INFINITY PHARMACEUTICALS, INC. (Form: 10-Q, Received: 05/07/2019 15:18:01)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)



ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2019



¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission file number 000-31141

INFINITY PHARMACEUTICALS, INC.

(Exact name of registrant as specified in its charter)



Delaware		33-0655706
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

784 Memorial Drive, Cambridge, Massachusetts 02139

(Address of principal executive offices) (zip code)

(617) 453-1000

(Registrant’s telephone number, including area code)

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 ý No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ý No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer ¨	Accelerated filer ý	Non-accelerated filer ¨	Smaller reporting company ý	Emerging growth company ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No ý

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, $0.001 par value	INFI	Nasdaq Global Select Market

Number of shares of the registrant’s Common Stock, $0.001 par value, outstanding on April 30, 2019 : 56,925,528

Table of Contents

INFINITY PHARMACEUTICALS, INC.

FORM 10-Q

FOR THE QUARTER ENDED MARCH 31, 2019

TABLE OF CONTENTS



		Page No.
PART I	FINANCIAL INFORMATION	1
Item 1.	Unaudited Condensed Consolidated Financial Statements	1
	Condensed Consolidated Balance Sheets as of March 31, 2019 and December 31, 2018	1
	Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three Months Ended March 31, 2019 and 2018	2
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2019 and 2018	3
	Condensed Consolidated Statements of Stockholders’ Equity for the Three Months Ended March 31, 2019 and 2018	4
	Notes to Condensed Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	21
Item 4.	Controls and Procedures	22
PART II	OTHER INFORMATION	22
Item 1A.	Risk Factors	22
Item 6.	Exhibits	57
	Signatures	58

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Unaudited Condensed Consolidated Financial Statements

INFINITY PHARMACEUTICALS, INC.

Condensed Consolidated Balance Sheets

(unaudited)

(in thousands, except share and per share amounts)



	March 31, 2019			December 31, 2018
Assets
Current assets:
Cash and cash equivalents	$	52,947		$	48,616
Available-for-sale securities	17,584			9,975
Prepaid expenses and other current assets	3,641			1,227
Total current assets	74,172			59,818
Property and equipment, net	51			28
Other assets	522			369
Total assets	$	74,745		$	60,215
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	1,685		$	1,197
Accrued expenses and other current liabilities	5,774			6,521
Total current liabilities	7,459			7,718
Liability related to sale of future royalties, net (Note 9)	27,846			—
Other liabilities	35			38
Total liabilities	35,340			7,756
Commitments and contingencies
Stockholders’ equity:
Preferred Stock, $0.001 par value; 1,000,000 shares authorized, no shares issued and outstanding at March 31, 2019 and December 31, 2018	—			—
Common Stock, $0.001 par value; 100,000,000 shares authorized; 56,925,528 and 56,907,096 shares issued and outstanding at March 31, 2019 and December 31, 2018, respectively	57			57
Additional paid-in capital	731,861			731,178
Accumulated deficit	(692,516		)	(678,772		)
Accumulated other comprehensive income (loss)	3			(4		)
Total stockholders’ equity	39,405			52,459
Total liabilities and stockholders’ equity	$	74,745		$	60,215

The accompanying notes are an integral part of these unaudited, condensed consolidated financial statements.

Table of Contents

INFINITY PHARMACEUTICALS, INC.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(unaudited)

(in thousands, except share and per share amounts)



	Three Months Ended March 31,
	2019			2018
Revenues:
Collaboration revenue	$	2,000		$	—
Royalty revenue	142			—
Total revenues	2,142			—
Operating expenses:
Research and development	5,766			5,911
General and administrative	3,398			3,606
Royalty expense	6,761			—
Total operating expenses	15,925			9,517
Loss from operations	(13,783		)	(9,517		)
Other income (expense):
Investment and other income	289			159
Interest expense	(304		)	(93		)
Total other income (expense)	(15		)	66
Loss before income taxes	(13,798		)	(9,451		)
Income taxes benefit	54			—
Net loss	$	(13,744	)	$	(9,451	)
Basic and diluted net loss per common share:	$	(0.24	)	$	(0.18	)
Basic and diluted weighted average number of common shares outstanding:	56,924,914			51,883,570
Other comprehensive income:
Net unrealized holding gains on available-for-sale securities arising during the period	7			4
Comprehensive loss	$	(13,737	)	$	(9,447	)

The accompanying notes are an integral part of these unaudited, condensed consolidated financial statements.

Table of Contents

INFINITY PHARMACEUTICALS, INC.

Condensed Consolidated Statements of Cash Flows

(unaudited)

(in thousands)



	Three Months Ended March 31,
	2019			2018
Operating activities
Net loss	$	(13,744	)	$	(9,451	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation	10			63
Stock-based compensation, including 401(k) match	683			883
Non-cash royalty revenue	(76		)	—
Non-cash interest expense	304			—
Other, net	(23		)	75
Changes in operating assets and liabilities:
Prepaid expenses and other assets	(2,567		)	(471		)
Accounts payable, accrued expenses and other liabilities	(262		)	(354		)
Net cash used in operating activities	(15,675		)	(9,255		)
Investing activities
Purchases of property and equipment	(33		)	—
Purchases of available-for-sale securities	(12,579		)	(5,744		)
Proceeds from maturities of available-for-sale securities	5,000			11,530
Net cash provided by (used in) investing activities	(7,612		)	5,786
Financing activities
Proceeds from sale of future royalties, net	27,618			—
Proceeds from common stock sales facility, net of issuance costs	—			3,408
Proceeds from issuances of common stock, net	—			29
Repayment of note payable	—			(4,000		)
Net cash provided by (used in) financing activities	27,618			(563		)
Net increase (decrease) in cash, cash equivalents and restricted cash	4,331			(4,032		)
Cash, cash equivalents and restricted cash at beginning of period	48,616			34,607
Cash, cash equivalents and restricted cash at end of period	$	52,947		$	30,575
Supplemental schedule of noncash activities
Issuance of common stock for repayment of note payable, including interest	$	—		$	2,301
Issuance of common stock for compensation	$	—		$	493

The accompanying notes are an integral part of these unaudited, condensed consolidated financial statements.

Table of Contents

INFINITY PHARMACEUTICALS, INC.

Condensed Consolidated Statements of Stockholders’ Equity

(unaudited)

(in thousands, except share amounts)



	Common Stock			Additional Paid-in Capital		Accumulated Deficit			Accumulated Other Comprehensive Income (Loss)			Total Stockholders’ Equity
	Shares	Amount		Additional Paid-in Capital		Accumulated Deficit			Accumulated Other Comprehensive Income (Loss)			Total Stockholders’ Equity
Balance at December 31, 2018	56,907,096	$	57	$	731,178	$	(678,772	)	$	(4	)	$	52,459
Stock-based compensation expense				683								683
Issuance of common stock, net	18,432											—
Unrealized gain on marketable securities									7			7
Net loss						(13,744		)				(13,744		)
Balance at March 31, 2019	56,925,528	$	57	$	731,861	$	(692,516	)	$	3		$	39,405



	Common Stock			Additional Paid-in Capital		Accumulated Deficit			Accumulated Other Comprehensive Income (Loss)			Total Stockholders’ Equity
	Shares	Amount		Additional Paid-in Capital		Accumulated Deficit			Accumulated Other Comprehensive Income (Loss)			Total Stockholders’ Equity
Balance at December 31, 2017	50,761,039	$	51	$	715,213	$	(667,519	)	$	(15	)	$	47,730
Exercise of stock options	20,000			29								29
Stock-based compensation expense				883								883
Issuance of common stock related to sales facility, net of issuance costs	1,551,615	2		3,406								3,408
Issuance of common stock related to repayment of note payable	1,134,689	1		2,300								2,301
Issuance of common stock, net	230,354			493								493
Unrealized gain on marketable securities									4			4
Net loss						(9,451		)				$	(9,451	)
Balance at March 31, 2018	53,697,697	$	54	$	722,324	$	(676,970	)	$	(11	)	$	45,397

Table of Contents

Infinity Pharmaceuticals, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Organization

Infinity Pharmaceuticals, Inc., is an innovative biopharmaceutical company dedicated to developing novel medicines for people with cancer. As used throughout these unaudited, condensed consolidated financial statements, the terms “Infinity,” “we,” “us,” and “our” refer to the business of Infinity Pharmaceuticals, Inc., and its wholly-owned subsidiaries.

2. Basis of Presentation

These condensed consolidated financial statements include the accounts of Infinity and its wholly-owned subsidiaries. We have eliminated all significant intercompany accounts and transactions in consolidation.

The accompanying condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments, consisting of normal recurring accruals and revisions of estimates, considered necessary for a fair presentation of the accompanying condensed consolidated financial statements have been included. Interim results for the three months ended March 31, 2019 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2019 .

The information presented in the condensed consolidated financial statements and related footnotes at March 31, 2019 , and for the three months ended March 31, 2019 and 2018 , is unaudited, and the condensed consolidated balance sheet amounts and related footnotes at December 31, 2018 have been derived from our audited financial statements. For further information, please refer to the consolidated financial statements and accompanying footnotes included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018 filed with the U.S. Securities and Exchange Commission, or SEC, on March 14, 2019, which we refer to as our 2018 Annual Report on Form 10-K.

Liquidity

As of March 31, 2019 , we had cash, cash equivalents and available-for-sale securities of $70.5 million . We have primarily incurred operating losses since inception and have relied on our ability to fund our operations through collaboration and license arrangements and through the sale of stock. We expect to continue to spend significant resources to fund the development and potential commercialization of IPI-549, our sole product candidate, an orally administered immuno-oncology product candidate that selectively inhibits the enzyme phosphoinositide-3 kinase gamma, or PI3K gamma, and to incur significant operating losses for the foreseeable future.

We believe that our existing cash, cash equivalents and available-for-sale securities at March 31, 2019 will be adequate to satisfy our forecasted operating needs for at least the next twelve months .

3. Significant Accounting Policies

Our significant accounting policies are described in Note 2, “Summary of Significant Accounting Policies,” in our 2018 Annual Report on Form 10-K, except as noted below with respect to our liability related to sale of future royalties, royalty expense and lease accounting policies within “Recently Adopted Accounting Pronouncements.”

Liability Related to Sale of Future Royalties

We treat the liability related to sale of future royalties (see Note 9 ) as a debt financing, amortized under the effective interest rate method over the estimated life of the related expected royalty stream. The liability related to sale of future royalties and the debt amortization are based on our current estimates of future royalties expected to be paid over the life of the arrangement. We will periodically assess the expected royalty payments using projections from external sources. To the extent our future estimates of future royalty payments are greater or less than previous estimates or the estimated timing of such payments is materially different than previous estimates, we will adjust the liability related to sale of future royalties and recognize related non-cash interest expense on a prospective basis. Non-cash royalty revenue is reflected as royalty revenue, and non-cash amortization of debt is reflected as interest expense in the Statement of Operations.

Table of Contents

Royalty Expense

Royalty expense is recorded when incurred and represents expense associated with amounts owed to third parties as a result of royalty revenue recognized and the amounts owed by us to Takeda in relation to sale of future royalties (see Note 11 ).

Segment Information

We operate in one business segment, which focuses on drug development. We make operating decisions based upon the performance of the enterprise as a whole and utilize our consolidated financial statements for decision making.

Basic and Diluted Net Income (Loss) per Common Share

Basic net income (loss) per share is based upon the weighted average number of common shares outstanding during the period, excluding restricted stock that has been issued but has not yet vested. Diluted net income (loss) per share is based upon the weighted average number of common shares outstanding during the period plus the effect of additional weighted average common equivalent shares outstanding during the period when the effect of adding such shares is dilutive. Common equivalent shares result from the assumed exercise of outstanding stock options and the exercise of outstanding warrants (the proceeds of which are then assumed to have been used to repurchase outstanding stock using the treasury stock method) and the vesting of restricted shares of common stock. In addition, the assumed proceeds under the treasury stock method include the average unrecognized compensation expense of stock options that are in-the-money. This results in the “assumed” buyback of additional shares, thereby reducing the dilutive impact of stock options. The two-class method is used for outstanding warrants as such warrants are considered to be participating securities, and this method is more dilutive than the treasury stock method. The following outstanding shares of common stock equivalents were excluded from the computation of net income (loss) per share attributable to common stockholders for the periods presented because including them would have been antidilutive:



	Three Months Ended March 31,
	2019	2018
Stock options	9,411,204	8,326,549
Warrants (excluded from treasury stock method)	1,000,000	1,000,000

Recently Adopted Accounting Pronouncements

Effective January 1, 2019, we adopted Accounting Standards Codification, or ASC, Topic 842, Leases, or ASC 842. The new standard requires lessees to recognize the assets and liabilities arising from leases on the balance sheet. The standard allows for two modified retrospective transition methods in which the standard is applied at the beginning of the earliest comparative period presented in the financial statements or in which an entity initially applies the new lease standard at the adoption date and recognizes a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. We elected the modified retrospective approach in which an entity initially applies the new leases standard at the adoption date and the available practical expedients permitted under the transition guidance within the new standard on adoption. Therefore, comparative prior periods have not been adjusted. The adoption of the standard resulted in the recording of an operating lease asset and an operating lease liability of $0.2 million as of January 1, 2019. The adoption of ASC 842 did not have an impact on our condensed consolidated statements of operations. See Note 10 for additional details on our leases.

4. Stock-Based Compensation

Total stock-based compensation expense related to all equity awards for the three months ended March 31, 2019 and 2018 was composed of the following:



	Three Months Ended March 31,
	2019		2018
	(in thousands)
Research and development	$	152	$	135
General and administrative	531		748
Total stock-based compensation expense	$	683	$	883

Table of Contents

As of March 31, 2019 , we had approximately $2.6 million of total unrecognized compensation cost related to unvested common stock options and awards under our Employee Stock Purchase Plan which is expected to be recognized over a weighted-average period of 2.4 years .

Stock Options

During the three months ended March 31, 2019 , we granted options to purchase 1,315,596 shares of our common stock at a weighted average fair value of $0.94 per share and a weighted average exercise price of $1.24 per share. During the three months ended March 31, 2018 , we granted options to purchase 1,155,750 shares of our common stock at a weighted average fair value of $1.63 per share and a weighted average exercise price of $2.13 per share. For the three months ended March 31, 2019 and 2018 , the fair values were estimated using the Black-Scholes valuation model using the following weighted-average assumptions:



	Three Months Ended March 31,
	2019		2018
Risk-free interest rate	2.5	%	2.3	%
Expected annual dividend yield	—		—
Expected stock price volatility	106.3	%	96.9	%
Expected term of options	4.5 years		5.7 years

During the three months ended March 31, 2019 , no options to purchase shares of common stock were exercised.

5. Cash, Cash Equivalents and Available-for-Sale Securities

The following is a summary of cash, cash equivalents and available-for-sale securities:



	March 31, 2019
	Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
	(in thousands)
Cash and cash equivalents	$	52,947	$	—	$	—		$	52,947
Available-for-sale securities:
U.S. Treasury securities due in one year or less	6,494		—		(1		)	6,493
U.S. government-sponsored enterprise obligations due in one year or less	11,087		4		—			11,091
Total available-for-sale securities	17,581		4		(1		)	17,584
Total cash, cash equivalents and available-for-sale securities	$	70,528	$	4	$	(1	)	$	70,531



	December 31, 2018
	Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
	(in thousands)
Cash and cash equivalents	$	48,616	$	—	$	—		$	48,616
Available-for-sale securities:
U.S. Treasury securities due in one year or less	4,988		—		(2		)	4,986
U.S. government-sponsored enterprise obligations due in one year or less	4,991		—		(2		)	4,989
Total available-for-sale securities	9,979		—		(4		)	9,975
Total cash, cash equivalents and available-for-sale securities	$	58,595	$	—	$	(4	)	$	58,591

Table of Contents

We held two debt securities at March 31, 2019 that had been in an unrealized loss position for less than 12 months and no debt securities that had been in an unrealized loss position for 12 months or greater. The fair value of these securities was $6.5 million . There were no material unrealized losses from these securities. As of March 31, 2019 , we held no securities in foreign financial institutions. We evaluated our securities for other-than-temporary impairments based on quantitative and qualitative factors. We considered the decline in market value for these securities to be primarily attributable to current economic and market conditions. It is not more likely than not that we will be required to sell these securities, and we do not intend to sell these securities before the recovery of their amortized cost basis. Based on our analysis, we do not consider these investments to be other-than-temporarily impaired as of March 31, 2019 .

We had no material realized gains or losses on our available-for-sale securities for the three months ended March 31, 2019 and 2018 . There were no other-than-temporary impairments recognized for the three months ended March 31, 2019 and 2018 .

6. Fair Value

The following table provides the assets carried at fair value measured on a recurring basis as of March 31, 2019 and December 31, 2018 :



	Level 1		Level 2
	(in thousands)
March 31, 2019
Assets:
Cash and cash equivalents	$	50,700	$	2,247
U.S. Treasury securities	—		6,493
U.S. government-sponsored enterprise obligations	—		11,091
Total	$	50,700	$	19,831
December 31, 2018
Assets:
Cash and cash equivalents	$	48,616	$	—
U.S. Treasury securities	—		4,986
U.S. government-sponsored enterprise obligations	—		4,989
Total	$	48,616	$	9,975

The fair value of the available-for-sale securities and cash and cash equivalents is based on the following inputs for both U.S. Treasury securities and U.S, government-sponsored enterprise obligations: benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers and reference data including TRACE ^® reported trades.

The carrying amounts reflected in the condensed consolidated balance sheets for prepaid expenses and other current assets, receivables, other assets, accounts payable and accrued expenses approximate their fair value due to their short-term maturities.

There have been no changes to our valuation methods during the three months ended March 31, 2019 . We had no available-for-sale securities that were classified as Level 3 at any point during the three months ended March 31, 2019 or during the year ended December 31, 2018 .

7. Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consist of the following:



	March 31, 2019		December 31, 2018
	(in thousands)
Prepaid expenses	$	1,048	$	641
Other current assets	2,593		586
Total prepaid expenses and other current assets	$	3,641	$	1,227

Table of Contents

8. Accrued Expenses and Other Current Liabilities

Accrued expenses consist of the following:



	March 31, 2019		December 31, 2018
	(in thousands)
Accrued clinical and development	$	2,940	$	2,656
Accrued compensation and benefits	1,287		2,630
Operating lease liability, current	105		—
Other	1,442		1,235
Total accrued expenses	$	5,774	$	6,521

9. Liability Related to Sale of Future Royalties

On March 5, 2019, we and HealthCare Royalty Partners III, L.P., or HCR, entered into a purchase and sale agreement, or the HCR Agreement, providing for the acquisition by HCR of our interest in certain royalty payments, or the Purchased Assets, based on worldwide annual net sales of products containing duvelisib, or Copiktra™, an oral, dual inhibitor of PI3K delta and gamma, or the Licensed Product, pursuant to the Verastem Agreement, as defined in Note 11 . Following satisfaction of customary closing conditions, the date of which we refer to as the Closing Date, we received $30.0 million , or the Closing Date Payment, less certain transaction expenses, on March 11, 2019. After sharing with Takeda in accordance with the Takeda Amendment, as defined in Note 11 , we retained $22.5 million in gross proceeds, or approximately $20.9 million in net proceeds. We are entitled to receive up to $15.0 million in potential milestone payments based on the achievement of certain pre-specified net sales levels of the Licensed Product in the United States in the calendar year 2019 and an additional $5.0 million potential milestone payment based on the achievement of a certain pre-specified net sales level of the Licensed Product in the United States in the calendar year 2020. We refer to the milestone payments collectively as the Sales Milestone Payments. The Sales Milestone Payments, if paid, together with the Closing Date Payment are collectively referred to herein as the Investment Amount.

Pursuant to the HCR Agreement, our sale of the Purchased Assets shall be subject to an increasing cap amount defined below, which we refer to as the Cap Amount. The Cap Amount is equal to, for each applicable time period specified below, a multiple, as set forth below, of (a) the Investment Amount plus (b) 100% of the reasonably incurred Applicable Purchaser Expenditures, as defined below:



Time Period	Cap Amount
From the Closing Date until June 30, 2022	145	%
From July 1, 2022 through June 30, 2023	155	%
From July 1, 2023 through June 30, 2024	165	%
From July 1, 2024 through June 30, 2025	175	%

On any date that aggregate royalty payments made to HCR equal the Cap Amount applicable to such date, or the Cap Date, the HCR Agreement will automatically terminate, and all rights to the royalty stream with respect to the Licensed Product will revert back to us, which we refer to as the Reversion. If the Cap Date has not been achieved by June 30, 2025, there shall be no Cap Date, and the term of the HCR Agreement shall continue through the term of the Verastem Agreement. Prior to June 30, 2025, we shall have the right, but not the obligation, at any time prior to the Cap Date, if applicable, to cause the occurrence of the Cap Date (including for the purpose of determining the termination date of the HCR Agreement) by paying to HCR an amount equal to (i) the then-applicable Cap Amount less (ii) 100% of all payments made in respect of the Purchased Assets received by HCR through the date of such payment. In addition to the Cap Date, the HCR Agreement (a) may be terminated by mutual agreement of us and HCR, and (b) shall automatically terminate upon the expiration of our and Verastem’s obligations to each other under the Verastem Agreement (for a reason other than early termination thereof).

Table of Contents

We recognized the proceeds received from HCR as a liability that will be amortized using the effective interest method over the life of the arrangement. As the basis for our determination, we considered, in accordance with the relevant accounting guidance, our right to the Reversion, if any, and our right to terminate the HCR Agreement by making payment to achieve the Cap Date. We recorded the receipt of the $30.0 million payment from HCR as a liability, net of debt discount and issuance costs of approximately $2.4 million . In order to determine the amortization of the liability, we are required to estimate the total amount of future net royalty payments to be made to HCR over the term of the HCR Agreement up to the estimated time period that the related Cap Amount would be achieved. The total threshold of net royalties to be paid, less the net proceeds received, will be recorded as interest expense over the life of the liability. We impute interest on the unamortized portion of the liability using the effective interest method. We estimated an effective annual interest rate of approximately 15% . Interest and debt discount amortization expense is reflected as interest expense in the Statement of Operations. Over the course of the HCR Agreement, the actual interest rate will be affected by the amount and timing of royalty revenue recognized and changes in forecasted royalty revenue. On a quarterly basis, we will reassess the effective interest rate and adjust the rate prospectively as needed.

The following table shows the activity within the liability account from the inception of the HCR Agreement through March 31, 2019:



	March 31, 2019
	(in thousands)
Liability related to sale of future royalties - beginning balance	$	—
Proceeds from sale of future royalties	30,000
Debt discount and issuance costs	(2,382		)
Non-cash royalty revenue	(76		)
Non-cash interest expense recognized	304
Liability related to sale of future royalties - ending balance	27,846

During the three months ended March 31, 2019, we recognized non-cash royalty revenue of $0.1 million and $0.3 million of related non-cash interest expense. As royalties are remitted to HCR from Verastem, the balance of the recognized liability will be effectively repaid over the life of the HCR Agreement. There are a number of factors that could materially affect the amount and timing of royalty payments from Verastem, none of which are within our control.

10. Commitments and Contingencies

We currently sublease 6,091 square feet of office space at 784 Memorial Drive, Cambridge, Massachusetts. The term of the lease commenced on September 1, 2017 and will expire on August 31, 2019 . From September 1, 2017 through August 31, 2018, the base rent of the lease was $19,796 per month. From September 1, 2018 until the expiration date, the base rent of the lease is $20,303 per month. In addition to the base rent, we are also responsible for our share of the operating expenses, utility costs and real estate taxes, in accordance with the terms of the lease.

Following the adoption of ASC 842, we recorded an asset and liability for the remaining term of our sublease and our data center lease. We combine lease and nonlease components for these two leases. Our leases do not provide an implicit rate; therefore, we use our incremental borrowing rate based on the information available at the adoption date in determining the present value of lease payments. The following is a summary of our current leases included in the respective balance sheet classifications:



	March 31, 2019
Operating Leases	(in thousands)
Other assets	$	125

Accrued expenses and other current liabilities	$	105

As of March 31, 2019 , the weighted average term remaining on our leases is 0.4 years , and the weighted average discount rate is 10% .

Table of Contents

Operating lease costs, including variable costs, of $0.1 million were incurred during the three months ended March 31, 2019 . Rent expense of approximately $0.1 million was incurred during the three months ended March 31, 2018.

Cash paid for amounts included in the measurement of lease liabilities was $0.1 million during the three months ended March 31, 2019. At March 31, 2019 , future minimum payments under the leases are approximately $0.1 million .

11. Collaborations

Verastem

On October 29, 2016, we and Verastem, Inc., or Verastem, entered into a license agreement, which we and Verastem amended and restated on November 1, 2016, effective as of October 29, 2016. We refer to the amended and restated license agreement as the Verastem Agreement. Under the Verastem Agreement, we granted to Verastem an exclusive worldwide license in oncology indications for the research, development, commercialization, and manufacture of duvelisib and products containing duvelisib, which we refer to as Licensed Products.

We assessed this arrangement in accordance with ASC Topic 606, Revenue from Contracts with Customers, or ASC 606, and concluded that at the date of contract inception this arrangement contained two performance obligations, consisting of the license and transition activities. We satisfied the license at contract inception and transition activities over the transition period which ended in December 2016.

Verastem is obligated to pay us royalties on worldwide net sales of Licensed Products ranging from the mid-single digits to the high-single digits, a portion of which we are obligated to share with Takeda as described below. The royalty obligation will continue on a product-by-product and country-by-country basis until the latest to occur of (i) the last-to-expire patent right covering the applicable Licensed Product in the applicable country, (ii) the last-to-expire patent right covering the manufacture of the applicable Licensed Product in the country of manufacture of such Licensed Product, (iii) the expiration of non-patent regulatory exclusivity for such Licensed Product in the applicable country and (iv) ten years following the first commercial sale of a Licensed Product in the applicable country, provided that upon the expiration of the last-to-expire patent right covering the Licensed Product in the United States, the applicable royalty on net sales for such Licensed Product in the United States will be reduced by 50% . The royalties are also subject to reduction by 50% of certain third-party royalty payments or patent litigation damages or settlements which might be required to be paid by Verastem if litigation were to arise, with any such reductions capped at 50% of the amounts otherwise payable during the applicable royalty payment period. On March 5, 2019, we and HCR entered into the HCR Agreement providing for the acquisition by HCR of our interest in such royalty payments. See Note 9 for details of the transaction.

In addition, Verastem is obligated to pay us a royalty of 4% on worldwide net sales of Licensed Products on a product-by-product and country-by-country basis, subject to specified conditions, to cover the reimbursement of research and development costs owed by us to Mundipharma International Corporation Limited, or Mundipharma, and Purdue Pharmaceutical Products L.P., or Purdue. We refer to these royalty obligations as the Trailing Mundipharma Royalties. Once we have fully reimbursed Mundipharma and Purdue, the Trailing Mundipharma Royalties will be reduced to 1% of net sales in the United States.

Takeda

In July 2010, we entered into a development and license agreement with Takeda Pharmaceutical Company Limited, which we refer to as Takeda, our PI3K inhibitor program licensor, under which we obtained rights to discover, develop and commercialize pharmaceutical products targeting the gamma and/or delta isoforms of PI3K, including IPI-549 and duvelisib. We refer to the amended and restated development and license agreement, as amended, as the Takeda Agreement.

Table of Contents

Duvelisib

Pursuant to the Takeda Agreement, prior to March 4, 2019, we were obligated to share equally with Takeda all revenue arising from certain qualifying transactions for duvelisib, including the Verastem Agreement, subject to certain exceptions including revenue we receive as reimbursement for duvelisib research and development expenses. By entry into a fourth amendment on March 4, 2019, or the Takeda Amendment, Takeda consented to the sale of the Purchased Assets and agreed to forego its rights to an equal share of the royalties due from Verastem during the period prior to the Reversion, and has agreed not to seek any payment from HCR with respect to the royalties owed to Takeda. In exchange, we paid Takeda $6.7 million representing 25% of the Closing Date Payment, net of 25% of the expenses incurred by us in connection with the HCR Agreement. In addition, we agreed to pay Takeda 25% of the royalties that would have been payable to us by Verastem but for the consummation of the HCR Agreement, which we refer to as the Interim Obligation, and 25% of any Sales Milestone Payments received. During the three months ended March 31, 2019, we recognized the $6.7 million payment and any Interim Obligation amounts owed to Takeda as royalty expense.

We have the right to extinguish the Interim Obligation by payment to Takeda of an amount equal to (i) the $6.7 million payment and 25% of any Sales Milestone Payments received multiplied by the multiple set forth in the table below corresponding to the time period in which such extinguishing payment is made, minus (ii) any payments made to Takeda pursuant to the Interim Obligation:



Time Period	Multiple
From the Takeda Amendment Effective Date until June 30, 2022	145	%
From July 1, 2022 through June 30, 2023	155	%
From July 1, 2023 through June 30, 2024	165	%
From July 1, 2024 through June 30, 2025	175	%

The Interim Obligation shall expire upon the occurrence of the Reversion, at which time our obligations to share equally with Takeda the royalties payable under the Verastem Agreement shall be reinstated.

IPI-549

Under the terms of the Takeda Agreement, we are obligated to pay Takeda up to $5.0 million in remaining success-based milestone payments for the development of a product candidate other than duvelisib, which could include IPI-549. We are also obligated to pay Takeda up to $165.0 million in remaining success-based milestone payments related to the approval and commercialization of one product candidate other than duvelisib, which could be IPI-549.

Pursuant to the third amendment to the Takeda Agreement entered into on July 26, 2017, our obligations to pay royalties to Takeda with respect to worldwide net sales of products containing or comprised of a selective inhibitor of PI3K gamma, including but not limited to IPI-549, were terminated. In consideration for such termination, we concurrently executed a convertible promissory note, which we refer to as the Takeda Note, which obligated us to pay Takeda, or its designated affiliate, the principal amount of $6.0 million together with interest accruing at a rate of 8% per annum on or before July 26, 2018 in cash or in shares of our common stock, at the election of Takeda.

On March 12, 2018, we exercised our right to prepay in full the Takeda Note in the principal amount of $6.0 million together with interest of approximately $0.3 million . Takeda elected to receive $4.0 million of such payment in cash and approximately $2.3 million of such payment in shares of our common stock. Pursuant to the terms of the Takeda Note, we issued 1,134,689 shares of common stock, calculated using an average price of $2.028 per share, to Takeda’s designated subsidiary, Millennium Pharmaceuticals, Inc.

PellePharm

In June 2013, we entered into a license agreement with PellePharm, Inc., or PellePharm, under which we granted PellePharm exclusive global development and commercialization rights to our hedgehog inhibitor program, including IPI-926, a clinical-stage product candidate. We refer to our license agreement with PellePharm as the PellePharm Agreement and products covered by the PellePharm Agreement as Hedgehog Products. We assessed this arrangement in accordance with ASC 606 and concluded that at the date of contract inception there was only one performance obligation, consisting of the license, which was satisfied at contract inception.

Table of Contents

Under the PellePharm Agreement, PellePharm is obligated to pay us up to $11.0 million in clinical, regulatory and commercial-based milestone payments through the first commercial sale of a Hedgehog Product. PellePharm is also obligated to pay us up to $37.5 million in success-based milestone payments upon the achievement of certain annual net sales thresholds, as well as a share of certain revenue received by PellePharm in the event that PellePharm sublicenses its rights under the PellePharm Agreement and tiered royalties on annual net sales of Hedgehog Products subject to specified conditions. During the three months ended March 31, 2019 , we recognized $2.0 million revenue for PellePharm’s initiation of a Phase 3 study investigating IPI-926 in patients with Gorlin Syndrome, a rare genetic disease that leads to the chronic formation of multiple basal cell carcinomas, as this milestone payment is variable consideration that became unconstrained following initiation of the study. We have recorded a corresponding receivable as of March 31, 2019 . We received the payment in April 2019. The remaining milestones have not been recognized as they represent variable consideration that is constrained. In making this assessment, we considered numerous factors, including the fact that achievement of the milestones is outside our control and contingent upon the future success of clinical trials, PellePharm’s actions, and the receipt of regulatory approval. As the single performance obligation was previously satisfied, all regulatory and commercial-based milestones will be recognized as revenue in full in the period in which the constraint is removed. Any consideration related to sales-based milestones, including royalties, will be recognized when the related sales occur as these amounts have been determined to relate predominantly to the license granted to PellePharm and therefore are recognized at the later of when the performance obligation is satisfied or the related sales occur.

12. Stockholders’ Equity

In May 2016, we entered into a controlled equity offering sales agreement, or Sales Agreement, with Cantor Fitzgerald & Co., or Cantor Fitzgerald, pursuant to which we may from time to time, at our option, offer and sell shares of our common stock having an aggregate offering price of up to $50.0 million through Cantor Fitzgerald, acting as our sales agent. Cantor Fitzgerald will be entitled to a commission of 3.0% of the aggregate gross proceeds from sales of shares of our common stock under the Sales Agreement. Sales of shares of our common stock under the Sales Agreement may be made by any method permitted by law that is deemed an “at the market” offering as defined in Rule 415 under the Securities Act of 1933, as amended, including sales made through the Nasdaq Global Select Market, on any other existing trading market for our common stock or to or through a market maker. We may also authorize Cantor Fitzgerald to sell shares in privately negotiated transactions. During the three months ended March 31, 2019 , we did no t sell any shares under the Sales Agreement. During the three months ended March 31, 2018 , we sold 1,551,615 shares of common stock at a weighted average price per share of $2.29 at-the-market pursuant to the Sales Agreement for $3.4 million in net proceeds. As of March 31, 2019 , we have an aggregate of $40.3 million available for future sales. We have no obligation to sell shares of our common stock and cannot provide any assurances that we will issue any additional shares pursuant to the Sales Agreement. We may also suspend the offering of shares of our common stock upon notice to Cantor Fitzgerald and subject to other conditions.

13. Subsequent Event

On April 5, 2019, we entered into a lease agreement, or the Lease, with Sun Life Assurance Company of Canada, or the Landlord, effective April 3, 2019 , or the Commencement Date, for the lease of approximately 10,097 square feet of office space at 1100 Massachusetts Avenue, Cambridge, Massachusetts, or the Leased Premises. The term of the Lease commences on the Commencement Date and expires on August 1, 2024 , or the Expiration Date, approximately five years after the Rent Commencement Date as described below.

Beginning August 1, 2019 , or the Rent Commencement Date, the total base rent of the Lease will be $47,961 per month and will increase by approximately 3% on each anniversary of the Rent Commencement Date until the Expiration Date. In addition to the base rent, we are also responsible for our share of the operating expenses, insurance, real estate taxes and certain capital costs, and we are responsible for utilities in our premises, all in accordance with the terms of the Lease. Pursuant to the terms of the Lease, we are required to provide a security deposit in the form of a letter of credit in the initial amount $300,000 , which may be reduced to $150,000 over time in accordance with the terms of the Lease. The Landlord has agreed to contribute up to $555,335 to fund certain improvements to be made by us to the Leased Premises.

Subject to certain conditions specified in the Lease, we have the right to extend the term of the Lease for two years, provided that we provide notice to the Landlord not earlier than 12 months, nor later than 9 months, prior to expiration of the Lease. The base rent for the extension term shall be equal to the greater of the base rent in effect for the last year of the initial lease term or a fair market base rent determined according to the terms of the Lease.

The Lease contains customary provisions allowing the Landlord to, among other things, accelerate payments under the Lease or terminate the Lease in its entirety if we fail to remedy a default of any of our obligations under the Lease within specified time periods or upon our bankruptcy or insolvency.

Table of Contents


Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes included elsewhere in this report. Some of the information contained in this discussion and analysis and set forth elsewhere in this report, including information with respect to our plans and strategy for our business, the possible achievement of development goals and milestones, our future development efforts, our collaborations, and our future operating results and financial position, includes forward-looking statements that involve risks and uncertainties. We often use words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “seek,” “target,” “goal,” “potential,” “will,” “would,” “could,” “should,” “continue,” and other words and terms of similar meaning to help identify forward-looking statements, although not all forward-looking statements contain these identifying words. You can also identify these forward-looking statements by the fact that they do not relate strictly to historical or current facts. There are a number of important risks and uncertainties that could cause actual results or events to differ materially from those indicated by forward-looking statements made herein. These risks and uncertainties include those inherent in pharmaceutical research and development, such as adverse results in our drug discovery and clinical development activities, decisions made by the U.S. Food and Drug Administration, or FDA, and other regulatory authorities with respect to the development and commercialization of our product candidates, our ability to obtain, maintain and enforce intellectual property rights for our product candidates, our dependence on our alliance partners, competition, our ability to obtain any necessary financing to conduct our planned activities, our ability to implement our strategic plans, our ability to achieve cost-savings benefits from our restructuring and other risk factors described herein. We have included, and you should review, important factors in the cautionary statements included in this Quarterly Report on Form 10-Q, particularly in the section titled “Risk Factors” in Part II, Item 1A that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis and elsewhere in this report. Unless required by law, we do not undertake any obligation to update any forward-looking statements.

Business Overview

We are an innovative biopharmaceutical company dedicated to developing novel medicines for people with cancer. We combine proven scientific expertise with a passion for developing novel small molecule drugs that target disease pathways for potential applications in oncology. We are focusing our efforts on advancing IPI-549, an orally administered, clinical-stage, immuno-oncology product candidate that selectively inhibits the enzyme phosphoinositide-3-kinase-gamma, or PI3K-gamma. We believe IPI-549 is the only selective inhibitor of PI3K-gamma being investigated in clinical trials.

Clinical Development Program

We entered into a clinical supply agreement with F. Hoffmann-La Roche Ltd., or Roche, on March 7, 2019, under which Roche will supply atezolizumab to us for our use in our Phase 2 multi-arm study entitled MARIO-3: MA crophage R eprogramming in I mmuno- O ncology. MARIO-3, which we intend to initiate in the third quarter of 2019, will evaluate IPI-549 in combination with atezolizumab, also known as Tecentriq ^® , and nab-paclitaxel, also known as Abraxane ^® , in front-line triple negative breast cancer and in combination with atezolizumab and bevacizumab in front-line renal cell carcinoma.

We entered into a clinical supply agreement in November 2018 with Bristol-Myers Squibb Company, or BMS, under which BMS has agreed to supply nivolumab, also known as Opdivo ^® , for our use in MARIO-275, a global, randomized Phase 2 study designed to evaluate the effect of adding IPI-549 to nivolumab in checkpoint-naïve advanced urothelial cancer patients who have progressed or recurred following treatment with platinum-based chemotherapy. We expect that approximately 160 patients will be randomized between combination therapy and nivolumab monotherapy plus placebo. The primary endpoint of the trial will be the overall response rate, which will be assessed in the overall population as well as in subsets of patients with different baseline levels of myeloid-derived suppressor cells, or MDSCs. The design of MARIO-275 is supported by data from MARIO-1 presented at the American Society of Clinical Oncology Annual Meeting, or ASCO, 2018, which showed that MDSCs were reduced in the majority of patients treated with IPI-549 monotherapy, as well as an exploratory analyses of data from a BMS clinical study evaluating nivolumab monotherapy in patients with urothelial cancer, referred to as CheckMate-275, that showed that high levels of MDSCs were associated with shorter overall survival in patients treated with nivolumab. We intend to initiate MARIO-275 in the second quarter of 2019.

