.C , § 18001 et seq.), the Federal Sunshine Law, the Generic Drug Enforcement Act of 1992 (21 U.S.C. § 335a et seq.), the Health Insurance Portability and Accountability Act of 1996 (42 U.S.C. §§ 1320d et seq.) as amended by the Health Information Technology for Economic and Clinical Health Act (42 U.S.C. §§ 17921 et seq.), the exclusion laws (42 U.S.C. § 1320a-7), Medicare (Title XVIII of the Social Security Act), Medicaid (Title XIX of the Social Security Act), state and federal licensure laws, the regulations promulgated pursuant to such laws, the FCPA and other laws relevant to fraud, waste and abuse, anti-corruption and bribery, racketeering, money laundering or terrorism, and any other state or federal law similar to the foregoing.

1.3    “ Approval ” means any and all approvals, registrations, licenses or authorizations from any Regulatory Authority required for the manufacture, marketing, promotion and sale of a Product in the Territory.
1.4    “[***] Product ” means Eagle’s [***].

1.5    “[*** ] Product ” means Eagle’s [***].

1.6    “ Call ” means an interactive in-person visit to a Healthcare Professional or Healthcare Organization by a CAM that includes a discussion of one or more Products.

1.7    “ CAM ” means an individual within the CAM Team who (a) is employed by Spectrum (and not by a Third Party contractor, unless approved by Eagle pursuant to Section 3.3) to conduct Promotional and other Commercialization activities with respect to a Product in the Territory pursuant to this Agreement, (b) has been sufficiently trained in accordance with this Agreement, and (c) substantially meets the qualifications set forth in Exhibit A . The qualifications in Exhibit A may be amended from time to time by mutual written agreement of the Parties.

1.8    “ CAM Team ” means the corporate account manager team within Spectrum that, on or before March 1, 2016, will be comprised of thirty-two (32) FTEs and will be identified in a separate writing to Eagle, a percentage of which (on an FTE basis) will be utilized to Promote and Commercialize Products under this Agreement.

1.9    “ Change of Control ” means, with respect to a Party: (a) the sale of all or substantially all of a such Party’s assets or business relating to the subject matter of this Agreement; (b) a merger, reorganization or consolidation involving such Party in which the holders of voting securities of such Party outstanding immediately prior thereto cease to hold at least fifty percent (50%) of the combined voting power of the surviving entity or acquiring entity (or its parent) immediately after such merger, reorganization or consolidation; or (c) the acquisition of more than fifty percent (50%) of the voting equity securities of such Party as a result of a single transaction or a series of related transactions.

1.10    “ Codes ” means (a) the Department of Health and Human Services (“ HHS ”) Office of Inspector General (“ OIG ”) Compliance Program Guidance for Pharmaceutical Manufacturers (“ OIG Compliance Guidance ”); (b) the Code on Interactions with Healthcare Professionals promulgated by the Pharmaceutical Research and Manufacturers of America (“ PhRMA Code ”), (c) the American Medical Association (AMA) Guidelines on Gifts to Physicians from Industry, and (d) the Accreditation Council for Continuing Medical Education (ACCME) Standards for Commercial Support, as any of the foregoing may be amended from time to time. [***].



[***]: CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION.


1.11    “ Commercial Operations Support for [ *** ] Sales Force ” means, with respect to [***], support for and assistance with the following [***].

1.12    “ Commercialization ” means, with respect to a Product, activities directed to the preparation for sale of, offering for sale of, or sale of such Product in the Territory, including activities in preparation for launch of such Product and activities related to marketing, Advertising or Promoting such Product. When used as a verb, “ Commercialize ” means to engage in Commercialization.

1.13    “ Commercialization Plan ” means, with respect to each Product, the written Product-specific plan setting forth Commercialization and related activities to be conducted by Spectrum, including the budgets therefor, as such plan is more particularly described in Section 2.4 and as may be amended or updated in accordance with this Agreement.

1.14    “ Commercially Reasonable Efforts ” means, with respect to an obligation or task hereunder relating to a Product, a Party’s performance of such obligation or task using that degree of skill, effort, expertise, and resources normally used by such Party when performing such obligation or task with respect to a product owned by it or to which it has rights, and which has similar technical and regulatory characteristics, market potential and is at a similar stage in its product life cycle as such Product, but in no event using less than due care consistent with the efforts and resources commonly used by a comparable pharmaceutical company with respect to a product which has similar technical and regulatory characteristics, market potential and is at a similar stage in its product life cycle as such Product.

1.15    “ Confidentiality Agreement ” means that certain Confidentiality Agreement between the Parties dated July 26, 2015.

1.16    “ Copyrights ” means all statutory and common law copyrights owned by Eagle in and to the Promotional Materials, Training Materials, Advertising or the Labels for the Products used in the Territory.

1.17    “ Detail ” means a face-to-face, one-on-one discussion with a Target Prescriber/Account in the Target Prescriber/Account’s office, hospital, clinic or other appropriate location (excluding medical convention exhibits and displays) during which a CAM makes a presentation of a Product’s clinical attributes in a fair and balanced manner strictly in accordance with the Promotional Materials, the Labeling, the terms of this Agreement and all Applicable Laws, and in a manner that is customary in the industry in the Territory for the purpose of promoting a prescription pharmaceutical product. For clarity, a “ Detail ” shall not include electronic communications, video calls, telephone calls, sample drops, or presentations made at conventions, exhibits, exhibit booths, educational programs or speaker meetings, or similar gatherings. When used as a verb, “ Detail ” or “ Detailing ” means to conduct a Detail.

1.18    “[*** ] Product ” means Eagle’s [***].

1.19    “ Executives ” means, (a) with respect to Eagle, its President and Chief Executive Officer or a senior executive of Eagle designated by its President and Chief Executive and, (b) with respect to Spectrum, its Chief Executive Officer or a senior executive of Spectrum designated by its Chief Executive Officer.

1.20    “ FCPA ” means the U.S. Foreign Corrupt Practices Act (15 U.S.C. Section 78dd-1, et. seq.) as amended.

1.21    “ FDA ” means the United States Food and Drug Administration.



[***]: CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION.


1.22    “ FDCA ” means the federal Food, Drug and Cosmetic Act (21 U.S.C. §§ 301 et seq.), as amended, and the regulations promulgated and guidances issued thereunder from time to time.
1.23    “ Federal Sunshine Law ” means 42 U.S.C. 1320a-7h, as amended, and the regulations promulgated thereunder from time to time.

1.24    “ FTE ” means the equivalent of the work of one (1) full-time Spectrum Personnel for one (1) year, consisting of [***] hours per year. No individual may be charged at greater than one (1) FTE, regardless of that individual’s hours worked during that year, and any individual who works less than [***] hours per year shall be treated as an FTE on a pro rata basis, calculated by dividing the actual number of hours worked by such individual in the year by [***].

1.25    “ GAAP ” means generally accepted accounting principles in the United States.

1.26    “ Healthcare Organization ” or “ HCO ” means any entity that may, directly or indirectly, purchase, prescribe, recommend, refer or arrange for the prescribing, purchasing or formulary placement of a health-related product or service in the Territory including, but not limited to, hospitals, pharmacies (including specialty pharmacies), physician groups, nursing homes, group purchasing organizations, insurers, and health plans.

1.27    “ Healthcare Professional ” or “ HCP ” means any individual who is licensed to prescribe or dispense drugs in the Territory, or who is in a position to recommend or refer a health-related product or service in the Territory, or who has significant input or influence on prescribing, purchasing or formulary decisions in the Territory, including physicians, physician assistants, nurses, nurse practitioners, pharmacists, medical directors, pharmacy directors, and formulary committee members.

1.28    “ Incentive Compensation ” means the total compensation paid, on an annual basis, by or under the authority of Spectrum to a CAM involved in Promotion of a Product(s) under this Agreement based on [***], including any target bonus, award or other incentive, but excluding salary.

1.29    “ Launch Date ” means, with respect to a Product, the date of the first commercial sale in the Territory of such Product by Eagle to a non-sublicensee Third Party after obtaining Approval to market and sell such Product in the Territory.

1.30    “ Label ” or “ Labeling ” means, with respect to each Product: (a) the FDA-approved full prescribing information for such Product; and (b) the FDA-approved labels and other written, printed, or graphic matter upon any container, wrapper, or any package insert, utilized with or for such Product.

1.31    “ Materials ” means, collectively, the Promotional Materials and Other Materials.

1.32    “ MLR ” means Eagle’s multidisciplinary medical, legal and regulatory committee tasked with reviewing Promotional Materials for compliance with Applicable Laws and Labeling.

1.33    “ NAM ” means an individual employed by Spectrum as a national account manager to conduct Commercialization activities with respect to a Product in the Territory pursuant to this Agreement (among other activities relating to Spectrum’s products).

1.34    “ Net Sales ” means, with respect to a Product, the gross amount invoiced by or on behalf of Eagle for the sale of such Product to Third Parties in the Territory, less deductions, [***]. Deductions from “ Net Sales ,” as set forth in the above definition, shall be calculated in accordance with GAAP.


[***]: CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION.



1.35    “ Other Materials ” means any and all written, printed, graphic, electronic, audio, video or other materials to be provided to Target Prescribers/Accounts by CAMs in connection with Commercialization activities other than Promotion, as developed and approved in accordance with Section 4.1.
    
1.36    “ Payor ” means any Person that provides a health benefit program for health care products and services, including, any government payor (e.g., Medicaid, Medicare), commercial health plan, and any Person acting on behalf of any government payor or commercial health plan by contract or otherwise.

1.37    “ PDMA ” means the Prescription Drug Marketing Act, as amended, and the regulations promulgated thereunder from time to time.

1.38    “ Person ” means an individual, corporation, partnership, limited liability company, trust, business trust, association, firm, joint stock company, joint venture, pool, syndicate, sole proprietorship, unincorporated organization, governmental authority, or any other form of entity not specifically listed herein.

1.39    “ PRC ” means Spectrum’s multidisciplinary committee tasked with reviewing Promotional Materials for compliance with Applicable Laws and Labeling.

1.40    “ Product ” or “ Products ” means, individually or collectively, the [***] and, if agreed by the Parties pursuant to Section 2.5, up to three (3) additional Eagle products.

1.41    “ Product Quality Complaint ” means, with respect to a Product, any and all manufacturing or packaging-related complaints related to such Product, including: (a) any complaint involving the possible failure of such Product to meet any of the specifications for such Product; (b) any dissatisfaction with the design, package or Labeling of such Product; or (c) any Adverse Event that may involve the quality of such Product.

1.42    “ Product Training ” means, with respect to a Product, the Product-specific training program conducted in accordance with the applicable Commercialization Plan, Applicable Laws and Codes, which may include, as determined by the JCC or set forth in the applicable Commercialization Plan, training concerning (a) the scientific basis for such Product, (b) permissible communications regarding safety and efficacy claims relating to such Product, (c) permissible communications related to such Product in accordance with the Labeling, (d) use of Promotional Materials by the CAMs, and (e) other appropriate topics relevant to the Promotion and Commercialization of the Product.

1.43    “ Promotion ” or “ Promote ” means, with respect to each Product, promotional activities to be conducted by CAMs in the Territory that are set forth in an applicable Commercialization Plan or approved in writing by the JCC. When used as a verb, “ Promote ” means to engage in one or more of such activities, including the following (as approved by the JCC or set forth in a Commercialization Plan): (a) Detailing; (b) utilizing Promotional Materials during Details; (c) conducting display booths, displaying Promotional Materials and conducting meetings with Target Prescribers/Accounts in exhibits at conferences and trade shows; (d) sponsoring Advertising in journals and publications directed to Target Prescribers/Accounts; (e) conducting company-directed peer-to-peer educational programs regarding a Product (including speakers bureau and speaker training) directed at Target Prescribers/Accounts; and (f) distributing Promotional Materials to Target Prescribers/Accounts using direct mail or other appropriate dissemination methods; in each case, solely within the Territory. For clarity, “ Promotion ” shall not include: (i) discussing or responding to questions regarding the Product outside of the Labeling; (ii) independently maintaining a website, call


[***]: CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION.


center or medical information hotline for the Product; (iii) taking Product orders or otherwise selling or offering the Product for sale; (iv) other activities reserved to Eagle pursuant to Article 6, or (v) other marketing activities not allocated to Spectrum under this Agreement or in an approved Commercialization Plan.

1.44    “ Promotional Materials ” means any and all written, printed, graphic, electronic, audio, video or other materials to be used in connection with any Promotion activities, as developed and approved in accordance with Section 4.1. For clarity, Promotional Materials may include materials such as detail aids, reprints and disease state materials, as applicable, as approved in accordance with Section 4.1.

1.45    “ Regulatory Authority ” means any United States federal, state, commonwealth, territory, or local government, or political subdivision thereof, or any authority, agency or commission entitled to exercise any administrative, executive, judicial, legislative, police, regulatory or taxing authority or power, any court or tribunal (or any department, bureau or division thereof), or any governmental arbitrator or arbitral body with responsibility for granting approvals necessary for the marketing of a Product in the Territory, including the FDA.

1.46    “ Spectrum Personnel ” means the CAMs, the NAMs and any other personnel employed by Spectrum (including supervisory personnel overseeing the activities of the CAMs and the NAMs, and legal, regulatory and other support personnel) who are or may be involved with activities under this Agreement.

1.47    “ Target Prescriber/Account ” means any Healthcare Professional or Healthcare Organization identified in writing by the JCC (including in the Commercialization Plans) as being a suitable target for the Promotion and Detailing of a Product in the Territory.

1.48    “ Territory ” means the United States of America and its territories and possessions, including Puerto Rico.

1.49    “ Third Party ” means any Person other than a Party or any Affiliate of a Party.

1.50    “ Trademarks ” means: (a) any trademarks that are owned or controlled by Eagle and are used, or intended to be used, in connection with any Product in the Territory, including all word marks, logos, trade dress and/or indicia of origin, including applicable branding, color, palette, typeface, tagline and icon (“ Product Trademarks ”); and (b) the Eagle trade name and logo (“ Eagle House Marks ”); and including, in each case, all registrations and applications for registration of any such Trademarks in the Territory.

1.51    “ Training Materials ” means the materials (which may include written or other recorded, videotaped or Web-based training materials or on-line training programs) to be used in Product Training for Spectrum Personnel regarding each Product, as approved by Eagle pursuant to Section 5.5(b).

1.52     Terms Defined Elsewhere in this Agreement . The following terms have the meanings set forth in the sections indicated:










[***]: CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION.



“ Adverse Event ” …………………………………………      Section 9.1(c)
“ Advertising” ……………………………………………      Section 4.3(a)
“ Audited Party ” ………………………………………….      Section 8.5(a)
“ Auditing Party ” …………………………………………      Section 8.5(a)
“ Base Fee ”      ……………………………………………..      Section 7.2(a)
“[ *** ] Sales Force ” ………………………………………      Section 3.6
“ CAM Allocation ”…………………………………………Section 2.4(b)
“ CAM Team Break-Up ”…………………………………      Section 3.4
“ Claims ” ………………………………………………….      Section 13.4
“ Commercialization Support Costs ”…………………….      Section 2.4(b)
“ Competing Product ” ……………………………………      Section 3.5(a)
“ Confidential Information ” ……………………………..      Section 10.1
“ Cost Report ” …………………………………………….      Section 7.1
“ Debarred/Excluded ”……………………………………      Section 13.2(a)
“ Disclosing Party ” ……………………………………….      Section 10.1
“ FTE Requirements ”………………………………………Section 2.4(b)
“ Eagle Indemnitees ” ……………………………………..      Section 13.4
“ Executive Mediation ” ……………………………………      Section 14.2(a)
“ Force Majeure Event ” ………………………………….      Section 14.10
“ JCC ”……………………………………… ……………      Section 2.3(a)
“ Indemnified Party ” ……………………………………..      Section 13.6
“ Indemnifying Party ” ……………………………………      Section 13.6
“ Initial Term ”……………………………………………..      Section 12.1
“ Losses ” ……………………………………………………      Section 13.4
“ Ordinary Course Terminations and Replacements ”….      Section 3.4
“ Performance Bonus ………………………      ……………      Section 7.3(b)
“ Performance Bonus ” ……………………………………      Section 7.3(b)
“ Pharmacovigilance Agreement ” ……………………….      Section 9.1(a)
“ Proceeding ” ……………………………………………..      Section 13.2(b)
“ Product Information Request ” or “ PIR ” …………....…      Section 5.6
“ Promotion Report ” ……………………………………..      Section 8.2
“ Receiving Party ” ………………………………………..      Section 10.1
“ Representatives ” ………………………………………..      Section 10.2(a)
“ Revenue Thresholds ” …………………………………      Section 7.3(a)
“ Spectrum House Marks ” ……………………………….      Section 4.1
“ Spectrum Indemnitees ” ………………………………..      Section 13.5
“ Subcommittee ” ………………………………………….      Section 2.3(e)
“ Term ” ……………………………………………………      Section 12.1
“ Training Costs ” …………………………………………      Section 5.5(a)




[***]: CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION.


ARTICLE II

GRANT OF EXCLUSIVE RIGHTS; GOVERNANCE; PLANS

2.1    Grant of Exclusive Rights .

(a) Subject to the terms and conditions of this Agreement, including Sections 3.4(c) and 12.3(a), Eagle hereby grants to Spectrum the exclusive right (except as to Eagle and its Affiliates) to Promote and Detail the Products in the Territory to the Target Prescribers/Accounts during the Term, in compliance with all Applicable Laws, Codes, the terms and conditions of this Agreement and the applicable Commercialization Plans. Except as set forth in this Agreement, such right shall be non-transferable and non-sublicensable, and Spectrum shall not grant any rights to, or permit or authorize, any other Person to Promote or Detail the Products in the Territory.

(b) Eagle hereby grants to Spectrum a non-exclusive, royalty-free license to use the Product Trademarks, the Eagle House Marks and Copyrights in the Territory solely as necessary to Promote and otherwise Commercialize the Products in the Territory, including for use in the Promotional Materials and Training Materials, in each case in accordance with this Agreement, including the quality control and usage restrictions set forth in this Agreement. Such license shall be non-transferable and non-sublicensable and shall automatically and immediately terminate upon the expiration or earlier termination of this Agreement for any reason.

2.2    Retained Rights . Except as specifically set forth in this Agreement, Spectrum shall have no other rights with respect to the Products, and for clarity, shall not Promote, market or otherwise Commercialize the Products except as Spectrum is expressly authorized to do under this Agreement. Eagle reserves and retains, for itself, its Affiliates and for any Third Party, all rights in and relating to the Products not expressly granted to Spectrum under this Agreement.

2.3    Governance .

(a)     Joint Commercialization Committee . Within ten (10) days after the Effective Date, the Parties shall establish a Joint Commercialization Committee (“ JCC ”), which shall operate during the Term of this Agreement. The JCC shall be responsible for operationalizing this Agreement and, subject to the terms and conditions of this Agreement, determining all aspects of the Promotion and other Commercialization of the Products, including developing, reviewing and approving, updating and revising, and overseeing compliance with, the Commercialization Plan for each Product.

(b)     JCC Membership . The JCC shall be comprised of an equal number of representatives of each Party; provided that, unless the Parties otherwise agree, the JCC shall be comprised of three (3) members from each Party. Each Party’s JCC representatives will be appropriately knowledgeable regarding commercialization of pharmaceutical products and the matters within the JCC’s authority. Each Party will designate one of its representatives as the co-chairperson of the JCC. Each Party’s co-chairperson will be responsible, on an alternating basis, for scheduling meetings, preparing and circulating an agenda in advance of each meeting, preparing and issuing minutes of each meeting within thirty (30) days thereafter, revising such minutes to reflect timely comments thereon, and overseeing the ratification of such revised minutes.



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(c) JCC Meetings .

(i) The JCC shall meet on a regular basis, no less than [***] (unless mutually agreed otherwise), either in-person or by any means of communication as the members deem necessary or appropriate, including by telephone, videoconference or similar means in which each participant can hear what is said, and be heard, by the other participants; provided that the JCC shall meet as and when necessary to review and approve, on a timely basis, all Commercialization Plans and any amendments or updates thereto. Unless otherwise agreed by the Parties, at least [ *** ] meetings of the JCC per year (beginning on the Effective Date) shall be in-person and all such in-person meetings shall be held on an alternating basis between Eagle’s and Spectrum’s U.S. facilities, with the first in-person meeting to be held at Eagle’s U.S. facilities. Either Party may also call a special meeting of the JCC (by videoconference, teleconference, or in person) by providing at least five (5) business days’ prior written notice to the other Party if such Party reasonably believes that a significant matter must be addressed prior to the next scheduled meeting.

(ii) Each Party may, upon prior notice to the other Party: (1) have representative(s) from its organization attend JCC meetings as regular participants and (2) invite other subject matter experts to any JCC meeting on an as needed basis; provided , however, that such attendees (A) shall not vote or otherwise participate in the decision-making process of the JCC and (B) shall be bound by obligations of confidentiality and non-use equivalent to those set forth in Article 10. Each Party shall bear its own personnel and travel costs and expenses relating to its participation in the JCC and attendance at any JCC meetings.

(d) JCC Decision-Making . The JCC shall make its decisions by (i) consensus of its members present at a meeting ( provided that at least one member from each Party is present at such meeting), with Eagle and Spectrum each having collectively, among its respective members, one vote irrespective of the number of members in attendance, or (ii) a written resolution signed by at least the co-chairperson appointed by each Party or his/her designee identified in writing. If the JCC is unable to reach consensus regarding a matter before it, then Eagle shall have final decision making authority with respect to such matter, and the decision of Eagle’s co-chairperson of the JCC with respect to any such matter shall be final and binding on the Parties, subject to the following provisions of this Section 2.3(d):

(i) Spectrum shall have final decision making authority with respect to the day-to-day operations and management of the CAM Team and other Spectrum Personnel. For the avoidance of doubt, Spectrum shall only have final decision making authority with respect to the practical, logistical aspects of implementing Spectrum’s obligations under this Agreement and, subject to the remainder of this Section 2.3(d), Eagle shall have final decision making authority with respect to all other matters relating to Products in the Territory, including: strategic matters (e.g., use of Product Trademarks, Product packaging, brand positioning, messaging and other marketing strategies); identification of Target Prescribers/Accounts; and decisions about methods and criteria for monitoring Spectrum’s performance under the Commercialization Plan [***].

(ii) Eagle shall not use its final decision making authority with respect to the following matters:

(A) Changing the Revenue Thresholds;

(B) Expanding the performance responsibilities or financial obligations of Spectrum beyond those in this Agreement;

(C) Increasing the number of CAMs Promoting the Products to more than


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thirty-two (32) FTEs;
(D) Requiring Spectrum to take any action that Spectrum believes, in good faith and on the advice of counsel, may violate any Applicable Laws;

(E) Matters under Section 2.4(b)(viii) that require agreement of the Parties; or

(F) Amending, altering or modifying any Commercialization Plan to effect any of the foregoing, (A) through (E).

(iii) Neither Party may use its final decision making authority to amend, alter or modify this Agreement.

(iv) In the event the JCC is unable to reach consensus with regard to any matter to be decided by the JCC within [***] days after such matter has been brought to the JCC’s attention, the Spectrum representatives to the JCC may, within [***] days thereafter, request Executive Mediation in accordance with Section 14.2(a); provided , that such Executive Mediation shall not be required to continue for a period of more than [***] days. If Spectrum invokes Executive Mediation pursuant to this Section 2.3(d)(iv) and the Executives are unable to resolve the matter through such Executive Mediation within such [***] day period, the decision of Eagle’s Executive with respect to such matter shall be final and binding on the Parties, subject to Section 2.3(d)(ii) and (iii).

(e) Subcommittees . From time to time, the JCC may establish and delegate specific matters or duties within its responsibilities to subcommittees or working groups (each a “ Subcommittee ”), the composition of which shall consist of an equal number of representatives from Spectrum and Eagle. Employees or consultants of either Party who are not members of a Subcommittee may attend meetings of such Subcommittee on an as needed basis; provided , however, that such attendees (i) shall not vote on Subcommittee voting matters and (ii) shall be bound by obligations of confidentiality and non-use equivalent to those set forth in Article 10. Each Subcommittee shall report to, and its activities shall be subject to the oversight, review and approval of, the JCC. Any disagreement between the representatives of the Parties on any Subcommittee shall be referred to the JCC for resolution.

2.4     Commercialization Plans . The Parties shall cooperate to develop each Commercialization Plan setting forth the Promotion activities and other Commercialization activities to be conducted by Spectrum in the Territory with respect to each Product.

(a)     Initial Plans; Updates . Each Commercialization Plan, and each amendment or update thereto, shall be subject to review and approval by the JCC in accordance with Section 2.3. Each initial Commercialization Plan shall be finalized and approved as soon as practicable but in any event not less than [***] days prior to the Launch Date of the applicable Product; provided that, if Approval to market and sell a Product in the Territory occurs before February 1, 2016, the JCC will prioritize finalizing the Commercialization Plan for such Product. Either Party shall have the right to propose amendments or updates to any then-current Commercialization Plan by written notice to the other Party; provided that all such amendments and updates must be reviewed and approved by the JCC in accordance with Section 2.3.

(b)     Content . All Commercialization Plans will be transparent and specific so that Eagle and Spectrum can coordinate and objectively measure performance. At a minimum, each Commercialization Plan shall contain:
(i) List of Target Prescribers/Accounts;


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(ii) Number of CAMs (on an FTE basis), which, without Spectrum’s consent, shall not exceed thirty-two (32) CAMs (on an FTE basis), to be deployed by Spectrum on a monthly basis to Promote and Commercialize the Products, on a Product-by-Product basis (the “ FTE Requirements ”), and timelines for deployment;

(iii) Percentage of the CAM Team (on an FTE basis) to be utilized to Promote and Commercialize the Products on a monthly basis, which, without Spectrum’s consent, shall not exceed eighty percent (80%) of the aggregate CAM Team FTEs (the “ CAM Allocation ”); for clarity, the maximum monthly CAM Allocation is 80% of the thirty-two (32) CAM Team FTEs (or .80 x 32 = 25.6 FTEs);

(iv) Promotion-related key performance indicators that can be used to evaluate the effectiveness of Promotion activities under such Commercialization Plan;

(v) Product Training, including schedules and topics, consistent with Section 5.5 of this Agreement, and training-related key performance indicators;

(vi) Anticipated or planned development and use of Materials;
 
(vii) Promotion activities (including conventions and conferences) to be conducted by CAMs in the Territory;

(viii) If agreed by the Parties, number of Details to be performed by the CAMs, by Detail position and type of Target Prescriber/Account;

(ix) Other Commercialization activities to be conducted by Spectrum in the Territory, including any pre-launch activities ;

(x) Activities to be conducted by, or the time or level of effort to be provided by, NAMs and other Non-CAM Spectrum Personnel to carry out non-Promotional Commercialization activities and to support Promotional efforts by the CAM Team, such as the number of support Spectrum Personnel (on an FTE basis), consistent with Commercially Reasonable Efforts, up to, but not exceeding without Spectrum’s consent, [***];

(xi) Annual Net Sales forecasts (prorated for any partial calendar year), and the Revenue Thresholds, as the same may be revised to align with any revised annual Net Sales forecast (in all cases, approved by the Parties in accordance with Section 2.3); and

(xii) Budgets for out-of-pocket costs (without mark-up) to be incurred by Spectrum in conducting Commercialization activities in the Territory pursuant to the Commercialization Plan, on a calendar year and/or calendar quarter basis throughout the Term, including out-of-pocket costs of the following to the extent detailed in the Commercialization Plan: [***] (collectively, “ Commercialization Support Costs ”), but excluding Spectrum Personnel costs, Detailing costs, costs of Commercial Operations Support for [***] Sales Force or other internal costs of Spectrum (which are compensated by the Base Fee payable pursuant to Section 7.2 and the fee set forth in Section 3.6). The initial budgets for Commercialization Support Costs for each of the [***] Product, the [***] Product and the [***] Product are set forth in Exhibit B .
2.5      Additional Products . From time to time during the Term, Eagle may propose that up to three (3) additional Products be included under this Agreement as Products to which Spectrum has the right to


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Promote under Section 2.1(a), and otherwise on the terms and subject to the conditions of this Agreement. If Spectrum agrees to include any additional Product as a Product which is Promoted by Spectrum under this Agreement, then the JCC will promptly meet and develop a Commercialization Plan with respect to the applicable additional Product (including a budget for any applicable additional Commercialization Support Costs) and the Parties will promptly meet and use Commercially Reasonable Efforts to agree to the following with respect to such Products: any changes to Spectrum’s Incentive Compensation plan and any increases in the number of CAMs or other Spectrum Personnel (on an FTE basis) or other expansion of Spectrum’s resources or responsibilities, if any, required.

ARTICLE III

SPECTRUM COMMERCIALIZATION RESPONSIBILITIES; RESTRICTIONS

3.1     Promotion Activities . Commencing on the Launch Date of each Product (on a Product-by-Product basis) and continuing throughout the Term, the CAM Team shall Promote such Product in the Territory to the Target Prescribers/Accounts in accordance with the then-current applicable Commercialization Plan and the terms of this Agreement. Without limiting the foregoing, Spectrum shall: (a) employ sufficient number of CAMs, and use Commercially Reasonable Efforts to ensure that such CAMs devote the necessary time exclusively Promoting the Products, in each case as necessary to meet the FTE Requirements and the CAM Allocation; and (b) perform Details in accordance with the targeting, positioning and frequency of Details set forth in the Commercialization Plan.

3.2     Pre-Launch and Other Commercialization Activities . If and to the extent set forth in a Commercialization Plan (on a Product-by-Product basis), Spectrum shall conduct activities in preparation for launch of such Product and other Commercialization activities in accordance with the then-current applicable Commercialization Plan and the terms of this Agreement, including Section 5.2. Without limiting the foregoing, if and as set forth in a Commercialization Plan and to the extent compliant with Applicable Laws, both Parties’ compliance policies and procedures and the terms of this Agreement, CAMs may provide Other Materials[***] to Target Prescribers/Accounts and NAMs or other Spectrum Personnel may assist Eagle with contracting strategy.

3.3     Subcontracting . Spectrum may not subcontract with any Third Parties (including any contract sales organization) to perform any of the Promotion or other Commercialization activities to be performed by Spectrum under this Agreement, unless such subcontracting has been approved by Eagle in writing in advance, which approval shall not be unreasonably withheld. Spectrum shall provide all information requested by Eagle related to any potential subcontractor in order for Eagle to evaluate Spectrum’s request to subcontract. In all cases, Spectrum shall: (a) ensure that all permitted subcontractors are bound by written obligations as protective of the Product and Eagle as the terms and conditions of this Agreement, as applicable to such subcontractors; (b) oversee the performance by its permitted subcontractors of the subcontracted activities; and (c) remain responsible and fully liable for the performance (and/or non-performance) of any activities by any of its subcontractors in connection with this Agreement as if such activities had been performed by Spectrum itself.

3.4     Maintenance of CAM Team .

(a)    Commencing on March 1, 2016 and at all times thereafter during the Term, except with Eagle’s prior written consent (which Eagle may grant or withhold in its discretion) and pursuant to this Section 3.4, Spectrum shall maintain thirty-two (32) FTEs within the CAM Team, and shall use Commercially


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Reasonable Efforts to employ and assign CAMs with substantially the same experience as the individual CAMs who make up the CAM Team as of the Effective Date to Promote and Commercialize the Products, subject to voluntary resignations by CAMs or terminations or reassignments of individual CAMs by Spectrum for reason of a CAM’s failure to achieve applicable performance requirements or otherwise in the ordinary course in accordance with Spectrum’s applicable HR policies, including for cause (collectively, “ Ordinary Course Terminations and Replacements ”). In the event an individual who is a member of the 32-FTE CAM Team as of March 1, 2016 voluntarily resigns from Spectrum or is terminated or reassigned by Spectrum as a result of Ordinary Course Terminations and Replacements, Spectrum shall promptly (but in any event within [***] days) replace such individual with a new CAM who substantially meets the qualifications set forth in Exhibit A (as the same may be amended from time to time by mutual written agreement of the Parties). Notwithstanding the foregoing, Spectrum shall not be deemed to be in breach of this Section 3.4 if Spectrum fails to replace a CAM within the foregoing [***] day period so long as (i) the applicable Revenue Threshold in the aggregate for both the [***] Product and the [***] Product is achieved (on a pro rata basis) during such [***] day period, (ii) Spectrum is using Commercially Reasonable Efforts to replace the CAM, and (iii) Spectrum replaces the CAM within [***] days after the CAM resigns or is terminated or reassigned as a result of Ordinary Course Terminations and Replacements. For clarity, Spectrum will be in breach of this Section 3.4 if Spectrum fails to replace any CAM in accordance with this Section 3.4(a) within the [***]-day or [***]-day period (as applicable) after a CAM resigns or is terminated or reassigned as a result of Ordinary Course Terminations and Replacements and such failure is deemed to be material by Eagle in its reasonable discretion.

(b)    During the Term, Spectrum shall not implement any reduction-in-force directed at the CAM Team or any other broad-based layoffs, reassignments or restructuring, in each case, directed at the CAM Team (including as a result of or following any Change of Control of Spectrum) (each, a “ CAM Team Break-Up ”), unless agreed upon in writing in advance by Eagle in its discretion. For the avoidance of doubt, any CAM Team Break-Up during the Term, without Eagle’s prior written consent, will be a breach of this Section 3.4.

(c)    In the event Spectrum breaches this Section 3.4, Eagle shall have the right, exercisable in its sole discretion and effective upon written notice thereof by Eagle to Spectrum, to (i) on a Product-by-Product basis, convert the license granted to Spectrum under Section 2.1(a) to a non-exclusive license (and upon delivery of such notice such license shall automatically be deemed non-exclusive with respect to such Product without any further action or amendment by the Parties), and, without limiting the foregoing, Eagle shall have the right thereafter to Promote and otherwise Commercialize the applicable Product(s) in the Territory by itself or with or through a Third Party or otherwise, or (ii) terminate this Agreement pursuant to Section 12.2(b).

3.5     Non-Competition .

(a)    During the Term, Spectrum shall not, and shall cause its Affiliates not to, directly or indirectly, (a) market, Promote, sell, distribute or accept orders for the sale of any product that has the same “indications and usage” as identified on its package insert as any Product in the Territory (“ Competing Product ”), or (b) assist or cooperate in any way with any other Person in connection with the marketing, Promotion, selling, distribution or acceptance of orders for the sale of any Competing Product in the Territory; provided , however that the foregoing restriction shall not apply with respect to any Competing Product (i) owned or controlled by Spectrum as of the Effective Date as disclosed by Spectrum to Eagle prior to the Effective Date, or (ii) of a Third Party that becomes an acquirer, surviving entity or Affiliate of Spectrum as a result of a Change of Control of Spectrum if such Third Party was, prior to such Change of Control, already marketing, Promoting, selling, distributing or accepting orders for the sale of such Competing Product in the


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Territory. Spectrum acknowledges and agrees that the restrictions set forth in this Section 3.5(a) are reasonable and necessary to protect the legitimate interests of Eagle and agrees not to contest such restrictions in any proceeding.

(b)    The Parties will use reasonable efforts to mitigate any risks of potential non-compliance with antitrust laws arising from or relating to this Agreement. In the event of a Change of Control of either Party which, in light of this Agreement, might give rise to potential non-compliance with any antitrust laws, such Party shall give notice to the other Party at the earliest practicable date. If the other Party believes, on the advice of counsel, that continuation of this Agreement following such Change of Control may result in potential non-compliance with applicable antitrust laws, the Parties will discuss in good faith measures to be taken to address such potential non-compliance, and if the Parties are unable to agree on such measures within [***] days, the other Party will have the right to terminate this Agreement pursuant to Section 12.2(f) or Section 12.2(g) (as applicable).

3.6     [***] Sales Force . If at any time during the Term, Eagle decides that it wants to hires a sales force to promote and commercialize the [***] Product in the Territory (the “[ ***] Sales Force ”), then at Eagle’s request Spectrum will assist Eagle in identifying and recruiting candidates for the [***] Sales Force for up to twenty-two (22) positions at Eagle, which positions shall consist of twenty (20) sales representatives and two (2) area managers. In consideration for and commencing at the time Spectrum begins providing assistance with recruiting and hiring the [***] Sales Force and for providing Commercial Operations Support for [***] Sales Force, Eagle shall pay Spectrum an annualized fee of [***].

ARTICLE IV

MATERIALS; ADVERTISING

4.1     Preparation of Materials . Spectrum or Eagle (as mutually agreed by the Parties) will (a) develop and produce all Materials to be used by Spectrum Personnel pursuant to this Agreement, including Promotional Materials and, to the extent compliant with Applicable Laws and provided for in a Commercialization Plan, Other Materials such as summaries of Product contract terms, and (b) provide the Materials to Spectrum in quantities set forth in the Commercialization Plans. The Party responsible for developing the Materials will provide proofs of the Materials to the other Party at least [***] days before intended use, and shall consider in good faith all comments provided by the other Party. All Materials to be used by Spectrum Personnel pursuant to this Agreement shall at all times be in compliance with all Applicable Laws and the Labeling and shall be subject to approval by each of Eagle’s MLR and Spectrum’s PRC, prior to any use or dissemination by Spectrum Personnel. Costs incurred by Spectrum in generating Materials in accordance with this Section 4.1 will be included in Commercialization Support Costs if and to the extent included in and not exceeding the approved budget therefor set forth in a Commercialization Plan. All Promotional Materials (and other Materials if and to the extent approved by Eagle) shall include the Trademarks (including the Eagle House Marks), and may also include the Spectrum trade name and logo (“ Spectrum House Marks ”), in reasonable size and prominence (but never larger or more prominent than the Eagle House Marks), in accordance with all FDA requirements and as approved in advance by Eagle. Eagle shall own all Copyrights and other right, title and interest in and to all Materials, and Spectrum hereby assigns to Eagle any and all interest that Spectrum may have in the Materials; provided , that Eagle is obtaining no right to use the Spectrum House Marks other than the non-exclusive right to use Spectrum House Marks exclusively in connection with the Materials and then to the extent consistent with this Agreement and during the Term. Such non-exclusive right shall automatically and immediately terminate upon the expiration or earlier termination of this Agreement for any reason and shall be non-transferable and non-sublicensable. If


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Spectrum is the Party responsible for developing Materials, Spectrum will (on behalf of Eagle) or will enable Eagle to (as directed by Eagle), warehouse all art files and raw/print ready art related to such Materials.

4.2     Submission; Use of Materials . Eagle’s SOPs will govern the submission and re-submission of Promotional Materials to the FDA and Eagle shall be responsible for submitting all Promotional Materials to the FDA in accordance with applicable FDA requirements. Spectrum and the Spectrum Personnel shall: (a) use the Promotional Materials solely for the purposes of conducting the Promotion activities in the Territory as contemplated by this Agreement and for no other purposes; (b) ensure that the Materials are not modified, changed, misbranded or altered in any way by Spectrum or Spectrum Personnel; (c) in conducting Promotion activities hereunder, make only those statements and claims regarding the Product, including as to efficacy and safety, that are consistent with the Promotional Materials, the Labeling and Applicable Laws; (d) in Promoting and Commercializing the Products, use only the Materials that are produced and approved in accordance with Section 4.1; and (e) promptly notify Eagle, and provide Eagle with a copy, of any correspondence or other report or complaint received by Spectrum or any Spectrum Personnel from any Regulatory Authority, including the FDA, or any Third Party claiming that any oral or written statements about the Product or any Materials are inconsistent with the applicable Labeling or are otherwise in violation of Applicable Laws or that any CAM or other Spectrum Personnel conducting Promotion or other Commercialization activities is making statements or claims regarding a Product that are inconsistent with the Materials or the Labeling. If any Materials provided to Spectrum by Eagle are withdrawn from use for any reason, Eagle shall promptly notify Spectrum of such withdrawal and Spectrum shall promptly effectuate such withdrawal.

4.3     Advertising; Digital Media .

(a)     Advertising . Spectrum may engage in any Advertising that is approved by the JCC and included in the Commercialization Plan; provided that all Advertising shall at all times be in compliance with all Applicable Laws and the Labeling, shall be subject to Eagle’s MLR review process, and shall be approved in advance by Eagle. As used herein, “ Advertising ” means the advertising of any Product in the Territory through any means, including television and radio advertisements and advertisements appearing in journals, newspapers, magazines and other tangible print media. For the avoidance of doubt, Eagle reserves for itself the right to engage in Advertising; provided , that all Advertising shall at all times be in compliance with all Applicable Laws and the Labeling and shall be subject to Eagle’s MLR review process.
(b)     Digital Media . Spectrum shall not without Eagle’s prior written permission create or maintain a website related to any Product(s) and shall not without Eagle’s prior written permission otherwise display, or permit to be displayed, anywhere on the internet any information in any way connected with Eagle, any of the Products or the Trademarks. Spectrum shall not engage (and shall prohibit all Spectrum Personnel from engaging) in any social media activities, including Facebook, Twitter and YouTube, related to or in any way connected with Eagle, any of the Products or related disease states. For the avoidance of doubt, Eagle reserves for itself the right to create and maintain a website related to any Products and to engage in social media activities; provided , that these activities are conducted in compliance with Applicable Laws and the Labeling and are subject to Eagle’s MLR review process.

(c)     Promotional Samples . The Parties acknowledge and agree that the Promotion contemplated as of the Effective Date does not include a program for the distribution of promotional samples of the Products, and no CAM shall distribute promotional samples of any Product. If the JCC approves a program for the distribution of promotional samples of any Product, then the Parties shall prepare a Product sample plan that complies with Applicable Laws and that will be agreed to in writing by the Parties and, thereafter, the CAMs shall distribute promotional samples of the applicable Product only in accordance with


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such Product sample plan and in compliance with all Applicable Laws; provided , that any additional out-of-pocket costs incurred by Spectrum in connection with the distribution of promotional samples shall be reimbursed by Eagle.

ARTICLE V

PERSONNEL; COMPLIANCE; TRAINING

5.1     Spectrum Personnel .

(a)     Qualifications . Spectrum shall conduct its Promotion activities (including Details) using CAMs who meet the requirements of this Agreement, including those set forth in Section 1.7. Spectrum will manage its CAMs performing Promotion activities hereunder in accordance with Applicable Laws and Codes. No CAM or other Spectrum Personnel shall be Debarred/Excluded. In advance of engaging any CAMs or other Spectrum Personnel to perform Promotion activities or other Commercialization services under this Agreement, and at least annually thereafter, Spectrum shall check the debarment/exclusion status of each such Spectrum Personnel and confirm that such Spectrum Personnel is not Debarred/Excluded.

(b)     Compensation and Benefits . Spectrum shall be solely responsible for recruiting and hiring all Spectrum Personnel at Spectrum’s sole cost and expense. Spectrum shall be solely responsible for: (i) all salaries, wages, benefits and other compensation that the CAMs and any other Spectrum Personnel may be entitled to receive in connection with the performance of the services under this Agreement, including Incentive Compensation, and all taxes, excises, assessments and other charges levied by any agency on, or because of, the services to be provided by Spectrum under this Agreement; (ii) maintaining all necessary personnel and payroll records for all CAMs and any other Spectrum Personnel; and (iii) providing workers’ compensation and unemployment insurance coverage for the CAMs and any other Spectrum Personnel in amounts as required by Applicable Laws. Spectrum shall indemnify, defend and hold harmless Eagle from and against all Losses to the extent incurred by or imposed upon Eagle in connection with or arising from any Claims (including by any Spectrum Personnel) relating to any of Spectrum’s responsibilities enumerated in the preceding sentence (including any Claims relating to Spectrum’s payment of or failure to pay Incentive Compensation). Each Party acknowledges and agrees that the CAMs and any other Spectrum Personnel are not, and are not intended to be or be treated as, employees of Eagle or any of its Affiliates, and that such individuals are not, and are not intended to be, eligible to participate in any benefits programs or in any “employee benefit plan,” as such term is defined in Section 3(3) of ERISA, that are sponsored by Eagle or any of its Affiliates or that are offered from time to time by Eagle or its Affiliates to its or their own employees.

(c)     Incentive Compensation . Promptly after the Effective Date, Spectrum shall allow Eagle to review Spectrum’s existing Incentive Compensation plan for the CAMs. Prior to any CAM commencing Promotion under this Agreement, Spectrum shall modify its Incentive Compensation plan to include targets and incentives pertaining to the Products that are reflective of the level of effort and focus required to conduct the Details and other Promotion obligations in accordance with this Agreement. All modifications to Spectrum’s Incentive Compensation plan that pertain to the Products shall be subject to Eagle’s approval, not to be unreasonably withheld, prior to implementation. Notwithstanding the foregoing, unless otherwise agreed by Eagle in its discretion, each CAM’s Incentive Compensation relating to Products in a given semi-annual period during the Term (commencing January 1, 2016) shall be not less than [***]; provided that in the first half of 2016, such Incentive Compensation relating to Products shall be not less than [***]. In connection with the foregoing approval, Eagle agrees that the Incentive Compensation plan as it pertains to the Products shall be in compliance with Applicable Laws and the Codes.


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(d)     General Conduct . Spectrum shall be solely responsible and fully liable for: (i) the compliance of all Spectrum Personnel, including the CAMs and the NAMs, with all Applicable Laws, the Codes, and Spectrum’s compliance policies and procedures, including as applicable, policies and procedures related to interactions with HCPS, HCOs and Payors; (ii) the acts and omissions of the CAMs, the NAMs and any other Spectrum Personnel while performing any activities under this Agreement; and (iii) all disciplinary, probationary and termination actions taken by it, as well as for the formulation, content, and dissemination (including content) of all employment policies and rules (including written disciplinary, probationary and termination policies) applicable to any CAM, NAM or other Spectrum Personnel. Spectrum shall ensure that its CAMs, NAMs and other Spectrum Personnel are familiar with the procedures, obligations, rights, and responsibilities imposed by the terms of this Agreement as applicable to the performance of Promotional activities and other Commercialization hereunder.

(e)     Removal of Personnel from Product Responsibilities. Spectrum shall immediately remove any CAM or other Spectrum Personnel from having any responsibilities relating to the Promotion or Commercialization of any Product under this Agreement if required by any Applicable Laws, including if Spectrum determines that such Spectrum Personnel is Debarred/Excluded. Further, upon Eagle’s request, Spectrum shall promptly remove any CAM or other Spectrum Personnel from having any responsibilities relating to the Promotion or Commercialization of any Product under this Agreement if such CAM or Spectrum Personnel fails to comply with any Applicable Laws, the Codes, or Spectrum’s compliance policies, procedures, standards and practices.

5.2     Compliance with Laws, Codes and Policies .

(a)     General . Spectrum shall: (i) perform all of its obligations under this Agreement (including Promotion and all activities under each Commercialization Plan) in compliance with all Applicable Laws and Codes; (ii) instruct the Spectrum Personnel not to, and shall use reasonable efforts consistent with industry practices to ensure that the Spectrum Personnel do not, make any representation, statement, warranty or guaranty, oral or written, with respect to any Product that is inconsistent with the then-current Labeling of such Product, the applicable approved Materials or Applicable Laws; or that is deceptive or misleading in any way; or take any action that disparages or may jeopardize the good name, goodwill or reputation of any of the Products or of Eagle or any of its Affiliates; (iii) maintain and enforce a corporate compliance program consistent with the OIG Compliance Guidance, including maintaining a mechanism for its personnel to report, at any time and anonymously if they choose, any concerns about potential non-compliance with Applicable Laws, Codes or Spectrum policies, procedures, standards and practices, and that requires Spectrum to promptly and diligently investigate and take appropriate corrective and disciplinary action with regard to any such reports, as applicable; (iv) promptly notify Eagle of the substance of, and coordinate with Eagle regarding, any report described in clause (iii) above relating to a Product or Spectrum’s activities under this Agreement that potentially violates Applicable Laws, Codes, or Spectrum’s compliance policies, procedure, standards and practices; and (v) provide Eagle with copies of any corrective action plan or other remedial action measures. [***].

(b)     Certification . Each year during the Term, Spectrum shall certify to Eagle in writing that it has, and enforces, a code of conduct and compliance program for Spectrum Personnel (including CAMs) that is consistent with Applicable Laws and Codes. Without limiting such certification obligations of Spectrum, Spectrum shall promptly notify Eagle of any material changes to its compliance program (including applicable policies and procedures) that relate to or may affect Spectrum’s performance of its Promotion or other activities under this Agreement. The certification provided to Eagle under this Section 5.2(b) and any information contained therein shall be deemed Confidential Information of Spectrum under Article 10.


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(c)     Notification of Legal Proceeding . Unless and to the extent prohibited by Applicable Laws, Spectrum shall immediately notify Eagle of any claim, demand, communication or inquiry of any type, including, but not limited to, a subpoena, civil investigative demand, or congressional inquiry letter, from any federal, state or local governmental entity or Regulatory Authority, related in any way to Eagle, the Products, or this Agreement.

(d)     Activities in Violation of Law . Notwithstanding any provision of this Agreement, Spectrum shall not be required to, undertake any activity under or in connection with this Agreement which violates, or which it believes, in good faith and on the advice of counsel, may violate, any Applicable Laws.

5.3     Payments to Healthcare Professionals/Healthcare Organizations . Spectrum shall not directly or indirectly provide any payment, remuneration or other transfer of value to a Target Prescriber/Account or other HCP, HCO or Payor in connection with Promotion or Commercialization activities, except as provided in accordance with all Applicable Laws, Codes, Spectrum’s policies, procedures, standards and practices, and the applicable Commercialization Plan and subject to Spectrum’s tracking and reporting obligations under Section 5.4 of this Agreement.

5.4     Transparency Reporting . Each Party shall be responsible for tracking and reporting all payments and transfers of value provided by such Party to HCPs and HCOs in connection with this Agreement in accordance with the Federal Sunshine Law and similar transparency laws required by any state and local government in the Territory that requires such reporting.

5.5     Training .

(a)     Training . Each Commercialization Plan shall include (i) a Product Training schedule, including timing, location and number of training sessions (including refresher programs), as well as the topics for such Product Training sessions, and (ii) an annual budget for the reasonable out-of-pocket costs of Product Training and Training Materials provided by or on behalf of Spectrum under this Agreement (“ Training Costs ”). Training Costs incurred by Spectrum shall be included in Commercialization Support Costs if and to the extent included in and not exceeding the approved budget therefor set forth in a Commercialization Plan. Spectrum shall be responsible for planning and conducting all Product Training, consistent with each Commercialization Plan, and shall ensure that each CAM and other Spectrum Personnel completes all required Product Training prior to commencing any Promotion or other Commercialization activities under this Agreement and continues to participate in Product Training at least annually thereafter. Spectrum shall also be responsible, at its own expense, for providing, and shall provide, to all CAMs and other Spectrum Personnel a broad general training program, including training on proper promotion and marketing techniques, ethics, compliance with Applicable Laws and substantial compliance with the Codes, and the compliance with Spectrum’s policies, procedures, standards and practices. The Parties shall seek to coordinate the Product Training and other Product-specific meetings held by Spectrum, and Eagle shall have the right to attend and participate in Product Training sessions and any other Product-specific meetings of the Spectrum Personnel in Eagle’s discretion and at Eagle’s sole expense.