Our ongoing Phase 1/1b study MARIO-1 is designed to evaluate the safety, tolerability, pharmacokinetics, pharmacodynamics, and activity for IPI-549 both as a monotherapy and in combination with nivolumab in approximately 220 patients with advanced solid tumors. Nivolumab is an immune checkpoint inhibitor therapy commercialized by BMS that targets PD-1. The dose-escalation portions of MARIO-1 are complete, and enrollment is ongoing in the combination therapy expansion cohorts designed to evaluate patients dosed at 40 mg once daily, or QD, of IPI-549 in combination with the standard regimen of nivolumab.

Table of Contents

We reported data from the combination expansion cohorts of the MARIO-1 study in a late-breaking poster presentation at the 33rd Annual Meeting of the Society for Immunotherapy of Cancer on November 10, 2018. Among the 44 patients evaluable for activity as of the October 14, 2018 data-cutoff date, 15 patients showed a best response of stable disease or better, including one partial response in an advanced melanoma patient who progressed on immediate prior nivolumab therapy. Reductions in elevated baseline levels of MDSCs were seen in these patients, as well as corresponding increases in the proliferative fraction of previously exhausted memory cytotoxic T cells. The data included long-term follow up on additional partial responses in two patients from the combination dose escalation component of the study who demonstrated sustained inhibition of MDSCs during the period in which the partial response was maintained. Among the 82 patients evaluable for safety, the majority of side effects reported were Grade 1 or Grade 2, with three (4%) patients discontinuing the study due to treatment-related toxicities. The most common Grade 3+ adverse events were rash (n=6, 7%) and increased liver enzymes AST (n=7, 9%) and ALT (n=5, 6%). There were no treatment-related deaths.

This safety profile is consistent with the safety data from the dose-escalation portion of MARIO-1 that we presented on June 4, 2018, during a poster session and poster discussion session at ASCO. The data demonstrated that IPI-549 combined with nivolumab was well tolerated at all doses tested, up to the recommended combination therapy expansion dose of IPI-549 at 40 mg QD plus nivolumab at 240 mg once every two weeks. No maximum tolerated dose was determined, and there were no treatment-related deaths. The pharmacokinetic/pharmacodynamic profile of IPI-549 (up to the recommended combination expansion dose of 40 mg QD) was unaffected by nivolumab co-administration, and IPI-549 in combination with nivolumab reduced immune suppression and increased immune activation, as indicated by analyses of peripheral blood. At ASCO, we also presented updated clinical and translational data from the fully enrolled monotherapy expansion portion of MARIO-1 that demonstrated that IPI-549 as a monotherapy continued to be well tolerated at all doses studied up to the recommended dose for monotherapy expansion of 60 mg QD, and that IPI-549 as a monotherapy reduced immune suppression and increased immune activation, as indicated by analyses of peripheral blood and paired tumor biopsies.

We will also be seeking to advance a novel triple combination therapy with Arcus Biosciences, Inc., or Arcus, evaluating IPI-549 in combination with AB928, Arcus’s dual adenosine receptor antagonist, and chemotherapy in patients with previously treated, advanced triple negative breast cancer, or TNBC. As both macrophages and high adenosine levels are believed to play critical roles in creating a highly immunosuppressive tumor microenvironment in cancer after chemotherapy, the novel immuno-oncology combination being evaluated in this setting represents a potentially promising approach to treating TNBC. We intend to initiate the Arcus study in the second half of 2019.

2019 Lease

I n April 2019, we entered into a lease agreement with Sun Life Assurance Company of Canada, which we refer to as our Landlord, for the lease of approximately 10,097 square feet of office space at 1100 Massachusetts Avenue, Cambridge, Massachusetts, which we refer to as the Leased Premises. The initial Lease term expires on August 1, 2024, and we have the right to extend the initial term of the Lease for two years, provided that we provide notice to the Landlord not earlier than 12 months, nor later than 9 months, prior to expiration of the Lease and subject to other conditions specified in the Lease. The Lease contains customary provisions allowing the Landlord to, among other things, accelerate payments under the Lease or terminate the Lease in its entirety if we fail to remedy a default of any of our obligations under the Lease within specified time periods or upon our bankruptcy or insolvency.

Beginning August 1, 2019 , or the Rent Commencement Date, the total base rent of the Lease will be $47,961 per month and will increase by approximately 3% on each anniversary of the Rent Commencement Date until the expiration date. In addition to the base rent, we are also responsible for our share of the operating expenses, insurance, real estate taxes and certain capital costs, and are responsible for utilities in our premises, all in accordance with the terms of the Lease. Pursuant to the terms of the Lease, we are required to provide a security deposit in the form of a letter of credit in the initial amount $300,000 , which may be reduced to $150,000 over time in accordance with the terms of the Lease. The Landlord has agreed to contribute up to $555,335 to fund certain improvements to be made by us to the Leased Premises.

Alliances, Collaborations, and Other Arrangements

We have primarily incurred operating losses since inception and will continue to fund our operations through collaboration and license arrangements and alliances, as well as through the sale of securities until such time as we are able to generate significant revenue from product sales. Such arrangements have provided access to breakthrough science, significant research and development support and funding, and innovative drug development programs, all intended to help us realize the full potential of our product pipeline. In the first quarter of 2019, we entered into agreements to accelerate proceeds from and realized milestone payments related to several such arrangements:

Table of Contents

•

On March 5, 2019, we entered into a purchase and sales agreement, or the HCR Agreement, with HealthCare Royalty Partners III, L.P., or HCR, providing for the acquisition by HCR of our interest in certain royalty payments, or the Purchased Assets, due to us under our license agreement with Verastem, Inc., or Verastem, based on worldwide annual net sales of products containing duvelisib, or Copiktra™, in oncology indications, or Licensed Product. We refer to the license agreement with Verastem as the Verastem Agreement. Duvelisib is a selective PI3K-delta,gamma inhibitor that we licensed from a subsidiary of Takeda Pharmaceutical Company Limited, or Takeda, under a license agreement that we refer to as the Takeda Agreement. In consideration for the Purchased Assets, we received a $30.0 million upfront payment from HCR, less certain expenses, and are also entitled to receive (i) up to $15.0 million in potential milestone payments based on the achievement of certain pre-specified net sales levels of the Licensed Product in the United States in the calendar year 2019 and (ii) up to an additional $5.0 million in potential milestone payments based on the achievement of a certain pre-specified net sales level of the Licensed Product in the United States in the calendar year 2020. We collectively refer to such milestone payments as the Sales Milestone Payments.

•

On March 4, 2019, in order to facilitate the HCR Agreement, we entered into a fourth amendment to the Takeda Agreement, which we refer to as the Takeda Amendment. Pursuant to the Takeda Amendment, Takeda (i) consented to the sale of the Purchased Assets, (ii) agreed to forego its rights to an equal share of the royalties owed to it under the Takeda Agreement during a period of time designated under the HCR Agreement, and (iii) agreed not to seek any payment from HCR with respect to the royalties owed to Takeda. In exchange, we paid to Takeda $6.7 million, representing 25% of the upfront payment we received from HCR under the HCR Agreement, less certain expenses, and agreed to pay Takeda 25% of the royalties that would have been payable to us by Verastem but for the consummation of the transaction under the HCR Agreement, no later than the date such payments would have been received by us under the Verastem Agreement, and 25% of the Sales Milestone Payments we receive, if any, net of applicable expenses.

•

In March 2019, we earned a $2.0 million milestone payment from PellePharm, Inc., or PellePharm, which we received in April 2019, for the initiation of a Phase 3 study investigating IPI-926 in patients with Gorlin Syndrome, a rare genetic disease that leads to the chronic formation of multiple basal cell carcinomas. The milestone payment was made pursuant to a license agreement we entered into with PellePharm in 2013, under which we granted PellePharm exclusive global development and commercialization rights to our hedgehog inhibitor program, including IPI-926.

For a further description of these agreements and other of our strategic alliances, see Note 9 and Note 11 of the notes to our unaudited, condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q and our prior disclosure included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018 filed with the U.S. Securities and Exchange Commission, or SEC, on March 14, 2019, which we refer to as our 2018 Annual Report on Form 10-K.

To date, substantially all of our resources have been devoted to organizing and staffing our company, conducting preclinical and translational research and clinical development, and otherwise raising capital and business planning. We expect to continue to spend significant resources to fund the development and potential commercialization of IPI-549 and will continue to incur significant operating losses for the foreseeable future. If we are unable to raise capital or enter into a collaboration or license arrangement on terms that ensure adequate funding on terms favorable to us, we may have to delay, reduce or discontinue the development or commercialization of IPI-549.

Due to the risks and uncertainties inherent in pharmaceutical product development and commercialization, as described in the section entitled “Risk Factors” in Part II, Item 1A of this Quarterly Report on Form 10-Q, we are unable to predict future expenses and future profitability. We may fail to obtain marketing approval for IPI-549 or to successfully commercialize IPI-549. If we are unable to create sustained profitability, we may be forced to reduce or terminate our operations.

Financial Overview

Revenue

To date, all our revenue has been generated under collaboration agreements. The terms of these collaboration agreements may include payment to us of upfront license fees, funding or reimbursement of research and development efforts, milestone payments if specified objectives are achieved, and/or royalties on product sales.

Table of Contents

At the inception of each agreement, we follow a five-step model: 1) identify the customer contract; 2) identify the contract’s performance obligations; 3) determine the transaction price; 4) allocate the transaction price to the performance obligations; and 5) recognize revenue when or as a performance obligation is satisfied. We evaluate all promised goods and services within a customer contract and determine which of those are separate performance obligations. This evaluation includes an assessment of whether the good or service is capable of being distinct and whether the good or service is separable from other promises in the contract. When a performance obligation is satisfied, we recognize as revenue the amount of the transaction price, excluding estimates of variable consideration that are constrained, that is allocated to that performance obligation. For contracts that contain variable consideration, such as milestone payments, we estimate the amount of variable consideration by using either the expected value method or the most likely amount method. In making this assessment, we evaluate factors such as the clinical, regulatory, commercial and other risks that must be overcome to achieve the milestone. Each reporting period we re-evaluate the probability of achievement of such milestones and any related constraints. We will include variable consideration, without constraint, in the transaction price to the extent it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved.

We recognize sales-based milestones and royalty revenue based upon net sales by the licensee of licensed products in licensed territories, and in the period the sales occur under the sales- and usage-based royalty exception when the sole or predominate item to which the royalty relates is a license to intellectual property.

In the event of an early termination of a collaboration agreement, any contract liabilities would be recognized in the period in which all our obligations under the agreement have been fulfilled.

Research and Development Expense

We are a drug development company. Our research and development expense has historically consisted primarily of the following:

• compensation of personnel associated with research and development activities;

• clinical testing costs, including payments made to contract research organizations;

• costs of combination and comparator drugs used in clinical studies;

• costs of manufacturing product candidates for preclinical testing and clinical studies;

• costs associated with the licensing of research and development programs;

• preclinical testing costs, including costs of toxicology studies;

• fees paid to external consultants;

• fees paid to professional service providers for independent monitoring and analysis of our clinical trials;


•	costs for collaboration partners to perform research activities, including development milestones for which a payment is due when achieved;

• depreciation of equipment; and

• allocated costs of facilities.

General and Administrative Expense

General and administrative expense primarily consists of compensation of personnel in executive, finance, accounting, legal and intellectual property, information technology infrastructure, corporate communications, corporate development and human resources functions. Other costs include facilities costs not otherwise included in research and development expense and professional fees for legal and accounting services.

Royalty Expense

Royalty expense represents expense associated with amounts owed to third parties as a result of royalty revenue recognized and the sale of future royalties.

Other Income and Expense

Other income and expense typically consists of interest earned on cash, cash equivalents and available-for-sale securities, gain or loss on sale of property and equipment and interest expense.

Table of Contents

Critical Accounting Policies and Significant Judgments and Estimates

The discussion and analysis of our financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make judgments, estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. On an ongoing basis, we evaluate our estimates, including those related to cumulative revenue related to variable consideration, accrued expenses, estimates of future net royalty payments used in the calculation of our liability related to the sale of future royalties, assumptions in the valuation of stock-based compensation and income taxes. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ from those estimates.

There have been no material changes to our critical accounting policies, except as noted below with respect to our liability related to sale of future royalties, royalty expense and lease accounting policies within “Recently Adopted Accounting Pronouncements” during the three months ended March 31, 2019 . Please refer to Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our 2018 Annual Report on Form 10-K for a discussion of our critical accounting policies and significant judgments and estimates.

Liability Related to Sale of Future Royalties

We treat the liability related to sale of future royalties as a debt financing, amortized under the effective interest rate method over the estimated life of the related royalty stream. The liability related to sale of future royalties and the debt amortization are based on our current estimates of future royalties expected to be paid over the life of the arrangement. We will periodically assess the expected royalty payments using projections from external sources. To the extent our future estimates of future royalty payments are greater or less than previous estimates or the estimated timing of such payments is materially different than previous estimates, we will adjust the liability related to sale of future royalties and recognize related non-cash interest expense on a prospective basis. Non-cash royalty revenue is reflected as royalty revenue, and non-cash amortization of debt is reflected as interest expense in the Statement of Operations.

Royalty Expense

Recently Adopted Accounting Pronouncements

See Note 3 of the notes to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for a description of recently adopted accounting pronouncements applicable to our business.

Results of Operations

The following table summarizes our results of operations for each of the three months ended March 31, 2019 and 2018 , together with the change in these items in dollars and as a percentage:



	Three Months Ended March 31,						$ Change			% Change
	2019			2018			$ Change			% Change
	(in thousands)
Collaboration revenue	$	2,000		$	—		$	2,000		—	%
Royalty revenue	142			—			142			—	%
Research and development expense	5,766			5,911			(145		)	(2	)%
General and administrative expense	3,398			3,606			(208		)	(6	)%
Royalty expense	6,761			—			6,761			—	%
Investment and other income	289			159			130			82	%
Interest expense	(304		)	(93		)	(211		)	227	%
Income taxes benefit	54			—			54			—	%

Revenue

Our revenue for the three months ended March 31, 2019 consisted of:

Table of Contents


•	$2.0 million of revenue related to the milestone from PellePharm for the initiation of a Phase 3 study investigating IPI-926 in patients with Gorlin Syndrome, and


•	approximately $0.1 million of revenue related to royalties from Verastem on net sales of duvelisib.

Research and Development Expense

Research and development expense is comparable for the three months ended March 31, 2019 as compared to the three months ended March 31, 2018 .

We began to track and accumulate expenses by major program starting on January 1, 2006. These expenses primarily relate to payroll and related expenses for personnel working on our programs, process development and manufacturing, preclinical toxicology studies, clinical trial costs and allocated costs of facilities. During the three months ended March 31, 2019 and 2018 , we estimate that we incurred $5.8 million and $5.9 million , respectively, on IPI-549. From January 1, 2006 through March 31, 2019 , we estimate that we incurred $635.3 million on our PI3K inhibitor program, including IPI-549 and duvelisib.

We do not believe that the historical costs associated with our drug development programs are indicative of the future costs associated with these programs. Due to the variability in the length of time and scope of activities necessary to develop a product candidate and uncertainties related to our cost estimates and our ability to obtain marketing approval for our product candidates, accurate and meaningful estimates of the total costs required to bring our product candidates to market are not available.

Because of the risks inherent in drug development, we cannot reasonably estimate or know:

• the nature, timing and estimated costs of the efforts necessary to complete the development of our programs;

• the completion dates of these programs; or


•	the period in which material net cash inflows are expected to commence, if at all, from the programs described above and any potential future product candidates.

There is significant uncertainty regarding our ability to successfully develop any product candidates. These risks include the uncertainty of:


•	the scope, rate of progress and cost of our clinical trials that we are currently conducting or may commence in the future;


•	clinical trial results;


•	the cost of establishing clinical supplies of any product candidates;


•	the cost and availability of comparator and combination drugs;


•	the cost of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights relating to our programs under development;


•	the terms and timing of any strategic alliance, licensing and other arrangements that we have or may establish in the future relating to our programs under development;


•	the cost and timing of regulatory approvals; and


•	the effect of competing technological and market developments.

General and Administrative Expense

General and administrative expense is comparable for the three months ended March 31, 2019 as compared to the three months ended March 31, 2018 .

Royalty Expense

Royalty expense represents the 4% royalty on net sales of duvelisib owed by us to Mundipharma International Corporation Limited and Purdue Pharmaceutical Products L.P and costs owed by us to Takeda, including the $6.7 million paid in relation to the HCR Agreement (see Note 11 of the notes to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q).

Investment and Other Income

Table of Contents

Investment and other income increased for the three months ended March 31, 2019 as compared to the three months ended March 31, 2018 primarily as a result of higher yields on our cash equivalents and available-for-sale securities.

Interest Expense

Interest expense for the three months ended March 31, 2019 was due to the amortization of the liability related to sale of future royalties.

Interest expense for the three months ended March 31, 2018 was due to the Takeda Note (see Note 11 of the notes to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q).

Liquidity and Capital Resources

We have primarily incurred operating losses since inception and have relied on our ability to fund our operations through collaboration and license arrangements and through the sale of stock. Because IPI-549 is in clinical development, and the outcome of this effort is uncertain, we cannot estimate the actual amounts necessary to successfully complete the development and commercialization of our product candidate or whether, or when, we may achieve profitability.

The following table summarizes the components of our financial condition:



	March 31, 2019		December 31, 2018
	(in thousands)
Cash, cash equivalents and available-for-sale securities	$	70,531	$	58,591
Working capital	66,713		52,100



	Three Months Ended March 31,
	2019			2018
	(in thousands)
Cash provided by (used in):
Operating activities	$	(15,675	)	$	(9,255	)
Investing activities	(7,612		)	5,786
Financing activities	27,618			(563		)

Cash Flows

For the three months ended March 31, 2019 compared to the three months ended March 31, 2018 , our cash used in operating activities increased primarily due to our payment to Takeda related to the HCR Agreement. Our cash used in operating activities in future periods may vary significantly.

Net cash from investing activities for the three months ended March 31, 2019 primarily included purchases of available-for-sale securities of $12.6 million and proceeds of $5.0 million from maturities of available-for-sale securities.

Net cash provided by financing activities for the three months ended March 31, 2019 included $27.6 million in net proceeds from the sale of future royalties due to us from Verastem (see Note 9 of the notes to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q).

Operating Capital Requirements

As of March 31, 2019 , we had cash, cash equivalents and available-for-sale securities of $ 70.5 million . We believe that our existing cash, cash equivalents and available-for-sale securities at March 31, 2019 will be adequate to satisfy our capital needs for at least the next twelve months based on our current operational plans. We expect to continue to spend significant resources to fund the development and potential commercialization of IPI-549 and to incur significant operating losses for the foreseeable future.

Our estimate as to how long we expect our existing cash, cash equivalents and available-for-sale securities to be able to continue to fund our operations is based on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect. Further, changing circumstances, some of which may be beyond our control, could cause us to consume capital significantly faster than we currently anticipate. Our future funding requirements, both short-term and long-term, will depend on many factors, including, but not limited to:

Table of Contents


•	the scope, progress, results and costs of developing IPI-549, currently in clinical development;


•	the timing of, and the costs involved in, obtaining regulatory approvals for IPI-549;


•	subject to receipt of marketing approval, revenue, if any, received from commercial sales of IPI-549;


•	the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims, including litigation costs and the outcome of such litigation;


•	any breach, acceleration event or event of default under any agreements with third parties;


•	the outcome of any lawsuits that could be brought against us;


•	the cost of acquiring raw materials for, and of manufacturing, our product candidates is higher than anticipated;


•	the cost or quantity required of comparator or combination drugs used in clinical studies increases;


•	the effect of competing technological and market developments; and


•	a loss in our investments due to general market conditions or other reasons.

We may seek additional funds through arrangements with collaborators or other third parties, or through project financing. These arrangements would generally require us to relinquish or encumber rights to some of our technologies or product candidates, and we may not be able to enter into such agreements on acceptable terms, if at all. We may also seek additional funding through public or private financings of equity and/or debt securities, but such financings may not be available on acceptable terms, if at all. In addition, the terms of our financings may be dilutive to, or otherwise adversely affect, holders of our common stock, and such terms may impact our ability to make capital expenditures or incur additional debt. If we are unable to obtain additional funding on a timely basis, we may be required to curtail or terminate some or all of our development programs or to scale back, suspend or terminate our business operations.

Common Stock Sales Facility

In May 2016, we entered into a controlled equity offering sales agreement, or Sales Agreement, with Cantor Fitzgerald & Co., or Cantor Fitzgerald, pursuant to which we may from time to time, at our option, offer and sell shares of our common stock having an aggregate offering price of up to $50.0 million through Cantor Fitzgerald, acting as our sales agent. Cantor Fitzgerald will be entitled to a commission of 3.0% of the aggregate gross proceeds from sales of shares of our common stock under the Sales Agreement. Sales of shares of our common stock under the Sales Agreement may be made by any method permitted by law that is deemed an “at the market” offering as defined in Rule 415 under the Securities Act of 1933, as amended, including sales made through the Nasdaq Global Select Market, on any other existing trading market for our common stock or to or through a market maker. We may also authorize Cantor Fitzgerald to sell shares in privately negotiated transactions. During the three months ended March 31, 2019 , we did no t sell any shares under the Sales Agreement. As of March 31, 2019 , we have an aggregate of $40.3 million available for future sales. We have no obligation to sell shares of our common stock and cannot provide any assurances that we will issue any additional shares pursuant to the Sales Agreement. We may also suspend the offering of shares of our common stock upon notice to Cantor Fitzgerald and subject to other conditions.

Off-Balance Sheet Arrangements

Since inception, we have not engaged in any off-balance sheet financing activities, including the use of structured finance, special purpose entities or variable interest entities.


Item 3.	Quantitative and Qualitative Disclosures About Market Risk

Not applicable.

Table of Contents


Item 4.	Controls and Procedures

Our management, with the participation of our principal executive and financial officers, evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2019 . The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 as amended, or the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of March 31, 2019 , our principal executive and financial officers concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter ended March 31, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION


Item 1A.	Risk Factors

You should carefully consider the following risk factors, in addition to other information included in this Quarterly Report on Form 10-Q, in evaluating us and our business. If any of the following risks occur, our business, financial condition, operating results and strategic plans could be materially and adversely affected. These risk factors restate and supersede the risk factors set forth in the section entitled “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2018 .

Risks Related to Our Financial Position and Need for Additional Capital

We have a history of operating losses, expect to incur significant and increasing operating losses in the future, and may never become profitable, or if we become profitable, we may not remain profitable.

We have no approved products, have generated no product revenue from sales, and have primarily incurred operating losses. As of March 31, 2019 , we had an accumulated deficit of $692.5 million . We expect to continue to spend significant resources to fund IPI-549, our selective inhibitor of phosphoinositide-3-kinase, or PI3K-gamma. While we may have net income in some periods as the result of non-recurring collaboration revenue, we expect to incur substantial operating losses over the next several years as our clinical trial and drug manufacturing activities continue. In addition, if we proceed to seek and possibly obtain regulatory approval of IPI-549, we would expect to incur significant commercialization expenses for product sales, marketing, manufacturing and distribution, to the extent such sales, marketing, manufacturing and distribution are not the responsibility of a future collaborator. As a result, we expect that our accumulated deficit would also increase significantly.

IPI-549 is under clinical development and may never be approved for sale or generate any revenue. We will not be able to generate product revenue unless and until IPI-549 successfully completes clinical trials and receives regulatory approval. We do not expect to generate revenue from product sales for the foreseeable future. Even if we eventually generate revenues, we may never be profitable, and if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to become and remain profitable would decrease the value of our company and could impair our ability to raise capital, expand our business, and maintain our research and development efforts, and cause a decline in the value of our common stock.

Table of Contents

We will need substantial additional funding, and if we are unable to raise capital when needed, we could be forced to delay, reduce or eliminate the development of IPI-549 or future efforts to commercialize IPI-549.

Developing pharmaceutical products, including conducting preclinical studies and clinical trials, is a very time consuming, expensive and uncertain process that takes years to complete. We will need substantial additional funds to support our planned operations. In the absence of additional funding or business development activities, we believe that our existing cash, cash equivalents and available-for-sale securities at March 31, 2019 will be adequate to satisfy our capital needs for at least the next twelve months .

Our estimate as to how long we expect our existing cash, cash equivalents and available-for-sale securities to be able to continue to fund our operations is based on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect. Further, changing circumstances, some of which may be beyond our control, could cause us to consume capital significantly faster than we currently anticipate, and we may need to seek additional funds sooner than planned. Our future funding requirements, both short-term and long-term, will depend on many factors, including, but not limited to:


•	the scope, progress, results and costs of developing IPI-549, currently in clinical development;


•	the timing of, and the costs involved in, obtaining regulatory approvals for IPI-549;


•	subject to receipt of marketing approval, revenue, if any, received from commercial sales of IPI-549;

•

the ti ming and amount of additional revenues, if any, received from commercial sales of products containing duvelisib, or Licensed Products, including any milestone payments based on the achievement of certain pre-specified net sales, or Sales Milestone Payments, we might receive under the purchase and sale agreement, or HCR Agreement, we entered into with HealthCare Royalty Partners III, L.P., or HCR, or any additional royalties we might receive from Verastem, Inc., or Verastem, if such rights reverted to us in accordance with the HCR Agreement upon satisfaction of our obligations to HCR thereunder;


•	the timing and amount of royalty payments, if any, owed to Takeda Pharmaceuticals Company Limited, or Takeda, based on sales of Licensed Products by Verastem;


•	the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims, including litigation costs and the outcome of such litigation;


•	any breach, acceleration event or event of default under any agreements with third parties;


•	the outcome of any lawsuits that could be brought against us;


•	the cost of acquiring raw materials for, and of manufacturing, our product candidates is higher than anticipated;


•	the cost or quantity required of comparator or combination drugs used in clinical studies increases;


•	the effect of competing technological and market developments;


•	any federal government shutdown that prevents or delays the U.S. Securities and Exchange Commission, or SEC, from processing any future registration statements we may file to register shares for capital raising purposes; and


•	a loss in our investments due to general market conditions or other reasons.

Raising additional capital may cause dilution to our stockholders, restrict our operations or require us to relinquish rights to our technologies or product candidates.

We may seek additional funding through public or private financings of equity or debt securities, but such financing may not be available on acceptable terms, if at all. If we raise additional funds through the issuance of additional debt or equity securities, it could result in dilution to our existing stockholders, increased fixed payment obligations and the existence of securities with rights that may adversely affect the rights of our existing stockholders including liquidation or other preferences and anti-dilution protections. For example, during the fiscal year ending December 31, 2018, we sold 4,461,893 shares of common stock at a weighted average price per share of $2.18 under our common stock sales facility for $9.3 million in net proceeds. Additionally, we sold 1,134,689 shares of common stock to Millennium Pharmaceuticals, Inc., the designated subsidiary of Takeda Pharmaceutical Company Limited, as partial repayment for the convertible promissory note we issued on July 26, 2017. We refer to our PI3K inhibitor program licensor, including its several subsidiaries, as Takeda.

If we incur additional indebtedness, there could be significant adverse consequences, including:


•	requiring us to dedicate a portion of our cash resources to the payment of interest and principal, and prepayment and repayment fees and penalties, thereby reducing money available to fund working capital, capital expenditures, product development and other general corporate purposes;

Table of Contents


•	requiring us to grant security interests on our assets;


•	subjecting us to restrictive covenants that may reduce our ability to incur additional debt, make capital expenditures, create liens, redeem stock, declare dividends, and acquire, sell or license intellectual property rights, or other operating restrictions that could adversely impact our ability to conduct our business;


•	limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we compete;


•	placing us at a competitive disadvantage compared to our competitors that have less debt or better debt servicing options; and


•	increasing our vulnerability to adverse changes in general economic, industry and market conditions.

We may not have sufficient funds, and may be unable to arrange for additional financing, to pay the amounts due under any debt that we may incur. Failure to make payments or comply with other covenants under these debt instruments could result in an event of default and acceleration of amounts due. If an event of default occurs and the lenders accelerate the amounts due, we may not be able to make accelerated payments.

In addition, securing financing could require a substantial amount of time and attention from our management and may divert a disproportionate amount of their attention away from day-to-day activities, which may adversely affect our management’s ability to oversee the development of our product candidates.

We may also seek additional funds through arrangements with collaborators or other third parties, or through project financing. These arrangements would generally require us to relinquish or encumber valuable rights to our technologies, future revenue streams, or product candidates, and we may not be able to enter into such agreements on acceptable terms, if at all.

If we are unable to obtain additional funding on a timely basis, we may be required to curtail, terminate, sell or license rights to develop and market IPI-549 that we would otherwise prefer to develop and market ourselves, or to scale back, suspend, or terminate our business operations.

We have broad discretion in the use of our available cash and other sources of funding and may not use them effectively.

Our management has broad discretion in the use of our available cash and other sources of funding and could spend those resources in ways that do not improve our results of operations or enhance the value of our common stock. The failure by our management to apply these funds effectively could result in financial losses that could cause the price of our common stock to decline and delay the development of IPI-549 or any future product candidate. We may invest our available cash pending its use in a manner that does not produce income or that loses value.

Risks Related to the Development and Commercialization of IPI-549 and Any Future Product Candidate

We are dependent on the success of IPI-549, our only product candidate.

Our prospects are substantially dependent on our ability to develop, obtain marketing approval for and successfully commercialize product candidates in one or more disease indications.

We currently have no products approved for sale and are investing substantially all of our efforts and financial resources in the development of IPI-549.

The success of IPI-549 will depend on several factors, including the following:


•	our ability to raise additional capital;


•	initiation, enrollment and successful completion of clinical trials, including in combination with other agents;


•	a safety, tolerability and efficacy profile that is satisfactory to the U.S. Food and Drug Administration, or FDA, or any comparable foreign regulatory authority for marketing approval;


•	timely receipt of marketing approvals from applicable regulatory authorities;


•	the extent of any required post-marketing approval commitments to applicable regulatory authorities;


•	establishment of supply arrangements with third-party raw materials suppliers and manufacturers;


•	establishment of arrangements with third-party manufacturers to obtain finished drug product that is appropriately packaged for sale;


•	adequate ongoing availability of raw materials and drug product for clinical development and any commercial sales;

Table of Contents


•	obtaining and maintaining patent, trade secret protection and regulatory exclusivity, both in the United States and internationally;


•	protection of our rights in our intellectual property portfolio;


•	successful launch of commercial sales following any marketing approval;


•	a continued acceptable safety profile following any marketing approval;


•	commercial acceptance by patients, the medical community and third-party payors; and


•	our ability to compete with other therapies.

We also expect that the success of IPI-549 will depend primarily on its therapeutic potential in combination with other therapeutics, such as checkpoint inhibitor therapies, and not as a monotherapy.

Many of these factors are beyond our control, including clinical development, the regulatory submission process, potential threats to our intellectual property rights and the manufacturing, marketing and sales efforts of any collaborator. If we are unable to develop, receive marketing approval for and successfully commercialize IPI-549, on our own or with any collaborator, or experience delays as a result of any of these factors or otherwise, our business would be substantially harmed.

IPI-549 remains subject to clinical testing and regulatory approval. This process is highly uncertain, and we may never be able to obtain marketing approval for IPI-549.

To date, we have not obtained approval from the FDA or any foreign regulatory authority to market or sell any product candidates. IPI-549 and any future product candidates that we seek to advance will be subject to extensive governmental regulations relating to development, clinical trials, manufacturing and commercialization. Rigorous preclinical testing, testing in clinical trials, and an extensive regulatory approval process are required in the United States and in many foreign jurisdictions prior to the commercial sale of medicinal products.

For example, we are evaluating IPI-549, our only product candidate, in clinical development. If our current clinical trials are successful, we will need to conduct further clinical trials and will need to apply for regulatory approval before we may market or sell any products based on IPI-549. Satisfaction of these and other regulatory requirements is costly, time consuming, uncertain and subject to unanticipated delays. It is possible that IPI-549 will not obtain marketing approval. Even if IPI-549 has a beneficial effect, that effect may not be detected during clinical evaluation as a result of one or more of a variety of factors, including the size, duration, design, measurements, conduct or analysis of our clinical trials. Conversely, as a result of the same factors, our clinical trials may indicate an apparent positive effect of IPI-549 that is greater than the actual positive effect, if any. Similarly, in our clinical trials we may fail to detect toxicity of or intolerability caused by IPI-549 or mistakenly believe that IPI-549 is toxic or not well tolerated when that is not in fact the case.

We may conduct clinical trials for IPI-549 or future product candidates at sites outside the United States. The FDA may not accept data from trials conducted in such locations and the conduct of trials outside the United States could subject us to additional delays and expense.

In the future we may conduct one or more of our clinical trials with one or more trial sites that are located outside the United States. Although the FDA may accept data from clinical trials conducted outside the United States, acceptance of these data is subject to certain conditions imposed by the FDA. For example, the clinical trial must be well designed and conducted and performed by qualified investigators in accordance with good clinical practices. The FDA must be able to validate the data from the trial through an onsite inspection if necessary. The trial population must also have a similar profile to the U.S. population, and the data must be applicable to the U.S. population and U.S. medical practice in ways that the FDA deems clinically meaningful, except to the extent the disease being studied does not typically occur in the United States. In addition, while these clinical trials are subject to the applicable local laws, FDA acceptance of the data will be dependent upon its determination that the trials also complied with all applicable U.S. laws and regulations. There can be no assurance that the FDA will accept data from trials conducted outside of the United States. If the FDA does not accept the data from any trial that we conduct outside the United States, it would likely result in the need for additional trials, which would be costly and time-consuming and delay or permanently halt our development of IPI-549 or any future product candidates.

In addition, the conduct of clinical trials outside the United States could have a significant adverse impact on us. Risks inherent in conducting international clinical trials include:


•	clinical practice patterns and standards of care that vary widely among countries;


•	non-U.S. regulatory authority requirements that could restrict or limit our ability to conduct our clinical trials;


•	administrative burdens of conducting clinical trials under multiple non-U.S. regulatory authority schema;


•	foreign exchange fluctuations; and

Table of Contents


•	diminished protection of intellectual property in some countries.

IPI-549 must undergo rigorous clinical trials prior to receipt of regulatory approval. Any problems in these clinical trials could delay or prevent commercialization of IPI-549.

We cannot predict whether we will encounter problems with any of our ongoing or planned clinical trials that will cause us or regulatory authorities to delay, suspend, or discontinue clinical trials or to delay the analysis of data from ongoing clinical trials. Any of the following could delay or disrupt the clinical development of IPI-549:


•	unfavorable results of discussions with the FDA or comparable foreign authorities regarding the scope or design of our clinical trials;


•	delays in receiving, or the inability to obtain, required approvals from institutional review boards or other reviewing entities at clinical sites selected for participation in our clinical trials;


•	delays in enrolling patients into clinical trials;


•	a lower than anticipated retention rate of patients in clinical trials;


•	the need to repeat or discontinue clinical trials as a result of inconclusive or negative results or unforeseen complications in testing or because the results of later trials may not confirm positive results from earlier preclinical studies or clinical trials;


•	inadequate supply, delays in distribution or deficient quality of, or inability to purchase or manufacture drug product, comparator drugs or other materials necessary to conduct our clinical trials;


•	unfavorable FDA or other foreign regulatory inspection and review of a clinical trial site, us, or a vendor of ours, or records of any clinical or preclinical investigation;


•	serious and unexpected drug-related side effects experienced by participants in our clinical trials, which may occur even if they were not observed in earlier trials or only observed in a limited number of participants;


•	a finding that the trial participants are being exposed to unacceptable health risks;


•	the placement by the FDA or a foreign regulatory authority of a clinical hold on a trial; or


•	any restrictions on, or post-approval commitments with regard to, any regulatory approval we ultimately obtain that render the product candidate not commercially viable.

We may suspend, or the FDA or other applicable regulatory authorities may require us to suspend, clinical trials of IPI-549 at any time if we or they believe the patients participating in such clinical trials, or in independent third-party clinical trials for drugs based on similar technologies, are being exposed to unacceptable health risks or for other reasons.

The delay, suspension or discontinuation of any of our clinical trials, or a delay in the analysis of clinical data for IPI-549, for any of the foregoing reasons, could adversely affect our ability to obtain regulatory approval for and to commercialize IPI-549, increase our operating expenses and have a material adverse effect on our financial results.

Adverse events or undesirable side effects caused by, or other unexpected properties of, IPI-549, alone or in combination with other agents, may be identified during development and could delay or prevent IPI-549 marketing approval or limit its use.

Adverse events or undesirable side effects caused by, or other unexpected properties of, IPI-549, alone or in combination with other agents, could cause us, any collaborators, an institutional review board or regulatory authorities to interrupt, delay or halt clinical trials of IPI-549 and could result in a more restrictive label or the delay or denial of marketing approval by the FDA or comparable foreign regulatory authorities. If IPI-549 is associated with adverse events or undesirable side effects or has properties that are unexpected, we, or any collaborators, may need to abandon development or limit development of IPI-549 to certain uses or subpopulations in which the undesirable side effects or other characteristics are less prevalent, less severe or more acceptable from a risk-benefit perspective. Many compounds that initially showed promise in clinical or earlier stage testing have later been found to cause undesirable or unexpected side effects that prevented further development of the compound. Combining two or more agents may increase the instances of or severity of adverse events or undesirable effects.

If the market opportunities for IPI-549 or product candidates we may develop in the future are smaller than we believe they are, even assuming approval of a drug candidate, our business may suffer.

Table of Contents

Our projections of both the number of people who are affected by disease within our target indications, as well as the subset of these people who have the potential to benefit from treatment with IPI-549 or product candidates we may develop in the future, are based on our beliefs and estimates. These estimates have been derived from a variety of sources, including the scientific literature, healthcare utilization databases and market research, and may prove to be incorrect. Further, new studies may change the estimated incidence or prevalence of these diseases. The number of patients may turn out to be lower than expected. Likewise, the potentially addressable patient population for our product candidate may be limited or may not be amenable to treatment with our product candidate, and new patients may become increasingly difficult to identify or gain access to, which would adversely affect our results of operations and our business.

If we, or any future collaborators, experience any of a number of possible unforeseen events in connection with clinical trials of IPI-549, potential clinical development, marketing approval or commercialization of IPI-549 could be delayed or prevented.

We, or any future collaborators, may experience numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent clinical development, marketing approval or commercialization of IPI-549, including:


•	regulators or institutional review boards may not authorize us, any collaborators or our or their investigators to commence a clinical trial or conduct a clinical trial at a prospective trial site;


•	we, or any collaborators, may have delays in reaching or fail to reach agreement on acceptable clinical trial contracts or clinical trial protocols with prospective trial sites;


•	clinical trials of IPI-549 may produce unfavorable or inconclusive results;


•	we, or any collaborators, may decide, or regulators may require us or them, to conduct additional clinical trials or abandon IPI-549;


•	the number of patients required for clinical trials of IPI-549 may be larger than we, or any collaborators, anticipate; patient enrollment in these clinical trials may be slower than we, or any collaborators, anticipate; or participants may drop out of these clinical trials at a higher rate than we, or any collaborators, anticipate;


•	the cost of planned clinical trials of IPI-549 may be greater than we anticipate;


•	our third-party contractors or those of any collaborators, including those manufacturing IPI-549, comparator or combination drugs, or components or ingredients thereof or conducting clinical trials on our behalf or on behalf of any collaborators, may fail to comply with regulatory requirements or meet their contractual obligations to us or any collaborators in a timely manner or at all;


•	patients that enroll in a clinical trial may misrepresent their eligibility to do so or may otherwise not comply with the clinical trial protocol, resulting in the need to drop the patients from the clinical trial, increase the needed enrollment size for the clinical trial or extend the clinical trial’s duration;


•	we, or any collaborators, may have to delay, suspend or terminate clinical trials of IPI-549 for various reasons, including a finding that the participants are being exposed to unacceptable health risks, undesirable side effects or other unexpected characteristics of IPI-549;

•

regulators or institutional review boards may require that we, or any collaborators, or our or their investigators suspend or terminate clinical research for various reasons, including noncompliance with regulatory requirements or their standards of conduct, a finding that the participants are being exposed to unacceptable health risks, undesirable side effects or other unexpected characteristics of IPI-549 or findings of undesirable effects caused by a chemically or mechanistically similar product or product candidate;


•	the FDA or comparable foreign regulatory authorities may disagree with our, or any collaborators’, clinical trial designs or our or their interpretation of data from preclinical studies and clinical trials;


•	the FDA or comparable foreign regulatory authorities may fail to approve or subsequently find fault with the manufacturing processes or facilities of third-party manufacturers with which we, or any collaborators, enter into agreements for clinical and commercial supplies;


•	the supply or quality of raw materials or manufactured product candidates and combination or comparator drugs or other materials necessary to conduct clinical trials of IPI-549 may be insufficient, inadequate or not available at an acceptable cost, or we may experience interruptions in supply; and


•	the approval policies or regulations of the FDA or comparable foreign regulatory authorities may significantly change in a manner rendering our clinical data insufficient to obtain marketing approval.

Table of Contents

Product development costs for us, or any collaborators, will increase if we, or they, experience delays in testing or pursuing marketing approvals and we, or they, may be required to obtain additional funds to complete clinical trials and prepare for possible commercialization of IPI-549. We do not know whether any clinical trials will begin as planned, will need to be restructured, or will be completed on schedule or at all. Significant preclinical study or clinical trial delays also could shorten any periods during which we, or any collaborators, may have the exclusive right to commercialize IPI-549 or allow our competitors, or the competitors of any current or future collaborators, to bring products to market before we, or any collaborators, do and impair our ability, or the ability of any collaborators, to successfully commercialize IPI-549 and may harm our business and results of operations. In addition, many of the factors that lead to clinical trial delays may ultimately lead to the denial of marketing approval of IPI-549, or, in the event that our clinical trials remain unable to demonstrate meaningful clinical benefit, our failure to reach the marketing approval stage at all.

Results of preclinical studies and early clinical trials may not be successful, and even if they are successful, may not be predictive of results of future late-stage clinical trials.

We are in early-stage clinical development for IPI-549. The outcome of preclinical studies and early clinical trials may not be predictive of the success of later clinical trials, and interim results of clinical trials do not necessarily predict success in future clinical trials. Many companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in late-stage clinical trials after achieving positive results in earlier development, and we could face similar setbacks. The design of a clinical trial can determine whether its results will support approval of a product and flaws in the design of a clinical trial may not become apparent until the clinical trial is well advanced. We may be unable to design and execute a clinical trial to support marketing approval. In addition, preclinical and clinical data are often susceptible to varying interpretations and analyses. Many companies that believed their product candidates performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain marketing approval for the product candidates. Even if we, or any collaborators, believe that the results of clinical trials for IPI-549 warrant marketing approval, the FDA or comparable foreign regulatory authorities may disagree and may not grant marketing approval of IPI-549.

In some instances, there can be significant variability in safety or efficacy results between different clinical trials of the same product candidate due to numerous factors, including changes in trial procedures set forth in protocols, differences in the size and type of the patient populations, changes in and adherence to the dosing regimen and other clinical trial protocols and the rate of dropout among clinical trial participants. If we fail to receive positive results in clinical trials of IPI-549, the development timeline and regulatory approval and commercialization prospects for IPI-549 and, correspondingly, our business and financial prospects, would be negatively impacted.

Our inability to enroll sufficient numbers of patients in our clinical trials, or any delays in patient enrollment, could result in increased costs and longer development periods for our product candidates.

Clinical trials require sufficient patient enrollment, which is a function of many factors, including:


•	the size and nature of the patient population;


•	the severity of the disease under investigation;


•	the nature and complexity of the trial protocol, including eligibility criteria for the trial;


•	the number of clinical trial sites and the proximity of patients to those sites;


•	standard of care in disease under investigation;


•	the commitment of clinical investigators to identify eligible patients;


•	competing studies or trials; and


•	clinicians’ and patients’ perceptions as to the potential advantages and risks of the drug being studied in relation to other available therapies, including any new drugs that may be approved for the indications we are i nvestigating.

Our failure to enroll patients in a clinical trial could delay the initiation or completion of the clinical trial beyond current expectations. In addition, the FDA or other foreign regulatory authorities could require us to conduct clinical trials with a larger number of patients than has been projected for IPI-549 or any product candidates we may develop in the future. As a result of these factors, we may not be able to enroll a sufficient number of patients in a timely or cost-effective manner.

Furthermore, enrolled patients may drop out of a clinical trial, which could impair the validity or statistical significance of the clinical trial. A number of factors can influence the patient discontinuation rate, including, but not limited to:


•	the inclusion of a placebo or comparator arm in a trial;


•	possible inactivity or low activity of the product candidate being tested at one or more of the dose levels being tested;

Table of Contents


•	the occurrence of adverse side effects, whether or not related to the product candidate; and


•	the availability of numerous alternative treatment options, including clinical trials evaluating competing product candidates, that may ind uce patients to discontinue their participation in the trial.

A delay in our clinical trial activities could adversely affect our ability to obtain regulatory approval for and to commercialize our product candidates, increase our operating expenses, and have a material adverse effect on our financial results.

We have never obtained marketing approval for a product candidate, and we may be unable to obtain, or may be delayed in obtaining, marketing approval for any product candidate.

We have never obtained marketing approval for a product candidate. It is possible that the FDA may refuse to accept for substantive review any new drug applications, or NDAs, that we may in the future submit for any product candidate or may conclude after review of our data that our application is insufficient to obtain marketing approval. If the FDA does not accept or approve any future NDAs we may submit, it may require that we conduct additional clinical trials, preclinical studies or manufacturing validation studies and submit that data before it will reconsider our applications. Depending on the extent of these or any other FDA-required trials or studies, approval of any application that we submit may be delayed by several years, or may require us to expend more resources than we have available. It is also possible that additional trials or studies, if performed and completed, may not be considered sufficient by the FDA to approve our NDAs.

Any delay in obtaining, or an inability to obtain, marketing approvals would prevent us from commercializing IPI-549 or any product candidates we may develop in the future, or any companion diagnostics, generating revenues and achieving and sustaining profitability. If any of these outcomes occurs, we may be forced to abandon our development efforts for one or more product candidates, which could significantly harm our business.

Even if a product candidate receives marketing approval in the future, we or others may later discover that the product is less effective than previously believed or causes undesirable side effects that were not previously identified, which could compromise our ability, or that of any future collaborator, to market such product candidate.

Even if we receive regulatory approval for a product candidate, we will have tested it in only a small number of patients in carefully defined subsets and over a limited period of time during our clinical trials, such as is the case for IPI-549. If any future applications for marketing are approved and more patients begin to use our products, or patients use such products for a longer period of time, such products might be less effective than indicated by our clinical trials. Furthermore, new risks and side effects associated with such products may be discovered or previously observed risks and side effects may become more prevalent and/or clinically significant.

In addition, supplemental clinical trials that may be conducted on a drug following its initial approval may produce findings that are inconsistent with the trial results previously submitted to regulatory authorities. As a result, regulatory authorities may revoke their approvals, or we may be required to conduct additional clinical trials, make changes in labeling of a product (including a “black box” warning or a contraindication) or the manner in which it is administered, reformulate such product or make changes to and obtain new approvals for our and our suppliers’ manufacturing facilities. We also might have to withdraw or recall such product from the marketplace, and regulators might seize such product. We might be subject to fines, injunctions, or the imposition of civil or criminal penalties. Any safety concerns with respect to such product may also result in a significant drop in the potential sales of such product, damage to our reputation in the marketplace, or result in our and our collaborators’ becoming subject to lawsuits, including class actions. Any of these results could decrease or prevent any sales of our approved product or substantially increase the costs and expenses of commercializing and marketing our product and could negatively impact our stock price.

Even if a product candidate receives marketing approval, it may fail to achieve the degree of market acceptance by physicians, patients, third-party payors and others in the medical community necessary for commercial success, in which case we may not be able to generate significant revenues from product sales to become profitable.

Even if a product candidate obtains regulatory approval, it may not gain market acceptance among physicians, patients, managed care organizations, third-party payors, and the medical community for a variety of reasons including:


•	timing of our receipt of any marketing approvals, the terms of any such approvals and the countries in which any such approvals are obtained;


•	timing of market introduction of competitive products;


•	lower demonstrated clinical safety or efficacy, or less convenient or more difficult route of administration, compared to competitive products;

Table of Contents


•	lack of cost-effectiveness;


•	lack of reimbursement from government payors, managed care plans and other third-party payors;


•	prevalence and severity of side effects;


•	potential advantages of alternative treatment methods;


•	whether it is designated under physician treatment guidelines as a first, second or third line therapy;


•	changes in the standard of care for targeted indications;


•	limitations or warnings, including distribution or use restrictions, contained in the product’s approved labeling;


•	safety concerns with similar products marketed by others;


•	the reluctance of the target population to try new therapies and of physicians to prescribe those therapies;


•	the lack of success of our physician education programs; and


•	ineffective sales, marketing and distribution support.

If any product candidate we develop, such as IPI-549, received marketing approval but fails to achieve market acceptance, we would not be able to generate significant revenue, which may adversely impact our ability to become profitable.

If we obtain approval to commercialize a product candidate outside of the United States, a variety of risks associated with international operations could materially adversely affect our business.

We expect that we will be subject to additional risks in commercializing any product candidate outside the United States, including:


•	different regulatory requirements for approval of drugs and biologics in foreign countries;


•	reduced protection for intellectual property rights;


•	unexpected changes in tariffs, trade barriers and regulatory requirements;


•	economic weakness, including inflation, or political instability in particular foreign economies and markets;


•	compliance with tax, employment, immigration and labor laws for employees living or traveling abroad;


•	foreign currency fluctuations, which could result in increased operating expenses and reduced revenue, and other obligations incident to doing business in another country;


•	workforce uncertainty in countries where labor unrest is more common than in the United States;


•	production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad; and


•	business interruptions resulting from geopolitical actions, including war and terrorism or natural disasters including earthquakes, typhoons, floods and fires.

Even if we receive regulatory approvals for marketing any product candidates we may develop, we could lose our regulatory approvals and our business would be adversely affected if we, our collaborators, or our contract manufacturers fail to comply with continuing regulatory requirements.

The FDA and other regulatory agencies continue to review products even after they receive initial approval. If we receive approval to commercialize any product candidates, the manufacturing, marketing and sale of these drugs will be subject to continuing regulation, including compliance with quality systems regulations, the FDA’s current good manufacturing practices, or cGMPs, adverse event requirements and prohibitions on promoting a product for unapproved uses. Enforcement actions resulting from our failure to comply with government and regulatory requirements could result in fines, suspension of approvals, withdrawal of approvals, product recalls, product seizures, mandatory operating restrictions, criminal prosecution, civil penalties and other actions that could impair the manufacturing, marketing and sale of any product candidates and our ability to conduct our business.

Table of Contents

If we are unable to establish sales, marketing and distribution capabilities or enter into sales, marketing and distribution arrangements with third parties, we may not be successful in commercializing any product candidates if approved.

We do not have a sales, marketing or distribution infrastructure and have no experience in the sale, marketing or distribution of pharmaceutical products. To achieve commercial success for any approved product, we must either develop a sales and marketing organization or outsource these functions to third parties. The development of sales, marketing and distribution capabilities would require substantial resources, would be time consuming and could delay any product launch. If the commercial launch of a product candidate for which we recruit a sales force and establish marketing and distribution capabilities is delayed or does not occur for any reason, we could have prematurely or unnecessarily incurred these commercialization costs. This may be costly, and our investment could be lost if we cannot retain or reposition our sales and marketing personnel. In addition, we may not be able to hire or retain a sales force in the United States that is sufficient in size or has adequate expertise in the medical markets that we choose to target. If we are unable to establish or retain a sales force and marketing and distribution capabilities, our operating results may be adversely affected. If a potential partner has development or commercialization expertise that we believe is particularly relevant to one of our products, then we may seek to collaborate with that potential partner even if we believe we could otherwise develop and commercialize the product independently.

As a result of entering into any such arrangements with third parties to perform sales, marketing and distribution services, our product revenues or the profitability of these product revenues may be lower, perhaps substantially lower, than if we were to directly market and sell our products in those markets. Furthermore, we may be unsuccessful in entering into the necessary arrangements with third parties or may be unable to do so on terms that are favorable to us. In addition, we may have little or no control over such third parties, and any of them may fail to devote the necessary resources and attention to sell and market our products effectively.

If we do not establish sales, marketing and distribution capabilities, either on our own or in collaboration with third parties, we will not be successful in commercializing IPI-549 or any of product candidates we may develop in the future that receive marketing approval.

Our competitors and potential competitors may develop products that make IPI-549 less attractive or obsolete.

Immuno-oncology, or IO, is a highly competitive and rapidly changing segment of the pharmaceutical industry. Many large pharmaceutical and biotechnology companies, academic institutions, governmental agencies and other public and private research organizations are pursuing the development of novel drugs that target various oncology diseases. We currently face, and expect to continue to face, intense and increasing competition as new products enter the market and advanced technologies become available.

IPI-549 is an inhibitor of the gamma isoform of PI3K, and we believe it is the only PI3K-gamma selective inhibitor in clinical development. However, there are many competitors developing or commercializing therapies targeting macrophage biology, including the following competitors, which we believe to be conducting clinical studies of product candidates targeting one or more aspects of macrophage biology: Array Biopharma, Inc., Deciphera Pharmaceuticals, Inc., Incyte Corporation (through its collaboration with Calithera Inc.), Bristol-Myers Squibb Company (through its collaboration with Five Prime Therapeutics, Inc.), Plexxikon Inc., GlaxoSmithKline plc, Eli Lilly and Company, Amgen Inc., F. Hoffmann-La Roche Ltd, Janssen Research & Development, LLC, a subsidiary of Johnson & Johnson, Forty Seven Inc., Surface Oncology, Inc., Celgene Corporation, Trillium Therapeutics Inc., Pfizer Inc., XBiotech, Inc., AbbVie Inc., Takeda Pharmaceuticals International, Inc., Novartis AG, Efranat Ltd., Seattle Genetics, Inc., AstraZeneca PLC, Apexigen Inc., X4 Pharmaceuticals, Inc., Syndax Pharmaceuticals, Inc., Syntrix Biosystems, Inc., Eisai Co., Ltd., Vaccinex, Inc., and Alligator Bioscience AB.

Further, the broader field of IO is crowded with innovative therapies that may compete with IPI-549, including checkpoint inhibitor therapies such as PD-1 inhibitors nivolumab and pembrolizumab; PDL-1 inhibitors atezolizumab, avelumab, and durvalumab; and CTLA-4 inhibitors ipilimumab, and tremelimumab. Many of these checkpoint inhibitor therapies are being evaluated in combination with other non-checkpoint inhibitor IO product candidates. For example, nivolumab, which we are currently testing in combination with IPI-549, is being evaluated by others in multiple clinical trials in combination with non-checkpoint inhibitor candidates such as BMS-986016, an anti-LAG3 antibody; elotuzumab, a CD319 antibody; urelumab, a CD137 antibody; cabiralizumab, an anti-CSF1R antibody; and NKTR-214, an IL-2R agonist. The success of competing IO therapies may limit the number of patients available for enrollment in our clinical trials.

Table of Contents

Our competitors may commence and complete clinical testing of their product candidates, obtain regulatory approvals and begin commercialization of their products sooner than we and/or our collaborators may for IPI-549. These competitive products may have superior safety or efficacy, have more attractive pharmacologic properties, or be manufactured less expensively than IPI-549. Mergers and acquisitions in the pharmaceutical and biotechnology industries may result in even more resources being concentrated among a smaller number of our competitors. Smaller or early stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. These competitors also compete with us in recruiting and retaining qualified scientific and management personnel and establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, the development of IPI-549 or future product candidates we may develop.

If we are unable to compete effectively against these companies on the basis of safety, efficacy or cost, then we may not be able to commercialize IPI-549 or achieve a competitive position in the market. This would adversely affect our ability to generate revenues.

Even if we, or any future collaborators, are able to commercialize IPI-549, the product may become subject to unfavorable pricing regulations, third-party payor reimbursement practices or healthcare reform initiatives, any of which could harm our business.

The commercial success of IPI-549 will depend substantially, both domestically and abroad, on the extent to which the costs of IPI-549 will be paid by third-party payors, including government healthcare programs and private health insurers. If coverage is not available, or reimbursement is limited, we, or any future collaborators, may not be able to successfully commercialize IPI-549. Even if coverage is provided, the approved reimbursement amount may not be high enough to allow us, or any future collaborators, to establish or maintain pricing sufficient to realize a sufficient return on our or their investments. In the United States, no uniform policy of coverage and reimbursement for products exists among third-party payors and coverage and reimbursement levels for products can differ significantly from payor to payor. As a result, the coverage determination process is often a time consuming and costly process that may require us to provide scientific and clinical support for the use of our products to each payor separately, with no assurance that coverage and adequate reimbursement will be applied consistently or obtained in the first instance.

The extent to which patients have third-party payor coverage that could in principle cover treatment with IPI-549 may be affected by legislative and regulatory changes relating to the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Affordability Reconciliation Act, or collectively the ACA. For instance, the so-called “individual mandate” provisions of the ACA require most individuals to carry acceptable insurance for themselves and their family, whether through the government or a private insurer, or else incur a penalty. However, the tax reform legislation signed into law on December 22, 2017, eliminated the penalty for failure to comply with the individual mandate, effective for periods beginning after December 31, 2018. This change and other legislative or regulatory actions in relation to the ACA may increase the pool of patients lacking third-party payor coverage. There is significant uncertainty related to third-party payor coverage and reimbursement of newly approved drugs. Marketing approvals, pricing and reimbursement for new drug products vary widely from country to country. Some countries require approval of the sale price of a drug before it can be marketed. In many countries, the pricing review period begins after marketing or product licensing approval is granted. In some foreign markets, prescription pharmaceutical pricing remains subject to continuing governmental control even after initial approval is granted. As a result, we, or any future collaborators, might obtain marketing approval for a product in a particular country, but then be subject to price regulations that delay commercial launch of the product, possibly for lengthy time periods, or prevent it altogether, which may negatively impact the revenues we are able to generate from the sale of the product in that country. Adverse pricing limitations may hinder our ability or the ability of any future collaborators to recoup our or their investment in IPI-549, even if IPI-549 obtains marketing approval.

Table of Contents

Patients who are provided medical treatment for their conditions generally rely on third-party payors to reimburse all or part of the costs associated with their treatment. Therefore, our ability, and the ability of any future collaborators, to successfully commercialize IPI-549 will depend in part on the extent to which coverage and adequate reimbursement for IPI-549 and related treatments will be available from third-party payors. Third-party payors decide which medications they will cover and establish reimbursement levels. The healthcare industry is acutely focused on cost containment, both in the United States and elsewhere. Government authorities and other third-party payors have attempted to control costs by limiting coverage and the amount of reimbursement for particular medications, which could affect our ability or that of any future collaborators to sell IPI-549 profitably. These payors may not view IPI-549 as cost-effective, and coverage and reimbursement may not be available to our customers, or those of any future collaborators, or may not be sufficient to allow IPI-549 to be marketed on a competitive basis. Cost-control initiatives could cause us, or any future collaborators, to decrease the price we, or they, might establish for IPI-549, which could result in lower than anticipated product revenues. If the prices for IPI-549 decrease or if governmental and other third-party payors do not provide coverage or adequate reimbursement, our prospects for revenue and profitability will suffer.

There may also be delays in obtaining coverage and reimbursement for newly approved drugs, and coverage may be more limited than the indications for which the drug is approved by the FDA or comparable foreign regulatory authorities. Moreover, eligibility for reimbursement does not imply that any drug will be paid for in all cases or at a rate that covers our costs, including research, development, manufacture, sale and distribution. Reimbursement rates may vary, by way of example, according to the use of the product and the clinical setting in which it is used. Reimbursement rates may also be based on reimbursement levels already set for lower cost drugs or may be incorporated into existing payments for other services.

In addition, increasingly, third-party payors are requiring higher levels of evidence of the benefits and clinical outcomes of new technologies and are challenging the prices charged. Further, the net reimbursement for drug products may be subject to additional reductions if there are changes to laws that presently restrict imports of drugs from countries where they may be sold at lower prices than in the United States. An inability to promptly obtain coverage and adequate payment rates from both government-funded and private payors for IPI-549 could significantly harm our operating results, our ability to raise capital needed to commercialize IPI-549 and our overall financial condition.

If the FDA or comparable foreign regulatory authorities grant generic versions of IPI-549 marketing approval, or such authorities do not grant IPI-549 appropriate periods of data exclusivity before approving generic versions of IPI-549, the sales of IPI-549 could be adversely affected.

Once an NDA is approved, the product covered thereby becomes a “reference-listed drug” in the FDA’s publication, “Approved Drug Products with Therapeutic Equivalence Evaluations,” or the Orange Book. Manufacturers may seek approval of generic versions of reference-listed drugs through submission of abbreviated new drug applications, or ANDAs, in the United States. In support of an ANDA, a generic manufacturer need not conduct clinical trials. Rather, the applicant generally must show that its product has the same active ingredient(s), dosage form, strength, route of administration and conditions of use or labeling as the reference-listed drug and that the generic version is bioequivalent to the reference-listed drug, meaning it is absorbed in the body at the same rate and to the same extent. Generic products may be significantly less costly to bring to market than the reference-listed drug and companies that produce generic products are generally able to offer them at lower prices. Thus, following the introduction of a generic drug, a significant percentage of the sales of any branded product or reference-listed drug may be lost to the generic product.

The FDA may not approve an ANDA for a generic product until any applicable period of non-patent exclusivity for the reference-listed drug has expired. The Federal Food, Drug, and Cosmetic Act, or FDCA, provides a period of five years of non-patent exclusivity for a new drug containing a new chemical entity, or NCE. Specifically, in cases where such exclusivity has been granted, an ANDA may not be filed with the FDA until the expiration of five years unless the submission is accompanied by a Paragraph IV certification that a patent covering the reference-listed drug is either invalid or will not be infringed by the generic product, in which case the applicant may submit its application four years following approval of the reference-listed drug. When the composition of matter patents underlying our product candidates expire, it is possible that another applicant could obtain approval to produce generic versions of our product candidates. If any product we develop does not receive five years of NCE exclusivity, the FDA may approve generic versions of such product three years after its date of approval, subject to the requirement that the ANDA applicant certifies to any patents listed for our products in the Orange Book. Manufacturers may seek to launch these generic products following the expiration of the applicable marketing exclusivity period, even if we still have patent protection for our product.

Product liability lawsuits against us or any licensees could cause us or our licensees to incur substantial liabilities and could limit commercialization of any products that we or they may develop.

Table of Contents

We face an inherent risk of product liability exposure related to the testing of IPI-549 or any future product candidates in human clinical trials, and we and any licensees will face an even greater risk as we or they commercially sell any products that we or they may develop, such as duvelisib. If we or our licensees cannot successfully defend ourselves or themselves against claims that our product candidates or products caused injuries, we could incur substantial liabilities. Regardless of merit or eventual outcome, liability claims may result in:


•	decreased demand for any product candidates or medicines that we may develop;


•	injury to our reputation and significant negative media attention;


•	withdrawal of clinical trial participants;


•	significant costs to defend the related litigation;


•	substantial monetary awards to trial participants or patients;


•	loss of revenue;


•	reduced resources of our management to pursue our business strategy; and


•	the inability to commercialize any medicines that we may develop.

Although we maintain product liability insurance coverage, it may not be adequate to cover all liabilities that we may incur. We anticipate that we will need to increase our insurance coverage as we advance or expand our clinical trials and if we successfully commercialize any products. Insurance coverage is increasingly expensive. We may not be able to maintain insurance coverage at a reasonable cost or in an amount adequate to satisfy any liability that may arise. In addition, if one of our licensees were to become subject to product liability claims or were unable to successfully defend themselves against such claims, any such licensee could be more likely to terminate such relationship with us and therefore substantially limit the commercial potential of our products.

Risks Related to Our Dependence on Third Parties

If a collaborator terminates or fails to perform its obligations under agreements with us, the development and commercialization of IPI-549 or any future product candidates we may develop could be delayed or terminated.

We currently have worldwide development and commercialization rights to IPI-549. We license certain patent and other intellectual property rights under our agreement with Takeda, which we refer to as the Takeda Agreement, to discover, develop and commercialize pharmaceutical products targeting the delta and/or gamma isoforms of PI3K, including IPI-549 and duvelisib. We have also licensed or sublicensed certain of our intellectual property rights to third parties, including our exclusive license of worldwide rights to develop and commercialize duvelisib to Verastem, Inc., or Verastem, pursuant to an agreement we entered into with Verastem in November 2016 and which we refer to as the Verastem Agreement. We may in the future seek other third-party collaborators. The success of a strategic alliance with any partner is largely dependent on the resources, efforts, technology and skills brought to such alliance by such partner. The benefits of such alliances will be reduced or eliminated if any such partner:


•	does not or cannot devote the necessary resources to the development, marketing and distribution of such product or products;

•

decides not to pursue development and commercialization of the program or to continue or renew development or commercialization programs, based on clinical trial results, changes in the collaborators’ strategic focus or available funding, the belief that other product candidates may have a higher likelihood of obtaining regulatory approval or potential to generate a greater return on investment, or external factors, such as an acquisition, that divert resources or create competing priorities;


•	does not perform its obligations as expected;


•	does not have sufficient resources necessary or is otherwise unable to carry the program through clinical development, regulatory approval and commercialization;


•	cannot obtain the necessary regulatory approvals;


•	delays clinical trials, provides insufficient funding for a clinical trial program, stops a clinical trial or abandons the program, repeats or conducts new clinical trials or requires a new formulation of the program for clinical testing;


•	independently develops, or develops with third parties, products that compete directly or indirectly with the program;


•	does not properly maintain or defend our intellectual property rights or uses our proprietary information in such a way as to invite litigation that could jeopardize or invalidate our intellectual property or proprietary information or expose us to potential litigation;

Table of Contents


•	infringes the intellectual property rights of third parties, which may expose us to litigation and potential liability; or


•	terminates the collaboration prior to its completion.

If such partner were to terminate its arrangements with us, or breach such arrangements, or fail to maintain the financial resources necessary to continue financing its portion of development, manufacturing, and commercialization costs, as applicable, we may not have the financial resources or capabilities necessary to continue development and commercialization of the product candidate on our own. Consequently, the development and commercialization of the affected product candidate could be delayed, curtailed or terminated, and we may find it difficult to attract a new collaborator for such product candidate.

Disputes and difficulties in these types of relationships are common, often due to priorities changing over time, conflicting priorities or conflicting interests. Merger and acquisition activity may exacerbate these conflicts. Much of the potential revenue from alliances consists of payments contingent upon the achievement of specified milestones and royalties payable on sales of any successfully developed drugs. Any such contingent revenue will depend upon our, and our collaborators’, ability to successfully develop, launch, market and sell new drugs. In some cases, we will not be involved in some or all of these processes, and we will depend entirely on our collaborators.

If any future collaborator fails to develop or effectively commercialize a product candidate that is the subject of our strategic alliance with them, we may not be able to develop and commercialize such product candidate independently, and our financial condition and operations would be negatively impacted.

We might seek to establish collaborations in the future and, if we are not able to establish them on commercially reasonable terms, we may have to alter our development and commercialization plans.

In the future, we might seek out one or more other collaborators for the development and commercialization of IPI-549 or any product candidate that we may develop in the future. Likely collaborators may include large and mid-size pharmaceutical companies, regional and national pharmaceutical companies and biotechnology companies. In addition, if we are able to obtain marketing approval for IPI-549 or any other product candidate from foreign regulatory authorities, we might enter into strategic relationships with international biotechnology or pharmaceutical companies for the commercialization of such product candidate outside of the United States.

We would face significant competition in seeking appropriate collaborators. Whether we reach a definitive agreement for an additional collaboration will depend, among other things, upon our assessment of the collaborator’s resources and expertise, the terms and conditions of the proposed collaboration, and the proposed collaborator’s evaluation of a number of factors. Those factors may include the potential differentiation of our product candidate from competing product candidates, design or results of clinical trials, the likelihood of approval by the FDA or comparable foreign regulatory authorities and the regulatory pathway for any such approval, the potential market for our product candidate, the costs and complexities of manufacturing and delivering the product to patients and the potential of competing products. The collaborator may also consider alternative product candidates or technologies for similar indications that may be available for collaboration and whether such a collaboration could be more attractive than the one with us for our product candidate.

Additional collaborations would be complex and time consuming to negotiate and document.

Any collaboration agreements that we enter into in the future may contain restrictions on our ability to enter into potential collaborations or to otherwise develop IPI-549 or any product candidate that we may develop in the future.

Further, there have been a significant number of recent business combinations among large pharmaceutical companies that have resulted in a reduced number of potential future collaborators. We may not be able to negotiate collaborations on a timely basis, on acceptable terms, or at all. If we are unable to do so, we may have to curtail the development of a given product candidate, reduce or delay its development, delay its potential commercialization or reduce the scope of any sales or marketing activities, or increase our expenditures and undertake development or commercialization activities at our own expense.

Table of Contents

We rely on third parties to conduct our clinical trials, and those third parties may not perform satisfactorily.

We rely on third parties such as contract research organizations, medical institutions and external investigators to enroll qualified patients, conduct our clinical trials and provide services in connection with such clinical trials, and we intend to rely on these and other similar entities in the future. Our reliance on these third parties for clinical development activities reduces our control over these activities. Accordingly, these third-party contractors may not complete activities on schedule or conduct our clinical trials in accordance with regulatory requirements or the trial design. If these third parties do not successfully carry out their contractual obligations or meet expected deadlines, we may be required to replace them. Replacing a third-party contractor may result in a delay of the affected trial and unplanned costs. If this were to occur, our ability to obtain regulatory approval for and to commercialize IPI-549 or any product candidate that we may develop in the future could be delayed.

In addition, we are responsible for ensuring that each of our clinical trials is conducted in accordance with the general investigational plan and protocol for the trial. The FDA requires us to comply with certain standards, referred to as good clinical practices, for conducting, recording and reporting the results of clinical trials to assure that data and reported results are credible and accurate and that the rights, integrity and confidentiality of trial participants are protected. Our reliance on third parties that we do not control does not relieve us of these responsibilities and requirements. If any of our trial investigators or third-party contractors does not comply with good clinical practices, we may not be able to use the data and reported results from the trial. If this noncompliance were to occur, our ability to obtain regulatory approval for and to commercialize our product candidate could be delayed or put at risk.

We currently rely on third-party manufacturers to produce our preclinical and clinical drug supplies, and we may also rely upon third-party manufacturers to produce commercial supplies of IPI-549.

IPI-549 requires precise, high quality manufacturing. The third-party manufacturers on which we rely may not be able to comply with cGMPs, and other applicable government regulations and corresponding foreign standards. These regulations govern manufacturing processes and procedures and the implementation and operation of systems to control and assure the quality of products. The FDA and foreign regulatory authorities may, at any time, audit or inspect a manufacturing facility to ensure compliance with cGMPs and other quality standards. Any failure by our contract manufacturers to achieve and maintain high manufacturing and quality control standards could result in the inability of IPI-549 to be released for use in one or more countries. In addition, such a failure could result in, among other things, patient injury or death, product liability claims, penalties or other monetary sanctions, the failure of regulatory authorities to grant marketing approval of IPI-549, delays, suspension or withdrawal of approvals, license revocation, seizures or recalls of IPI-549, operating restrictions and/or criminal prosecution, any of which could significantly and adversely affect supply of IPI-549 and seriously hurt our business.

Contract manufacturers may also encounter difficulties involving production yields or delays in performing their services. We do not have control over third-party manufacturers’ performance and compliance with applicable regulations and standards. If, for any reason, our manufacturers cannot perform as agreed, we may be unable to replace such third-party manufacturers in a timely manner, and the production of IPI-549 or any future product candidates would be interrupted, resulting in delays in clinical trials and additional costs. Switching manufacturers may be difficult because the number of potential manufacturers is limited, the demand for such services is high and, depending on the type of material manufactured at the contract facility, the change in contract manufacturer must be submitted to and/or approved by the FDA and comparable regulatory authorities outside of the United States. In addition, a new manufacturer would have to be educated in, or develop substantially equivalent processes for, production of our product candidates after receipt of regulatory approval. It may be difficult or impossible for us to quickly find a replacement manufacturer on acceptable terms, or at all.

To date, IPI-549 has been manufactured for preclinical testing and clinical trials primarily by third-party manufacturers. If the FDA or other regulatory agencies approve IPI-549 for commercial sale, we expect that we would continue to rely, at least initially, on third-party manufacturers to produce commercial quantities of IPI-549. These manufacturers may not be able to successfully increase the manufacturing capacity for IPI-549 in a timely or economical manner, or at all. Significant scale-up of manufacturing might entail changes in the manufacturing process that would have to be submitted to or approved by the FDA or other regulatory agencies. If contract manufacturers engaged by us are unable to successfully increase the manufacturing capacity for IPI-549, or we are unable to establish our own manufacturing capabilities, the commercial launch of any approved products may be delayed or there may be a shortage in supply.

Table of Contents

Risks Related to Our Intellectual Property

If we fail to obtain or maintain necessary or useful intellectual property rights, we could encounter substantial delays in the research, development and commercialization of IPI-549 and any product candidates that we may develop in the future.

We currently have rights to certain intellectual property through the Takeda Agreement to develop IPI-549 and other product candidates that we may in the future develop under our PI3K inhibitor program. In addition, we have rights to certain intellectual property through the Takeda Agreement that we have exclusively licensed to Verastem pursuant to the Verastem Agreement. We may decide to license additional third-party technology that we deem necessary or useful for our business. However, we may be unable to acquire or in-license any compositions, methods of use, processes or other intellectual property rights from third parties that we identify as necessary for IPI-549 at a reasonable cost, or at all. The licensing or acquisition of third-party intellectual property rights is a competitive area, and several more established companies may pursue strategies to license or acquire third-party intellectual property rights that we may consider attractive. These established companies may have a competitive advantage over us due to their size, capital resources and greater clinical development and commercialization capabilities. In addition, companies that perceive us to be a competitor may be unwilling to assign or license rights to us.

We sometimes collaborate with non-profit and academic institutions to accelerate our preclinical research or development under written agreements with these institutions. Typically, these institutions provide us with an option to negotiate a license to any of the institution’s rights in technology resulting from the collaboration. Regardless of such option, we may be unable to negotiate a license within the specified timeframe or under terms that are acceptable to us or we may decide not to execute such option if we believe such license is not necessary to pursue our program. If we are unable or opt not to do so, the institution may offer the intellectual property rights to other parties, potentially blocking our ability to pursue our program.

If we do not obtain or maintain these intellectual property rights which we require, we could encounter substantial delays in developing and commercializing IPI-549 or any other potential product candidate while we attempt to develop alternative technologies, methods and product candidates, which we may not be able to accomplish. If we are ultimately unable to do so, we may be unable to develop or commercialize our product candidate, which could harm our business significantly.

If we fail to comply with our obligations under our existing and any future intellectual property licenses with third parties, we could lose license rights that are important to our business.

We are party to several license agreements under which we license patent rights and other intellectual property related to our business including the Takeda Agreement, under which we obtained rights to discover, develop and commercialize pharmaceutical products targeting the delta and/or gamma isoforms of PI3K, including IPI-549 and duvelisib. We may enter into additional license agreements in the future. Our license agreements impose, and we expect that future license agreements will impose, various diligence, milestone payment, royalty, insurance and other obligations on us. If we fail to comply with our obligations under these licenses, our licensors may have the right to terminate these license agreements, in which event we might not be able to market IPI-549 that is covered by these agreements, or our licensors may convert the license to a non-exclusive license, which could adversely affect the value of IPI-549 being developed under the license agreement. Termination of these license agreements or reduction or elimination of our licensed rights may also result in our having to negotiate new or reinstated licenses with less favorable terms. For example, if we fail to use diligent efforts to develop and commercialize products licensed under the Takeda Agreement, or if Verastem materially breaches the Verastem Agreement, we could lose our license rights under the Takeda Agreement, including rights to IPI-549.

Our intellectual property licenses with third parties may be subject to disagreements over contract interpretations, which could narrow the scope of our rights to the relevant intellectual property or technology or increase our financial or other obligations to our licensors.

The agreements under which we currently license intellectual property or technology from third parties are complex, and certain provisions in such agreements may be susceptible to multiple interpretations. The resolution of any contract interpretation disagreement that may arise could narrow what we believe to be the scope of our rights to the relevant intellectual property or technology, or increase what we believe to be our financial or other obligations under the relevant agreement, either of which could harm our business, financial condition, results of operations and prospects.

Table of Contents

Our success depends substantially upon our ability to obtain and maintain intellectual property protection for IPI-549.