(b)     Training Materials . Spectrum shall develop and provide all Training Materials for use hereunder; provided that the content and format of all Training Materials shall be reviewed and approved by Eagle’s MLR prior to any use, and the Training Materials shall at all times be in compliance with all Applicable Laws and the Codes. Spectrum shall not use any materials in providing Product Training to the CAMs or other Spectrum Personnel other than the Training Materials approved by Eagle. Spectrum’s use of the Training Materials in connection with training Spectrum Personnel under this Agreement shall be in compliance with the terms of this Agreement and the Commercialization Plan or as otherwise approved by


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the JCC. Eagle shall own all Copyrights and other right, title and interest in and to all Training Materials, and Spectrum hereby assigns to Eagle any and all interest that Spectrum may have in the Training Materials to the extent such Training Materials are exclusively related to Products (and not including any Spectrum House Marks).

(c)     Testing and Certification . Without limiting Section 5.5(a) or 5.5(b), in connection with each Product Training, Spectrum shall provide testing that verifies that each CAM and other Spectrum Personnel has satisfactorily completed and understood the Product Training. Each CAM and other Spectrum Personnel also must certify at the end of each Product Training session that he/she has completed, understood and agrees to comply with such Product Training.

(d)     Recordkeeping . Spectrum shall maintain records related to Product Training sufficient to show the Spectrum Personnel in attendance at each Product Training session, including sign-in sheets and computer records for Web-based training. Spectrum shall maintain all such attendance records and other Product training records, including testing records, certifications, and copies of Training Materials used at each Product Training session, in accordance with Section 8.4. Spectrum shall provide copies of such records to Eagle upon request.

5.6     Requests for Medical Information . Eagle shall have the exclusive right and obligation to respond, in accordance with Applicable Laws and the Codes (as applicable), to all questions or requests for information about any Product that are outside of the Label made by any Healthcare Professional, Healthcare Organization or any other Third Party to the CAMs or other Spectrum Personnel (each, a “ Product Information Request ” or “ PIR ” ) . With respect to a Product Information Request received by a CAM or other Spectrum Personnel, such Spectrum Personnel shall promptly refer such PIRs to Eagle’s call center for response. For clarity, PIRs shall not be proactively solicited by CAMs or other Spectrum Personnel. For any PIR received by Spectrum’s call center, Spectrum shall promptly transfer such PIR to Eagle’s call center. Eagle shall promptly provide Spectrum with a copy of any written materials provided by Eagle in response to a PIR or a summary of any oral discussions provided by Eagle in response to a PIR.

5.7     Product Quality Complaints . With respect to Product Quality Complaints received by a CAM or other Spectrum Personnel, such Spectrum Personnel shall promptly refer such Product Quality Complaint to Eagle’s call center for management of the report. With respect to Product Quality Complaints received by mail (or other written communication), Spectrum shall forward all correspondence to Eagle by secure e-mail or fax within two (2) business days after Spectrum’s receipt thereof. Notwithstanding the foregoing, Spectrum shall promptly, but in any event within one (1) day, notify Eagle of any information that it receives or generates that may require a recall, field alert, withdrawal or other corrective action related to the Product. Spectrum shall promptly, but in any event within two (2) days, notify Eagle of any information Spectrum receives regarding any threatened or pending action by the FDA or other Regulatory Authority which may affect any of the Products or the continued development or marketing of any Product. In the event of any Adverse Event involving the quality of a Product, the terms of Section 9.1 shall apply. Spectrum shall, at Eagle’s expense, cooperate with Eagle’s reasonable requests and use its Commercially Reasonable Efforts to assist Eagle, as may be reasonably requested by Eagle, in connection with (a) preparing any and all reports with respect to any of the Products in the Territory for submission to any Regulatory Authority, and (b) investigating and responding to any Product Quality Complaint related to any of the Products in the Territory. Eagle will inform Spectrum of any Product quality-related matters that may adversely affect the Product(s).


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ARTICLE VI

EAGLE RIGHTS AND RESPONSIBILITIES

6.1     Orders for Products; Returns . Eagle shall have the sole responsibility and right and shall use Commercially Reasonable Efforts to, accept and fill orders with respect to the Products and shall book all sales of Products in the Territory. Spectrum shall not take orders for the Products, but if for any reason Spectrum should receive orders for any Product from a Third Party, Spectrum shall promptly forward such orders to Eagle and shall advise such Third Party to contact its Eagle authorized distributor to place orders for such Product. Eagle shall have sole the right and responsibility and shall use Commercially Reasonable Efforts to, arrange warehousing and distribution of the Products and for billing and collections for the sale of the Products in the Territory. Spectrum shall not solicit the return of any Product, but if for any reason Spectrum should receive any returned Product, Spectrum shall promptly notify Eagle. Upon request by Eagle, any Product returned to Spectrum shall be shipped by Spectrum to Eagle’s (or its designee’s) designated facility at Eagle’s expense. If Eagle does not request that such Product be returned to Eagle, then Spectrum shall, in compliance with Applicable Laws, destroy the Product at Eagle’s expense.

6.2     Terms of Sale . Eagle shall have the sole right and responsibility for establishing and modifying the terms and conditions of the sale of the Products, including pricing and contracting, whether the Products will be subject to any discounts, whether any discount will be provided for payments on accounts receivable, whether the Products will be subject to rebates, returns and allowances or retroactive price reductions, the channels of distribution of the Products, and whether credit is to be granted or refused in connection with the sale of any Products; [ *** ]. For the avoidance of doubt, Eagle will have final decision-making authority over all Product contracts and all contract terms, and will be the contracting party in all such contracts, including with Payors and HCOs.

6.3     Grants; Charitable Requests; HCP/HCO Agreements . As between the Parties, Eagle shall have the right (in its sole discretion) to determine participation in free goods program plans, patient assistance programs and indigent access programs, if applicable, as well as to determine funding levels for grants, sponsorships and other charitable requests (including in support of professional symposia and continuing medical education programs), with respect to the Products in the Territory (including on a national, regional and local level, if applicable). If, for any reason, Spectrum receives any requests with respect to any of the foregoing activities, including any request with respect to any Product to support any of the foregoing activities, that have not been approved by the JCC to be performed by Spectrum and included in a Commercialization Plan, Spectrum shall promptly forward such requests to Eagle as soon as practicable for Eagle’s consideration. Unless explicitly authorized by Eagle in writing, Spectrum shall not enter into any agreements with Healthcare Professionals or Healthcare Organizations relating to speaker programs, advisory boards, consulting arrangements or similar arrangements related to any of the Products.

6.4     Development Activities . Except as may be specifically approved by the JCC to be performed by Spectrum and included in a Commercialization Plan, as between the Parties, Eagle shall have the sole right to conduct, and Spectrum shall not conduct or sponsor (directly or indirectly), clinical trials or other development activities with respect to any of the Products, including providing support or assistance for investigator sponsored trials, cooperative studies, clinical studies, including post-approval studies, or other studies, including health economics and outcomes research and Phase 4 studies, or any other research or development activities with respect to the Products. If a CAM or any other Spectrum Personnel receives any inquiry regarding any such matter described in this Section 6.4, Spectrum shall refer the Person making the inquiry to Eagle, in a manner directed by Eagle from time to time.


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6.5     Government and Managed Care; Reimbursement . Eagle shall have the sole right and responsibility for activities relating to reimbursement and government or managed care market segments, including (i) contract strategy, (ii) contract creation, (iii) contract compliance, monitoring and audits, (iv) contract administration and claims processing, and (v) any other matters related to managed care.

6.6     Government Price Reporting and Processing . Eagle shall be responsible for all government price calculations, reporting and rebate processing in the Territory relating to the Products. However, Spectrum shall, to the extent it has in its possession relevant information, cooperate with and assist Eagle in complying with its Product-related government price reporting obligations in the Territory, including by providing to Eagle or its designee, promptly upon Eagle’s request in order to satisfy reporting deadlines, all data and other information required for government price reporting that is collected or maintained by or otherwise in the possession or reasonable control of Spectrum and by promptly responding to Eagle’s questions and requests for information or assistance.

6.7     Coordination . It is understood and agreed that, except to the extent explicitly set forth in a Commercialization Plan or otherwise authorized in writing by Eagle, Spectrum shall not engage in any activities that are reserved to Eagle under this Article 6.

6.8     Manufacture and Supply . Eagle shall use Commercially Reasonable Efforts to manufacture or have manufactured the Products for commercial sale in the Territory. Without limiting the foregoing, Eagle shall use Commercially Reasonable Efforts to manufacture quantities of each Product sufficient to Launch the Product, as set forth in the Commercialization Plan. Notwithstanding any provision of this Agreement, Eagle shall have no obligation to Launch any Product and may elect in its discretion not to Launch any one or more Products.

6.9     Compliance with Laws, Codes and Policies .

(a)     General . Eagle shall: (i) perform all of its obligations under this Agreement in compliance with all Applicable Laws and the Codes; (ii) instruct its personnel not to, and shall use reasonable efforts consistent with industry practices to ensure that its personnel do not, make any representation, statement, warranty or guaranty, oral or written, with respect to any Product that is inconsistent with the then-current Labeling of such Product, the applicable approved Materials or Applicable Laws; or that is deceptive or misleading in any way; or take any action that disparages or may jeopardize the good name, goodwill or reputation of any of the Products or of Eagle or any of its Affiliates; (iii) maintain and enforce a corporate compliance program consistent with the OIG Compliance Guidance, including maintaining a mechanism for its personnel to report, at any time and anonymously if they choose, any concerns about potential non-compliance with Applicable Laws, Codes or Eagle policies, procedures, standards and practices, and that requires Eagle to promptly and diligently investigate and take appropriate corrective and disciplinary action with regard to any such reports, as applicable; and (iv) promptly notify Spectrum of the substance of, and coordinate with Spectrum regarding, any report described in clause (iii) above relating to a Product or Eagle’s activities under this Agreement that potentially violates Applicable Laws, Codes or Eagle’s compliance policies, procedure, standards and practices.

(b)     Notification of Legal Proceeding . Unless and to the extent prohibited by Applicable Laws, Eagle shall immediately notify Spectrum of any claim, demand, communication or inquiry of any type, including, but not limited to, a subpoena, civil investigative demand, or congressional inquiry letter, from any federal, state or local governmental entity or Regulatory Authority related in any way to Spectrum, the Products, or this Agreement.


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(c)     Activities in Violation of Law . Notwithstanding any provision of this Agreement, Eagle shall not be required to undertake any activity under or in connection with this Agreement which violates, or which it believes, in good faith and on the advice of counsel, may violate, any Applicable Laws.


ARTICLE VIII

COSTS AND COMPENSATION

7.1     Commercialization Support Costs . Within [***] business days after the end of each calendar quarter during the Term (and after termination of this Agreement with respect to costs incurred prior to termination of this Agreement), Spectrum shall provide a written report (each, a “ Cost Report ”) to Eagle setting forth in reasonable detail any Commercialization Support Costs incurred by Spectrum during such calendar quarter in accordance with a Commercialization Plan and the budget set forth therein. Each Cost Report shall enable Eagle to compare the reported out-of-pocket costs against the budget for Commercialization Support Costs set forth in the applicable Commercialization Plan, on both a quarterly basis and a cumulative basis for each activity. Together with the Cost Report, Spectrum shall provide to Eagle an invoice for the amount of Commercialization Support Costs for the preceding calendar quarter. With each Cost Report and invoice, Spectrum shall also provide to Eagle copies of Third Party invoices and other supporting documentation for all out-of-pocket costs detailed in such Cost Report. Eagle shall pay the invoiced amount of Commercialization Support Costs to Spectrum within [***] days after receiving each invoice, Cost Report and supporting documentation, provided that for any particular activity, time period, or cost, as applicable, Eagle shall have no obligation to pay any amount that exceeds the amount budgeted in the applicable Commercialization Plan. For the avoidance of doubt, Commercialization Support Costs do not include any costs relating to Spectrum Personnel (including CAMs and NAMs) and all Spectrum Personnel costs are compensated solely by the Base Fee.

7.2     Base Fee .

(a)     Base Fee . From and after the Effective Date and subject to this Section 7.2(a), Eagle shall compensate Spectrum for its costs of employing and maintaining Spectrum Personnel (including CAMs, NAMs and legal, regulatory and other support personnel) to conduct Promotional and Commercialization activities and support thereof hereunder, as well as its Detailing costs, in the annualized amount of [***] (the “ Base Fee ”). The Base Fee shall be payable in the following percentages during the Term:

(i)    For the first calendar quarter of 2016, Eagle shall pay to Spectrum [***] percent ([***]%) of the Base Fee;

(ii)    For the second calendar quarter of 2016 through the remainder of the Term, Eagle shall pay to Spectrum [***] percent ([***]%) of the Base Fee.
The 2016 Base Fee (annual and monthly) shall be increased [***] percent ([***]%) for 2017.
(b)     Base Fee Payment . Within the first [***] days of each calendar month during the Term, Eagle shall pay the Base Fee due to Spectrum for such month.
 
7.3     Performance Bonus .

(a)     Revenue Thresholds . Based on forecasts of annual Net Sales of the [***] Product and the [***] Product for 2016 and 2017 (as prorated for the first half of 2017 unless the Term is extended


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pursuant to Section 12.1), the Parties have established thresholds for aggregate Net Sales (annual or semi-annual, as applicable) of the [***] Product and the [***] Product as set forth in Exhibit C (the “ Revenue Thresholds ”). In the event the JCC approves in writing (including in any Commercialization Plan) any revisions to the Net Sales forecasts of the [***] Product and/or the [***] Product, the JCC shall revise, and set forth in the applicable Commercialization Plans, the Revenue Thresholds to align with such revisions to the Net Sales forecast(s). In addition, if one or both of the [***] Product and the [***] Product does not obtain Approval in the Territory, both the Net Sales forecasts and the Revenue Thresholds will be revised downward by the JCC and set forth in the Commercialization Plans.

(b)     Performance Bonus . Each calendar year (or portion thereof) during the Term, if the actual aggregate Net Sales of the [***] Product and/or the [***] Product sold in the Territory exceeds the then-applicable Revenue Threshold(s), Eagle shall pay Spectrum a performance bonus as set forth in Exhibit D (the “ Performance Bonus ”). Within [***] days after (i) the end of calendar year 2016, (ii) June 30, 2017 or calendar year 2017 (depending upon whether the Initial Term is extended pursuant to Section 12.1), and (iii) if applicable, after termination of this Agreement pursuant to Section 12.2(e), Eagle shall provide Spectrum with a written statement of the actual aggregate Net Sales of the [***] Product and/or the [***] Product (as applicable) obtained during that calendar year (or portion thereof), and Eagle shall pay Spectrum the amount of the Performance Bonus due, if any.

7.4     [***] Milestone Payments . Eagle shall pay Spectrum up to two (2) milestone payments as follows: (a) if the exit market share of the [***] Product as of December 31, 2016 is equal to or greater than the applicable market share set forth in Exhibit E (depending upon the number of competitors as of December 31, 2016 as set forth in Exhibit E ), Eagle shall pay Spectrum a milestone payment of [***] after the end of calendar year 2016, within [***] days after the relevant IMS data become available to Eagle; and (b) (i) if the exit market share of the [***] Product as of June 30, 2017 (if the Term expires upon expiration of the Initial Term pursuant to Section 12.1) is equal to or greater than the applicable market share set forth in Exhibit E (depending upon the number of competitors as of June 30, 2017 as set forth in Exhibit E ), Eagle shall pay Spectrum a milestone payment of [***] after expiration of the Initial Term, within [***] days after the relevant IMS data become available to Eagle, or (ii) if the exit market share of the [***] Product as of December 31, 2017 (if the Term is extended by Eagle pursuant to Section 12.1) is equal to or greater than the applicable market share set forth in Exhibit E (depending upon the number of competitors as of December 31, 2017 as set forth in Exhibit E ), Eagle shall pay Spectrum a milestone payment of [***] after end of calendar year 2017, within [***] days after the relevant IMS data become available to Eagle. For the avoidance of doubt, no more than two (2) milestone payments will be payable under this Section 7.4, and no milestone payment will be due under this Section 7.4 unless the [***] Product attains the applicable market share set forth in Exhibit E .

7.5     Payments .

(a)     Wire Transfer . All payments made by Eagle under this Article 7 shall be made by wire transfer from a banking institution in the United States in U.S. Dollars in accordance with instructions given in writing from time to time by Spectrum.

(b)     Overdue Payments . If any undisputed amounts payable by Eagle to Spectrum under this Agreement that are not paid when due, such outstanding amounts shall accrue interest (from the date such amounts were due through and including the date upon which full payment is made) at the prime rate as reported by The Wall Street Journal (Internet Edition) on the date such payment is due, plus an additional [***] percent ([***]%), or the maximum rate permitted by applicable law, whichever is less.


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ARTICLE VIII

REPORTS; MAINTENANCE OF RECORDS; AUDIT RIGHTS

8.1     Account Management and Reporting System . Spectrum shall apply its existing electronic account management and reporting system to document and report its Details and other Promotion activities hereunder, including all of the information that is required to be reported in the Promotion Reports, and to document and report its compliance activities and comply with the transparency reporting requirements under Section 5.4. Prior to the Launch Date of the first Product, Spectrum shall enable Eagle to conduct an in-depth review of Spectrum’s account management system and other systems for documenting and reporting Spectrum’s activities as required under this Agreement.

8.2     Reports . Spectrum shall keep Eagle regularly informed regarding the conduct of its Promotion activities under this Agreement. Without limiting the foregoing, Spectrum shall provide Eagle with a report (each, a “ Promotion Report ”) within [***] days after the end of each calendar quarter (and within [***] days after the end of each calendar year) which shall set forth the efforts of the Spectrum Personnel in conducting Details and other Promotion activities under this Agreement during the preceding calendar quarter or preceding calendar year, in a form mutually agreed by the Parties, including the following information: (a) the number of CAMs (both in absolute numbers and in FTEs); (b) the percentage of the CAM Team utilized to Detail the Products under this Agreement; (c) the number of Details made and recorded by CAMs broken out by region, position of Details and type of Target Prescriber/Account; (d) a certification by Spectrum that each CAM was compensated in accordance with the Incentive Compensation plan approved by Eagle with respect to Products ( provided that such certification will only be included with the Promotion Report for the calendar quarter in which Spectrum provides Incentive Compensation to its employees in accordance with its standard practices); and (d) such other information as may be required in the then-current Commercialization Plan. In the event Spectrum cannot provide the certification in (d), Spectrum shall provide a written explanation to Eagle setting for the details as to why Spectrum cannot provide such certification. Each Promotion Report shall be provided in an electronic format or as agreed by the Parties and shall include all applicable information from Spectrum’s account management system.

8.3     Eagle’s Audit Rights Relating to Spectrum’s Activities .

(a)     Right to Audit . During the Term, and upon reasonable prior notice from Eagle, Spectrum shall afford to Eagle reasonable access during normal business hours (and at such other times as the Parties may mutually agree) to inspect and audit the relevant books, records and other information of Spectrum in order to monitor Spectrum’s compliance with its obligations under the Commercialization Plan and the terms of this Agreement and to verify that Spectrum’s Promotion and other Commercialization activities were accurately reported and conducted in compliance with this Agreement. Such audit shall occur no more than [***] during any calendar year, except that Eagle may conduct more frequent inspections and audits for “cause” at any time that Eagle learns of any material non-compliance (or of any condition that Eagle determines is reasonably likely to result in material non-compliance) with the Commercialization Plan or the terms of this Agreement. Subject to the limitations set forth in this Section 8.3(a), Eagle may conduct such audit (i) itself, or by an independent certified public accountant appointed by Eagle at its expense and reasonably acceptable to Spectrum, by auditing the relevant records (including the Account Management System) of Spectrum and its Affiliates at Spectrum’s United States facilities; (ii) by conducting surveys of the Target Prescribers/Accounts; and/or (iii) by direct observation of any such Promotion activity. Spectrum shall keep and maintain complete and accurate records of all Promotion and other Commercialization activities conducted by Spectrum in accordance with Section 8.4.


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(b)     Audit Results . All records made available for audit pursuant to this Section 8.3 shall be deemed to be Confidential Information of Spectrum. In the event that an audit establishes that there was an error in Promotion activities (including number of FTEs or the or time spent conducting Promotion activities) reported by Spectrum hereunder, Spectrum shall promptly (but in any event no later than [***] days after Spectrum’s receipt of the audit report so concluding) provide a corrected report to Eagle. Eagle shall bear the full cost of such audit unless such audit discloses a downward adjustment of the number of FTEs shown by such inspection of more than [***] of the number reported in such statement, in which case Spectrum shall reimburse Eagle for the reasonable out-of-pocket costs incurred by Eagle in connection with such audit.

8.4     Maintenance of Books and Records . Each Party shall maintain complete and accurate books and records in sufficient detail, in accordance with all Applicable Laws, to enable verification of the performance of such Party’s obligations under this Agreement, including all Detailing, Promotion and Product Training. Such books and records shall be deemed to be the Confidential Information of the maintaining Party and shall be maintained by such Party for the latest to occur of: (i) a period of [***] years after the end of each calendar year in the Term, (ii) longer if required by Applicable Laws or such Party’s document management program, or (iii) until the final resolution of any audit or dispute as to which such records relate.

8.5     Payment Audits .

(a)     Right to Audit . Either Party (herein, the “ Auditing Party ”) may demand, no more than [***] for any calendar year in the Term, an audit of the relevant books and records of the other Party (herein, the “ Audited Party ”) in order to verify the Audited Party’s reports on financial matters addressed in this Agreement, which shall include, without limitation, Spectrum’s right to audit Eagle’s books and records relating to calculation of Net Sales and of the Performance Bonus payable to Spectrum and Eagle’s right to audit Spectrum’s books and records relating to the Base Fee and Commercialization Support Costs. Upon no less than [***] days’ prior written notice to the Audited Party by the Auditing Party, the Audited Party shall grant reasonable access to members of a nationally-recognized independent certified public accounting firm selected by the Auditing Party (but not the auditor that conducts or has within the past three years conducted the audit of the Auditing Party’s financial statements) to the relevant books and records of the Audited Party in order to conduct a review or audit thereof. Such access shall be permitted only during normal business hours. The auditor will execute a written confidentiality agreement with the Audited Party and will disclose to the Auditing Party only such information necessary or relevant to verify the Audited Party’s reports on the financial matters addressed in this Agreement. The accountant shall report its conclusions and calculations to the Auditing Party and the Audited Party; provided , that in no event shall the accountant disclose any information of the Audited Party except to the extent necessary to verify the Audited Party’s reporting and other compliance with the terms of this Agreement. Such examination shall be conducted (a) at the facility(ies) where such books and records are maintained and (b) without disruption to operations of the Audited Party. Except as set forth in Section 8.5(b), the Auditing Party shall bear the full cost of the performance of any such audit. All inspections made under this Section 8.5 shall be made no later than [***] years after the reports that are the subject of the investigation were made.

(b)     Audit Results . If as a result of any audit of the books and records of the Audited Party under this Section 8.5, it is shown that the Audited Party’s payments to the Auditing Party under this Agreement with respect to the period of time audited were less than the amount which should have been paid to the Auditing Party pursuant to this Agreement, then the Audited Party shall pay to the Auditing Party the amount of such shortfall within [***] days after the Auditing Party’s demand therefor. If as a result of any audit of the books and records of Audited Party it is shown that the Auditing Party’s payments to the Audited Party under this Agreement with respect to the period of time audited were more than the amount which should


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have been paid to the Audited Party pursuant to this Agreement, then the Audited Party shall reimburse to the Auditing Party the amount of such overpayment within [***] days after the Auditing Party’s demand therefor. In addition, if any amount of underpayment by the Audited Party or overpayment by the Auditing Party is more than [***] of the amount which should have been paid pursuant to this Agreement with respect to the period in question, then the Audited Party shall also reimburse the Auditing Party for its documented, reasonable, out-of-pocket costs and expenses incurred in connection with the audit.

ARTICLE IX

PHARMACOVIGILANCE AND REGULATORY MATTERS

9.1     Pharmacovigilance .

(a)     Pharmacovigilance Agreement . In conjunction with this Agreement, Eagle and Spectrum (under the guidance of their respective pharmacovigilance departments, or equivalents thereof) shall enter into one or more separate safety data exchange agreement(s) (each, a “ Pharmacovigilance Agreement ”) in order to identify and finalize the responsibilities that the Parties shall employ to comply with each Party’s respective safety obligations (including Adverse Event reporting) for each of the Products in the Territory in accordance with all Applicable Laws and consistent with the provisions of this Section 9.1. Additionally, promptly after the Effective Date, the Parties shall exchange contact information for their respective employees or agents who are responsible for Adverse Event reporting.

(b)     Eagle Responsibilities . Eagle shall have primary responsibility for pharmacovigilance activities related to the Products in the Territory. Eagle shall establish and maintain any and all pharmacovigilance requirements for the Products in full compliance with all Applicable Laws and requirements of the FDA. Eagle’s pharmacovigilance responsibilities for the Products may include, as set forth in the Pharmacovigilance Agreement: (i) production and maintenance of risk management plans, if applicable; (ii) production of post-marketing periodic safety updates; (iii) receiving and processing all post-marketing spontaneous Adverse Event reports that originate in the Territory with respect to the Products, which reports will be processed in accordance with Applicable Laws and Eagle’s standard procedures; (iv) obtaining follow-up information for all post-marketing Adverse Event reports (any such information received by Spectrum shall be forwarded to Eagle on the same timelines as for initial information); (v) obligations for communication with regulatory and safety contacts with the FDA; and (vi) submission of post-marketing periodic safety update reports to the FDA.

(c)     Spectrum Responsibilities . Spectrum’s responsibilities for the Products include, as set forth in the Pharmacovigilance Agreement: (i) notifying Eagle in writing by secure e-mail or facsimile of information concerning Adverse Events (except as set forth in the next sentence of this Section 9.1(c)) within two (2) business days of the date first learned; (ii) carrying out risk management plan obligations in the Territory; and (iii) communicating information about Adverse Events to Healthcare Professionals in the Territory. In addition, throughout the Term, Spectrum agrees to notify Eagle within one (1) day of relevant information, if any, that Spectrum obtains during its performance of the obligations hereunder concerning a side effect, injury, toxicity or sensitivity reaction, or an unexpected incident, and the severity thereof, whether or not determined to be attributable to the Product (“ Adverse Event ”), where such Adverse Event is: (i) serious or unexpected and associated with the clinical uses, studies, investigations, tests and marketing of any Product; or (ii) non-serious and spontaneously reported in connection with the marketing of any Product in the Territory. “ Serious ” as used in this Section refers to an experience which is fatal or life threatening, results in a persistent or significant disability or incapacity, in-patient hospitalization or prolongation of hospitalization; or is a congenital anomaly, a birth defect, a cancer, or the result of an overdose (whether


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accidental or intentional) or other important medical event, even if such event does not result in death, is not life-threatening or may not require hospitalization. “ Unexpected ” as used in this Section refers to a condition or development not listed in the current Labeling for a Product, and includes an event that may be symptomatically and pathophysiologically related to an event listed in the Labeling, but differs from the event because of increased frequency or greater severity or specificity.

9.2     Regulatory Matters .

(a)     Reporting . As between the Parties, Eagle shall be responsible for reporting of, and shall report, regulatory matters regarding the manufacture, distribution, promotion and safety of the Product (including Adverse Events and Product Quality Complaints) to or with the FDA and/or other relevant Regulatory Authorities in the Territory, as applicable. For clarity, the foregoing shall not limit Spectrum’s obligations under Applicable Laws to report its relevant Promotion activities under this Agreement, including Spectrum’s reporting obligations under Applicable Laws with respect to transparency reporting, as described in Section 5.4.

(b)     Spectrum Involvement . As between the Parties, all regulatory matters in the Territory regarding the Products shall be the responsibility of Eagle, and Spectrum shall not, without Eagle’s prior written consent (unless so required by Applicable Laws), correspond or communicate with the FDA or with any other Regulatory Authority concerning the Products, or otherwise take any action concerning any Approval under which any Product is marketed. Spectrum shall provide to Eagle, promptly upon receipt, copies of any communication from the FDA, or other Regulatory Authority, related to any of the Products, and Eagle shall provide to Spectrum, promptly upon receipt, copies of any communication from the FDA or other Regulatory Authority relevant to Spectrum’s rights or obligations under this Agreement. Upon Eagle’s request, Spectrum shall cooperate fully with, and provide assistance to, Eagle in connection with Eagle’s regulatory requirements arising from Spectrum’s Promotion activities under this Agreement (including Adverse Event reporting) for the Products. If Spectrum believes it is required by Applicable Laws to communicate with the FDA or other Regulatory Authority regarding any matter relating to any of the Products or Spectrum’s activities hereunder, then Spectrum shall, unless and to the extent prohibited by Applicable Laws, so advise Eagle promptly and provide Eagle in advance with a copy of any proposed communication (including the text of any oral communication) with the FDA or such other Regulatory Authority prior to such communication, and shall comply with any and all reasonable direction of Eagle, to the extent consistent with Applicable Laws, concerning any meeting or written or oral communication with the FDA or any other Regulatory Authority or governmental authority.

9.3     Permits . Each Party shall, at its sole cost and expense, maintain in full force and effect all permits and other authorizations required by contract and/or by Applicable Laws to carry out its duties and obligations under this Agreement; it being understood that Eagle retains sole responsibility to maintain Approvals for the Products in the Territory.

ARTICLE X

CONFIDENTIAL INFORMATION

10.1     General . At all times during the Term and for a period of [***] following termination of this Agreement, each Party (the “ Receiving Party ”) shall, and shall cause its officers, directors, employees and agents to, keep confidential and not publish or otherwise disclose, and not use, directly or indirectly, for any purpose, any Confidential Information of the other Party (the “ Disclosing Party ”), except to the extent such disclosure or use is permitted by the terms of this Agreement or is otherwise agreed upon in writing by the


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Parties. “ Confidential Information ” means any technical, scientific, regulatory, commercial, business or other confidential, proprietary, or trade secret information provided by or on behalf of the Disclosing Party to the Receiving Party pursuant to this Agreement or otherwise relating to or disclosed during any transaction contemplated hereby (including information disclosed prior to the Effective Date under the Confidentiality Agreement), including information relating to the terms of this Agreement, the Products, Target Prescribers/Accounts, and the scientific, regulatory or business affairs of either Party; provided that, Confidential Information shall not include any information that the Receiving Party can demonstrate by competent written proof:

(i)    is in the public domain by use and/or publication at the time of its receipt from the Disclosing Party or thereafter enters into the public domain through no fault of the Receiving Party; or

(ii)    was already in the Receiving Party’s possession prior to receipt from the Disclosing Party or is developed independently of information received from the Disclosing Party, in each case as demonstrated by contemporaneous written documentation; or

(iii)    is obtained by the Receiving Party from a source (other than a Party or its Representatives) which is not bound by a confidentiality agreement or other contractual restriction that may prohibit the disclosure of such information.

10.2     Permitted Disclosures . Each Receiving Party may only disclose Confidential Information of the Disclosing Party to the extent that such disclosure is:

(a)    made by the Receiving Party or its Affiliates to its or their attorneys, auditors, advisors, consultants or contractors (“ Representatives ”) on a need-to-know basis and solely in connection with the performance of the Receiving Party’s obligations or the exercise of its rights under this Agreement; provided , however, that each Representative must be bound by obligations of confidentiality and non-use equivalent in scope to, and no less restrictive than, those set forth in this Article 10 prior to any such disclosure; or

(b)    made in response to a valid order of a court of competent jurisdiction, Regulatory Authority or other governmental authority of competent jurisdiction or, if in the reasonable opinion of the Receiving Party’s legal counsel, such disclosure is otherwise required by law, including by reason of filing with securities regulators; provided , however, that the Receiving Party shall first have given written notice to the Disclosing Party and given the Disclosing Party a reasonable opportunity to quash such order or to obtain a protective order or confidential treatment requiring that such Confidential Information be held in confidence by such court or governmental authority or, if disclosed, be used only for the purposes for which the order was issued; and provided further, that the Confidential Information disclosed in response to such court or governmental authority order shall be limited to that information which is legally required to be disclosed in response to such order.

10.3     Public Announcements; Agreement Terms .

(a)     Consent Required . Without limiting the restrictions set forth in Section 10.1, a Party may not use the name of the other Party in any publicity or advertising or make any public announcement or issue any press release concerning the existence or terms of this Agreement or activities hereunder without the prior written consent of the other Party, including approval of any press release or other public announcement. Notwithstanding the foregoing, (i) a Party may disclose information relating to this Agreement (including any termination hereof) as required by Applicable Laws, including to the United States


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Securities and Exchange Commission or any other securities exchange or governmental authority as required by law or regulation, provided that the disclosing Party shall (1) if practicable, provide the other Party with reasonable advance notice of and an opportunity to comment on any such required disclosure, and (2) if reasonably requested by such other Party, seek, or cooperate with such Party’s efforts to obtain, confidential treatment or a protective order with respect to any such disclosure to the extent available at such other Party’s expense, (ii) each Party may use the name of the other Party in connection with its Promotion of the Products in accordance with the Commercialization Plan(s), and (iii) the Parties shall, promptly following the Effective Date, jointly issue the press release described in Section 10.3(b), below.

(b)     Confidential Terms . This Agreement shall be deemed Confidential Information of both Spectrum and Eagle and may only be disclosed: (i) as may be permitted under Sections 10.2 and 10.3(a); (ii) to potential or actual investors or acquirers who are bound by obligations of confidentiality and non-use equivalent in scope to, and no less restrictive than, those set forth in this Article 10 prior to any such disclosure; or (iii) otherwise with the prior written consent of the other Party hereto, which shall not be withheld unreasonably. The Parties shall agree upon a mutual press release to announce the execution of this Agreement, a copy of which is attached as Exhibit F , together with a corresponding Question & Answer outline for use in responding to inquiries about this Agreement; and thereafter, each Party may each disclose to Third Parties the information contained in such press release and Question & Answer outline without the need for further approval by the other Party.

10.4     Prior Confidentiality Agreement . Upon execution of this Agreement, the terms of this Article 10 shall supersede the Parties’ obligations under the Confidentiality Agreement solely with respect to non-use and non-disclosure of any information relating to the Products or the respective business operations of the Parties (but not, for clarity, to the extent the Confidentiality Agreement includes non-use and non-disclosure obligations with respect to any information relating to any product of Eagle’s other than the Product); provided that any information relating to the Products or the respective business operations of the Parties disclosed by one Party to the other, including, without limitation, under the Confidentiality Agreement shall be deemed to have been disclosed under this Agreement.

10.5     Injunctive Relief . Each Party acknowledges that damages resulting from disclosure of the Confidential Information in violation of Section 10.1 may not be an adequate remedy and that, in the event of any such disclosure or any indication of an intent to disclose such information, a Party (or its Affiliates) owning such information will be entitled to seek injunctive relief or other equitable relief in addition to any and all remedies available at law or in equity, including the recovery of damages and reasonable attorneys’ fees.

ARTICLE XI

INTELLECTUAL PROPERTY RIGHTS

11.1     Ownership of Materials . As between the Parties, Eagle shall own all right, title and interest in and to the Promotional Materials, Training Materials, Advertising and Labeling, in each case including all content contained therein and all applicable Copyrights and trademark rights (but excluding any trademark or other rights in Spectrum House Marks). To the extent Spectrum (or any of its Affiliates or other agents) obtains or otherwise has a claim to the Promotional Materials, Training Materials, Advertising and Labeling, Spectrum shall assign, and hereby does assign, to Eagle (or its designated Affiliate) all of Spectrum’s (and its Affiliate’s and other agent’s) right, title and interest in and to such Promotional Materials, Training Materials, Advertising, Labeling and all content therein (excluding, in each case, any rights in Spectrum House Marks). Eagle hereby grants to Spectrum a non-exclusive, royalty-free license to use the Materials,


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Training Materials, Advertising and Labeling and under all Copyrights that cover the Materials, Training Materials, Advertising and Labeling solely as necessary to Promote and otherwise Commercialize the Products in the Territory, in each case in accordance with this Agreement, including the quality control and usage restrictions set forth in this Agreement. Such license shall be non-transferable and non-sublicensable and shall automatically and immediately terminate upon the expiration or earlier termination of this Agreement for any reason; provided , that Spectrum shall be entitled to use any content in the Training Materials to the extent such content is unrelated to the Products and can be used independently of the Products.

11.2     Use of Trademarks .

(a)     Use of Trademark . All Promotional Materials shall include the Trademarks, including the Eagle House Marks. Spectrum shall discuss and refer to the Products only under the Product Trademarks and shall use such Product Trademarks and the Eagle House Marks only on the Promotional Materials and only in accordance with the terms and conditions of this Agreement. Spectrum shall follow the reasonable instructions and guidelines of Eagle in connection with the use of any Trademarks. All goodwill generated by Spectrum’s use of the Trademarks shall inure to the benefit of Eagle. Any right to the use of the Trademarks granted hereunder and all use of the Trademarks by Spectrum shall cease at the end of the Term. Spectrum (and its Affiliates) will not register, apply to register or use any marks (including in connection with any domain names) that are confusingly similar to any of the Trademarks. To the extent that Eagle makes use of any Spectrum House Marks in connection with this Agreement, the provisions set forth in this Section 11.2 shall apply to Eagle, mutatis mutandis , with respect to the Spectrum House Marks.

(b)     No Dispute . Neither Party shall, and shall not knowingly cause another person to, contest or dispute or otherwise impair or endanger the validity of, the exclusive rights of any of the trademarks (including the Trademarks and Spectrum House Marks) owned, licensed or maintained, as the case may be, by the other Party or its Affiliates, or any part thereof, or the registrations thereof. Neither Party shall undertake any action in respect of the filing, registration or renewal of any of the other Party’s trademarks (including the Trademarks and Spectrum House Marks) without such other Party’s consent.

11.3     Infringement . Each Party shall promptly inform the other Party of any material infringement of, or challenge to, any Trademark or any other intellectual property relating to the Products owned or controlled by Eagle in the Territory, in each case whether actual or threatened, which comes to the attention of such Party. As between the Parties, Eagle shall have the exclusive right (in its sole discretion) to take (or not take, as applicable) action in respect of the defense or infringement of the Trademarks and/or or any other material intellectual property relating to the Products, and Spectrum shall, at Eagle’s expense, provide reasonable assistance and cooperation with such activities as Eagle may reasonably request.

ARTICLE XII

TERM AND TERMINATION

12.1     Term . This Agreement shall commence as of the Effective Date and, unless sooner terminated as provided below, shall expire on June 30, 2017 (the “ Initial Term ”); provided that, Eagle shall have the right, by giving written notice at least [***] days before expiration of the Initial Term, to extend the term of this Agreement to expire on December 31, 2017; and provided further that, if and as mutually agreed upon by the Parties in writing, the term of this Agreement may be extended after December 31, 2017 for consecutive periods of six (6) months each (the “ Term ”). For clarity, if the Initial Term is not extended, then the term “ Term ” shall mean only the Initial Term as required by the context.


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12.2      Early Termination . The Parties shall have the right to terminate this Agreement under the following conditions:

(a)    Either Party shall have the right to terminate this Agreement at any time upon written notice to the other Party if the other Party materially breaches this Agreement and such other Party fails to cure such breach within [***] days after written notice is given to such other Party specifying the breach.

(b)    Eagle shall have the right to terminate this Agreement effective immediately upon written notice to Spectrum if Spectrum breaches the terms of Section 3.4.

(c)    Eagle may terminate this Agreement, effective immediately upon written notice to Spectrum, in the event of any material breach of Section 5.2(a).

(d)    Spectrum may terminate this Agreement, effective immediately upon written notice to Eagle, in the event of any material breach of Section 6.9(a).

(e)    Eagle shall have the right to terminate this Agreement for convenience by giving sixty (60) days’ written notice to Spectrum; provided that in the event of termination pursuant to this Section 12.2(e), Eagle shall pay Spectrum an amount calculated as set forth in Exhibit G .

(f) Eagle shall have the right to terminate this Agreement by giving [***] days’ written notice to Spectrum if, following a Change of Control of Spectrum, the Parties are unable to agree on measures to be taken to address potential non-compliance with applicable antitrust laws pursuant to Section 3.5(b).

(g) Spectrum shall have the right to terminate this Agreement by giving [***] days’ written notice to Eagle if, following a Change of Control of Eagle, the Parties are unable to agree on measures to be taken to address potential non-compliance with applicable antitrust laws pursuant to Section 3.5(b); provided that in the event of termination pursuant to this Section 12.2(g), Eagle shall pay Spectrum an amount calculated as set forth in Exhibit G .

(h) Either Party may terminate this Agreement, effective immediately upon written notice to the other Party, in the event that the other Party makes an assignment of substantially all of its assets for the benefit of creditors, appoints or suffers appointment of a receiver or trustee over all or substantially all of its property, files a petition under any bankruptcy or insolvency act or has any such petition filed against it which is not discharged within [***] days of the filing thereof.

12.3     Consequences of Termination of Agreement . Upon the expiration or early termination of this Agreement for any reason, the following provisions shall apply.
        
(a)    Spectrum shall conduct an orderly wind down of Spectrum’s Promotion and other Commercialization activities as agreed by Eagle, and Spectrum shall provide to Eagle such Product-related information as is maintained by Spectrum and is reasonably required to transition Spectrum’s Promotion and other Commercialization responsibilities to Eagle. Commencing reasonably in advance of expiration of the Term or, if applicable, upon notice of early termination of this Agreement pursuant to Section 12.2, Eagle shall have the right to engage a Third Party to facilitate the smooth transition of Spectrum’s obligations hereunder to Eagle or its designee, and the license granted to Spectrum under Section 2.1(a) will be deemed to be non-exclusive at such time for such purpose.

(b)    Except as otherwise agreed by Eagle with respect to any wind-down activities, all


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rights of Spectrum to perform Promotion and other activities hereunder shall terminate immediately and be of no further force and effect, and Spectrum shall promptly cease all Promotion (including Detailing) activities and all other Commercialization activities, shall promptly discontinue the use of any Trademarks and Copyrights in the Territory and shall promptly return to Eagle, or dispose of in accordance with instructions from Eagle, all Promotional Materials and Training Materials in its possession or the possession of its Affiliates or any of the Spectrum Personnel. Spectrum will provide Eagle with a certified statement that all remaining Promotional Materials and Training Materials have been returned or otherwise properly disposed of, and that neither Spectrum nor any Spectrum Personnel are in possession or control of any such Promotional Materials or Training Materials, and will not be using any such Promotional Materials or Training Materials as of the effective date of termination (unless otherwise agreed by Eagle with respect to any wind-down activities).

(c)    Each Party shall, at the other Party’s request, promptly return to such Party or, at such Party’s option, destroy all Confidential Information of the providing Party and provide that Party with a certified statement that all Confidential Information of the providing Party has been returned or destroyed; provided that the receiving Party may retain one (1) copy of the Confidential Information of the providing Party in its archives solely for the purpose of establishing the contents thereof and ensuring compliance with its obligations hereunder.

12.4     Surviving Provisions . The following provisions will remain in full force and effect after the expiration or termination of this Agreement: Sections 8.4 - 8.5 (audits), 11.1 (pursuant to its terms), 12.3 - 12.5 (termination), 13.4 - 13.6 (indemnification), 13.7 (pursuant to its terms), 13.8 (warranty disclaimer), 13.9 (limitation of liability), and Articles 1 (to the extent necessary to give force to, or otherwise understand, surviving provisions), 7 (Costs and Compensation, with respect to any payments that remain due thereunder), 10 (Confidentiality) and 14 (Miscellaneous).

12.5     Accrued Rights . Termination or expiration of this Agreement for any reason will be without prejudice to any rights which will have accrued to the benefit of either Party or any liability incurred by either Party prior to the effective date of termination or expiration, and will not preclude either Party from pursuing all rights and remedies it may have hereunder or at law or in equity with respect to any breach of this Agreement or prejudice either Party’s right to obtain performance of any obligation.

ARTICLE XIII

REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION

13.1     Mutual Representations and Warranties . Spectrum and Eagle each represents and warrants to the other, as of the Effective Date, as follows:

(a)    It is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, and has all requisite power and authority, corporate or otherwise, to execute, deliver and perform this Agreement;

(b)    The execution and delivery of this Agreement and the performance by it of the transactions contemplated hereby have been duly authorized by all necessary corporate action and will not violate: (i) such Party’s certificate of incorporation or bylaws; (ii) any agreement, instrument or contractual obligation to which such Party is bound in any material respect; (iii) any requirement of any Applicable Law; or (iv) any order, writ, judgment, injunction, decree, determination or award of any court or governmental agency presently in effect applicable to such Party; and


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(c)    This Agreement is a legal, valid and binding obligation of such Party enforceable against it in accordance with its terms and conditions.

13.2     Representations, Warranties and Covenants of Spectrum . In addition, Spectrum represents and warrants to Eagle, as of the Effective Date, and covenants to Eagle as follows:

(a)    Neither it, nor any of its Affiliates, nor any of their respective officers, employees, agents, representatives or other Persons used in the performance of its obligations under this Agreement has been debarred or suspended under 21 U.S.C. §335(a) or (b), excluded from a federal health care program, debarred from federal contracting, or convicted of or pled nolo contendere to any felony, or to any federal or state legal violation (including misdemeanors) relating to prescription drug products or fraud (“ Debarred/Excluded ”). Spectrum shall promptly notify Eagle if it becomes aware that it, any of its Affiliates, or any officer, employee, agent, representative or other Person who is performing any activities under this Agreement is or becomes Debarred/Excluded, pursuant to Sections 5.1(a);

(b)    Except as would not reasonably be expected to have a material adverse effect on the Promotion of the Products in the Territory (i) to Spectrum’s knowledge, it and its Affiliates have promoted its products in the Territory in compliance with Applicable Laws in all material respects, (ii) as of the Effective Date, neither it nor any of its Affiliates (A) is being investigated, and there are no ongoing investigations, by any Regulatory Authority or other government authority in the Territory specifically or primarily relating to the promotion of any product in the Territory, nor (B) has it or any of its Affiliates received written notice that any Regulatory Authority or other government authority in the Territory intends to conduct any such investigation, and (iii) neither it nor any of its Affiliates (x) is a party or the subject of any action, suit or other proceeding (collectively, “ Proceeding ”) that is pending as of the Effective Date or was pending or filed at any time during the two (2) year period prior to the Effective Date, that alleges that it or any of its Affiliates have violated any Applicable Laws in the Territory in connection with the promotion of any product in the Territory, nor (y) has it or any of its Affiliates received any threats in writing of any such Proceeding as of the Effective Date or at any time during the two (2) year period prior to the Effective Date;

(c)    It has not, nor will it, pay, offer or promise to pay, or authorize the payment directly or indirectly of any moneys or anything of value to (i) any government official or employee, or any political party or candidate for political office for the purpose of influencing any act or decision of such official or of the government to obtain or retain business or direct business to any person, in each case with respect to the Product; or (ii) any HCP, HCO or Payor if any one purpose is to encourage, influence or reward the prescribing or purchasing of any Product or recommending the prescribing or purchasing of any Product, except in either case, as permitted by Applicable Laws (such as payments under applicable safe-harbor provisions).

(d)    It is, and shall remain in, material compliance with all Applicable Laws and Codes;

(e)    There is no action, suit, proceeding or investigation pending or, to its knowledge, threatened before any court or administrative agency against Spectrum or its Affiliates which could, directly or indirectly, reasonably be expected to materially affect its ability to perform its obligations hereunder; and
 
(f)    It has implemented, and shall maintain, a compliance program designed to comport with all Applicable Laws and the Codes.



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13.3     Representations and Warranties of Eagle . In addition, Eagle represents and warrants to Spectrum that, as of the Effective Date:

(a)    It has not been subject to any action, suit, claim, hearing or other proceeding, at law or equity, in or before any court or arbitrator in which the counterparty alleged that (i) the manufacture, use, distribution, import, sale, or offer for sale of any of the Products in the Territory infringes or misappropriates any patent, trademark, copyright or trade secret right of any Third Party, or (ii) the use of any of the Products in the Territory resulted in any death, personal injury or other harm to any Person;

(b)    Neither it nor any of its Affiliates is being investigated, and there are no ongoing investigations, by any Regulatory Authority or other government authority in the Territory specifically or primarily relating to the Promotion of the Products in the Territory, nor has it or any of its Affiliates received written notice that any Regulatory Authority or other government authority in the Territory intends to conduct any such investigation;

(c)    Neither it nor any of its Affiliates has granted any license or sublicense to any Third Party to sell or promote any Products in the Territory;

(d)    Eagle has all right, title and interest necessary to grant the rights set forth in this Agreement to Spectrum; and

(e)    To Eagle’s knowledge (i) no Third Party has claimed or is claiming any ownership interest in the intellectual property rights covering the Products, (ii) the Promotion of the Products as contemplated under this Agreement does not infringe the intellectual property rights of a Third Party, and (iii) no Third Party is infringing on the intellectual property rights covering the Products.
 
13.4     Defense and Indemnification of Eagle by Spectrum . Spectrum shall indemnify, defend and hold harmless Eagle, its Affiliates, their respective directors, officers, employees and agents, and their respective successors, heirs and assigns (collectively, the “ Eagle Indemnitees ”), against all liabilities, damages, losses and expenses (including reasonable attorneys’ fees and expenses of litigation or investigation) (collectively, “ Losses ”) to the extent incurred by or imposed upon the Eagle Indemnitees, or any of them, related to claims, suits, actions, demands, investigations, proceedings or judgments brought or obtained by Third Parties (including any Regulatory Authority or governmental authority) (collectively, “ Claims ”), arising out of: [***], except with respect to any Claims or Losses under the foregoing clauses (a), (b) or (c) to the extent resulting from a Claim for which Eagle is required to indemnify Spectrum under Section 13.5.