We own or hold exclusive licenses to a number of U.S. and foreign patents and patent applications directed to IPI-549. Our success depends on our ability to obtain patent protection both in the United States and in other countries for IPI-549, our methods of manufacture and our methods of use. Our ability to protect IPI-549 from unauthorized or infringing use by third parties depends substantially on our ability to obtain and enforce our patents.

Due to evolving legal standards relating to the patentability, validity and enforceability of patents covering pharmaceutical inventions and molecular diagnostics and the claim scope of these patents, our ability to obtain and enforce patents that may issue from any pending or future patent applications is uncertain and involves complex legal, scientific and factual questions. The standards that the United States Patent and Trademark Office, or USPTO, and its foreign counterparts use to grant patents are not always applied predictably or uniformly and are subject to change. To date, no consistent policy has emerged regarding the breadth of claims allowed in pharmaceutical or molecular diagnostics patents. Thus, we cannot guarantee that any patents will issue from any pending or future patent applications owned by or licensed to us. Even if patents do issue, we cannot guarantee that the claims of these patents will be held valid or enforceable by a court of law, will provide us with any significant protection against competitive products or will afford us a commercial advantage over competitive products.

The Leahy-Smith America Invents Act, or the America Invents Act, reforms United States patent law in part by changing the standard for patent approval for certain patents from a “first to invent” standard to a “first to file” standard and developing a post-grant review system. This new law changes United States patent law in a way that may severely weaken our ability to obtain patent protection in the United States. Additionally, recent judicial decisions establishing new case law and a reinterpretation of past case law, as well as regulatory initiatives, may make it more difficult for us to protect our intellectual property.

Issued patents that we have or may obtain or license may not provide us with any meaningful protection, prevent competitors from competing with us or otherwise provide us with any competitive advantage. Our competitors may be able to circumvent our patents by developing similar or alternative technologies or products in a non-infringing manner.

If we do not obtain adequate intellectual property protection for our products in the United States, competitors could duplicate them without repeating the extensive testing that we will have been required to undertake to obtain approval by the FDA. Regardless of any patent protection, under the current statutory framework, the FDA is prohibited by law from approving any generic version of any of our products for up to five years after it has approved our product. Upon the expiration of that period, or if that time period is altered, the FDA could approve a generic version of our product unless we have patent protection sufficient for us to block that generic version. Without sufficient patent protection, the applicant for a generic version of our product would only be required to conduct a relatively inexpensive study to show that its product is bioequivalent to our product and would not have to repeat the studies that we conducted to demonstrate that the product is safe and effective.

In the absence of adequate patent protection in other countries, competitors may similarly be able to obtain regulatory approval in those countries for products that duplicate IPI-549. The laws of some foreign jurisdictions do not protect intellectual property rights to the same extent as in the United States. Many companies have encountered significant difficulties in protecting and defending such rights in foreign jurisdictions. Some of our development efforts may be performed in China, India and other countries outside of the United States through third-party contractors. We may not be able to monitor and assess intellectual property developed by these contractors effectively; therefore, we may not be able to appropriately protect this intellectual property and could lose valuable intellectual property rights. In addition, the legal protection afforded to inventors and owners of intellectual property in countries outside of the United States may not be as protective of intellectual property rights as in the United States, and we may, therefore, be unable to acquire and protect intellectual property developed by these contractors to the same extent as if these development activities were being conducted in the United States. If we encounter difficulties in protecting our intellectual property rights in foreign jurisdictions, our business prospects could be substantially harmed.

In addition, we rely on intellectual property assignment agreements with our collaborators, vendors, employees, consultants, clinical investigators, scientific advisors and other collaborators to grant us ownership of new intellectual property that is developed by them. These agreements may not result in the effective assignment to us of that intellectual property.

Other agreements through which we license patent rights may not give us control over patent prosecution or maintenance, so that we may not be able to control which claims or arguments are presented and may not be able to secure, maintain, or successfully enforce necessary or desirable patent protection from those patent rights. If we are unable to obtain control over patent prosecution in these other agreements, we cannot be certain that patent prosecution and maintenance activities by our licensors have been or will be conducted in compliance with applicable laws and regulations or will result in valid and enforceable patents.

Table of Contents

We, or any future partners, collaborators or licensees, may fail to identify patentable aspects of inventions made in the course of development and commercialization activities before it is too late to obtain patent protection for them. Therefore, we may miss potential opportunities to strengthen our patent position.

It is possible that defects of form in the preparation or filing of our patents or patent applications may exist, or may arise in the future, for example with respect to proper priority claims, inventorship, claim scope or patent term adjustments. If we or our partners, collaborators, licensees, or licensors, whether current or future, fail to establish, maintain or protect such patents and other intellectual property rights, such rights may be reduced or eliminated. If our partners, collaborators, licensees or licensors are not fully cooperative or disagree with us as to the prosecution, maintenance or enforcement of any patent rights, such patent rights could be compromised. If there are material defects in the form, preparation, prosecution, or enforcement of our patents or patent applications, such patents may be invalid and/or unenforceable, and such applications may never result in valid, enforceable patents. Any of these outcomes could impair our ability to prevent competition from third parties, which may have an adverse impact on our business. As a result, our ownership of key intellectual property could be compromised.

Confidentiality agreements may not adequately prevent disclosure of trade secrets and other proprietary information.

To protect our proprietary technology, we rely in part on confidentiality agreements with our vendors, collaborators, employees, consultants, scientific advisors, clinical investigators and other collaborators. We generally require each of these individuals and entities to execute a confidentiality agreement at the commencement of a relationship with us. These agreements may not effectively prevent disclosure of confidential information and may not provide an adequate remedy in the event of unauthorized disclosure or misuse of confidential information or other breaches of the agreements.

In addition, we may rely on trade secrets to protect our technology, especially where we do not believe patent protection is appropriate or obtainable. Trade secrets are, however, difficult to protect. Others may independently discover our trade secrets and proprietary information, and in such case we could not assert any trade secret rights against such party. Enforcing a claim that a party illegally obtained and is using our trade secrets is difficult, expensive and time consuming, and the outcome is unpredictable. In addition, courts outside of the United States may be less willing to protect trade secrets. Costly and time-consuming litigation could be necessary to seek to enforce and determine the scope of our proprietary rights and could result in a diversion of management’s attention, and failure to obtain or maintain trade secret protection could adversely affect our competitive business position.

Patent interference, opposition or similar proceedings relating to our intellectual property portfolio are costly, and an unfavorable outcome could prevent us from commercializing IPI-549.

Patent applications in the United States are maintained in confidence for up to 18 months after their filing. In some cases, however, patent applications remain confidential in the USPTO for the entire time prior to issuance as a U.S. patent. Similarly, publication of discoveries in the scientific or patent literature often lags behind actual discoveries. Consequently, we cannot be certain that we were the first to invent, or the first to file patent applications on, IPI-549 or its therapeutic use. In the event that a third party has also filed a U.S. patent application relating to IPI-549 or a similar invention, we may have to participate in interference or derivation proceedings declared by the USPTO or the third party to determine priority of invention in the United States. An adverse decision in an interference or derivation proceeding may result in the loss of rights under a patent or patent application. In addition, the cost of interference proceedings could be substantial.

Claims by third parties of intellectual property infringement are costly and distracting, and could deprive us of valuable rights we need to develop or commercialize IPI-549 and any product candidate that we might develop in the future or impact the commercialization of duvelisib and the royalties owed to us under the Verastem Agreement.

Our commercial success will depend on whether there are third-party patents or other intellectual property relevant to our potential products that may block or hinder our ability to develop and commercialize IPI-549. We may not have identified all U.S. and foreign patents or published applications that may adversely affect our business either by blocking our ability to manufacture or commercialize our drugs or by covering similar technologies that adversely affect the applicable market. In addition, we may undertake research and development with respect to IPI-549, even when we are aware of third-party patents that may be relevant to IPI-549, on the basis that we may challenge or license such patents. There are no assurances that such licenses will be available on commercially reasonable terms, or at all. If such licenses are not available, we may become subject to patent litigation and, while we cannot predict the outcome of any litigation, it may be expensive and time consuming. If we are unsuccessful in litigation concerning patents owned by third parties, we may be precluded from selling IPI-549.

Table of Contents

While we are not currently aware of any litigation or third-party claims of intellectual property infringement related to IPI-549 or duvelisib, the biopharmaceutical industry is characterized by extensive litigation regarding patents and other intellectual property rights. Other parties may obtain patents and claim that the use of our or Verastem’s technologies infringes these patents or that we or Verastem are employing their proprietary technology without authorization. We or Verastem could incur substantial costs and diversion of management and technical personnel in defending against any claims that the manufacture and sale of our potential products or use of our or Verastem’s technologies infringes any patents, or defending against any claim that we or Verastem are employing any proprietary technology without authorization. The outcome of patent litigation is subject to uncertainties that cannot be adequately quantified in advance, including the demeanor and credibility of witnesses and the identity of the adverse party, especially in pharmaceutical patent cases that may turn on the testimony of experts as to technical facts upon which experts may reasonably disagree. In the event of a successful claim of infringement against us, we or Verastem may be required to:


•	pay substantial damages;


•	stop developing, manufacturing and/or commercializing IPI-549 or duvelisib (as applicable);


•	develop non-infringing product candidates, technologies and methods; and


•	obtain one or more licenses from other parties, which could result in our or Verastem paying substantial royalties or the granting of cross-licenses to our or Verastem’s technologies.

If any of the foregoing were to occur, we may be unable to commercialize IPI-549, or we may elect to cease certain of our business operations, either of which could severely harm our business. Similarly, Verastem may be unable to commercialize duvelisib, therefore reducing or eliminating the royalties owed to us under the Verastem Agreement.

We may undertake infringement or other legal proceedings against third parties, causing us to spend substantial resources on litigation and exposing our own intellectual property portfolio to challenge.

Competitors may infringe our patents. To prevent infringement or unauthorized use, we may need to file infringement suits, which are expensive and time-consuming. In an infringement proceeding, a court may decide that one or more of our patents is invalid, unenforceable, or both. Even if the validity of our patents is upheld, a court may refuse to stop the other party from using the technology at issue on the ground that the other party’s activities are not covered by our patents. In this case, third parties may be able to use our patented technology without paying licensing fees or royalties. Policing unauthorized use of our intellectual property is difficult, and we may not be able to prevent misappropriation of our proprietary rights, particularly in countries where the laws may not protect such rights as fully as in the United States. In addition, third parties may affirmatively challenge our rights to, or the scope or validity of, our patent rights.

Patent terms may be inadequate to protect our competitive position on our products for an adequate amount of time.

Given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized. We expect to seek extensions of patent terms in the United States and, if available, in other countries where we are prosecuting patents. In the United States, the Drug Price Competition and Patent Term Restoration Act of 1984 permits a patent term extension of up to five years beyond the normal expiration of the patent, which is limited to the approved indication (or any additional indications approved during the period of extension). However, the applicable authorities, including the FDA and the USPTO in the United States, and any equivalent regulatory authority in other countries, may not agree with our assessment of whether such extensions are available, and may refuse to grant extensions to our patents, or may grant more limited extensions than we request. If this occurs, our competitors may be able to take advantage of our investment in development and clinical trials by referencing our clinical and preclinical data and launch their product earlier than might otherwise be the case.

We may be subject to claims by third parties asserting that we or our employees have misappropriated their intellectual property, or claiming ownership of what we regard as our own intellectual property.

Table of Contents

Many of our employees and our licensors’ employees, including our senior management, were previously employed at universities or at other biotechnology or pharmaceutical companies, some of which may be competitors or potential competitors. Some of these employees, including each member of our senior management, executed proprietary rights, non-disclosure and non-competition agreements, or similar agreements, in connection with such previous employment. Although we try to ensure that our employees do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that we or these employees have used or disclosed intellectual property, including trade secrets or other proprietary information, of any such third party. Litigation may be necessary to defend against such claims. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel or sustain damages. Such intellectual property rights could be awarded to a third party, and we could be required to obtain a license from such third party to commercialize our technology or products. Such a license may not be available on commercially reasonable terms or at all. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to our senior management and scientific personnel.

In addition, while we typically require our employees, consultants and contractors who may be involved in the development of intellectual property to execute agreements assigning such intellectual property to us, we may be unsuccessful in executing such an agreement with each party who in fact develops intellectual property that we regard as our own, which may result in claims by or against us related to the ownership of such intellectual property. If we fail in prosecuting or defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights. Even if we are successful in prosecuting or defending against such claims, litigation could result in substantial costs and be a distraction to our senior management and scientific personnel.

If our trademarks and trade names are not adequately protected, then we may not be able to build name recognition in our markets of interest and our business may be adversely affected.

We have not yet registered trademarks in our potential markets. Any registered trademarks or trade names may be challenged, circumvented or declared generic or determined to be infringing on other marks. We may not be able to protect our rights to these trademarks and trade names, which we need to build name recognition among potential partners or customers in our markets of interest. At times, competitors may adopt trade names or trademarks similar to ours, thereby impeding our ability to build brand identity and possibly leading to market confusion. In addition, there could be potential trade name or trademark infringement claims brought by owners of other registered trademarks or trademarks that incorporate variations of our registered or unregistered trademarks or trade names. Over the long term, if we are unable to establish name recognition based on our trademarks and trade names, then we may not be able to compete effectively and our business may be adversely affected. Our efforts to enforce or protect our proprietary rights related to trademarks, trade secrets, domain names, copyrights or other intellectual property may be ineffective and could result in substantial costs and diversion of resources and could adversely impact our financial condition or results of operations.

Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.

The USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other provisions during the patent process. There are situations in which non-compliance can result in abandonment or lapse of a patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. If we or our sublicensees fail to comply with these requirements, competitors might be able to enter the market earlier than would otherwise have been the case, which could decrease our revenue from that product.

Intellectual property rights do not necessarily address all potential threats.

The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations, and may not adequately protect our business or permit us to maintain our competitive advantage. For example:


•	others may be able to make products that are similar to IPI-549 or any future product candidates we may develop but that are not covered by the claims of the patents that we own or license or may own in the future;


•	we, or any partners or collaborators, might not have been the first to make the inventions covered by the issued patent or pending patent application that we license or may own in the future;


•	we, or any partners or collaborators, might not have been the first to file patent applications covering certain of our or their inventions;


•	others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our owned or licensed intellectual property rights;

Table of Contents


•	it is possible that our pending licensed patent applications or those that we may own in the future will not lead to issued patents;


•	issued patents that we hold rights to may be held invalid or unenforceable, including as a result of legal challenges by our competitors;


•	our competitors might conduct research and development activities in countries where we do not have patent rights and then use the information learned from such activities to develop competitive products for sale in our major commercial markets;


•	we may not develop additional proprietary technologies that are patentable;


•	the patents of others may have an adverse effect on our business; and


•	we may choose not to file a patent for certain trade secrets or know-how, and a third party may subsequently file a patent covering such intellectual property.

Risks Related to Regulatory Approval and Marketing of IPI-549 and Other Legal Compliance Matters

Even if we complete the necessary preclinical studies and clinical trials, the regulatory approval process is expensive, time-consuming and uncertain and may prevent us from obtaining approvals for the commercialization of IPI-549. If we or our collaborators are not able to obtain, or if there are delays in obtaining, required regulatory approvals, we or they will not be able to commercialize IPI-549, and our ability to generate revenue will be materially impaired.

IPI-549 and the activities associated with its development and commercialization, including its design, testing, manufacture, safety, efficacy, record keeping, labeling, storage, approval, advertising, promotion, sale and distribution, export and import, are subject to comprehensive regulation by the FDA and other regulatory agencies in the United States and by the European Medicines Agency and comparable regulatory authorities in other countries. Failure to obtain marketing approval for IPI-549 will prevent us from commercializing IPI-549. We and our collaborators have not received approval to market IPI-549 from regulatory authorities in any jurisdiction. We have only limited experience in filing and supporting the applications necessary to gain marketing approvals and expect to rely on third-party contract research organizations to assist us in this process.

Securing marketing approval requires the submission of extensive preclinical and clinical data and supporting information to the various regulatory authorities for each therapeutic indication to establish the product candidate’s safety and efficacy. Securing regulatory approval also requires the submission of information about the product manufacturing process to, and inspection of manufacturing facilities by, the relevant regulatory authority. IPI-549 may not be effective, may be only moderately effective or may prove to have undesirable or unintended side effects, toxicities or other characteristics that may preclude our obtaining marketing approval or prevent or limit commercial use.

The process of obtaining marketing approvals, both in the United States and abroad, is expensive, may take many years if additional clinical trials are required, if approval is obtained at all, and can vary substantially based upon a variety of factors, including the type, complexity and novelty of the product candidates involved. Changes in marketing approval policies during the development period, changes in or the enactment of additional statutes or regulations, or changes in regulatory review for each submitted product application, may cause delays in the approval or rejection of an application. The FDA and comparable authorities in other countries have substantial discretion in the approval process and may refuse to accept any application or may decide that our data is insufficient for approval and require additional preclinical, clinical or other studies. In addition, varying interpretations of the data obtained from preclinical and clinical testing could delay, limit or prevent marketing approval of IPI-549. Any marketing approval we or our collaborators ultimately obtain may be limited or subject to restrictions or post-approval commitments that render the approved product not commercially viable.

Accordingly, if we or our collaborators experience delays in obtaining approval or if we or they fail to obtain approval of IPI-549, the commercial prospects for IPI-549 may be harmed, and our ability to generate revenues will be materially impaired.

Failure to obtain marketing approval in foreign jurisdictions would prevent IPI-549 from being marketed in such jurisdictions.

Table of Contents

In order to market and sell our medicines in the European Union and many other jurisdictions, we or our third-party collaborators must obtain separate marketing approvals and comply with numerous and varying regulatory requirements. The approval procedure varies among countries and can involve additional testing. The time required to obtain approval may differ substantially from that required to obtain FDA approval. The regulatory approval process outside the United States generally includes all of the risks associated with obtaining FDA approval. In addition, in many countries outside the United States, a product must be approved for reimbursement before the product can be approved for sale in that country. We or our third-party collaborators may not obtain approvals from regulatory authorities outside the United States on a timely basis, if at all. Approval by the FDA does not ensure approval by regulatory authorities in other countries or jurisdictions, and approval by one regulatory authority outside the United States does not ensure approval by regulatory authorities in other countries or jurisdictions or by the FDA. We may not be able to file for marketing approvals and may not receive necessary approvals to commercialize IPI-549 in any market.

Additionally, on June 23, 2016, the electorate in the United Kingdom voted in favor of leaving the European Union, commonly referred to as Brexit. On March 29, 2017, the country formally notified the European Union of its intention to withdraw pursuant to Article 50 of the Lisbon Treaty. The United Kingdom had a period of a maximum of two years from the date of its formal notification to negotiate the terms of its withdrawal from, and future relationship with, the European Union. If no formal withdrawal agreement can be reached between the United Kingdom and the European Union, then it is expected that the United Kingdom’s membership of the European Union would automatically terminate on the deadline, which was initially March 29, 2019. That deadline has been extended to October 31, 2019 to allow the parties to negotiate a withdrawal agreement, which has proven to be extremely difficult to date. Discussions between the United Kingdom and the European Union will continue to focus on withdrawal issues and transition agreements. However, limited progress to date in these negotiations and ongoing uncertainty within the government of the United Kingdom sustains the possibility of the United Kingdom leaving the European Union without a withdrawal agreement and associated transition period in place, which is likely to cause significant market and economic disruption.

Since a significant proportion of the regulatory framework in the United Kingdom is derived from European Union directives and regulations, Brexit could materially impact the regulatory regime with respect to the approval of IPI-549 or any future product candidate in the United Kingdom or the European Union. For example, the British government has begun negotiating the terms of the UK’s withdrawal from the EU. It is unclear what impact Brexit may have, if any, on the development and commercialization of IPI-549, although the first practical effects of Brexit on healthcare were felt in November 2017 when EU member states voted to move the European Medicines Agency, or the EMA, the EU’s regulatory body, from London to Amsterdam. Operations in Amsterdam are slated to commence by March 30, 2019, although the move itself could cause significant disruption to the regulatory approval process in Europe.

Any delay in obtaining, or an inability to obtain, any marketing approvals, as a result of Brexit or otherwise, would prevent us from commercializing our future product candidates in the United Kingdom and/or the European Union and restrict our ability to generate revenue and achieve and sustain profitability. If any of these outcomes occur, we may be forced to restrict or delay efforts to seek regulatory approval in the United Kingdom and/or European Union for our product candidates, which could significantly and materially harm our business.

Even if we or our collaborators obtain marketing approvals for IPI-549, the terms of approvals and ongoing regulation of IPI-549 may limit how we manufacture and market IPI-549, which could impair our ability to generate revenue.

Once marketing approval has been granted, an approved product and its manufacturer and marketer are subject to ongoing review and extensive regulation. We, and any collaborators, must therefore comply with requirements concerning advertising and promotion for IPI-549. Promotional communications with respect to prescription drugs are subject to a variety of legal and regulatory restrictions and must be consistent with the information in the product’s approved labeling. Thus, we and any collaborators will not be able to promote any products we develop for indications or uses for which they are not approved.

In addition, manufacturers of approved products and those manufacturers’ facilities are required to comply with extensive FDA requirements, including ensuring that quality control and manufacturing procedures conform to cGMPs applicable to drug manufacturers or quality assurance standards applicable to medical device manufacturers, which include requirements relating to quality control and quality assurance as well as the corresponding maintenance of records and documentation and reporting requirements. We, any contract manufacturers we may engage in the future, our current or future collaborators and their contract manufacturers will also be subject to other regulatory requirements, including submissions of safety and other post-marketing information and reports, registration and listing requirements, requirements regarding the distribution of samples to physicians, recordkeeping, and costly post-marketing studies or clinical trials and surveillance to monitor the safety or efficacy of the product such as the requirement to implement a risk evaluation and mitigation strategy.

Table of Contents

Accordingly, assuming we, or any of our collaborators, receive marketing approval for IPI-549, we, our collaborators, and our and their contract manufacturers will continue to expend time, money and effort in all areas of regulatory compliance, including manufacturing, production, product surveillance and quality control.

If we, and any collaborators, are not able to comply with post-approval regulatory requirements, we, and our collaborators, could have the marketing approvals for our products withdrawn by regulatory authorities and our, or any collaborators’, ability to market any future products could be limited, which could adversely affect our ability to achieve or sustain profitability. Further, the cost of compliance with post-approval regulations may have a negative effect on our operating results and financial condition.

IPI-549 could be subject to restrictions or withdrawal from the market and we may be subject to substantial penalties if we or our collaborators fail to comply with regulatory requirements or if we or they experience unanticipated problems with IPI-549, when and if it is approved.

Any product candidate for which we or our collaborators obtain marketing approval, along with the manufacturing processes, post-approval clinical data, labeling, advertising and promotional activities for such product, will be subject to continual requirements of and review by the FDA and other regulatory authorities. These requirements include submissions of safety and other post-marketing information and reports, registration and listing requirements, cGMP requirements relating to quality control and manufacturing, quality assurance and corresponding maintenance of records and documents, and requirements regarding the distribution of samples to physicians and recordkeeping. Even if marketing approval of IPI-549 is granted, the approval may be subject to limitations on the indicated uses for which the product may be marketed or to the conditions of approval, or contain requirements for costly post-marketing testing and surveillance to monitor the safety or efficacy of the medicine, including the requirement to implement a risk evaluation and mitigation strategy.

The FDA and other agencies, including the Department of Justice, or the DOJ, closely regulate and monitor the post-approval marketing and promotion of products to ensure that they are marketed and distributed only for the approved indications and in accordance with the provisions of the approved labeling. The FDA and DOJ impose stringent restrictions on manufacturers’ communications regarding off-label use and if we do not market our products for their approved indications, we may be subject to enforcement action for off-label marketing. Violations of the FDCA and other statutes, including the False Claims Act, relating to the promotion and advertising of prescription drugs may lead to investigations and enforcement actions alleging violations of federal and state healthcare fraud and abuse laws, as well as state consumer protection laws.

In addition, later discovery of previously unknown adverse events or other problems with our products, manufacturers or manufacturing processes, or failure to comply with regulatory requirements, may yield various results, including:


•	restrictions on such products, manufacturers or manufacturing processes;


•	restrictions on the labeling or marketing of a product;


•	restrictions on distribution or use of a product;


•	requirements to conduct post-marketing studies or clinical trials;


•	warning letters or untitled letters;


•	withdrawal of the products from the market;


•	refusal to approve pending applications or supplements to approved applications that we submit;


•	recall of products;


•	damage to relationships with any potential collaborators;


•	unfavorable press coverage and damage to our reputation;


•	fines, restitution or disgorgement of profits or revenues;


•	suspension or withdrawal of marketing approvals;


•	refusal to permit the import or export of our products;


•	product seizure;


•	injunctions or the imposition of civil or criminal penalties; and


•	litigation involving patients using our products.

Non-compliance with European Union requirements regarding safety monitoring or pharmacovigilance, and with requirements related to the development of products for the pediatric population, can also result in significant financial penalties. Similarly, failure to comply with the European Union’s requirements regarding the protection of personal information can also lead to significant penalties and sanctions.

Table of Contents

Under the CURES Act and the Trump Administration’s regulatory reform initiatives, the FDA’s policies, regulations and guidance may be revised or revoked and that could prevent, limit or delay regulatory approval of IPI-549 or any future product candidates we may develop, which would impact our ability to generate revenue.

In December 2016, the 21st Century Cures Act, or Cures Act, was signed into law. The Cures Act, among other things, is intended to modernize the regulation of drugs and spur innovation, but its ultimate implementation is unclear. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approval that we may have obtained and we may not achieve or sustain profitability, which would adversely affect our business, prospects, financial condition and results of operations.

We also cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative or executive action, either in the United States or abroad. For example, certain policies of the Trump Administration may impact our business and industry. Namely, the Trump Administration has taken several executive actions, including the issuance of a number of Executive Orders, that could impose significant burdens on, or otherwise materially delay, the FDA’s ability to engage in routine regulatory and oversight activities such as implementing statutes through rulemaking, issuance of guidance, and review and approval of marketing applications. An under-staffed FDA could result in delays in the FDA’s responsiveness or in its ability to review submissions or applications, issue regulations or guidance, or implement or enforce regulatory requirements in a timely fashion or at all. Moreover, on January 30, 2017, President Trump issued an Executive Order, applicable to all executive agencies, including the FDA, which requires that for each notice of proposed rulemaking or final regulation to be issued in fiscal year 2017, the agency shall identify at least two existing regulations to be repealed, unless prohibited by law. These requirements are referred to as the “two-for-one” provisions. This Executive Order includes a budget neutrality provision that requires the total incremental cost of all new regulations in the 2017 fiscal year, including repealed regulations, to be no greater than zero, except in limited circumstances. For fiscal years 2018 and beyond, the Executive Order requires agencies to identify regulations to offset any incremental cost of a new regulation and approximate the total costs or savings associated with each new regulation or repealed regulation. In interim guidance issued by the Office of Information and Regulatory Affairs within the Office of Management and Budget on February 2, 2017, the administration indicates that the “two-for-one” provisions may apply not only to agency regulations, but also to significant agency guidance documents. In addition, on February 24, 2017, President Trump issued an executive order directing each affected agency to designate an agency official as a “Regulatory Reform Officer” and establish a “Regulatory Reform Task Force” to implement the two-for-one provisions and other previously issued executive orders relating to the review of federal regulations, however it is difficult to predict how these requirements will be implemented, and the extent to which they will impact the FDA’s ability to exercise its regulatory authority. If these executive actions impose constraints on the FDA’s ability to engage in oversight and implementation activities in the normal course, our business may be negatively impacted.

Our relationships with healthcare providers, physicians and third-party payors will be subject to applicable anti-kickback, fraud and abuse and other healthcare laws and regulations, which, in the event of a violation, could expose us to criminal sanctions, civil penalties, contractual damages, reputational harm and diminished profits and future earnings.

Healthcare providers, physicians and third-party payors will play a primary role in the recommendation and prescription of any product candidates for which we obtain marketing approval. Our future arrangements with healthcare providers, physicians and third-party payors may expose us to broadly applicable fraud and abuse and other healthcare laws and regulations that may constrain the business or financial arrangements and relationships through which we market, sell and distribute any products for which we obtain marketing approval. Restrictions under applicable federal and state healthcare laws and regulations include the following:

•

the federal Anti-Kickback Statute prohibits, among other things, persons from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual for, or the purchase, order or recommendation or arranging of, any good or service, for which payment may be made under a federal healthcare program such as Medicare and Medicaid;

•

the federal False Claims Act imposes criminal and civil penalties, including through civil whistleblower or qui tam actions, against individuals or entities for, among other things, knowingly presenting, or causing to be presented, false or fraudulent claims for payment by a federal healthcare program or making a false statement or record material to payment of a false claim or avoiding, decreasing or concealing an obligation to pay money to the federal government, with potential liability including mandatory treble damages and significant per-claim penalties, currently set at $5,500 to $11,000 per false claim;


•	the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, imposes criminal and civil liability for executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters;

Table of Contents


•	HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act and its implementing regulations, also imposes obligations, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health information;


•	the federal Physician Payments Sunshine Act requires applicable manufacturers of covered drugs to report payments and other transfers of value to physicians and teaching hospitals; and


•	analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws and transparency statutes, may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers.

Some state laws require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government and may require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures. State and foreign laws also govern the privacy and security of health information in some circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.

If our operations are found to be in violation of any of the laws described above or any governmental regulations that apply to us, we may be subject to penalties, including civil and criminal penalties, damages, fines and the curtailment or restructuring of our operations. Any penalties, damages, fines, curtailment or restructuring of our operations could adversely affect our financial results. As we move toward potential commercialization of IPI-549, any corporate compliance program we design would be intended to ensure that we will market and sell any future products that we successfully develop from IPI-549 or other product candidates we may develop in compliance with all applicable laws and regulations. However, if implemented, we cannot guarantee that such program would protect us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations. If any such actions are instituted against us and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of significant fines or other sanctions.

Efforts to ensure that our business arrangements with third parties will comply with applicable healthcare laws and regulations will involve substantial costs. It is possible that governmental authorities will conclude that our business practices may not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations. If our operations are found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, damages, fines, imprisonment, exclusion of products from government funded healthcare programs, such as Medicare and Medicaid, and the curtailment or restructuring of our operations. If any of the physicians or other healthcare providers or entities with whom we expect to do business is found to be not in compliance with applicable laws, they may be subject to criminal, civil or administrative sanctions, including exclusions from government funded healthcare programs.

Recently enacted and future legislation may increase the difficulty and cost for us and any future collaborators to obtain marketing approval of and commercialize IPI-549 or any product candidates we may develop and affect the prices we, or they, may obtain.

In the United States and some foreign jurisdictions, there have been a number of legislative and regulatory changes and proposed changes regarding the healthcare system that could, among other things, prevent or delay marketing approval of our product candidates, restrict or regulate post-approval activities and affect our ability, or the ability of any future collaborators, to profitably sell any products for which we, or they, obtain marketing approval. We expect that current laws, as well as other healthcare reform measures that may be adopted in the future, may result in more rigorous coverage criteria and in additional downward pressure on the price that we, or any future collaborators, may receive for any approved products.

In the United States, the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, or Medicare Modernization Act, changed the way Medicare covers and pays for pharmaceutical products. The legislation expanded Medicare coverage for drug purchases by the elderly and introduced a new reimbursement methodology based on average sales prices for physician administered drugs. In addition, this legislation provided authority for limiting the number of drugs that will be covered in any therapeutic class. Cost reduction initiatives and other provisions of this legislation could decrease the coverage and price that we receive for any approved products. While the Medicare Modernization Act applies only to drug benefits for Medicare beneficiaries, private payors often follow Medicare coverage policy and payment limitations in setting their own reimbursement rates. Therefore, any reduction in reimbursement that results from the Medicare Modernization Act may result in a similar reduction in payments from private payors.

Table of Contents

In March 2010, then-President Obama signed into law the ACA. Among the provisions of the ACA of potential importance to our business and IPI-549, including, without limitation, our ability to commercialize and the prices we may obtain for IPI-549 or any future product candidates we may develop and that are approved for sale, are the following:


•	an annual, non-deductible fee on any entity that manufactures or imports specified branded prescription drugs and biologic products;


•	an increase in the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program;


•	expansion of federal healthcare fraud and abuse laws, including the False Claims Act and the Anti-Kickback Statute, new government investigative powers and enhanced penalties for noncompliance;


•	a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 50% point-of-sale discounts off negotiated prices;


•	extension of manufacturers’ Medicaid rebate liability;


•	expansion of eligibility criteria for Medicaid programs;


•	expansion of the entities eligible for discounts under the Public Health Service pharmaceutical pricing program;


•	new requirements to report financial arrangements with physicians and teaching hospitals;


•	a new requirement to annually report drug samples that manufacturers and distributors provide to physicians; and


•	a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research.

In addition, other legislative changes have been proposed and adopted since the ACA was enacted. In August 2011, the Budget Control Act of 2011, among other things, created measures for spending reductions by Congress. A Joint Select Committee on Deficit Reduction, tasked with recommending a targeted deficit reduction of at least $1.2 trillion for the years 2013 through 2021, was unable to reach required goals, thereby triggering the legislation’s automatic reduction to several government programs. These changes included aggregate reductions to Medicare payments to providers of up to 2% per fiscal year, which went into effect in April 2013 and will remain in effect through 2024 unless additional congressional action is taken. The American Taxpayer Relief Act of 2012, among other things, reduced Medicare payments to several providers and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. These new laws may result in additional reductions in Medicare and other healthcare funding and otherwise affect the prices we may obtain for IPI-549 or any future product candidates we may develop for which we may obtain regulatory approval or the frequency with which any such product candidate is prescribed or used.

Since enactment of the ACA, there have been numerous legal challenges and congressional actions to repeal and replace provisions of the law. For example, with enactment of the Tax Cuts and Jobs Act, or TCJA, which was signed by the President on December 22, 2017, Congress repealed the “individual mandate.” The repeal of this provision, which requires most Americans to carry a minimal level of health insurance, will become effective in 2019. According to the Congressional Budget Office, the repeal of the individual mandate will cause 13 million fewer Americans to be insured in 2027 and premiums in insurance markets may rise. Further, each chamber of the Congress has put forth multiple bills designed to repeal or repeal and replace portions of the ACA. Although none of these measures has been enacted by Congress to date, Congress may consider other legislation to replace elements of the ACA. It is possible that such initiatives, if enacted into law, could ultimately result in fewer individuals having health insurance coverage or in individuals having insurance coverage with less generous benefits. While the timing and scope of any potential future legislation to amend the ACA is highly uncertain in many respects, it is also possible that some of the ACA provisions that generally are not favorable for the research-based pharmaceutical industry could also be repealed along with ACA coverage expansion provision. We will continue to evaluate the effect that the ACA and its possible repeal and replacement could have on our business.

The Trump Administration has also taken executive actions to undermine or delay implementation of the ACA. Since January 2017, President Trump has signed two Executive Orders designed to delay the implementation of certain provisions of the ACA or otherwise circumvent some of the requirements for health insurance mandated by the ACA. One Executive Order directs federal agencies with authorities and responsibilities under the ACA to waive, defer, grant exemptions from, or delay the implementation of any provision of the ACA that would impose a fiscal or regulatory burden on states, individuals, healthcare providers, health insurers, or manufacturers of pharmaceuticals or medical devices. The second Executive Order terminates the cost-sharing subsidies that reimburse insurers under the ACA. Several state Attorneys General filed suit to stop the Trump Administration from terminating the subsidies, but their request for a restraining order was denied by a federal judge in California on October 25, 2017. Further, on June 14, 2018, U.S. Court of Appeals for the Federal Circuit ruled that the federal government was not required to pay more than $12 billion in ACA risk corridor payments to third-party payors who argued were owed to them. The effects of this gap in reimbursement on third-party payors, the viability of the ACA marketplace, providers, and potentially our business, are not yet known.

Table of Contents

In addition, the Centers for Medicare & Medicaid Services, or CMS, has proposed regulations that would give states greater flexibility in setting benchmarks for insurers in the individual and small group marketplaces, which may have the effect of relaxing the essential health benefits required under the ACA for plans sold through such marketplaces. On November 30, 2018, CMS announced a proposed rule that would amend the Medicare Advantage and Medicare Part D prescription drug benefit regulations to reduce out of pocket costs for plan enrollees and allow Medicare plans to negotiate lower rates for certain drugs. Among other things, the proposed rule changes would allow Medicare Advantage plans to use pre-authorization, or PA, and step therapy, or ST, for six protected classes of drugs, with certain exceptions; permit plans to implement PA and ST in Medicare Part B drugs; and change the definition of “negotiated prices” while adding a definition of “price concession” in the regulations. It is unclear whether these proposed changes will be accepted, and if so, what effect such changes will have on our business. Litigation and legislation over the ACA are likely to continue, with unpredictable and uncertain results.

Further, on December 14, 2018, a U.S. District Court judge in the Northern District of Texas ruled that the individual mandate portion of the ACA is an essential and inseverable feature of the ACA, and therefore because the mandate was repealed as part of the TCJA, the remaining provisions of the ACA are invalid as well. The Trump Administration and CMS have both stated that the ruling will have no immediate effect, and on December 30, 2018 the same judge issued an order staying the judgment pending appeal. The Trump Administration has recently represented to the Court of Appeals considering this judgment that it does not oppose the lower court’s ruling. It is unclear how this decision and any subsequent appeals and other efforts to repeal and replace the ACA will impact the ACA and our business. Litigation and legislation over the ACA are likely to continue, with unpredictable and uncertain results.

We will continue to evaluate the effect that the ACA and its possible repeal and replacement could have on our business. It is possible that repeal and replacement initiatives, if enacted into law, could ultimately result in fewer individuals having health insurance coverage or in individuals having insurance coverage with less generous benefits. While the timing and scope of any potential future legislation to repeal and replace ACA provisions is highly uncertain in many respects, it is also possible that some of the ACA provisions that generally are not favorable for the research-based pharmaceutical industry could also be repealed along with ACA coverage expansion provisions. Accordingly, such reforms, if enacted, could have an adverse effect on anticipated revenue from product candidates that we may successfully develop and for which we may obtain marketing approval and may affect our overall financial condition and ability to develop commercialize product candidates.

The costs of prescription pharmaceuticals in the United States has also been the subject of considerable discussion in the United States, and members of Congress and the Administration have stated that they will address such costs through new legislative and administrative measures. The pricing of prescription pharmaceuticals is also subject to governmental control outside the United States. In these countries, pricing negotiations with governmental authorities can take considerable time after the receipt of marketing approval for a product. To obtain reimbursement or pricing approval in some countries, we may be required to conduct a clinical trial that compares the cost effectiveness of IPI-549 or future product candidates we may develop to other available therapies. If reimbursement of our products is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, our ability to generate revenues and become profitable could be impaired. In the European Union, similar political, economic and regulatory developments may affect our ability to profitably commercialize our products. In addition to continuing pressure on prices and cost containment measures, legislative developments at the European Union or member state level may result in significant additional requirements or obstacles that may increase our operating costs.

Table of Contents

Specifically, there have been several recent U.S. congressional inquiries and proposed federal and proposed and enacted state legislation designed to, among other things, bring more transparency to drug pricing, review the relationship between pricing and manufacturer patient programs, reduce the costs of drugs under Medicare and reform government program reimbursement methodologies for drug products. At the federal level, Congress and the Trump Administration have each indicated that it will continue to seek new legislative and/or administrative measures to control drug costs. For example, on May 11, 2018, the Trump Administration issued a plan to lower drug prices. Under this blueprint for action, the Trump Administration indicated that the HHS will: take steps to end the gaming of regulatory and patent processes by drug makers to unfairly protect monopolies; advance biosimilars and generics to boost price competition; evaluate the inclusion of prices in drug makers’ ads to enhance price competition; speed access to and lower the cost of new drugs by clarifying policies for sharing information between insurers and drug makers; avoid excessive pricing by relying more on value-based pricing by expanding outcome-based payments in Medicare and Medicaid; work to give Part D plan sponsors more negotiation power with drug makers; examine which Medicare Part B drugs could be negotiated for a lower price by Part D plans, and improving the design of the Part B Competitive Acquisition Program; update Medicare’s drug-pricing dashboard to increase transparency; prohibit Part D contracts that include “gag rules” that prevent pharmacists from informing patients when they could pay less out-of-pocket by not using insurance; and require that Part D plan members be provided with an annual statement of plan payments, out-of-pocket spending, and drug price increases. More recently, on January 31, 2019, the HHS Office of Inspector General proposed modifications to the federal Anti-Kickback Statute discount safe harbor for the purpose of reducing the cost of drug products to consumers which, among other things, if finalized, will affect discounts paid by manufacturers to Medicare Part D plans, Medicaid managed care organizations and pharmacy benefit managers working with these organizations.

At the state level, individual states are increasingly aggressive in passing legislation and implementing regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. In addition, regional healthcare authorities and individual hospitals are increasingly using bidding procedures to determine what pharmaceutical products and which suppliers will be included in their prescription drug and other healthcare programs. These measures could reduce the ultimate demand for our products, once approved, or put pressure on our product pricing. We expect that additional state and federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that federal and state governments will pay for healthcare products and services, which could result in reduced demand for IPI-549 or future product candidates we may develop or additional pricing pressures.

Moreover, legislative and regulatory proposals have also been made to expand post-approval requirements and restrict sales and promotional activities for pharmaceutical drugs. We cannot be sure whether additional legislative changes will be enacted, or whether the FDA regulations, guidance or interpretations will be changed, or what the impact of such changes on the marketing approvals of our drug candidates, if any, may be. In addition, increased scrutiny by the United States Congress of the FDA’s approval process may significantly delay or prevent marketing approval, as well as subject us and any future collaborators to more stringent drug labeling and post-marketing testing and other requirements.

Governments outside the United States tend to impose strict price controls, which may adversely affect our revenues, if any.

In some countries, such as the countries of the European Union, the pricing of prescription pharmaceuticals is subject to governmental control and access. In these countries, pricing negotiations with governmental authorities can take considerable time after the receipt of marketing approval for a product. To obtain reimbursement or pricing approval in some countries, we, or any current or future collaborators, may be required to conduct a clinical trial that compares the cost-effectiveness of our product to other available therapies. If reimbursement of our products is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, our business could be materially harmed.

We are subject to U.S. and foreign anti-corruption and anti-money laundering laws with respect to our operations and non-compliance with such laws can subject us to criminal and/or civil liability and harm our business.

We are subject to the U.S. Foreign Corrupt Practices Act of 1977, as amended, or the FCPA, the U.S. domestic bribery statute contained in 18 U.S.C. § 201, the U.S. Travel Act, the USA PATRIOT Act, and possibly other state and national anti-bribery and anti-money laundering laws in countries in which we conduct activities. Anti-corruption laws are interpreted broadly and prohibit companies and their employees, agents, third-party intermediaries, joint venture partners and collaborators from authorizing, promising, offering, or providing, directly or indirectly, improper payments or benefits to recipients in the public or private sector. We may have direct or indirect interactions with officials and employees of government agencies or government-affiliated hospitals, universities, and other organizations. In addition, we may engage third-party intermediaries to promote our clinical research activities abroad and/or to obtain necessary permits, licenses, and other regulatory approvals. We can be held liable for the corrupt or other illegal activities of these third-party intermediaries, our employees, representatives, contractors, partners, and agents, even if we do not explicitly authorize or have actual knowledge of such activities.

Table of Contents

Compliance with the FCPA is expensive and difficult, particularly in countries in which corruption is a recognized problem. The FCPA presents particular challenges in the pharmaceutical industry, because, in many countries, hospitals are operated by the government, and doctors and other hospital employees are considered foreign officials. Certain payments to hospitals in connection with clinical trials and other work have been deemed to be improper payments to government officials and have led to FCPA enforcement actions.

We cannot ensure that our employees and third-party intermediaries will comply with such anti-corruption laws. Noncompliance with anti-corruption and anti-money laundering laws could subject us to whistleblower complaints, investigations, sanctions, settlements, prosecution, other enforcement actions, disgorgement of profits, significant fines, damages, other civil and criminal penalties or injunctions, suspension and/or debarment from contracting with certain persons, the loss of export privileges, reputational harm, adverse media coverage, and other collateral consequences. If any subpoenas, investigations, or other enforcement actions are launched, or governmental or other sanctions are imposed, or if we do not prevail in any possible civil or criminal litigation, our business, results of operations and financial condition could be materially harmed. In addition, responding to any action will likely result in a materially significant diversion of management’s attention and resources and significant defense and compliance costs and other professional fees. In certain cases, enforcement authorities may even cause us to appoint an independent compliance monitor which can result in added costs and administrative burdens.

We are subject to governmental export and import controls that could impair our ability to compete in international markets due to licensing requirements and subject us to liability if we are not in compliance with applicable laws.

Our products and solutions are subject to export control and import laws and regulations, including the U.S. Export Administration Regulations, U.S. Customs regulations, and various economic and trade sanctions regulations administered by the U.S. Treasury Department’s Office of Foreign Assets Controls. Exports of our products and solutions outside of the United States must be made in compliance with these laws and regulations. If we fail to comply with these laws and regulations, we and certain of our employees could be subject to substantial civil or criminal penalties, including the possible loss of export or import privileges; fines, which may be imposed on us and responsible employees or managers; and, in extreme cases, the incarceration of responsible employees or managers.

In addition, changes in our products or solutions or changes in applicable export or import laws and regulations may create delays in the introduction, provision, or sale of our products and solutions in international markets, prevent customers from using our products and solutions or, in some cases, prevent the export or import of our products and solutions to certain countries, governments or persons altogether. Any limitation on our ability to export, provide, or sell our products and solutions could adversely affect our business, financial condition and results of operations.

If we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or incur costs that could harm our business.

We are subject to numerous environmental, health and safety laws and regulations, including those governing laboratory procedures and the handling, use, storage, treatment and disposal of hazardous materials and wastes. From time to time and in the future, our operations may involve the use of hazardous and flammable materials, including chemicals and biological materials, and may also produce hazardous waste products. Even if we contract with third parties for the disposal of these materials and waste products, we cannot completely eliminate the risk of contamination or injury resulting from these materials. In the event of contamination or injury resulting from the use or disposal of our hazardous materials, we could be held liable for any resulting damages, and any liability could exceed our resources. We also could incur significant costs associated with civil or criminal fines and penalties for failure to comply with such laws and regulations.

We maintain workers’ compensation insurance to cover us for costs and expenses we may incur due to injuries to our employees resulting from the use of hazardous materials, as well as other work-related injuries, but this insurance may not provide adequate coverage against potential liabilities. However, we do not maintain insurance for environmental liability or toxic tort claims that may be asserted against us.

In addition, we may incur substantial costs in order to comply with current or future environmental, health and safety laws and regulations. Current or future environmental laws and regulations may impair our research, development or production efforts. In addition, failure to comply with these laws and regulations may result in substantial fines, penalties or other sanctions.

Table of Contents

Unfavorable global economic conditions could adversely affect our business, financial condition or results of operations.

Our results of operations could be adversely affected by general conditions in the global economy and in the global financial markets. The 2008 global financial crisis caused extreme volatility and disruptions in the capital and credit markets. A severe or prolonged economic downturn, such as that in 2008, could result in a variety of risks to our business, including weakened demand for IPI-549 or any future product candidates we may develop and our ability to raise additional capital when needed on acceptable terms, if at all. A weak or declining economy could strain our suppliers, possibly resulting in supply disruption, or cause delays in payments for our services by third-party payors or our collaborators. Any of the foregoing could harm our business and we cannot anticipate all of the ways in which the current economic climate and financial market conditions could adversely impact our business.

Our internal computer systems, or those of any collaborators or contractors or consultants, may fail or suffer security breaches, which could result in a material disruption of our product development programs.

Despite the implementation of security measures and certain data recovery measures, our internal computer systems and those of third parties with which we contract are vulnerable to damage from cyber-attacks, computer viruses, unauthorized access, sabotage, natural disasters, terrorism, war, and telecommunication and electrical failures. Any system failure, accident or security breach that causes interruptions in our operations, for us or those third parties with which we contract, could result in a material disruption of our product development programs and business operations, in addition to possibly requiring substantial expenditures of resources to remedy. For example, the loss of clinical trial data from completed clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. To the extent that any disruption or security breach results in a loss of, or damage to, our data or applications, or inappropriate disclosure of confidential or proprietary information, we may incur liabilities and the further development of IPI-549, or any future product candidates we may develop, may be delayed. In addition, we may not have adequate insurance coverage to provide compensation for any losses associated with such events.

We could be subject to risks caused by misappropriation, misuse, leakage, falsification or intentional or accidental release or loss of information maintained in the information systems and networks of our company, including personal information of our employees. In addition, outside parties may attempt to penetrate our systems or those of our vendors or fraudulently induce our employees or employees of our vendors to disclose sensitive information to gain access to our data. Like other companies, we may experience threats to our data and systems, including malicious codes and viruses, and other cyber-attacks. The number and complexity of these threats continue to increase over time. If a material breach of our security or that of our vendors occurs, the market perception of the effectiveness of our security measures could be harmed, we could lose business and our reputation and credibility could be damaged. We could be required to expend significant amounts of money and other resources to repair or replace information systems or networks. Although we develop and maintain systems and controls designed to prevent these events from occurring, and we have a process to identify and mitigate threats, the development and maintenance of these systems, controls and processes is costly and requires ongoing monitoring and updating as technologies change and efforts to overcome security measures become more sophisticated. Moreover, despite our efforts, the possibility of these events occurring cannot be eliminated entirely.

Compliance with global privacy and data security requirements could result in additional costs and liabilities to us or inhibit our ability to collect and process data globally, and the failure to comply with such requirements could have a material adverse effect on our business, financial condition or results of operations.

Table of Contents

The regulatory framework for the collection, use, safeguarding, sharing, transfer and other processing of information worldwide is rapidly evolving and is likely to remain uncertain for the foreseeable future. Globally, virtually every jurisdiction in which we operate has established its own data security and privacy frameworks with which we must comply. For example, the European Union’s General Data Protection Regulation 2016/679, or GDPR, imposes strict obligations on the processing of personal data, including personal health data, and the free movement of such data. The GDPR applies to any company established in the European Union as well as any company outside the European Union that processes personal data in connection with the offering of goods or services to individuals in the European Union or the monitoring of their behavior. The GDPR enhances data protection obligations for processors and controllers of personal data, including, for example, obligations relating to: processing health and other sensitive data; obtaining consent of individuals; providing notice to individuals regarding data processing activities; responding to data subject requests; taking certain measures when engaging third-party processors; notifying data subjects and regulators of data breaches; implementing safeguards to protect the security and confidentiality of personal data; and transferring personal data to countries outside the European Union, including the United States. The GDPR imposes additional obligations and risks upon our business and substantially increases the penalties to which we could be subject in the event of any non-compliance, including fines of up to €20 million or 4% of total worldwide annual turnover, whichever is higher. The GDPR also confers a private right of action on data subjects and consumer associations to lodge complaints with supervisory authorities, seek judicial remedies and obtain compensation for damages. Given the breadth and depth of changes in data protection obligations, preparing for and complying with the GDPR’s requirements has required and will continue to require significant time, resources and a review of our technologies, systems and practices, as well as those of any third-party collaborators, service providers, contractors or consultants that process or transfer personal data collected in the European Union. The GDPR and other changes in laws or regulations associated with the enhanced protection of certain types of sensitive data, such as healthcare data or other personal information from our clinical trials, could require us to change our business practices or lead to government enforcement actions, private litigation or significant fines and penalties against us, reputational harm and could have a material adverse effect on our business, financial condition or results of operations.

Our employees may engage in misconduct or other improper activities, including non-compliance with regulatory standards and requirements, which could cause significant liability for us and harm our reputation.

We are exposed to the risk of employee fraud or other misconduct, including intentional failures to comply with FDA regulations or similar regulations of comparable foreign regulatory authorities, provide accurate information to the FDA or comparable foreign regulatory authorities, comply with manufacturing standards we have established, comply with federal and state healthcare fraud and abuse laws and regulations and similar laws and regulations established and enforced by comparable foreign regulatory authorities, report financial information or data accurately or disclose unauthorized activities to us. Employee misconduct could also involve the improper use of information obtained in the course of clinical trials, which could result in regulatory sanctions and serious harm to our reputation. It is not always possible to identify and deter employee misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws, standards or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business and results of operations, including the imposition of significant fines or other sanctions.

Risks Related to Employee Matters and Managing Potential Future Growth

If we are not able to retain key personnel and advisors, we may not be able to operate our business successfully.

We are highly dependent on our executive leadership team. All of these individuals are employees-at-will, which means that neither we nor the employee is obligated to a fixed term of service and that the employment relationship may be terminated by either us or the employee at any time, without notice and whether or not cause or good reason exists for such termination. The loss of the services of any of these individuals might impede the achievement of our research, development and commercialization objectives. We do not maintain “key person” insurance on any of our employees.

Retaining qualified scientific and business personnel is also critical to our success. Our industry has experienced a high rate of turnover of management personnel in recent years. If we lose one or more of our executive officers or other key employees, our ability to implement our business strategy successfully could be seriously harmed. This competition is particularly intense near our headquarters in Cambridge, Massachusetts. We may not be able to attract or retain these personnel on acceptable terms given the competition among numerous pharmaceutical and biotechnology companies for similar personnel. In addition, we may face additional challenges in retaining our existing senior management and key employees for our company as our business needs change.

Table of Contents

We also experience competition in the hiring of scientific personnel from universities and research institutions. In addition, we rely on consultants and advisors, including scientific and clinical advisors, to assist us in formulating our research and development strategy. Our consultants and advisors may be employed by other entities, have commitments under consulting or advisory contracts with third parties that limit their availability to us, or both.

We may undertake strategic acquisitions in the future, and any difficulties from integrating acquired businesses, products, product candidates and technologies could adversely affect our business and our stock price.

We may acquire additional businesses, products, product candidates, or technologies that complement or augment our existing business. We may not be able to integrate any acquired businesses, products, product candidates or technologies successfully or operate any acquired business profitably. Integrating any newly acquired business, product, product candidate, or technology could be expensive and time-consuming. Integration efforts often place a significant strain on managerial, operational and financial resources and could prove to be more difficult or expensive than we expect. The diversion of the attention of our management to, and any delay or difficulties encountered in connection with, any future acquisitions we may consummate could result in the disruption of our ongoing business or inconsistencies in standards, controls, procedures and policies that could adversely affect our ability to maintain relationships with customers, suppliers, collaborators, employees and others with whom we have business dealings. We may need to raise additional funds through public or private debt or equity financings to acquire any businesses, products, product candidates, or technologies which may result in, among other things, dilution for stockholders or the incurrence of indebtedness.

As part of our efforts to acquire businesses, products, product candidates and technologies or to enter into other significant transactions, we conduct business, legal and financial due diligence in an effort to identify and evaluate material risks involved in the transaction. We will also need to make certain assumptions regarding acquired product candidates, including, among other things, development costs, the likelihood of receiving regulatory approval and the market for such product candidates. If we are unsuccessful in identifying or evaluating all such risks or our assumptions prove to be incorrect, we might not realize some or all of the intended benefits of the transaction. If we fail to realize intended benefits from acquisitions we may consummate in the future, our business and financial results could be adversely affected.

In addition, we will likely incur significant expenses in connection with our efforts, if any, to consummate acquisitions. These expenses may include fees and expenses for investment bankers, attorneys, accountants and other advisers in connection with our efforts and could be incurred whether or not an acquisition is consummated. Even if we consummate a particular acquisition, we may incur as part of such acquisition substantial closure costs associated with, among other things, elimination of duplicate operations and facilities. In such case, the incurrence of these costs could adversely affect our financial results for particular quarterly or annual periods.

Risks Related to Our Common Stock

Our common stock may have a volatile trading price and low trading volume.

The market price of our common stock has been and we expect it to continue to be subject to significant fluctuations. Some of the factors that may cause the market price of our common stock to fluctuate include:


•	the results of our current and any future clinical trials of IPI-549;


•	future sales of, and the trading volume in, our common stock;


•	announcements of strategic transactions relating to our programs or our company;


•	our entry into key agreements, including those related to the acquisition or in-licensing of new programs, or the termination of key agreements, including the Takeda Agreement or the Verastem Agreement;


•	the results and timing of regulatory reviews relating to the approval of IPI-549;


•	the initiation of, material developments in, or conclusion of litigation, including but not limited to litigation to enforce or defend any of our intellectual property rights or to defend product liability claims;


•	the failure of IPI-549, if approved, to achieve commercial success;


•	the results of clinical trials conducted by others on drugs that would compete with IPI-549;


•	the regulatory approval of drugs that would compete with IPI-549;


•	issues in manufacturing IPI-549;


•	the loss of executive officers or other key employees;


•	changes in estimates or recommendations, or publication of inaccurate or unfavorable research about our business, by securities analysts who cover our common stock;


•	future financings through the issuance of equity or debt securities or otherwise;

Table of Contents


•	healthcare reform measures, including changes in the structure of healthcare payment systems;


•	our cash position and period-to-period fluctuations in our financial results; and


•	general and industry-specific economic and/or capital market conditions.

Moreover, the stock markets in general have experienced substantial volatility that has often been unrelated to the operating performance of individual companies. These broad market fluctuations may also adversely affect the trading price of our common stock.

In the past, when the market price of a stock has been volatile, as our stock price may be, holders of that stock have occasionally brought securities class action litigation against the company that issued the stock. If any of our stockholders were to bring a lawsuit of this type against us, even if the lawsuit is without merit, negative publicity could be generated, and we could incur substantial costs defending the lawsuit. A stockholder lawsuit could also divert the time and attention of our management.

If we fail to meet the requirements for continued listing on the Nasdaq Global Select Market, our common stock could be delisted from trading, which would decrease the liquidity of our common stock and our ability to raise additional capital.

Our common stock is currently listed for quotation on the Nasdaq Global Select Market. We are required to meet specified requirements in order to maintain our listing on the Nasdaq Global Select Market, including, among other things, a minimum bid price of $1.00 per share. If our bid price falls below $1.00 per share for 30 consecutive business days, we will receive a deficiency notice from Nasdaq advising us that we have 180 days to regain compliance by maintaining a minimum bid price of at least $1.00 for a minimum of ten consecutive business days. Under certain circumstances, Nasdaq could require that the minimum bid price exceed $1.00 for more than ten consecutive days before determining that a company complies.

If we fail to satisfy the Nasdaq Global Select Market’s continued listing requirements, we may transfer to the Nasdaq Capital Market, which generally has lower financial requirements for initial listing, to avoid delisting, or, if we fail to meet its listing requirements, the OTC Bulletin Board. A transfer of our listing to the Nasdaq Capital Market or having our common stock trade on the OTC Bulletin Board could adversely affect the liquidity of our common stock. Any such event could make it more difficult to dispose of, or obtain accurate quotations for the price of, our common stock, and there also would likely be a reduction in our coverage by securities analysts and the news media, which could cause the price of our common stock to decline further. We may also face other material adverse consequences in such event, such as negative publicity, a decreased ability to obtain additional financing, diminished investor and/or employee confidence, and the loss of business development opportunities, some or all of which may contribute to a further decline in our stock price.

The estimates and judgments we make, or the assumptions on which we rely, in preparing our consolidated financial statements could prove inaccurate.

Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of our assets, liabilities, revenues and expenses. Such estimates and judgments include those related to revenue recognition, impairment of long-lived assets, accrued expenses, assumptions in the valuation of stock-based compensation and income taxes. We base our estimates and judgments on historical experience, facts and circumstances known to us and on various assumptions that we believe to be reasonable under the circumstances. These estimates and judgments, or the assumptions underlying them, may change over time or prove inaccurate. If this is the case, we may be required to restate our financial statements, which could in turn subject us to securities class action litigation. Defending against such potential litigation relating to a restatement of our financial statements would be expensive and would require significant attention and resources of our management. Moreover, our insurance to cover our obligations with respect to the ultimate resolution of any such litigation may be inadequate. As a result of these factors, any such potential litigation could have a material adverse effect on our financial results and cause our stock price to decline.

If we are not able to maintain effective internal control under Section 404 of the Sarbanes-Oxley Act, our business and stock price could be adversely affected.

Section 404 of the Sarbanes-Oxley Act of 2002 requires us, on an annual basis, to review and evaluate our internal control and requires our independent auditors to attest to the effectiveness of our internal control over financial reporting. Any failure by us to maintain the effectiveness of our internal control in accordance with the requirements of Section 404 of the Sarbanes-Oxley Act, which could be impacted by our restructuring or employee turnover, as such requirements exist today or may be modified, supplemented or amended in the future, could have a material adverse effect on our business, operating results and stock price.

Table of Contents

We might not be able to utilize a significant portion of our net operating loss carryforwards and research and development tax credit carryforwards.

We have incurred significant net losses since our inception and cannot guarantee when, if ever, we will become profitable. To the extent that we continue to generate federal and state taxable losses, unused net operating loss and tax credit carryforwards will carry forward to offset future taxable income, subject to applicable limitations on the use of those losses. Losses incurred in taxable years ending on or before December 31, 2017, are eligible to be carried forward for up to 20 years, and to be deducted in full against income for the years to which they may be carried. Losses incurred in taxable years ending after December 31, 2017, are eligible to be carried forward indefinitely, but may offset no more than 80% of the taxable income for the years to which they are carried (computed without regard to the deduction for carryovers of net operating losses). Net operating loss carryovers from periods ending on or before December 31, 2017, and tax credit carryovers from all periods, could expire unused and be unavailable to offset future income tax liabilities.

In addition, under Section 382 of the Internal Revenue Code of 1986, as amended, or the Internal Revenue Code, and corresponding provisions of state law, if a corporation undergoes an “ownership change,” which is generally defined as a greater than 50% change, by value, in its equity ownership over a three-year period, the corporation’s ability to use its pre-change net operating loss and credit carryovers to reduce its tax liability for post-change periods may be limited. We may experience ownership changes as a result of subsequent shifts in our stock ownership, some of which may be outside of our control. In addition, we have not conducted a detailed study to document whether our historical activities qualify to support the research and development credits currently claimed as a carryover. A detailed study could result in adjustment to our research and development credit carryovers. If we determine that an ownership change has occurred and our ability to use our historical net operating loss and tax credit carryovers is materially limited, or if our research and development credit carryforwards are adjusted, our use of those attributes to offset future income tax liabilities would be limited.

Comprehensive changes to the U.S. tax code made by 2017’s tax reform law could adversely affect our business and financial condition.

On December 22, 2017, President Trump signed into law legislation, the TCJA, that significantly revised the Internal Revenue Code. The TCJA, among other things, contains significant changes to corporate taxation, including reduction of the corporate tax rate from a top marginal rate of 35% to a flat rate of 21%, limitation of the tax deduction for interest expense to 30% of adjusted earnings (except for certain small businesses), limitation of the deduction for net operating losses to 80% of current year taxable income and elimination of net operating loss carrybacks, one time taxation of offshore earnings at reduced rates regardless of whether they are repatriated, elimination of U.S. tax on foreign earnings (subject to certain important exceptions), immediate deductions for certain new investments instead of deductions for depreciation expense over time, and modifying or repealing many business deductions and credits. Notwithstanding the reduction in the corporate income tax rate, the overall impact of the TCJA remains uncertain and our business and financial condition could be adversely affected. In addition, how various states will respond to the TCJA continues to be uncertain. The impact of this tax reform on holders of our common stock is also uncertain and could be adverse. We urge our stockholders to consult with their legal and tax advisors with respect to this legislation and the potential tax consequences of investing in or holding our common stock.

Our effective tax rate may fluctuate, and we may incur obligations in tax jurisdictions in excess of accrued amounts.

Our effective tax rate may be different than experienced in the past due to numerous factors, including as a result of applying the provisions of the TCJA (as such provisions may be elaborated on or further developed in guidance, regulations and technical corrections pertaining to the TCJA), changes in the mix of our profitability apportioned to tax jurisdictions in which we may operate, the results of examinations and audits of our tax filings, our inability to secure or sustain acceptable agreements with tax authorities, changes in accounting for income taxes and changes in tax laws. Any of these factors could cause us to experience an effective tax rate significantly different from previous periods or our current expectations and may result in tax obligations in excess of amounts accrued in our financial statements.

Because we do not anticipate paying cash dividends, stock price appreciation, if any, will be our stockholders’ sole return on investment.

We anticipate retaining any future earnings for reinvestment in the infrastructure and personnel necessary to support our development and potential commercialization efforts. Therefore, we do not anticipate paying cash dividends in the future. As a result, only appreciation of the price of our common stock will provide a return to stockholders. Investors seeking cash dividends should not invest in our common stock.

Table of Contents

Inadequate funding for the FDA, the SEC and other government agencies could hinder their ability to hire and retain key leadership and other personnel, prevent new products and services from being developed or commercialized in a timely manner or otherwise prevent those agencies from performing normal business functions on which the operation of our business may rely, which could negatively impact our business.

The ability of the FDA to review and approve new products can be affected by a variety of factors, including government budget and funding levels, ability to hire and retain key personnel and accept the payment of user fees, and statutory, regulatory, and policy changes. Average review times at the agency have fluctuated in recent years as a result. In addition, government funding of the SEC and other government agencies on which our operations may rely, including those that fund research and development activities is subject to the political process, which is inherently fluid and unpredictable.

Disruptions at the FDA and other agencies may also slow the time necessary for new drugs to be reviewed and/or approved by necessary government agencies, which would adversely affect our business. For example, over the last several years, the U.S. government has shut down several times and certain regulatory agencies, such as the FDA and the SEC, have had to furlough critical employees and stop critical activities. If a prolonged government shutdown occurs, it could significantly impact the ability of the FDA to timely review and process our regulatory submissions, which could have a material adverse effect on our business. Further, future government shutdowns could impact our ability to access the public markets and obtain necessary capital in order to properly capitalize and continue our operations.

Our e xecutive officers, directors and major shareholders may be able to exert significant control over the company, which may make an acquisition of us difficult.

To our knowledge, based on the number of shares of our common stock outstanding on April 30, 2019, stockholders beneficially owning 5% or more of our common stock, as well as our executive officers, directors, and their respective affiliates, beneficially owned in the aggregate approximately 31% of our common stock. These stockholders have the ability to influence our company through this ownership position. For example, as a result of this concentration of ownership, these stockholders, if acting together, may have the ability to affect the outcome of matters submitted to our stockholders for approval, including the election and removal of directors, changes to our equity compensation plans and any merger or similar transaction. This concentration of ownership may, therefore, harm the market price of our common stock by:


•	delaying, deferring or preventing a change in control of our company;


•	impeding a merger, consolidation, takeover or other business combination involving us; or


•	discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of us.

Anti-takeover provisions in our organizational documents and Delaware law may make an acquisition of us difficult.

We are incorporated in Delaware. Anti-takeover provisions of Delaware law and our organizational documents may make a change in control more difficult. Also, under Delaware law, our Board of Directors may adopt additional anti-takeover measures. For example, our charter authorizes our Board of Directors to issue up to 1,000,000 shares of undesignated preferred stock and to determine the terms of those shares of stock without any further action by our stockholders. If our Board of Directors exercises this power, it could be more difficult for a third party to acquire a majority of our outstanding voting stock. Our charter and bylaws also contain provisions limiting the ability of stockholders to call special meetings of stockholders.

Our stock incentive plan generally permits our Board of Directors to provide for acceleration of vesting of options granted under that plan in the event of certain transactions that result in a change of control. If our Board of Directors uses its authority to accelerate vesting of options, this action could make an acquisition more costly, and it could prevent an acquisition from going forward.

Moreover, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law statute, which generally prohibits a person who owns in excess of 15% of our outstanding voting stock from engaging in a transaction with us for a period of three years after the date on which such person acquired in excess of 15% of our outstanding voting common stock, unless the transaction is approved by our Board of Directors and holders of at least two-thirds of our outstanding voting stock, excluding shares held by such person. The prohibition against such transactions does not apply if, among other things, prior to the time that such person became an interested stockholder, our Board of Directors approved the transaction in which such person acquired 15% or more of our outstanding voting stock. The existence of the foregoing provisions could limit the price that investors might be willing to pay in the future for shares of our common stock.

Table of Contents

Our investments are subject to risks that may cause losses and affect the liquidity of these investments.

As of March 31, 2019 , we had $70.5 million in cash, cash equivalents and available-for-sale securities. We historically have invested these amounts in money market funds, corporate obligations, U.S. government-sponsored enterprise obligations, U.S. Treasury securities and mortgage-backed securities meeting the criteria of our investment policy, which prioritizes the preservation of our capital. Corporate obligations may include obligations issued by corporations in countries other than the United States, including some issues that have not been guaranteed by governments and government agencies. Our investments are subject to general credit, liquidity, market and interest rate risks and instability in the financial markets. We may realize losses in the fair value of these investments or a complete loss of these investments. In addition, should our investments cease paying or reduce the amount of interest paid to us, our interest income would suffer. These market risks associated with our investment portfolio may have a material adverse effect on our financial results and the availability of cash to fund our operations.


Item 6.	Exhibits

Description

Incorporated by Reference

Exhibit No.

Form

SEC

Filing

date

Exhibit

Number

Filed

with

this

10-Q

3.1

Restated Certificate of Incorporation of the Registrant.

10-Q

8/9/2007

3.1

3.2

Amended and Restated Bylaws of the Registrant.

8-K

3/17/2009

3.1

4.1

Form of Common Stock Certificate.

10-K

3/14/2008

4.1

10.1

Amendment No. 4 to Amended and Restated Development and License Agreement, dated as of March 4, 2019, by and between the Registrant and Intellikine LLC.

10.2

Purchase and Sale Agreement, dated as of March 5, 2019, between the Registrant and HealthCare Royalty Partners III, L.P.

10.3

Protective Rights Agreement, dated as of March 11, 2019, between the Registrant and HCR Collateral Managements, LLC.

10.4

Lease Agreement, dated April 3, 2019, between Registrant and Sun Life Assurance Company of Canada.

31.1

Certification of principal executive officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended.

31.2

Certification of principal financial officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended.

32.1

Certification of principal executive officer pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2

Certification of principal financial officer pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101

The following materials from the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2019, formatted in XBRL (eXtensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Operations and Comprehensive Loss, (iii) the Condensed Consolidated Statements of Cash Flows, (iv) the Condensed Consolidated Statements of Stockholders’ Equity, and (v) Notes to Condensed Consolidated Financial Statements. Filed herewith.

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 report to be signed on its behalf by the undersigned, thereunto duly authorized.



	INFINITY PHARMACEUTICALS, INC.
Date: May 7, 2019	By:	/s/ L AWRENCE E. B LOCH , M.D., J.D.
		Lawrence E. Bloch, M.D., J.D.
		President
		(Principal Financial Officer & Principal Accounting Officer)

AMENDMENT No. 4 TO

AMENDED AND RESTATED DEVELOPMENT AND LICENSE AGREEMENT

This Amendment No. 4 to Amended and Restated Development and License Agreement (“ Amendment No. 4 ”) is made as of this 4 ^th day of March, 2019 (the “ Amendment No. 4 Effective Date ”) by and between Intellikine LLC, a limited liability company organized and existing under the laws of the State of Delaware and successor to Intellikine, Inc. (“ Intellikine ”), and Infinity Pharmaceuticals, Inc., a company organized and existing under the laws of the State of Delaware (“ Infinity ”). Intellikine and Infinity are each referred to individually as a “ Party ” and together as the “ Parties ”.

RECITALS

WHEREAS, Intellikine and Infinity are parties to the Amended and Restated Development and License Agreement, effective as of December 24, 2012, as amended on July 29, 2014, on September 27, 2016, and on July 26, 2017 (the “ Agreement ”);

WHEREAS, pursuant to Section 3.1 of the Agreement, Infinity sublicensed its rights under Section 2.1 of the Agreement to Verastem, Inc. (“ Verastem ”) in accordance with the terms thereof and memorialized the terms of the sublicense in the Amended and Restated License Agreement between Infinity and Verastem, effective October 29, 2016 (the “ Verastem Agreement ”);

WHEREAS, Intellikine is entitled to receive from Infinity, fifty percent (50%) of all Qualifying Transaction Revenue;

WHEREAS, Infinity wishes to effectuate a sale of certain royalties due to Infinity under the Verastem Agreement;

WHEREAS, to clarify the rights and obligations of each Party with respect to the amounts received pursuant to the Royalty Sale Transaction (as defined below), the Parties wish to amend the Agreement, in accordance with Section 18.8 thereof, as set forth below;

NOW THEREFORE, in consideration of the mutual covenants and agreements contained herein, the Parties agree as follows:

Agreement to Royalty Sale . Intellikine hereby consents to the sale to a Third Party (a “ Royalty Purchaser ”) of (a) the amounts due or to be paid to Infinity or any of its Affiliates under Section 6.1.1 of the Verastem Agreement with respect to Net Sales (as defined in the Verastem Agreement) made on or after January 1, 2019 (“ Royalties ”), (b) any interest payable under Section 6.3 of the Verastem Agreement with respect to the late payment of the Royalties or underpayments or interest thereon, (c) any amounts payable under Section 6.5.1 of the Verastem Agreement with respect to any underpayment of the Royalties and (d) various enforcement rights of Infinity related to the foregoing (such sale, the “ Royalty Sale Transaction ”).

Proceeds from Royalty Sale . Intellikine and Infinity agree that Infinity may retain 75%, and will pay to Intellikine 25%, of any consideration received by Infinity or any of its Affiliates from a Royalty Purchaser for the sale of the Royalties pursuant to the Royalty Sale Transaction, which consideration shall not be less than thirty million dollars ($30,000,000). Infinity will pay Intellikine Intellikine’s share of such consideration, less Intellikine’s share of Royalty Transaction Expenses (defined below), within fifteen (15) days following Infinity’s (or any of its Affiliate’s) receipt of such consideration.


3.	Continuing Obligation .

3.1.

Subject to Section 3.2 below, Infinity will pay Intellikine an amount equal to 25% of the Royalties if, as, and when such Royalties would have been paid to Infinity under the Verastem Agreement but for the Royalty Sale Transaction (the “ Interim Obligation ”), provided, however , that, following a termination of the definitive agreement for the Royalty Sale Transaction and reversion of the Royalties to Infinity (the “ Reversion ”), Intellikine and Infinity will share equally in any Qualifying Transaction Revenue, including but not limited to Royalties paid to Infinity by Verastem.

3.2.

Infinity will have the right to extinguish the Interim Obligation by payment to Intellikine of an amount equal to (i) the amount paid to Intellikine under Section 2 above multiplied by the multiple set forth in the table below corresponding to the time period in which such extinguishing payment pursuant to this Section 3.2 is made, minus (ii) all payments made to Intellikine pursuant to the Interim Obligation:



Time Period	Multiple
From Amendment No. 4 Effective Date until June 30, 2022	145%
From July 1, 2022 through June 30, 2023	155%
From July 1, 2023 through June 30, 2024	165%
From July 1, 2024 through June 30, 2025	175%


4.	Release . Intellikine agrees to look solely to Infinity, and not to any Royalty Purchaser, for the payment of any amounts payable to Intellikine under the Agreement, as amended, and hereby waives and releases any claim against any Royalty Purchaser with respect to the Royalties or any other amount described in Section 1 above with respect to any time period prior to the Reversion.


5.	Expenses . Infinity will be responsible for 75%, and Intellikine will be responsible for 25%, of any expenses incurred by Infinity or any of its Affiliates in connection with the sale of the Royalties (the “ Royalty Transaction Expenses ”), provided, however that, as between Infinity and Intellikine, such Royalty Transaction Expenses shall be capped at four million dollars ($4,000,000).


6.	Press Release . In the event that either Party wishes to issue a press release or other public statement relating to the terms and conditions of this Amendment No. 4, it shall comply with the obligations set forth in Section 13.2 of the Agreement with respect thereto.


7.	Entire Agreement/Amendments . Except as amended by this Amendment No. 4, the Agreement shall remain in full force and effect. After the Amendment No. 4 Effective Date, every reference in the Agreement to the “Agreement” shall mean the Agreement as amended by this Amendment.


8.	Counterparts . This Amendment No. 4 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. Signatures provided by facsimile transmission or in Adobe ^TM Portable Document Format (PDF) sent by electronic mail shall be deemed to be original signatures.

[THIS SPACE INTENTIONALLY LEFT BLANK]

IN WITNESS WHEREOF, the Parties intending to be bound have caused this Amendment No. 4 to be executed by their duly authorized representatives



SIGNED for and on behalf of	)	/s/Fabien Dubois
INTELLIKINE LLC	)	Fabien Dubois
	)	Treasurer of Intellikine LLC and Millennium Pharmaceuticals, Inc.



SIGNED for and on behalf of	)	/s/Adelene Q. Perkins
INFINITY PHARMACEUTICALS, INC.	)	Adelene Q. Perkins
	)	Chief Executive Officer

Execution Version

PURCHASE AND SALE AGREEMENT

dated as of March 5, 2019

between

INFINITY PHARMACEUTICALS, INC.

and

HEALTHCARE ROYALTY PARTNERS III, L.P.