13.5     Defense and Indemnification of Spectrum by Eagle . Eagle shall indemnify, defend and hold harmless Spectrum, its Affiliates, their respective directors, officers, employees and agents, and their respective successors, heirs and assigns (collectively, the “ Spectrum Indemnitees ”), against all Losses to the extent incurred by or imposed upon the Spectrum Indemnitees, or any of them, related to Claims arising out of: [***]; except with respect to any Claims or Losses under the foregoing clauses (a) through (f) to the extent resulting from a Claim for which Spectrum is required to indemnify Eagle under Section 13.4.

13.6     Conditions to Defense and Indemnification . A Party seeking recovery under this Article 13 (the “ Indemnified Party ”) with respect to a Claim shall give prompt written notice to the Party from which indemnification is sought (the “ Indemnifying Party ”), and shall permit the Indemnifying Party to control any litigation relating to such Claim and the disposition of such Claim; provided that the Indemnifying Party shall: (a) act reasonably and in good faith with respect to all matters relating to the settlement or disposition of such Claim as the settlement or disposition relates to such Indemnified Party; and (b) not settle


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or otherwise resolve such claim without the prior written consent of such Indemnified Party (which consent shall not be unreasonably withheld, conditioned or delayed). Each Indemnified Party shall cooperate with the Indemnifying Party in its defense of any such Claim in all reasonable respects and shall have the right to be present in person or through counsel at all legal proceedings with respect to such Claim. For the avoidance of doubt, no Party shall be required to admit fault or liability under any circumstances.

13.7     Non-Solicitation . From the Effective Date until expiration of the Initial Term or earlier termination of this Agreement by Eagle pursuant to Section 12.2 (other than pursuant to Section 12.2(e)), Eagle shall not recruit, solicit, or induce [***] of Spectrum’s management employees [***] or [***] of Spectrum’s non-management employees to terminate such employee’s employment with Spectrum and become employed by Eagle. Notwithstanding any provision of this Section 13.7 to the contrary, the restrictions set forth herein shall not apply to: (a) circumstances where an employee of Spectrum initiates contact with Eagle with regard to possible employment; (b) generalized advertisements of employment opportunities or generalized employee searches by headhunter/search firms (in either case not focused specifically on or directed in any way at an employee of Spectrum); or (c) solicited individuals who have not been employed by Spectrum for at least [***] months or whose employment relationship with Spectrum were terminated prior to solicitation. Furthermore, the terms of this Section 13.7 shall not apply, and Eagle shall have the right to recruit, solicit, or induce any of Spectrum’s employees to terminate such employee’s employment with Spectrum and become employed by Eagle, in the event [***] or (iii) a Change of Control of Spectrum. For clarity, the terms of this Section 13.7 shall not apply, and Eagle shall have the right to recruit, solicit, or induce any of Spectrum’s employees to terminate such employee’s employment with Spectrum and become employed by Eagle, after any termination of this Agreement by Eagle pursuant to Section 12.2 (other than pursuant to Section 12.2(e)) or after expiration of the Initial Term (if not earlier terminated), regardless of whether the Term is extended pursuant to Section 12.1. Further for clarity, if Eagle terminates this Agreement pursuant to Section 12.2(e) prior to the expiration of the Initial Term, the terms of this Section 13.7 shall apply until June 30, 2017. Notwithstanding the foregoing, Eagle shall not have the right to recruit, solicit, or induce any of Spectrum’s employees to terminate such employee’s employment with Spectrum and become employed by Eagle during the Initial Term in the event of a Change of Control of Eagle or in the event the current Chief Executive Officer of Eagle (as of the Effective Date) at any time after the Effective Date (until expiration of the Initial Term) does not hold either Eagle’s Chief Executive Officer position or Eagle’s Chairman of the Board position. In no event shall Eagle’s hiring of any Spectrum employee as permitted by this Section 13.7 result in a breach by Spectrum of Section 3.4; provided that Spectrum is using Commercially Reasonable Efforts to replace such employee.

13.8     Warranty Disclaimer . EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS AGREEMENT, NEITHER PARTY MAKES ANY WARRANTY WITH RESPECT TO ANY GOODS, SERVICES, RIGHTS OR OTHER SUBJECT MATTER OF THIS AGREEMENT AND EACH PARTY HEREBY DISCLAIMS ALL WARRANTIES, EXPRESS OR IMPLIED, INCLUDING WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.

13.9     Limitation of Liability . NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS AGREEMENT, NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY OR ANY OF ITS AFFILIATES FOR (i) ANY SPECIAL, PUNITIVE, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES, INCLUDING LOST PROFITS, LOST REVENUES OR PENALTIES, OR (ii) COST OF PROCUREMENT OF SUBSTITUTE GOODS, TECHNOLOGY OR SERVICES, WHETHER UNDER ANY CONTRACT, WARRANTY, NEGLIGENCE, STRICT LIABILITY OR OTHER LEGAL OR EQUITABLE THEORY. NOTWITHSTANDING THE FOREGOING, THE LIMITATIONS SET FORTH IN THIS PARAGRAPH SHALL NOT APPLY TO: ANY DEFENSE OR INDEMNITY OBLIGATION


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OWED BY ONE PARTY TO ANOTHER PARTY FOR THIRD PARTY CLAIMS PURSUANT TO SECTION 13.4 OR 13.5 OF THIS AGREEMENT.

ARTICLE XIV

MISCELLANEOUS

14.1     Governing Law . This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without regard to the application of principles of conflicts of law.

14.2     Dispute Resolution; Jurisdiction .
        
(a)    In the event that there is a dispute, controversy, or claim between the Parties arising out of or relating to this Agreement, or its interpretation, performance, nonperformance or any breach of any respective obligations hereunder, excluding any dispute at the JCC level (to which the procedures in Section 2.3(d) shall apply), then the Parties shall seek to resolve such dispute through prompt negotiations between the Executives. The Executives will meet in-person and use good faith efforts to resolve any such dispute (for clarity, excluding any dispute at the JCC level) within [***] days after a request by a Party (“ Executive Mediation ”).

(b)    If such dispute is not resolved within [***] days of commencing Executive Mediation (or such other period as may be mutually agreed upon by the Executives), then either Party shall have the right to file an action in the courts of the State of New York or in the United States District Court for New York. Each Party hereby irrevocably and unconditionally (a) consents to the exclusive jurisdiction of the courts of the State of New York or in the United States District Court for New York for any action, suit or proceeding (other than appeals therefrom) arising out of or relating to this Agreement, and agree not to commence any action, suit or proceeding (other than appeals therefrom) related thereto except in such courts, (b) waives its right to a jury trial, (c) waives any objection to the laying of venue of any action, suit or proceeding (other than appeals therefrom) arising out of or relating to this Agreement in the courts of the State of New York or in the United States District Court for New York, (d) agrees not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum, and (e) agrees that service of any process, summons, notice or document by registered mail to its address set forth in Section 14.4 shall be effective service of process for any action, suit or proceeding brought against it under this Agreement in any such court.

14.3     Relationship of the Parties . The status of the Parties under this Agreement shall be that of an independent contractor. Neither Party shall have the right to enter into any agreements on behalf of the other Party, nor shall it represent to any person that it has any such right or authority. Nothing in this Agreement shall be construed: (a) to create or imply a general partnership between the Parties; (b) to make either Party or any of their Affiliates or its or their respective personnel the agent of the other for any purpose; (c) to alter, amend, supersede or vitiate any other arrangements between the Parties with respect to any subject matters not covered hereunder; (d) to give either Party the right to bind or act on behalf of the other; (e) to create any duties or obligations between the Parties except as expressly set forth herein; or (f) to grant any direct or implied licenses or any other right other than as expressly set forth herein.



[***]: CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION.


14.4     Notices . All notices and communications shall be in writing and delivered personally or by nationally-recognized overnight express courier providing evidence of delivery or mailed via certified mail, return receipt requested, addressed as follows, or to such other address as may be designated from time to time:

If to Eagle:
Eagle Pharmaceuticals, Inc.,
50 Tice Blvd.
Suite 315
Woodcliff Lake, NJ 07677
Attention: [***]
 
Facsimile: [***]
 
 
 
With a copy (which shall not constitute notice) to:
 

Cooley LLP
One Freedom Square
Reston Town Center
11951 Freedom Drive
Reston, VA 201910-565
Attn: [***]
 
 
If to Spectrum :
Spectrum Pharmaceuticals, Inc.
 
11500 S. Eastern Avenue, Suite 240
 
Henderson, NV 89052
 
Facsimile: [***]
 
Attention: [***]
 
With a copy (which shall not constitute notice) to:
 
Hogan Lovells US LLP
100 International Drive, Suite 2000
Baltimore, MD 21202
Attn: [***]
In addition, all notices to the JCC shall be sent to each Party’s designated members of such committee at such Party’s address stated above or to such other address as such Party may designate by written notice given in accordance with this Section 14.4.
Except as otherwise expressly provided in this Agreement or mutually agreed in writing, any notice, communication or document (excluding payment) required to be given or made shall be deemed given or made and effective upon actual receipt or, if earlier, (a) one (1) business day after deposit with a nationally-recognized overnight express courier with charges prepaid, or (b) five (5) business days after mailed by certified mail, postage prepaid, in each case addressed to a Party at its address stated above or to such other address as such Party may designate by written notice given in accordance with this Section 14.4.

14.5     Headings . Section and subsection headings are inserted for convenience of reference only and do not form a part of this Agreement.

14.6     Counterparts . This Agreement may be executed simultaneously in counterparts, each of which shall be deemed an original and both of which, together, shall constitute a single agreement. Signatures to this Agreement delivered by facsimile or similar electronic transmission will be deemed binding as originals.


[***]: CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION.


14.7     Amendment; Waiver . This Agreement may be amended, modified, superseded or canceled, and any of the terms of this Agreement may be waived, only by a written instrument executed by each Party or, in the case of waiver, by the Party or Parties waiving compliance. The delay or failure of either Party at any time or times to require performance of any provisions shall in no manner affect the rights at a later time to enforce the same. No waiver by either Party of any condition or of the breach of any term contained in this Agreement, whether by conduct, or otherwise, in any one or more instances, shall be deemed to be, or considered as, a further or continuing waiver of any such condition or of the breach of such term or any other term of this Agreement.

14.8     No Third Party Beneficiaries . No Third Party (including employees of either Party) shall have or acquire any rights by reason of this Agreement.

14.9     Assignment and Successors . This Agreement shall not be assignable by either Party to any Third Party without the written consent of the other Party hereto; except either Party may assign this Agreement without the other Party’s consent to a Third Party that acquires substantially all of the business or assets of the assigning Party, whether by merger, acquisition or otherwise, provided that the Third Party to whom this Agreement is assigned assumes this Agreement in writing or by operation of law. In addition, either Party shall have the right to assign this Agreement to an Affiliate upon written notice to the non-assigning Party; provided that the assigning Party shall remain directly liable under this Agreement for the performance of this Agreement by such Affiliate.

14.10     Force Majeure . Neither Party shall be liable for any failure or delay in performing its obligations under this Agreement when such failure or delay is beyond the reasonable control of the Party seeking relief from its obligations, including without limitation any of the following causes (but only if such cause is beyond the reasonable control of the Party seeking relief): any act of God, flood, fire, explosion, earthquake, breakdown of plant, shortage of critical equipment, loss or unavailability of manufacturing facilities or material, strike, lockout, labor dispute, casualty or accident, or war, revolution, civil commotion, terrorism and acts of public enemies, blockage or embargo, or any injunction, law, order, proclamation, regulation, ordinance, demand or requirement of any government or of any subdivision, authority or representative of any such government, inability to procure or use materials, labor, equipment, transportation or energy sufficient to meet manufacturing needs without allocation, or any other cause whatsoever, whether similar or dissimilar to those above enumerated, beyond the reasonable control of the Party seeking relief (“ Force Majeure Event ”). In the event that either Party is delayed in the performance of any obligations under this Agreement for reason of any Force Majeure Event, the time for the performance of said obligations shall be extended for the period required by reason of such delay, up to a maximum period of ninety (90) days, after which, if such delay in performance would constitute a material breach of this Agreement in the absence of such Force Majeure Event, the non-affected Party may terminate this Agreement immediately upon written notice to the other Party. The Party affected by the Force Majeure Event shall inform the other Party of the beginning of and, if possible, the anticipated ending date of the above causes and the circumstances thereof in writing within fifteen (15) days after the occurrence of such Force Majeure Event. In any event, neither Spectrum nor Eagle shall be liable in any way for loss or damage arising directly or indirectly through or in consequence of any such Force Majeure Event.

14.11     Interpretation . The Parties hereto acknowledge and agree that: (a) each Party and its counsel reviewed and negotiated the terms and provisions of this Agreement and have contributed to its revision; (b) the rule of construction to the effect that any ambiguities are resolved against the drafting Party shall not be employed in the interpretation of this Agreement; and (c) the terms and provisions of this Agreement shall be construed fairly as to each Party and not in favor of or against either Party, regardless of which Party was generally responsible for the preparation of this Agreement. In addition, unless a context otherwise requires,


[***]: CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION.


wherever used: (i) the singular shall include the plural, the plural the singular; (ii) the use of any gender shall be applicable to all genders; (iii) the word “ notice ” shall require notice in writing (whether or not specifically stated) and shall include notices, consents, approvals and other communications contemplated under this Agreement; (iv) the word “ will ” shall be construed to have the same meaning and effect as the word “ shall ;” (v) the word “ including ” (and words of similar import) is used without limitation and shall mean “ including without limitation ;” (vi) the word “ day ” or “ year ” or “ quarter ” shall mean a calendar day or calendar year or calendar quarter, respectively, unless otherwise specified and (vii) provisions that require that a Party, the Parties or the JCC hereunder “ agree ,” “ consent ” or “ approve ” or the like shall require that such agreement, consent or approval be specific and in writing, whether by written agreement, letter or otherwise. References to terms of accounting, including terms of payment, shall be defined in accordance with U.S. GAAP.

14.12     Integration; Severability . This Agreement and the Pharmacovigilance Agreement, together with the Schedules and Exhibits attached hereto and thereto, sets forth the entire agreement with respect to the subject matter hereof and thereof and supersedes all other agreements and understandings between the Parties with respect to such subject matter, including the Confidentiality Agreement to the extent provided in Section 10.4. If any one or more of the provisions of this Agreement are held to be invalid or unenforceable by any court of competent jurisdiction from which no appeal can be or is taken, such provisions will be considered severed from this Agreement and will not serve to invalidate any remaining provisions hereof. The Parties will make a good faith effort to replace any invalid or unenforceable provision with a valid and enforceable one such that the objectives contemplated by the Parties when entering this Agreement, as evidenced by the terms of this Agreement, may be realized.

14.13     Further Assurances . Each of Spectrum and Eagle agrees to duly execute and deliver, or cause to be duly executed and delivered, such further instruments and do and cause to be done such further ministerial or similar acts and things, including, the filing of such additional assignments, agreements, documents and instruments, as the other Party may at any time and from time to time reasonably request in connection with this Agreement to carry out more effectively the provisions and purposes of, or to better assure and confirm unto such other Party its rights and remedies under, this Agreement.
[Remainder of page intentionally left blank; signature page follows]

IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by their duly authorized representatives.


[***]: CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION.


EAGLE PHARMACEUTICALS, INC.
By:      /s/ David E. Riggs     
Name:      David E. Riggs     
Title:      CFO     
SPECTRUM PHARMACEUTICALS, INC.
By:      /s/ Kurt A. Gustafson     
Name: Kurt A. Gustafson     
Title:      Chief Financial Officer     



[***]: CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION.


Exhibit A
CAM Qualifications

•
[***]




[***]: CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION.


Exhibit B
Initial Commercialization Support Costs Budgets
[***]


[***]: CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION.


Exhibit C
Revenue Thresholds
2016
[***]

First Half 2017 (through June 30, 2017)
[***]

Full Year 2017 (through December 31, 2017)
[***]




[***]: CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION.


Exhibit D
Performance Bonus

[***]





[***]: CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION.


Exhibit E
[***] Product Market Share

[***]




[***]: CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION.


Exhibit F
Joint Press Release
[***]



[***]: CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION.


Exhibit G

Section 12.2(e) and 12.2(g) Payment

If Eagle terminates this Agreement pursuant to Section 12.2(e) or Spectrum terminates this Agreement pursuant to Section 12.2(g), Eagle shall pay to Spectrum an amount calculated by [***]








    



[***]: CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION.

EXHIBIT 10.55


CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT MARKED WITH [***] HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT, AS AMENDED.

EXECUTION COPY


LICENSE AND ASSET PURCHASE AGREEMENT
DATED AS OF NOVEMBER 16, 2015
BETWEEN
SPECTRUM PHARMACEUTICALS CAYMAN, L.P.
AND
MUNDIPHARMA INTERNATIONAL CORPORATION LIMITED






[***]: CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION.



TABLE OF CONTENTS



 
 
 
Page

1
DEFINITIONS

1
2
LICENSE OF ASSETS

13
 
2.1
Licenses and Related Provisions

13
 
2.2
Know-How Delivery

17
 
2.3
Transfer of Licensed IP

18
 
2.4
Covenant Not to Sue

18
 
2.5
Consents to Transfer Agreements

18
 
2.6.
Development

19
 
2.7
Territory Protections

20
3
TRANSFER OF ASSETS
20
 
3.1
Acquired Assets

20
 
3.2
Excluded Assets

21
 
3.3
Assumed Liabilities Excluded Spectrum Liabilities

23
 
3.4
Excluded Spectrum Liabilities

24
 
3.5
Excluded Presumer Liabilities
26
 
3.6
Consents
26
 
3.7
Consent Costs
27
4
CONSIDERATION
28
 
4.1
Consideration to Spectrum

28
 
4.2
Interest

28
 
4.3
Royalty Payments

28
 
4.4
Payment Provisions

29
 
4.5
Records; Audit

30
 
4.6
Purchase Price Allocation

31
5
INVENTORY
31
 
5.1
Inventory Payment
31
6
CLOSING
31
 
6.1
The Closing
31
 
6.2
Closing Deliveries
32
7
REPRESENTATIONS AND WARRANTIES OF SPECTRUM

32
 
7.1
Organization

33
 
7.2
Power and Authorization

33
 
7.3
Authorization of Governmental Authorities

33
 
7.4
Noncontravention

33
 
7.5
Other Rights

34
 
7.6
No Violation

34
 
7.7
No Debarment

34
 
7.8
Financial Information

35
 
7.9
Absence of Certain Developments

35
 
7.10
Assets

35
 
7.11
Real Property

35
 
7.12
Litigation

36


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i

TABLE OF CONTENTS
(continued)


 
 
 
Page
 
7.13
No Unauthorized Use

36
 
7.14
Intellectual Property

36
 
7.15
Legal Compliance; Permits; Regulatory Matters

39
 
7.16
Clinical Investigations

39
 
7.17
Regulatory Filings

39
 
7.18
Safety and Efficacy

39
 
7.19
Contracts

40
 
7.20
Enforceability, etc

40
 
7.21
Breach, etc

40
 
7.22
Litigation; Governmental Orders

40
 
7.23
No Brokers

40
 
7.24
Access to Information

40
 
7.25
Third Party Confidentiality

41
 
7.26
Tax Matters

41
 
7.27
No Undisclosed Liabilities

42
 
7.28
Labor Disputes; Compliance

42
 
7.29
Compliance with The Foreign Corrupt Practices Act and Export Control and Antiboycott Laws

42
 
7.30
Solvency

42
8
REPRESENTATIONS AND WARRANTIES OF PURCHASER

43
 
8.1

Organization

43
 
8.2

Power and Authorization

43
 
8.3

Authorization of Governmental Authorities

43
 
8.4

Noncontravention

44
 
8.5

No Brokers

44
 
8.6

Litigation

44
9
COVENANTS

44
 
9.1

Closing

44
 
9.2

Omitted

44
 
9.3

Omitted
44
 
9.4

Omitted
44
 
9.5

Confidentiality
45
 
9.6

Publicity
46
 
9.7

Transfer of Certain Funds Received Post-Closing

46
 
9.8

Transfer of Permits

46
 
9.9

Rebates, Chargebacks, Returns and Other Adjustments

47
 
9.10

Transition Assets
49
 
9.11

Joint Contracts

49
 
9.12

Notices and Consents

49
 
9.13

Non-Competition

49
 
9.14

Transaction Expenses

50



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TABLE OF CONTENTS
(continued)


 
 
 
Page
 
9.15

Books and Records

50
 
9.16

Further Assurances

50
10
INTELLECTUAL PROPERTY AND OTHER COVENANTS

51
 
10.1

Reservation of Intellectual Property

51
 
10.2

Filing, Prosecution and Maintenance of Licensed Patents and Licensed Trademarks

51
 
10.3

IP Enforcement

52
 
10.4

Claimed Infringement of Third Party Rights

54
 
10.5

Other Infringement Resolutions

55
 
10.6

Diligence

55
 
10.7

Ownership of Inventions
56
 
10.8

Rights of Reference to Regulatory Materials

56
11
CONDITIONS TO PURCHASER’S OBLIGATIONS AT THE CLOSING

56
 
11.1

Representations and Warranties

56
 
11.2

Performance
57
 
11.3

Compliance Certificate

57
 
11.4

Omitted
57
 
11.5

Qualifications

57
 
11.6

Absence of Litigation

57
 
11.7

Consents, etc.

57
12
CONDITIONS TO SPECTRUM’S OBLIGATIONS AT THE CLOSING

57
 
12.1

Representations and Warranties

57
 
12.2

Performance

58
 
12.3

Compliance Certificate

58
 
12.4

Qualifications

58
 
12.5

Absence of Litigation

58
13
TERMINATION
58
 
13.1

Omitted
58
 
13.2

Omitted
58
 
13.3

Termination by Spectrum For Purchaser Material Default

58
 
13.4

Termination by Purchaser For Spectrum Material Default

60
 
13.5

Unilateral Termination by Purchaser

61
 
13.6

Termination by Governmental Authority

62
 
13.7

Termination of Bayer Agreement

63
14
INDEMNIFICATION

63
 
14.1

Indemnification by Spectrum

63
 
14.2

Indemnification by Purchaser

64
 
14.3

Time for Claims

65
 
14.4

Third Party Claims

66
 
14.5

Remedies Cumulative

68
 
14.6

Exclusive Remedy

68
 
14.7

Limitation of Liability

68
 
14.8

Insurance

68



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TABLE OF CONTENTS
(continued)


 
 
 
Page
 
14.9

Insurance Recoveries and Tax Benefits

68
 
14.10
Disclaimer

69
15
TAX MATTERS
69
 
15.1

Certain Taxes and Fees

69
 
15.2

Tax Record Retention; Cooperation on Tax Matters

69
 
15.3

Apportionment of Ad Valorem Taxes

69
 
15.4

Assignment of Agreement

70
16
MISCELLANEOUS

70
 
16.1

Notices

70
 
16.2

Succession and Assignment

71
 
16.3

Amendments and Waivers

72
 
16.4

Entire Agreement

72
 
16.5

Counterparts

72
 
16.6

Severability

72
 
16.7

Headings

72
 
16.8

Construction

72
 
16.9

Governing Law

73
 
16.10
Dispute Resolution

73
 
16.11
Arbitration

74
 
16.12
Jurisdiction; Venue; Service of Process

76
 
16.13
Specific Performance

76
 
16.14
Waiver of Jury Trial

77
 
16.15
Certain Rules of Construction

77
 
16.16
Third Party Beneficiaries

77




[***]: CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION.




SCHEDULES
Schedule 1A – Spectrum’s Knowledge
Schedule 1B – Business Domain Names
Schedule 1C – Business-Specific Licensed Patents
Schedule 1D – Business-Specific Licensed Trademarks
Schedule 1E – Shared Licensed Patents
Schedule 3.1(c) – Transferred Contracts
Schedule 3.2(f) – Excluded Rights, Claims, Etc.
Schedule 3.3(d) – Assumed Volume Credits and Obligations
Schedule 3.6 – Consents
Schedule 4.1 – Purchase Price
Schedule 4.4.2 – Exchange Rate
Schedule 6.2.1 – Bank Accounts
Schedule 7.3 – Authorization of Governmental Authorities (Spectrum)
Schedule 7.4 – Noncontravention (Spectrum)
Schedule 7.8 – Financial Information
Schedule 7.9.1 – Absence of Certain Developments
Schedule 7.10 – Assets
Schedule 7.14.1 – Business Domain Names
Schedule 7.14.2 – Licensed IP
Schedule 7.14.6 – Validity and Enforcement
Schedule 7.14.8 – Orders
Schedule 7.14.11 – Infringement and Misappropriation
Schedule 7.14.12 – Royalties
Schedule 7.14.13 – Litigation
Schedule 7.15.2 – Permits
Schedule 7.15.3 – Regulatory and Related Matters
Schedule 7.16 – Clinical Investigations
Schedule 7.17 – Regulatory Filings
Schedule 7.18 – Safety and Efficacy
Schedule 7.19 – Material Transferred Contracts
Schedule 7.22 – Litigation; Governmental Orders
Schedule 7.26.3 – Audits, Examinations or Legal Proceedings
Schedule 7.26.5 – Tax Encumbrances
Schedule 7.27 – Liabilities
Schedule 8.3 – Authorization of Governmental Authorities (Purchaser)
Schedule 8.4 – Noncontravention (Purchaser)
Schedule 9.11 – Joint Contracts
Schedule 11.7 – Consents
Schedule 14.3A – Time for Claims (Spectrum)
Schedule 14.3B – Time for Claims (Purchaser)


[***]: CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION.

- v -



LICENSE AND ASSET PURCHASE AGREEMENT
This License and Asset Purchase Agreement, dated as November 16, 2015 (the “ Effective Date ”) (as amended or otherwise modified, the “ Agreement ”), is between Spectrum Pharmaceuticals Cayman, L.P., an Exempted Limited Partnership organized under the laws of the Cayman Islands (“ Spectrum ”) and Mundipharma International Corporation Limited, a Bermuda corporation (“ Purchaser ”).
RECITALS
WHEREAS, pursuant to that certain License and Asset Purchase Agreement, dated January 23, 2012 (“ Bayer Agreement ”), Spectrum licensed certain assets of the Bayer Business (as defined herein) and acquired certain other assets of the Bayer Business;
WHEREAS, Spectrum wishes to license certain rights of the Licensed Business (as defined herein) and to sell certain other assets of the Licensed Business, and Purchaser wishes to license certain assets of the Licensed Business and to acquire certain assets from Spectrum, as specified herein, which relate to the Licensed Business, all on the terms and conditions set forth in this Agreement; and
WHEREAS, the parties also intend to execute and deliver other agreements contemporaneously with the Closing, which will further the intent of the parties that Spectrum shall license certain assets and sell certain assets and Purchaser shall license certain assets and acquire certain assets.
AGREEMENT
NOW THEREFORE, in consideration of the premises and mutual promises herein made, and in consideration of the representations, warranties and covenants herein contained, Purchaser and Spectrum hereby agree as follows:
1.
DEFINITIONS.
As used herein, the following terms will have the following meanings:
“ AAA Rules ” is defined in Section 16.11(i).
“ Acquired Assets ” is defined in Section 3.1.
“ Action ” means any claim, action, cause of action, chose in action or suit (whether in contract or tort or otherwise), litigation (whether at law or in equity, whether civil or criminal), controversy, assessment, arbitration, examination, audit, investigation, hearing, charge, complaint, demand, notice or proceeding to, from, by or before any Governmental Authority or arbitrator(s).
“ Adjusted Expiration Date ” is defined in Section 9.9.4(a).


[***]: CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION.

- 1 -



“ Affiliate ” means, (i) with respect to either Spectrum or Purchaser, any person, firm, trust, corporation, partnership or other entity or combination thereof that directly or indirectly controls, is controlled by or is under common control with such party; the term “control” (including, with correlative meaning, the terms “controlled by” or “under common control with”) meaning direct or indirect ownership of fifty percent (50%) or more, including ownership by trusts with substantially the same beneficial interests, of the voting and equity rights of such person, firm, trust, corporation, partnership or other entity or combination thereof, or the power to direct the management of such person, firm, trust, corporation, partnership or other entity or combination thereof, and (ii) with respect to Bayer or any Person other than Spectrum or Purchaser, such meaning as set forth in the Bayer Agreement.
“ Agreement ” is defined in the Preamble.
“ Agreement Year ” shall mean a twelve (12) month period from the Closing Date and each anniversary thereof.
“ Allocation Schedule ” is defined in Section 4.6(i).
“ Ancillary Agreements ” means the Supply Agreement and Pharmacovigilance Agreement.
“ Apportioned Taxes ” is defined in Section 15.3(i).
“ Assumed Liabilities ” is defined in Section 3.3.
“ Auditing Party ” is defined in Section 4.5.
“ Average Age ” is defined in Section 9.9.4(a).
“ Bayer ” means Bayer Pharma AG.
“ Bayer Agreement ” is defined in the Recitals.
“ Bayer Business ” means the Business conducted by Bayer and its Affiliates in the Territory and transferred to Spectrum pursuant to the Bayer Agreement.
“ Biogen Agreement ” means that certain Amended and Restated License Agreement between Biogen Idec (f/k/a IDEC Pharmaceuticals Corporation) and Bayer (f/k/a Schering Aktiengesellschaft) dated as of January 16, 2012.
“ Biogen Trademark Agreement ” means that certain Trademark License Agreement between Biogen Idec and Spectrum.
“ Biogen Idec ” means Biogen Idec Inc.


[***]: CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION.

2


“ Biogen IP ” means intellectual property controlled by Biogen Idec and licensed by Biogen Idec to Bayer pursuant to the Biogen Agreement as set forth on schedules to the Biogen Agreement and to Spectrum pursuant to the Biogen Trademark Agreement.
“ Books and Records ” means all customer, distributor, supplier and mailing lists, drawings, notebooks, specifications and creative materials in the possession or Control of Spectrum and exclusively related to the Licensed Business, whether written or electronically stored or however otherwise recorded, maintained or stored, including all regulatory files (together with all correspondence associated with such regulatory files), copies of the approved label components to the extent available, all labeling decision documents, and each Licensed Product’s safety database, marketing materials, customer master files, sales records for each product by account, written and electronic training manuals and modules, speaker slide kits, sales/demand forecasts, and all files and written correspondence exclusively related to the Licensed Business other than Excluded Books and Records.
“ Business ” means the commercialization of the Licensed Products.
“ Business Day ” means any weekday other than a weekday on which banks in New York, New York are authorized or required to be closed.
“ Business Domain Names ” means the internet domain names exclusively relating to the Licensed Business, including those listed as of the Closing on Schedule 7.14.1 .
“ Business-Specific Licensed Copyrights ” means all works of authorship (including advertising, marketing and promotional materials, artwork, labeling, and other works of authorship), and all copyrights, moral rights and other rights and interests thereto throughout the Licensed Territory, whether or not registered, that are Controlled by Spectrum or any of its Affiliates, that are exclusively related to the Licensed Products and that are used exclusively in, had been used exclusively in and are currently exclusive to, or were developed exclusively for and are currently exclusive to, the Licensed Business.
“ Business-Specific Licensed IP ” means the Business-Specific Licensed Copyrights, Business-Specific Licensed Know-How, Business-Specific Licensed Patents and Business-Specific Licensed Trademarks.
“ Business-Specific Licensed Know-How ” means Know-How Controlled by Spectrum or any of its Affiliates that (1) is exclusively related to the inventions claimed in the Business-Specific Licensed Patents or (2) is exclusively related to the Licensed Products and is used exclusively in, had been used exclusively in and is currently exclusive to, the Licensed Business, or (3) is exclusively related to the Licensed Products and was developed exclusively for and is currently exclusive to the Licensed Products.
“ Business-Specific Licensed Patents ” means any Patent Rights Controlled by Spectrum or its Affiliates that are exclusively related to the Licensed Products and claim inventions that are used exclusively in, had been used exclusively in and are currently exclusive to, or were


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developed exclusively for and are currently exclusive to, the Licensed Business. The Business-Specific Licensed Patents include those Patent Rights set forth on Schedule 1C .
“ Business-Specific Licensed Trademarks ” means the trademarks and service marks, the goodwill associated therewith, and all registrations and applications relating thereto, that are Controlled by Spectrum or any of its Affiliates, and are exclusively related to the Licensed Products and that are used exclusively in, had been used exclusively in and are currently exclusive to, or were developed exclusively for and are currently exclusive to, the Licensed Business. The Business-Specific Licensed Trademarks include those trademarks set forth on Schedule 1D .
“ Chargeback Liability Shift Date ” is defined in Section 9.9.2.
“ CIS Countries ” means Armenia, Azerbaijan, Belarus, Georgia, Kazakhstan, Kyrgyzstan, Moldova, Turkmenistan, Tajikistan, Ukraine and Uzbekistan.
“ Claim ” is defined in Section 16.10(i).
“ Closing ” is defined in Section 6.1.
“ Closing Date ” means the date on which the Closing actually occurs, which the parties agree shall be the Effective Date.
“ Code ” means the U.S. Internal Revenue Code of 1986, as amended.
“ Confidential Disclosure Agreement ” means that certain mutual Confidentiality Agreement between Spectrum Pharmaceuticals, Inc. and Mundipharma International Limited dated as of April 13, 2012.
“ Confidential Information ” is defined in Section 9.5.2(a).
“ Consideration ” is defined in Section 4.6(i).
“ Contemplated Transactions ” means, collectively, the transactions contemplated by this Agreement, including (a) the licenses of the Licensed IP, the sale of the Acquired Assets and the assignment and assumption of the Assumed Liabilities and (b) the execution, delivery and performance of the Ancillary Agreements.
“ Contractual Obligation ” means, with respect to any Person, any contract, agreement, plan, mortgage, lease, license, commitment, promise, undertaking, arrangement or understanding, whether written or oral and whether express or implied, or other document or instrument to which or by which such Person is a party or otherwise subject or bound or to which or by which any property, business, operation or right of such Person is subject or bound.
“ Control ” or “ Controlled ” means, with respect to any Intellectual Property right, possession by a party (including its Affiliates) of the right (whether by ownership, license or


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otherwise) to grant to another party a license or a sublicense under such Intellectual Property right without violating the terms of any agreement or other arrangement with any third party.
“ Days of Channel Inventory ” is defined in Section 9.9.1.
“ Designated Countries ” means [***].
“ Disclosed Contract ” is defined in Section 7.20.
“ Dispute Escalation Notice ” is defined in Section 16.10(ii).
“ Effective Date ” is defined in the Preamble.
“ EMA ” means the European Medicines Agency or any successor agency thereto.
“ Encumbrance ” means any charge, claim, condition, equitable interest, lien, license, option, pledge, security interest, mortgage, right of way, easement, encroachment, servitude, right of first offer or first refusal, buy/sell agreement and any other restriction or covenant with respect to, or condition governing the use, construction, voting (in the case of any security or equity interest), transfer, receipt of income or exercise of any other attribute of ownership.
“ Enforceable ” means, with respect to any Contractual Obligation stated to be “Enforceable” by or against any Person, that such Contractual Obligation is a legal, valid and binding obligation of such Person enforceable by or against such Person in accordance with its terms, except to the extent that enforcement of the rights and remedies created thereby is subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws of general application affecting the rights and remedies of creditors and to general principles of equity (regardless of whether enforceability is considered in a proceeding in equity or at law).
“ European Countries ” means Austria, Belgium, Bulgaria, the CIS Countries, Croatia, Cyprus, the Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Latvia, Liechtenstein, Lithuania, Luxembourg, Macedonia, Malta, Monaco, Montenegro, the Netherlands, Norway, Poland, Portugal, Romania, Russia, Serbia, Slovakia, Slovenia, Spain, Sweden, Switzerland and the United Kingdom.
“ Excluded Assets ” are defined in Section 3.2.
“ Excluded Books and Records ” means (i) all Books and Records prepared in connection with or related to the negotiation of the transactions contemplated by this Agreement and the Ancillary Agreements, (ii) any of the foregoing that are the subject of binding confidentiality agreements with non-Affiliates of Spectrum restricting their conveyance or disclosure to Purchaser; provided, however, that Spectrum shall use its commercially reasonable efforts to obtain the right from such non-Affiliates either to disclose such records to Purchaser or to transfer such confidentiality agreements to Purchaser, (iii) all Books and Records relating to Non-Transferred Businesses, Excluded Assets and Excluded Spectrum Liabilities, (iv) all Books and Records relating to Tax returns and Tax records for periods or portions thereof ending on or prior to the Closing, and (iv) all Books and Records not exclusively relating to Acquired Assets


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and (vi) Books and Records reasonably necessary to the performance by Spectrum and its Affiliates of the Ancillary Agreements.
“ Excluded Intellectual Property ” means Intellectual Property Controlled by Spectrum and its Affiliates.
“ Excluded Purchaser Liabilities ” is defined in Section 3.5.
“ Excluded Spectrum Liabilities ” is defined in Section 3.4.
“ Ex-US Trademark Rights ” has the meaning set forth in the Biogen Trademark Agreement.
“ FD&C Act ” means the U.S. Federal Food, Drug, and Cosmetic Act, as amended.
“ Field ” has the meaning set forth in the Biogen Agreement.
“ First Commercial Sale ” means the first invoiced commercial sale to a third party by Purchaser, its Affiliates, Sublicensees or distributors in the Licensed Territory of a Licensed Product for any indication after the grant of all required permits, authorizations, consents, approvals or Governmental Orders from the appropriate Governmental Authority in the Licensed Territory.
“ Fuji Contract ” means the Manufacturing and Distribution Agreement, dated July 8, 2008 between Bayer Yakuhn Ltd. and Fuji Film RI Pharma Co. Ltd. as amended by that certain First Amendment to Manufacturing and Distribution Agreement, dated 1 July, 2013, as may be further amended and restated prior to Closing by Spectrum or its Affiliate and Fuji Film RI Pharma Co. Ltd.
“ Governmental Authority ” means any government or any agency, bureau, board, commission, court, department, political subdivision, tribunal, or other instrumentality of any government (including any regulatory or administrative agency), whether federal, state or local, domestic or foreign, and including any multinational authority or non-governmental authority, including the EMA, which licenses or authorizes or may license or authorize the manufacturing, distribution, marketing or sale of a Licensed Product. The term, Governmental Authority, shall not include medical facilities or institutions of higher education including colleges or universities.
“ Governmental Order ” means an Order entered by or with any Governmental Authority or arbitrator(s).
“ In-License Agreement ” means the Bayer Agreement, the Biogen Agreement and the Biogen Trademark Agreement.
“ Indemnified Party ” means, with respect to any Indemnity Claim, the party or Person asserting such claim under Section 14.1 or 14.2, as the case may be.


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“ Indemnifying Party ” means, with respect to any Indemnity Claim, Purchaser Indemnified Person or the Spectrum Indemnified Person under Section 14.1 or 14.2, as the case may be, against whom such claim is asserted.
“ Indemnity Basket ” is defined in Section 14.1.2.
“ Indemnity Claim ” means a claim for indemnity under Section 14.1 or 14.2, as the case may be.
“ Infringement Claim ” is defined in Section 10.4.1.
“ Intellectual Property ” means intellectual property rights of every kind and nature throughout the world, however denominated, including all rights and interests pertaining to or deriving from:
(a)    Patent Rights and Know-How;
(b)    trademarks, trade names, service marks, service names, brands, trade dress and logos, domain names, and the goodwill and activities associated therewith;
(c)    copyrights, works of authorship, rights of privacy and publicity, moral rights, and similar proprietary rights of any kind or nature, in all media now known or hereafter created; and
(d)    any and all registrations, applications, recordings, licenses, statutory rights, common-law rights and rights under Contractual Obligations relating to any of the foregoing.
“ Inventory ” means all raw materials, work-in-process, fill-to-pack products, packed/not released products, finished goods, purchased goods, merchandise held for resale, goods in transit (not including goods in transit to third parties), goods off premises (including materials subject to process and goods held in storage) goods on consignment and other materials and supplies used exclusively in the Licensed Business, including packaging, spare parts and stores.
“ Japan Proposed Study ” is defined in Section 2.6(iii).
“ Joint Contract ” is defined in Section 9.11.
“ Joint Inventions ” is defined in Section 10.7.
“ Joint Patents ” is defined in Section 10.7.
“ Joint Permits ” is defined in Section 9.8(i).
“ Know-How ” means inventions, business, marketing, technical and manufacturing information, know-how and materials, including technology, software, instrumentation, specifications, devices, data, compositions, formulas, biological materials, assays, reagents,


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constructs, compounds, discoveries, procedures, processes, practices, protocols, methods, techniques, results of experimentation or testing, knowledge, trade secrets, skill and experience, research and development reports and records, pre-clinical studies, manufacturing documents (including drug master files, batch records, Master Batch Records, deviations, OOS investigations, CAPA, material specifications, and product-specific standard operating procedures), clinical protocols, clinical studies, pre-clinical and clinical data, results and analyses used in or resulting from any pre-clinical study or clinical trial, in each case whether or not patentable or copyrightable.
“ Legal Requirement ” means any law, statute, standard, ordinance, code, rule, regulation, resolution or promulgation, or any Governmental Order, or any license, franchise, permit or similar right granted under any of the foregoing, or any similar provision having the force or effect of law.
“ Liability ” means, with respect to any Person, any liability or obligation of such Person whether known or unknown, whether asserted or unasserted, whether determined, determinable or otherwise, whether absolute or contingent, whether accrued or unaccrued, whether liquidated or unliquidated, whether incurred or consequential, whether due or to become due and whether or not required to be accrued on the financial statements of such Person.
“ Licensed Business ” means the Business to the extent conducted by Spectrum, Bayer and their Affiliates in the Licensed Territory prior to or as of the Closing, either directly or indirectly through an extension of rights that Spectrum or its Affiliates’ Control to contractors (including manufacturers, distributors) or licensees.
“ Licensed Copyrights ” means the Business-Specific Licensed Copyrights and the Shared Licensed Copyrights.
“ Licensed IP ” means the Business-Specific Licensed IP, the Shared Licensed IP and the Biogen IP.
“ Licensed Know-How ” means the Business-Specific Licensed Know-How and the Shared Licensed Know-How.
“ Licensed Patents ” means the Business-Specific Licensed Patents and the Shared Licensed Patents.
“ Licensed Products ” has the meaning set forth in the Biogen Agreement.
“ Licensed Territory ” means all countries of the world excluding those countries in the Spectrum Territory.
“ Licensed Trademarks ” means the Business-Specific Licensed Trademarks and Ex-US Trademark Rights.
“ Losses ” means any loss, cost, Liability or expense, Tax, settlement, damage of any kind, judgment, obligation, charge, fee, fine, penalty, interest, court cost and/or administrative and


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reasonable attorneys’ fees, reasonable expert fees, reasonable consulting fees, and reasonable disbursements (at all levels, including appellate), but excluding all indirect corporate and administrative overhead costs. Losses shall be (a) decreased to take into account any Tax benefit actually realized by the Indemnified Parties or their Affiliates arising from the incurrence or payment of the relevant indemnified item and (b) increased by the amount of any Tax cost actually incurred by the Indemnified Parties or their Affiliates on account of the accrual and receipt of the related indemnification payment.
“ Material Adverse Effect ” means any change, effect or circumstance that, individually or in the aggregate with all other changes, effects and circumstances, is or would reasonably be expected to be materially adverse to the Licensed Business as operated as of the Effective Date by Spectrum or its Affiliates (including the Acquired Assets, Licensed IP and/or Assumed Liabilities), disregarding any changes, effects or circumstances to the extent they arise out of (a) a deterioration in the economy in general in the United States or any country in which the Licensed Business is conducted, (b) an outbreak or escalation of hostilities involving the United States or any member state of the European Union, the declaration by the United States or any member state of the European Union of a national emergency or war, or the occurrence of any acts of terrorism, (c) a change in Legal Requirements (d) the announcement of the Contemplated Transactions (including a loss of customers, suppliers, distributors, service providers or employees to the extent attributable thereto) or (e) any failure to promote Licensed Product.
“ Material Impact ” means a material adverse effect on the regulatory status or commercial sales of the Licensed Product.
“ Maximum Indemnity Cap ” is defined in Section 14.1.2.
“ Net Sales ” has the meaning set forth in the Biogen Agreement.
“ Nonassigned Asset ” is defined in Section 3.6(ii).
“ Non-Transferred Businesses ” means all businesses of Spectrum and its Affiliates other than the Licensed Business including the Business conducted by Spectrum and its Affiliates in the Spectrum Territory.
“ Notice of Dispute ” is defined in Section 16.10(ii).
“ Order ” means any order, writ, judgment, injunction, decree, stipulation, ruling, determination or award.
“ Ordinary Course of Business ” means an action taken by any Person in the ordinary course of such Person’s business which is consistent with the past customs and practices (excluding any product promotion) of such Person given the circumstances and which is taken in the ordinary course of the normal day-to-day operations of such Person given the circumstances, but in all cases, without taking into consideration the Contemplated Transactions.


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“ Organizational Documents ” means, with respect to any Person (other than an individual), (a) the certificate or articles of incorporation or organization and any joint venture, limited liability company, operating or partnership agreement and other similar documents adopted or filed in connection with the creation, formation or organization of such Person and (b) all by-laws and similar instruments relating to the organization or governance of such Person, in each case, as amended or supplemented.
“ Out-License Agreement ” means any Contractual Obligation entered into prior to the Closing Date under which Spectrum or its Affiliate has granted to any third party rights with respect to the Licensed Business, including rights with respect to the Biogen Agreement, the Business-Specific Licensed IP, Business Domain Names or any Licensed Product in the Licensed Territory. The Out-License Agreements in existence as of the Closing are identified on Schedule 7.14.2 .
“ Overlap Period ” is defined in Section 9.9.4(b).
“ Patent Rights ” means (a) all patents, patent applications and similar government-issued rights ( e.g. , utility models) protecting inventions in any country or jurisdiction however denominated, (b) all priority applications, international applications, divisionals, continuations, substitutions, continuations-in-part of and any applications claiming priority to any of the foregoing and (c) all patents and similar government-issued rights ( e.g. , utility models) protecting inventions issuing on any of the foregoing applications, together with all registrations, reissues, renewals, re-examinations, confirmations, supplementary protection certificates, and extensions of any of (a), (b) or (c).
“ Payment Period ” is defined in Section 4.3.2.
“ Permits ” means, with respect to any Person, any license, franchise, permit, consent, approval, right, privilege, certificate or other similar authorization issued by, or otherwise granted or required by, any Governmental Authority to which or by which such Person is subject or bound or to which or by which any property, business, operation or right of such Person is subject or bound, including all approvals, licenses or permits required by any Governmental Authority to market, offer, sell, distribute, import and export Licensed Products.
“ Permitted Encumbrance ” means (a) statutory liens for current Taxes, special assessments or other governmental charges not yet due and payable, (b) mechanics’, materialmen’s, carriers’, workers’, repairers’ and similar statutory liens arising or incurred in the Ordinary Course of Business which liens are not yet due and payable, (c) deposits or pledges made in connection with, or to secure payment of, worker’s compensation, unemployment insurance, old age pension programs mandated under applicable Legal Requirements or other social security and (d) restrictions on the transfer of securities arising under federal and state securities laws.
“ Person ” means any individual or corporation, association, partnership, limited liability company, joint venture, joint stock or other company, business trust, trust, organization, university, college, Governmental Authority or other entity of any kind.


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“ Pharmacovigilance Agreement ” is defined in Section 6.2(v)(b).
“ Proposed Study ” is defined in Section 2.6(i).
“ Purchase Price ” is defined in Section 4.1(b).
“ Purchaser ” is defined in the Preamble.
“ Purchaser Indemnified Person ” is defined in Section 14.1.1.
“ Purchaser Material Default ” is defined in Section 13.3.1.
“ Purchaser Related Affiliates ” is defined in Section 13.3.1(b).
“ Qualifications ” is defined in Section 16.11.2.
“ Released ” with respect to any product means the completion of the manufacturing of such product with the release by quality operations of such product from “quarantined product” to finished goods for sale, in accordance with Spectrum’s standard quality assurance and quality control procedures.
“ Representative ” means, with respect to any Person, any director, officer, employee, agent, consultant, advisor, or other representative of such Person, including legal counsel, accountants, and financial advisors.
“ Royalty Payments ” is defined in Section 4.3.1(a).
“ Royalty Term ” is defined in Section 4.3.1(a).
“ Shared Licensed Copyrights ” means all works of authorship (including advertising, marketing and promotional materials, artwork, labeling, and other works of authorship) and all copyrights, moral rights and other rights and interests thereto throughout the Licensed Territory, whether or not registered, that are Controlled by Spectrum or any of its Affiliates, other than Business-Specific Licensed Copyrights that are related to the Licensed Products and that have been used in, or developed with the identified intent that it would be useful in, the Licensed Business. Shared Licensed Copyrights does not include any copyright in works of authorship developed by Spectrum or its Affiliates after the Effective Date.
“ Shared Licensed IP ” means the Shared Licensed Copyrights, Shared Licensed Know-How and Shared Licensed Patents.
“ Shared Licensed Know-How ” means Know-How Controlled by Spectrum or any of its Affiliates, other than Business-Specific Licensed Know-How, that are related to the Licensed Products and that have been used in, or developed with the identified intent that it would be useful in, the Licensed Business. Shared Licensed Know-How does not include any copyright in works of authorship developed by Spectrum or its Affiliates after the Effective Date.


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“ Shared Licensed Patents ” means any Patent Rights Controlled by Spectrum or its Affiliates, other than Business-Specific Licensed Patents that claim inventions that are related to the Licensed Products and that have been used in, or developed with the identified intent that it would be useful in, the Licensed Business. The Shared Licensed Patents include those Patent Rights set forth on Schedule 1E , and any Patent Rights that directly or indirectly claim priority to such Patent Rights, (including continuations-in-part but only to the extent the claims in the continuations-in-part claim inventions to the subject matter that is related to the Licensed Products in the Licensed Territory and that as of the Effective Date has been used in, or developed with the identified intent that it would be useful in, the Licensed Business and to the extent such inventions either (a) were disclosed and described in the Patent Rights filed prior to the Effective Date or (b) are included in Shared Licensed Know-How as such Know-How existed on the Effective Date). Shared Licensed Patents does not include any Patent Rights based on inventions made by Spectrum and its Affiliates after the Effective Date.
“ Spectrum ” is defined in the Preamble.
“ Spectrum Indemnified Person ” is defined in Section 14.2.1.
“ Spectrum’s Knowledge ” means the actual knowledge of any of the individuals holding the positions set forth on Schedule 1A .
“ Spectrum Material Default ” is defined in Section 13.4.1.
“ Spectrum Rebate Liability ” is defined in Section 9.9.1.
“ Spectrum Territory ” means the U.S., Canada, People’s Republic of China (including, Hong Kong, Macau and Taiwan), the European Countries, and India, including all possessions and territories thereof.
“ Sublicensee ” means any third party to which Purchaser or its Affiliates grants, after the Closing, any or all of the rights licensed by Spectrum to Purchaser under Section 2.1.1; provided , however , that distributors who purchase Licensed Products from Purchaser, its Affiliates or its Sublicensees in order to resell such Licensed Product shall not be considered Sublicensees.
“ Supply Agreement ” is defined in Section 6.2(v)(a).
“ Tax ” or “ Taxes ” means (a) any and all federal, state, local, or foreign tax, charge, fee, levy or other assessment of every kind or nature, including all income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental, customs duties, capital stock, franchise, profits, withholding, social security (or similar, including FICA), unemployment, disability, real property, personal property (tangible and intangible), sales, use, transfer, registration, escheat obligation, value added, alternative or add-on minimum, estimated, or other tax, charge, fee, levy or assessment of any kind or nature whatsoever, including any interest, penalty, or addition thereto, whether disputed or not and (b) any liability for the payment of any amounts of the type described in clause (a) of this definition as a result of being a member of an affiliated, consolidated, combined or unitary group for any


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period, as a result of any tax sharing, tax allocation or tax indemnification agreement, arrangement or understanding, or as a result of being liable for another Person’s Taxes as a transferee or successor, by contract or otherwise.
“ Tax Return ” means any return, declaration, report, claim for refund or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof, filed with any Governmental Authority.
“ Term ” means the period commencing on the Closing and continuing on a country-by-country basis for the commercial life of the Licensed Products in each country in the Licensed Territory, subject to the Royalty Term provisions of Section 4.3.1.
“ Termination Date ” means the date on which this Agreement terminates or expires for any reason whatsoever, either in its entirety or on a Licensed Product-by-Licensed Product or country-by-country basis, as applicable.
“ Territory ” means all jurisdictions worldwide except the U.S.
“ Third Party Agreement ” means any In-License Agreement or Out-License Agreement other than In-License Agreements and Out-License Agreements that are Transferred Contracts and other than the Biogen Agreement.
“ Third Party Claim ” is defined in Section 14.4.1.
“ Transaction Expenses ” is defined in Section 9.14.
“ Transferred Contracts ” is defined in Section 3.1(c).
“ Transferred Permits ” is defined in Section 3.1(e).
“ Transition Assets ” is defined in Section 9.10.
“ U.S. ” means the United States of America, including all possessions and territories thereof.
“ Valid and Enforceable Patent ” means an issued/granted unexpired Licensed Patent that has not been held invalid or unenforceable in an unappealed or unappealable decision of a court or competent body having jurisdiction thereof; provided, however, that such Licensed Patent would, but for the licenses granted under this Agreement, be infringed by the manufacture, use, sale of the Licensed Product.
“ VAT ” is defined in Section 4.4.4.
2.
LICENSE OF ASSETS
2.1      Licenses and Related Provisions .


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2.1.1      Licenses. Subject to Article 13 and Sections 2.1.2, 2.6 and 16.2, and in exchange for the Purchase Price and the assumption of the Assumed Liabilities by the Purchaser, effective at the time of the Closing:
(a)      For the Business-Specific Licensed IP : Spectrum hereby grants to Purchaser, during the Royalty Term, an exclusive (even as to Spectrum), irrevocable (subject to Article 13), transferable (as specified in Section 16.2) license, with the right to sublicense through multiple tiers as provided in Section 2.1.2(a), under the Business-Specific Licensed IP, in the Licensed Territory, as it exists on the Closing Date, to research, develop, make and have made (subject to the Supply Agreement), use, sell, offer for sale, have sold, import and export Licensed Products in the Licensed Territory, and to otherwise practice and exploit the Business-Specific Licensed IP, including researching, developing, subject to the Supply Agreement making and having made, using, selling, offering for sale, having sold, importing and exporting any product for all fields of use in humans in the Licensed Territory.
(b)      For the Shared Licensed IP . Spectrum hereby grants to Purchaser, during the Royalty Term, an exclusive (even as to Spectrum), irrevocable (subject to Article 13), transferable (as specified in Section 16.2) license, with the right to sublicense as provided in Section 2.1.2(b), under the Shared Licensed Patents, Shared Licensed Know-How and Shared Licensed Copyrights, as they all exist on the Closing Date, solely to research, develop, make and have made (subject to the Supply Agreement), use, sell, offer for sale, have sold, import and export Licensed Products in the Licensed Territory.
(c)      Biogen IP . Spectrum hereby grants to Purchaser, during the Royalty Term, an exclusive (even as to Spectrum), irrevocable (subject to Article 13), transferrable (as specified in Section 16.2) license under the Biogen IP, to use, research, develop, manufacture, have manufactured, market, sell, import for sale and distribute the Licensed Products for all indications in the Field in the Licensed Territory, with the right to sublicense through multiple tiers to the extent provided in the Biogen Agreement.
(d)      Ex-US Trademark Rights . Spectrum hereby grants to Purchaser, during the Term, an exclusive license to the Ex-US Trademark Rights solely to market, distribute and sell the Licensed Products in the Licensed Territory.
2.1.2      Sublicense Obligation .
(a)      For the Business-Specific Licensed IP and, subject to the terms and conditions of the Biogen Agreement, the Biogen IP, Purchaser may grant sublicenses (including multiple tier sublicenses) without Spectrum’s consent; provided , however , that (i) Purchaser will be fully responsible for the performance of such Sublicensees hereunder, (ii) each such sublicense shall permit Spectrum and Bayer to audit the Sublicensee on substantially the same terms as those set forth in Section 4.5 and (iii) each Sublicensee of any commercial rights shall agree to diligence requirements no less than those specified in Section 10.6 to the extent applicable to the activities to be undertaken by such Sublicensee.


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(b)      For the Shared Licensed Patents, Shared Licensed Know-How and Shared Licensed Copyrights, Purchaser may grant sublicenses (i) with Spectrum’s prior written consent, whose consent shall not be unreasonably withheld, delayed or conditioned, (ii) without Spectrum’s consent to a Purchaser Affiliate, or (iii) without Spectrum’s consent only if the Shared Licensed Patents, Shared Licensed Know-How and Shared Licensed Copyrights are sublicensed with and to no greater scope than a sublicense of the Business-Specific Licensed IP; provided , however , that in either case (A) Purchaser shall be fully responsible for the performance of such Sublicensees hereunder, (B) each such sublicense shall permit Spectrum and Bayer to audit the Sublicensee on substantially the same terms as those set forth in Section 4.5, (C) each Sublicensee of any commercial rights shall agree to diligence requirements no less than those specified in Section 10.6 to the extent applicable to the activities to be undertaken by such Sublicensee and (D) Purchaser provides notice to Spectrum of said sublicense, including the names and contact information of each Sublicensee and the scope and purpose of the sublicense.
(c)      Any sublicense granted by Purchaser to an Affiliate will automatically terminate upon termination of this Agreement.
2.1.3      Retained Rights .
(a)      All licenses granted under Section 2.1.1 above by Spectrum to Purchaser are subject to the rights retained by Bayer under the Bayer Agreement, the rights retained by Biogen Idec under the Biogen Agreement and the Biogen Trademark Agreement and the rights retained by Spectrum under this Agreement.
(b)      Spectrum retains the non-exclusive, non-transferable right under the Business-Specific Licensed IP, in the Licensed Territory, only to the extent necessary for Spectrum to perform its obligations under this Agreement and the Ancillary Agreements. This retained right may be sublicensed by Spectrum as reasonably necessary in Spectrum’s sole discretion for Spectrum to perform its obligations under the Ancillary Agreements, provided , however , that (i) Spectrum will, or will cause its Affiliates to, be fully responsible for the performance of such sublicensees and (ii) Spectrum promptly provides notice to Purchaser of each such sublicense, including the names and contact information of each sublicensee and the scope and purpose of the sublicense.
(c)      For the purpose of clarity and notwithstanding anything else to the contrary in this Agreement, Spectrum may use the inventions claimed in the Business-Specific Licensed Patents, in the Licensed Territory, to the same extent as a non-licensed third party would be legally permitted to use such inventions.
(d)      Spectrum reserves all rights under the Business-Specific Licensed IP, Shared Licensed IP, Biogen IP and Ex-US Trademark Rights in the Spectrum Territory.
2.1.4      Third Party Agreements .


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(a)      Spectrum covenants that it will not, and will cause its Affiliates not to, in each case, without Purchaser’s prior written consent (which consent, with regard to the Shared Licensed IP, shall not be unreasonably withheld, delayed or conditioned) agree or consent to any amendment, supplement or other modification to or any termination of any existing Third Party Agreement (including all In-License Agreements), or take any action under a Third Party Agreement with respect to: (i) the Business-Specific Licensed IP in the Licensed Territory and (ii) the Shared Licensed IP licensed thereunder (to the extent such actions affect Purchaser’s rights in the Shared Licensed IP). Spectrum will, and will cause its Affiliates to, exercise its rights relating to the Business-Specific Licensed IP in the Licensed Territory and to the Shared Licensed IP (with regard to the Shared Licensed IP, to the extent such actions affect Purchaser’s rights in the Shared Licensed IP) under any Third Party Agreement in consultation with Purchaser and in a manner that is consistent with the terms of this Agreement, and in consultation with Purchaser, take all commercially reasonable actions necessary to maintain and enforce such rights with respect to the Business-Specific Licensed IP in the Licensed Territory and to the Shared Licensed IP (with regard to the Shared Licensed IP, to the extent such actions affect Purchaser’s rights in the Shared Licensed IP) under Third Party Agreements. To the extent Spectrum is unwilling or unable to maintain and enforce such rights, Spectrum shall cooperate in allowing Purchaser to do so, and Purchaser’s expenses thereof shall be set off against amounts otherwise due from Purchaser to Spectrum under this Agreement. Purchaser covenants that it will not, and will cause its Affiliates not to, cause a breach in any material respect of any Third Party Agreement.
(b)      Biogen Agreement . Spectrum agrees to keep Purchaser fully informed of the rights that Bayer or any of its Affiliates has with respect to the Biogen IP that has been licensed to Bayer or its Affiliates under the Biogen Agreement and relates to the Licensed Business. Spectrum will, and will cause its Affiliates to, take all actions reasonably requested by Purchaser in respect of these rights, as well as provide to Purchaser all material information and copies of material correspondence and other material documents received from Biogen Idec with respect to the Biogen Agreement as it relates to the Licensed Business. Spectrum will, and will cause its Affiliates to, immediately notify Purchaser upon becoming aware of (i) any event that affects in any material respect the rights granted to Bayer under the Biogen Agreement that are, in turn, sublicensed to Purchaser pursuant to this Agreement or (ii) receipt by Bayer of any written notice received under the Biogen Agreement, including any breach or termination of the Biogen Agreement, to the extent such event or notice affects Purchaser’s rights under this Agreement. Spectrum will, and will cause its Affiliates to, promptly furnish Purchaser with copies of all reports and other communications that Bayer or any of its Affiliates furnishes to the other parties to the Biogen Agreement that relate in any material respect to the Licensed Business or the rights granted to Purchaser under this Agreement, and to the extent any such reports or communication relate to the efforts of Purchaser under this Agreement, Spectrum will, and will cause its Affiliates to, give Purchaser a reasonable opportunity to review and comment upon such reports or communications before they are transmitted to the other parties to the Biogen Agreement. Spectrum agrees to provide Purchaser with copies of any and all amendments to the Biogen Agreement concurrently with each such amendment so long as such amendments relate to the Licensed Business. Purchaser covenants that it will not, and will cause its Affiliates not to, cause a breach in any material respect of the Bayer Agreement or the Biogen Agreement. For the


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avoidance of doubt, a breach in a material respect of the Bayer Agreement or the Biogen Agreement will be deemed to occur where Purchaser or any of its Affiliates breaches or causes a breach under this Agreement that gives Bayer a right to terminate the Bayer Agreement and Biogen Idec a right to terminate the Biogen Agreement, respectively.
2.1.5      Trademark Control . The quality of the Licensed Products sold by Purchaser under or in connection with the Licensed Trademarks must be of a sufficiently high quality to be generally comparable to the quality of products sold by Spectrum or Bayer under the Licensed Trademarks prior to the Closing Date. At the reasonable request of Spectrum, not more frequently than annually, Purchaser will send Spectrum samples of the Licensed Products sold by Purchaser under the Licensed Trademarks. In the event that Purchaser materially breaches this Section 2.1.5 with respect to a Licensed Trademark and fails to cure such breach within sixty (60) days after Spectrum notifies Purchaser in writing of such breach, Spectrum may terminate the license to such Licensed Trademark under Section 2.1 by delivery to Purchaser of a written notice of termination. In addition to the foregoing termination rights, Spectrum shall retain any other rights and remedies it has in law and/or equity with respect to a breach related to a Licensed Trademark.
2.1.6      No Implied Rights; Future IP . Purchaser acknowledges and agrees that:
(a)      No rights or licenses of Intellectual Property rights are conveyed to Purchaser other than those expressly provided in this Agreement and the Ancillary Agreements, and except as expressly provided in this Agreement and the Ancillary Agreements, no such conveyance or license of rights will be implied or deemed to have been made.
(b)      No rights or licenses are conveyed to Purchaser with respect to any Intellectual Property rights owned or Controlled by any third party that is not an Affiliate of Spectrum as of the Effective Date (regardless of whether such third party later becomes an Affiliate of Spectrum).
(c)      For purposes of clarity:
(i)      The license granted in Section 2.1.1(a) under the Business-Specific Licensed IP is granted as the Business-Specific Licensed IP exists at the Effective Date, and does not grant any license to Purchaser with respect to a Patent Right claiming an invention made after the Effective Date, Know-How developed after the Effective Date, any copyright to a work created after the Effective Date, or any trademark adopted after the Effective Date. For further clarity, (A) the license granted by Spectrum under the Business-Specific Licensed Patents does include Patent Rights filed and issued after the Effective Date (1) if such Patent Rights directly or indirectly claim priority to a Business-Specific Licensed Patent that was filed prior to the Effective Date (including continuations-in-part but only to the extent the claims in the continuations-in-part claim inventions to subject matter that is exclusively related to the Licensed Products and used exclusively in, had been used exclusively in and are as of the Effective Date exclusive to, or was developed exclusively for and is currently exclusive to, the Licensed Business and that was disclosed and described in a Business-Specific Licensed Patents that was filed prior to the Effective Date) or (2) to the extent such Patent Rights claim an invention that


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was contained within Business-Specific Licensed Know-How as the Business-Specific Licensed Know-How existed prior to the Effective Date; (B) the license granted under the Business-Specific Licensed Copyrights does include any registrations filed and issued after the Effective Date that relate to copyrightable works created prior to the Effective Date, and (C) the license granted under the Business-Specific Licensed Trademarks does include any applications and registrations filed and issued after the Effective Date that relate to Business-Specific Licensed Trademarks adopted prior to the Effective Date.
(ii)      The license granted in Section 2.1.1(b) under the Shared Licensed IP is granted as the Shared Licensed IP exists at the Effective Date, and does not grant any license with respect to a Patent Right claiming an invention made after the Effective Date, Know-How developed after the Effective Date, any copyright to a work created after the Effective Date, or any trademark adopted after the Effective Date. For further clarity, (A) the license granted under the Shared Licensed Patents does include Patent Rights filed and issued after the Effective Date (1) if such Patent Rights directly or indirectly claim priority to a Shared Licensed Patent that was filed prior to the Effective Date (including continuations-in-part but only to the extent the claims in the continuations-in-part claim inventions to subject matter that is related to the Licensed Products and that as of the Effective Date has been used in, or disclosed with the identified intent that it would be useful in, the Licensed Business and that is disclosed and described in a Shared Licensed Patents that was filed prior to the Effective Date or (2) to the extent that such Patent Rights claim any inventions contained within Shared Licensed Know-How as the Shared Licensed Know-How existed prior to the Effective Date); and (B) the license granted under the Shared Licensed Copyrights does include any registrations filed and issued after the Effective Date that relate to copyrightable works created prior to the Effective Date.
2.2      Know-How Delivery . To enable Purchaser to exercise the rights granted under this Agreement, Spectrum will promptly deliver or otherwise provide to Purchaser and its Representatives Licensed Know-How within the possession or Control of Spectrum or any of its Affiliates. Additionally, on a commercially reasonable schedule and in a commercially reasonable format to be agreed upon by the parties, Spectrum will deliver to Purchaser copies of documents, files, diagrams, specifications, designs, schematics, reports, records, laboratory notebooks, data, materials, prototypes, test devices, models and simulations, or other written, graphic, biologic or other tangible material in Spectrum’s or its Affiliates’ possession in any media, to the extent it discloses or embodies Licensed Know-How.
2.3      Transfer of Licensed IP . During the Term, neither Spectrum nor any of its Affiliates will transfer or assign its right, title or interest in the Biogen Agreement or any Business-Specific Licensed IP in the Licensed Territory to any third party, other than in connection with an assignment of this Agreement as a whole in accordance with Section 16.2.
2.4      Covenant Not to Sue .
i.      Spectrum hereby covenants that it shall not, and shall cause its Affiliates, Bayer and Bayer’s Affiliates not to, sue or commence or prosecute any Action against Purchaser or any of its Affiliates, or their successors, assigns or Sublicensees, for infringement of any Patent Rights owned by Spectrum, Bayer or any of its Affiliates on or after the Closing Date


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(other than the Licensed IP), or voluntarily assist any other Person in doing any of the foregoing, but such covenant shall only apply to the extent such Patent Rights owned by Spectrum and Bayer are necessary for Purchaser to make, have made, use, sell, offer to sell or import Licensed Products in the Licensed Territory as such Licensed Products were made, used, sold, offered for sale, or imported as of the Closing Date.
ii.      As used in this Section 2.4 the word “necessary” shall mean that there is at that time no way to make, have made, use, sell, offer to sell, import and export Licensed Products in compliance with applicable Legal Requirements without infringing the applicable Patent Rights. To the extent it is necessary for Purchaser to obtain new, additional or amended permits, approvals or Governmental Order from a Governmental Authority in order to avoid infringing the applicable Patent Rights, Spectrum agrees to extend the covenant not to sue to all products sold only as long as Purchaser is as promptly as practicable preparing and pursuing actively and diligently obtaining such additional or amended permit, approval or Governmental Order.
iii.      For clarity, except as expressly provided in this Section 2.4, Spectrum and Bayer shall be free to sue Purchaser for infringement for use of any Patent Rights of Spectrum or Bayer outside of the grant of rights in Section 2.1.1.
2.5      Consents to Transfer Agreements .
i.      Spectrum has the right (a) under the Bayer Agreement to fully license to Purchaser (with a right to further sublicense) without Bayer’s consent the Intellectual Property rights licensed to Spectrum or its Affiliates thereunder, and (b) under the Biogen Trademark Agreement to fully license to Purchaser without Biogen’s consent the trademarks rights to ZEVALIN® and ZEVAMAB® in the Licensed Territory.
ii.      Following the Effective Date, Spectrum will seek the consent, to the extent necessary, of the entities involved in company-sponsored trials or investigator-sponsored trials or studies related to the Licensed Products in the Licensed Territory to transfer Spectrum’s rights under the contracts associated therewith to Purchaser, including sublicensing Spectrum’s rights, if any, to any and all Intellectual Property arising from those trials or studies to Purchaser.
2.6      Development .
i.      Purchaser shall not conduct any development study in relation to the Licensed Products without the prior written approval of Spectrum, such approval not to be unreasonably withheld, conditioned or delayed.  If Purchaser wishes to conduct a development study for the Licensed Products (the “ Proposed Study ”), Purchaser shall present to Spectrum the proposed design, timelines and budget of the Proposed Study.  Within [***] days after receipt of such proposal, Spectrum shall, in its sole discretion, and as its sole option in respect of a Proposed Study, either (i) approve the Proposed Study for conduct solely by Purchaser, (ii) wish to cooperate in such Proposed Study and the parties will agree in writing on the terms under which they will cooperate in the Proposed Study, or (iii) reject the Proposed Study, if Spectrum reasonably believes that the Proposed Study is likely to create a Material Impact in the Spectrum


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Territory, provided,  if Spectrum fails to respond to Purchaser within such [***] day period, Purchaser shall be permitted to conduct such Proposed Study in its sole discretion.
ii.      Notwithstanding anything to the contrary in this Agreement, Spectrum shall be entitled to conduct any development studies in relation to the Licensed Products in the Licensed Territory and Purchaser shall be entitled to conduct Spectrum-approved Proposed Studies in Spectrum Territory.
iii.      Notwithstanding anything to the contrary in Section 2.6(i), and subject always to the provisions of this Section 2.6(iii), Purchaser shall be entitled to conduct any development studies in relation to the Licensed Products in Japan, which are required to obtain or maintain regulatory approvals for existing or additional indications in Japan (the “ Japan Proposed Study ”) without the prior approval of Spectrum.  If Purchaser wishes to conduct a Japan Proposed Study, Purchaser shall present to Spectrum the proposed design, timelines and budget of the Japan Proposed Study.  Within [***] days after receipt of such proposal,  Spectrum shall notify Purchaser if Spectrum reasonably believes that the Japan Proposed Study is likely to create a Material Impact in the Spectrum Territory; provided , however , if Purchaser requires a response from Spectrum within a shorter period of time due to the requirements of a Governmental Authority in Japan, Purchaser shall immediately notify Spectrum of such requirement and Spectrum shall provide the foregoing Material Impact notice to Purchaser as soon as practicable, but in any event within [***] days of Purchaser’s notification to Spectrum of the requirements of such Governmental Authority in Japan, provided , further , if Spectrum fails to respond to Purchaser within such [***] day period (or such shorter period not to exceed [***] days if so required by a Governmental Authority), Purchaser shall be permitted to conduct such Japan Proposed Study in its sole discretion.  If Spectrum responds to Purchaser within the specified period of time and Purchaser agrees with Spectrum’s belief, Purchaser shall not commence the Japan Proposed Study.  If Purchaser does not agree with Spectrum’s belief, the matter shall be settled in accordance with Section 16.10 and Purchaser shall not commence the Japan Proposed Study until such matter is settled in Purchaser’s favor; provided, however, if  Spectrum notifies Purchaser that a Japan Proposed Study would create a Material Impact in the Spectrum Territory, but such Japan Proposed Study is required by the appropriate Regulatory Authority in Japan (pursuant to the “Non-Approved Drug for Medical Unmet Needs” (Mishonin Yaku) regulations in Japan) in order to maintain the regulatory approvals, or obtain any required additional regulatory approvals, for the Licensed Products in Japan, then Purchaser shall notify Spectrum of the necessity of such Japan Proposed Study and Spectrum shall either (i) permit Purchaser to conduct such Japan Proposed Study without resorting to the dispute resolution procedures set forth in Section 16.10 or (ii) maintain its position that such Japan Proposed Study will create a Material Impact in the Spectrum Territory, thereby preventing Purchaser from conducting such Japan Proposed Study, in which case Purchaser and Spectrum will meet and confer in good faith, reasonably promptly, to address the situation. Spectrum shall notify Purchaser of its decision with respect to subsections (i) and (ii) of the preceding sentence within [***] days of Spectrum’s receipt of notice from Purchaser that such Japan Proposed Study is required by the appropriate Regulatory Authority in Japan in order to maintain regulatory approval or obtain any required additional regulatory approval.


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2.7      Territory Protections . Each party and its Affiliates shall use commercially reasonable efforts to ensure that products of the Licensed Business or the Non-Transferred Business, as applicable, sold by it or on its behalf in its territory (i.e., the Licensed Territory or the Spectrum Territory, as applicable) are not exported to, or used, marketed or sold in, any country outside its territory, including by not selling such products to any third party in such party’s territory that, to such party’s knowledge, is reasonably likely to export, market, or sell such products outside that territory. Without limiting the foregoing, to the extent that a party or its Affiliates sells products of the Licensed Business or Non-Transferred Business, as applicable, to a Sublicensee (in the case of Purchaser) or a third party sublicensee (in the case of Spectrum) or distributors for re-sale, such party and its Affiliates shall use commercially reasonable efforts to ensure that such Sublicensee, sublicensees, and distributors, as applicable, do not (i) directly or indirectly export any such product outside such party’s territory, or (ii) re-sell such products to a third party that, to such party’s knowledge, is reasonably likely to export such product outside such party’s territory. If either party becomes aware of the availability of other party’s products of the Licensed Business or Non-Transferred Business, as applicable, outside the selling party’s territory, the other party may inform the selling party of such circumstances. Upon being informed of the availability of a party’s products of the Licensed Business or the Non-Transferred Business, as applicable, outside its territory, such party shall promptly investigate and use best efforts to stop the export of its products outside its territory.
3.
TRANSFER OF ASSETS
3.1      Acquired Assets . Except as provided in Section 3.2, upon the terms and subject to the conditions of this Agreement, and in exchange for the Purchase Price and the assumption of the Assumed Liabilities by Purchaser, Spectrum shall, and shall cause one or more of its Affiliates to, sell, assign, transfer, convey and deliver to Purchaser, free and clear of all Encumbrances other than Permitted Encumbrances, and Purchaser shall acquire and receive, subject to the terms and conditions of this Agreement, from Spectrum and its Affiliates, at the Closing (except as provided in Section 3.6), all of Spectrum’s and its Affiliates’ right, title and interest in and to all assets used exclusively in the Licensed Business wherever located as of the Closing Date as follows (the “ Acquired Assets ”):
a.      Warranties . All rights under all covenants and warranties to the extent related to the Acquired Assets or the operation or conduct of the Licensed Business, express or implied (including manufacturers’, suppliers’ and contractors’ warranties), that have heretofore been made by any predecessors in title or any third-party manufacturers, suppliers, contractors, engineers and other third parties in connection with products or services purchased by or furnished for use in connection with the Licensed Business;
b.      Books and Records . All Books and Records reasonably necessary to conduct the Licensed Business and to the extent in Spectrum’s possession;
c.      Contracts . All rights under Contractual Obligations listed on Schedule 3.1(c) (collectively, but excluding any Contractual Obligation which is an Excluded Asset, the “ Transferred Contracts ”);


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d.      Domain Names . The Business Domain Names;
e.      Permits . All Permits that are necessary for the current operation of the Licensed Business and are capable of being transferred from Spectrum, Bayer or their Affiliates to Purchaser or its Affiliate under applicable Legal Requirements, and all rights of Spectrum, Bayer or any of its Affiliates under such Permits and any and all pending applications relating to any such Permits, including those listed on Schedule 7.15.2 (the “ Transferred Permits ”); provided, that, subject to Section 9.8, to the extent any Transferred Permits with respect to Japan are not able to be transferred on the Closing Date, Spectrum shall (i) diligently prosecute and maintain such Transferred Permits with respect to Japan until they are transferred to Purchaser and (ii) transfer such Transferred Permits with respect to Japan to Purchaser as soon as reasonably practicable; and
f.      Claims . All claims, causes of action, choses in action and rights of recovery arising from the operation of the Licensed Business or in respect of the Licensed Products.
3.2      Excluded Assets . Notwithstanding any provisions herein to the contrary, all right, title and interest of Spectrum, and its Affiliates of whatever kind and nature, real or personal, tangible or intangible, owned, leased, licensed, used or held for use or license in all assets other than Acquired Assets and all of the assets listed below even if they would otherwise be included in the definition of Acquired Assets (the “ Excluded Assets ”) shall be retained by Spectrum and its Affiliates:
a.      the assets of the Non-Transferred Businesses;
b.      the Excluded Intellectual Property;
c.      the Joint Contracts and Joint Permits;
d.      all Contractual Obligations of insurance related to the Licensed Business;
e.      all Excluded Books and Records;
f.      all rights, Claims, credits, or rights of set-off (i) against any Person for payments owed to Spectrum or its Affiliates on or before the Closing Date, (ii) against any Person to reimburse Spectrum for any Loss as a result of actions of a third party on or prior to the Closing Date and known to Spectrum as shall be identified at Closing on Schedule 3.2(f) , (iii) against any Person to reimburse Spectrum for any Loss by Spectrum or its Affiliates as a result of the actions of a third party prior to the Closing where such action or loss was not within Spectrum’s Knowledge on the Closing Date, provided in the case of Claims under this subpart, Spectrum shall notify Purchaser of such Claim prior to the formal initiation of such Claim, or (iv) against third parties who have asserted or who assert after the Closing Date rights, Claims, credits or rights of set-off against Spectrum or its Affiliates or against third parties with respect to which Spectrum and its Affiliates may, in such events, have rights of indemnification or contribution or similar rights, relating in each case to the Acquired Assets, the Excluded Assets


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and the Excluded Spectrum Liabilities, whether liquidated or unliquidated, fixed or contingent, including rights of indemnification, hold harmless agreements, covenants not to prosecute and other agreements;
g.      all rights and Claims, whether now existing or arising hereafter, for carryforwards or carrybacks of Losses, or for credits or refunds of any Taxes incurred in or attributable to periods ending on or before the Closing Date and the portion of any such item allocated or apportioned to Spectrum or its Affiliates for any taxable period that includes (but does not end on) the Closing Date;
h.      all invoiced trade accounts receivable arising in the Ordinary Course of Business from sales of products or services of the Licensed Business on or prior to the Closing Date, including all intercompany receivables among Spectrum and its Affiliates, and all receivables related to Excluded Assets;
i.      all cash, cash equivalents, money market funds and mutual funds in the bank or other depository accounts of Spectrum or any of its Affiliates, including all interest and dividends receivable with respect thereto;
j.      all accounts receivable;
k.      any assets required by Spectrum to perform its obligations under any Ancillary Agreements that, absent such Ancillary Agreements, would constitute Acquired Assets;
l.      the corporate names of Spectrum, Bayer or any of their Affiliates;
m.      all rights of Spectrum under this Agreement or any Ancillary Agreement;
n.      all corporate seals, minute books, charter documents, corporate stock record books, registers of other securities, copies of original tax and financial records (the originals of which will be delivered to Purchaser as part of the Acquired Assets to the extent related to the Acquired Assets) of Spectrum or any of its Affiliates, and such other books and records as they pertain only to the organization, existence, share capitalization or debt financing of Spectrum or any of its Affiliates;
o.      all Contractual Obligations in respect of indebtedness for borrowed money or any guarantee of the Liabilities of another Person;
p.      all prepayments, rights to refunds, rights of set off, defenses, affirmative defenses, rights of defense and rights of recoupment arising from the operation of the Licensed Business prior to the Closing or in respect of Licensed Products sold prior to the Closing; and all claims, causes of action, choses in action and rights of recovery pending or threatened in writing at or prior to the Closing Date;
q.      all land, equipment (movable and fixed), machinery, automobiles and other physical assets related to the manufacture or transportation of any Licensed Product, other than any Inventory;


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r.      all Inventory other than the Inventory purchased pursuant to the Supply Agreement; and
s.      all Contractual Obligations solely between or among Spectrum and any of its Affiliates or between or among Spectrum’s Affiliates.
3.3      Assumed Liabilities . Purchaser shall assume only the following Liabilities related to the Licensed Business and Acquired Assets, in each case solely to the extent related to the Licensed Territory, which would have been the Liabilities of Spectrum or any of its Affiliates if the Contemplated Transactions were not consummated (“ Assumed Liabilities ”):
a.      Liabilities specifically assumed by Purchaser pursuant and subject to Article 9;
b.      Liabilities arising out of Joint Contracts or Joint Permits after the Closing Date, to the extent related solely to the Licensed Business;
c.      all Liabilities for Taxes relating to, arising from or with respect to the Acquired Assets or the Licensed Business, which are attributable to Tax periods or portions thereof commencing after the Closing Date, other than any Liabilities for Taxes relating to the Excluded Assets and Retained Rights and other than any Liabilities for Taxes relating to, arising from or with respect to any Royalty Payments;
d.      all Liabilities to pay or extend to customers, suppliers and distributors of, and others doing business with, the Licensed Business volume discounts, volume rebates, chargebacks and similar credits and obligations pursuant to Contractual Obligations in effect as of the Closing Date which shall be set forth on Schedule 3.3(d) to be delivered on or about the Closing Date;
e.      all Permitted Encumbrances;
f.      all Liabilities imposed by Governmental Authorities on the Licensed Business other than the Excluded Assets, to the extent such Liabilities exist on the Closing Date, including any compliance obligations, responsibilities, conditions, or directions stated or identified by any Governmental Authority on or before the Closing Date, other than any Liabilities arising under any Governmental Order or portion of a Governmental Order entered on or before the Closing Date requiring payment of any fines, penalties or monetary obligations for alleged non-compliance with applicable Legal Requirements to any Governmental Authority;
g.      all Liabilities for governmental rebates that are attributable to sales made by Purchaser after the Closing Date of products of the Licensed Business (subject to Section 9.9);
h.      all Liabilities arising after the Closing under the Transferred Contracts, other than Liabilities arising out of any breach, default or action or omission of Spectrum or any of its Affiliates occurring prior to the Closing;


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i.      all Liabilities under any purchase order that constitutes a Transferred Contract for the purchase of any products or services ordered thereby which have not been delivered or performed on or prior to the Closing Date, other than Liabilities arising out of any breach, default or action or omission of Spectrum or any of its Affiliates with respect to such purchase order occurring prior to the Closing;
j.      all Liabilities and obligations arising after the Closing for any reason under the Biogen Agreement and the Bayer Agreement in the Licensed Territory, other than for payment of royalties and Liabilities arising out of any breach, default, action or omission of Spectrum or any of its Affiliates;
k.      all obligations to provide replacement Licensed Products under any warranties applicable to Licensed Products sold by the Licensed Business prior to the Closing subject to Section 3.4(h) below;
l.      all Liabilities of Purchaser or any of its Affiliates that are attributable to sales of products of the Licensed Business made by Purchaser or any of its Affiliates after the Closing including those as calculated pursuant to Section 9.9 (other than those included in the definition of Excluded Spectrum Liabilities);
m.      all claims, Actions or Losses arising from products sold by Purchaser or an Affiliate after the Closing; and
n.      all Liabilities arising after Closing with respect to Acquired Assets.
3.4      Excluded Spectrum Liabilities . Spectrum and/or its Affiliates shall retain the following Liabilities of Spectrum or any of its Affiliates that are not specifically included in the definition of Assumed Liabilities (“ Excluded Spectrum Liabilities ”):
a.      Liabilities specifically assumed by Spectrum pursuant and subject to Article 9;
b.      Liabilities arising out of the Excluded Assets and the Retained Rights, except as otherwise specified in Sections 9.8(i) and 9.11 hereof with respect to Joint Contracts or Joint Permits, or the Non-Transferred Businesses;
c.      all Liabilities (other than Permitted Encumbrances) (i) under purchase orders to the extent related to the Licensed Business relating to periods prior to the Closing Date or (ii) that relate to any Acquired Asset or the Licensed Business, in each case relating to periods on or prior to the Closing Date, other than those Liabilities for Claims or Losses specifically addressed in Article 9;
d.      all Liabilities for Taxes relating to, arising from or with respect to (i) Acquired Assets or the Licensed Business which are attributable to Tax periods or portions thereof ending on or prior to the Closing Date, (ii) Excluded Assets or Retained Rights that are attributable to any Tax period and (iii) Royalty Payments;


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e.      all Liabilities for Taxes of Spectrum relating to, arising from or with respect to the consummation of the transactions contemplated hereby, except as provided in Section 15.1;
f.      all payables of the Licensed Business as of the Closing Date, including intercompany payables among Spectrum and its Affiliates;
g.      all indebtedness of Spectrum and its Affiliates;
h.      all reasonable direct costs and expenses (other than of Purchaser’s personnel) incurred by Purchaser in connection with the performance of replacement of products under any products or service warranties applicable to products Released or services provided by the Licensed Business on or before the Closing Date, which Purchaser shall invoice Spectrum for;
i.      all Liabilities for governmental rebates that are attributable to sales made by Spectrum or its Affiliates on or prior to the Closing Date of products of the Licensed Business subject to Section 9.9;
j.      all Liabilities of Spectrum or any of its Affiliates that are attributable to sales of products of the Licensed Business made by Spectrum or any of its Affiliates prior to the Closing including those as calculated pursuant to Section 9.9 (other than those included in the definition of Assumed Liabilities);
k.      all claims, Actions or Losses arising from products sold by Spectrum or an Affiliate prior to the Closing;
l.      all Liabilities arising prior to the Closing with respect to Acquired Assets (other than those included in the definition of Assumed Liabilities) and all Liabilities with respect to Excluded Assets except as otherwise specified in Section 9.11 with respect to Joint Contracts;
m.      all Liabilities for payment of royalties under the Biogen Agreement; and
n.      all obligations related to employees or independent contractors of Spectrum, including obligations with respect to withholding Taxes of employees, pension, medical, bonus, retirement, termination, change of control (including payments subject to Section 280G of the Code) and severance pay, life or other insurance or any other employee benefit or employee stock plan or employment claim with respect to the past or present employees of Spectrum;
in each case, except to the extent Spectrum is entitled to indemnification therefor (as limited by the monetary and other limitations set forth in Article 14) or such Liability is otherwise expressly allocated under this Agreement or an Ancillary Agreement. Nothing in this Agreement shall be interpreted as imposing on Spectrum any Liability for personal injury arising from the sale, distribution or use of any Licensed Product or Inventory after the Closing Date except to the


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extent Purchaser is entitled to indemnification under this Agreement or an Ancillary Agreement or as expressly allocated to Spectrum under this Agreement or an Ancillary Agreement.
3.5      Excluded Purchaser Liabilities . Purchaser and/or its Affiliates shall retain the following liabilities (“ Excluded Purchaser Liabilities ”):
a.      all Liabilities of Purchaser or any of its Affiliates for Taxes arising out of the operation of the Licensed Business for (i) any taxable period beginning after the Closing Date and (ii) with respect to any taxable period that begins on or before the Closing Date and ends after the Closing Date, the portion of such taxable period that begins after the Closing Date, subject to Sections 15.1 and 15.3 but, in each case, not including Taxes relating to the Excluded Assets and Retained Rights and any Liabilities for Taxes relating to, arising from or with respect to any Royalty Payments;
b.      all Liabilities of Purchaser or any of its Affiliates that give rise on or after the Closing to Permitted Encumbrances on the Acquired Assets;
c.      all Liabilities of Purchaser or any of its Affiliates in respect of all payables of the Licensed Business to the extent arising after Closing, including intercompany payables among Purchaser and its Affiliates;
d.      all indebtedness of Purchaser or any of its Affiliates;
e.      all Liabilities that are attributable to certain sales of Licensed Products made by Purchaser or any of its Affiliates after the Closing, including those as calculated pursuant to Section 9.9; and
f.      all claims, Actions or Losses arising from products sold by Purchaser or any of its Affiliates after the Closing;
in each case, except to the extent Purchaser is entitled to indemnification therefor (as limited by the monetary and other limitations set forth in Article 14) or such Liability is otherwise expressly allocated under this Agreement or an Ancillary Agreement.
3.6      Consents .
i.      This Agreement does not constitute an agreement to assign or transfer any Transferred Contract, Transferred Permit or other Acquired Asset that is not assignable or transferable without the consent of or action by another Person (other than Spectrum or any of its Affiliates) or action by a Governmental Authority, which shall be set forth on Schedule 3.6 , to the extent that such consent has not been given or such action has not been taken prior to the Closing; provided , however , that Spectrum will, and will cause its Affiliates to, use, both prior to and after the Closing, commercially reasonable efforts to obtain, and Purchaser will assist and cooperate with Spectrum in connection therewith, all necessary consents to the assignment and transfer thereof, it being understood that to the extent the foregoing requires any action by Spectrum or any of its Affiliates that would affect the Licensed Business after the Closing, such


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action will require the prior written consent of Purchaser. Upon obtaining the requisite third-party consents thereto, such Transferred Contract, Transferred Permit or other Acquired Asset will be deemed transferred and assigned to Purchaser hereunder.
ii.      With respect to any Transferred Contract, Transferred Permit or other Acquired Asset that is not transferred or assigned to Purchaser at the Closing by reason of Section 3.6(i) (a “ Nonassigned Asset ”), after the Closing and until the requisite consent is obtained and the foregoing is transferred and assigned to Purchaser, Spectrum will, and will cause its Affiliates to, take commercially reasonable efforts to provide to Purchaser the benefits thereof (or substantially comparable benefits) and will enforce, at the request of and for the account of Purchaser, any rights of Spectrum or any of its Affiliates arising thereunder against any Person, including the right to elect to terminate in accordance with the terms thereof upon the advice of Purchaser. If Purchaser is provided with benefits of any Nonassigned Asset, Purchaser will perform, at the direction and cost of Spectrum or its Affiliate, as applicable, the obligations of Spectrum or its Affiliate thereunder. Notwithstanding anything to the contrary set forth herein, to the extent that any Assumed Liability relates to any Nonassigned Asset, such Assumed Liability will not be deemed to be an Assumed Liability unless and until such Nonassigned Asset is transferred and assigned to Purchaser or Purchaser obtains the benefit of such Nonassigned Asset under this Section 3.6(ii), at which point such Liability will become an Assumed Liability hereunder.
3.7      Consent Costs . Spectrum shall be solely responsible for obtaining the consent required, if any, to assign the Fuji Contract. Subject to the foregoing, to the extent any other third party requires consideration in exchange for (i) a consent to be obtained by Spectrum, as set forth on Schedule 7.4 or (ii) a consent to be obtained by Purchaser, as set forth on Schedule 8.4 , the payment of such consideration will be shared equally between Spectrum and Purchaser except:
a.      if such consideration to a third party was explicitly set forth as a requirement for a consent in the underlying Contractual Obligation with such third party or was known by the party to the Contractual Obligation as of the Closing Date, the cost of obtaining the consent will be borne solely by the party to the underlying Contractual Obligation; and
b.      if a third party requires a resolution of a dispute with respect to the underlying Contractual Obligation prior to providing a consent, the party to the Contractual Obligation is responsible for any and all costs associated with resolution of such dispute.
With regard to consideration paid to a third party in exchange for a consent that is to be shared equally between Spectrum and Purchaser, the party to the underlying Contractual Obligation that is required to use commercially reasonable efforts to obtain such consent will control the negotiations with such third party, but may only agree to an amount of consideration to be paid to such third party with the consent of the other party hereto, which consent will not be unreasonably withheld, conditioned or delayed.
4.
CONSIDERATION.


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4.1      Consideration to Spectrum . Upon the terms and subject to the conditions of this Agreement and in consideration of the grant of the licenses pursuant to Section 2.1.1, the delivery of Licensed Know-How pursuant to Section 2.2 and the contribution, conveyance, assignment and transfer of the Acquired Assets to Purchaser, Purchaser shall pay or deliver to Spectrum, on behalf of Spectrum and/or one or more of Spectrum’s Affiliates:
a.      on the Closing Date, one or more assignment and assumption agreements and the other agreements contemplated hereby to effect the assignment to Purchaser of all Acquired Assets and assumption by Purchaser of all Assumed Liabilities, duly executed by Purchaser; and
b.      within five (5) Business Days of the Closing Date, a non-refundable amount equal to the purchase price set forth in Schedule 4.1 (such amount, the “ Purchase Price ”) by wire transfer of immediately available funds in U.S. Dollars to an account designated by notice from Spectrum.
4.2      Interest . Any payments due under this Agreement shall be due on such date as specified in this Agreement and, in the event such date is not a Business Day, then the next succeeding Business Day. Any failure by Purchaser or Spectrum to make a payment within five (5) Business Days after the date when due shall obligate Purchaser or Spectrum to pay computed interest, the interest period commencing on the due date and ending on the payment date, to the other party at a rate per annum equal to [***]. These rates are currently published by Reuters on screen <EURIBOR>. The interest rate shall be adjusted monthly. Interests shall be paid using the modified following payment convention and calculated based on the actual/360 adjusted day count convention.
4.3      Royalty Payments .
4.3.1      Royalty Payments .
(a)      In accordance with the terms and conditions of this Agreement, Purchaser or its Affiliate will make royalty payments to Spectrum, as consideration for the licenses granted by Spectrum to Purchaser pursuant to Section 2.1.1, by paying a royalty equal to [***] (the “ Royalty Payments ”), from [***] until [***] (the “ Royalty Term ”); provided, however, that the Royalty Payments shall be subject to any applicable royalty reduction pursuant to the terms of Section 4.3.1(b).
(b)      In the case of any reduction of the Royalty Payments (as defined in the Bayer Agreement), which Spectrum is obliged to pay to Bayer pursuant to the Bayer Agreement, Spectrum will (i) notify Purchaser of such reduction(s) and (ii) the Royalty Payments owed pursuant to Section 4.3.1(a) shall be reduced [***].
(c)      For clarity, Spectrum’s royalty obligations to Bayer under the Bayer Agreement cease, on a Licensed Product-by-Licensed Product and country-by-country basis upon the expiration of the last-to-expire Valid and Enforceable Patent covering the marketing and sale of the Licensed Product in the relevant country or fifteen (15) years from the


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date of First Commercial Sale of the Licensed Product in such country (as determined under the Biogen Agreement), whichever is longer.
(d)      Upon expiration of the Royalty Term for Licensed Product in a particular country, (i) the licenses granted to Purchaser pursuant to [***] with respect to such Licensed Product in such country and (ii) the licenses granted to Purchaser [***] with respect to such Licensed Product in such country.
4.3.2      Royalty Payment Reports and Payments . For as long as Purchaser is obligated to make Royalty Payments, within thirty (30) days after the last day of each calendar quarter, Purchaser will deliver to Spectrum a report of Net Sales of each Licensed Product by Purchaser, its Affiliates and Sublicensees during the preceding quarterly period (any such period, a “ Payment Period ”), with all Royalty Payments, if any, due for the Payment Period covered by such report being due no later than [***] days after the last day of such Payment Period.
4.4      Payment Provisions .
4.4.1      Payment Method . Royalty Payments under this Agreement will be made by Purchaser or its Affiliates in Euros in each case by wire transfer to an account designated by Spectrum.
4.4.2      Exchange Rate . For the purpose of computing Net Sales sold in a currency other than Euros, such currency shall be converted into Euros in accordance with Schedule 4.4.2 .
4.4.3      Withholdings . Any income Tax or other Tax which Purchaser is required by applicable Legal Requirements to withhold or pay to a Governmental Authority with respect to monies payable under this Agreement will be deducted from the amount of such payments and paid to the relevant Governmental Authority. Any amounts actually deducted, withheld or paid pursuant to the foregoing sentence will be treated for all purposes of this Agreement as paid to the Person in respect of which such withholding, deduction or payment was made. Purchaser will promptly provide (or cause to be provided) to Spectrum a certificate or other documentary evidence establishing the payment to the relevant Governmental Authority of any amount withheld or deducted by Purchaser or its Affiliates. No deduction shall be made or a reduced amount shall be deducted, as applicable, if Purchaser or its paying Affiliate is timely furnished with the necessary documents prescribed by applicable Legal Requirements in a form reasonably satisfactory to Purchaser identifying that the payment is exempt from Tax or subject to a reduced Tax rate. Prior to the first time that a particular type of payment (or the first time a payment arises from a particular country or jurisdiction) is subject to any withholding made by the Purchaser pursuant to this Section 4.4.3, Purchaser shall provide Spectrum with at least [***] days advance written notice of the withholding, provided Purchaser has knowledge of such withholding at that time, to allow Spectrum the opportunity to submit documentation to reduce or eliminate the withholding. At Spectrum’s expense, Purchaser (and its Affiliates) and Spectrum will reasonably cooperate in completing and filing documents required under the provisions of any applicable Tax treaty or under any other applicable Legal Requirement, in


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order to enable Purchaser to make such payments to Spectrum without any deduction or withholding, or at a reduced deduction or withholding rate, if possible.
4.4.4      VAT . Subject to the provisions of this Section 4.4.4, value added tax (“ VAT ”) applies additionally as legally owed, payable after receipt of a correct invoice, which meets all requirements according to the applicable VAT Legal Requirements. If any documents or information are required to invoice the delivery of goods or services exempt from VAT and these documents or information can only be provided by Purchaser, Purchaser shall, if legally entitled to do so, promptly provide these documents or information referring to provisions of the applicable law. If any of these documents or information are not provided duly or are incomplete, Spectrum shall invoice plus VAT if required and owed by applicable VAT-law.
4.5      Records; Audit . Purchaser will, and will cause its Affiliates to, keep and maintain for [***] years after the relevant calendar quarter complete and accurate books and records in sufficient detail so that Net Sales and payments made hereunder can be properly calculated. No more frequently than once during each calendar year during the Term and once during the [***] year period thereafter, Purchaser will permit independent third-party auditors appointed by Spectrum or Bayer (the party requesting an audit, the “ Auditing Party ”) and with at least [***] days advance notice at any time during normal business hours, accompanied at all times, to inspect, audit and copy reasonable amounts of relevant accounts and records of Purchaser and its Affiliates and reports submitted to Purchaser and its Affiliates pertaining to a Payment Period that is not earlier than [***] months from the date of conclusion of the audit, for the sole purpose of verifying the accuracy of the calculation of payments to Spectrum pursuant to this Article 4. The accounts, records and reports related to any particular period of time may only be audited one time under this Section 4.5. The Auditing Party will cause their independent third-party auditors not to provide the Auditing Party with any copies of such accounts, records or reports and not to disclose to the Auditing Party any information other than information relating solely to the accuracy of the accounting and payments made by Purchaser pursuant to this Article 4. The Auditing Party will cause its independent third-party auditors to promptly provide a copy of their report to Purchaser. If such audit determines that payments are due to Spectrum, Purchaser will pay to Spectrum any such additional amounts within [***] Business Days after the date on which such auditor’s written report is delivered to Purchaser and the Auditing Party, unless such audit report is disputed by Purchaser, in which case the dispute will be resolved in accordance with Section 16.10. If such audit determines that Purchaser has overpaid any amounts to Spectrum, Spectrum will refund any such overpaid amounts to Purchaser within [***] Business Days after the date on which such auditor’s written report is delivered to Purchaser and the Auditing Party. Any such inspection of records will be at Spectrum’s expense unless such audit discloses a deficiency in the payments made by Purchaser (whether for itself or on behalf of its Affiliates) of more than [***] percent ([***]%) of the aggregate amount payable for the relevant period, in which case Purchaser will bear the cost of such audit. Each of the parties agrees that all information subject to review under this Section 4.5 is Purchaser’s Confidential Information that is subject to Spectrum’s confidentiality and non-use obligations under Section 9.5.2, and the Auditing Party agrees that it will cause its independent third-party auditors to also retain all such information subject to the non-disclosure and non-use restrictions of Section 9.5.2 or similar (but