Table of Contents

Page

ARTICLE I
DEFINED TERMS AND RULES OF CONSTRUCTION

Section 1.1 Defined Terms 1

Section 1.2 Rules of Construction 9

ARTICLE II
PURCHASE AND SALE OF THE PURCHASED ASSETS

Section 2.1 Purchase and Sale. 10

Section 2.2 Payment of Investment Amount 11

Section 2.3 No Assumed Obligations 12

Section 2.4 Excluded Assets 12

Section 2.5 Seller Prepayment 12

ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLER

Section 3.1 Organization 12

Section 3.2 No Conflicts. 13

Section 3.3 Authorization 13

Section 3.4 Ownership 13

Section 3.5 Governmental and Third Party Authorizations 14

Section 3.6 No Litigation 14

Section 3.7 Tax Matters 14

Section 3.8 No Brokers’ Fees 15

Section 3.9 Compliance with Laws 15

Section 3.10 Intellectual Property Matters. 15

Section 3.11 Regulatory Approval, Manufacturing and Marketing. 17

Section 3.12 Counterparty License Agreement. 17

Section 3.13 UCC Matters 19

Section 3.14 Information 19

Section 3.15 Insolvency; Material Adverse Change 19

Section 3.16 Set-off and Other Sources of Royalty Reduction 19

ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER

Section 4.1 Organization 20

Section 4.2 No Conflicts 20

Section 4.3 Authorization 20

Section 4.4 Governmental and Third Party Authorizations 21

Section 4.5 No Litigation 21

Section 4.6 Access to Information 21

Section 4.7 Funds Available 21

ARTICLE V
COVENANTS

Section 5.1 Books and Records; Notices. 22

Section 5.2 Confidentiality; Public Announcement. 22

Section 5.3 Best Efforts; Further Assurances. 24

Section 5.4 Payments on Account of the Purchased Assets. 26

Section 5.5 Counterparty License Agreement. 27

Section 5.6 Termination of the Counterparty License Agreement 28

Section 5.7 Audits 29

Section 5.8 Inspections; Quarterly Meetings. 30

Section 5.9 Tax Matters. 30

Section 5.10 Purchaser Acknowledgment 31

ARTICLE VI
THE CLOSING

Section 6.1 Closing 31

Section 6.2 Closing Conditions Applicable to the Purchaser 31

Section 6.3 Closing Conditions Applicable to the Seller 32

Section 6.4 Milestone Payments 33

ARTICLE VII
TERMINATION

Section 7.1 Termination. 33

Section 7.2 Effect of Termination. 34

ARTICLE VIII
INDEMNIFICATION

Section 8.1 Indemnification by the Seller 34

Section 8.2 Indemnification by the Purchaser 35

Section 8.3 Procedures 35

Section 8.4 Exclusive Remedy 36

ARTICLE IX
MISCELLANEOUS

Section 9.1 Survival 37

Section 9.2 Specific Performance 37

Section 9.3 Notices 37

Section 9.4 Successors and Assigns 38

Section 9.5 Independent Nature of Relationship 39

Section 9.6 Entire Agreement 39

Section 9.7 Governing Law. 39

Section 9.8 Waiver of Jury Trial 40

Section 9.9 Severability 40

Section 9.10 Counterparts 40

Section 9.11 Amendments; No Waivers 41

Section 9.12 Cumulative Remedies 41

Section 9.13 Table of Contents and Headings 41

Section 9.14 Currency 41

Exhibit A Form of Bill of Sale

Exhibit B Form of Counterparty Consent

Exhibit C Form of Protective Rights Agreement

Exhibit D Intellectual Property Matters

PURCHASE AND SALE AGREEMENT

This PURCHASE AND SALE AGREEMENT (this “ Purchase and Sale Agreement ” or this “ Agreement ”) dated as of March 5, 2019 (the “ Execution Date ”) is between Infinity Pharmaceuticals, Inc., a Delaware corporation (the “ Seller ”), and HealthCare Royalty Partners III, L.P., a Delaware limited partnership (the “ Purchaser ”).

W I T N E S E T H :

WHEREAS, the Seller has the right to receive royalties based on Annual Net Sales of the Licensed Product in the Territory in the Field under the Counterparty License Agreement; and

WHEREAS, the Seller desires to sell, assign, transfer, convey and grant to the Purchaser, and the Purchaser desires to purchase, acquire and accept from the Seller, the Purchased Assets described herein, upon and subject to the terms and conditions set forth in this Purchase and Sale Agreement;

NOW, THEREFORE, in consideration of the premises and the mutual agreements, representations and warranties set forth herein and of other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto covenant and agree as follows:

Article I
DEFINED TERMS AND RULES OF CONSTRUCTION

Section 1.1 Defined Terms . The following terms, as used herein, shall have the following respective meanings:

“ Affiliate ” means, with respect to any Person, any other Person that, directly or indirectly controls or is controlled by or is under common control with such Person. For purposes of this definition, “ control ,” “ controlling ” or “ controlled ” means ownership, directly or indirectly, of more than fifty percent (50%) of the shares of stock entitled to vote for the election of directors, in the case of a corporation, or more than fifty percent (50%) of the equity interest in the case of any other type of legal entity, status as a general partner in any partnership, or any other arrangement whereby a Person controls or has the right to control the board of directors or equivalent governing body of a corporation or other entity.

“ Annual Net Sales ” has the meaning set forth in Section 1.2 of the Counterparty License Agreement.

“ Applicable Law ” means, with respect to any Person, all laws, rules, regulations and orders of Governmental Authorities applicable to such Person or any of its properties or assets.

“ Applicable Purchaser Expenditures ” means 100% of any reasonable expenses incurred by the Purchaser in connection with Section 5.3(f) , Section 5.3(g) , Section 5.5(d) and Section 5.6 .

“ Bill of Sale ” means that certain bill of sale dated as of the Closing Date executed by the Seller and the Purchaser substantially in the form of Exhibit A .

“ Business Day ” means any day other than Saturday or Sunday on which the banks in New York, New York, United States are open for business.

“ Cap Amount ” means, for each applicable time period specified below, a dollar amount equal to a multiple as set forth below of (a) the Investment Amount plus (b) any Applicable Purchaser Expenditures:



Time Period	Multiple
From Closing until June 30, 2022	145%
From July 1, 2022 through June 30, 2023	155%
From July 1, 2023 through June 30, 2024	165%
From July 1, 2024 through June 30, 2025	175%

Beginning on July 1, 2025 and continuing through the term of the Counterparty License Agreement, there shall be no Cap Amount. For the avoidance of doubt, if the Cap Amount has not been achieved by June 30, 2025, there shall be no Cap Amount.

“ Cap Date ” means the date on which the sum of all Royalties received by the Purchaser (determined net of any Indemnified Tax withheld in respect of any applicable payments) under the Counterparty License Agreement or this Agreement from and after the Closing Date meets or exceeds the then-applicable Cap Amount, provided , however , that if the Cap Date has not been achieved by June 30, 2025, there shall be no Cap Date, and the term of this Agreement shall continue through the term of the Counterparty License Agreement.

“ Cap Payment ” means, at any given time, a payment in the amount equal to (i) the then-applicable Cap Amount less (ii) 100% of all payments made in respect of the Purchased Assets received by the Purchaser pursuant to the Counterparty License Agreement or this Agreement through the date of such payment (determined net of any Indemnified Tax withheld in respect of any applicable payments). For the avoidance of doubt, the Cap Payment shall be calculated using the Cap Amount in effect on the date the Cap Payment is made to the Purchaser.

“ Closing ” has the meaning set forth in Section 6.1 .

“ Closing Date ” means the later of (a) the Execution Date and (b) the date on which all of the conditions set forth in Section 6.2 and Section 6.3 are fulfilled or waived in writing by the applicable Party.

“ Closing Payment ” has the meaning set forth in Section 2.2(a) .

“ Code ” means the U.S. Internal Revenue Code of 1986, as amended, and the regulations thereunder.

“ Confidential Disclosure Agreement ” means that certain letter agreement, dated November 29, 2018 between the Seller and HealthCare Royalty Management, LLC.

“ Confidential Information ” means, as it relates to the Seller and its Affiliates, the Licensed Product or any of the Intellectual Property Rights, all information (whether written or oral, or in electronic or other form) involving or relating in any way, directly or indirectly, to any of the Licensed Product, the Counterparty License Agreement, the Counterparty Consent, the Counterparty, the INFI Third Party Agreements, any party to any of the INFI Third Party Agreements, the Intellectual Property Rights, the Purchased Assets or the Royalties, including (a) any license, sublicense, assignment, product development, royalty, sale, supply, escrow or other agreements (including the Counterparty License Agreement, the Counterparty Consent and the INFI Third Party Agreements) involving or relating in any way, directly or indirectly, to the Purchased Assets, the Royalties or the intellectual property (including the Intellectual Property Rights), compounds or products (including the Licensed Product) giving rise to the Purchased Assets, and including all terms and conditions thereof and the identities of the parties thereto, (b) any reports, data, materials or other documents or information of any kind concerning or relating in any way, directly or indirectly, to the Seller, the Counterparty, the Licensed Product, the Counterparty License Agreement, the Counterparty Consent, the INFI Third Party Agreements, any party to any of the INFI Third Party Agreements, the Purchased Assets, the Royalties or the intellectual property (including the Intellectual Property Rights), compounds or products (including the Licensed Product) giving rise to the Purchased Assets, and including reports, data, materials or other documents of any kind delivered pursuant to or under any of the agreements referred to in clause (a) above or based on or derived from any such reports, data, materials or other documents of any kind, and (c) the Intellectual Property Rights or any other inventions, devices, improvements, formulations, discoveries, compositions, ingredients, patents, patent applications, Know-How, processes, trial results, research, developments or any other intellectual property, trade secrets or information involving or relating in any way, directly or indirectly, to the Purchased Assets or the compounds or products (including the Licensed Product) giving rise to the Purchased Assets; provided , however , that Confidential Information shall not include information that is (i) already in the public domain at the time the information is disclosed to Purchaser pursuant to this Purchase and Sale Agreement other than as a result of disclosure in violation of the confidentiality undertakings in this Purchase and Sale Agreement or the Confidential Disclosure Agreement, or (ii) lawfully obtained, other than under an obligation of confidentiality, from other sources (other than the Counterparty or any party to any of the INFI Third Party Agreements) who had no obligation to Seller or any of its Affiliates not to disclose such information to others who are not under a confidentiality obligation with respect thereto.

“ Counterparty ” means Verastem, Inc. , a Delaware corporation.

“ Counterparty Consent ” means that certain letter agreement regarding consent and payment direction under the Counterparty License Agreement, effective as of November 20, 2018, as amended on February 18, 2019, by and between the Seller and the Counterparty, in the forms set forth in Exhibit B .

“ Counterparty License Agreement ” means that certain Amended and Restated License Agreement, effective October 29, 2016, by and between the Seller and the Counterparty .

“ Defaulting Party ” has the meaning set forth in Section 5.5(c) .

“ Disputes ” has the meaning set forth in Section 3.10(g) .

“ Dollar ” or the sign “ $ ” means United States dollars.

“ Duvelisib IP ” has the meaning set forth in Section 1.17 of the Counterparty License Agreement.

“ Duvelisib Patent Rights ” has the meaning set forth in Section 1.19 of the Counterparty License Agreement.

“ Field ” has the meaning set forth in Section 1.23 of the Counterparty License Agreement.

“ First Sales Milestone Event ” means that Net Sales of the Licensed Product in the United States for the nine month period beginning January 1, 2019 and ending September 30, 2019 shall have exceeded $30,000,000.

“ First Sales Milestone Payment ” has the meaning set forth in Section 2.2(b) .

“ Fourth Sales Milestone Event ” means that Net Sales of the Licensed Product in the United States for calendar year 2020 shall have exceeded $350,000,000.

“ Fourth Sales Milestone Payment ” has the meaning set forth in Section 2.2(e) .

“ GAAP ” means generally accepted accounting principles in effect in the United States from time to time (or the applicable accounting standards in any relevant jurisdiction outside of the United States).

“ Governmental Authority ” means any multinational, federal, state, county, local, municipal or other entity, office, commission, bureau, agency, political subdivision, instrumentality, branch, department, authority, board, court, arbitral or other tribunal, official or officer, exercising executive, judicial, legislative, police, regulatory, administrative or taxing authority or functions of any nature pertaining to government.

“ Indemnified Tax ” means any withholding tax imposed by any Governmental Authority in any jurisdiction (other than United States federal withholding tax) solely as a result of (i) any change in applicable tax law after the Closing Date (which, for clarity, shall not include any tax to the extent resulting in any respect from (x) any change in or addition to or change in the legal status, residence, or domicile of the constituent partners or owners of the Purchaser, in each case after the Closing Date or (y) any assignment by the Purchaser pursuant to Section 9.4, except in the case of clause (x) or (y) to the extent that the change in applicable tax law occurs after the applicable event described in clause (x) or (y)) or (ii) the Seller changing its domicile, tax residence, or location of any of its activities to a new jurisdiction after the Closing Date.

“ INFI Third Party Agreements ” has the meaning set forth in Section 1.36 of the Counterparty License Agreement.

“ Initial Search Period ” has the meaning set forth in Section 5.6.

“ INK ” has the meaning set forth in Section 1.37 of the Counterparty License Agreement.

“ INK Agreement ” has the meaning set forth in Section 1.37 of the Counterparty License Agreement.

“ Intellectual Property Rights ” means the Duvelisib IP.

“ Investment Amount ” means the sum of the Closing Payment, the First Sales Milestone Payment (if any), the Second Sales Milestone Payment (if any), the Third Sales Milestone Payment (if any) and the Fourth Sales Milestone Payment (if any), in each case actually paid by the Purchaser to the Seller under this Agreement.

“ Involuntary Seller Bankruptcy ” means, without the consent or acquiescence of the Seller, the entering of an order for relief or approving a petition for relief or reorganization or any other petition seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution or other similar relief under any present or future bankruptcy, insolvency or similar Applicable Law, or the filing of any such petition against the Seller or, without the consent or acquiescence of the Seller, the entering of an order appointing a trustee, custodian, receiver or liquidator of the Seller or of all or any substantial part of the property of the Seller, in each case where such petition or order shall remain unstayed or shall not have been stayed or dismissed within 90 days from entry thereof.

“ IPI-145 Product ” has the meaning set forth in Section 1.42 of the Counterparty License Agreement.

“ IPR ” means an inter partes review proceeding before the United States Patent and Trademark Office.

“ Know-How ” has the meaning set forth in Section 1.45 of the Counterparty License Agreement.

“ Licensed Product ” means the IPI-145 Product.

“ Lien ” means any security interest, mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or otherwise), charge against or interest in property or other priority or preferential arrangement of any kind or nature whatsoever, in each case to secure payment of a debt or performance of an obligation, including any conditional sale or any sale with recourse, but excluding any payment due to INK from Seller pursuant to the INK Agreement with respect to the Investment Amount.

“ Loss ” means any loss, assessment, award, cause of action, claim, charge, cost, expense (including expenses of investigation and attorneys’ fees), fine, judgment, liability, obligation, penalty or Set-off.

“ Major Market Country ” has the meaning set forth in Section 5.3(f) .

“ Material Adverse Change ” means any event, circumstance or change that could reasonably be expected to result, individually or in the aggregate, in a material adverse effect, in any respect, on (a) the legality, validity or enforceability of any of the Transaction Documents, the Counterparty License Agreement or the security interest granted pursuant to the Protective Rights Agreement, (b) the right or ability of the Seller (or any permitted assignee) or the Purchaser to perform any of its obligations under any of the Transaction Documents or the Counterparty License Agreement, in each case to which it is a party, or to consummate the transactions contemplated hereunder or thereunder, (c) the rights or remedies of the Purchaser under any of the Transaction Documents or the Counterparty License Agreement, (d) the timing, amount or duration of the Royalties, or (e) the Purchased Assets.

“ Net Sales ” has the meaning set forth in Section 1.58 of the Counterparty License Agreement.

“ New Arrangement ” has the meaning set forth in Section 5.6 .

“ New Arrangement Expenses ” has the meaning set forth in Section 5.6 .

“ Orange Book ” means the FDA publication titled “Approved Drug Products with Therapeutic Equivalence Evaluations”, including any updates or successor publications thereto.

“ Orange Book Patent ” has the meaning set forth in Section 5.3(f) .

“ Patent ” means any pending patent application or issued patent, or any continuation, continuation in part, division, extension or reissue thereof.

“ Patent Office ” means the applicable patent office, including the United States Patent and Trademark Office and any comparable foreign patent office, for any Intellectual Property Rights that are Patents.

“ Permitted Recipient ” has the meaning set forth in Section 5.2(a) .

“ Person ” means any natural person, corporation, general partnership, limited partnership, joint venture, proprietorship or other business organization or a governmental agency or a political subdivision thereto.

“ Purchase and Sale Agreement ” has the meaning set forth in the preamble.

“ Purchased Assets ” means, collectively, (a) the Seller’s right, title and interest in, to and under the Counterparty License Agreement to (i) receive all of the Royalties, (ii) receive, in addition to the Seller, the reports produced by Counterparty pursuant to the Counterparty License Agreement and the Counterparty Consent in respect of sales of the Licensed Product solely to the extent related to the Royalties, (iii) any interest payable under Section 6.3 of the Counterparty License Agreement with respect to the late payment of the amounts described in subsection (a) of the definition of “Royalties” or underpayments or interest thereon, and (iv) any amounts payable under Section 6.5.1 of the Counterparty License Agreement (for clarity, excluding the out-of-pocket costs of the auditing party in connection with any such audit that are payable by Counterparty, if any) with respect to any underpayment of the amounts described in subsection (a) of the definition of “Royalties”; (b) the right to receive from Seller the audit reports described in Section 6.5.1 of the Counterparty License Agreement with respect to any audits performed thereunder and (c) to the extent permitted by the Counterparty Consent, the right to enforce all rights of the Seller with respect to the Purchased Assets against the Counterparty under the Counterparty License Agreement and under Applicable Law.

“ Purchaser Expenses ” means the amount of Purchaser’s actual, documented, out-of-pocket fees and expenses incurred in connection with Purchaser’s confirmatory due diligence and legal documentation associated with the negotiation and execution of this Agreement, provided that in no event shall Purchaser Expenses exceed $250,000.

“ Purchaser ” has the meaning set forth in the preamble.

“ Purchaser Account ” has the meaning set forth in Section 5.4(b) .

“ Purchaser Indemnified Party ” has the meaning set forth in Section 8.1 .

“ Protective Rights Agreement ” means that certain Protective Rights Agreement dated of the Closing Date by and between the Seller and HCR Collateral Management, LLC, as agent for the Purchaser, substantially in the form attached hereto as Exhibit C .

“ Regulatory Approvals ” has the meaning set forth in Section 1.65 of the Counterparty License Agreement.

“ Royalties ” means (a) all amounts due or to be paid to the Seller or any of its Affiliates under Section 6.1.1 of the Counterparty License Agreement (for clarity, excluding any amounts payable under Section 6.1.3 of the Counterparty License Agreement) with respect to Net Sales made on or after the Royalties Commencement Date, (b) all accounts (as defined under the UCC) evidencing the rights to the payments and amounts described in clause (a) of this definition and (c) all proceeds (as defined under the UCC) of any of the foregoing.

“ Royalty & Audit Reports ” has the meaning set forth in the Counterparty Consent.

“ Royalty-Related Agreement Information ” has the meaning set forth in the Counterparty Consent.

“ Royalties Commencement Date ” means January 1, 2019.

“ SEC ” means the U.S. Securities and Exchange Commission.

“ Sales Milestone Events ” means each of the First Sales Milestone Event, the Second Sales Milestone Event, the Third Sales Milestone Event and the Fourth Sales Milestone Event.

“ Sales Milestone Payments ” means each of the First Sales Milestone Payment, the Second Sales Milestone Payment, the Third Sales Milestone Payment and the Fourth Sales Milestone Payment.

“ Second Sales Milestone Event ” means that Net Sales of the Licensed Product in the United States for calendar year 2019 shall have exceeded $40,000,000.

“ Second Sales Milestone Payment ” has the meaning set forth in Section 2.2(c) .

“ Seller ” has the meaning set forth in the preamble.

“ Seller Account ” has the meaning set forth in Section 5.4(d) .

“ Seller Indemnified Party ” has the meaning set forth in Section 8.2 .

“ Set-off ” means any set-off, off-set, rescission, counterclaim, reduction, deduction or defense.

“ Sublicensee ” has the meaning set forth in Section 1.74 of the Counterparty License Agreement.

“ Subsidiary ” means, with respect to any Person, any other Person which is at the time directly or indirectly controlled by such Person and/or one or more other Subsidiaries of such Person.

“ Territory ” has the meaning set forth in Section 1.76 of the Counterparty License Agreement.

“ Third Sales Milestone Event ” means that Net Sales of the Licensed Product in the United States for calendar year 2019 shall have exceeded $66,000,000.

“ Third Sales Milestone Payment ” has the meaning set forth in Section 2.2(d) .

“ Transaction Documents ” means this Purchase and Sale Agreement, the Bill of Sale, the Protective Rights Agreement and the Counterparty Consent.

“ UCC ” means the Uniform Commercial Code as in effect from time to time in New York; provided , that, if, with respect to any financing statement or by reason of any provisions of Applicable Law, the perfection or the effect of perfection or non-perfection of the security interest or any portion thereof granted pursuant to the Protective Rights Agreement is governed by the Uniform Commercial Code as in effect in a jurisdiction of the United States other than New York, then “ UCC ” means the Uniform Commercial Code as in effect from time to time in such other jurisdiction for purposes of the provisions of this Purchase and Sale Agreement and any financing statement relating to such perfection or effect of perfection or non-perfection.

“ U.S. ” or “ United States ” means the United States of America, its 50 states, each territory thereof and the District of Columbia.

“ Voluntary Seller Bankruptcy ” means (a) an admission in writing by the Seller of its inability to pay its debts generally or a general assignment by the Seller for the benefit of creditors or (b) the filing of any petition or answer by the Seller seeking to adjudicate itself as bankrupt or insolvent, or seeking for itself any liquidation, winding-up, reorganization, arrangement, adjustment, protection, relief or composition of the Seller or its debts under any Applicable Law relating to bankruptcy, insolvency, receivership, winding-up, liquidation, reorganization, examination, relief of debtors or other similar Applicable Law now or hereafter in effect, or seeking, consenting to or acquiescing in the entry of an order for relief in any case under any such Applicable Law, or the appointment of or taking possession by a receiver, trustee, custodian, liquidator, examiner, assignee, sequestrator or other similar official for the Seller or for any substantial part of its property.

Section 1.2 Rules of Construction . Unless the context otherwise requires, in this Purchase and Sale Agreement:

(a) A term has the meaning assigned to it and an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP or International Financial Reporting Standards, as applicable.

(b) Unless otherwise defined, all terms that are defined in the UCC shall have the meanings stated in the UCC.

(d) The definitions of terms shall apply equally to the singular and plural forms of the terms defined.

(e) The terms “include”, “including” and similar terms shall be construed as if followed by the phrase “without limitation”.

(f) Unless otherwise specified, references to an agreement or other document include references to such agreement or document as from time to time amended, restated, reformed, supplemented or otherwise modified in accordance with the terms thereof (subject to any restrictions on such amendments, restatements, reformations, supplements or modifications set forth herein or therein) and include any annexes, exhibits and schedules attached thereto.

(g) References to any Applicable Law shall include such Applicable Law as from time to time in effect, including any amendment, modification, codification, replacement or reenactment thereof or any substitution therefor, provided, however, that for purposes of Articles III and IV of this Agreement, references to Applicable Law shall mean Applicable Law as in effect on the date on which the relevant representation or warranty is made.

(h) References to any Person shall be construed to include such Person’s successors and permitted assigns (subject to any restrictions on assignment, transfer or delegation set forth herein or in any of the other Transaction Documents or the Counterparty License Agreement or Counterparty Consent), and any reference to a Person in a particular capacity excludes such Person in other capacities.

(i) The word “will” shall be construed to have the same meaning and effect as the word “shall”.

(j) The words “hereof”, “herein”, “hereunder” and similar terms when used in this Purchase and Sale Agreement shall refer to this Purchase and Sale Agreement as a whole and not to any particular provision hereof, and Article, Section and Exhibit references herein are references to Articles and Sections of, and Exhibits to, this Purchase and Sale Agreement unless otherwise specified.

(k) Any reference herein to a term that is defined by reference to its meaning in the Counterparty License Agreement (whether expressly or implicitly cross referenced) shall refer to such term’s meaning in the Counterparty License Agreement as in existence on the Execution Date or as amended, restated, reformed, supplemented or otherwise modified in accordance with this Purchase and Sale Agreement.

(l) Any reference to the “knowledge” of the Seller means the knowledge, in each case after reasonable inquiry of his or her direct reports who are employees of the Seller and who are responsible with respect to the applicable subject matter, of the Seller’s General Counsel, President, Chief Medical Officer, Chief Scientific Officer and Chief Executive Officer as of the Execution Date; provided, that the Seller’s General Counsel, President, Chief Medical Officer, Chief Scientific Officer and Chief Executive Officer, as applicable, shall be entitled to rely on the actual knowledge, without any duty to investigate, of such direct reports with respect to any such subject matter as of the Execution Date. For clarification, in the case of information set forth in reports or correspondence received by the Seller from the Counterparty or any counsel or other advisor to the Counterparty, “knowledge” of the Seller includes the information provided in such reports or correspondence, but the Seller has no obligation to make further inquiry into the accuracy or completeness of such information.

(m) Any reference to the “actual knowledge” of the Seller means the actual knowledge, in each case without any duty to investigate, of the Seller’s General Counsel, President, Chief Medical Officer, Chief Scientific Officer and Chief Executive Officer as of the Execution Date. For clarification, in the case of information set forth in reports or correspondence received by the Seller from the Counterparty or any counsel or other advisor to the Counterparty, “actual knowledge” of the Seller includes the information provided in such reports or correspondence, but the Seller has no obligation to make further inquiry into the accuracy or completeness of such information.

ARTICLE II
PURCHASE AND SALE OF THE PURCHASED ASSETS

Section 2.1 Purchase and Sale .

(a) Subject to the terms and conditions of this Purchase and Sale Agreement, on the Closing Date, the Seller shall sell, assign, transfer, convey and grant to the Purchaser, and the Purchaser shall purchase, acquire and accept from the Seller, all of the Seller’s rights, title and interest in and to the Purchased Assets, free and clear of any and all Liens, other than those Liens created in favor of the Purchaser by the Transaction Documents.

(b) The Seller and the Purchaser intend and agree that the sale, assignment, transfer, conveyance and granting of the Purchased Assets under this Purchase and Sale Agreement shall be, and are, a true, complete, absolute and irrevocable assignment and sale by the Seller to the Purchaser of the Purchased Assets without recourse except as otherwise provided in this Purchase and Sale Agreement, and that such assignment and sale shall provide the Purchaser with the full benefits of ownership of the Purchased Assets. Neither the Seller nor the Purchaser intends the transactions contemplated hereby to be, or for any purpose characterized as, a loan from the Purchaser to the Seller or a pledge or assignment or a security agreement. The Seller waives any right to contest or otherwise assert that this Purchase and Sale Agreement does not constitute a true, complete, absolute and irrevocable sale and assignment by the Seller to the Purchaser of the Purchased Assets under Applicable Law, which waiver shall be enforceable against the Seller in any Voluntary Seller Bankruptcy or Involuntary Seller Bankruptcy. The sale, assignment, transfer, conveyance and granting of the Purchased Assets shall be reflected on the Seller’s financial statements and other records as a sale of assets to the Purchaser (except to the extent GAAP, International Financial Reporting Standards or the rules of the SEC, as applicable, require otherwise with respect to the Seller’s consolidated financial statements).

(c) The Seller hereby authorizes the Purchaser or its designee to execute, record and file, and consents to the Purchaser or its designee executing, recording and filing, at the Purchaser’s sole cost and expense, financing statements in the appropriate filing offices under the UCC (and continuation statements with respect to such financing statements when applicable), and amendments thereto or assignments thereof, in such manner and in such jurisdictions as are necessary or appropriate to evidence or perfect the sale, assignment, transfer, conveyance and grant by the Seller to the Purchaser, and the purchase, acquisition and acceptance by the Purchaser from the Seller, of the Purchased Assets and to perfect the security interest in the Purchased Assets granted by the Seller to the Purchaser pursuant to the Protective Rights Agreement. The Seller will provide to the Purchaser such information as the Purchaser may reasonably request to complete any financing statement or amendment in order for it to be accepted by a filing office.

Section 2.2 Payment of Investment Amount .

In full consideration for the sale, assignment, transfer, conveyance and granting of the Purchased Assets, and subject to the terms and conditions set forth herein, the Purchaser shall make the following payments:

(a) Closing Payment. Subject to the terms and conditions set forth in Section 6.2 , the Purchaser shall pay (or cause to be paid) to the Seller, or the Seller’s designee, on the Closing Date, the sum of $30,000,000 less the amount of Purchaser Expenses, in immediately available funds by wire transfer to the Seller Account (the “ Closing Payment ”).

(b) First Sales Milestone Payment . Within 15 Business Days after receipt by the Purchaser of a Royalty & Audit Report demonstrating achievement of the First Sales Milestone Event, subject to the satisfaction of the conditions set forth in Section 6.4 , the Purchaser shall pay to the Seller an amount equal to $5,000,000 (the “ First Sales Milestone Payment ”) by wire transfer of immediately available funds as directed by the Seller.

(c) Second Sales Milestone Payment. Within 15 Business Days after receipt by the Purchaser of a Royalty & Audit Report demonstrating achievement of the Second Sales Milestone Event, subject to the satisfaction of the conditions set forth in Section 6.4 , the Purchaser shall pay to the Seller an amount equal to $5,000,000 (the “ Second Sales Milestone Payment ”) by wire transfer of immediately available funds as directed by the Seller.

(d) Third Sales Milestone Payment. Within 15 Business Days after receipt by the Purchaser of a Royalty & Audit Report demonstrating achievement of the Third Sales Milestone Event, subject to the satisfaction of the conditions set forth in Section 6.4 , the Purchaser shall pay to the Seller an amount equal to $5,000,000 (the “ Third Sales Milestone Payment ”) by wire transfer of immediately available funds as directed by the Seller.

(e) Fourth Sales Milestone Payment. Within 15 Business Days after receipt by the Purchaser of a Royalty & Audit Report demonstrating achievement of the Fourth Sales Milestone Event, subject to the satisfaction of the conditions set forth in Section 6.4 , the Purchaser shall pay to the Seller an amount equal to $5,000,000 (the “ Fourth Sales Milestone Payment ”) by wire transfer of immediately available funds as directed by the Seller.

For the avoidance of doubt, the achievement of any Sales Milestone Event and the corresponding payment of such Sales Milestone Payment shall not preclude, nor have any effect on, the achievement of any other Sales Milestone Event and the corresponding payment of such Sales Milestone Payment.

Section 2.3 No Assumed Obligations . Notwithstanding any provision in this Purchase and Sale Agreement or any other writing to the contrary, the Purchaser is purchasing, acquiring and accepting only the Purchased Assets and is not assuming any liability or obligation of the Seller or any of the Seller’s Affiliates of whatever nature, whether presently in existence or arising or asserted hereafter (including any liability or obligation of the Seller under the Counterparty License Agreement or any INFI Third Party Agreements). All such liabilities and obligations shall be retained by and remain liabilities and obligations of the Seller or the Seller’s Affiliates, as the case may be.

Section 2.4 Excluded Assets . The Purchaser does not, by purchase, acquisition or acceptance of the rights, title or interest granted hereunder or otherwise pursuant to any of the Transaction Documents, purchase, acquire or accept any assets of the Seller other than the Purchased Assets.

Section 2.5 Seller Prepayment . Prior to June 30, 2025, the Seller shall have the right, but not the obligation, at any time prior to the Cap Date (if applicable) to pay the then-applicable Cap Payment to the Purchaser, and the date of the Cap Payment, if any, shall be deemed the “Cap Date” (including for the purpose of determining the termination date of this Agreement).

ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLER

The Seller hereby represents and warrants to the Purchaser as of the Execution Date and as of the Closing Date as follows:

Section 3.1 Organization . The Seller is a corporation duly organized, validly existing and in good standing under the laws of Delaware and has all powers and authority, and all licenses, permits, franchises, authorizations, consents and approvals of all Governmental Authorities, required to own its property and conduct its business as now conducted and to exercise its rights and to perform its obligations under the Counterparty License Agreement. The Seller is duly qualified to transact business and is in good standing in every jurisdiction in which such qualification or good standing is required by Applicable Law (except where the failure to be so qualified or in good standing would not be a Material Adverse Change).

Section 3.2 No Conflicts .

(a) None of the execution and delivery by the Seller of any of the Transaction Documents to which the Seller is party, the performance by the Seller of the obligations contemplated hereby or thereby or the consummation of the transactions contemplated hereby or thereby will: (i) contravene, conflict with, result in a breach, violation, cancellation or termination of, constitute a default (with or without notice or lapse of time, or both) under, require prepayment under, give any Person the right to exercise any remedy or obtain any additional rights under, or accelerate the maturity or performance of or payment under, in any respect, (A) any Applicable Law or any judgment, order, writ, decree, permit or license of any Governmental Authority, to which the Seller or any of its Subsidiaries or any of their respective assets or properties may be subject or bound, (B) any term or provision of any contract, agreement, indenture, lease, license, deed, commitment, obligation or instrument to which the Seller or any of its Subsidiaries is a party or by which the Seller or any of its Subsidiaries or any of their respective assets or properties is bound or committed (including the Counterparty License Agreement and the INFI Third Party Agreements) or (C) any term or provision of any of the organizational documents of the Seller or any of its Subsidiaries; or (ii) except as provided in any of the Transaction Documents to which it is party, result in or require the creation or imposition of any Lien on the Intellectual Property Rights, the Licensed Product, the Counterparty License Agreement or the Purchased Assets.

(b) The Seller has not granted, nor does there exist, any Lien on the Transaction Documents, the Counterparty License Agreement, the Intellectual Property Rights or the Purchased Assets. Except for the licenses and other rights granted under the INFI Third Party Agreements, the license and other rights granted by the Seller to Counterparty under the Counterparty License Agreement (including any rights granted by Counterparty under the Counterparty License Agreement) and the rights granted by the Seller or Counterparty under the Counterparty Consent, there are no licenses, sublicenses or other rights under the Intellectual Property Rights in the Territory that have been granted to any other Person.

Section 3.3 Authorization . The Seller has all powers and authority to execute and deliver, and perform its obligations under, the Transaction Documents to which it is party and to consummate the transactions contemplated hereby and thereby. The execution and delivery of each of the Transaction Documents to which the Seller is party and the performance by the Seller of its obligations hereunder and thereunder have been duly authorized by the Seller. Each of the Transaction Documents to which the Seller is party has been duly executed and delivered by the Seller. Each of the Transaction Documents to which the Seller is party constitutes the legal, valid and binding obligation of the Seller, enforceable against the Seller in accordance with its respective terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or similar Applicable Laws affecting creditors’ rights generally, general equitable principles and principles of public policy.

Section 3.4 Ownership . The Seller is the exclusive owner of the entire right, title (legal and equitable) and interest in, to and under the Purchased Assets and has good and valid title thereto, free and clear of all Liens. The Purchased Assets sold, assigned, transferred, conveyed and granted to the Purchaser on the Closing Date have not been pledged, sold, assigned, transferred, conveyed or granted by the Seller to any other Person. The Seller has full right to sell, assign, transfer, convey and grant the Purchased Assets to the Purchaser. Upon the sale, assignment, transfer, conveyance and granting by the Seller of the Purchased Assets to the Purchaser, the Purchaser shall acquire good and marketable title to the Purchased Assets free and clear of all Liens, other than Liens in favor of the Purchaser, and shall be the exclusive owner of the Purchased Assets.

Section 3.5 Governmental and Third Party Authorizations . The execution and delivery by the Seller of the Transaction Documents to which the Seller is party, the performance by the Seller of its obligations hereunder and thereunder and the consummation of any of the transactions contemplated hereunder and thereunder (including the sale assignment, transfer, conveyance and granting of the Purchased Assets to the Purchaser) do not require any consent, approval, license, order, authorization or declaration from, notice to, action or registration by or filing with any Governmental Authority or any other Person, except for the filing of a Current Report on Form 8-K with the SEC, the filing of UCC financing statements, the notice to Counterparty contained in the Counterparty Consent, those consents, approvals, licenses, orders, authorizations or declarations from, notices to, actions or registrations previously obtained and those consents, approvals, licenses, orders, authorizations or declarations from, notices to, actions or registrations, which the failure to obtain would not result in a Material Adverse Change.

Section 3.6 No Litigation . There is no (a) action, suit, arbitration proceeding, claim, demand, citation, summons, subpoena, investigation or other proceeding (whether civil, criminal, administrative, regulatory, investigative or informal) pending or, to the knowledge of the Seller, threatened in respect of the Licensed Product or the Purchased Assets (including the Counterparty License Agreement), at law or in equity, or (b) inquiry or investigation (whether civil, criminal, administrative, regulatory, investigative or informal) by or before a Governmental Authority pending or, to the knowledge of the Seller, threatened against the Seller or any of its Subsidiaries in respect of the Licensed Product or the Purchased Assets (including the Counterparty License Agreement), that, in each case, (i) would be a Material Adverse Change or (ii) challenges or seeks to prevent or delay the consummation of any of the transactions contemplated by any of the Transaction Documents to which the Seller is party. To the knowledge of the Seller, no event has occurred or circumstance exists that may give rise to or serve as a basis for the commencement of any such action, suit, arbitration, claim, investigation, proceeding or inquiry.

Section 3.7 Tax Matters . No deduction or withholding for or on account of any tax has been made, or was required under Applicable Law to be made, from any payment to the Seller under the Counterparty License Agreement and, following the Closing Date, the Seller believes that no such deduction or withholding will be made or required under currently Applicable Law to be made from any payment to the Purchaser under the Counterparty License Agreement. The Seller has filed (or caused to be filed) all tax returns and reports required by Applicable Law to have been filed by it and has paid all taxes required to be paid by it, except (i) any such taxes that are being diligently contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP or International Financial Reporting Standards, as applicable, have been set aside on its books or (ii) any failure to file or failure to pay that would not result, individually or in the aggregate, in a Material Adverse Change.

Section 3.8 No Brokers’ Fees . The Seller has not taken any action that would entitle any person or entity other than Morgan Stanley & Co. LLC to any commission or broker’s fee in connection with the transactions contemplated by this Purchase and Sale Agreement.

Section 3.9 Compliance with Laws . None of the Seller or any of its Subsidiaries (a) has violated or is in violation of, or, to the knowledge of the Seller, is under investigation with respect to or has been threatened to be charged with or been given notice of any violation of, any Applicable Law or any judgment, order, writ, decree, injunction, stipulation, consent order, permit or license granted, issued or entered by any Governmental Authority or (b) is subject to any judgment, order, writ, decree, injunction, stipulation, consent order, permit or license granted, issued or entered by any Governmental Authority, in each case, that would be a Material Adverse Change.