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no less stringent) obligations of confidentiality and non-use customary in the accounting industry.
4.6      Purchase Price Allocation .
i.      The Purchase Price, the amount of the Assumed Liabilities, and the inventory payment under Section 5.1 (the “ Consideration ”) shall be allocated among the Acquired Assets, the licenses granted pursuant to Section 2.1.1 and the delivery of Licensed Know-How pursuant to Section 2.2 (collectively, the “ Assets ”) pursuant to a written allocation schedule (the “ Allocation Schedule ”). Spectrum will complete a draft Allocation Schedule allocating the Consideration to the Assets and provide a copy to Purchaser within [***] days after Closing.
ii.      Purchaser shall notify Spectrum within [***] days after the receipt thereof if it agrees with the draft Allocation Schedule prepared by Spectrum. The agreement shall not be unreasonably withheld, delayed or conditioned. Purchaser and Spectrum shall attempt to resolve any disagreement in good faith. If Purchaser and Spectrum fail to reach agreement as to an alternative allocation in the [***] days following such notice, the dispute with respect to the Allocation Schedule shall be presented on the next Business Day to a nationally recognized independent accounting firm mutually chosen by Purchaser and Spectrum, and if Purchaser and Spectrum cannot agree, mutually chosen by their respective independent accounting firms, for a decision that shall be rendered within [***] days thereafter. The independent accounting firm’s review shall be final and binding on all parties. The fees, costs and expenses incurred in connection therewith shall be [***]; provided, however, Purchaser shall bear the full amount of fees, costs and expenses if there are no material changes to the Allocation Schedule. Neither Spectrum nor Purchaser will file any tax return which is inconsistent with the Allocation Schedule.
iii.      Purchaser and Spectrum shall make appropriate adjustments to the Allocation Schedule to take into account subsequent adjustments to the Purchase Price, including any indemnification payments, which shall be treated for Tax purposes as adjustments to the Purchase Price, in accordance with applicable Legal Requirements.
5.
INVENTORY
5.1      Inventory Payment . Purchaser will pay to Spectrum, for Inventory purchased pursuant to the Supply Agreement, an amount determined in accordance therewith.
6.
CLOSING
6.1      The Closing . The licenses granted in Section 2.1.1 will take effect, and the purchase and sale of the Acquired Assets and the assumption of the Assumed Liabilities (the “ Closing ”) will take place within five (5) Business Days following the satisfaction or waiver of the conditions set forth in Articles  11 and 12 that may be satisfied or waived prior to Closing, or on such other date as Purchaser and Spectrum may agree in writing, in each case, subject to the


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satisfaction or waiver of the conditions set forth in Articles 11 and 12. For all purposes, the Closing shall be effective as of 11:59 p.m. on the Closing Date.
6.2      Closing Deliveries . The parties will take the actions set forth in this Section 6.2 at the Closing, in each case subject to satisfaction or waiver of the conditions set forth in Articles 11 and 12.
i.      Purchaser will deliver to Spectrum the consideration described in Section 4.1 by wire transfer of immediately available funds to the account designated on Schedule 6.2.1 .
ii.      Spectrum will, and will cause its Affiliates who own Acquired Assets to, execute one or more bills of sale, in a form reasonably acceptable to Purchaser, with respect to all tangible personal property included in the Acquired Assets to be delivered at Closing.
iii.      Spectrum will, and will cause its Affiliates who own Business Domain Names to, execute one or more domain name assignments in a form to be mutually agreed by the parties.
iv.      Spectrum will, and will cause its Affiliates who own Acquired Assets to, and Purchaser will, execute an instrument of assignment and assumption in form and substance reasonably acceptable to the parties with respect to the Assumed Liabilities, Transferred Contracts, Transferred Permits, and other Acquired Assets and such other instruments as will be reasonably requested by Purchaser to vest in Purchaser title in and to the other Acquired Assets, in accordance with the provisions hereof.
v.      Purchaser and Spectrum will, or will cause their respective Affiliates to, as appropriate, execute and deliver to each other the following:
(a)    the Supply Agreement in a form to be mutually agreed by the parties within [***] days of the Closing Date (the “ Supply Agreement ”); and
(b)    the Pharmacovigilance Agreement in a form to be mutually agreed by the parties within [***] days of the Closing Date (the “ Pharmacovigilance Agreement ”).
vi.      Spectrum will, and will cause its Affiliates who own Acquired Assets that are in tangible form to deliver all such Acquired Assets to Purchaser.
vii.      The parties will deliver the various certificates, instruments and documents required of each of them under Articles 11 and 12.
7.
REPRESENTATIONS AND WARRANTIES OF SPECTRUM.
In order to induce Purchaser to enter into and perform this Agreement and to consummate the Contemplated Transactions, Spectrum hereby represents and warrants to Purchaser, as of the Closing Date, as set forth below. Notwithstanding the foregoing, Spectrum makes no


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representations and warranties with respect to Biogen Idec, the Biogen Agreement or the Biogen IP unless otherwise expressly stated and expressly referenced.
7.1      Organization . Spectrum and any of its Affiliates that will be a party to any Ancillary Agreement is (a) duly organized, validly existing and, to the extent such concept is applicable in a jurisdiction, is in good standing under the laws of the jurisdiction of its organization and (b) is duly qualified to do business and, to the extent such concept is applicable in a jurisdiction, in good standing in each jurisdiction where the nature of the activities conducted by it or the character of the property owned by it make such qualification necessary, except for those jurisdictions where the failure to be so qualified does not constitute a Material Adverse Effect.
7.2      Power and Authorization . The execution, delivery and performance by Spectrum and its Affiliates of this Agreement and each Ancillary Agreement to which Spectrum or such Affiliate is (or will be) a party and the consummation of the Contemplated Transactions are within the power and authority of Spectrum and any such Affiliate and have been duly authorized by all necessary corporate, limited liability company or other applicable entity action on the part of Spectrum and any such Affiliate. This Agreement and each Ancillary Agreement to which Spectrum or any of its Affiliates is (or will be) a party (a) has been (or, in the case of Ancillary Agreements to be entered into at, prior to or after the Closing, will be) duly executed and delivered by Spectrum or any such Affiliate and (b) assuming the due execution and delivery by Purchaser, is (or, in the case of Ancillary Agreements to be entered into at or prior to the Closing, will be) a legal, valid and binding obligation of Spectrum and any such Affiliate, enforceable against Spectrum and such Affiliates, as applicable, in accordance with its terms, except as enforceability may be (i) limited by any applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights generally and (ii) subject to general principles of equity (regardless of whether that enforceability is considered in a proceeding in equity or at law). Each of Spectrum and any of its Affiliates that will be a party to any Ancillary Agreement has the full power and authority necessary to own and use its assets related to the Licensed Business and carry on its relevant portion of the Licensed Business.
7.3      Authorization of Governmental Authorities . Except as disclosed on Schedule 7.3 , and ignoring for this purpose the Permits and Section 3.6, no action by (including any authorization, consent or approval), or in respect of, or filing with, any Governmental Authority in any Designated Country is required for, or in connection with (a) the authorization, execution, delivery and performance by Spectrum or any of its Affiliates of this Agreement and each Ancillary Agreement to which Spectrum or any of its Affiliates is (or will be) a party, (b) the consummation of the Contemplated Transactions by Spectrum or any of its Affiliates or (c) prevention of the termination of any right, privilege, license or agreement relating to the Contemplated Transactions or the continuation thereof following the Closing Date.
7.4      Noncontravention . Except as disclosed on Schedule 7.4 , and ignoring for this purpose Section 3.5, neither the execution, delivery and performance by Spectrum or any of its Affiliates of this Agreement or any Ancillary Agreement to which it is (or will be) a party nor the consummation of the Contemplated Transactions will:


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a.      assume the taking of any action by (including any authorization, consent or approval), or in respect of, or any filing with, any Governmental Authority, in each case, with respect to Permits or as disclosed on Schedule 7.3 , violate any Legal Requirement applicable to Spectrum or any of its Affiliates in any Designated Country;
b.      result in a breach or violation of, or default under, or in the acceleration of, or create in any party the right to accelerate, terminate, modify or cancel, any Contractual Obligation of Spectrum or any of its Affiliates;
c.      require any action by (including any authorization, consent or approval) or in respect of (including notice to) any Person under any Contractual Obligation of Spectrum or any of its Affiliates;
d.      result in the creation or imposition of a material Encumbrance upon, or the forfeiture of, any Acquired Asset, the Biogen Agreement, any Business-Specific Licensed IP in the Territory or Shared Licensed IP (with regard to the Shared Licensed IP, to the extent it would affect Purchaser’s rights to such Shared Licensed IP under this Agreement); or
e.      result in a breach or violation of, or default under, the Organizational Documents of Spectrum or any of its Affiliates.
7.5      Other Rights . Neither Spectrum nor any of its Affiliates is a party to or otherwise bound by any oral or written contract or agreement that will result in any other Person obtaining any interest in, or that would give to any other Person any right to assert any claim in or with respect to, any of Spectrum’s or such Affiliate’s rights under this Agreement.
7.6      No Violation . Neither Spectrum nor any of its Affiliates is under any obligation to any Person, contractual or otherwise, that is in violation of the terms of this Agreement or that would impede the fulfillment of any of Spectrum’s or such Affiliate’s obligations hereunder.
7.7      No Debarment . As of the Closing Date, none of Spectrum’s employees, consultants or contractors:
a.      is debarred under Section 306(a) or 306(b) of the FD&C Act or by the analogous Legal Requirements of any Governmental Authority;
b.      has, to Spectrum’s knowledge, been charged with, or convicted of, any felony or misdemeanor within the ambit of 42 U.S.C. §§ 1320a-7(a), 1320a-7(b)(l)-(3), or pursuant to the analogous Legal Requirements of any Governmental Authority, or is proposed for exclusion, or the subject of exclusion or debarment proceedings by a Governmental Authority; and
c.      is excluded, suspended or debarred from participation, or otherwise ineligible to participate, in any U.S. or non-U.S. health care programs (or has been convicted of a criminal offense that falls within the scope of 42 U.S.C. §1320a-7 but not yet excluded, debarred, suspended or otherwise declared ineligible), or excluded, suspended or debarred by a


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Governmental Authority from participation, or otherwise ineligible to participate, in any procurement or non-procurement programs.
7.8      Financial Information . The financial information disclosed as set forth on Schedule 7.8 (a) was derived from the books and records of the Licensed Business, (b) has been prepared using good faith allocations of overhead and other expense items applicable to both the indicated Licensed Product and products other than the indicated Licensed Product where applicable, and (c) fairly presents, in all material respects, the results of operations of the Licensed Business and the Licensed Products as a whole for the indicated periods.
7.9      Absence of Certain Developments .
i.      Since April 1, 2012, the Licensed Business has been conducted in the Ordinary Course of Business and, except for the matters disclosed on Schedule 7.9.1 and matters in the Ordinary Course of Business:
(a)      (i) neither Spectrum nor any of its Affiliates has entered into, amended, terminated or otherwise modified any Transferred Contract required to be disclosed on Schedule 7.19 (or any Contractual Obligation that would have qualified as such had it not been previously terminated) and (ii) to Spectrum’s Knowledge, no third party has amended, terminated or otherwise modified any Transferred Contract that, individually or in the aggregate, would have a Material Adverse Effect;
(b)      there has not been any event, occurrence or development that has had, or would have, individually or in the aggregate, a Material Adverse Effect except as has been previously disclosed to Purchaser;
(c)      neither Spectrum nor any of its Affiliates has subjected any of the Acquired Assets or Licensed IP in the Territory to any Encumbrances except Permitted Encumbrances;
(d)      there has not been any damage to or destruction or loss of any Acquired Asset, whether or not covered by insurance;
(e)      neither Spectrum nor any of its Affiliates has sold, transferred, leased, subleased, licensed or otherwise transferred or disposed of, to any third party, any Acquired Assets or Licensed IP in the Licensed Territory; or
(f)      there has not been any indication by any supplier of an intention to discontinue or change the terms of its relationship with Spectrum.
7.10      Assets . Spectrum and any of its Affiliates which holds Acquired Assets has good and marketable title to, or, in the case of property held under a lease, license or other Contractual Obligation, an Enforceable leasehold interest, license or other contractual right in, or right to use, all of the Acquired Assets. Except as disclosed on Schedule 7.10 , none of the Acquired Assets is subject to any Encumbrance which is not a Permitted Encumbrance.


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7.11      Real Property . There is no real property or leasehold interest in real property included in the Acquired Assets.
7.12      Litigation .
i.      There is no suit, claim, action, investigation, litigation or proceeding pending or, to Spectrum’s Knowledge, threatened against Spectrum or its Affiliates, with respect to the Acquired Assets, the Licensed Products or the Licensed Business, which (i) if adversely determined would result in a Material Adverse Effect or (ii) challenges or seeks to prevent or enjoin the transactions contemplated by this Agreement, nor to Spectrum’s Knowledge, has any suit, claim, action, investigation, litigation or proceeding been brought or threatened since April 1, 2012.
ii.      Bayer did not disclose any suit, claim, action, investigation, litigation or proceeding pending or threatened against Bayer or its Affiliates, with respect to the Acquired Assets, the Licensed Products or the Licensed Business, which (i) if adversely determined would result in a Material Adverse Effect on the Bayer Business or (ii) challenged or sought to prevent or enjoin the transactions contemplated by the Bayer Agreement.
7.13      No Unauthorized Use . Since April 1, 2012, neither Spectrum nor any of its Affiliates has received any written notice of any unauthorized use, infringement, misappropriation or dilution by any Person, including any current or former employee or consultant of Spectrum, of any of the Acquired Assets.
7.14      Intellectual Property .
7.14.1      Business Names . Schedule 7.14.1 shall identify as of the Closing Date (a) all Business Domain Names (b) any pending application for a Business Domain Name and (c) any Contractual Obligation relating to any Business Domain Name. For each such Business Domain Name or application therefor, Schedule 7.14.1 sets forth Business Domain Name, expiration date, owner, registrar, admin-contact, tech-contact and search results on whether Business Domain Names are in use.
7.14.2      Licensed IP .
(a)      Part A of Schedule 7.14.2 identifies as of the Closing Date a complete and accurate list of (i) all registered Business-Specific Licensed Trademarks and issued Business-Specific Licensed Patents in the Licensed Territory, (ii) each pending application in the Licensed Territory with respect to any Business-Specific Licensed IP specified in (i) above, and (iii) each Out-License Agreement.
(b)      Part B of Schedule 7.14.2 identifies as of the Closing Date a complete and accurate list of (i) all issued Shared Licensed Patents in the Licensed Territory, and (ii) each pending application in the Licensed Territory with respect to any Shared Licensed Patents specified in (i) above.


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(c)      For each issued or filed Licensed Patent, Schedule 7.14.2 sets forth as of the Closing Date, the country in the Licensed Territory, title, patent number (if issued), application number, filing date, issue date, inventors and any continuity relationship (such as continuation, continuation-in-part, divisional) with respect to any other Patent Right. For each registered Business-Specific Licensed Trademark, Schedule 7.14.2 sets forth the mark, country of registration in the Licensed Territory, registration number (if issued), application number, filing date, issue date and the description of goods or services covered. For each registered Licensed Copyright, Schedule 7.14.2 sets forth as of the Closing Date, the title of the work of authorship, the country in the Territory, and the registration number and registration date if registered or the application date if filed but unregistered.
7.14.3      Renewal and Maintenance Fees . All material renewal and maintenance fees due as of the Closing Date with respect to the prosecution and maintenance of the Licensed Patents have been paid.
7.14.4      Third Party Agreements . Other than the Third Party Agreements identified on Schedule 7.14.1 and Schedule 7.14.2 , as of the Closing Date, Spectrum has not granted any options, licenses, agreements or covenants of any kind relating to the Bayer Agreement, the Business-Specific Licensed IP in the Licensed Territory or Business Domain Names. Except as provided in an Out-License Agreement identified on Schedule 7.14.2 , as of the Closing Date, neither Spectrum nor its Affiliates are obligated to indemnify any Person against a charge of infringement of Intellectual Property with respect to the Licensed Products. Each Third Party Agreement and its amendments (i) assuming any such Third Party Agreement and any amendments thereto are Enforceable against the third party or parties that are party to such Third Party Agreement, constitutes an Enforceable Contractual Obligation of Spectrum or its Affiliates party thereto, and is in full force and effect, and subject to Schedules 7.3 and 7.4 , will continue to be in full force and effect on identical terms immediately following the Closing. Spectrum or its Affiliate has performed in all material respects all of its obligations under each of the Third Party Agreements and Spectrum or its Affiliates are not (with or without the lapse of time or the giving of notice, or both) in breach or default in any material respect under any Third Party Agreement and, to Spectrum’s Knowledge, no other party to any such Contractual Obligation is (with or without the lapse of time or the giving of notice, or both) in breach or default in any material respect thereunder. Except for required consents to assign the agreements set forth on Schedules 7.3 and 7.4 , the entry into and consummation of the Contemplated Transactions will not give the counterparty to any Third Party Agreement the right to terminate such Third Party Agreement and will not give rise to any other right of such counterparty with respect to the Business-Specific Licensed IP in the Licensed Territory or Business Domain Names.
7.14.5      Title . Except as specified on Schedule 7.14.1 or Schedule 7.14.2 , Spectrum or its Affiliate identified on Schedule 7.14.1 or Schedule 7.14.2 , as applicable, owns and possesses all rights, title and interests transferred or licensed by Bayer to Spectrum under the Bayer Agreement in and to (a) the Business Domain Names and (b) the Business-Specific Licensed IP and the Shared Licensed IP in the Licensed Territory. There is no outstanding breach by Spectrum or its Affiliates of the Bayer Agreement.


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7.14.6      Validity and Enforceability . Except as specified on Schedules 7.9.1 and 7.14.6 , to Spectrum’s Knowledge, the registered or issued Business-Specific Licensed IP is, valid and enforceable (or, in the case of applications for Patent Rights, are pending) in the Licensed Territory.
7.14.7      Licensed IP . The Licensed IP contains all the Intellectual Property Controlled by Spectrum or its Affiliates and used by Spectrum or its Affiliates in the manufacture, use, sale, distribution or importation of the Licensed Products in the Licensed Territory. Other than the Licensed IP, there is no other Intellectual Property Controlled by Spectrum or its Affiliates and used by Spectrum or its Affiliates in the Licensed Business. For the avoidance of doubt, Spectrum or its Affiliates Control the Licensed IP only to the extent provided in the In-License Agreements in accordance with the terms and conditions of the In-License Agreements.
7.14.8      Orders . Except as specified on Schedules 7.14.8 and 7.14.13 , no Licensed IP owned by Spectrum or its Affiliates is subject to any outstanding Governmental Order in the Territory, and no Action is pending or, to Spectrum’s Knowledge, threatened, in the Licensed Territory that challenges the legality, validity, Enforceable nature of, use or ownership of such Licensed IP. In addition, to Spectrum’s Knowledge, (a) the Biogen IP licensed to Spectrum or its Affiliates is not subject to any outstanding Governmental Order in the Territory, and (b) no Action is pending or threatened in the Territory that challenges the legality, validity, Enforceable nature of, use or ownership of such Business-Specific Licensed IP and Shared Licensed IP. There is no outstanding Governmental Order in the Licensed Territory that restricts Spectrum from granting to Purchaser the licenses granted in Section 2.1.1.
7.14.9      Notice of Infringement or Misappropriation . Spectrum has not received any written notice from any third party asserting or alleging that (i) the conduct of the Licensed Business prior to the Closing Date infringed or misappropriated any Intellectual Property rights of such third party or (ii) the exercise of Purchaser’s rights granted under this Agreement infringes or would infringe any Intellectual Property rights of third parties.
7.14.10      Infringement and Misappropriation . To Spectrum’s Knowledge, the conduct of the Licensed Business will not interfere with, infringe upon, misappropriate (or any other terms in jurisdictions other than the United States that have similar meaning) any Intellectual Property rights of third parties.
7.14.11      Third Party Infringement and Misappropriation . Except as set forth on Schedule 7.14.11 , to Spectrum’s Knowledge, no third party is infringing upon or has misappropriated any Biogen IP, Business-Specific Licensed IP or Business Domain Name in the Licensed Territory, and no third party is infringing upon or has misappropriated any Shared Licensed IP (to the extent such actions affect Purchaser’s rights in the Shared Licensed IP) in the Licensed Territory.
7.14.12      Royalties . Except as disclosed on Schedule 7.14.12 , there are no contracts which require the payment of royalties by Spectrum or its Affiliates with respect to the sales of Licensed Products.


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7.14.13      Litigation . Except as specified on Schedule 7.14.13 , to Spectrum’s Knowledge, no Actions concerning the Licensed IP or Business Domain Names are currently pending or are, to Spectrum’s Knowledge, threatened, in the Licensed Territory that, if determined adversely to Spectrum, would have a Material Adverse Effect on the Contemplated Transactions or would impair in any material respect Purchaser’s rights under the licenses granted in Section 2.1.1.
7.15      Legal Compliance; Permits; Regulatory Matters .
7.15.1      Compliance . Neither Spectrum nor any of its Affiliates, in each case with respect to the Licensed Business, has since April 1, 2012, been in material breach or violation of, or material default under any material Legal Requirement.
7.15.2      Permits . Except as set forth on Schedule 7.15.2 , Spectrum and each Affiliate, which conducts a portion of the Licensed Business has been duly granted in the Designated Countries all Permits under all Legal Requirements necessary for the conduct of the Licensed Business and exclusively related to the Licensed Business. Schedule 7.15.2 shall list as of the Closing Date each Permit and pending application therefor used (or intended for use in, in the case of pending applications) in the Licensed Business, including all Permits pursuant to which Spectrum or any of its Affiliates is authorized or licensed to manufacture, market or sell a Licensed Product. Except as disclosed on Schedule 7.15.2 as of the Closing Date, with respect to Designated Countries, (a) such Permits are valid and in full force and effect, (b) neither Spectrum nor any of its Affiliates is in material breach or violation of, or material default under, any such Permit, (c) Spectrum and each Affiliate has filed all material reports, notifications and filings with, and has paid all regulatory fees to, the applicable Governmental Authority necessary to maintain all of such Permits in full force and effect, and (d) since April 1, 2012, neither Spectrum nor any of its Affiliates has received written notice to the effect that a Governmental Authority was or is considering the withdrawal, suspension, termination, revocation or cancellation of any such Permit.
7.15.3      Regulatory and Related Matters . Except as disclosed on Schedule 7.15.3 , since April 1, 2012, with respect to the Licensed Business and the Licensed Products, in the Designated Countries neither Spectrum nor any of its Affiliates (a) has received any written notice from any Person alleging any violation of any material Legal Requirement, or (b) been the subject of a written order or a written assessment of penalty by any Governmental Authority.
7.16      Clinical Investigations . Schedule 7.16 shall list as of the Closing Date any interest or ownership rights of Spectrum in, and any regulatory filings or submissions by Spectrum since April 1, 2012 and still outstanding related to, the conduct of clinical investigations relating to Licensed Product in the Licensed Territory.
7.17      Regulatory Filings . Except as disclosed on Schedule 7.17 , to Spectrum’s Knowledge or the knowledge of each Affiliate which conducts a portion of the Licensed Business, all regulatory filings were prepared, filed and maintained in accordance with applicable Legal Requirements.


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7.18      Safety and Efficacy . Except as disclosed on Schedule 7.18 and except as would not have a Material Adverse Effect, since April 1, 2012, (i) there have not been any problems concerning the safety or efficacy of the Licensed Product (including any of its ingredients) or of any questions raised by any Governmental Authority with respect thereto, (ii) Spectrum has informed Purchaser of all adverse drug reactions known to Spectrum relating to the Product or its use and (iii) there has not been any occurrence of any product recall, market withdrawal or replacement, or post-sale warning by or on behalf of Spectrum concerning Licensed Product.
7.19      Contracts . Schedule 7.19 sets forth as of the Closing Date each Transferred Contract described below:
a.      any Contractual Obligation (or group of related Contractual Obligations) related to the Licensed Business the performance of which involves annual payments to or by Spectrum and its Affiliates in the aggregate in excess of $100,000, other than any Contractual Obligation which by its terms can be terminated upon no greater than sixty (60) days’ notice without material penalty or any further obligation or Liability to Spectrum or any of its Affiliates;
b.      any licenses of Intellectual Property related to the Licensed Business; and
c.      any Contractual Obligation with any Governmental Authority and related to the Licensed Business.
7.20      Enforceability, etc . Each Contractual Obligation required to be disclosed on Schedule 7.19 and which is a Transferred Contract or Joint Contract (each, a “ Disclosed Contract ”) is Enforceable against Spectrum or its Affiliate (assuming for this purpose that such Contractual Obligation is Enforceable against the counterparties to such Contractual Obligation) and is in full force and effect, and, subject to obtaining any necessary consents disclosed in Schedule 7.3 or Schedule 7.4 , will continue to be so Enforceable and in full force and effect on substantially identical terms immediately following the Closing.
7.21      Breach, etc . Neither Spectrum nor any of its Affiliates nor, to Spectrum’s Knowledge, any other party to any Disclosed Contract, is in material breach or material violation of, or material default under any Disclosed Contract.
7.22      Litigation; Governmental Orders . Except as disclosed on Schedule 7.22 , there is no Action to which Spectrum or an Affiliate is a party (either as plaintiff or defendant) or to which the Acquired Assets are subject pending, or to Spectrum’s Knowledge, threatened, in each case with respect to the Licensed Business or the Licensed Products in the Licensed Territory. Except as disclosed on Schedule 7.22 , no Governmental Order has been issued and remains in force which is applicable to the Licensed Business or any Acquired Asset in the Licensed Territory.
7.23      No Brokers . Neither Spectrum nor any of its Affiliates has any Liability of any kind to, or is subject to any claim of, any broker, finder or agent in connection with the Contemplated Transactions other than those which will be borne by Spectrum or an Affiliate.


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7.24      Access to Information . Spectrum has allowed, and will continue to allow, Purchaser reasonable access to all material information in Spectrum’s possession or Control relating to the Licensed Business.
7.25      Third Party Confidentiality . Spectrum has not disclosed any Licensed Know-How to a third party not subject to continuing obligations of confidentiality owed to Spectrum or its Affiliates.
7.26      Tax Matters .
7.26.1      Spectrum has timely filed all Tax Returns that it was required to file. All such Tax Returns were correct and complete in all respects. All Taxes owed by Spectrum (whether or not shown on any Tax Return) have been paid. Spectrum is currently not the beneficiary of any extension of time within which to file any Tax Return. No claim has ever been made by a Governmental Authority in a jurisdiction where Spectrum does not file Tax Returns that it is or may be subject to taxation by that jurisdiction. Spectrum has not waived any statute of limitations in respect of Taxes or agreed to any extension of time with respect to a Tax assessment, reassessment or deficiency.
7.26.2      Spectrum has timely withheld and paid all Taxes required to have been withheld and paid in connection with any amounts paid or owing to any employee, independent contractor, creditor, stockholder or other third party and all Tax Returns with respect thereto have been correctly completed and timely filed.
7.26.3      Spectrum has not received written or oral notice from any Governmental Authority (a) that such Governmental Authority has assessed or reassessed additional Taxes for any period for which Tax Returns have been filed or (b) regarding an intended assessment or reassessment of such taxes. There is no dispute or claim concerning any Tax liability of Spectrum that has been raised in writing by any Governmental Authority or of which Spectrum has knowledge based on personal contact with any agent of any Governmental Authority. Except as set forth in Schedule 7.26.3 , there have been no audits, examinations or legal proceedings (whether active or closed) involving Tax matters in respect of the Licensed Business.
7.26.4      The Assumed Liabilities will not include a “parachute payment” within the meaning of Section 280G of the Code.
7.26.5      Except as set forth on Schedule 7.26.5 , there are no Encumbrances with respect to Taxes upon any Acquired Asset, other than for current Taxes not yet due and payable.
7.26.6      No private letter ruling of a Governmental Authority or comparable material ruling or guidance issued by a Governmental Authority in writing in respect of the Licensed Business has been received or requested.
7.26.7      No Liability for Taxes has been incurred by or in respect of the Licensed Business arising from extraordinary gains or losses outside the ordinary course of business consistent with past practice.


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7.26.8      Spectrum is not a party to a Tax allocation, indemnification or sharing agreement (or any similar agreement), is not liable for the Taxes of any Person as a result of being a member of an affiliated, consolidated, combined or unitary group for any period and is not liable for another Person’s Taxes as a transferee or successor, by contract or otherwise.
7.27      No Undisclosed Liabilities . Except as set forth on Schedule 7.27 , and except as would not have a Material Adverse Effect, Spectrum has no Liabilities with respect to the Acquired Assets, except for current Liabilities incurred in the Ordinary Course of Business.
7.28      Labor Disputes; Compliance . Spectrum has complied in all respects with all Legal Requirements relating to employment practices, terms and conditions of employment, equal employment opportunity, nondiscrimination, immigration, wages, hours, benefits, collective bargaining and other requirements under all applicable Legal Requirements, the payment of social security and similar Taxes and occupational safety and health. Spectrum is not liable for the payment of any Taxes, fines, penalties or other amounts, however designated, for failure to comply with any of the foregoing Legal Requirements.
7.29      Compliance with The Foreign Corrupt Practices Act and Export Control and Antiboycott Laws .
7.29.1      Spectrum and its Representatives have not, to obtain or retain business, directly or indirectly offered, paid or promised to pay, or authorized the payment of, any money or other thing of value (including any fee, gift, sample, travel expense or entertainment with a value in excess of One Hundred U.S. Dollars ($100.00) in the aggregate to any one individual in any year) or any commission payment of any amount payable, to: (i) any Person who is an official, officer, agent, employee or representative of any Governmental Authority or of any existing or prospective customer (whether government owned or nongovernment owned); (ii) any political party or official thereof; (iii) any candidate for political or political party office; or (iv) any other individual or entity while knowing or having reason to believe that all or any portion of such money or thing of value would be offered, given or promised, directly or indirectly, to any such official, officer, agent, employee, representative, political party, political party official, candidate, individual or any entity affiliated with such customer, political party or official or political office.
7.29.2      Since April 1, 2012, each transaction related to the Licensed Business is properly and accurately recorded on the books and records of Spectrum, and each document upon which entries in Spectrum’s books and records are based is complete and accurate in all material respects. Spectrum maintains a system of internal accounting controls adequate to insure that Spectrum maintains no off-the-books accounts and that Spectrum’s material assets are used only in accordance with Spectrum’s management directives.
7.30      Solvency .
7.30.1      Spectrum is not now insolvent and will not be rendered insolvent by any of the Contemplated Transactions. As used in this section, “insolvent” means that the sum of the


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debts and other probable Liabilities of Spectrum exceeds the present fair saleable value of Spectrum’s assets.
7.30.2      Immediately after giving effect to the consummation of the Contemplated Transactions: (i) Spectrum will be able to pay its Liabilities as they become due in the usual course of its business; (ii) Spectrum will have assets (calculated at fair market value) that exceed its Liabilities; and (iii) taking into account all pending and threatened litigation, final judgments against Spectrum in actions for money damages are not reasonably anticipated to be rendered at a time when, or in amounts such that, Spectrum will be unable to satisfy any such judgments promptly in accordance with their terms (taking into account the maximum probable amount of such judgments in any such actions and the earliest reasonable time at which such judgments might be rendered) as well as all other obligations of Spectrum. The cash available to Spectrum, after taking into account all other anticipated uses of the cash, will be sufficient to pay all such debts and judgments promptly in accordance with their terms.
8.
REPRESENTATIONS AND WARRANTIES OF PURCHASER.
In order to induce Spectrum to enter into and perform this Agreement and to consummate the Contemplated Transactions, Purchaser hereby represents and warrants to Spectrum, as of the date hereof and as of the Closing Date, that:
8.1      Organization . Purchaser and any Affiliate of Purchaser that will be a party to any Ancillary Agreement is (a) duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization and (b) is duly qualified to do business and in good standing in each jurisdiction where the nature of the activities conducted by it or the character of the property owned by it make such qualification necessary, except for those jurisdictions where the failure to be so qualified does not have a material adverse effect on Purchaser or any such Affiliate of Purchaser.
8.2      Power and Authorization . The execution, delivery and performance by Purchaser and its Affiliates of this Agreement and each Ancillary Agreement to which Purchaser or such Affiliate is (or will be) a party and the consummation of the Contemplated Transactions are within the power and authority of Purchaser and any such Affiliate and have been duly authorized by all necessary corporate action on the part of Purchaser and any such Affiliate. This Agreement and each Ancillary Agreement to which Purchaser or an Affiliate is (or will be) a party (a) has been (or, in the case of Ancillary Agreements to be entered into at, prior to or after the Closing, will be) duly executed and delivered by Purchaser or its Affiliate and (b) assuming the due execution and delivery by Spectrum is (or in the case of Ancillary Agreements to be entered into at, prior to or after the Closing, will be) a legal, valid and binding obligation of Purchaser or its Affiliate, enforceable against Purchaser or its Affiliate in accordance with its terms, except as that enforceability may be (i) limited by any applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights generally and (ii) subject to general principles of equity (regardless of whether that enforceability is considered in a proceeding in equity or at law). Each of Purchaser and each Affiliate that will be a party to any Ancillary Agreement has the full power and authority necessary to own and use


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the Acquired Assets related to the Business that is held by it as of the Closing Date and carry on its relevant portion of Business.
8.3      Authorization of Governmental Authorities . Except as disclosed on Schedule 8.3 , no action by (including any authorization, consent or approval), or in respect of, or filing with, any Governmental Authority in any Designated Country is required for, or in connection with (a) the authorization, execution, delivery and performance by Purchaser or any of its Affiliates of this Agreement and each Ancillary Agreement to which it is (or will be) a party (b) the consummation of the Contemplated Transactions by Purchaser or any of its Affiliates or (c) prevention of the termination of any right, privilege, license or agreement relating to the Contemplated Transactions or the continuation thereof following the Closing Date.
8.4      Noncontravention . Except as disclosed on Schedule 8.4 or as would not reasonably be expected to have a material adverse effect on the ability of Purchaser and its Affiliates to consummate the Contemplated Transactions on a timely basis, neither the execution, delivery and performance by Purchaser or any of its Affiliates of this Agreement or any Ancillary Agreement to which Purchaser or any of its Affiliates is (or will be) a party nor the consummation of the Contemplated Transactions will:
a.      assume the taking of any action by (including any authorization, consent or approval) or in respect of, or any filing with, any Governmental Authority, in each case, as disclosed on Schedule 8.3 , violate any provision of any Legal Requirement applicable to Purchaser or any of its Affiliates in any Designated Country;
b.      result in a breach or violation of, or default under, any Contractual Obligation of Purchaser or any of its Affiliates;
c.      require any action by (including any authorization, consent or approval) or in respect of (including notice to), any Person under any Contractual Obligation; or
d.      result in a breach or violation of, or default under, the Organizational Documents of Purchaser or any of its Affiliates.
8.5      No Brokers . Neither Purchaser nor any of its Affiliates has any Liability of any kind to, and is not subject to any claim of, any broker, finder or agent with respect to the Contemplated Transactions other than those which will be borne by Purchaser or any of its Affiliates.
8.6      Litigation . There is no suit, claim, action, investigation, litigation or proceeding pending or, to the knowledge of Purchaser or its Affiliates, threatened against Purchaser or its Affiliates, with respect to the Acquired Assets, the Licensed Products or the Business in the Territory which (i) if adversely determined would result in a material adverse effect on Purchaser or its Affiliates or (ii) challenges or seeks to prevent or enjoin the transactions contemplated by this Agreement.
9.
COVENANTS.


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9.1      Closing . Spectrum will, and will cause its Affiliates to, and Purchaser will, each use commercially reasonable efforts to cause all of the conditions to the consummation of the Contemplated Transactions to be satisfied as soon as practicable.
9.2      Omitted .
9.3      Omitted .
9.4      Omitted .
9.5      Confidentiality .
9.5.1      Disclosure of Information . All information disclosed by a party or its Affiliate to the other party or its Affiliate pursuant to the Confidential Disclosure Agreement shall be deemed to be such party’s Confidential Information disclosed hereunder and the other party shall have the confidentiality, non-use and non-disclosure obligations set forth in this Section 9.5. In the event that any such obligations conflict with the obligations set forth in the Confidential Disclosure Agreement, then the other party and its Affiliates shall comply with the obligations set forth in this Section 9.5.
9.5.2      Non-Disclosure and Non-Use .
(a)      Confidential Information . Purchaser and Spectrum agree that the terms and conditions of this Agreement and the Ancillary Agreements, any activities conducted in connection with or pursuant to this Agreement or the Ancillary Agreements, and information disclosed by either party in accordance with this Agreement or the Ancillary Agreements or in the course of performance under the Ancillary Agreements, including the performance and receipt of services under the Ancillary Agreements (“ Confidential Information ”), will be used and disclosed by the receiving party only to perform its obligations and exercise its rights under this Agreement and the Ancillary Agreements and/or to conduct the Business. Information relating to the Acquired Assets, Licensed Products (to the extent it is not Shared Licensed IP) and Business-Specific Licensed IP will be considered the Confidential Information of Purchaser. The terms and conditions of this Agreement will be considered the Confidential Information of the parties to the Agreement, as if all parties were receiving parties. Notwithstanding the foregoing, Confidential Information will not include:
(i)      information (other than information relating to the Acquired Assets, Licensed Products (to the extent it is not Shared Licensed IP) and Business-Specific Licensed IP) that the receiving party can establish was already known by the receiving party (other than under an obligation of confidentiality) at the time of disclosure by the disclosing party;
(ii)      information that the receiving party can establish was generally available to the public or otherwise part of the public domain at the time of its disclosure to the receiving party; or


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(iii)      information that the receiving party can establish became generally available to the public or otherwise part of the public domain after its disclosure or development, as the case may be, other than through any act or omission of the receiving party or any of its Affiliates.
(b)      Authorized Disclosure and Use . Notwithstanding the foregoing provisions of Subsection (a), each party may disclose Confidential Information belonging to the other party to the extent such disclosure is reasonably necessary to:
(i)      prosecute or defend an Action;
(ii)      comply with applicable Legal Requirements and any stock exchange rules; or
(iii)      make filings and submissions to, or correspond or communicate with, any Governmental Authority.
In the event a party deems it reasonably necessary to disclose Confidential Information belonging to the other party pursuant to clauses (i), (ii) or (iii) of this Section 9.5.2(b), the disclosing party will (unless prohibited by applicable Legal Requirements) give reasonable advance notice of such disclosure to the other party, consult with the other party with regard to the disclosure of Confidential Information and take all reasonable measures to ensure confidential treatment of such information. Each party will promptly notify the other party upon becoming aware of any misappropriation or unauthorized disclosure or use of the other party’s Confidential Information.
9.6      Publicity . The parties will reasonably agree to the press releases announcing the transactions contemplated by this Agreement. On or after the date the press releases are agreed, the parties hereto may make public disclosures regarding the transactions contemplated by this Agreement provided such disclosure is consistent with the agreed upon press release, or by the mutual written consent of Purchaser and Spectrum, or other information previously publicly disclosed in compliance herewith. The provisions of this Section 9.6 will not prohibit (a) any disclosure required by any applicable Legal Requirements, or the rules of any stock market (in which case the disclosing party will provide the other parties with the opportunity to review in advance the disclosure) or (b) any disclosure made in connection with the enforcement of any right or remedy relating to this Agreement or the Contemplated Transactions.
9.7      Transfer of Certain Funds Received Post-Closing . With respect to any and all amounts received or collected by Spectrum or any of its Affiliates from and after the Closing attributable to, or in respect of, the Licensed Business (other than with respect to an Excluded Asset), Spectrum will provide notice of such receipt or collection to Purchaser (including information included with such payment or otherwise within Spectrum’s possession with respect to such payment, including invoice and/or remittance information) and pay monthly to Purchaser any and all such amounts so received or collected by wire transfer of immediately available funds to an account specified by Purchaser or by other means acceptable to Purchaser. With respect to any and all amounts received or collected by Purchaser or any of its Affiliates from


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and after the Closing attributable to, or in respect of, any Excluded Asset, Purchaser will provide notice of such receipt or collection to Spectrum (including information included with such payment or otherwise within Spectrum’s possession with respect to such payment, including invoice and/or remittance information) and pay monthly to Spectrum any and all such amounts so received or collected by wire transfer of immediately available funds to an account specified by Spectrum or by other means acceptable to Spectrum.
9.8      Transfer of Permits .
i.      Promptly after the Closing Date, the parties will collaborate to determine a timetable and procedure for the transfer or re-issuance to Purchaser of all Permits held by Spectrum, Bayer or their Affiliates used in the Licensed Business. The parties shall, and shall cause their Affiliates to, use commercially reasonable efforts to (a) provide the required notices to, and/or obtain the authorizations, approvals, consents or waivers from, Governmental Authorities and third parties in order to transfer all Transferred Permits to Purchaser or its Affiliates and/or to enable Purchaser or its Affiliates to obtain its or their own substitute Permits for the Licensed Business and (b) to the extent permitted under applicable Legal Requirements and/or the issuing body of a Permit, allow Purchaser or its Affiliates to distribute, market, import and sell Licensed Products from and after the Closing while the applicable Permit remains held by Spectrum, Bayer or an Affiliate of Spectrum or Bayer or until Purchaser or its Affiliates can obtain its or their own Permit or the applicable Permits are transferred to Purchaser. With respect to all Permits that relate in part to the Licensed Business and in part to the businesses of Spectrum, Bayer and their Affiliates other than the Licensed Business (the “ Joint Permits ”), each of Purchaser and Spectrum shall use commercially reasonable efforts in seeking separate Permits for each such business.
ii.      Purchaser will, or will cause its Affiliates to, use commercially reasonable efforts to apply for transfers of Permits or issuances of substitute Permits as promptly as practicable following Closing and in any event to achieve such transfers on or before January 1, 2018.
9.9      Rebates, Chargebacks, Returns and Other Adjustments . Responsibility for returns, rebates, chargebacks, cash discounts and fees for services paid to wholesalers and distributors will be allocated between Spectrum and Purchaser in accordance with this Section 9.9, except as may otherwise be required by applicable Legal Requirement. Sections 9.9.1 through 9.9.4 apply to such items generated in each country where such allocation methods may reasonably be applied. In each other country where the allocation methods cannot be reasonably applied, the parties will work in good faith to determine an alternative allocation method in accordance with the principles set forth herein.
9.9.1      Rebates . All rebates calculated against periods entirely preceding the Closing Date shall be the sole responsibility of Spectrum. All rebates calculated against periods including or following the Closing Date will be the sole responsibility of Purchaser, except that Spectrum will make a payment to Purchaser to account for the portion of the quarter in which the Closing Date occurred during which Spectrum owned the Business and the amount of inventory in the wholesale and distribution channels on the Closing Date. Calculation of this payment will


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be based on the application of a ratio, being the number of Business Days in the calendar quarter in which the Closing Date occurred prior to and including the Closing Date, plus the number of days of supply of a Licensed Product held by wholesalers and distributors on the Closing Date, divided by the total number of Business Days in such calendar quarter, stated as follows:
(A+C) =
“ Spectrum Rebate Liability ” (expressed as %)
B
A =
The number of Business Days from and including the first day of the applicable quarter to and including the Closing Date.
B =
The number of Business Days in the applicable calendar quarter.
C =
The number of Business Days of supply of a Licensed Product held by wholesalers and distributors on the Closing Date (the “ Days of Channel Inventory ”); whereby the sum of A and C shall not exceed B.
9.9.2      Chargebacks . The obligations of the parties for chargebacks will be allocated based on the setting of a Chargeback Liability Shift Date with chargebacks on wholesaler invoices to their customers dated before the Chargeback Liability Shift Date being the obligation of Spectrum, and chargebacks on wholesaler invoices to their customer sent on or after that date being the responsibility of Purchaser. The “ Chargeback Liability Shift Date ” shall be the number of Business Days after the Closing Date equal to the Days of Channel Inventory on the Closing Date. Whether an invoice falls before or after the Chargeback Liability Shift Date shall be determined by reference to the date on the wholesaler invoice to its customer. This analysis will be done on an invoice-by-invoice basis for each Licensed Product. Purchaser will pay all chargebacks which become due after the Closing Date, and will invoice Spectrum monthly for the chargebacks for which Spectrum is responsible.
9.9.3      Fees for Service . If a wholesaler, distributor or retailer is entitled to a fee-for-service delivered over time ( e.g. , inventory management services) such fee will be prorated between Spectrum and Purchaser based on the relative portion of such period falling before or after the Closing Date.
9.9.4      Returns . Any return from a production lot of Licensed Product, one hundred percent (100%) of which was sold by Spectrum, will be the sole responsibility of Spectrum. Any return from a production lot of Licensed Product, one hundred percent (100%) of which was sold by Purchaser, will be the sole responsibility of Purchaser. Any return from a production lot sold partially by Spectrum and partially by Purchaser shall be shared by Spectrum and Purchaser as described below.
(a)      The average dating of inventory of a Licensed Product manufactured in a production lot sold partially by Spectrum and partially by Purchaser at the time of sale by Spectrum or an Affiliate over the year preceding the Closing Date expressed in months to expiry will be determined as of the Closing Date (the “ Average Age ”) and added to the Closing Date to determine an “ Adjusted Expiration Date .”


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(b)      The period extending from three (3) months before the Adjusted Expiration Date to six (6) months after the Adjusted Expiration Date will be the “ Overlap Period .”
Any return of a Licensed Product prior to the Overlap Period will be the sole responsibility of Spectrum. Any return of a Licensed Product after the Overlap Period will be the sole responsibility of Purchaser. Responsibility for any return of a Licensed Product during the Overlap Period will be shared equally by Spectrum and Purchaser 50/50. The Average Age will be determined, to the extent practicable, on the basis of appropriate documentation and substantiation, and in circumstances where substantiation is not practicable, the reasonable, good faith estimate of the parties.
9.10      Transition Assets . To the extent Spectrum or its Affiliates requires the use of any Acquired Asset to perform its obligations under any of the Ancillary Agreements (the “ Transition Assets ”), Spectrum will inform Purchaser of such need and Purchaser will make such Transition Assets available to Spectrum for this purpose for the period of time Spectrum requires such Transition Assets to perform its obligations under any of the Ancillary Agreements.
9.11      Joint Contracts . With respect to any Contractual Obligations with third parties relating in part to the Licensed Business and in part to the businesses of Spectrum, Bayer and their Affiliates other than the Licensed Business (including Spectrum’s Business in the Spectrum Territory), which shall be set forth on Schedule 9.11 (each, a “ Joint Contract ”), Purchaser will attempt to enter into a separate Contractual Obligation with the counterparty or counterparties to such Joint Contract with respect to the portion of such Joint Contract exclusively related to the Licensed Business on the same terms and conditions applicable to the Licensed Business. If Purchaser is unable to replace such Joint Contract with a separate Contractual Obligation the portion of a Joint Contract exclusively related to the Licensed Business, Spectrum will, and will cause its Affiliates to, if permitted by the Terms of such Joint Contract, take commercially reasonable efforts (including by seeking an amendment of the Joint Contract, if necessary) to provide to Purchaser the benefits under such Joint Contract with respect to the Licensed Business, until the stated expiration of such Joint Contract, without regard to any available renewal options. In such event, the benefits and obligations under such Joint Contract exclusively related to the Licensed Business shall be for the account of Purchaser, and the remaining benefits and obligations shall be retained by Spectrum and its Affiliates. Spectrum and each of its Affiliates that are parties to any Joint Contract shall perform their obligations thereunder so as not to create a material default. Neither Spectrum nor its Affiliates will be obligated to extend credit to Purchaser under a Joint Contract.
9.12      Notices and Consents .
i.      Spectrum will, and will cause its Affiliates to, give all notices to, make all filings with and use its commercially reasonable efforts to obtain all authorizations, consents or approvals from, any Governmental Authority or other Person that are set forth on Schedule 7.3 and Schedule 7.4 .