Section 3.10 Intellectual Property Matters .

(a) To the knowledge of the Seller, Exhibit D sets forth an accurate and complete list of all Intellectual Property Rights that are Patents. For each Patent set forth on Exhibit D , the Seller has indicated, to the knowledge of the Seller, (i) the application number, (ii) the patent or registration number, if any, (iii) the country or other jurisdiction where the Patent was issued, registered, or filed, (iv) the scheduled expiration date of any issued Patent, including a notation if such scheduled expiration date includes a term extension or supplementary protection certificate, and (v) the registered owner thereof.

(b) To the knowledge of the Seller, each individual associated with the filing and prosecution of the Intellectual Property Rights that are Patents, including the named inventors of the Intellectual Property Rights that are Patents, has complied in all material respects with all applicable duties of candor and good faith in dealing with any Patent Office, including any duty to disclose to any Patent Office all information known by such inventors to be material to the patentability of each of the Intellectual Property Rights that are Patents (including any relevant prior art), in each case, in those jurisdictions in the Territory where such duties exist.

(c) To the knowledge of the Seller, no allowable or allowed or granted subject matter of the Intellectual Property Rights that are Patents is subject to any competing conception claims of allowable or allowed or granted subject matter of any Patents of any third party and have not been the subject of any interference, re-examination or opposition proceedings.

(d) To the knowledge of the Seller, each of the Patents set forth on Exhibit D which are solely owned by the Seller correctly identifies each and every inventor of the claims thereof as determined in accordance with the laws of the jurisdiction in which such Patent was issued or is pending. To the knowledge of the Seller, there is not any Person who is or claims to be an inventor of any of such Patents who is not a named inventor thereof. The Seller has not received any notice from any Person who is or claims to be an inventor of any of such Patents who is not a named inventor thereof. Each inventor named on any Patent set forth on Exhibit D that is solely owned by the Seller has executed a contract assigning their entire right, title and interest in and to such Patents and the inventions claimed therein, to the Seller (or to a predecessor in interest of Seller), and evidence of such assignment has been duly recorded at the United States Patent and Trademark Office.

(e) With respect to each Patent set forth on Exhibit D that is not solely owned by the Seller, to the actual knowledge of the Seller, (i) each such Patent correctly identifies each and every inventor of the claims thereof as determined in accordance with the laws of the jurisdiction in which such Patent was issued or is pending, (ii) there is not any Person who is or claims to be an inventor of such Patent who is not a named inventor thereof, (iii) the Seller has not received any notice from any Person who is or claims to be an inventor of such Patent who is not a named inventor thereof, and (iv) except as set forth on Schedule 3.10, each inventor named on any such Patent has executed a contract assigning their entire right, title and interest in and to such Patent and the inventions claimed therein, to the owner thereof (or to a predecessor in interest of the owner thereof), and evidence of such assignment has been duly recorded at the United States Patent and Trademark Office.

(f) To the actual knowledge of the Seller, each of the issued Patents set forth on Exhibit D is valid, enforceable and subsisting. The Seller has not received any opinion of counsel that any of such Patents is invalid or unenforceable. The Seller has not received notice of any claim by any third party challenging the validity or enforceability of any of such Patents.

(g) To the knowledge of the Seller, there is no pending or threatened opposition, IPR, interference, reexamination, injunction, claim, suit, action, citation, summon, subpoena, hearing, inquiry, investigation (by the International Trade Commission or otherwise), complaint, arbitration, mediation, demand, decree or other dispute, disagreement, proceeding or claim (collectively, “ Disputes ”) challenging the legality, validity, enforceability or ownership of any of the Intellectual Property Rights that are granted Patents or any granted claims therein, or that could give rise to any Set-off against the payments due to the Seller under the Counterparty License Agreement for the use of the related Intellectual Property Rights that are Patents. There are no Disputes by or with any third party against the Seller involving the Licensed Product. Seller is not subject to any outstanding injunction, judgment, order, decree, ruling, change, settlement or other disposition of a Dispute with respect to the Intellectual Property Rights.

(h) To the actual knowledge of the Seller, no third party patent issued as of the Effective Date in any Major Market Country has been or is or will be infringed by the manufacture, use, marketing, sale, offer for sale, importation or distribution of the Licensed Product in the formulation that, to the Seller’s actual knowledge, is being sold by the Counterparty as of the Effective Date.

(i) To the actual knowledge of the Seller, there is at least one valid claim in each issued Orange Book Patent that would be infringed by the Counterparty’s manufacture, use, marketing, sale, offer for sale, importation or distribution of the Licensed Product but for the Seller’s and the Counterparty’s rights in the issued Orange Book Patents.

(j) The Seller has not received any written notice of any actual or threatened action, suit or proceeding, or any investigation or claim that claims that the manufacture, use, marketing, sale, offer for sale, importation or distribution of the Licensed Product infringes on any patent or other intellectual property rights of any other Person or constitute misappropriation of any other Person’s trade secrets or other intellectual property rights.

(k) The Seller has not received any notice under the Counterparty License Agreement of infringement of any of the Intellectual Property Rights.

(l) Each of the Seller and, to the knowledge of the Seller, Counterparty has taken reasonable precautions to protect the secrecy or confidentiality of any Know-How in the Intellectual Property Rights whose value is derived from being secret or confidential.

(m) The Intellectual Property Rights constitute all of the Know-How and Patents owned or licensed by the Seller or any of the Seller’s Affiliates necessary for the sale of the Licensed Product in the Field in the Territory.

Section 3.11 Regulatory Approval, Manufacturing and Marketing .

(a) To the knowledge of the Seller, Counterparty has complied with its obligations to develop the Licensed Product and seek and obtain Regulatory Approval for the Licensed Product to the extent required by the Counterparty License Agreement.

(b) The Licensed Product has received Regulatory Approval for marketing and distribution in the United States.

Section 3.12 Counterparty License Agreement .

(a) Other than the Transaction Documents, the INFI Third Party Agreements and the Counterparty License Agreement, there is no contract, agreement or other arrangement (whether written or oral) to which the Seller or any of its Subsidiaries is a party or by which any of their respective assets or properties is bound or committed (i) that creates a Lien on or adversely affects the Purchased Assets, the Counterparty License Agreement or (ii) for which breach, nonperformance, cancellation or failure to renew would be a Material Adverse Change.

(b) The Seller has provided to the Purchaser a true, correct and complete copy of the Counterparty License Agreement, any reports produced by Counterparty pursuant to the Counterparty License Agreement in respect of Net Sales of the Licensed Product in the Territory, and each of the INFI Third Party Agreements.

(c) The Counterparty License Agreement is in full force and effect and is the legal, valid and binding obligation of the Seller and, to the knowledge of the Seller, Counterparty and any other party thereto, enforceable against the Seller and, to the knowledge of the Seller, Counterparty and any other party thereto in accordance with its respective terms, subject, as to enforcement of remedies, to bankruptcy, insolvency, reorganization, moratorium or similar Applicable Laws affecting creditors’ rights generally, general equitable principles and principles of public policy. The execution and delivery of, and performance of obligations under, the Counterparty License Agreement were and are within the powers of the Seller and, to the knowledge of the Seller, Counterparty. The Counterparty License Agreement was duly authorized by all necessary action on the part of, and validly executed and delivered by, the Seller and, to the knowledge of the Seller, Counterparty and any other party thereto. The Seller is not in breach or violation of or in default under the Counterparty License Agreement. There is no event or circumstance that, upon notice or the passage of time, or both, could constitute or give rise to any breach or default in the performance of the Counterparty License Agreement by the Seller or, to the knowledge of the Seller, Counterparty or any other party thereto.

(d) Each of the INFI Third Party Agreements is in full force and effect and is the legal, valid and binding obligation of the Seller and, to the knowledge of the Seller, each other party thereto, enforceable against the Seller and, to the knowledge of the Seller, each other party thereto in accordance with its respective terms, subject, as to enforcement of remedies, to bankruptcy, insolvency, reorganization, moratorium or similar Applicable Laws affecting creditors’ rights generally, general equitable principles and principles of public policy. The execution and delivery of, and performance of obligations under, each of the INFI Third Party Agreements were and are within the powers of the Seller and, to the knowledge of the Seller, each other party thereto. Each of the INFI Third Party Agreements was duly authorized by all necessary action on the part of, and validly executed and delivered by, the Seller and, to the knowledge of the Seller, each other party thereto. The Seller is not in breach or violation of or in default under any INFI Third Party Agreement. There is no event or circumstance that, upon notice or the passage of time, or both, could constitute or give rise to any breach or default in the performance of any INFI Third Party Agreement by the Seller or, to the knowledge of the Seller, any other party thereto.

(e) The Seller has not waived any rights or defaults under the Counterparty License Agreement or released Counterparty or any other party thereto, in whole or in part, from any of its obligations under the Counterparty License Agreement. To the knowledge of the Seller, there are no oral waivers or modifications in respect of the Counterparty License Agreement. Neither the Seller nor Counterparty has agreed to amend or waive any provision of the Counterparty License Agreement.

(f) To the knowledge of the Seller, no event has occurred that would give the Seller or Counterparty or any other party thereto the right to terminate the Counterparty License Agreement or cease paying Royalties thereunder. The Seller has not received any notice of an intention by Counterparty or any other Person to terminate or breach the Counterparty License Agreement, in whole or in part, or challenging the validity or enforceability of the Counterparty License Agreement or the obligation to pay the Royalties under the Counterparty License Agreement, or that the Seller or Counterparty or any other party thereto is in default of its obligations under the Counterparty License Agreement. The Seller is not aware of any default, violation or breach by Counterparty under or the Counterparty License Agreement. The Seller has no current intention of terminating the Counterparty License Agreement and has not given Counterparty or any other party thereto any notice of termination of the Counterparty License Agreement, in whole or in part.

(g) Except as provided in the Counterparty License Agreement and except for any payment due to INK pursuant to the INK Agreement with respect to the Investment Amount, the Seller is not a party to any agreement entitling any other Person to any payments, including by way of Set-off, in respect of the Royalties payable under the Counterparty License Agreement to the Seller.

(h) The Seller has not consented to an assignment by Counterparty or any other party thereto of any of Counterparty’s or such other party’s rights or obligations under the Counterparty License Agreement, and the Seller does not have any knowledge of any such assignment by Counterparty or any other such party. Except as contemplated by Section 2.1 , the Seller has not assigned, in whole or in part, and has not granted, incurred or suffered to exist any Liens on the Counterparty License Agreement, the Purchased Assets or any of the Seller’s rights, title or interest in and to the Intellectual Property Rights.

(i) None of the Seller, Counterparty or any other party thereto has made any claim of indemnification under the Counterparty License Agreement.

(j) The Seller has not exercised its rights to conduct an audit under the Counterparty License Agreement.

(k) To the knowledge of the Seller, the Seller has received all amounts owed to it under the Counterparty License Agreement.

Section 3.13 UCC Matters . The Seller’s exact legal name is, and for the preceding 10 years has been, “Infinity Pharmaceuticals, Inc.”. The Seller’s principal place of business is, and for the preceding 10 years has been, located in Cambridge, Massachusetts. The Seller’s jurisdiction of organization is, and for the preceding 10 years has been, Delaware. For the preceding 10 years, the Seller has not been the subject of any merger or other corporate or other reorganization in which its identity or status was materially changed, except in each case when it was the surviving or resulting Person.

Section 3.14 Information . Other than financial projections, Licensed Product sale projections or any other forward-looking information, all written information heretofore or herein supplied by or on behalf of the Seller to the Purchaser is accurate and complete in all material respects, and none of such information, when taken together with all other information furnished (including any information included in the Seller’s publicly available securities filings), contains an untrue statement of a material fact or omits to state any material fact necessary to make such information not materially misleading in light of the circumstances under which it was made.

Section 3.15 Insolvency; Material Adverse Change . No Involuntary Seller Bankruptcy or Voluntary Seller Bankruptcy has ever occurred. To the knowledge of the Seller, no Material Adverse Change has occurred.

Section 3.16 Set-off and Other Sources of Royalty Reduction . Except as provided in the Counterparty License Agreement, Counterparty has no right of Set-off under any contract or other agreement against the Royalties or any other amounts payable to the Seller under the Counterparty License Agreement. Counterparty has not exercised, and, to the knowledge of the Seller, Counterparty has not had the right to exercise, and, to the knowledge of the Seller, no event or condition exists that, upon notice or passage of time or both, would reasonably be expected to permit Counterparty to exercise, any Set-off against the Royalties or any other amounts payable to the Seller under the Counterparty License Agreement. To the knowledge of the Seller, there are no third party patents that would provide a basis for a reduction in the royalties due to the Seller pursuant to Section 6.1.1(d) of the Counterparty License Agreement. There are no compulsory licenses granted or, to the knowledge of the Seller, threatened to be granted with respect to the Intellectual Property Rights.

ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER

The Purchaser hereby represents and warrants to the Seller as of the Execution Date and as of the Closing Date as follows:

Section 4.1 Organization . The Purchaser is a limited partnership duly organized, validly existing and in good standing under the laws of Delaware and has all powers and authority, and all licenses, permits, franchises, authorizations, consents and approvals of all Governmental Authorities, required to own its property and conduct its business as now conducted.

Section 4.2 No Conflicts . None of the execution and delivery by the Purchaser of any of the Transaction Documents to which the Purchaser is party, the performance by the Purchaser of the obligations contemplated hereby or thereby or the consummation of the transactions contemplated hereby or thereby will contravene, conflict with, result in a breach, violation, cancellation or termination of, constitute a default (with or without notice or lapse of time, or both) under, require prepayment under, give any Person the right to exercise any remedy or obtain any additional rights under, or accelerate the maturity or performance of or payment under, in any respect, (i) any Applicable Law or any judgment, order, writ, decree, permit or license of any Governmental Authority to which the Purchaser or any of its assets or properties may be subject or bound, (ii) any term or provision of any contract, agreement, indenture, lease, license, deed, commitment, obligation or instrument to which the Purchaser is a party or by which the Purchaser or any of its assets or properties is bound or committed or (iii) any term or provision of any of the organizational documents of the Purchaser.

Section 4.3 Authorization . The Purchaser has all powers and authority to execute and deliver, and perform its obligations under, the Transaction Documents to which it is party and to consummate the transactions contemplated hereby and thereby. The execution and delivery of each of the Transaction Documents to which the Purchaser is party and the performance by the Purchaser of its obligations hereunder and thereunder have been duly authorized by the Purchaser. Each of the Transaction Documents to which the Purchaser is party has been duly executed and delivered by the Purchaser. Each of the Transaction Documents to which the Purchaser is party constitutes the legal, valid and binding obligation of the Purchaser, enforceable against the Purchaser in accordance with its respective terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or similar Applicable Laws affecting creditors’ rights generally, general equitable principles and principles of public policy.

Section 4.4 Governmental and Third Party Authorizations . The execution and delivery by the Purchaser of the Transaction Documents to which the Purchaser is party, the performance by the Purchaser of its obligations hereunder and thereunder and the consummation of any of the transactions contemplated hereunder and thereunder do not require any consent, approval, license, order, authorization or declaration from, notice to, action or registration by or filing with any Governmental Authority or any other Person, except as described in Section 3.5 .

Section 4.5 No Litigation . There is no (a) action, suit, arbitration proceeding, claim, demand, citation, summons, subpoena, investigation or other proceeding (whether civil, criminal, administrative, regulatory, investigative or informal) pending or, to the knowledge of the Purchaser, threatened by or against the Purchaser, at law or in equity, or (b) inquiry or investigation (whether civil, criminal, administrative, regulatory, investigative or informal) by or before a Governmental Authority pending or, to the knowledge of the Purchaser, threatened against the Purchaser, that, in each case, challenges or seeks to prevent or delay the consummation of any of the transactions contemplated by any of the Transaction Documents to which the Purchaser is party.

Section 4.6 Access to Information . The Purchaser acknowledges that it has (a) reviewed the Counterparty License Agreement, the Counterparty Consent, the INFI Third Party Agreements and such other documents and information relating to the Intellectual Property Rights and the Licensed Product and (b) had the opportunity to ask such questions of, and to receive answers from, representatives of the Seller concerning the Counterparty License Agreement, the Counterparty Consent, the INFI Third Party Agreements, the Intellectual Property Rights and the Licensed Product, in each case, as it deemed necessary to make an informed decision to purchase, acquire and accept the Purchased Assets in accordance with the terms of this Purchase and Sale Agreement. The Purchaser has such knowledge, sophistication and experience in financial and business matters that it is capable of evaluating the risks and merits of purchasing, acquiring and accepting the Purchased Assets in accordance with the terms of this Purchase and Sale Agreement.

Section 4.7 Funds Available . The Purchaser has sufficient funds on hand or binding and enforceable commitments to provide it with sufficient funds to satisfy its obligations, in each case to pay the Investment Amount, and the Purchaser has no reason to believe, and has not been provided with oral or written notice that any of its investors are not required or do not intend, for any reason, to satisfy their obligations under such commitments. The Purchaser acknowledges and agrees that its obligations under this Purchase and Sale Agreement are not contingent on obtaining financing.

ARTICLE V
COVENANTS

The parties hereto covenant and agree as follows:

Section 5.1 Books and Records; Notices .

(a) During the term of this Purchase and Sale Agreement and for a period of two (2) years thereafter, the Seller shall keep and maintain, or cause to be kept and maintained, at all times full and accurate books and records adequate to reflect all financial information it has received, and all amounts paid or received under the Counterparty License Agreement, with respect to the Royalties.

(b) Promptly following receipt by the Seller of any Royalty & Audit Reports or Royalty-Related Agreement Information, the Seller shall (i) inform the Purchaser in writing of such receipt and (ii) furnish the Purchaser with a copy of such communication.

(c) The Seller shall provide the Purchaser with written notice as promptly as practicable after becoming aware of any of the following: (i) the occurrence of a Voluntary Seller Bankruptcy or an Involuntary Seller Bankruptcy; (ii) any breach or default by the Seller of or under any covenant, agreement or other provision of any Transaction Document to which it is party; (iii) any representation or warranty made by the Seller in any of the Transaction Documents or in any certificate delivered to the Purchaser pursuant to this Purchase and Sale Agreement shall prove to be untrue, inaccurate or incomplete in any respect on the date as of which made; or (iv) any change, effect, event, occurrence, state of facts, development or condition that would be a Material Adverse Change.

(d) The Seller shall notify the Purchaser in writing not less than 30 days prior to any change in, or amendment or alteration of, the Seller’s (i) legal name, (ii) form or type of organizational structure or (iii) jurisdiction of organization.

(e) Subject to applicable confidentiality restrictions, Applicable Laws relating to securities matters and the provisions of the Counterparty License Agreement, the INFI Third Party Agreements and the Counterparty Consent, the Seller shall make available such other information as the Purchaser may, from time to time, reasonably request with respect to (i) the Purchased Assets or (ii) the condition or operations, financial or otherwise, of the Seller that is reasonably likely to impact or affect the performance of the Seller’s obligations hereunder or the Seller’s compliance with the terms, provisions and conditions of this Purchase and Sale Agreement.

Section 5.2 Confidentiality; Public Announcement .

(a) Except as otherwise required by Applicable Law or by the rules and regulations of any securities exchange or trading system (and then in accordance with this Section 5.2 ) and except as otherwise set forth in this Section 5.2 , all Confidential Information furnished by the Seller to the Purchaser (as a Representative (as defined in the Confidential Disclosure Agreement) of HealthCare Royalty Management, LLC) or otherwise received by the Purchaser (including directly from Counterparty or directly or indirectly pursuant to the Confidential Disclosure Agreement), as well as the terms, conditions and provisions of this Purchase and Sale Agreement and any other Transaction Document, shall be kept confidential by the Purchaser and shall be used by the Purchaser only in connection with this Purchase and Sale Agreement and any other Transaction Document and the transactions contemplated hereby and thereby. Notwithstanding the foregoing, the Purchaser may disclose such information (i) to its affiliates, actual or potential financing sources, investors or co-investors and permitted assigns, and its or their respective employees, consultants, contractors, subcontractors, agents, legal advisors or financial advisors (each, a “ Permitted Recipient ”) ( provided , that such Persons shall be informed of the confidential nature of such information and shall be obligated to keep such information confidential pursuant to obligations of confidentiality no less onerous than those set out herein); (ii) as required to be disclosed in any document to be filed with any Governmental Authority having jurisdiction over the recipient of such information or (iii) as required to be disclosed by court or administrative order having jurisdiction over the recipient of such information or under Applicable Laws with respect to the Purchaser or its Affiliates (including Applicable Laws relating to securities matters), as the case may be, or pursuant to the rules and regulations of any stock exchange or stock market on which securities of the Purchaser or its Affiliates may be listed for trading.

(b) The Seller and the Purchaser acknowledge that each party hereto may, after execution of this Purchase and Sale Agreement, make a public announcement of the transactions contemplated by the Transaction Documents. The Seller and the Purchaser agree that, after the Closing Date, public announcements may be issued in the form of one or more press releases, and in disclosures contained in documents to be filed with or furnished to the SEC, in each case subject to the Purchaser or the Seller having a reasonable prior opportunity to review such public announcement, and which announcement shall be in a form mutually acceptable to the Purchaser and the Seller, and either party hereto may thereafter disclose any information contained in such press release or SEC documents at any time without the consent of the other party hereto. For the avoidance of doubt, no public announcement or press release issued by the Purchaser shall contain any Confidential Information without the prior written consent of the Seller.

(c) In the event that the Purchaser or any Permitted Recipient is required to furnish or disclose any portion of the Confidential Information pursuant to clauses (ii) or (iii) of Section 5.2(a) , the Purchaser shall provide the Seller, as promptly as practicable, with written notice of the existence of, and terms and circumstances relating to, such requirement, and the proposed disclosure, so that the Seller, Counterparty or any counterparty to any INFI Third Party Agreement may seek, at its expense, a protective order or other appropriate remedy (and, if the Seller, Counterparty or any counterparty to any INFI Third Party Agreement seeks such an order, the Purchaser or such Permitted Recipient, as the case may be, shall provide, at their expense, such cooperation and assistance as Seller, Counterparty or any counterparty to any INFI Third Party Agreement shall reasonably require). Subject to the foregoing, the Purchaser or such Permitted Recipient, as the case may be, may disclose that portion (and only that portion) of the Confidential Information that is legally required to be disclosed; provided , however, that the Purchaser or such Permitted Recipient, as the case may be, shall: (i) take all reasonable and lawful actions to obtain confidential treatment for such disclosure, including by obtaining reliable assurance that confidential treatment will be accorded any such Confidential Information disclosed; and (ii) limit the disclosure to the required purpose.

(d) The obligations of this Section 5.2 shall survive the termination of this Purchase and Sale Agreement.

Section 5.3 Best Efforts; Further Assurances .

(a) Subject to the terms and conditions of this Purchase and Sale Agreement, each party hereto will use its best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary under Applicable Laws to consummate the transactions contemplated by the Transaction Documents to which the Seller or the Purchaser, as applicable, is party, including to (i) perfect the sale, assignment, transfer, conveyance and granting of the Purchased Assets to the Purchaser pursuant to this Purchase and Sale Agreement, (ii) execute and deliver such other documents, certificates, instruments, agreements and other writings and to take such other actions as may be necessary or desirable, or reasonably requested by the other party hereto, in order to consummate or implement expeditiously the transactions contemplated by any Transaction Document to which the Seller or the Purchaser, as applicable, is party, (iii) perfect, protect, more fully evidence, vest and maintain in the Purchaser good, valid and marketable rights and interests in and to the Purchased Assets free and clear of all Liens (other than those permitted by the Transaction Documents), (iv) create, evidence and perfect the Purchaser’s security interest granted pursuant to the Protective Rights Agreement and (v) enable the Purchaser to exercise or enforce any of the Purchaser’s rights under any Transaction Document to which the Seller or the Purchaser, as applicable, is party, including following the Closing Date.

(b) The Seller and the Purchaser shall cooperate and provide assistance as reasonably requested by the other party hereto, at the expense of such other party hereto (except as otherwise set forth herein), in connection with any litigation, arbitration, investigation or other proceeding (whether threatened, existing, initiated or contemplated prior to, on or after the date hereof) to which the other party hereto, any of its Affiliates or controlling persons or any of their respective officers, directors, equityholders, controlling persons, managers, agents or employees is or may become a party or is or may become otherwise directly or indirectly affected or as to which any such Persons have a direct or indirect interest, in each case relating to any Transaction Document, the Purchased Assets or the transactions described herein or therein but in all cases excluding any litigation brought by the Seller (for itself or on behalf of any Seller Indemnified Party) against the Purchaser or brought by the Purchaser (for itself or on behalf of any Purchaser Indemnified Party) against the Seller.

(c) The Seller and the Purchaser shall comply, as applicable, with all Applicable Laws with respect to each of the Transaction Documents, the Counterparty License Agreement, the Counterparty Consent, the Purchased Assets and all ancillary agreements related thereto, in each case the violation of which would result in a Material Adverse Change.

(d) The Seller and the Purchaser shall not enter into any contract, agreement or other legally binding arrangement (whether written or oral), or grant any right to any other Person, in any case that would reasonably be expected to conflict with the Transaction Documents or, with respect to the Seller, serve or operate to limit or circumscribe any of the Purchaser’s rights under the Transaction Documents (or the Purchaser’s ability to exercise any such rights), in each case in a manner which would result in a Material Adverse Change.

(e) The Seller shall not amend, modify, supplement, restate, cancel, terminate or grant a waiver under any INFI Third Party Agreement in any manner that would materially and adversely affect the Purchased Assets or otherwise adversely affect the timing, amount or duration of the Royalties, in each case without the prior written consent of the Purchaser.

(f) The Seller and the Purchaser acknowledge and agree that the Counterparty has the right, pursuant to Section 7.3 of the Counterparty License Agreement, to prosecute and maintain certain of the Patents set forth on Exhibit D and that the Counterparty has, pursuant to Section 7.5 of the Counterparty License Agreement, certain rights with respect to third party infringement of certain of the Patents set forth on Exhibit D . With respect to such Patents that are listed in the Orange Book with respect to the Licensed Product in the United States or any equivalent of such Patent in France, Germany, Italy, Spain, the United Kingdom or Japan (each such Patent, an “ Orange Book Patent ” and each such country, a “ Major Market Country ”), then (1) solely to the extent that (A) Seller is obligated to prosecute and maintain such Orange Book Patent in such Major Market Country pursuant to Section 7.3.1(c) of the Counterparty License Agreement, or (B) Counterparty notifies Seller of its decision not to prosecute and maintain such Orange Book Patent in such Major Market Country in accordance with Section 7.3.1(d)(i) of the Counterparty License Agreement, then, subject to the INFI Third Party Agreements, the Seller shall notify the Purchaser thereof and, at the Purchaser’s request and expense (including the Purchaser’s payment of the Seller’s reasonable attorney’s fees, if any, in connection therewith), use commercially reasonable efforts to prepare, execute, deliver and file any and all agreements, documents or instruments which are reasonably necessary to prosecute and maintain such Orange Book Patent in such country or (2) there is a third party infringement of such Orange Book Patent in such Major Market Country, then subject to Counterparty’s rights and obligations thereto under Section 7.4 of the Counterparty License Agreement, and, subject to the INFI Third Party Agreements, the Seller shall notify the Purchaser thereof and, at the Purchaser’s request and expense (including the Purchaser’s payment of the Seller’s reasonable attorney’s fees, if any, in connection therewith), use commercially reasonable efforts to prepare, execute, deliver and file any and all agreements, documents or instruments which are reasonably necessary to defend or assert such Orange Book Patent against significant infringement or interference by any other Persons, and against any claims of invalidity or unenforceability, in such country (including by bringing any legal action for infringement or defending any counterclaim of invalidity or action of a third party for declaratory judgment of non-infringement or non-interference). The Seller shall keep the Purchaser informed of all such actions taken at the Purchaser’s request with respect to such Orange Book Patent in such Major Market Country and the Purchaser shall have the opportunity to participate and meaningfully consult with the Seller with respect to the direction thereof and the Seller shall consider the Purchaser’s comments in good faith. All out-of-pocket third party expenses of the Seller (including reasonable attorney’s fees) incurred pursuant to this Section 5.3(f) shall be promptly reimbursed by the Purchaser.

(g) With respect to Orange Book Patents in the Major Market Countries, if Counterparty or the Seller terminates or provides written notice of termination of the Counterparty License Agreement (in whole or in part), or the Counterparty License Agreement otherwise terminates (in whole or in part), then, solely to the extent permitted by and subject to the survival provisions of the Counterparty License Agreement, any provisions of the INFI Third Party Agreements and any New Arrangement, the Seller shall notify the Purchaser thereof and, at the Purchaser’s request and expense (including the Purchaser’s payment of the Seller’s reasonable attorney’s fees, if any, in connection therewith), the Seller shall use commercially reasonable efforts to prepare, execute, deliver and file any and all agreements, documents or instruments which are reasonably necessary to (i) prosecute and maintain the Orange Book Patents in the Major Market Countries set forth on Exhibit D and (ii) defend or assert such Patents against significant infringement or interference by any other Persons, and against any claims of invalidity or unenforceability, in any jurisdiction (including by bringing any legal action for infringement or defending any counterclaim of invalidity or action of a third party for declaratory judgment or non-infringement or non-interference). The Seller shall keep the Purchaser informed of all such actions and the Purchaser shall have the opportunity to participate and meaningfully consult with the Seller with respect to the direction thereof and the Seller shall consider the Purchaser’s comments in good faith. All out-of-pocket third party expenses of the Seller (including reasonable attorney’s fees) incurred pursuant to this Section 5.3(g) shall be promptly reimbursed by the Purchaser.

Section 5.4 Payments on Account of the Purchased Assets .

(a) Notwithstanding the terms of the Counterparty Consent, if Counterparty, any Sublicensee or any other Person makes any future payment in respect of the Purchased Assets to the Seller (or any of its Subsidiaries) directly on account of the Purchased Assets, then (i) the portion of such payment that represents Royalties shall be held by the Seller (or such Subsidiary) in trust for the benefit of the Purchaser in a segregated account, (ii) the Seller (or such Subsidiary) shall have no right, title or interest whatsoever in such portion of such payment and shall not create or suffer to exist any Lien thereon and (iii) the Seller (or such Subsidiary) promptly following the receipt by the Seller (or such Subsidiary) of such portion of such payment, shall remit such portion of such payment to the Purchaser Account pursuant to Section 5.4(b) in the exact form received with all necessary endorsements.

(b) The Seller shall make all payments required to be made by it to the Purchaser pursuant to this Purchase and Sale Agreement by wire transfer of immediately available funds, without Set-off, to the following account (or to such other account as the Purchaser shall notify the Seller in writing from time to time) (the “ Purchaser Account ”):

Bank Name: Silicon Valley Bank
ABA Number: 121-140-399
Account Number: 3301301702
Account Name: Healthcare Royalty Partners III, L.P.
Attention: Controller

(c) If Counterparty, any Sublicensee or any other Person makes any payment to the Purchaser of Royalties after the Cap Date, then (i) such payment shall be held by the Purchaser in trust for the benefit of the Seller in a segregated account, (ii) the Purchaser shall have no right, title or interest whatsoever in such payment and shall not create or suffer to exist any Lien thereon and (iii) the Purchaser promptly, and in any event no later than three (3) Business Days following the receipt by the Purchaser of such payment, shall remit such payment to the Seller Account pursuant to Section 5.4(d) in the exact form received with all necessary endorsements.

(d) The Purchaser shall make all payments required to be made by it to the Seller pursuant to this Purchase and Sale Agreement by wire transfer of immediately available funds, without Set-off, to the following account (or to such other account as the Seller shall notify the Purchaser in writing from time to time) (the “ Seller Account ”):

Bank Name: JPMorgan Chase Bank
ABA Number: 021000021
Account Number: 825874498
Account Name: Infinity Pharmaceuticals, Inc.

Attention: Controller

(e) The Seller shall not amend, modify, supplement, restate, cancel, terminate or grant a waiver under (i) the Counterparty Consent or (ii) the payment direction letter delivered by the Seller to the Counterparty in accordance with Section 6.2(a) , in each case without the prior written consent of the Purchaser.

Section 5.5 Counterparty License Agreement .

(a) The Seller (i) shall not forgive, release or compromise any Royalties or other Purchased Assets owed to or becoming owing to it under the Counterparty License Agreement, (ii) shall not assign, amend, modify, supplement, restate, waive, cancel or terminate (or consent to any cancellation or termination of), in whole or in part, any rights constituting or involving, affecting or relating to the Royalties or other Purchased Assets (including any such rights in the Counterparty License Agreement or any provision thereof or right thereunder) or the right to receive the Royalties, in each case to the extent such assignment, amendment, modification, supplement, restatement, waiver, cancellation, termination or consent would materially adversely affect the Purchased Assets or otherwise adversely affect the timing, amount or duration of the Royalties, (iii) shall not breach any provisions of Counterparty License Agreement, to the extent the breach of such duty or obligation would materially adversely affect the Purchased Assets or otherwise adversely affect the timing, amount or duration of the Royalties, (iv) except pursuant to Section 5.6 , shall not enter into any new agreement or legally binding arrangement in respect of the Purchased Assets, the Royalties or the Licensed Product, in each case in respect of the Territory in the Field and in a manner that would materially adversely affect the Purchased Assets or otherwise adversely affect the timing, amount or duration of the Royalties, and (v) shall not waive any obligation of, or grant any consent to, Counterparty under or in respect of the Licensed Product (in respect of the Territory in the Field) or the Counterparty License Agreement that would materially adversely affect the Purchased Assets or otherwise adversely affect the timing, amount or duration of the Royalties.

(b) To the extent permitted under the Counterparty License Agreement and the Counterparty Consent and solely to the extent the following would have a Material Adverse Change on the Purchased Assets, promptly after receiving notice from Counterparty or any other Person (i) terminating the Counterparty License Agreement (in whole or in part), (ii) alleging any breach of or default under the Counterparty License Agreement by the Seller or (iii) asserting the existence of any facts, circumstances or events that, alone or together with other facts, circumstances or events, Seller reasonably expects (with or without the giving of notice or passage of time, or both) to give rise to a breach of or default under the Counterparty License Agreement by the Seller or the right to terminate the Counterparty License Agreement (in whole or in part) by Counterparty or any other Person, the Seller shall (A) promptly give a written notice to the Purchaser describing in reasonable detail the relevant breach, default or termination event, including a copy of any written notice received from Counterparty or the other relevant Person, and, in the case of any breach or default or alleged breach or default by the Seller, describing in reasonable detail any corrective action the Seller proposes to take, and (B) in the case of any breach or default or alleged breach or default by the Seller, use its best efforts to promptly cure such breach or default and shall give written notice to the Purchaser upon curing such breach or default.

(c) To the extent permitted under the Counterparty License Agreement and the Counterparty Consent and solely to the extent the following would have a Material Adverse Change on the Purchased Assets, promptly after the Seller obtains knowledge of a breach of or default under, or an alleged breach of or default under, the Counterparty License Agreement by Counterparty or any other Person (each, a “ Defaulting Party ”) or of the existence of any facts, circumstances or events that, alone or together with other facts, circumstances or events, Seller reasonably expects (with or without the giving of notice or passage of time, or both) to give rise to a breach of or default under the Counterparty License Agreement by a Defaulting Party or the right to terminate the Counterparty License Agreement (in whole or in part) by the Seller, in each case, the Seller shall promptly (but in any event within ten Business Days) give a written notice to the Purchaser describing in reasonable detail the relevant breach, default or termination event.

(d) To the extent consistent with the Counterparty License Agreement and the Counterparty Consent, the Seller shall, at the Purchaser’s request and expense, make available its relevant records and personnel to the Purchaser in connection with any prosecution of litigation by the Seller or the Purchaser against any party to the Counterparty License Agreement to enforce any of the Purchaser’s rights under the Counterparty License Agreement, and provide reasonable assistance and authority to file and bring the litigation, including, if required to bring the litigation, being joined as a party plaintiff. All out-of-pocket third party expenses of the Seller (including reasonable attorney’s fees) incurred pursuant to this Section 5.5(d) shall be promptly reimbursed by the Purchaser.

Section 5.6 Termination of the Counterparty License Agreement . Without limiting the provisions of Section 5.5 , if Counterparty or the Seller terminates or provides written notice of termination of the Counterparty License Agreement (in whole or in part), or the Counterparty License Agreement otherwise terminates (in whole or in part), then, to the extent permitted by the survival provisions of the Counterparty License Agreement and any provisions of the INFI Third Party Agreements, the Seller shall use commercially reasonable efforts, at the Purchaser’s request and sole cost and expense (including the Purchaser’s payment of the Seller’s reasonable attorney’s fees, if any, in connection therewith), in consultation and cooperation with the Purchaser, for a period of one hundred eighty (180) days (or such shorter period as set forth in this Section 5.6 ) (the “ Initial Search Period ”), to locate, negotiate and secure a license of the Intellectual Property Rights with respect to the Licensed Product in the Field in the Territory (any such license, a “ New Arrangement ”); provided, that the Purchaser shall have the right to consent in writing to any New Arrangement, which approval shall not be unreasonably withheld or delayed, and Seller agrees to undertake in connection with such New Arrangement such obligations and liabilities, if any, as are comparable to the obligations and liabilities it currently has under the Counterparty License Agreement. The Seller shall not pay (or enter into any agreement to pay) any upfront costs, fees or expenses to a third party in connection with the Seller’s efforts to locate, negotiate and secure a New Arrangement (“ New Arrangement Expenses ”) without the prior written consent of the Purchaser. If the Purchaser does not consent to such New Arrangement Expenses, the Purchaser may, upon written notice to the Seller, terminate the Initial Search Period. Following the expiration or termination of the Initial Search Period, the Purchaser may, at its option and sole cost and expense, continue efforts to locate, negotiate and secure a New Arrangement; provided, that the Seller shall have the right to consent in writing to any New Arrangement, which approval shall not be unreasonably withheld or delayed, it being further understood and agreed that it shall not be unreasonable for the Seller to refuse consent to the extent that the obligations and liabilities that Seller would be required to undertake in connection with such New Arrangement, if any, are materially more onerous or unfavorable than obligations and liabilities it currently has under the Counterparty License Agreement. The Seller shall use commercially reasonable efforts, at the Purchaser’s request and sole cost and expense (including the Purchaser’s payment of the Seller’s reasonable attorney’s fees, if any, in connection therewith) to provide cooperation and assistance to the Purchaser in connection with the Purchaser’s efforts pursuant to the foregoing sentence. In the event the Seller enters into a New Arrangement, references in this Purchase and Sale Agreement to the Purchased Assets and the Counterparty License Agreement shall be deemed to be references to any new purchased asset and the new license agreement constructed under the New Arrangement, and references to Counterparty shall be deemed to be references to the other party to such New Arrangement. Such New Arrangement shall also provide, for no additional consideration from the Purchaser (other than, for clarity, the costs and expenses described in this Section 5.6 ), that (i) the Purchaser shall have the same rights as those acquired under the Counterparty License Agreement pursuant to this Purchase and Sale Agreement and (ii) all payments and other consideration (including any upfront fees) thereunder (to the extent that such payments or other consideration would have constituted Royalties under the Counterparty License Agreement) be made by the other party to such New Arrangement directly to the Purchaser subject to the Cap Amount; provided, that all such payments and other consideration (including any upfront fees) made by the other party to such New Arrangement shall be deemed to be Royalties hereunder for purposes of determining the Cap Date. All out-of-pocket third party expenses of the Seller (including reasonable attorney’s fees) incurred pursuant to this Section 5.6 shall be promptly reimbursed by the Purchaser.