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ii.      Purchaser will, and will cause its Affiliates to, give all notices to, make all filings with and use its commercially reasonable efforts to obtain all authorizations, consents or approvals from, any Governmental Authority or other Person that are set forth on Schedule 8.3 and Schedule 8.4 .
9.13      Non-Competition . From and after the Effective Date, for a period of [***], or if such period is not allowable by law in a country, then for the maximum period allowable by law in such country, Spectrum and its Affiliates will not, directly manufacture, offer for sale, sell, distribute, or actively assist or enable a third Person to manufacture, offer for sale, sell, distribute, [***]. If Spectrum acquires a Person which is in the business of distributing, marketing or selling [***], it will not be deemed in violation of this Section 9.13 if it [***]; provided, however, if such business is acquired within [***].
9.14      Transaction Expenses . Except as otherwise provided in Section 3.7, with respect to the costs and expenses (including legal, accounting, consulting, advisory and brokerage) incurred in connection with the Contemplated Transactions (such costs and expenses, the “ Transaction Expenses ”), each party will bear its own Transaction Expenses.
9.15      Books and Records . Spectrum may retain copies of Books and Records that do not relate exclusively to the Acquired Assets or Assumed Liabilities or are necessary to perform its legal obligations hereunder or under the Ancillary Agreements or defend or prosecute any Claim brought by Spectrum or its Affiliates against any third party or by any third party against Bayer or its Affiliates. Spectrum and its Affiliates shall promptly deliver any Books and Records discovered after the Closing Date. Notwithstanding the foregoing, following Closing, Spectrum shall provide Purchaser, upon the request of Purchaser, with copies of and reasonable access to all Books and Records and Excluded Books and Records relating to Tax returns or Tax records; and Spectrum and its Affiliates shall keep confidential and not use, except as permitted in this Agreement and in the Ancillary Agreements or the extent necessary to determine Taxes with respect to the Licensed Business, any information in the Books and Records; and provided, further, that Spectrum shall ensure that all such Books and Records relating to any Taxes that may be subject to indemnification under this Agreement and Excluded Books and Records relating to Tax returns or Tax records are retained by Spectrum and its Affiliates until [***] days after the applicable statute of limitations (as extended) has expired for any Tax Returns filed or required to be filed covering the periods up to and including the Closing Date. Spectrum shall provide Purchaser with at least [***] days’ notice prior to disposing of any Books and Records or Excluded Books and Records relating to Tax returns or Tax records and, upon request by Purchaser, deliver such Books and Records and Excluded Books and Records relating to Tax returns or Tax records to Purchaser at Purchaser’s expense.
9.16      Further Assurances . From and after the Closing Date, upon the request of either Spectrum or Purchaser, each of the parties hereto will, and will cause their Affiliates to, do, execute, acknowledge and deliver all such further acts, assurances, deeds, assignments, transfers, conveyances and other instruments and papers as may be reasonably required or appropriate to carry out the Contemplated Transactions. Spectrum will, and will cause its Affiliates to, provide all cooperation reasonably requested by Purchaser in connection with any effort by Purchaser to


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establish, perfect, defend, or enforce its rights in or to the Acquired Assets, including executing further consistent assignments, transfers, pledges and releases, and causing its Representatives and agents to provide good faith testimony by affidavit, declaration, deposition or other means. Spectrum will, and will cause its Affiliates to, refer all customer inquiries relating to the Licensed Business to Purchaser from and after the Closing. Spectrum will, and will cause its Affiliates and its and their respective Representatives to, cooperate and assist Purchaser with an orderly transition of the Licensed Business and Acquired Assets to Purchaser. Spectrum will not, and will cause its Affiliates not to, take any action that is designed or intended to have the effect of discouraging any lessor, licensor, supplier, distributor or customer of the Licensed Business or other Person with whom the Licensed Business has a relationship from maintaining the same relationship with the Business after the Closing as it maintained prior to the Closing. Spectrum will provide to Purchaser, at Spectrum’s sole cost and expense: (a) [***] hours of regulatory and development support during the first Agreement Year, and (b) [***] hours of regulatory and development support for each Agreement Year after the first anniversary of the Closing Date. For all regulatory and development support provided by Spectrum to Purchaser in excess of the number of free hours in any Agreement Year, as set forth above, Spectrum shall invoice Purchaser for such additional support at a rate of $[***] USD per hour.
10.
INTELLECTUAL PROPERTY AND OTHER COVENANTS.
10.1      Reservation of Intellectual Property . All Intellectual Property of Spectrum and its Affiliates that is not Licensed IP or licensed in this Agreement is reserved and retained by Spectrum and its Affiliates. Except as expressly provided in this Agreement or any other Ancillary Agreement, as of the Closing Date, no other assignments or licenses of Intellectual Property are granted whatsoever, whether expressly or by implication or by estoppel, by any party hereto.
10.2      Filing, Prosecution and Maintenance of Licensed Patents and Licensed Trademarks .
10.2.1      Responsibility .
(a)      Business-Specific Licensed IP . From and after Closing, Purchaser, through counsel of its choosing and at its sole discretion and expense, will be responsible for and have control over filing, obtaining, prosecuting (including any interferences, reissue proceedings, re-examinations and oppositions), and maintaining throughout the Licensed Territory the Business-Specific Licensed Patents and Business-Specific Licensed Trademarks. Purchaser shall keep Spectrum informed regarding the prosecution and maintenance of the Business-Specific Licensed Patents and Business-Specific Licensed Trademarks, and Spectrum will cooperate with Purchaser in regard to the filing, prosecution and maintenance thereof. Purchaser may, in its sole discretion, elect not to pursue patent protection for any Business-Specific Licensed Patent or trademark registration for any Business-Specific Licensed Trademark in one or more countries in the Licensed Territory. In the event that Purchaser desires to abandon or cease prosecution or maintenance of any Business-Specific Licensed Patent or Business-Specific Licensed Trademark, Purchaser shall provide reasonable prior written notice to Spectrum of such intention (which notice shall, in any event, be given no later than [***] days prior to the next deadline for


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any action that may be taken with respect to such patent or trademark with the applicable patent or trademark office). Upon receiving such notice, Spectrum may elect to continue prosecution and/or maintenance of such Business-Specific Licensed Patent or Business-Specific Licensed Trademark, as applicable, at its sole cost and expense.
(b)      Shared Licensed Patents . From and after Closing, Purchaser acknowledges that Bayer, through counsel of its choosing and at its sole discretion and expense, will be responsible for and have control over obtaining, prosecuting (including any interferences, reissue proceedings, re-examinations and oppositions) and maintaining throughout the Territory the Shared Licensed Patents. Bayer may, in its sole discretion, elect not to pursue patent protection for any Shared Licensed Patent in one or more countries in the Territory. To the extent Spectrum is informed by Bayer, Spectrum shall keep Purchaser informed regarding the prosecution and maintenance of the Shared Licensed Patents to the extent that such actions affect Purchaser’s rights in the Shared Licensed Patents. Other than as provided, Spectrum shall have no obligation to keep Purchaser informed regarding the prosecution and maintenance of such Shared Licensed Patent. Purchaser will have no right to take any actions to prosecute or maintain throughout the Territory the Shared Licensed Patents.
(c)      Business-Specific Licensed Know-How . Purchaser may file in the Licensed Territory patent applications on Business-Specific Licensed Know-How. If Purchaser subsequently obtains issued patents on such applications, Purchaser shall, and hereby, grants, Spectrum a non-exclusive, non-transferable, royalty-free, sublicensable (with Purchaser’s prior written consent) right to make, have made, use, sell and commercially exploit such patents for all uses outside the Licensed Territory and outside of Non-Hodgkin’s Lymphoma within the Licensed Territory.
10.2.2      Cooperation . Spectrum will: (a) make its Representatives reasonably available to Purchaser (or to Purchaser’s authorized Representatives), to the extent reasonably necessary to enable Purchaser to undertake patent filings and prosecution and trademark registration of the Business-Specific Licensed Patents and Business-Specific Licensed Trademarks in the Licensed Territory; (b) at the reasonable request of Purchaser, cooperate with Purchaser in gaining patent term extensions and trademark registration renewals wherever applicable to Business-Specific Licensed Patents and Business-Specific Licensed Trademarks that are subject to this Agreement; and (c) use its commercially reasonable and diligent efforts to minimize or avoid interference with the prosecution and maintenance of the Business-Specific Licensed Patents and Business-Specific Licensed Trademarks in the Licensed Territory. Purchaser will reimburse Spectrum for Spectrum’s reasonable out-of-pocket expenses in complying with this Section 10.2.2; provided , however , that Spectrum provides Purchaser with invoices or other reasonable documentation evidencing such expenses on a timely basis after the incurrence of such expense.
10.3      IP Enforcement .
10.3.1      Notification . Each party will promptly report in writing to the other party any (a) known or suspected third party infringement of any Licensed Patents, Licensed Trademarks or Licensed Copyrights, or (b) unauthorized use or misappropriation of any Licensed


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Know-How or other Confidential Information by a third party of which it becomes aware, and will provide the other party with all available evidence supporting such infringement or unauthorized use or misappropriation.
10.3.2      Right to Enforce .
(a)      Purchaser will have the sole and exclusive right, but not the obligation, to take any reasonable measures it deems appropriate to stop activities in the Licensed Territory from infringing the Business-Specific Licensed Patents, Business-Specific Licensed Trademarks or Business-Specific Licensed Copyrights or the use without proper authorization of any Business-Specific Licensed Know-How, including (a) initiating or prosecuting an infringement or other appropriate Action against or (b) granting adequate rights and licenses necessary for continuing such activities in the Territory to any third party who at any time has infringed, or is suspected of infringing, any Business-Specific Licensed Patents, Business-Specific Licensed Trademarks or Business-Specific Licensed Copyrights or has used or is suspected of using without proper authorization the Business-Specific Licensed Know-How. Without the written consent of Purchaser, Spectrum will have no right to take any reasonable measures in the Licensed Territory to stop any infringement of the Business-Specific Licensed Patents, Business-Specific Licensed Trademarks or Business-Specific Licensed Copyrights or the use without proper authorization of the Business-Specific Licensed Know-How.
(b)      Purchaser acknowledges that Bayer will always have the first right, but not the obligation, to take any reasonable measures it deems appropriate to stop activities in the Territory infringing the Shared Licensed Patents or Shared Licensed Copyrights or the use without proper authorization of any Shared Licensed Know-How, in each case in connection with a Person’s manufacture, use, sale, offering for sale, or importation of Licensed Products, including (a) initiating or prosecuting an infringement or other appropriate Action against or (b) granting adequate rights and licenses necessary for continuing such activities in the Territory to any such Person. If Bayer does not initiate any such measures within [***] days of receiving written notice of such activities (or within a reasonable shorter time period if a shorter period to take action is required by applicable Legal Requirements to avoid the loss of legal rights) (“ Bayer Action Period ”), then Spectrum will have the second right, but not the obligation, to take any reasonable measures it deems appropriate to stop such activities If Spectrum does not initiate any such measures within [***] days of completion of the Bayer Action Period, then Purchaser will have the third right, but not the obligation, to take any reasonable measures it deems appropriate to stop such activities; provided , however , Purchaser must coordinate and consult with Spectrum regarding such measures and will not take any measures, without the written permission of Spectrum, which permission will not be unreasonably withheld, delayed or conditioned. It shall be reasonable for Spectrum to withhold such permission if Bayer reasonably believes such measures will affect the protection that any Shared Licensed IP affords Bayer; provided , however , the mere likelihood that a defendant would allege that the asserted Shared Licensed Patents or Shared Licensed Copyrights is invalid or unenforceable shall not be sufficient grounds for Spectrum to withhold permission. If any party brings a suit or action under this Section 10.3.2(b), the other party will have the right, at its expense, to retain its own counsel to monitor such Action. Neither party will have the right to settle any infringement or


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misappropriation Action under this Section 10.3.2(b) in a manner that diminishes the rights or interests of the other party without the express written consent of such other party; provided , however , that the grant by Purchaser of a sublicense under the Shared Licensed Patents or Shared Licensed Copyrights in accordance with this Agreement will not be considered to diminish the rights of Spectrum, and the grant by Spectrum of a license under the Shared Licensed IP that is not in conflict with the exclusive rights granted to Purchaser in Section 2.1.1 will not be considered to diminish the rights of Purchaser. In addition, (i) Purchaser will not settle any such Action in a manner that admits the invalidity or unenforceability of any Shared Licensed IP without obtaining the prior written consent of Spectrum and (ii) during the [***] day period, Spectrum will not settle any such Action in a manner that admits the invalidity or unenforceability of any Shared Licensed Patents or Shared Licensed Copyrights without obtaining the prior written consent of Purchaser.
10.3.3      Procedures and Expenses . The party with the right to take action pursuant to Section 10.3.2 will have the sole right to select counsel for any Action brought by it and will pay all expenses of such Action, including attorneys’ fees and court costs. If required under applicable Legal Requirements in order for such party to initiate and/or maintain such Action, or if such party is unable to initiate or prosecute such Action solely in its own name or it is otherwise advisable to obtain an effective legal remedy, in each case, at such party’s request, the other party will join as a party to the Action and will execute and cause its Affiliates to execute all documents necessary for a party to initiate an Action to prosecute and maintain such Action. In addition, at a party’s request, the other party will provide reasonable assistance in connection with such Action and the reasonable out-of-pocket expenses of the party providing assistance shall be reimbursed by the party requesting such assistance.
10.3.4      Recoveries .
(a)      If a party obtains from a third party infringer, in connection with an Action brought pursuant to Section 10.3.2, any damages, license fees, royalties or other compensation (including any amount received in settlement of such Action) with respect to Licensed Product, then any amounts recovered will first be applied to the reimbursement of each party’s reasonable costs, expenses and legal fees, including amounts one party has reimbursed to the other. The remaining balance shall be retained by Purchaser if the infringing activity occurred in Licensed Territory, but will be considered Net Sales and subject to Purchaser’s payment obligations under Section 4.3.1 to the extent such recovery was subject to a royalty payment under the Bayer Agreement and/or the Biogen Agreement. The party bringing such Action pursuant to Section 10.3.2 will bear all payments awarded against or agreed to be paid by such party pursuant to such Action, including any costs or expenses incurred that exceed the amounts recovered by such party.
(b)      Purchaser’s rights to enforce the Biogen IP shall be as set forth for Spectrum pursuant to the Biogen Agreement and Bayer Agreement. For clarity and without limitation, any rights granted by Spectrum in Article 10 are only granted to the extent Spectrum and its Affiliates have such rights to grant.
10.4      Claimed Infringement of Third Party Rights .


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10.4.1      Notice . In the event that a third party at any time provides written notice of a claim to, or brings an Action against any party, or any of such party’s respective Affiliates or sublicensees, claiming infringement of its Patent Rights or unauthorized use or misappropriation of its Know-How, based upon the development, manufacture or commercialization of Licensed Products in the Licensed Territory (“ Infringement Claim ”), such party will promptly notify the other party of the Infringement Claim or the commencement of such action, suit or proceeding, enclosing a copy of the Infringement Claim and all papers served. Each party agrees to make available to the other party its advice and counsel regarding the technical merits of any such claim at no cost to the other party and to offer reasonable assistance to the other party at no cost to the other party.
10.4.2      Defense of Infringement Claim; Declaratory Judgment Actions .
(a)      As between Spectrum and Purchaser, Purchaser will have the sole and exclusive right, but not the obligation, to control the defense of any Infringement Claim brought against Purchaser or any of its Affiliates arising out of the development, manufacture or commercialization of Licensed Products in the Licensed Territory. As between Spectrum and Purchaser, Spectrum will have the sole and exclusive right, but not the obligation, to control the defense of any Infringement Claim brought against Spectrum or any of its Affiliates or sublicensees (other than Purchaser) arising out of the development, manufacture or commercialization of Licensed Products in the Spectrum Territory. Neither party will settle any such Action in a manner that (i) admits that any Licensed Product infringes or misappropriates a third party’s Intellectual Property or (ii) agrees to any injunction or other equitable remedy binding the other party without obtaining the prior written consent of the other party, which consent will not be unreasonably withheld, conditioned or delayed. In addition, if applicable prior to the initiation of an Infringement Claim, either party has the right, but not the obligation, to bring a declaratory judgment action relating to any third party Patent Right that such third party has alleged is infringed by the development, manufacture or commercialization of Licensed Products in the Territory; provided , however , neither party shall bring such declaratory judgment action without first consulting with the other party.
(b)      The party controlling the defense of an Infringement Claim or bringing a declaratory judgment action will have the sole and exclusive right to select counsel for such Infringement Claim or such declaratory judgment action. The party controlling the defense of an Infringement Claim or bringing a declaratory judgment Action will keep the other party informed, and will from time to time consult with the other party regarding the status of any such Action and will upon request provide the other party with copies of all documents filed in, and all written communications relating to, any suit brought in connection with such Action. The other party will also have the right to participate and be represented in any such Action, at its own expense.
10.5      Other Infringement Resolutions . In the event of a dispute or potential dispute that has not ripened into a demand or Action of the types described in Section 10.3 and Section 10.4 ( e.g. , Actions seeking declaratory judgments and revocation proceedings), the same principles governing control of the resolution of the dispute, consent to settlements of the dispute, and


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implementation of the settlement of the dispute will apply. Each party will immediately notify the other party of any certification of which it becomes aware filed pursuant to 21 U.S.C. § 355(b)(2)(A) or § 355(j)(2)(A)(vii) or foreign equivalent statute (or any amendment or successor statute thereto) or declaratory judgment action filed by a third party claiming that a Licensed Patent is invalid or that infringement of such Licensed Patent will not arise from the development, manufacture, use or sale of any product by a third party. The provisions of Section 10.3 will thereafter apply as if such third party were an infringer or suspected infringer.
10.6      Diligence . Purchaser shall, directly and through its Affiliates and sublicensees, use commercially reasonable efforts to commercialize the Licensed Products in the Designated Countries in its approved indications. For the purposes of this Section 10.6, “commercially reasonable efforts” means, with respect to the commercialization of each Licensed Product, at any given time as the case may be, efforts reasonably used by Purchaser or its Affiliates (giving due consideration to relevant industry standards) for Purchaser’s own products (including internally developed, acquired and in-licensed products) with similar commercial potential at a similar stage in their lifecycle (assuming continuing development of such product), taking into consideration their safety, tolerability and efficacy, and the radioimmunotherapy nature of the Licensed Products, the profitability consistent with Purchaser’s financial statements, the competitive landscape, extent of market exclusivity, patent protection, cost to develop the product, promotable claims, health economic claims, the approved indications and the regulatory and reimbursement structure involved. This Section 10.6 shall have no further force or effect with respect to the Licensed Products once Purchaser no longer has any obligation to make payments to Spectrum with respect to Net Sales of such Licensed Product under Section 4.3.1.
10.7      Ownership of Inventions . Each party shall own any inventions, whether or not patentable, made solely by its own employees, agents, or independent contractors in the course of conducting its activities under this Agreement, together with all intellectual property rights therein. The parties shall jointly own any inventions that are made jointly by employees, agents, or independent contractors of each party in the course of performing activities under this Agreement, together with all intellectual property rights therein (“ Joint Inventions ”). Inventorship as between the parties shall be determined in accordance with U.S. patent laws. All patents claiming Joint Inventions shall be referred to herein as “ Joint Patents .” Except to the extent either party is restricted by the licenses granted to the other party under this Agreement or the other terms of this Agreement, each party shall be entitled to practice and exploit the Joint Inventions and Joint Patents without the duty of accounting or seeking consent from the other party.
10.8      Rights of Reference to Regulatory Materials. Spectrum hereby grants to Purchaser and Purchaser’s Affiliates and licensees in the Licensed Territory a right of reference to all regulatory materials filed by or on behalf of Spectrum (including by its Affiliates and licensees), which right of reference Purchaser (and its Affiliates and licensees) may use for the sole purpose of seeking, obtaining and maintaining regulatory approvals and developing and commercializing the Licensed Product in the Licensed Territory. Purchaser hereby grants to Spectrum and Spectrum’s Affiliates and licensees in the Spectrum Territory a right of reference to all regulatory materials filed by or on behalf of Purchaser, which right of reference Spectrum


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may use for the sole purpose of seeking, obtaining and maintaining regulatory approvals and developing and commercializing the Licensed Products in the Spectrum Territory. Each party shall support the other party, as reasonably requested by such other party, in obtaining regulatory approvals in such other party’s territory, including providing necessary documents or other materials required by applicable laws to obtain regulatory approval in such territory, all in accordance with the terms and conditions of this Agreement.
11.
CONDITIONS TO PURCHASER’S OBLIGATIONS AT THE CLOSING.
The obligations of Purchaser to consummate the Closing are subject to the fulfillment of each of the following conditions:
11.1      Representations and Warranties . The representations and warranties of Spectrum contained in this Agreement and in any document, instrument or certificate delivered hereunder (a) that are not qualified by materiality or Material Adverse Effect will be true and correct at and as of the Closing Date, except where the failure to be true and correct would not be reasonably expected to have a Material Adverse Effect or a material adverse effect on the ability of Spectrum to consummate the Contemplated Transactions or perform its obligations under this Agreement or the Ancillary Agreements, and (b) that are qualified by materiality or Material Adverse Effect will be true and correct in all respects at and as of the Closing Date, other than representations and warranties that expressly speak only as of a specific date or time, which will be true and correct to the extent described above as of such specified date or time.
11.2      Performance . Spectrum will have performed and complied with, in all material respects, all agreements, obligations and covenants contained in this Agreement that are required to be performed or complied with by it at or prior to the Closing; provided, that, with respect to agreements, obligations and covenants that are qualified by materiality, Spectrum will have performed such agreements, obligations and covenants, as so qualified, in all respects.
11.3      Compliance Certificate . Spectrum will have delivered to Purchaser a certificate as to the matters set forth in Sections 11.1, 11.2 and 11.4 having been satisfied.
11.4      Omitted .
11.5      Qualifications . There shall be in effect no provision of any material applicable Legal Requirement or Governmental Order, in each case in the Designated Countries, prohibiting the consummation of any of the Contemplated Transactions.
11.6      Absence of Litigation . No Action brought by a Governmental Authority or third party will be pending or threatened in writing that could result in an Order nor will there be any Order in effect (a) that would prevent consummation of any of the Contemplated Transactions, (b) that would result in any of the Contemplated Transactions being rescinded following consummation, (c) that would limit or otherwise adversely affect Purchaser’s right to own the Licensed Business or to operate all or any material portion of either the Licensed Business or the Acquired Assets or of Purchaser’s business or assets or that any of its Affiliates or (d) would compel Purchaser or any of its Affiliates to dispose of all or any material portion of either the


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Licensed Business or the Acquired Assets or the business or assets of Purchaser or any of its Affiliates.
11.7      Consents, etc . All actions by (including any authorization, consent or approval) or in respect of (including notice to), or filings with, any Governmental Authority or other Person that are required to consummate the Contemplated Transactions that are set forth on Schedule 3.6 will have been obtained or made, and no such authorization, consent or approval will have been revoked.
12.
CONDITIONS TO SPECTRUM’S OBLIGATIONS AT THE CLOSING.
12.1      Representations and Warranties . The representations and warranties of Purchaser contained in this Agreement and in any document, instrument or certificate delivered hereunder (a) that are not qualified by materiality will be true and correct at and as of the Closing Date, except where the failure to be true and correct would not be reasonably expected to have a material adverse effect on the ability of Purchaser to consummate the Contemplated Transactions or perform its obligations under this Agreement or the Ancillary Agreements and (b) that are qualified by materiality will be true and correct in all respects at and as of the Closing Date, other than representations and warranties that expressly speak only as of a specific date or time, which will be true and correct to the extent described above as of such specified date or time.
12.2      Performance . Purchaser will have performed and complied with, in all material respects, all agreements, obligations and covenants contained in this Agreement that are required to be performed or complied with by Purchaser at or prior to the Closing; provided, that, with respect to agreements, obligations and covenants that are qualified by materiality, Purchaser will have performed such agreements, obligations and covenants, as so qualified, in all respects.
12.3      Compliance Certificate . Purchaser will have delivered to Spectrum a certificate as to the matters set forth in Sections 12.1 and 12.2.
12.4      Qualifications . There shall be in effect no provision of any material applicable Legal Requirement or Governmental Order, in each case in the Designated Countries, prohibiting the consummation of any of the Contemplated Transactions.
12.5      Absence of Litigation . No Action brought by a Governmental Authority or third party will be pending or threatened in writing that could result in an Order, nor will there be any Order in effect, (a) that would prevent consummation of any of the Contemplated Transactions, or (b) that would result in any of the Contemplated Transactions being rescinded following consummation (and no such Governmental Order will be in effect).
13.
TERMINATION.
13.1      Omitted .
13.2      Omitted .
13.3      Termination by Spectrum For Purchaser Material Default .


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13.3.1      Purchaser Material Default . This Agreement shall automatically terminate if a Purchaser Material Default as defined below in subsections (b), (c) or (d)(i) occurs. If a Purchaser Material Default as defined below in subsections (a) or (d)(ii) occurs and, in the case of (a) below, continues for a period of [***] days after Spectrum has delivered written notice to Purchaser stating the specific Purchaser Material Default and citing this Section 13.3.1, then subject to Section 13.3.2 below, Spectrum may terminate this Agreement by providing written notice to Purchaser. In the event this Agreement terminates under this Section 13.3.1, (i) all Acquired Assets as defined in this Agreement transferred to Purchaser (to the extent such assets remain in existence and to the extent of the then right, title and interest of Purchaser or its Affiliates in such assets) and all licenses granted to Purchaser under this Agreement or any Ancillary Agreement and all other rights granted to Purchaser hereunder or thereunder shall automatically terminate and revert to Spectrum and Purchaser shall, and shall cause its Affiliates to, execute all documents reasonably requested by Spectrum to support such reversions, and (ii) Purchaser shall have no further payment obligations to Spectrum under this Agreement, except for payment obligations arising on or prior to the Termination Date. It shall be a “ Purchaser Material Default ” by Purchaser under this Section 13.3 if any of the following occurs:
(a)      Purchaser has breached or violated in any material respect any of its covenants, obligations and agreements contained in this Agreement (including Purchaser’s failure to timely pay any payments under this Agreement or payments required to be made under any of the Ancillary Agreements after resolution of any disputed payments issues in accordance with the terms and conditions of any such Ancillary Agreement);
(b)      Purchaser or any of its Affiliates connected to the Licensed Business (the “ Purchaser Related Affiliates ”) shall make an assignment for the benefit of creditors, or admit in writing its inability to pay or generally fail to pay its debts as they mature or become due, or shall petition or apply for the appointment of a trustee or other custodian, liquidator or receiver of Purchaser or any of its Purchaser Related Affiliates or of any substantial part of the assets of Purchaser or any of its Purchaser Related Affiliates or shall commence any case or other proceeding relating to Purchaser or any of its Purchaser Related Affiliates under any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution or liquidation or similar law of any jurisdiction, now or hereafter in effect, or shall take any action to authorize or in furtherance of any of the foregoing, or if any such petition or application shall be filed or any such case or other proceeding shall be commenced against Purchaser or any of its Purchaser Related Affiliates and Purchaser or any of its Purchaser Related Affiliates shall indicate its approval thereof, consent thereto or acquiescence therein;
(c)      a decree or order is entered appointing any such trustee, custodian, liquidator or receiver or adjudicating Purchaser or any of its Purchaser Related Affiliates bankrupt or insolvent, or approving a petition in any such case or other proceeding, or a decree or order for relief is entered in respect of Purchaser or any of its Purchaser Related Affiliates in an involuntary case under any bankruptcy laws as now or hereafter constituted; or
(d)      Purchaser breaches or causes a breach of the Bayer Agreement and (i) Bayer terminates the Bayer Agreement in accordance with the terms and conditions of the


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Bayer Agreement as a result of such breach, or (ii) Purchaser fails to remedy such breach within [***] days of notice from Spectrum of its receipt of written notice thereof from Bayer to Spectrum.
13.3.2      Disputes Regarding Purchaser Material Defaults . If Purchaser disputes in good faith the existence of a Purchaser Material Default with respect to subsection 13.3.2(a) above specified in a notice provided by Spectrum pursuant to Section 13.3.1 above, and provides notice to Spectrum of such dispute within the [***] day period following the date Spectrum notifies Purchaser of a Purchaser Material Default, Spectrum will not have the right to terminate this Agreement unless and until the existence of such Purchaser Material Default by Purchaser has been determined by a final arbitration award that is no longer subject to appeal or other review in accordance with the dispute resolution provisions of Sections 16.10 and 16.11, and Purchaser fails to cure such Purchaser Material Default or satisfy the arbitration award or judicial order or judgment within [***] Business Days following such determination. It is understood and acknowledged that during the pendency of such dispute, all the terms and conditions of this Agreement will remain in effect and the parties will continue to perform all of their respective obligations hereunder.
13.3.3      Expiration of Termination Clause . Sections 13.3.1(a) and (b) shall have no further force or effect once Purchaser no longer has any obligation to make Royalty Payments or payments under any Ancillary Agreements.
13.3.4      Effect of Termination . In the event of termination pursuant to Section 13.3, (i) the Ancillary Agreements shall terminate and the covenants contained in Sections 2.5 (Consents to Transfer Agreements), 3.6 (Consents), 7.24 (Access to Information), 9.5 (Confidentiality), 9.8 (Transfer of Permits), 9.9 (Rebates, Chargebacks, Returns and Other Adjustments), 9.11 (Joint Contracts), 9.12 (Notices and Consents) and 9.16 (Further Assurances) of Spectrum and its Affiliates shall become covenants of Purchaser and its Affiliates and vice versa; and (ii) the following provisions of this Agreement shall survive termination of this Agreement and continue in full force and effect: (x) Articles 1 (to the extent defined terms are contained in the following surviving Articles and Sections) and 14; and (y) Sections 2.1.6, 4.3, 4.4, 4.6 (provided that the preceding Sections of Article 4 shall survive only with respect to any payment incurred or accrued prior to such expiration or termination), 9.5, 10.7, 13.3.4, 16.1, 16.3, 16.4, 16.6, 16.7, 16.8, 16.9, 16.11, 16.12, 16.13, 16.14 and 16.15.
13.4      Termination by Purchaser For Spectrum Material Default .
13.4.1      Spectrum Material Default . If a Spectrum Material Default as defined below in this Section 13.4.1 occurs and continues for a period of [***] days after Purchaser has delivered written notice to Spectrum stating the specific Spectrum Material Default and citing this Section 13.4.1, then subject to Section 13.4.2 below, then, at Purchaser’s election, either (i) as Purchaser’s only remedy and Spectrum’s only liability, the limitations on Purchaser’s development rights under Section 2.6(iii) shall no longer apply, or (ii) Purchaser may terminate this Agreement by providing written notice to Spectrum, in which event (x) all Acquired Assets as defined in this Agreement transferred to Purchaser (to the extent such assets remain in existence and to the extent of the then right, title and interest of Purchaser or its Affiliates in such


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assets) and all licenses granted to Purchaser under this Agreement or any Ancillary Agreement and all other rights granted to Purchaser hereunder or thereunder shall automatically terminate and revert to Spectrum and Purchaser shall, and shall cause its Affiliates to, execute all documents reasonably requested by Spectrum to support such reversions, and (y) Purchaser shall have no further payment obligations to Spectrum under this Agreement, except for payment obligations arising on or prior to the Termination Date. It shall be a “ Spectrum Material Default ” by Spectrum under this Section 13.4 if Spectrum has breached or violated in any material respect any of its covenants, obligations and agreements contained in this Agreement.
13.4.2      Disputes Regarding Spectrum Material Defaults . If Spectrum disputes in good faith the existence of a Spectrum Material Default with respect to subsection 13.4.1(a) above specified in a notice provided by Purchaser pursuant to Section 13.4.1 above, and provides notice to Purchaser of such dispute within the [***] day period following the date Purchaser notifies Spectrum of the Spectrum Material Default, Purchaser will not have the right to terminate this Agreement unless and until the existence of such Spectrum Material Default by Spectrum has been determined by a final arbitration award that is no longer subject to appeal or other review in accordance with the dispute resolution provisions of Sections 16.10 and 16.11, and Spectrum fails to cure such Spectrum Material Default or satisfy the arbitration award or judicial order or judgment within [***] Business Days following such determination. It is understood and acknowledged that during the pendency of such dispute, all the terms and conditions of this Agreement will remain in effect and the parties will continue to perform all of their respective obligations hereunder.
13.4.3      Effect of Termination . In the event of termination pursuant to Section 13.4, (i) the Ancillary Agreements shall terminate and the covenants contained in Sections 2.5 (Consents to Transfer Agreements), 3.6 (Consents), 7.24 (Access to Information), 9.5 (Confidentiality), 9.8 (Transfer of Permits), 9.9 (Rebates, Chargebacks, Returns and Other Adjustments), 9.11 (Joint Contracts), 9.12 (Notices and Consents) and 9.16 (Further Assurances) of Spectrum and its Affiliates shall become covenants of Purchaser and its Affiliates and vice versa, and (ii) the following provisions of this Agreement shall survive termination of this Agreement and continue in full force and effect: (x) Articles 1 (to the extent defined terms are contained in the following surviving Articles and Sections) and 14; and (y) Sections 2.1.6, 4.3, 4.4, 4.6 (provided that the preceding Sections of Article 4 shall survive only with respect to any payment incurred or accrued prior to such expiration or termination), 9.5, 10.7, 13.4.3, 16.1, 16.3, 16.4, 16.6, 16.7, 16.8, 16.9, 16.11, 16.12, 16.13, 16.14 and 16.15.
13.5      Unilateral Termination by Purchaser .
13.5.1      Termination Upon Written Notice . Notwithstanding any other provision of this Agreement, Purchaser may terminate this Agreement in its entirety upon one hundred eighty (180) days prior written notice to Spectrum at any time.
13.5.2      Effect of Termination . In the event this Agreement terminates under Section 13.5:


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(a)      (i) all Acquired Assets as defined in this Agreement transferred to Purchaser (to the extent such assets remain in existence and to the extent of the then right, title and interest of Purchaser or its Affiliates in such assets) and all licenses granted to Purchaser under this Agreement or any Ancillary Agreement and all other rights granted to Purchaser hereunder or thereunder shall automatically terminate and revert to Spectrum and Purchaser shall, and shall cause its Affiliates to, execute all documents reasonably requested by Spectrum to support such reversions, (ii) Purchaser shall have no further payment obligations to Spectrum under this Agreement, except for payment obligations arising on or prior to the Termination Date upon termination of this Agreement by Purchaser pursuant to Section 13.5.1, and (iii) any ongoing clinical trials (unless assumed by Spectrum) shall stop recruiting and shall be terminated in accordance with ethical guidelines and in coordination with Spectrum to prevent any disruption to the status of any marketing authorization, and Purchaser shall promptly assign to Spectrum ownership of all data generated prior to the date such rights revert to Spectrum. In connection with a reversion of rights and assignment in accordance with this Section 13.5.2, Purchaser shall provide such assistance, as expeditiously as possible, at no cost to Spectrum, and as may be, and for so long as, reasonably necessary or useful (in Spectrum’s reasonable determination) to the extent Purchaser, its Affiliates and sublicensees are then performing or having performed such activities, including (i) furnishing to Spectrum all safety information owned or controlled by Purchaser and (ii) assigning or amending as appropriate, upon request of Spectrum, any agreements or arrangements with third party contractors to develop, distribute, sell or otherwise commercialize the Licensed Products in the Licensed Territory, and any authorizations from a Governmental Authority relating to the development, distribution, sale or commercialization of the Licensed Products in the Licensed Territory. To the extent that any such contract between Purchaser and a third party is not assignable to Spectrum, Purchaser shall reasonably cooperate with Spectrum to arrange to continue to provide such services for a reasonable time after termination against fee for service which will be discussed in good faith.
(b)      (i) the Ancillary Agreements shall terminate and the covenants contained in Sections 2.5 (Consents to Transfer Agreements), 3.6 (Consents), 7.24 (Access to Information), 9.5 (Confidentiality), 9.8 (Transfer of Permits), 9.9 (Rebates, Chargebacks, Returns and Other Adjustments), 9.11 (Joint Contracts), 9.12 (Notices and Consents) and 9.16 (Further Assurances) of Spectrum and its Affiliates shall become covenants of Purchaser and its Affiliates and vice versa, and (ii) the following provisions of this Agreement shall survive termination of this Agreement and continue in full force and effect: (x) Articles 1 (to the extent defined terms are contained in the following surviving Articles and Sections) and 14; and (y) Sections 2.1.6, 4.3, 4.4, 4.6 (provided that the preceding Sections of Article 4 shall survive only with respect to any payment incurred or accrued prior to such expiration or termination), 9.5, 10.7, 13.5.2, 16.1, 16.3, 16.4, 16.6, 16.7, 16.8, 16.9, 16.11, 16.12, 16.13, 16.14 and 16.15.
13.6      Termination by Governmental Authority .
13.6.1      Suspension or Termination . Should any serious and unexpected events or issues occur with respect to the safety of any Licensed Product as a result of which (i) any authorization, consent or approval from any Governmental Authority for such Licensed Product is terminated or suspended in one or more regulatory jurisdictions in the Licensed Territory, or


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(ii) a Governmental Authority directs or requests discontinuance of development, use or sale of such Licensed Product in one or more countries in the Licensed Territory, then Purchaser’s obligations under this Agreement with respect to such Licensed Product will be suspended in such regulatory jurisdiction(s) and/or country(ies) (as applicable) until such serious safety event is resolved and such authorization, consent or approval from such Governmental Authority for such Licensed Product is no longer terminated or suspended or the Governmental Authority has given approval again to distribute or sell such Licensed Product (as applicable) in such regulatory jurisdiction(s) and/or country(ies). Purchaser may, upon written notice to Spectrum, terminate this Agreement, on a Licensed Product-by-Licensed Product and country-by-country basis pursuant to this Section 13.6.1 if Purchaser’s obligations under this Agreement are suspended pursuant to this Section 13.6.1 for a period in excess of [***] months. In the event this Agreement terminates under this Section 13.6.1, (i) all Acquired Assets as defined in this Agreement transferred to Purchaser (to the extent such assets remain in existence and to the extent of the then right, title and interest of Purchaser or its Affiliates in such assets) and all licenses granted to Purchaser under this Agreement or any Ancillary Agreement and all other rights granted to Purchaser hereunder or thereunder shall automatically terminate and revert to Spectrum, in all cases on a Licensed Product-by-Licensed Product and country-by-country basis, and Purchaser shall, and shall cause its Affiliates to, execute all documents reasonably requested by Spectrum to support such reversions, and (ii) Purchaser shall have no further payment obligations to Spectrum under this Agreement, except for payment obligations arising on or prior to the Termination Date, in all cases on a Licensed Product-by-Licensed Product and country-by-country basis.
13.6.2      Expiration of Termination Clause . Section 13.6.1 shall have no further force or effect once Purchaser no longer has any obligation to make Royalty Payments or payments under any Ancillary Agreements.
13.6.3      Effect of Termination . In the event of termination pursuant to Section 13.4, (i) the Ancillary Agreements shall terminate and the covenants contained in Sections 2.5 (Consents to Transfer Agreements), 3.6 (Consents), 7.24 (Access to Information), 9.5 (Confidentiality), 9.8 (Transfer of Permits), 9.9 (Rebates, Chargebacks, Returns and Other Adjustments), 9.11 (Joint Contracts), 9.12 (Notices and Consents) and 9.16 (Further Assurances) of Spectrum and its Affiliates shall become covenants of Purchaser and its Affiliates and vice versa, and (ii) the following provisions of this Agreement shall survive termination of this Agreement and continue in full force and effect: (x) Articles 1 (to the extent defined terms are contained in the following surviving Articles and Sections) and 14; and (y) Sections 2.1.6, 4.3, 4.4, 4.6 (provided that the preceding Sections of Article 4 shall survive only with respect to any payment incurred or accrued prior to such expiration or termination), 9.5, 10.7, 13.6.3, 16.1, 16.3, 16.4, 16.6, 16.7, 16.8, 16.9, 16.11, 16.12, 16.13, 16.14 and 16.15.
13.7      Termination of Bayer Agreement . This Agreement shall automatically terminate upon the termination of the Bayer Agreement for any reason.
14.
INDEMNIFICATION.
14.1      Indemnification by Spectrum .


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14.1.1      Indemnification . Subject to the limitations set forth in this Article 14, Spectrum will indemnify and hold harmless Purchaser and each of its Affiliates, and the Representatives and Affiliates of each of the foregoing Persons (each, a “ Purchaser Indemnified Person ”), from, against and in respect of any and all Losses, incurred or suffered by Purchaser Indemnified Persons or any of them as a result of, arising out of or directly or indirectly relating to:
(a)      any breach of, or inaccuracy in, any representation or warranty made by Spectrum in this Agreement;
(b)      any breach or violation of any covenant or agreement of Spectrum (including under this Article 14) in this Agreement;
(c)      any Excluded Spectrum Liability;
(d)      Apportioned Taxes allocable to it pursuant to Section 15.3; or
(e)      any fraud or intentional misrepresentation of Spectrum or any of its Affiliates.
14.1.2      Monetary Limitations . Spectrum will have no obligation to indemnify the Purchaser Indemnified Persons in respect of Losses arising from the breach of, or inaccuracy in, any representation or warranty pursuant to Section 14.1.1(a) or breach of any covenant or agreement to be performed prior to the Closing pursuant to Section 14.1.1(b) with respect to claims brought after the Closing, unless the aggregate amount of all such Losses incurred or suffered by the Purchaser Indemnified Persons exceeds [***] (the “ Indemnity Basket ”) (at which point Spectrum will indemnify the Purchaser Indemnified Persons for all such Losses exceeding [***]). Notwithstanding the foregoing, Spectrum’s liability in respect of claims for indemnification arising from the breach of, or inaccuracy in, any representation or warranty contained in [***] shall not exceed [***]. Further, Spectrum’s aggregate liability in respect of claims for indemnification arising from the breach of, or inaccuracy in, any representation or warranty pursuant to Section 14.1.1(a) and claims brought after the Closing arising from the breach of any covenant or agreement to be performed by Spectrum hereunder pursuant to Section 14.1.1(b), will not exceed [***] (such amount, the “ Maximum Indemnity Cap ”). The monetary limitations contained in this Section 14.1.2 will not apply to [***]. Claims for indemnification pursuant to any other provision of Section 14.1.1 are not subject to the monetary limitations set forth in this Section 14.1.2.
14.2      Indemnification by Purchaser .
14.2.1      Indemnification . Subject to the limitations set forth in this Article 14, Purchaser will indemnify and hold harmless Spectrum and its Affiliates, and the Representatives and Affiliates of each of the foregoing Persons (each, a “ Spectrum Indemnified Person ”), from, against and in respect of any and all Losses incurred or suffered by the Spectrum Indemnified Persons or any of them as a result of, arising out of or relating to, directly or indirectly:


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(a)      any breach of, or inaccuracy in, any representation or warranty made by Purchaser in this Agreement;
(b)      any breach or violation of any covenant or agreement of Purchaser (including under this Article 14) in or pursuant to this Agreement;
(c)      any Assumed Liability and any Excluded Purchaser Liability;
(d)      Taxes payable by Purchaser pursuant to Section 15.1 and Apportioned Taxes allocable to it pursuant to Section 15.3; or
(e)      any fraud or intentional misrepresentation of Purchaser or any of its Affiliates.
14.2.2      Monetary Limitations . Purchaser will have no obligation to indemnify the Spectrum Indemnified Persons in respect to Losses arising from the breach of, or inaccuracy in, any representation or warranty pursuant to Section 14.2.1(a) and the breach of any covenant or agreement to be performed prior to the Closing pursuant to Section 14.2.1(b) with respect to claims brought after the Closing, unless and until the aggregate amount of all such Losses incurred or suffered by the Spectrum Indemnified Persons exceeds the Indemnity Basket (at which point Purchaser will indemnify the Spectrum Indemnified Persons for all such Losses exceeding the Indemnity Basket). Further, Purchaser’s aggregate liability in respect of claims for indemnification arising from the breach of, or inaccuracy in, any representation or warranty pursuant to Section 14.2.1(a) and claims brought after the Closing arising from the breach of any covenant or agreement to be performed by Purchaser hereunder pursuant to Section 14.2.1(b) will not exceed the Maximum Indemnity Cap; provided , however , that the foregoing limitations will not apply to [***]. Claims for indemnification pursuant to any other provision of Section 14.2.1 are not subject to the limitations set forth in this Section 14.2.2.
14.3      Time for Claims . All representations and warranties and all covenants, to the extent required to be performed prior to the Closing, set forth herein will survive the Closing for the time period set forth below, provided , however , that no claim may be made or suit instituted seeking indemnification pursuant to Section 14.1.1(a) or 14.2.1(a) of this Agreement or with respect to breach of covenants or agreements to be performed prior to the Closing pursuant to Sections 14.1.1(b) or 14.2.1(b) of this Agreement, unless the claiming party provides notice as specified in Section 14.1 within the following time periods:
a.      at any time, in the case of any breach of, or inaccuracy in, the representations and warranties set forth in Sections 7.1 (Organization), 7.2 (Power and Authorization), 7.4(e) (Breach of Organizational Documents), 7.10 (Assets), 7.14 (Intellectual Property), 7.23 (No Brokers), 8.1 (Organization), 8.2 (Power and Authorization), 8.4(d) (Breach of Organizational Documents) or 8.5 (No Brokers);
b.      at any time, in the case of any claim or suit based upon fraud or intentional misrepresentation;


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c.      at any time prior to the conclusion of the day that is [***] after Closing Date in the case of breach of, or inaccuracy in, the representation and warranty in Section 7.8;
d.      at any time prior to the [***] after the expiration of the applicable statute of limitations (taking into account any tolling periods and other extensions) in the case of any breach of, or inaccuracy in, the representations and warranties set forth in Section 7.26 (Tax Matters); and
e.      at any time prior to the conclusion of the day that is [***] after the Closing Date, in the case of any breach of, or inaccuracy in, any other representation and warranty in this Agreement or breach of any covenant, to the extent required to be performed prior to the Closing Date (other than covenants relating to Taxes, which are not subject to the limitations of this Section 14.3).
Claims for indemnification not specified with a time limitation in this Section 14.3 are not subject to the limitations set forth in this Section 14.3 and shall be governed by the applicable statute of limitations. No claim for Loss by Purchaser shall be deemed to have survived, and shall be deemed waived, if written notice has not been provided to Spectrum within [***] of actual knowledge of such Loss by the Purchaser individuals set forth on Schedule 14.3A . No claim for Loss by Spectrum shall be deemed to have survived, and shall be deemed waived, if written notice has not been provided to Purchaser within [***] of actual knowledge of such Loss by the Spectrum individuals set forth on Schedule 14.3B .
For avoidance of doubt, claims will be deemed to have been made within the survival period if a reasonably complete description of the claim based upon the facts available at the time is presented by the party seeking indemnification to the Indemnifying Party within the specified time period herein.
14.4      Third Party Claims .
14.4.1      Notice of Claim . If any third party notifies an Indemnified Party with respect to any matter (a “ Third Party Claim ”) that may give rise to an Indemnity Claim against an Indemnifying Party under this Article 14, then the Indemnified Party will promptly give written notice to the Indemnifying Party; provided , however , that no delay on the part of the Indemnified Party in notifying the Indemnifying Party will relieve the Indemnifying Party from any obligation under this Article 14, except to the extent such delay actually and materially prejudices the Indemnifying Party.
14.4.2      Assumption of Defense, etc . The Indemnifying Party will be entitled to participate in the defense of any Third Party Claim (including a claim for Taxes) that is the subject of a notice given by the Indemnified Party pursuant to Section 14.4.1. In addition, the Indemnifying Party will have the right to defend the Indemnified Party against the Third Party Claim with counsel of its choice reasonably satisfactory to the Indemnified Party so long as (a) the Indemnifying Party gives written notice to the Indemnified Party within [***] calendar days after the Indemnified Party has given notice of the Third Party Claim that the Indemnifying Party will indemnify the Indemnified Party from and against the entirety of any and all Losses the


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Indemnified Party may suffer resulting from, arising out of, relating to, in the nature of, or caused by the Third Party Claim; (b) the Third Party Claim involves only money damages and does not seek an injunction or other equitable relief against the Indemnified Party; (c) the Indemnified Party has not been advised by counsel that an actual or potential conflict exists between the Indemnified Party and the Indemnifying Party in connection with the defense of the Third Party Claim; (d) the Third Party Claim does not relate to or otherwise arise in connection with Taxes or any criminal or regulatory enforcement Action; (e) settlement of an adverse judgment with respect to or the Indemnifying Party’s conduct of the defense of the Third Party Claim is not, in the good faith judgment of the Indemnified Party, reasonably likely to be materially adverse to the Indemnified Party’s reputation or continuing business interests (including its relationships with current or potential customers, suppliers or other parties material to the conduct of its business); and (f) the Indemnifying Party conducts the defense of the Third Party Claim actively and diligently. The Indemnified Party may retain separate co-counsel at its sole cost and expense and participate in the defense of the Third Party Claim; provided , however , that the Indemnifying Party will pay the fees and expenses of separate co-counsel retained by the Indemnified Party that are incurred prior to the Indemnifying Party’s assumption of control of the defense of the Third Party Claim.
14.4.3      Limitations on Indemnifying Party . The Indemnifying Party will not consent to the entry of any judgment or enter into any compromise or settlement with respect to the Third Party Claim without the prior written consent of the Indemnified Party unless such judgment, compromise or settlement (a) provides for the payment by the Indemnifying Party of money as sole relief for the claimant; (b) results in the full and general release of the Purchaser Indemnified Persons or Spectrum Indemnified Persons, as applicable, from all liabilities arising or relating to, or in connection with, the Third Party Claim; and (c) involves no finding or admission of any violation of Legal Requirements or the rights of any Person and no effect on any other claims that may be made against the Indemnified Party. Notwithstanding any provision to the contrary in Section 14.4.2 and 14.4.3, Spectrum shall have the full and unrestricted right to defend, with counsel of its own choosing, any Action and negotiate and settle any Action initiated against it by any Governmental Authority which may in Spectrum’s judgment, exercised in good faith, materially affect operations and activities of Spectrum beyond the Business, even though such defense or settlement may or will also affect the Business, provided , however , that, if permitted by applicable Legal Requirements, Spectrum notifies Purchaser of any such Action, keeps Purchaser apprised of material developments with respect to such Action and consults with Purchaser regarding such Action from time to time and nothing in this sentence excuses Spectrum from performing its obligations under this Agreement or under the Ancillary Agreements.
14.4.4      Indemnified Party’s Control . If the Indemnifying Party does not deliver the notice contemplated by clause (a) of Section 14.4.2 within [***] calendar days after the Indemnified Party has given notice of the Third Party Claim, or otherwise at any time fails to conduct the defense of the Third Party Claim actively and diligently, the Indemnified Party may defend and may consent to the entry of any judgment or enter into any compromise or settlement with respect to, the Third Party Claim in any manner it may deem appropriate (and the Indemnified Party need not consult with, or obtain any consent from, the Indemnifying Party in


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connection therewith). If such notice is given on a timely basis and the Indemnifying Party conducts the defense of the Third Party Claim actively and diligently but any of the other conditions in Section 14.4.2 are or become unsatisfied, the Indemnified Party may defend, and may consent to the entry of any judgment or enter into any compromise or settlement with respect to, the Third Party Claim; provided , however , that the Indemnifying Party will not be bound by the entry of any such judgment consented to, or any such compromise or settlement effected, without its prior written consent (which consent will not be unreasonably withheld, conditioned or delayed). In the event that the Indemnified Party conducts the defense of the Third Party Claim pursuant to this Section 14.4.4, the Indemnifying Party will (a) advance the Indemnified Party promptly and periodically for the costs of defending against the Third Party Claim (including reasonable attorneys’ fees and expenses) and (b) remain responsible for any and all other Losses that the Indemnified Party may incur or suffer resulting from, arising out of, relating to, in the nature of or caused by the Third Party Claim to the fullest extent provided in this Article 14.
14.4.5      Consent to Jurisdiction Regarding Third Party Claim . Purchaser and Spectrum, each in its capacity as an Indemnifying Party, hereby consents to the non-exclusive jurisdiction of any court in which any Third Party Claim may be brought against any Indemnified Party for purposes of any claim which such Indemnified Party may have against such Indemnifying Party pursuant to this Agreement in connection with such Third Party Claim, and in furtherance thereof, the provisions of Section 16.12 are incorporated herein by reference, mutatis mutandis.
14.5      Remedies Cumulative . The rights of each Purchaser Indemnified Person and Spectrum Indemnified Person under this Article 14 are cumulative, and each Purchaser Indemnified Person and Spectrum Indemnified Person, as the case may be, will have the right in any particular circumstance, in its sole discretion, to enforce any provision of this Article 14 without regard to the availability of a remedy under any other provision of this Article 14. However, in no event shall either party be entitled to recover the same Loss more than once.
14.6      Exclusive Remedy . FROM AND AFTER THE CLOSING, AND EXCEPT AS SET FORTH IN SECTION 16.13, THE INDEMNIFICATION PROVISIONS PROVIDED IN THIS ARTICLE 14 SHALL BE THE SOLE AND EXCLUSIVE REMEDIES OF THE PARTIES FOR RESOLUTION OF THE MATTERS SPECIFIED IN SECTIONS 14.1.1 AND 14.2.1, EXCEPT FOR INDEMNIFICATION RELATED TO A PARTY’S (A) FRAUD OR (B) CRIMINAL ACTS.
14.7      Limitation of Liability . NO PARTY SHALL BE LIABLE TO ANY OTHER PARTY FOR ANY CLAIMS FOR CONSEQUENTIAL, INCIDENTAL, PUNITIVE, BUSINESS INTERRUPTION, EXEMPLARY OR INDIRECT DAMAGES, OR LOST PROFITS ARISING UNDER STATUTE, IN TORT, CONTRACT OR OTHERWISE. THE FOREGOING LIMITATION WILL NOT APPLY TO LIMIT ANY PARTY’S LIABILITY WITH RESPECT TO (A) A THIRD PARTY CLAIM, (B) FRAUD OR (C) CRIMINAL ACTS.
14.8      Insurance . Each of Spectrum and Purchaser shall procure and maintain insurance, including product liability insurance, or shall self-insure, in each case in a manner adequate to


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cover its obligations hereunder and consistent with normal business practices of prudent companies similarly situated at all times during which any Licensed Product is being clinically tested or commercially distributed or sold by such party. It is understood that such insurance shall not be construed to create a limit of either party’s liability with respect to its indemnification obligations under this Article 14. Each of Spectrum and Purchaser shall provide the other party with written evidence of such insurance or self-insurance upon request. Each of Spectrum and Purchaser shall provide the other party with written notice at least [***] days prior to the cancellation, non-renewal or material change in such insurance.
14.9      Insurance Recoveries and Tax Benefits. If an Indemnified Party has acquired insurance in compliance with Section 14.8 or otherwise, and such coverage is available to offset Losses incurred or suffered by such Indemnified Party, such Indemnified Party shall not be entitled to indemnification from the Indemnifying Party for such Losses under this Article 14 to the extent such Indemnified Party has actually received cash payments from such insurers, net of any increase in premiums, resulting therefrom and net of any Tax liabilities arising from the receipt or accrual of cash payments from insurers. In each such instance, the Indemnified Party shall use its commercially reasonable efforts to seek recovery for some or all of such Losses under applicable insurance policies. In addition to the foregoing, an Indemnified Party’s right to indemnification for Losses shall be determined by taking into account any Tax benefits actually realized by the Indemnified Party arising from the deductibility (or amortization, or depreciation or other Tax benefit) of such Losses and any Tax liabilities arising from the receipt or accrual of any payment from the Indemnifying Party.
14.10      Disclaimer . EACH PARTY MAKES NO REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, OTHER THAN THOSE EXPRESSLY MADE IN THIS AGREEMENT. ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, ARE HEREBY DISCLAIMED.
15.
TAX MATTERS
15.1      Certain Taxes and Fees . All transfer, documentary, sales, use, stamp, registration, excise and other similar Taxes (but excluding income Taxes), and any conveyance fees or recording charges incurred in connection with the Contemplated Transactions will be borne by Purchaser.
15.2      Tax Record Retention; Cooperation on Tax Matters . Each of Purchaser, Spectrum and their respective Affiliates will retain all Tax records relating to the Licensed Business or the Acquired Assets until the [***] after the expiration of the applicable statute of limitations (including any extensions thereof). Purchaser, Spectrum and their respective Affiliates will cooperate fully, as and to the extent reasonably requested by the other party, in connection with any Tax matters relating to the Licensed Business or the Acquired Assets (including by the provision of reasonably relevant records or information). The party requesting such cooperation will pay the reasonable out-of-pocket expenses of the other party.
15.3      Apportionment of Ad Valorem Taxes .


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i.      All personal property taxes (tangible or intangible), and similar ad valorem obligations levied with respect to the Acquired Assets in the Licensed Territory for a taxable period that includes (but does not end on) the Closing Date (collectively, the “ Apportioned Taxes ”) will be apportioned between Spectrum and Purchaser (or, as appropriate, their respective Affiliates) based on the number of days of the taxable period ending on the Closing Date and the number of days in the full taxable period. Spectrum, or, as appropriate, its Affiliates, will be liable for the proportionate amount of Apportioned Taxes attributable to days before or on the Closing Date and Purchaser, or, as appropriate, its Affiliates, will be liable for the proportionate amount attributable to days after the Closing Date.
ii.      Apportioned Taxes will be timely paid, and all applicable filings, reports and returns will be filed as provided by applicable Legal Requirements. The paying party will be entitled to reimbursement from the non-paying party in accordance with the apportionment in Section 15.3(ii). Upon payment of Apportioned Taxes, the paying party will present a statement to the non-paying party setting forth the amount of the reimbursement to which the paying party is entitled hereunder together with such supporting evidence as is reasonably necessary to calculate the amount to be reimbursed. The non-paying party will reimburse the paying party no later than [***] calendar days after the presentation of the statement. Any payment not made within that time will bear interest from the payment due date until, but excluding, the date of the payment at an annual rate equal to the Prime Rate as published in The Wall Street Journal, East Coast Edition, in effect from time to time during the applicable period. Such interest will be payable at the same time as the payment to which it relates and will be calculated daily on the basis of a year of 365 days without compounding.
15.4      Assignment of Agreement . The parties agree that if a party’s assignment of this Agreement or any of its rights, interests or obligations hereunder (or any other designation of another person to perform any payment obligation of the party) creates any additional Tax obligations or Tax Liabilities for the non-assigning party or its Affiliates (including any new or increased Tax withholding obligation by the assigning party or any of its Affiliates on payments made under this Agreement), the assigning party will reimburse the non-assigning party or its Affiliates for any such additional Tax obligations or Liabilities created by the assignment, and shall gross-up the non-assigning party or its Affiliate for additional Taxes resulting from reimbursements, until the non-assigning party or its Affiliates receives the amount it would have received absent the assignment. In the case of a new or increased Tax withholding obligation, the assigning party shall pay to the non-assigning party or its Affiliate the full amount of the payment that would have been due prior to the new or increased withholding obligation, and the assigning party shall nevertheless be responsible to withhold and pay the amount required by applicable Legal Requirements to the appropriate Governmental Authority. The reimbursement, gross-up and payment obligations pursuant to this Section 15.4 will be reduced by any Tax benefit actually realized by the non-assigning party or its Affiliates (whether in the year of payment or a future period) as a result of any payments made by the assigning party or its Affiliates pursuant to this Section 15.4.
16.
MISCELLANEOUS


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16.1      Notices . All notices, requests, demands, claims and other communications required or permitted to be delivered, given or otherwise provided under this Agreement must be in writing and must be delivered, given or otherwise provided:
a.      by hand (in which case, it will be effective upon delivery);
b.      by facsimile (in which case, it will be effective upon receipt of confirmation of good transmission); or
c.      by overnight delivery by a nationally recognized courier service (in which case, it will be effective on the Business Day after being deposited with such courier service);
in each case, to the address (or facsimile number) listed below:
•
If to Purchaser, to it at:
Mundipharma International Corporation Limited
Mundipharma House, 14 Par-la-Ville Road
P.O. Box HM 2332, Hamilton HM JX
Bermuda
Attn: [***]
Fax: [***]
E-mail: [***]
•
with a copy to:
Chadbourne & Parke LLP
1301 Avenue of the Americas
New York, New York 10019
Attn: Stuart D. Baker
Fax: (212) 489-7130
E-mail: SBaker@chadbourne.com
•
If to Spectrum, to it at:
Spectrum Pharmaceuticals, Inc.
11500 South Eastern Ave. Suite 240
Henderson, NV 89052
Attn: Legal Department
Telephone number:    (702) 835-6300
Facsimile number:     (702) 260-7405
E-mail: legal@sppirx.com
•
with a copy to:
Stradling Yocca Carlson & Rauth
660, Newport Center Dr, Suite 1600


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Newport Beach, CA 92660
Attn: Marc G. Alcser, Esq.
Telephone number:     (949) 725-4000
Facsimile number:     (949) 725-4100
E-mail: malcser@sycr.com
Each of the parties to this Agreement may specify different address or facsimile number by giving notice in accordance with this Section 16.1 to each of the other parties hereto.
16.2      Succession and Assignment . Subject to the subsections below, this Agreement will be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns, each of which such successors and permitted assigns will be deemed to be a party hereto for all purposes hereof.
i.      Purchaser may not assign, delegate or otherwise transfer either this Agreement or any of its rights, interests, or obligations hereunder without the prior written approval of Spectrum.
ii.      Notwithstanding subsection (a), Purchaser, upon providing Spectrum written notice, may, without the consent of Spectrum, (i) assign, license, or sublicense any or all of its rights and interests hereunder to one or more of its Affiliates and/or designate one or more of its Affiliates to be a purchaser of some or all of the Acquired Assets, an assumer of some or all of the Assumed Liabilities, or licensee or sublicensee of some or all of the Licensed IP; (ii) designate one or more of its Affiliates to perform its obligations hereunder, in each case, so long as the assigning, licensing, or sublicensing party is not relieved of any Liability hereunder and so long as any such Affiliate remains such party’s Affiliate; provided , however , that such Affiliate assignee(s), licensee(s), or sublicensee(s) provide the other parties with written acknowledgement of and agreement to the assigning, licensing, or sublicensing party’s obligations under the Agreement that were assigned, licensed, or sublicensed to it.
16.3      Amendments and Waivers . No amendment or waiver of any provision of this Agreement will be valid and binding unless it is in writing and signed, in the case of an amendment, by each party hereto, or in the case of a waiver, by the party against whom the waiver is to be effective. No waiver by any party of any breach or violation or default under or inaccuracy in any representation, warranty, agreement or covenant hereunder, whether intentional or not, will be deemed to extend to any prior or subsequent breach, violation, default of, or inaccuracy in, any such representation, warranty, agreement or covenant hereunder or affect in any way any rights arising by virtue of any prior or subsequent such occurrence. No delay or omission on the part of any party in exercising any right, power or remedy under this Agreement will operate as a waiver thereof.


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16.4      Entire Agreement . This Agreement, together with the other Ancillary Agreements and any documents, instruments and certificates explicitly referred to herein, constitutes the entire agreement among the parties hereto with respect to the subject matter hereof and supersedes any and all prior discussions, negotiations, proposals, undertakings, understandings and agreements, whether written or oral, with respect thereto. The schedules hereto are an integral part of this Agreement and references to this Agreement shall be construed accordingly.
16.5      Counterparts . This Agreement may be executed in any number of counterparts, each of which will be deemed an original, but all of which together will constitute but one and the same instrument. This Agreement will become effective when duly executed by each party hereto.
16.6      Severability . Any term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction will not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction. In the event that any provision hereof would, under applicable Legal Requirements, be invalid or unenforceable in any respect, each party hereto intends that such provision will be construed by modifying or limiting it so as to be valid and enforceable to the maximum extent compatible with, and possible under, applicable Legal Requirements.
16.7      Headings . The headings contained in this Agreement are for convenience purposes only and will not in any way affect the meaning or interpretation hereof.
16.8      Construction . The parties have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement will be construed as if drafted jointly by the parties and no presumption or burden of proof will arise favoring or disfavoring any party by virtue of the authorship of any of the provisions of this Agreement. The parties intend that each representation, warranty and covenant contained herein will have independent significance. If any party has breached or violated, or if there is an inaccuracy in, any representation, warranty, agreement or covenant contained herein in any respect, the fact that there exists another representation, warranty, agreement or covenant relating to the same subject matter (regardless of the relative levels of specificity) which the party has not breached or violated, or in respect of which there is not an inaccuracy, will not detract from or mitigate the fact that the party has breached or violated, or there is an inaccuracy in, the first representation, warranty, agreement or covenant. Provisions in this Agreement relating to jurisdiction, venue, governing law or other aspects of dispute resolution that expressly refer to the negotiation or performance of this Agreement are not intended to alter the application of principles under New York law relating to the construction or interpretation of contracts. Except as otherwise expressly provided herein all references to “$” or “dollars” refer to the lawful money of the U.S.
16.9      Governing Law . Except as otherwise expressly provided for in this Agreement, this Agreement, the rights of the parties and all Actions arising in whole or in part under or in connection with this Agreement or the negotiation or performance hereof will be governed by and construed in accordance with the domestic substantive laws of the State of New York,


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without giving effect to any choice or conflict of law provision or rule that would cause the application of the laws of any other jurisdiction.
16.10      Dispute Resolution .
i.      Prior to initiating arbitration, Purchaser and Spectrum will negotiate in good faith to resolve, pursuant to the procedures described in Section 16.10(ii), any dispute, controversy, difference or Action asserted by a Spectrum Indemnified Person against Purchaser or by a Purchaser Indemnified Person against Spectrum arising out of or related to this Agreement or the negotiation or performance hereof (a “ Claim ”), including any Claim for indemnification pursuant to Article 14 hereof, but excluding any Claim for indemnification between the parties governed by Section 14.4.5. Notwithstanding the foregoing, either party may apply to any court having jurisdiction pursuant to Section 16.12 without negotiating to resolve the Claim pursuant to Section 16.10(ii) with respect to any Action seeking preliminary or emergency injunctive relief in accordance with Section 16.11.11 or any Action seeking equitable relief to enforce Section 9.5 or as contemplated by Section 16.13.
ii.      Spectrum or Purchaser may give the other party written notice of a Claim not resolved in the normal course of business (“ Notice of Dispute ”). Within [***] Business Days after delivery of such Notice of Dispute, executives of Spectrum and Purchaser who have authority to settle the Claim shall agree to meet at a mutually acceptable time and place, and thereafter as often as they reasonably deem necessary, to consult and negotiate with each other in good faith and, recognizing their mutual interests, attempt to reach a just and equitable solution satisfactory to such parties. If the Claim has not been resolved within [***] days of the first meeting of such executives (or, if the parties are unable to mutually agree upon an acceptable time and place to meet, within [***] days of the disputing party’s Notice of Dispute), Purchaser or Spectrum may, by notice to the other party (“ Dispute Escalation Notice ”), refer the Claim to the respective officers of the parties designated below.
For Spectrum: Chief Executive Officer
For Purchaser: Regional Director of Purchaser’s Affiliate within the Licensed Territory
Such officers shall negotiate in good faith to resolve the Claim in a manner satisfactory to Purchaser and Spectrum within [***] days of the Dispute Escalation Notice. In the event the Claim is not resolved within such [***] day period, either party may initiate arbitration pursuant to Section 16.11.
16.11      Arbitration .
i.      Subject to Sections 16.10(i) and 16.10(ii), any Claim required pursuant to Section 16.10(i) to be negotiated pursuant to Section 16.10(ii), or any other claim or dispute that the parties agree in writing to arbitrate, shall be settled by arbitration administered by the American Arbitration Association in accordance with the then current Commercial Rules of the American Arbitration Association including the Procedures for Large, Complex Commercial


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Disputes (including the Optional Rules for Emergency Measures of Protection) (“ AAA Rules ”), except that any such arbitration must be conducted in accordance with the remainder of this Section 16.11. Except as expressly limited by Section 16.11.7, the arbitrators shall have the authority to grant any equitable and legal remedies that would be available in any judicial proceeding instituted to resolve a disputed matter.
16.11.2      Number and Selection of Arbitrators . The number of arbitrators shall be three (3), who shall be selected as follows: each of Spectrum, on the one hand, and Purchaser on the other hand, shall choose one (1) arbitrator within [***] Business Days of either initiating or receiving notice of an arbitration (as the case may be), and those party-appointed arbitrators shall unanimously select one (1) chairman arbitrator within [***] Business Days of the appointment of the last party-appointed arbitrator, who shall be a lawyer admitted to practice for at least fifteen (15) years, and who is experienced with disputes in asset purchase agreements and Intellectual Property licenses in the pharmaceutical field transactions (“ Qualifications ”). If the party-appointed arbitrators are unable to agree upon the selection of the third arbitrator within ten (10) Business Days of the appointment of the last party appointed arbitrator, such chairman arbitrator shall be selected by the AAA within [***] Business Days and shall have Qualifications.
16.11.3      Place and Language of Arbitration . The place of arbitration shall be New York, New York, at a suitable venue to be agreed by the parties and arbitrators within [***] Business Days of the appointment of the chairman arbitrator. The proceedings shall be conducted in the English language.
16.11.4      Binding Decision . The decision and award of the arbitral tribunal shall be made by majority decision and shall be final, nonappealable and binding on the parties hereto and their successors and assigns. The arbitral award shall be accompanied by a reasoned opinion.
16.11.5      Allocation of Costs . The decision and award of the arbitral tribunal shall include a decision regarding the allocation of costs relating to any such arbitration. For purposes of this subsection, “costs” shall include reasonable attorneys’ fees and reasonable experts’ fees actually incurred with respect to the arbitration proceeding.
16.11.6      Interest . The arbitral award may include both pre-and post-award interest, at a rate to be determined by the arbitral tribunal.
16.11.7      Limitation of Damages . The arbitral tribunal shall be empowered to award damages only to the extent of actual damages suffered, and only to the extent consistent with Section 14.7.
16.11.8      Period for Arbitration .
(a)      The arbitration shall be completed no later than [***] after the selection of the chairman arbitrator, unless the chairman arbitrator determines, at the request of any party or on his or her own initiative, that such time period should be extended, in which case such time period may not be extended beyond an additional [***] months.


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(b)      Notwithstanding any provision of the AAA Rules: (i) each of Purchaser and Bayer shall be permitted to serve up to [***] interrogatories, and to take at least [***] depositions of the other party, in addition to exchange of documents, exhibits and information as provided for in the AAA Rules, on dates and locations to be mutually agreed upon (or, failing such agreement, as the chairman arbitrator shall select after hearing from the parties); (ii) any documents not in English that are produced by a party shall be accompanied by a translation into English, which translation shall not be binding upon the other party or the arbitrators; (iii) each of Purchaser and Bayer covenant and agree that it shall produce documents, information, and deposition and hearing witnesses, as required by this Section 16.11.8 and as otherwise required by the AAA Rules; and (iv) subpoenas to non-parties, for production of documents and/or for testimony, shall be issued at the request of a party, up to [***] subpoenas per party. The parties will make their respective employees, and will use commercially reasonable efforts to make their former employees, available for depositions and hearing testimony as requested by the other parties.
16.11.9      Enforcement of Judgment . Judgment on the arbitral award may be entered in any court having jurisdiction thereof.
16.11.10      Confidentiality . Except as required by Legal Requirements or as required for recognition and enforcement of the arbitral decision and award, neither a party nor an arbitrator may disclose the existence, content or results of any arbitration hereunder without the prior written consent of the parties. Any documents submitted to the arbitrators shall be kept confidential and shall not be disclosed, except that any such documents may be disclosed in connection with any Action to collect the award, or if any such documents are discoverable or admissible in any Action in court contemplated by this Agreement.
16.11.11      Enforcement; Interim Measures; Equitable Relief . Notwithstanding the provisions of Section 16.11, each party may apply to any court having jurisdiction pursuant to Section 16.12.1 (a) to enforce the arbitration provisions of this Agreement, (b) to seek provisional injunctive relief so as to maintain the status quo (including maintaining the confidentiality of any arbitration proceedings and non-public information) until the final arbitration award is rendered and is finally judicially confirmed if challenged judicially, or the dispute is otherwise resolved, or (c) to seek equitable relief to enforce Section 9.5 or as contemplated by Section 16.13.
16.12      Jurisdiction; Venue; Service of Process .
16.12.1      Jurisdiction . Subject to the provisions of Sections 14.4.5, 16.10(i), 16.11 and 16.13, each party to this Agreement, by its execution hereof, unless otherwise prohibited by applicable Legal Requirements (a) hereby irrevocably submits to the exclusive jurisdiction of the state courts of the State of New York in the Borough of Manhattan and to the United States District Court for the Southern District of New York for the purpose of any Action between the parties arising in whole or in part under or in connection with this Agreement or the negotiation or performance hereof, (b) hereby waives and agrees not to assert, by way of motion, as a defense or otherwise, in any such Action, any claim that it is not subject personally to the jurisdiction of the above-named courts, that its property is exempt or immune from attachment or


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execution, that any such Action brought in one of the above-named courts should be dismissed on grounds of forum non conveniens , should be transferred or removed to any court other than one of the above-named courts, or should be stayed by reason of the pendency of some other proceeding in any court other than one of the above-named courts, or that this Agreement or the subject matter hereof may not be enforced in or by such court and (c) to the extent that an Action can be commenced in a court and not an arbitration, agrees not to commence any such Action in any court other than before one of the above-named courts. Notwithstanding the previous sentence, a party may commence any Action in a court other than the above-named courts (i) for the purpose of enforcing an order or judgment issued by one of the above-named courts and (ii) for the purposes of asserting a cross-claim, counterclaim, third party action or similar forms of action for indemnification under this Agreement in any Action commenced by the other parties (subject to this Section 16.12.1), by any third party, or by any Governmental Authority.
16.12.2      Venue . Each party waives any claim and will not assert that venue should properly lie in any other location within the selected jurisdiction.
16.12.3      Service of Process . Each party hereby (a) consents to service of process in and commencement of any arbitration as permitted under the AAA Rules; (b) consents to service of process in any Action between the parties arising in whole or in part under or in connection with this Agreement in any manner permitted by New York law, (c) agrees that service of process made in accordance with clause (a) or (b) or made pursuant to Section 16.1, will constitute good and valid service of process in any Action and (d) waives and agrees not to assert (by way of motion, as a defense, or otherwise) in any Action any claim that service of process made in accordance with clause (a), (b) or (c) does not constitute good and valid service of process.
16.13      Specific Performance . Each of the parties acknowledges and agrees that the other parties would be damaged irreparably in the event any of the provisions of this Agreement are not performed in accordance with their specific terms or otherwise are breached or violated. Accordingly, each of the parties agrees that, without posting a bond or other undertaking, the other parties may seek an injunction or injunctions to prevent breaches or violations of the provisions of this Agreement and to enforce specifically this Agreement and the terms and provisions hereof in any Action instituted in any court specified in Section 16.12.1 or in an arbitration proceeding pursuant to Section 16.11. An Action for specific performance as provided herein shall not preclude a party from pursuing any other remedy to which such party may be entitled, at law or in equity, in accordance with the terms of this Agreement. Each party further agrees that, in the event of any Action for specific performance in respect of such breach or violation, it will not assert that the defense that a remedy at law would be adequate provided , however , each party also agrees that any party can assert any other defense it may have other than the defense of adequate remedy at law. The provisions of this Section 16.13 shall not apply to any Action based upon any Section of this Agreement where the remedy sought is the payment of money.
16.14      Waiver of Jury Trial . TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW THAT CANNOT BE WAIVED, THE PARTIES HEREBY WAIVE, AND COVENANT


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THAT THEY WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR OTHERWISE), ANY RIGHT TO TRIAL BY JURY IN ANY ACTION ARISING IN WHOLE OR IN PART UNDER OR IN CONNECTION WITH THIS AGREEMENT OR THE NEGOTIATION OR PERFORMANCE HEREOF OR ANY OF THE CONTEMPLATED TRANSACTIONS, WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE. THE PARTIES AGREE THAT ANY OF THEM MAY FILE A COPY OF THIS PARAGRAPH WITH ANY COURT AS WRITTEN EVIDENCE OF THE KNOWING, VOLUNTARY AND BARGAINED-FOR AGREEMENT AMONG THE PARTIES IRREVOCABLY TO WAIVE ITS RIGHT TO TRIAL BY JURY IN ANY PROCEEDING WHATSOEVER BETWEEN THEM RELATING TO THIS AGREEMENT OR ANY OF THE CONTEMPLATED TRANSACTIONS AND THAT ANY SUCH TRIAL WILL INSTEAD BE TRIED IN A COURT OF COMPETENT JURISDICTION BY A JUDGE SITTING WITHOUT A JURY.
16.15      Certain Rules of Construction . Except as otherwise explicitly specified to the contrary, (a) references to a Section, Exhibit or Schedule means a Section of, or Schedule or Exhibit to, this Agreement, unless another agreement is specified, (b) the word “including” will be construed as “including without limitation,” (c) references to a particular statute or regulation include all rules and regulations thereunder and any predecessor or successor statute, rules or regulation, in each case as amended or otherwise modified from time to time, (d) words in the singular or plural form include the plural and singular form, respectively, (e) references to a particular Person include such Person’s successors and assigns to the extent not prohibited by this Agreement and (f) the words “shall” and “will” will have the same meaning.
16.16      Third Party Beneficiaries . Except as specifically provided herein, all rights, benefits and remedies under this Agreement are solely intended for the benefit of Purchaser and Spectrum, and no third party shall have any rights whatsoever to (i) enforce any obligation contained in this Agreement; (ii) seek a benefit or remedy for any breach of this Agreement; or (iii) take any other action relating to this Agreement under any legal theory, including actions in contract, tort (including negligence, gross negligence and strict liability), or as a defense, setoff or counterclaim to any action or claim brought or made by the parties.
[Remainder of Page is Intentionally Blank.]



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IN WITNESS WHEREOF, the undersigned have executed and delivered this Agreement as of the date first above written.
MUNDIPHARMA INTERNATIONAL CORPORATION LIMITED
By:
/s/ Douglas Docherty
 
Name: Douglas Docherty
 
Title: General Manager
 
 
 
 
SPECTRUM PHARMACEUTICALS CAYMAN, L.P.
By:
Spectrum Pharmaceuticals International Holdings, LLC
Its: General Partner

 
By: Spectrum Pharmaceuticals, Inc.
Its: Managing Member
 
By: /s/ Kurt A. Gustafson         
Name: Kurt A. Gustafson
Title: Chief Financial Officer



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[Signature Page to License and Asset Purchase Agreement]


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Schedule 1A
Spectrum’s Knowledge



[***]


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DOCSOC/1746928v1/100089-0001



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Schedule 1B
Business Domain Names



[***]


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DOCSOC/1746928v1/100089-0001



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Schedule 1C
Business-Specific Licensed Patents



[***]


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DOCSOC/1746928v1/100089-0001



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Schedule 1D
Business-Specific Licensed Trademarks



[***]


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DOCSOC/1746928v1/100089-0001



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Schedule 1E
Shared Licensed Patents



[***]


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DOCSOC/1746928v1/100089-0001



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Schedule 3.1(c)
Transferred Contracts



[***]


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DOCSOC/1746928v1/100089-0001



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Schedule 3.2(f)
Excluded Rights, Claims, Etc.



[***]


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DOCSOC/1746928v1/100089-0001



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Schedule 3.3(d)
Assumed Volume Credits and Obligations



[***]


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DOCSOC/1746928v1/100089-0001



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Schedule 3.6
Consents



[***]


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DOCSOC/1746928v1/100089-0001



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Schedule 4.1
Purchase Price



U.S. $15 Million


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Schedule 4.4.2
Exchange Rate



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Schedule 6.2.1
Bank Accounts



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Schedule 7.3
Authorization of Governmental Authorities (Spectrum)



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Schedule 7.4
Noncontravention (Spectrum)



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Schedule 7.8
Financial Information



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Schedule 7.9.1
Absence of Certain Developments



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Schedule 7.10
Assets



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Schedule 7.14.1
Business Domain Names



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Schedule 7.14.2
Licensed IP



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Schedule 7.14.6
Validity and Enforcement



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Schedule 7.14.8
Orders



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Schedule 7.14.11
Infringement and Misappropriation



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Schedule 7.14.12
Royalties



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Schedule 7.14.13
Litigation



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Schedule 7.15.2
Permits



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Schedule 7.15.3
Regulatory and Related Matters



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Schedule 7.16
Clinical Investigations



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Schedule 7.17
Regulatory Filings



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Schedule 7.18
Safety and Efficacy



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Schedule 7.19
Material Transferred Contracts



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Schedule 7.22
Litigation; Governmental Orders



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Schedule 7.26.3
Audits, Examinations or Legal Proceedings



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Schedule 7.26.5
Tax Encumbrances



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Schedule 7.27
Liabilities



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Schedule 8.3
Authorization of Governmental Authorities (Purchaser)



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Schedule 8.4
Noncontravention (Purchaser)



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Schedule 9.11
Joint Contracts



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Schedule 11.7
Consents



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Schedule 14.3A
Time for Claims (Spectrum)



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Schedule 14.3B
Time for Claims (Purchaser)



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DOCSOC/1746928v1/100089-0001
EXHIBIT 10.56

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT MARKED WITH [***] HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT, AS AMENDED.


SPECTRUM PHARMACEUTICALS CAYMAN, L.P.
and
MUNDIPHARMA MEDICAL COMPANY
SUPPLY AGREEMENT





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TABLE OF CONTENTS
Section      Title      Page
1.
DEFINITIONS .    1
2.
TERM     7
3.
MANUFACTURE AND SUPPLY .    7
4.
SUPPLY SHORTFALL; SUPPLY INTERRUPTION .    12
5.
PRICE AND PAYMENT TERMS .    12
6.
REGULATORY MATTERS .    13
7.
INSURANCE .    14
8.
INDEMNIFICATION .    15
9.
REPRESENTATIONS AND WARRANTIES; COVENANTS .    16
10.
TERMINATION .    20
11.
CONFIDENTIALITY .    21
12.
DISPUTE RESOLUTION .    22
13.
INDEPENDENT CONTRACTOR     23
14.
MISCELLANEOUS .    24

Exhibit A – Specifications
Exhibit B – Existing Inventory
Exhibit C – MMCO Trademarks
Exhibit D – Technical Agreement
Exhibit E – Pricing



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SUPPLY AGREEMENT
This SUPPLY AGREEMENT (this " Agreement "), dated this 16 th day of November, 2015 (the " Effective Date "), is by and between Spectrum Pharmaceuticals Cayman, L.P., an Exempted Limited Partnership organized under the laws of the Cayman Islands (" Spectrum "), and Mundipharma Medical Company, a partnership organized under the laws of Bermuda, having a place of business at 14 Par-la-Ville Road, P.O. Box HM 2332, Hamilton HM JX, Bermuda (" MMCO ").
RECITALS :
WHEREAS , Mundipharma International Corporation Limited, a Bermuda corporation (" MICL "), and Spectrum have entered into a license and asset purchase agreement of even date herewith, pursuant to which MICL has exclusive rights to develop and commercialize certain pharmaceutical products (including the Product (as defined below)) in the Licensed Territory (as defined below) (the " License Agreement "); and
WHEREAS , Spectrum has agreed to supply MMCO with Kits, to enable the Finished Product to be commercialized in the Licensed Territory in accordance with the License Agreement.
NOW, THEREFORE , the Parties agree as follows:
1. DEFINITIONS .
1.1      For purposes hereof, the following terms have the meanings set forth below:
" 2B8 " means the unlabeled monoclonal antibody to [***] cells more particularly described on Exhibit A .
" Acquiror " has the meaning set forth in Section 14.2.
" Adulterated " has the meaning set forth in the FD&C Act.
" Affiliate " means, with respect to either Party, any person, firm, trust, corporation, partnership or other entity or combination thereof that directly or indirectly controls, is controlled by or is under common control with such Party; the term "control" (including, with correlative meaning, the terms "controlled by" or "under common control with") meaning direct or indirect ownership of fifty percent (50%) or more, including ownership by trusts with substantially the same beneficial interests, of the voting and equity rights of such person, firm, trust, corporation, partnership or other entity or combination thereof, or the power to direct the management of such person, firm, trust, corporation, partnership or other entity or combination thereof.
" Agreement " means this Supply Agreement, as it may be amended or modified from time to time.
" Bankruptcy Code " means, as applicable, the U.S. Bankruptcy Code, as amended from time to time, and the rules and regulations and guidelines promulgated thereunder or the bankruptcy


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laws of any Governmental Authority, as amended from time to time, and the rules and regulations and guidelines promulgated thereunder.
" Breaching Party " has the meaning set forth in Section 10.3.
" Calendar Quarter " means each of the three month periods ending March 31 st , June 30 th , September 30 th and December 31 st .
" Calendar Year " means the 12-month period from January 1 st through December 31 st .
" Claims " has the meaning set forth in Section 8.1.
" CMC Information " means Information related to the chemistry, manufacturing and controls of the Antibody Conjugate, as specified by the FDA, EMA and other applicable Regulatory Authorities.
" Confidential Information " of a Party means any and all Information of such Party or its Affiliates that is disclosed by such Party or its Affiliates to the other Party or its Affiliates under this Agreement, whether in oral, written, graphic, or electronic form.
" Conjugated Antibody " means 2B8 conjugated with [***].
" Control " means, with respect to any material, Information, or intellectual property right, that a Party (a) owns or (b) has a license (other than a license granted to such Party under this Agreement) to such material, Information, or intellectual property right, and in each case, has the ability to grant to the other Party access, a license or a sublicense (as applicable) to the foregoing on the terms and conditions set forth in this Agreement without violating the terms of any then-existing agreement or other arrangement with any Third Party.
" Default Notice " has the meaning set forth in Section 10.3.
" Drug Approval " means an approval granted by the appropriate Regulatory Authority to market the Product in the Field in any particular jurisdiction in the Licensed Territory.
" Effective Date " has the meaning set forth in the Preamble.
" EMA " means the European Medicines Agency or any successor entity.
" European Countries " means Austria, Belgium, Bulgaria, the CIS Countries, Croatia, Cyprus, the Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Latvia, Liechtenstein, Lithuania, Luxembourg, Macedonia, Malta, Monaco, Montenegro, the Netherlands, Norway, Poland, Portugal, Romania, Russia, Serbia, Slovakia, Slovenia, Spain, Sweden and the United Kingdom.
" Excess Orders " has the meaning set forth in Section 3.4(d).


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" Executive Officers " means the Chief Executive Officer of Spectrum and the Regional Director of MMCO’s Affiliate within the Licensed Territory (or their designees).
" Existing Inventory " means the units of Kits and Finished Products set forth on Exhibit B .
" FD&C Act " means the U.S. Federal Food, Drug and Cosmetic Act, as amended.
" FDA " means the U.S. Food and Drug Administration or any successor entity.
" Field " has the meaning set forth in the License Agreement.
" Finished Product " means the Kits in their finished packing presentation for sale in the Licensed Territory.
" Firm Order " means a written irrevocable firm purchase order for Kits, which order must include a delivery schedule specifying the delivery date for the Kits ordered and must be submitted and accepted in accordance with Sections 3.4(a), (b) and (c) or 3.7(a) and (b), respectively.
" GMPs " means the standards relating to the then-current Good Manufacturing Practices for fine chemicals, API, intermediates, bulk products or finished pharmaceutical products set forth (i) in 21 U.S.C. 351(a)(2)(B), in U.S. FDA regulations at 21 C.F.R. Parts 210 and 211 and in The Rules Governing Medicinal Products in the European Community, Volume IV, Good Manufacturing Practice for Medicinal Products, each as may be amended from time to time, (ii) in ICH Guidelines relating to the manufacture of API and finished pharmaceuticals as may be amended from time to time, or (iii) applicable Laws promulgated by any Governmental Authority having jurisdiction over the manufacture of compounds or products or any components of either of the foregoing in the countries in which the Finished Product will be used or sold.
" Governmental Authority " means any multi-national, federal, state, local, municipal, provincial or other governmental authority of any nature (including any governmental division, prefecture, subdivision, department, agency, bureau, branch, office, commission, council, court or other tribunal).
" ICH " means the International Conference on Harmonization of Technical Requirements for Registration of Pharmaceuticals for Human Use.
" ICH Guidelines " means the guidelines of the ICH.
" Indemnified Party " has the meaning set forth in Section 8.3.
" Indemnifying Party " has the meaning set forth in Section 8.3.
" Information " means any data, results, technology, business or financial information or information of any type whatsoever, in any tangible or intangible form, including know-how, trade secrets, practices, techniques, methods, processes, inventions, developments, specifications, formulations, formulae, materials or compositions of matter of any type or kind (patentable or


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3



otherwise), software, algorithms, marketing reports, expertise, technology, test data (including pharmacological, biological, chemical, biochemical, clinical test data and data resulting from non-clinical studies), CMC information, stability data and other study data and procedures.
" Initial Term " has the meaning set forth in Section 2.
" JAMS Rules " has the meaning set forth in Section 12.1.
" Kit " means a kit to make a single dose of the Product consisting of a set of four unlabeled vials, which include (1) Conjugated Antibody, (2) sodium acetate, (3) formulation buffer; and (4) a reaction vial. The Kit does not include the radioisotope that will be separately purchased by MMCO. The term “ Kit Component ” shall mean any one of the four individual unlabeled vials that define the Kit.
" Knowledge " means, with respect to the Party to which such term is attributed, (i) the actual knowledge of: (a) for Spectrum, [***]; and (b) for MMCO, the following executives of MMCO or its Affiliates: [***].
" Laws " means all laws, statutes, rules, regulations, ordinances and other pronouncements having the effect of law of any federal, national, multinational, state, provincial, county, city or other political subdivision, domestic or foreign.
" License Agreement " has the meaning set forth in the recitals.
" Licensed Territory " means all countries of the world excluding those in the Spectrum Territory.
" Misbranded " has the meaning set forth in the FD&C Act.
" MMCO " has the meaning set forth in the first paragraph of this Agreement.
" MMCO Indemnitees " has the meaning set forth in Section 8.1.
"MMCO Trademarks" means MMCO-Controlled trademarks, trade names, logos and trade dress set forth on Exhibit C .
" Non-Breaching Party " has the meaning set forth in Section 10.3.
" Non-Governmental Authority " means any public body (including the National Institute of Clinical Excellence and the Scottish Medicines Consortium in the UK; the Institute for Quality and Efficiency in Healthcare in Germany; the Technical Scientific Commission in Italy; the Directorate of Pharmacy and Healthcare Products in Spain; and the National Union of Health Insurance Funds and the National Authority of Health in France) or non-Governmental Authority (including "Sick Funds" in Germany) with the authority to control, approve, recommend or otherwise determine pricing and reimbursement of pharmaceutical products, including those with authority to enter into risk sharing schemes and/or to impose retroactive price reductions, discounts, or rebates.


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" Packaging " means all labels, labeling, inserts, containers, including cartons, shipping cases and other like matter used in packaging or accompanying the Finished Product, including sample packaging.
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" Party " means Spectrum or MMCO and, when used in the plural, means Spectrum and MMCO.
" Permits " has the meaning set forth in Section 9.4(c).
" Pharmacovigilance Agreement " means a written pharmacovigilance agreement to be entered into by Spectrum and MICL within [***] days after the effective date of the License Agreement pursuant to which the parties shall define and finalize the actions that the parties shall employ with respect to the Product to protect patients and promote their well-being.
" Pricing Approval " means the governmental approval, agreement, determination or decision establishing prices for the Product that can be charged in regulatory jurisdictions where the applicable Governmental Authorities approve or determine the price of pharmaceutical products.
" Product " means the pharmaceutical product currently marketed and sold as ZEVALIN ® (Ibritumomab Tiuxetan), consisting of Indium-111 Ibritumomab Tiuxetan and/or Yttrium-90 Ibritumomab Tiuxetan.
" Regulatory Approval " means (i) Drug Approval and all other approvals necessary for the commercial sale of the Product in a given country or regulatory jurisdiction; (ii) Pricing Approval (but only in those countries or regulatory jurisdictions where Pricing Approval is required by applicable Law for commercial sale); and (iii) Reimbursement Approval, but only in those countries or regulatory jurisdictions where Reimbursement Approval is required for the price paid for the Product to be reimbursed by a Governmental Authority or a Non-Governmental Authority with the authority to approve reimbursement.
" Regulatory Authority " means, in a particular country or jurisdiction, any applicable Governmental Authority or Non-Governmental Authority involved in granting Regulatory Approval in such country or jurisdiction.
" Reimbursement Approval " means the approval, agreement, determination or decision recommending or approving the Product for use and/or establishing the prices for the Product that can be reimbursed in regulatory jurisdictions where the applicable Governmental Authority or Non-Governmental Authority approves, determines or recommends the reimbursement or use of pharmaceutical products.
" Renewal Term " has the meaning set forth in Section 2.
" Specifications " mean the requirements and standards for Kits set forth on Exhibit A attached hereto, as amended or supplemented in accordance with this Agreement.


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" Spectrum " has the meaning set forth in the first paragraph of this Agreement.
" Spectrum Indemnitees " has the meaning set forth in Section 8.2.
" Spectrum Territory " means the U.S., Canada, People's Republic of China (including, Hong Kong, Macau and Taiwan), the European Countries, and India, including all possessions and territories thereof.
"Sublicensee" means a Third Party to which MICL grants a sublicense of the rights granted to MICL under the License Agreement.
" Supply Interruption " has the meaning set forth in Section 4.2.
" Technical Agreement " means the agreement that will be entered into by the Parties subsequent to, but not later than 90 calendar days after, the Effective Date and will be appended hereto as Exhibit D .
" Term " has the meaning set forth in Section 2.
" Testing Laboratory " means an independent testing facility approved in the appropriate jurisdiction in the Licensed Territory as may be mutually agreed by the Parties.
" Third Party " means any entity other than Spectrum or MMCO or an Affiliate of either of them.
" Third Party Contractor " means a Third Party contractor engaged by a Party to provide the Kits.
" U.S. " means the United States of America, including all possessions and territories thereof.
1.2      In the event an ambiguity or a question of intent or interpretation arises, this Agreement will be construed as if drafted jointly by the Parties and no presumption or burden of proof will arise favoring or disfavoring either Party by virtue of the authorship of any provisions of this Agreement. The language in this Agreement is to be construed in all cases according to its fair meaning. The definitions of the terms herein apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun will include the corresponding masculine, feminine and neuter forms. The words "include", "includes" and "including" will be deemed to be followed by the phrase "without limitation." Unless the context requires otherwise, (i) any definition of or reference to any agreement, instrument or other document herein will be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein or therein); (ii) any reference to any applicable Laws herein will be construed as referring to such applicable Laws as from time to time enacted, repealed or amended; (iii) any reference herein to any person will be construed to include the person's successors and permitted assigns; (iv) the words "herein", "hereof" and "hereunder", and words of similar import, will be construed to refer to this Agreement in its entirety and not to any particular


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6



provision hereof; (v) any reference herein to the words "mutually agree" or "mutual written agreement" will not impose any obligation on either Party to agree to any terms relating thereto or to engage in discussions relating to such terms except as such Party may determine in such Party's sole discretion; (vi) all references herein to Sections or Exhibits will be construed to refer to Sections and Exhibits to this Agreement; (vii) the word "days" means calendar days unless otherwise specified; (viii) except as otherwise expressly provided herein all references to "$" or "dollars" refer to the lawful money of the United States; and (ix) the words "copy" and "copies" and words of similar import when used in this Agreement include, to the extent available, electronic copies, files or databases containing the information, files, items, documents or materials to which such words apply. The headings of each Article and Section in this Agreement have been inserted for convenience of reference only and are not intended to limit or expand on the meaning of the language contained in the particular Article or Section.
2.      TERM . This Agreement will commence on the Effective Date and, unless sooner terminated as set forth in this Agreement, will continue until the fifth anniversary of the Effective Date (the " Initial Term "). Unless either Party provides written notice to the other Party of its intent not to renew the Agreement at least six (6) months prior to the expiration of the then-current term, this Agreement shall thereafter automatically renew for successive terms of two (2) years each (each such term, a " Renewal Term " and collectively, the " Term ").
3.      MANUFACTURE AND SUPPLY .
3.1      Sale and Purchase of Existing Inventory . Upon the terms and subject to the conditions of this Agreement, as of the Effective Date, MMCO shall purchase and receive, and Spectrum shall sell and deliver to MMCO, the Existing Inventory, free and clear of all Encumbrances other than the Permitted Encumbrances.
3.2      Manufacture and Supply Obligations . During the Term and upon the terms and subject to the conditions of this Agreement, MMCO hereby agrees to purchase, and Spectrum hereby agrees to use commercially reasonable efforts to supply all of MMCO’s and its Affiliates’ (as well as MMCO’s licensees, successors and assignees) requirements for the Kits to be ultimately used by or sold to end-users as Finished Products in the Licensed Territory. The relationship between the Parties shall be non-exclusive in that MMCO may buy the Kits from Spectrum or any Third Party Contractor approved by Spectrum, which approval shall not be unreasonably withheld, conditioned, or delayed.
3.3      Forecasts; Capacity .
(a)      At least [***] days prior to the first delivery date for Kits (other than as part of Existing Inventory) hereunder, and at least [***] days before the end of each Calendar Quarter thereafter, MMCO will provide Spectrum with a rolling forecast of MMCO's best, good faith estimate of the quantities of Kits to be ordered by MMCO from Spectrum for the next four Calendar Quarters to meet its and its Affiliates' and Sublicensees' reasonably anticipated requirement for Kits, with the forecast for the first Calendar Quarter in the first forecast accounting for the remainder of the Calendar Quarter during which the first delivery takes place.


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(b)      The [***] Calendar Quarters of each forecast shall be binding, shall not be greater than [***]% of the amount previously forecasted for such Calendar Quarters (when they were the second and third Calendar Quarters in the forecast) or less than [***]% of the amount previously forecasted for such Calendar Quarters (when they were the second and third Calendar Quarters in the forecast), and shall constitute a binding obligation: (i) for MMCO to place orders for, in the aggregate with respect to such Calendar Quarters, quantities of Kits equal to such forecasted quantity for such first and second Calendar Quarter; and (ii) for Spectrum to accept orders for, in the aggregate with respect to such Calendar Quarters, such forecasted quantity of Kits for such Calendar Quarter.
3.4      Purchase Orders; Firm Orders; Requirements; Excess Orders .
(a)      MMCO shall provide to Spectrum written purchase orders, each of which shall specify (i) the quantity of Kits ordered, which quantity shall over each Calendar Quarter be the same as the quantity specified for such Calendar Quarter in the binding forecast submitted in accordance with Section 3.3, and (ii) the requested delivery date for such order, which shall be no less than [***] days after the date of such purchase order. Each order by MMCO for Kits shall be for at least [***] units of Kits.
(b)      Spectrum shall include the quantities specified by MMCO pursuant to subsection (a) above, in the purchase orders Spectrum submits to its Third Party manufacturers of Kits.
(c)      Spectrum will promptly (but in no case more than [***] days after its receipt of a purchase order placed pursuant to this Section 3.4), acknowledge in writing its receipt of such purchase order for Kits. Within [***] days after such acknowledgment of receipt, Spectrum must confirm in writing either (i) its acceptance of such purchase order for Kits, whereupon it shall become a Firm Order, (ii) its acceptance of such purchase order for Kits but specifying an alternative delivery date that is no later than [***] days after the date requested by MMCO in such purchase order for Kits, whereupon it shall become a Firm Order, or (iii) its rejection of such purchase order for Kits, provided , however , that Spectrum may only reject a purchase order for Kits [***]. If no such order confirmation is received by MMCO within [***] days after Spectrum's receipt of such purchase order, then Spectrum shall have been deemed to have accepted such purchase order, whereupon it shall become a Firm Order. Any purchase orders for Kits submitted by MMCO shall reference this Agreement and shall be governed exclusively by the terms contained herein. If there is any inconsistency or conflict between the terms and conditions of this Agreement and any provisions in any purchase order for Kits, invoice or similar document furnished by MMCO or Spectrum to the other Party, the terms and conditions of this Agreement shall control except for matters of quality, in which case the Technical Agreement shall control.
(d)      In addition to the foregoing, if MMCO, in any Calendar Quarter, submits purchase orders for Kits in excess of [***]% of the applicable binding forecast for the Kits in such Calendar Quarter (" Excess Orders "), Spectrum will use commercially reasonable efforts to fill the excess portion of such Excess Orders as promptly as practicable, but will not be in breach hereof if, notwithstanding such efforts, it will be unable to fill such excess portion. For clarity, Spectrum shall not have any obligation to incur any fees or other penalties to fill the excess portion of such Excess Orders or to supply to MMCO any quantities of Kits that Spectrum had forecasted, ordered or obtained for its own account or the account of another licensee in the Spectrum Territory. If


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Spectrum would incur fees to fill the excess portion of such Excess Orders, it shall bring this to MMCO's attention and if MMCO agrees to reimburse Spectrum for such fees, then Spectrum shall fill such excess portion unless it would otherwise not be commercially reasonable to do so.
(e)      All orders placed by MMCO pursuant to this Section 3.4 will be sent by MMCO to Spectrum via courier, e-mail or facsimile, to the address, email address or facsimile number supplied by Spectrum.
3.5      Batch Samples . As more specifically set forth in the Technical Agreement, Spectrum will retain or cause to be retained a sample of each batch tested for at least the shelf life of the batch plus [***], or such longer period as may be required by the Specifications or GMPs, provided that MMCO informs Spectrum in writing of any applicable retention requirement of an applicable Regulatory Authority in the Licensed Territory that exceeds the period required by the Specifications and Spectrum will use commercially reasonable efforts to retain or cause to be retained samples for such longer period.
3.6      Order Storage . MMCO may request that Spectrum store Kits (other than the Kits sold as part of Existing Inventory) ordered by MMCO for up to [***] days after the delivery date by providing Spectrum with at least [***] days written notice prior to the delivery date of such purchase order for Kits in accordance with Section 3.4 with no additional payment obligations. Spectrum will use commercially reasonable efforts to comply with MMCO's requests under this Section 3.6. For clarity, such compliance will not change the delivery date for such Kits, the shelf life of such Kits on such delivery date pursuant to Section 3.7(b), or the timing for MMCO's acceptance of such Kits pursuant to Section 3.10 or the timing of payment for such Kits pursuant to Section 5.2.
3.7      Delivery .
(a)      Spectrum will use commercially reasonable efforts to deliver the Kits ordered by MMCO in accordance with the quantities and delivery dates specified in the applicable Firm Order.
(b)      The Parties acknowledge that the shelf life of the Existing Inventory is through [***]. Subject to the foregoing and commencing from the availability of new inventory, Spectrum shall supply MMCO with Finished Products or Kits (other than Existing Inventory) with a shelf life from the delivery date (as specified in the Firm Order for such Finished Products or Kits, as applicable) of not less than [***] unless otherwise specified and agreed in writing by the Parties (i) with respect to [***], and (ii) with respect to [***]; provided, however, that Spectrum shall use commercially reasonable efforts to supply MMCO with Finished Products or Kits (other than Existing Inventory) with a shelf life from the delivery date (as specified in the Firm Order for such Finished Products or Kits, as applicable) of not less than [***] if required by the applicable Regulatory Authority. To the extent Spectrum has Finished Products or Kits with less than [***] of shelf life, including the Existing Product, MMCO may [***].
(c)      The Existing Inventory and Kits will be delivered to MMCO [***] at [***], subject to the relevant local laws and regulations; provided, that the delivery terms for any products


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delivered to MMCO in the U.S. shall be agreed in writing by the Parties at the time the applicable purchase order for such products is placed and, subject to the provisions in Section 3.4(c), will become a Firm Order only upon the parties’ agreement on such delivery terms. MMCO will arrange for and be responsible for the cost of all freight, insurance charges, taxes, import and export duties, inspection fees and other charges applicable to the transport of Existing Products and Kits purchased by MMCO hereunder. Spectrum will include in each shipment of Kits hereunder an itemized packing list and all other documentation as required to be included by the Technical Agreement, and if Kits are shipped under quarantine, the written consent thereto of one of MMCO's Quality representatives.
3.8      Subsequent Export . MMCO will be responsible for the export or re-export of Finished Products and Kits from the country of delivery, and will comply with all applicable Laws and regulations relating to the Packaging, export or re-export of Finished Products and Kits, including the prohibition against unlawful transshipments. Where Finished Products or Kits are destined for export or re-export from the country of delivery, MMCO agrees and accepts that it shall act as the exporter of record, and warrants that as the exporter of record, it will duly authorize and retain an agent who will act on its behalf, assuming all attendant responsibilities associated with the export or re-export, including obtaining any necessary export licenses. MMCO's responsibilities as the exporter of record include cooperating with its agent in providing a detailed description and accurate valuation and classification of the goods on the export commercial invoice, bills of lading, and all other required documentation. MMCO further agrees to defend Spectrum against any legal action, civil or criminal, private or public, in connection with the subsequent export or re-export by or on behalf of MMCO or its Affiliates or Sublicensees of such goods.
3.9      Release . The Technical Agreement contains provisions relating to the release of Kits.
3.10      Acceptance and Rejection .
(a)      Within [***] days after delivery of Finished Products or Kits to MMCO in accordance with Section 3.8, if for any reason MMCO becomes aware that such products did not conform to the Specifications, master batch record or relevant SOPs at the time of delivery, then MMCO will have the right to reject such defective shipment of the products by giving written notice of rejection to Spectrum and specify the grounds for such rejection within such [***] calendar day period. If MMCO provides such notice within such period and Spectrum does not dispute in good faith such rejection or such dispute is resolved in MMCO's favor pursuant to Section 12.1, then at Spectrum's option, the defective shipment of the products will be disposed of by MMCO or will be returned to Spectrum, in each case at Spectrum's expense, MMCO will not be obligated to pay the invoice therefor in accordance with Section 5.2 and MMCO may, at its option, (i) require Spectrum to use its commercially reasonable efforts to promptly replace the shipment of the defective products with conforming products as soon as reasonably practicable or (ii) inform Spectrum that it does not wish to receive replacement therefor, in which case the relevant Firm Order will be deemed cancelled. If MMCO does not provide such notice within such [***] calendar day period then such products shall be considered accepted and MMCO shall not have a right to reject it except with respect to a latent defect which existed at the time of delivery and was not reasonably discoverable at the time


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of delivery and for which Spectrum still has the right, under its agreement with the relevant Third Party manufacturer, to reject such products.
(b)      If Spectrum disputes MMCO's grounds for rejecting all or part of any shipment of the products as set forth above, and such dispute is not resolved by mutual agreement of the Parties within [***] calendar days of MMCO's notice of rejection, such dispute will be resolved by the Testing Laboratory. The final written determination of the Testing Laboratory with respect to all or part of any shipment will be final and binding upon each Party, but only as to reasons given by MMCO in rejecting the shipment or portion thereof and will have no effect on any matter for which the Testing Laboratory did not render a determination. The Testing Laboratory will render such determination within [***] days of its appointment by the Parties. The fees and expenses of the Testing Laboratory will be paid by the Party against which the determination is made.
3.11      Records; Inspection; Quality Audits .
(a)      Spectrum will maintain true and complete books and records of its data and all data provided by Spectrum's Third Party manufacturers relating to the manufacture and supply of the Kits (other than Kits sold as part of the Existing Inventory) delivered to MMCO hereunder. Upon at least five (5) calendar days' prior written notice, and during normal business hours, MMCO will have the right to inspect and review such books and records to the extent in Spectrum's possession (including as set forth in the attached Technical Agreement) as may be necessary to ensure Spectrum's compliance with the terms and conditions set forth above. To the extent Spectrum's books and records do not contain certain data relating to the manufacture and supply of the Kits delivered to MMCO hereunder and such data is in possession of Spectrum's Third Party manufacturer, then upon MMCO's reasonable request, Spectrum will use commercially reasonable efforts to assist MMCO in obtaining a copy of or access to such data from such Third Party manufacturer.
(b)      Spectrum will provide MMCO with copies of the reports from its quality audits of its Third Party Contractors' facilities with respect to the manufacture of Kits and Kit Components, as more fully set forth in the Technical Agreement.
(c)      Spectrum will allow MMCO one quality audit of Spectrum's manufacturing records per Calendar Year to be carried out by MMCO's employees or its designees upon reasonable notice and in accordance with Section 3.11(a).
4.      SUPPLY SHORTFALL; SUPPLY INTERRUPTION .
4.1      Supply Shortfall . A supply shortfall shall be deemed to have taken place if: (i) Spectrum fails to deliver to MMCO by the delivery date specified in the Firm Order for Kits the quantities of Kits ordered by MMCO under such Firm Order; or (ii) MMCO rejects a shipment pursuant to Section 3.10 due to non-conformity of the Kits to the Specifications. Spectrum shall use commercially reasonable efforts to cure any such supply shortfall as soon as practicable. For so long as a supply shortfall remains, MMCO will have the right, at its sole election and remedy, to purchase all of its requirements for Kits directly from any Third Party Contractor approved by Spectrum, such approval not to be unreasonably withheld, conditioned, or delayed.


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4.2      Supply Interruption . In the event that (i) Spectrum is unable to fully deliver ordered Kits to MMCO within [***] business days of the specified delivery date in the relevant Firm Order (including meeting Specifications) or (ii) a supply shortfall under Section 4.1 has occurred in [***] consecutive Calendar Quarters (each, a " Supply Interruption "), then the Parties will meet to discuss possible solutions and (i) Spectrum will use commercially reasonable efforts to supply the undelivered Kits at a future date agreed upon by the Parties (as to which a failure to deliver will be deemed to be an additional Supply Interruption), and (ii) if available, Spectrum will use commercially reasonable efforts to obtain Kits necessary to meet MMCO's requirements from a different Third Party Contractor of Spectrum (provided such Kits have not already been ordered by Spectrum for its own supply or the supply of its licensee in the Spectrum Territory).
5.      PRICE AND PAYMENT TERMS .
5.1      Price . As consideration for the purchase of Existing Inventory, within [***] days of the Effective Date, MMCO shall pay Spectrum the purchase price set forth on Exhibit E . For each Kit and Kit Component delivered by Spectrum, MMCO agrees to pay the price set forth in Exhibit E , as may be amended from time to time by the Parties. For clarity, for the purposes of this Agreement, including the determination of the applicable price per Kit, (i) the Existing Inventory, and (ii) the number of Kits sold by Spectrum Pharmaceuticals GK, or its successor, after the Effective Date, shall each count towards the initial [***] Kits purchased by MMCO from Spectrum.
5.2      Payment .
(a)      As a partial prepayment for the first [***] Kits sold to MMCO, MMCO shall pay Spectrum three million U.S. Dollars (US$ 3,000,000) within [***] days of the Effective Date. With respect to the balance due to Spectrum from MMCO for such [***] Kits sold to MMCO, Spectrum shall invoice MMCO in accordance with Section 5.2(c).
(b)      With respect to the [***] Kits sold to MMCO [***] Kits, Spectrum shall invoice MMCO in accordance with Section 5.2(c), provided , [***]. MMCO shall pay the balance due to Spectrum for all of such subsequent [***] Kits sold to MMCO within [***] days after the date on which [***] Kits to [***]. For clarity, [***]. For further clarity, MMCO shall pay to Spectrum [***] two million dollars ($2,000,000) [***] Kits as set forth herein.
(c)      Subject to the provisions of Sections 5.2(a) and 5.2(b), upon delivery of the Kits (other than the Kits sold to MMCO as part of the Existing Inventory), Spectrum will invoice MMCO therefor. MMCO will pay each invoice in full within [***] days after the receipt of each invoice, unless delivery is validly rejected by MMCO in accordance with this Agreement.
(d)      All Kits [***], after the Effective Date shall count towards the [***] Kits and the [***] Kits for purposes of this Agreement.
5.3      Late Payments . If Spectrum does not receive payment of any sum due to it on or before the due date, simple interest shall thereafter accrue on the sum due to Spectrum until the date of payment at the per annum rate of [***]. In addition to other remedies available to Spectrum


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in the event that MMCO fails to make any payment within [***] days of the date due hereunder, Spectrum may refuse to accept all future purchase orders and refuse to deliver Kits pursuant to pending Firm Orders until MMCO's account is paid in full.
5.4      Purchase Price Adjustments. After the first [***] Kits, not more than once per Calendar Year, Spectrum may adjust the purchase price by [***]. In addition to the above, Spectrum may change the purchase price with MMCO’s prior written consent, which shall not be unreasonably withheld, delayed or conditioned, subject to Spectrum providing MMCO sufficient detailed proof of such change, [***].
6.      REGULATORY MATTERS .
6.1      Specification Approval . The Specifications attached hereto as Exhibit A for Finished Products and Kits delivered to MMCO are the same as the specifications for such products procured by Spectrum as of the Effective Date for its own use. Changes made to such Specifications in accordance with this Section 6.1 or Section 6.2 shall retain such consistency with the then-current specifications for products procured by Spectrum at such time for its own use, except to the extent any changes are required by Regulatory Authorities in the Licensed Territory. Spectrum agrees to make no changes to the Specifications without following the procedures set forth in this Section 6.1 or Section 6.2. Spectrum will notify MMCO in writing at least [***] days prior to filing any planned changes in the manufacturing process that are reportable to a Regulatory Authority or any planned changes in Specifications. MMCO will have the right to review and approve or reject such changes; provided , however, that MMCO will not have the right to reject any such changes which are mandated by applicable Laws or changes thereto. If Spectrum decides to implement a change to the manufacturing process for Conjugated Antibody and such change is not required to be reported to a Regulatory Authority and does not change the applicable Specifications, then Spectrum shall notify MMCO in writing of such change promptly after Spectrum’s decision to implement such change. For clarity, MMCO will not have the right to approve or reject such change.
6.2      Required Specification Changes . Spectrum will maintain a system (consistent with standard industry practice) to control and implement changes to Specifications, manufacturing processes and qualification procedures, in accordance with GMPs and other applicable Laws in the United States, the European Countries or under ICH Guidelines. Each Party will provide written notice in a timely manner to the other Party of any other applicable Laws in their respective territories that require any such changes. Any costs associated with changes to the Specifications required by Regulatory Authorities in the Licensed Territory that are not also required in the Spectrum Territory will be paid by MMCO. Any costs associated with changes to the Specifications procured by Spectrum for its own use required by Regulatory Authorities in the Spectrum Territory will be paid by Spectrum unless such changes are also required by Regulatory Authorities in the Licensed Territory, in which case they will be equally shared by the Parties.
6.3      Communications with Regulatory Authorities . The Technical Agreement contains provisions relating to reporting and filing obligations to Regulatory Authorities with respect to manufacture of Kits. As more fully set forth in the Technical Agreement, both Parties will promptly provide to each other copies of correspondence to and from any Regulatory Authority


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relating to or impacting the manufacture of Kits, including correspondence to, from or among any Third Party Contractors and any Regulatory Authority with respect to the Kits.
6.4      Complaints . The Technical Agreement contains provisions relating to complaints.
6.5      Adverse Drug Experience Information . The Pharmacovigilance Agreements contain provisions relating to adverse drug experiences.
6.6      Good Manufacturing Practices . The Technical Agreement contains provisions relating to GMPs. If Spectrum's failure to comply with applicable Laws causes a Supply Interruption, Section 4 of this Agreement will apply.
6.7      Product Recalls or Seizure . As more fully described in the Technical Agreement, the Parties will mutually discuss all manufacturing-related recalls. Spectrum will handle all such recalls except that MMCO will handle any recalls in the event that the manufacturing issues that are the basis for such recall are specific to the Licensed Territory and do not have any effect on the Spectrum Territory.
7.      INSURANCE .
7.1      Each Party shall procure and maintain insurance, including product liability insurance, or shall self-insure, in each case in a manner adequate to cover its obligations hereunder and consistent with normal business practices of prudent companies similarly situated at all times during which any Kit or the Finished Kit is being manufactured, clinically tested or commercially distributed or sold by such Party. It is understood that such insurance shall not be construed to create a limit of either Party's liability with respect to its indemnification obligations under Section 8 of this Agreement. Each Party shall provide the other Party with written evidence of such insurance or self-insurance upon request. Each Party shall provide the other Party with written notice at least thirty (30) days prior to the cancellation, non-renewal or if there is a material change in or to such insurance.
8.      INDEMNIFICATION .
8.1      Indemnification by Spectrum . Spectrum shall, at its sole expense, defend, indemnify, and hold MMCO and its Affiliates and their respective officers, directors, employees, and agents (the " MMCO Indemnitees ") harmless from and against any and all Third Party claims, suits, proceedings, damages, losses, liabilities, costs, expenses (including court costs and reasonable attorneys' fees and expenses) and recoveries involving property damage or personal injury (including death) (collectively, " Claims ") to the extent that such Claims arise out of, are based on, or result from (a) the breach of any of Spectrum's representations and warranties set forth in Sections 9.1 or 9.3 and covenants under Sections 9.4(b)-(d) and 9.5, and (b) the willful misconduct or negligent acts of Spectrum, its Affiliates, or the officers, directors, employees, or agents of Spectrum or its Affiliates. The foregoing indemnity obligation shall not apply (x) to the extent that (i) the MMCO Indemnitees fail to comply with the indemnification procedures set forth in Section 8.3 and Spectrum's defense of the relevant Claims is prejudiced by such failure or (ii) such Claims arise out


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of or result from the gross negligence or willful misconduct of the MMCO Indemnitees, or any related breach by MMCO of its representations, warranties and/or covenants hereunder; or (y) to Claims for which MMCO has an obligation to indemnify Spectrum pursuant to Section 8.2, as to which Claims each Party shall indemnify the other to the extent of its liability for such Claims.
8.2      Indemnification by MMCO . MMCO shall, at its sole expense, defend, indemnify, and hold Spectrum and its Affiliates and their respective officers, directors, employees, and agents (the " Spectrum Indemnitees ") harmless from and against any and all Claims to the extent that such Claims arise out of, are based on, or result from (a) the breach of any of MMCO's representations and warranties set forth in Sections 9.2 or 9.3 and covenants under Section 9.5, and (b) the willful misconduct or negligent acts of MMCO, its Affiliates, or the officers, directors, employees, or agents of MMCO or its Affiliates. The foregoing indemnity obligation shall not apply (x) to the extent that (i) the Spectrum Indemnitees fail to comply with the indemnification procedures set forth in Section 8.3 and MMCO's defense of the relevant Claims is prejudiced by such failure or (ii) such Claims arise out of or result from the gross negligence or willful misconduct of the Spectrum Indemnitees, or any related breach by Spectrum of its representations, warranties and/or covenants hereunder; or (y) to Claims for which Spectrum has an obligation to indemnify MMCO pursuant to Section 8.1, as to which Claims each Party shall indemnify the other to the extent of its liability for such Claims.
8.3      Indemnification Procedures . The Party claiming indemnity under this Article 8 (the " Indemnified Party ") shall give written notice to the Party from whom indemnity is being sought (the " Indemnifying Party ") promptly after learning of such Claim. The Indemnified Party shall provide the Indemnifying Party with reasonable assistance, at the Indemnifying Party's expense, in connection with the defense of the Claim for which indemnity is being sought. The Indemnified Party may participate in and monitor such defense with counsel of its own choosing at its sole expense; provided , however , the Indemnifying Party shall have the right to assume and conduct the defense of the Claim with counsel of its choice. The Indemnifying Party shall not settle any Claim without the prior written consent of the Indemnified Party, not to be unreasonably withheld, unless the settlement involves only the payment of money. So long as the Indemnifying Party is actively defending the Claim in good faith, the Indemnified Party shall not settle or compromise any such Claim without the prior written consent of the Indemnifying Party. If the Indemnifying Party does not assume and conduct the defense of the Claim as provided above, (a) the Indemnified Party may defend against, consent to the entry of any judgment, or enter into any settlement with respect to such Claim in any manner the Indemnified Party may deem reasonably appropriate (and the Indemnified Party need not consult with, or obtain any consent from, the Indemnifying Party in connection therewith), and (b) the Indemnifying Party shall remain responsible to indemnify the Indemnified Party as provided in this Article 8.
8.4      Spectrum’s Third Party Manufacturers . If a Third Party brings a Claim against an MMCO Indemnitee on account of (i) failure of Kits supplied by Spectrum pursuant to this Agreement to comply with GMP, (ii) Kits supplied by Spectrum pursuant to this Agreement being Adulterated or Misbranded or (iii) the negligence, recklessness or willful misconduct of Spectrum’s Third Party manufacturer, and such MMCO Indemnitee is not entitled to indemnification by Spectrum pursuant to Section 8.1 but Spectrum is entitled, pursuant to its supply agreement with


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the Third Party manufacturer that produced such Supplied Kit, to indemnification from such Third Party manufacturer on account of such non-compliance, Adulteration, Misbranding, negligence, recklessness or willful misconduct, then Spectrum shall, at MMCO’s request, pursue its claim for indemnification from such Third Party manufacturer and shall pay to MMCO any amounts that Spectrum receives from such Third Party manufacturer on account of such indemnification claim, after deducting all legal fees and other reasonable out-of-pocket costs incurred by Spectrum with respect to such pursuit.
9.      REPRESENTATIONS AND WARRANTIES; COVENANTS .
9.1      Representations and Warranties of Spectrum : Spectrum hereby represents and warrants to MMCO as follows:
(a)      As of the Effective Date, it is a company or corporation duly organized, validly existing, and in good standing under the Laws of the jurisdiction in which it is incorporated or formed;
(b)      As of the Effective Date, (i) it has the corporate power and authority and the legal right to enter into this Agreement and perform its obligations hereunder; (ii) it has taken all necessary corporate action on its part required to authorize the execution and delivery of this Agreement and the performance of its obligations hereunder; and (iii) this Agreement has been duly executed and delivered on behalf of Spectrum, and constitutes a legal, valid, and binding obligation of Spectrum that is enforceable against it in accordance with its terms, subject as to enforcement of remedies to applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting generally the enforcement of creditors' rights and subject to a court's discretionary authority with respect to the granting of a decree ordering specific performance or other equitable remedies;
(c)      To Spectrum's Knowledge as of the Effective Date, the execution and performance of Spectrum's obligations hereunder do not and will not conflict with any material obligation it may have to any Third Party, and Spectrum does not and will not need the consent or approval of any Third Party or judicial or governmental agency to execute this Agreement or perform any of its obligations hereunder;
(d)      To Spectrum's Knowledge as of the Effective Date, there are no current investigations or claims against Spectrum in any court or by or before any governmental body or agency, with respect to manufacture or Spectrum's commercial release of the Finished Products or Kits, the manufacturing facilities in which the Finished Products and Kits are manufactured which may materially adversely affect Spectrum's ability to perform its obligations under this Agreement; and
(e)      To Spectrum's Knowledge as of the Effective Date, the Finished Products and Kits are not currently the subject of any pending action, suit or other legal proceeding, or any written claim of infringement of the intellectual property rights of any Third Party.
9.2      Representations and Warranties of MMCO : MMCO represents and warrants to Spectrum as follows:


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(a)      As of the Effective Date, it is a partnership duly organized, validly existing, and in good standing under the Laws of the jurisdiction in which it is incorporated or formed;
(b)      As of the Effective Date, (i) it has the partnership power and authority and the legal right to enter into this Agreement and perform its obligations hereunder; (ii) it has taken all necessary partnership action on its part required to authorize the execution and delivery of this Agreement and the performance of its obligations hereunder; and (iii) this Agreement has been duly executed and delivered on behalf of MMCO, and constitutes a legal, valid, and binding obligation of MMCO that is enforceable against it in accordance with its terms, subject as to enforcement of remedies to applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting generally the enforcement of creditors' rights and subject to a court's discretionary authority with respect to the granting of a decree ordering specific performance or other equitable remedies; and
(c)      To MMCO's Knowledge, as of the Effective Date, the execution and performance of MMCO's obligations hereunder do not and will not conflict with any material obligation it may have to any Third Party, and MMCO does not and will not need the consent or approval of any Third Party or judicial or governmental agency to execute this Agreement or perform any of its obligations hereunder.
9.3      Representations and Warranties of the Parties . Each Party hereby represents and warrants to the other Party that, as of the Effective Date, none of such Party's employees or consultants (i) are debarred under Section 306(a) or 306(b) of the FD&C Act or by the applicable Laws of any Regulatory Authority; (ii) have, to such Party's Knowledge, been charged with, or convicted of, any felony or misdemeanor within the ambit of 42 U.S.C. §§ 1320a-7(a), 1320a-7(b)(l)-(3), or pursuant to the applicable Laws of any Regulatory Authority, or are proposed for exclusion, or the subject of exclusion or debarment proceedings by a Regulatory Authority, during the employee's or consultant's employment or contract term; and (iii) are excluded, suspended or debarred from participation, or otherwise ineligible to participate, in any U.S. or non-U.S. health care programs (or have, to such Party's Knowledge, been convicted of a criminal offense that falls within the scope of 42 U.S.C. §1320a-7 but not yet excluded, debarred, suspended, or otherwise declared ineligible), or excluded, suspended or debarred by a Regulatory Authority from participation, or otherwise ineligible to participate, in any procurement or nonprocurement programs.
9.4      Covenants of Spectrum .
(a)      Spectrum agrees that the Finished Products and Kits delivered to MMCO under this Agreement (i) will meet the applicable Specifications at the time of delivery, (ii) will remain in compliance with the Specifications throughout the shelf-life of the Finished Products and Kits, as applicable, provided that it is stored in strict compliance with the applicable long term storage conditions, it is not tampered with, damaged, modified, mishandled or used in a manner other than as intended, and (iii) will have been manufactured and stored by or for Spectrum in conformity with GMPs and will not be Adulterated or Misbranded.
(b)      Spectrum will use commercially reasonable efforts to ensure the requisite manufacturing capacity to manufacture the Kits under the terms of this Agreement.


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(c)      Prior to the delivery of Kits hereunder, Spectrum will have received, will be in current compliance with, and will use reasonable commercial efforts to maintain throughout the Term, all permits, licenses, registrations, and other forms of governmental authorizations and approvals (" Permits ") required to be obtained and maintained by Spectrum in order for Spectrum to execute and deliver this Agreement and to perform its obligations hereunder in accordance with all applicable Laws and will otherwise perform its obligations hereunder in a manner which complies in all material respects with applicable Laws.
(d)      Spectrum shall be responsible for all process development and manufacturing scale-up activities, itself or through one or more of Spectrum's Third Party manufacturers, required to produce commercial quantities of the Kits for eventual sale in the Licensed Territory.
9.5      Covenants of the Parties .
(a)      During the Term, neither Party will utilize any employee or consultant (i) who has been debarred under Section 306(a) or 306(b) of the FD&C Act or pursuant to the applicable Laws of any Regulatory Authority; (ii) who, to such Party's Knowledge, has been charged with, or convicted of, any felony or misdemeanor within the ambit of 42 U.S.C. §§ 1320a-7(a), 1320a-7(b)(l)-(3), or otherwise pursuant to the applicable Laws of any Regulatory Authority, or is proposed for exclusion, or the subject of exclusion or debarment proceedings by a Regulatory Authority, during the employee's or consultant's employment or contract term; or (iii) who is excluded, suspended or debarred from participation, or otherwise ineligible to participate, in any U.S. or non-U.S. health care programs (or who, to such Party's Knowledge, has been convicted of a criminal offense that falls within the scope of 42 U.S.C. §1320a-7 but has not yet been excluded, debarred, suspended, or otherwise declared ineligible), or excluded, suspended or debarred by a Regulatory Authority from participation, or otherwise ineligible to participate, in any procurement or nonprocurement programs. Each Party shall notify the other Party promptly, but in no event later than five business days, upon becoming aware that any employee or consultant it is using has been excluded, debarred, suspended or otherwise ineligible, or is the subject of exclusion, debarment or suspension proceedings by any Regulatory Authority.
(b)      Each Party will own all intellectual property it or its Affiliates or designees create in the course of performing this Agreement.
9.6      Limitation on Liability . EXCEPT AS EXPRESSLY STATED IN THIS AGREEMENT (E.G., SECTIONS 9.1, 9.2 AND 9.3), NEITHER PARTY MAKES ANY REPRESENTATIONS OR WARRANTIES WHATSOEVER TO THE OTHER, WHETHER EXPRESS OR IMPLIED, EITHER IN FACT OR BY OPERATION OF LAW, BY STATUTE OR OTHERWISE, INCLUDING WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT, OR NON-MISAPPROPRIATION OF THIRD PARTY INTELLECTUAL PROPERTY RIGHTS, AND ALL REPRESENTATIONS AND WARRANTIES, WHETHER ARISING BY OPERATION OF LAW OR OTHERWISE, ARE HEREBY EXPRESSLY EXCLUDED. UNDER NO CIRCUMSTANCES SHALL MMCO HAVE ANY LIABILITY TO SPECTRUM'S THIRD PARTY MANUFACTURERS OF KITS UNDER THIS AGREEMENT. EXCEPT WITH RESPECT TO THIRD PARTY CLAIMS FOR PERSONAL INJURY ARISING OUT OF [***], UNDER NO CIRCUMSTANCES WILL SPECTRUM'S


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AGGREGATE LIABILITY TO MMCO OR ITS AFFILIATES WITH RESPECT TO THIS AGREEMENT EXCEED [***].
9.7      DISCLAIMER . NEITHER PARTY SHALL BE LIABLE TO THE OTHER FOR ANY SPECIAL, CONSEQUENTIAL, INCIDENTAL, PUNITIVE, OR INDIRECT DAMAGES ARISING FROM OR RELATING TO ANY BREACH OF THIS AGREEMENT, REGARDLESS OF ANY NOTICE OF THE POSSIBILITY OF SUCH DAMAGES. NOTWITHSTANDING THE FOREGOING, NOTHING IN THIS SECTION 9.7 IS INTENDED TO OR SHALL LIMIT OR RESTRICT THE INDEMNIFICATION RIGHTS OR OBLIGATIONS OF ANY PARTY UNDER SECTION 8.1 OR 8.2 OR THE RIGHTS OR OBLIGATIONS OF ANY PARTY UNDER SECTION 8.4 (FOR PURPOSES OF CLARITY, SPECTRUM DOES NOT HAVE ANY OBLIGATION UNDER SECTION 8.4 TO PROVIDE TO MMCO ANY AMOUNTS THAT ARE NOT RECEIVED BY SPECTRUM FROM THE APPLICABLE THIRD PARTY MANUFACTURER).
9.8      Sole Remedy . Spectrum's sole liability and MMCO's sole remedy for any breach of the representations set forth in Section 9.4(a) shall be as set forth in Section 3.11. Spectrum's sole liability and MMCO's sole remedy for any failure of Spectrum to deliver any Kits set forth in any Firm Order therefor shall be as set forth in Sections 4.1 and 4.2. Notwithstanding the foregoing, nothing in this Section 9.8 is intended to or shall limit or restrict the indemnification rights or obligations of any Party under Section 8.1 or 8.2 or the rights or obligations of any Party under Section 8.4 (For purposes of clarity, Spectrum does not have any obligation under Section 8.4 to provide to MMCO any amounts that are not received by Spectrum from the applicable Third Party manufacturer).
9.9      MMCO Trademarks.
(a)      License Grant . MMCO grants to Spectrum a non-exclusive, royalty free license to use the MMCO Trademarks for the sole purpose of allowing Spectrum to Package and supply Finished Products under this Agreement.
(b)      MMCO Ownership . MMCO shall be solely responsible for selecting, registering and enforcing the MMCO Trademarks used to identify the Finished Products and, except as set forth in Section 9.9(a), shall have sole and exclusive rights in such MMCO Trademarks.
10.      TERMINATION .
10.1      Cross-Termination . This Agreement will terminate automatically upon the termination of the License Agreement or upon the signed written agreement of the Parties.
10.2      Termination for Convenience . Spectrum may, at any time during the Term, terminate this Agreement for any reason by giving a one hundred eighty (180) days’ notice to MMCO; provided , that such termination shall be effective upon the earlier of (i) MMCO entering into supply agreement with a Third Party manufacturer for the supply of Kits, and (ii) two (2) years from the date of the termination notice. In the event of such termination notice, Spectrum hereby


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19



waives the exclusivity and MMCO agrees to use commercially reasonable efforts to secure such alternate sources of the Kits.
10.3      Termination for Breach . Each Party (the " Non-Breaching Party ") shall have the right to terminate this Agreement in its entirety immediately upon written notice to the other Party (the " Breaching Party ") if the Breaching Party materially breaches its obligations under this Agreement and, after receiving written notice identifying such material breach in reasonable detail (a " Default Notice "), fails to cure such material breach within [***] after delivery of the Default Notice.
10.4      Termination for Bankruptcy . Each Party shall have the right to terminate this Agreement in its entirety immediately upon written notice to the other Party if the other Party (i) applies for or consents to the appointment of, or the taking of possession by, a receiver, custodian, trustee or liquidator of itself or of all or a substantial part of its property, (ii) makes a general assignment for the benefit of its creditors, (iii) commences a voluntary case under the Bankruptcy Code, (iv) files a petition seeking to take advantage of any applicable Laws relating to bankruptcy, insolvency, reorganization, winding-up, or composition or readjustment of debts, (v) has a proceeding or case commenced against it in any court of competent jurisdiction (which proceeding or case is not discharged within 60 days of the filing thereof), seeking (A) its liquidation, reorganization, dissolution or winding-up, or the composition or readjustment of its debts, (B) the appointment of a trustee, receiver, custodian, liquidator or the like of all or any substantial part of its assets, or (C) similar relief under the Bankruptcy Code, or an order, judgment or decree approving any of the foregoing is entered and continues unstayed for a period of 60 days, or (vi) has an order for relief against it entered in an involuntary case under the Bankruptcy Code.
10.5      Post-Termination . Expiration or termination of this Agreement will not relieve the Parties of any obligations accruing prior to such expiration or termination.
11.      CONFIDENTIALITY .
11.1      Confidentiality . Each Party agrees that, for the longer of the Term or the term of the License Agreement and for a period of five years thereafter, it shall keep confidential and shall not publish or otherwise disclose and shall not use for any purpose other than as provided for in this Agreement (which includes the exercise of any rights or the performance of any obligations hereunder or thereunder) any Confidential Information furnished to it by the other Party pursuant to this Agreement, except to the extent expressly authorized by this Agreement or as otherwise agreed to in writing by the Parties. The foregoing confidentiality and non-use obligations shall not apply to any portion of the other Party's Confidential Information that the receiving Party can demonstrate by competent written proof:
(a)      was already known to the receiving Party or its Affiliate, other than under an obligation of confidentiality, at the time of disclosure by the other Party;
(b)      was generally available to the public or otherwise part of the public domain at the time of its disclosure to the receiving Party;


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20



(c)      became generally available to the public or otherwise part of the public domain after its disclosure and other than through any act or omission of the receiving Party in breach of this Agreement;
(d)      was disclosed to the receiving Party or its Affiliate by a Third Party who had a legal right to make such disclosure and who did not obtain such information directly or indirectly from the other Party; or
(e)      was independently discovered or developed by the receiving Party or its Affiliate without access to or aid, application or use of the other Party's Confidential Information, as evidenced by a contemporaneous writing.
11.2      Authorized Disclosure . Notwithstanding the obligations set forth in Section 11.1, a Party may disclose the other Party's Confidential Information and the terms of this Agreement to the extent:
(a)      such disclosure is reasonably necessary (i) to comply with the requirements of Regulatory Authorities with respect to obtaining and maintaining Regulatory Approval of the Product; or (ii) for prosecuting or defending litigation as contemplated by this Agreement or the License Agreement;
(b)      such disclosure is reasonably necessary to its officers, directors, employees, agents, consultants, contractors, licensees, sublicensees, attorneys, accountants, lenders, insurers or licensors on a need-to-know basis for the sole purpose of performing its obligations or exercising its rights under this Agreement; provided that in each case, the disclosees are bound by obligations of confidentiality and non-use no less stringent than those contained in this Agreement;
(c)      such disclosure is reasonably necessary to any bona fide potential or actual investor, acquiror, merger partner, or other financial or commercial partner for the sole purpose of evaluating an actual or potential investment, acquisition or other business relationship; provided that in each case, the disclosees are bound by written obligations of confidentiality and non-use having a minimum term of five years; or
(d)      such disclosure is reasonably necessary to comply with applicable Laws, including regulations promulgated by applicable security exchanges, court order, administrative subpoena or other order.
Notwithstanding the foregoing, in the event a Party is required to make a disclosure of the other Party's Confidential Information pursuant to Section 11.2(a) or 11.2(d), such Party shall promptly notify the other Party of such required disclosure and, upon the other Party's request, shall use reasonable efforts to obtain, or to assist the other Party in obtaining, a protective order preventing or limiting the required disclosure.
11.3      Confidentiality Agreements . The Confidentiality will remain in full force and effect and are not superseded by this Agreement. All Information disclosed by a Party or its Affiliate to the other Party or its Affiliate pursuant to the Confidentiality Agreement shall be deemed to be


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21



such Party's Confidential Information disclosed hereunder and the other Party and its Affiliates and disclosees shall have the confidentiality, non-use and non-disclosure obligations set forth in this Article 11.
11.4      Return of Confidential Information . Except as otherwise set forth in this Agreement, upon termination of this Agreement, the receiving Party will promptly return all of the disclosing Party's Confidential Information, including all reproductions and copies thereof in any medium, except that the receiving Party may retain one copy for its legal files.
11.5      Unauthorized Use . If either Party becomes aware or has Knowledge of any unauthorized use or disclosure of the other Party's Confidential Information, it will promptly notify the other Party of such unauthorized use or disclosure.
11.6      Exclusive Property . All Confidential Information is the sole and exclusive property of the disclosing Party and the permitted use thereof by the receiving Party for purposes of its performance hereunder will not be deemed a license or other right of the receiving Party to use any such Confidential Information for any other purpose.
11.7      Terms of Agreement. The Parties agree that the material terms of this Agreement are the Confidential Information of both Parties.
12.      DISPUTE RESOLUTION .
12.1      Arbitration . In the event of any disputes, controversies or differences which may arise between the Parties, out of or in relation to or in connection with this Agreement, including any alleged failure to perform, or breach, of this Agreement, or any issue relating to the interpretation or application of this Agreement, then upon the request of either Party, the Parties agree to meet and discuss in good faith a possible resolution thereof, which good faith efforts shall include at least one in-person meeting between the Executive Officers of each Party. Subject to Section 12.2 below, if the matter is not resolved within [***] days following the request for discussions, either Party may then invoke arbitration under this Section 12.1. Any dispute, controversy or claim arising out of or relating to the validity, construction, interpretation, enforceability, breach, performance, application or termination of this Agreement that is not resolved pursuant to Section 12.2 or by the Parties meeting in good faith to resolve such dispute, controversy or claim as outlined above, shall be settled by binding arbitration administered by JAMS pursuant to its Comprehensive Arbitration Rules and Procedures then in effect (the " JAMS Rules "), except as otherwise provided herein. The arbitration will be conducted in New York, New York and the Parties consent to the personal and subject matter jurisdiction of the state and federal courts in New York, New York, for any case arising out of or otherwise related to this arbitration, its conduct and its enforcement. Any situation not expressly covered by this Agreement shall be decided in accordance with the JAMS Rules.
12.2      Spectrum Decisions. Solely with respect to Kits supplied by or on behalf of Spectrum, the Executive Officers of Spectrum shall have the right to make the final decision with respect to any decision regarding manufacture of the Kits (including matters related to CMC, process development, scale up, or regulatory matters or aspects related to manufacture of the Kits), except where MMCO reasonably believes either that such decision is substantially likely to cause a material


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22



adverse impact on the regulatory status or the commercial sales of the Finished Product in the Licensed Territory and would not have a similar effect in the Spectrum Territory or that such decision poses a substantial and unwarranted safety risk.
12.3      Equitable Relief. Notwithstanding Sections 12.1 and 12.2, each Party acknowledges that its breach of Article 11 of this Agreement may cause irreparable harm to the other Party, which cannot be reasonably or adequately compensated by damages in an action at law. By reason thereof, each Party agrees that the other Party shall be entitled, in addition to any other remedies it may have under this Agreement or otherwise, to seek preliminary and permanent injunctive and other equitable relief from any state or federal court of competent jurisdiction in New York, New York to prevent or curtail any actual or threatened breach of Article 11 that is reasonably likely to cause it irreparable harm. In addition, notwithstanding Sections 12.1 and 12.2, to the fullest extent provided by Law, either Party may bring an action in any court of competent jurisdiction for injunctive relief (or any other provisional remedy) to protect a Party's rights or enforce a Party's obligations under this Agreement pending final resolution of any claims related thereto pursuant to the dispute resolution procedure set forth in Sections 12.1 and 12.2.

13.      INDEPENDENT CONTRACTOR . Each Party shall act solely as an independent contractor, and nothing in this Agreement shall be construed to give either Party the power or authority to act for, bind, or commit the other Party in any way. Nothing herein shall be construed to create the relationship of partners, principal and agent, or joint-venture partners between the Parties.
14.      MISCELLANEOUS .
14.1      Force Majeure . Both Parties shall be excused from the performance of their obligations under this Agreement to the extent that such performance is prevented by force majeure and the non-performing Party promptly provides notice of the prevention to the other Party. Such excuse shall continue for so long as the condition constituting force majeure continues and the non-performing Party takes reasonable efforts to remove the condition. For purposes of this Agreement, force majeure shall include conditions beyond the control of the Parties, including an act of God, war, civil commotion, terrorist act, epidemic, failure or default of public utilities or common carriers, destruction of production facilities or materials by fire, earthquake, storm or like catastrophe, and failure of plant or machinery (provided that such failure could not have been prevented by the exercise of skill, diligence, and prudence that would be reasonably and ordinarily expected from a skilled and experienced person engaged in the same type of undertaking under the same or similar circumstances). If a force majeure persists for more than [***] days, then the Parties will discuss in good faith the modification of the Parties' obligations under this Agreement in order to mitigate the delays caused by such force majeure.
14.2      Assignment . Neither Party may assign or transfer this Agreement or any rights or obligations hereunder without the prior written consent of the other Party, except that a Party may make such an assignment without the other Party's consent to its Affiliates or to a Third Party successor to substantially all of the business of such Party to which this Agreement relates (such Third Party, an " Acquiror "), whether in a merger, sale of stock, sale of assets or other transaction.


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23



Any successor or assignee of rights and/or obligations permitted hereunder shall, in writing to the other Party, expressly assume performance of such rights and/or obligations. Unless to an Affiliate, any assignment or transfer of this Agreement must be done together with an assignment or transfer of the License Agreement. Any permitted assignment shall be binding on the successors of the assigning Party. Any assignment or attempted assignment by either Party in violation of the terms of this Section 14.2 shall be null, void and of no legal effect.
14.3      Governing Law . This Agreement and all disputes arising out of or related to this Agreement or any breach hereof shall be governed by and construed under the laws of the State of New York, without giving effect to any choice of law principles that would require the application of the laws of a different state.
14.4      Notices . Any notice required or permitted to be given under this Agreement shall be in writing, shall specifically refer to this Agreement, and shall be addressed to the appropriate Party at the address specified below or such other address as may be specified by such Party in writing in accordance with this Section 14.4, and shall be deemed to have been given for all purposes (a) when received, if hand-delivered or sent by confirmed facsimile or a reputable courier service, or (b) five business days after mailing, if mailed by first class certified or registered airmail, postage prepaid, return receipt requested.
If to Spectrum:

Spectrum Pharmaceuticals, Inc.
11500 South Eastern Ave. Suite 240
Henderson, NV 89052
Attn: Legal Department
Telephone number:    (702) 835-6300
Facsimile number:     (702) 260-7405
E-mail: legal@sppirx.com

With copies to (which shall not constitute notice):

Stradling Yocca Carlson & Rauth
660 Newport Center Drive, Suite 1600
Newport Beach, CA 92660
Attn: Marc G. Alcser
Fax: (949) 823-5119
        
If to MMCO:
Mundipharma Medical Company
14 Par-la-Ville Road
P.O. Box HM 2332
Hamilton HM JX, Bermuda
Attn: [***]
Fax: [***]


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24




With copies to (which shall not constitute notice):

Chadbourne & Parke LLP
1301 Avenue of the Americas
New York, NY 10019-6022
Attention: Stuart D. Baker
Fax: (212) 489-7130
or to such other fax number and address as such Party receiving such notice will have communicated to the other Party hereto by notice given as aforesaid.
14.5      Counterparts . This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Each Party may execute this Agreement by facsimile transmission or in Adobe™ Portable Document Format (PDF) sent by electronic mail. In addition, facsimile or PDF signatures of authorized signatories of any Party will be deemed to be original signatures and will be valid and binding, and delivery of a facsimile or PDF signature by any Party will constitute due execution and delivery of this Agreement.
14.6      Entire Agreement; Amendment . This Agreement including the Exhibits hereto, together with the License Agreement, the Consent, the Technical Agreement and the Pharmacovigilance Agreements, sets forth the complete, final and exclusive agreement and all the covenants, promises, agreements, warranties, representations, conditions and understandings between the Parties hereto with respect to the subject matter hereof and supersedes, as of the Effective Date, all prior and contemporaneous agreements and understandings between the Parties with respect to the subject matter hereof. There are no covenants, promises, agreements, warranties, representations, conditions or understandings, either oral or written, between the Parties with respect to the subject matter of this Agreement other than as are set forth in this Agreement, the License Agreement, the Technical Agreement or the Pharmacovigilance Agreements. No subsequent alteration, amendment, change or addition to this Agreement shall be binding upon the Parties unless reduced to writing and signed by an authorized officer of each Party.
14.7      Survival . Termination or expiration of this Agreement shall not affect rights or obligations of the Parties under this Agreement that have accrued prior to the date of termination or expiration. Notwithstanding anything to the contrary contained in this Agreement, the provisions of those Sections which by their nature are meant to survive termination will survive any expiration or termination of this Agreement.
14.8      Further Actions . Each Party agrees to execute, acknowledge and deliver such further instruments, and to do all such other acts, as may be necessary or appropriate in order to carry out the purposes and intent of this Agreement.
14.9      Severability . If any one or more of the provisions of this Agreement is held to be invalid or unenforceable by any court of competent jurisdiction from which no appeal can be or is taken, the provision shall be considered severed from this Agreement and shall not serve to


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25



invalidate any remaining provisions hereof. The Parties shall make a good faith effort to replace any invalid or unenforceable provision with a valid and enforceable one such that the objectives contemplated by the Parties when entering this Agreement may be realized.
14.10      No Waiver . Any delay in enforcing a Party's rights under this Agreement or any waiver as to a particular default or other matter shall not constitute a waiver of such Party's rights to the future enforcement of its rights under this Agreement, except with respect to an express written and signed waiver relating to a particular matter for a particular period of time.
14.11      Expenses . Each of the Parties will bear its own direct and indirect expenses incurred in connection with the negotiation and preparation of this Agreement and, except as set forth in this Agreement, the performance of the obligations contemplated hereby and thereby.
14.12      Currency . All payment amounts set forth herein, and all obligations of Spectrum and MMCO relating to the payment or receipt of money, are expressed in and will be paid in Euros by wire transfer of immediately available funds into an account designated by Spectrum.
14.13      Performance by Affiliates . Each Party may discharge any obligations and exercise any right hereunder through any of its Affiliates. Each Party hereby guarantees the performance by its Affiliates of such Party's obligations under this Agreement, and shall cause its Affiliates to comply with the provisions of this Agreement in connection with such performance. Any breach by a Party's Affiliate of any of such Party's obligations under this Agreement shall be deemed a breach by such Party, and the other Party may proceed directly against such Party without any obligation to first proceed against such Party's Affiliate.
[ remainder of this page intentionally left blank ]



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26



IN WITNESS WHEREOF , the Parties hereto have caused this Supply Agreement to be executed by their duly authorized representatives as of the Effective Date.
MUNDIPHARMA MEDICAL COMPANY



By: /s/ Douglas Docherty            
Name: Douglas Docherty
Title:
General Manager

SPECTRUM PHARMACEUTICALS CAYMAN, L.P.
By: Spectrum Pharmaceuticals International Holdings, LLC
Its: General Partner

By: Spectrum Pharmaceuticals, Inc.
Its: Managing Member
By: /s/ Kurt A. Gustafson         
Name: Kurt A. Gustafson
Title: Chief Financial Officer


[Signature Page to Supply Agreement]
DOCSOC/1746929v1/100089-0001


EXHIBIT A
SPECIFICATIONS

[***]





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EXHIBIT B
EXISTING INVENTORY
None.





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EXHIBIT C
MMCO TRADEMARKS
None.



[***]: CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION.




EXHIBIT D
TECHNICAL AGREEMENT

In process.



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EXHIBIT E
PRICE
Existing Inventory Purchase Price: US $ [***] .
Kit and Kit Components Price:
Item
Per Unit Price
Kit [***]
US $ [***]
Kit [***]
The Parties will agree.
Conjugated   Antibody
[***]% of the price per unit of the Kit
Sodium Acetate
[***]% of the price per unit of the Kit
Formulation Buffer
[***]% of the price per unit of the Kit
Reaction Vial
[***]% of the price per unit of the Kit
The prices set forth on this Exhibit E are subject to adjustment pursuant to Section 5.4 of the Agreement.




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EXHIBIT 21.1

List of Subsidiaries

SUBSIDIARY/AFFILIATE NAME
 
INCORPORATION
 
 
 
Spectrum Oncology Private Limited
 
India
 
 
 
RIT Oncology, LLC
 
Delaware
 
 
 
Spectrum Pharmaceuticals International Holdings, LLC
 
Delaware
 
 
 
Allos Therapeutics, Inc.
 
Delaware
 
 
 
Allos Therapeutics, Ltd.
 
England and Wales
 
 
 
Spectrum and Cayman, L.P. (1% Spectrum Pharmaceuticals International Holdings, LLC and 99% Spectrum Pharmaceuticals, Inc.)
 
Cayman Islands
 
 
 
Spectrum Pharmaceuticals, B.V.
 
Netherlands
 
 
 
Spectrum Pharmaceuticals GK
 
Japan
 
 
 
Spectrum Pharma Canada Inc. (50% Spectrum Pharmaceuticals, Inc. 50% Prodev Pharma Inc.)
 
Canada
 
 
 
Talon Therapeutics, Inc.
 
Delaware





EXHIBIT 23.1


CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in Registration Statement Nos. 333-37585, 333-52331, 333-73009, 333-92855, 333-37180, 333-38710, 333-42852, 333-51388, 333-60966, 333-64432, 333-64444, 333-102587, 333-105814, 333-108658, 333-110103, 333-115759, 333-121612, 333-125208, 333-135029, 333-142628, 333-150260, 333-190413, 333-194823, and 333-208760 on Form S‑3, and Registration Statement Nos. 333-30345, 333-54246, 333-106427, 333-119833, 333-134566, 333-160312, 333-160705, 333-164014, 333-176681, and 333-202761 on Form S‑8 of our reports dated March 14, 2016 , relating to the consolidated financial statements and financial statement schedule of Spectrum Pharmaceuticals, Inc., and the effectiveness of Spectrum Pharmaceutical Inc.’s internal control over financial reporting, appearing in the Annual Report on Form 10‑K of Spectrum Pharmaceuticals, Inc. for the year ended December 31, 2015 .

/s/ Deloitte & Touche LLP
Costa Mesa, California
March 14, 2016





EXHIBIT 23.2


CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in Registration Statement Nos. 333-37585, 333-52331, 333-73009, 333-92855, 333-37180, 333-38710, 333-42852, 333-51388, 333-60966, 333-64432, 333-64444, 333-102587, 333-105814, 333-108658, 333-110103, 333-115759, 333-121612, 333-125208, 333-135029, 333-142628, 333-150260, 333-190413, 333-194823 and 333-208760 on Form S-3, and Registration Statement Nos. 333-30345, 333-54246, 333-106427, 333-119833, 333-134566, 333-160312, 333-160705, 333-164014, 333-176681, and 333-202761 on Form S-8 of our report dated March 12, 2014, with respect to the consolidated financial statements and schedule of Spectrum Pharmaceuticals, Inc. included in this Annual Report (Form 10-K) of Spectrum Pharmaceuticals, Inc. for the year ended December 31, 2015 .


/s/ Ernst & Young LLP

Irvine, California
March 14, 2016





EXHIBIT 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
I, Rajesh C. Shrotriya, certify that:
1.
I have reviewed this Annual Report on Form 10-K of Spectrum Pharmaceuticals, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make 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;
3.
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;
4.
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.
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;
b.
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;
c.
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
d.
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.
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
b.
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.
Date: March 14, 2016


 
/s/ RAJESH C. SHROTRIYA
Rajesh C. Shrotriya, M.D.
Chairman and Chief Executive Officer
(Principal Executive Officer)





EXHIBIT 31.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
I, Kurt A. Gustafson, certify that:
 
1.
I have reviewed this Annual Report on Form 10-K of Spectrum Pharmaceuticals, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make 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;
3.
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;
4.
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.
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;
b.
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;
c.
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
d.
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.
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
b.
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.
Date: March 14, 2016

 
 
/s/ KURT A. GUSTAFSON
Kurt A. Gustafson
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)




EXHIBIT 32.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Spectrum Pharmaceuticals, Inc. (the “Company”), hereby certifies, to such officer’s knowledge, that:
(i) the accompanying Annual Report on Form 10-K of the Company for the year ended December 31, 2015 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and
(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Dated: March 14, 2016
 
/s/ RAJESH C. SHROTRIYA
Rajesh C. Shrotriya, M.D.
Chairman and Chief Executive Officer
This certification accompanies this Report pursuant to Rule 13a-14(b) or Rule 15d-14(b) under the Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section 1350 and shall not be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.




EXHIBIT 32.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Spectrum Pharmaceuticals, Inc. (the “Company”), hereby certifies, to such officer’s knowledge, that:
(i) the accompanying Annual Report on Form 10-K of the Company for the year ended December 31, 2015 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and
(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Dated: March 14, 2016
 
/s/ KURT A. GUSTAFSON
Kurt A. Gustafson
Executive Vice President and Chief Financial Officer
This certification accompanies this Report pursuant to Rule 13a-14(b) or Rule 15d-14(b) under the Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section 1350 and shall not be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.