Section 5.7 Audits . The Seller shall, upon the written request of the Purchaser, cause an inspection or audit of Counterparty’s books and records to be conducted pursuant to, and in accordance with, Section 6.5 of the Counterparty License Agreement; provided , however , that the Seller shall retain the exclusive right to inspect and audit Counterparty’s books and records at any time and from time to time at its sole discretion for payments that are paid or payable to the Seller pursuant to the Counterparty License Agreement. For the purposes of exercising the Purchaser’s rights pursuant to this Section 5.7 , the Seller shall select such public accounting firm as the Purchaser shall recommend for such purpose. The Seller and the Purchaser agree that all of the expenses of any inspection or audit carried out for the benefit of the Purchaser that would otherwise be borne by the Seller pursuant to the Counterparty License Agreement shall instead be borne by the Purchaser, including such fees and expenses of such public accounting firm as are to be borne by the Seller pursuant to Section 6.5 of the Counterparty License Agreement together with the Seller’s reasonable out-of-pocket costs incurred in connection with such examination or audit. The Seller will furnish to the Purchaser any inspection or audit report prepared in connection with such inspection or audit. The Purchaser shall have the right to require the Seller, in writing, at the sole expense of the Purchaser, to exercise the Seller’s rights under the Counterparty License Agreement to cause Counterparty to cure such discrepancy in accordance with the Counterparty License Agreement.

Section 5.8 Inspections; Quarterly Meetings .

(a) During the term of this Agreement, the Purchaser and its representatives shall have the right, from time to time during normal business hours and upon at least five Business Days’ prior written notice to the Seller, but no more frequently than two times per calendar year without cause, as determined by the Purchaser in its reasonable discretion, and no more than one time with respect to each fiscal quarter of the Seller, to visit the offices and properties of the Seller where books and records relating or pertaining to the Purchased Assets, the Counterparty License Agreement, and the Intellectual Property are kept and maintained, to inspect and make extracts from and copies of such books and records, to discuss, with officers of the Seller, the business, operations, properties and financial and other condition of the Seller and to verify the accuracy of the Royalty & Audit Reports and the Royalties. In the event any inspection of such books and records reveals any underpayment of any Royalties in respect of any fiscal quarter of the Seller, the Seller shall (i) in accordance with Section 5.5 , cooperate with the Purchaser to enforce all rights under the Counterparty License Agreement against the Counterparty for payment of such amount and (ii) if reimbursement for such underpayment is received by the Seller, promptly (and in any event within five Business Days) following receipt by the Seller of such reimbursement remit the amount of such reimbursement to the Purchaser.

(b) During the term of this Agreement, the Seller shall, upon reasonable request not more than once per calendar quarter, cause such of the officers of the Seller as shall be reasonably identified by the Purchaser to participate in an in-person meeting with the Purchaser for purposes of discussing the Licensed Products and the Purchased Assets.

Section 5.9 Tax Matters .

(a) Notwithstanding the accounting treatment thereof, for United States federal, state and local income and similar tax purposes, the Seller and the Purchaser shall treat the transactions contemplated by the Transaction Documents as a sale of the Purchased Assets .

(b) All payments to the Purchaser under this Purchase and Sale Agreement shall be made without any deduction or withholding for or on account of any tax, unless otherwise required by applicable Law. The Seller shall promptly notify the Purchaser in writing in the event that any deduction or withholding is effected or proposed by the Seller, the Counterparty or any Governmental Authority, with respect to any such payments hereunder.

(c) The parties hereto agree not to take any position that is inconsistent with the provisions of this Section 5.9 on any tax return or in any audit or other administrative or judicial proceeding unless (i) the other party hereto has consented to such actions, such consent not to be unreasonably delayed, withheld or conditioned or (ii) otherwise required by a determination within the meaning of Section 1313(a) of the Code. If there is an inquiry by any Governmental Authority of the Seller or the Purchaser related to this Section 5.9 , the party subject to the inquiry will promptly notify the other party of such inquiry and the parties hereto shall cooperate with each other in responding to such inquiry in a reasonable manner consistent with this Section 5.9 .

Section 5.10 Purchaser Acknowledgment . The Purchaser acknowledges that nothing herein shall be interpreted to be a guaranty by the Seller of the creditworthiness or solvency of the Counterparty or its affiliates nor a guaranty of the sufficiency or amount of the Royalties.

ARTICLE VI
THE CLOSING

Section 6.1 Closing . The closing of the transactions contemplated hereby (the “ Closing ”) shall take place remotely via electronic delivery of the executed Transaction Documents and the other closing deliverables on the Closing Date.

Section 6.2 Closing Conditions Applicable to the Purchaser . The obligations of the Purchaser to effect the Closing shall be subject to the satisfaction of the following conditions, as of the Closing Date, any of which may be waived in writing by the Purchaser in its sole discretion:

(a) the Counterparty Consent shall have been executed by the Counterparty and the Seller and delivered by the Seller to Purchaser, and the Seller shall have delivered a payment direction letter to the Counterparty in form and substance acceptable to the Purchaser;

(b) all notices to, consents, approvals, authorizations and waivers from third parties and Governmental Authorities that are required for the consummation of the transactions contemplated by this Agreement or any of the Transaction Documents shall have been obtained or provided for and shall remain in effect;

(c) each representation and warranty of the Seller in any Transaction Document to which it is a party of in any certificate or other document delivered by the Seller in connection with this Agreement shall be true and correct in all respects as of the Execution Date and as of the Closing Date, except to the extent expressly made as of a specified date, in which case as of such specified date;

(d) the Seller shall have complied in all material respects with its obligations hereunder and under the other Transaction Documents required to be performed and complied with by it as of the Closing;

(e) the Seller shall have delivered the Bill of Sale and the Protective Rights Agreement, in each case executed by the Seller;

(f) no Material Adverse Change shall have occurred;

(g) the Seller shall have delivered (i) an opinion of counsel to the Seller, in form and substance reasonably satisfactory to the Purchaser and its counsel and (ii) an opinion of Pillsbury Winthrop Shaw Pittman LLP, special counsel to the Seller, in form and substance satisfactory to the Purchaser and its counsel;

(h) the Seller shall have delivered a certificate of an executive officer of the Seller (the statements made in which shall be true and correct on and as of the Closing Date): (i) attaching copies, certified by such officer as true and complete, of (x) the organizational documents of the Seller and (y) resolutions of the governing body of the Seller authorizing and approving the execution, delivery and performance by the Seller of the Transaction Documents and the transactions contemplated herein and therein; (ii) setting forth the incumbency of the officer or officers of the Seller who have executed and delivered the Transaction Documents, including therein a signature specimen of each such officer or officers; and (iii) attaching a copy, certified by such officer as true and complete, of a good standing certificate of the appropriate Governmental Authority of the Seller’s jurisdiction of organization, stating that the Seller is in good standing under the Applicable Laws of such jurisdiction; and

(i) the Seller shall have delivered such other certificates, documents and financing statements as the Purchaser may reasonably request, including a financing statement reasonably satisfactory to the Purchaser to create, evidence and perfect the sale, assignment, transfer, conveyance and grant of the Purchased Assets pursuant to Section 2.1 and the security interest granted pursuant to the Protective Rights Agreement.

Section 6.3 Closing Conditions Applicable to the Seller . The obligations of the Seller to effect the Closing shall be subject to the satisfaction of the following conditions, as of the Closing Date, any of which may be waived in writing by the Seller in its sole discretion:

(a) the Purchaser shall have executed and delivered the Bill of Sale and Protective Rights Agreement;

(b) the Purchaser shall have delivered a certificate of an executive officer of the Purchaser (the statements made in which shall be true and correct on and as of the Closing Date) certifying that: (i) the execution, delivery and performance by the Purchaser of this Purchase and Sale Agreement and the Transaction Documents to which the Purchaser is a party have been duly and validly authorized by the appropriate governing authority of the Purchaser, (ii) all of Purchaser's representations and warranties set forth in this Purchase and Sale Agreement are true and correct as of the Closing Date, and (iii) the Purchaser has complied in all material respects with all of its covenants and obligations under this Purchase and Sale Agreement as of the Closing Date; and

Section 6.4 Milestone Payments . The obligations of the Purchaser to make the First Sales Milestone Payment pursuant to Section 2.2(b) , the Second Sales Milestone Payment pursuant to Section 2.2(c) , the Third Sales Milestone Payment pursuant to Section 2.2(d) and the Fourth Sales Milestone Payment pursuant to Section 2.2(e) shall be subject to the satisfaction of the following conditions, in each case as of the applicable payment date:

(a) The Seller shall have complied in all material respects with its covenants set forth in the Transaction Documents; and

(b) No Material Adverse Change shall have occurred.

ARTICLE VII
TERMINATION

Section 7.1 Termination .

(a) This Agreement may be terminated, effective upon the delivery of written notice prior to or at the Closing:

(i) By mutual agreement of the Seller and the Purchaser;

(ii) By either the Seller or the Purchaser, if any of the conditions set forth in Section 6.2 or Section 6.3 shall not have been satisfied as of April 1, 2019 (other than through or as a result of the failure of the Party seeking to terminate this Agreement to comply with its obligations under this Agreement);

(b) This Agreement shall terminate on the earliest to occur of (x) the date on which this Agreement is terminated by either Party pursuant to and in accordance with Section 7.1(a) , (y) the Cap Date (if applicable) and (z) the expiration of the Seller’s and the Counterparty’s obligations to each other under the Counterparty License Agreement (for a reason other than early termination thereof).

(c) Upon the termination of this Agreement, the Purchaser shall provide to Counterparty (with a copy to the Seller) written instructions, in form and substance reasonably satisfactory to the Seller, irrevocably directing Counterparty to make all further payments under the Counterparty License Agreement directly to the Seller (the “ Reversion Instructions ”).

Section 7.2 Effect of Termination .

(a) The termination of this Agreement for any reason shall not release either Party any obligation or liability which, at the time of such termination, has already accrued to the other Party or which is attributable to a period prior to such termination. Accordingly, if any obligations remain unpaid or any amounts are owed or any payments are required to be made by either Party to the other Party on or after the date on which this Agreement is terminated, this Agreement shall remain in full force and effect until any and all such obligations, amounts or payments have been indefeasibly paid or made in accordance with the terms of this Agreement, and solely for that purpose.

(b) Notwithstanding anything herein to the contrary, the termination of this Agreement by a Party shall be without prejudice to other remedies such Party may have at law or in equity (including any enforcement of its rights under any of the Transaction Documents).

(c) In the event this Agreement is terminated by the Purchaser pursuant to Section 7.1(a) , then the Seller shall pay to the Purchaser by wire transfer of immediately available funds the Purchaser Expenses within five days of receipt of an invoice therefor.

(d) ARTICLE I and Sections 2.3 , 2.4 , 5.1(a) , 5.2 , 5.4(c) (and 5.4(d) with respect thereto), this Section 7.2 , ARTICLE VIII and ARTICLE IX shall survive the termination of this Agreement for any reason. Except as otherwise provided in this Section 7.2 , all rights and obligations of the Parties under this Agreement shall terminate upon expiration or termination of this Agreement for any reason.

ARTICLE VIII
INDEMNIFICATION

Section 8.1 Indemnification by the Seller . The Seller agrees to indemnify and hold each of the Purchaser and its Affiliates and any and all of their respective partners, directors, managers, members, officers, employees, agents and controlling persons (each, a “ Purchaser Indemnified Party ”) harmless from and against, and to pay to each Purchaser Indemnified Party the amount of, any and all Losses awarded against or incurred or suffered by such Purchaser Indemnified Party, whether or not involving a third party claim, demand, action or proceeding, to the extent arising out of (i) any breach of any representation, warranty or certification made by the Seller in any of the Transaction Documents to which the Seller is party or certificates given by the Seller to the Purchaser in writing pursuant to this Purchase and Sale Agreement or any other Transaction Document, (ii) any breach of or default under any covenant or agreement by the Seller to the Purchaser pursuant to any Transaction Document to which the Seller is party or by the Seller under the Counterparty License Agreement, the Counterparty Consent, or any INFI Third Party Agreement, (iii) any of the liabilities or obligations of the Seller (unless such liabilities or obligations are due to the Purchaser or its Permitted Recipients not complying with any confidentiality provisions set forth in the Counterparty License Agreement or the Counterparty Consent or due to the Purchaser interfering with the Counterparty or any of its Affiliates or Sublicensees in a manner not permitted by the Counterparty Consent) and (iv) any fees, expenses, costs, liabilities or other amounts incurred or owed by the Seller to any brokers, financial advisors or comparable other Persons retained or employed by it in connection with the transactions contemplated by this Purchase and Sale Agreement; provided , however , that the amount of any recoverable Losses for which any Purchaser Indemnified Party makes a claim for indemnification hereunder shall be reduced to the extent the underlying indemnification claim (A) results from the bad faith, gross negligence or willful misconduct of such Purchaser Indemnified Party or the breach by such Purchaser Indemnified Party of this Agreement, or (B) results from acts or omissions of the Seller based upon the written instructions from any Purchaser Indemnified Party. Any amounts due to any Purchaser Indemnified Party hereunder shall be payable by the Seller to such Purchaser Indemnified Party upon demand.

Section 8.2 Indemnification by the Purchaser . The Purchaser agrees to indemnify and hold each of the Seller and its Affiliates and any and all of their respective partners, directors, managers, members, officers, employees, agents and controlling Persons (each, a “ Seller Indemnified Party ”) harmless from and against, and will pay to each Seller Indemnified Party the amount of, any and all Losses (including attorneys’ fees) awarded against or incurred or suffered by such Seller Indemnified Party, whether or not involving a third party claim, demand, action or proceeding, arising out of (i) any breach of any representation, warranty or certification made by the Purchaser in any of the Transaction Documents or certificates given by the Purchaser in writing pursuant hereto or thereto, (ii) any breach of or default under any covenant or agreement by the Purchaser pursuant to any Transaction Document to which the Purchaser is party, (iii) any breach by Purchaser or any Permitted Recipients of any confidentiality provisions set forth in the Counterparty License Agreement or the Counterparty Consent or any interference by the Purchaser with Counterparty or any of its Affiliates or Sublicensees in a manner not permitted by the Counterparty Consent and (iv) any fees, expenses, costs, liabilities or other amounts incurred or owed by the Purchaser to any brokers, financial advisors or comparable other Persons retained or employed by it in connection with the transactions contemplated by this Purchase and Sale Agreement; provided , however , that the amount of any recoverable Losses for which any Seller Indemnified Party makes a claim for indemnification hereunder shall be reduced to the extent the underlying indemnification claim (A) results from the bad faith, gross negligence or willful misconduct of such Seller Indemnified Party or the breach by such Seller Indemnified Party of this Agreement, or (B) results from acts or omissions of the Purchaser based upon the written instructions from any Seller Indemnified Party. Any amounts due to any Seller Indemnified Party hereunder shall be payable by the Purchaser to such Seller Indemnified Party upon demand.

Section 8.3 Procedures . If any claim, demand, action or proceeding (including any investigation by any Governmental Authority) shall be brought or alleged against an indemnified party in respect of which indemnity is to be sought against an indemnifying party pursuant to Section 8.1 or Section 8.2 , the indemnified party shall, promptly after receipt of notice of the commencement of any such claim, demand, action or proceeding, notify the indemnifying party in writing of the commencement of such claim, demand, action or proceeding, enclosing a copy of all papers served, if any; provided , that the omission to so notify such indemnifying party will not relieve the indemnifying party from any liability that it may have to any indemnified party under Section 8.1 or Section 8.2 unless, and only to the extent that, the indemnifying party is actually prejudiced by such omission. In the event that any such action is brought against an indemnified party and it notifies the indemnifying party of the commencement thereof in accordance with this Section 8.3 , the indemnifying party will be entitled, at the indemnifying party’s sole cost and expense, to participate therein and, to the extent that it may wish, to assume the defense thereof, with counsel reasonably satisfactory to such indemnified party, and, after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party will not be liable to such indemnified party under this Article VII for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation. In any such proceeding, an indemnified party shall have the right to retain its own counsel, but the reasonable fees and expenses of such counsel shall be at the expense of such indemnified party unless (a) the indemnifying party and the indemnified party shall have mutually agreed to the retention of such counsel, (b) the indemnifying party has assumed the defense of such proceeding and has failed within a reasonable time to retain counsel reasonably satisfactory to such indemnified party or (c) the named parties to any such proceeding (including any impleaded parties) include both the indemnifying party and the indemnified party and representation of both parties by the same counsel would be inappropriate due to actual or potential conflicts of interests between them based on the advice of counsel to the indemnifying party. It is agreed that the indemnifying party shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the reasonable fees and expenses of more than one separate law firm (in addition to local counsel where necessary) for all such indemnified parties. The indemnifying party shall not be liable for any settlement of any proceeding effected without its written consent, but, if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party from and against any Loss by reason of such settlement or judgment. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement, compromise or discharge of any claim or pending or threatened proceeding in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party, unless such settlement, compromise or discharge, as the case may be, (i) includes an unconditional written release of such indemnified party, in form and substance reasonably satisfactory to the indemnified party, from all liability on claims that are the subject matter of such claim or proceeding, (ii) does not include any statement as to an admission of fault, culpability or failure to act by or on behalf of any indemnified party and (iii) does not impose any continuing material obligation or restrictions on any indemnified party.

Section 8.4 Exclusive Remedy . Except in the case of fraud or intentional breach, following the Closing, the indemnification afforded by this Article VIII shall be the sole and exclusive remedy for any and all Losses awarded against or incurred or suffered by a party hereto in connection with the transactions contemplated by the Transaction Documents, including with respect to any breach of any representation, warranty or certification made by a party hereto in any of the Transaction Documents or certificates given by a party hereto in writing pursuant hereto or thereto or any breach of or default under any covenant or agreement by a party hereto pursuant to any Transaction Document. Notwithstanding anything in this Purchase and Sale Agreement to the contrary, in the event of any breach or failure in performance of any covenant or agreement contained in any Transaction Document, the non-breaching party shall be entitled to specific performance, injunctive or other equitable relief pursuant to Section 9.2 .

ARTICLE IX
MISCELLANEOUS

Section 9.1 Survival . All representations, warranties and covenants made herein and in any other Transaction Document or any certificate delivered pursuant to this Purchase and Sale Agreement shall survive the execution and delivery of this Purchase and Sale Agreement and the Closing. The rights hereunder to indemnification, payment of Losses or other remedies based on such representations, warranties and covenants shall not be affected by any investigation conducted with respect to, or any knowledge acquired (or capable of being acquired) at any time (whether before or after the execution and delivery of this Purchase and Sale Agreement or the Closing) in respect of the accuracy or inaccuracy of or compliance with, any such representation, warranty or covenant.

Section 9.2 Specific Performance . Each of the parties hereto acknowledges that the other party hereto will have no adequate remedy at law if it fails to perform any of its obligations under any of the Transaction Documents. In such event, each of the parties hereto agrees that the other party hereto shall have the right, in addition to any other rights it may have (whether at law or in equity), to specific performance of this Purchase and Sale Agreement.

Section 9.3 Notices . All notices, consents, waivers and other communications hereunder shall be in writing and shall be effective (a) upon receipt when sent through the mails, registered or certified mail, return receipt requested, postage prepaid, with such receipt to be effective the date of delivery indicated on the return receipt, (b) upon receipt when sent by an overnight courier, (c) on the date personally delivered to an authorized officer of the party to which sent or (d) on the date transmitted by electronic transmission with a confirmation of receipt, in all cases, with a copy emailed to the recipient at the applicable address, addressed to the recipient as follows:

if to the Seller, to:

Infinity Pharmaceuticals, Inc.
784 Memorial Drive
Cambridge, Massachusetts 02139
Attention: General Counsel

Email: seth.tasker@infi.com

with copies to:

Infinity Pharmaceuticals, Inc.
784 Memorial Drive
Cambridge, Massachusetts 02139
Attention: Chief Executive Officer

Email: adelene.perkins@infi.com

and

Wilmer Cutler Pickering Hale and Dorr LLP
60 State Street
Boston, MA 02109
Attention: Cynthia Mazareas

Email: cynthia.mazareas@wilmerhale.com

if to the Purchaser, to:

HealthCare Royalty Partners III, L.P.
300 Atlantic Street, 6th Floor
Stamford, CT 06901
Attention: John A. Urquhart
Email: john.urquhart@hcroyalty.com

HealthCare Royalty Partners III, L.P.
300 Atlantic Street, 6th Floor
Stamford, CT 06901
Attention: Chief Legal Officer
Email: royalty-legal@hcroyalty.com

and

Morgan, Lewis & Bockius LLP
1701 Market Street
Philadelphia, PA 19103
Attention: Andrew Mariniello
Email: andrew.mariniello@morganlewis.com

Each party hereto may, by notice given in accordance herewith to the other party hereto, designate any further or different address to which subsequent notices, consents, waivers and other communications shall be sent.

Section 9.4 Successors and Assigns . The provisions of this Purchase and Sale Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. The Seller shall not be entitled to assign any of its obligations and rights under this Purchase and Sale Agreement without the prior written consent of the Purchaser; provided , however , that the Seller may, without the consent of the Purchaser, assign any of its obligations or rights under this Purchase and Sale Agreement to any other Person with which it may merge or consolidate or to which it may sell all or substantially all of its assets or all of its assets related to the Licensed Product, provided that the assignee under such assignment agrees to be bound by the terms of the Transaction Documents and furnishes a written agreement to the Purchaser in form and substance reasonably satisfactory to the Purchaser to that effect. The Purchaser may assign any of its obligations and rights hereunder without the prior written consent of the Seller (but with notice to the Seller) without restriction. The Seller shall be under no obligation to reaffirm any representations, warranties or covenants made in this Purchase and Sale Agreement or any of the other Transaction Documents or take any other action in connection with any such assignment by the Purchaser.

Section 9.5 Independent Nature of Relationship . The relationship between the Seller and the Purchaser is solely that of seller and purchaser, and neither the Seller nor the Purchaser has any fiduciary or other special relationship with the other party hereto or any of its Affiliates. Nothing contained herein or in any other Transaction Document shall be deemed to constitute the Seller and the Purchaser as a partnership, an association, a joint venture or any other kind of entity or legal form.

Section 9.6 Entire Agreement . This Purchase and Sale Agreement, together with the Exhibits hereto (which are incorporated herein by reference), the other Transaction Documents and the Confidential Disclosure Agreement (and the provisions of Sections 7, 8 and 12 thereof are hereby incorporated herein and shall apply to the Confidential Information to the same extent as they apply to the Evaluation Materials (as defined in the Confidential Disclosure Agreement)), constitute the entire agreement between the parties hereto with respect to the subject matter hereof and supersede all prior agreements, understandings and negotiations, both written and oral, between the parties hereto with respect to the subject matter of this Purchase and Sale Agreement. No representation, inducement, promise, understanding, condition or warranty not set forth herein (or in the Exhibits hereto or the other Transaction Documents) has been made or relied upon by either party hereto. Neither this Purchase and Sale Agreement nor any provision hereof is intended to confer upon any Person other than the parties hereto and the other Persons referenced in Article VIII any rights or remedies hereunder.

Section 9.7 Governing Law .

(a) THIS PURCHASE AND SALE AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL SUBSTANTIVE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO THE RULES THEREOF RELATING TO CONFLICTS OF LAW OTHER THAN SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.

(b) Each of the parties hereto hereby irrevocably and unconditionally submits, for itself and its property, to the non-exclusive jurisdiction of the Supreme Court of the State of New York sitting in New York County and of the United States District Court of the Southern District of New York, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Purchase and Sale Agreement, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State court or, to the extent permitted by Applicable Law, in such federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by Applicable Law.

(c) Each of the parties hereto hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection that it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Purchase and Sale Agreement in any court referred to in Section 9.7(b) . Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by Applicable Law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.

(d) Each of the parties hereto irrevocably consents to service of process in the manner provided for notices in Section 9.3 . Nothing in this Purchase and Sale Agreement will affect the right of any party hereto to serve process in any other manner permitted by Applicable Law. Each of the parties hereto waives personal service of any summons, complaint or other process, which may be made by any other means permitted by New York law.

Section 9.8 Waiver of Jury Trial . EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS PURCHASE AND SALE AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE OTHER PARTY HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE OTHER PARTY HERETO WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTY HERETO HAVE BEEN INDUCED TO ENTER INTO THIS PURCHASE AND SALE AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.8 .

Section 9.9 Severability . If one or more provisions of this Purchase and Sale Agreement are held to be invalid, illegal or unenforceable by a court of competent jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision of this Purchase and Sale Agreement, which shall remain in full force and effect, and the parties hereto shall replace such invalid, illegal or unenforceable provision with a new provision permitted by Applicable Law and having an economic effect as close as possible to the invalid, illegal or unenforceable provision. Any provision of this Purchase and Sale Agreement held invalid, illegal or unenforceable only in part or degree by a court of competent jurisdiction shall remain in full force and effect to the extent not held invalid, illegal or unenforceable.

Section 9.10 Counterparts . This Purchase and Sale Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Purchase and Sale Agreement shall become effective when each party hereto shall have received a counterpart hereof signed by the other party hereto. Any counterpart may be executed by facsimile or other electronic transmission, and such facsimile or other electronic transmission shall be deemed an original.

Section 9.11 Amendments; No Waivers . Neither this Purchase and Sale Agreement nor any term or provision hereof may be amended, supplemented, restated, waived, changed or modified except with the written consent of the parties hereto. No failure or delay by either party hereto in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. No notice to or demand on either party hereto in any case shall entitle it to any notice or demand in similar or other circumstances. No waiver or approval hereunder shall, except as may otherwise be stated in such waiver or approval, be applicable to subsequent transactions. No waiver or approval hereunder shall require any similar or dissimilar waiver or approval thereafter to be granted hereunder. Except as expressly provided herein, the rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by Applicable Law.

Section 9.12 Cumulative Remedies . The remedies herein provided are cumulative and not exclusive of any remedies provided by Applicable Law. Without limiting the foregoing, the Seller hereby authorizes the Purchaser, at any time and from time to time, to the fullest extent permitted by Applicable Law, to offset any amounts payable by the Purchaser to, or for the account of, the Seller against any obligations of the Seller to the Purchaser arising in connection with the Transaction Documents (including amounts payable pursuant to Article VII) that are then due and payable.

Section 9.13 Table of Contents and Headings . The Table of Contents and headings of the Articles and Sections of this Purchase and Sale Agreement have been inserted for convenience of reference only, are not to be considered a part hereof and shall in no way modify or restrict any of the terms or provisions hereof.

Section 9.14 Currency . Unless specified otherwise, all statements of or references to monetary amounts in this Purchase and Sale Agreement are to Dollars. The provisions of Section 6.2.2 of the Counterparty License Agreement shall apply to the Royalties.

{SIGNATURE PAGE FOLLOWS}

IN WITNESS WHEREOF, the parties hereto have executed this Purchase and Sale Agreement as of the day and year first written above.

INFINITY PHARMACEUTICALS, INC.

By: /s/Seth Tasker
Name: Seth Tasker
Title: VP, General Counsel & Secretary

HEALTHCARE ROYALTY PARTNERS III, L.P.

By: HealthCare Royalty GP III, LLC, its general partner

By: /s/Clarke B. Futch
Name: Clarke B. Futch
Title: Managing Partner

EXHIBIT C

FORM OF PROTECTIVE RIGHTS AGREEMENT

Incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the fiscal period ended March 31, 2019

ActiveUS 170539445v.22

Execution Version

PROTECTIVE RIGHTS AGREEMENT

THIS PROTECTIVE RIGHTS AGREEMENT (this “ Agreement ”) is made and entered into as of March 11, 2019 by and between Infinity Pharmaceuticals, Inc., a Delaware corporation (“ Grantor ”), and HCR Collateral Management, LLC, a Delaware limited liability company (“ Agent ”), as agent for HealthCare Royalty Partners III, L.P., a Delaware limited partnership (“ HC Royalty ”).

RECITALS:

A. Grantor and HC Royalty are parties to that certain Purchase Agreement (as defined below).

B. Pursuant to the Purchase Agreement, Grantor has agreed to sell, assign, transfer, convey and grant to HC Royalty, and HC Royalty agreed to purchase, acquire and accept from Grantor, all of Grantor’s rights, title and interest in and to the Purchased Assets (as defined in the Purchase Agreement).

C. Pursuant to the terms of the Purchase Agreement, Grantor has agreed to enter into this Agreement, under which Grantor grants to Agent, for the benefit of HC Royalty, a security interest in and to the Collateral (as defined below) as security for the due performance and payment of all of Grantor’s obligations to HC Royalty under the Purchase Agreement.

AGREEMENT:

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Grantor and Agent, with intent to be legally bound hereby, covenant and agree as follows:

SECTION 1. Definitions .

For purposes of this Agreement, capitalized terms used herein shall have the meanings set forth below. Capitalized terms used herein and not otherwise defined shall have the meaning given such terms in the UCC or the Purchase Agreement, as applicable.

“Agent” has the meaning set forth in the preamble to this Agreement.

“Agreement” has the meaning set forth in the preamble to this Agreement.

“Applicable Covenant” means the covenants set forth in Sections 5.3(a), (b), (d) and (e), Section 5.4(a), (b) and (e), and Section 5.5(a) and (b) of the Purchase Agreement.

“ Bankruptcy Event ” means an Involuntary Seller Bankruptcy or a Voluntary Seller Bankruptcy that has caused or would reasonably be expected to cause: (i) the invalidity of the security interest pursuant to this Agreement or the Purchase Agreement, (ii) impairment of a material portion of the Collateral, (iii) termination of the License Agreement or (iv) a material change in the timing, amount or duration of HC Royalty’s payments under the Purchase Agreement.

“Breach Event” means the occurrence of one or more of the following during the term of the Purchase Agreement:

(a) any breach by Grantor of any Applicable Covenant under the Purchase Agreement that has caused or would reasonably be expected to cause: (i) the invalidity of the security interest pursuant to this Agreement or the Purchase Agreement, (ii) impairment of a material portion of the Collateral or (iii) termination of the License Agreement;

(b) any breach by Grantor of any Applicable Covenant under the Purchase Agreement that has caused or would reasonably be expected to cause a material change in the timing, amount or duration of HC Royalty’s payments under the Purchase Agreement;

(d) any breach by Grantor of Section 5.6 of the Purchase Agreement.

“Collateral” has the meaning set forth in Section 2 of this Agreement.

“Counterparty” means Verastem, Inc., a Delaware corporation.

“Default” means (i) a Recharacterization or (ii) a Breach Event.

“Grantor” has the meaning set forth in the preamble to this Agreement.

“HC Royalty” has the meaning set forth in the preamble to this Agreement.

“License Agreement” means that certain Amended and Restated License Agreement, effective as of October 29, 2016, by and between Grantor and Counterparty, as may be further amended from time to time.

“Party” means any of Grantor or Agent as the context indicates and “ Parties ” shall mean all of Grantor and Agent.

“Patent Rights ” means the Patents solely owned by Grantor set forth on Exhibit D to the Purchase Agreement.

“Permitted Liens” means (a) the security interest created by this Agreement, (b) the assignment effected pursuant to the Purchase Agreement, (c) those Liens created in favor of HC Royalty pursuant to any other Transaction Document to which HC Royalty is a party and (d) the interest of Counterparty as licensee of the Intellectual Property Rights under the License Agreement.

“Purchase Agreement” means the Purchase and Sale Agreement entered into as of March 5, 2019 by and between Grantor and HC Royalty, as the same may be amended, modified or supplemented in accordance with the terms thereof.

“ Recharacterization ” means a judgment or order by a court of competent jurisdiction that the Seller’s right, title and interest in the Purchased Assets were not fully transferred to the Purchaser pursuant to, as contemplated by, and subject to the provisions of the Purchase Agreement and the Bill of Sale, but instead that such transaction(s) constituted a loan and security device.

“Secured Obligations” means (a) subject to the last sentence of Section 2 relating to a Recharacterization, the payment obligations of Grantor now or hereafter existing under or arising out of or in connection with this Agreement, the Purchase Agreement and each other Transaction Document to which it is a party, and (b) whether or not there is a Recharacterization, any damages, reimbursement of fees, expenses, indemnities or otherwise pursuant to any of the Purchase Agreement and other Transaction Documents arising out of a claim by Agent in connection with a Breach Event.

“Transfer” means any sale, conveyance, assignment, disposition, pledge, hypothecation or transfer.

“UCC” means the Uniform Commercial Code, as in effect on the date of this Agreement in the State of New York; provided , that, if, with respect to any financing statement or by reason of any provisions of Applicable Law, the perfection or the effect of perfection or non-perfection of the security interest or any portion thereof granted herein is governed by the Uniform Commercial Code as in effect in a jurisdiction of the United States other than New York, then “ UCC ” means the Uniform Commercial Code as in effect from time to time in such other jurisdiction for purposes of the provisions of this Agreement and any financing statement relating to such perfection or effect of perfection or non-perfection.

SECTION 2. Grant of Security .

Subject to the final paragraph of this Section 2 , Grantor hereby grants Agent, for the benefit of HC Royalty, a security interest in all of its right, title, and interest in, to and under the following property, whether now or hereinafter existing or acquired, whether tangible or intangible and wherever the same may be located (collectively, the “ Collateral ”):

(a) the Purchased Assets;

(b) the Patent Rights related to the patents listed on Schedule 2(b) ;

(c) all books, records and database extracts of Grantor specifically relating to any of the foregoing Collateral, subject in all respects to the limitations in the Counterparty Consent; and

(d) all proceeds of or from any and all of the foregoing Collateral, including all payments under any indemnity, warranty or guaranty, and all money now or at any time in the possession or under the control of, or in transit to, Agent, relating to any of the foregoing Collateral;

provided, however, that the Closing Payment, the First Sales Milestone Payment (if any), the Second Sales Milestone Payment (if any), the Third Sales Milestone Payment (if any) and the Fourth Sales Milestone Payment (if any) shall not constitute Collateral or any proceeds thereof.

Notwithstanding the foregoing definition of the term “Collateral,” the foregoing security interest is granted subject to all of the obligations of the Grantor set forth in the License Agreement (after giving effect to the Counterparty Consent) and the INFI Third Party Agreements, and Agent (on behalf of itself, HC Royalty, its and their Affiliates, and it and their successors and assigns) agrees not to take any action, in foreclosure proceedings, in bankruptcy proceedings or otherwise, to disturb or challenge the enforceability of the applicable counterparty’s rights under the License Agreement (after giving effect to the Counterparty Consent) or any INFI Third Party Agreement.

Each item of Collateral listed in this Section 2 that is defined in Article 9 of the UCC shall have the meaning set forth in the UCC, it being the intention of Grantor that the description of the Collateral set forth above be construed to include the broadest possible range of assets described herein.

Grantor’s rights, title and interest in and to the Purchased Assets have been sold, assigned, transferred, conveyed and granted to HC Royalty pursuant to the Purchase Agreement and it is the intention of the Parties that such transaction be treated as a true and absolute sale, without recourse. The security interest granted in this Section 2 is granted as a precaution against the possibility, contrary to the Parties’ intentions, that the transaction is subject to a Recharacterization, and Agent’s recourse to the Collateral for the Secured Obligations described in clause (a) of the definition of the term “Secured Obligations” arises only if there is a Recharacterization.

SECTION 3. Security for Obligations .

This Agreement secures, and the Collateral is collateral security for, the due and punctual payment or performance in full of all Secured Obligations.

SECTION 4. Grantor to Remain Liable .

Anything contained herein to the contrary notwithstanding, (a) Grantor shall remain liable under any contracts and agreements included in the Collateral, to the extent set forth therein, to perform all of its duties and obligations thereunder to the same extent as if this Agreement had not been executed, (b) the exercise by Agent of any of its rights hereunder shall not release Grantor from any of its duties or obligations under any contracts and agreements included in the Collateral, and (c) Agent shall not have any obligation or liability under any contracts, licenses, and agreements included in the Collateral by reason of this Agreement, nor shall Agent be obligated (i) to perform any of the obligations or duties of Grantor thereunder, (ii) to take any action to collect or enforce any claim for payment assigned hereunder, or (iii) to make any inquiry as to the nature or sufficiency of any payment Grantor may be entitled to receive thereunder.

SECTION 5. Representations and Warranties . Grantor represents and warrants as follows:

(a) Validity . This Agreement creates a valid security interest in the Collateral securing the payment and performance in full of the Secured Obligations. Upon the filing of appropriate UCC financing statements, substantially in the form set forth on Schedule 5(a) , in the filing offices listed on Schedule 5(b) , all filings, registrations, recordings and other actions necessary or appropriate to create, preserve, protect and perfect a first priority security interest in the Collateral will have been accomplished and such security interest will be prior to the rights of all other Persons therein and free and clear of any and all Liens, except any Permitted Liens, to the extent that a security interest in such Collateral can be perfected by filing of a UCC financing statement.

(b) Authorization, Approval . No authorization, approval, or other action by, and no notice to or filing with, any government or agency of any government or other Person is required either (i) for the grant by Grantor of the security interest granted hereby or for the execution, delivery and performance of this Agreement by Grantor; or (ii) for the perfection of, and the first priority of, the grant of the security interest created hereby or the exercise by Agent of its rights and remedies hereunder, other than in the case of clause (ii), the filing of financing statements or intellectual property security agreements in the respective offices listed on Schedule 5(b) .

(c) Enforceability . This Agreement is the legally valid and binding obligation of Grantor, enforceable against Grantor in accordance with its terms, subject, as to enforcement of remedies, to bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally or general equitable principles.

(d) Office Locations; Type and Jurisdiction of Organization . The sole place of business, the chief executive office and each office where Grantor keeps its records regarding the Collateral are, as of the date hereof, located at the locations set forth on Schedule 5(d) ; Grantor’s type of organization (e.g., corporation) and jurisdiction of organization are listed on Schedule 5(d) .

(e) Names . The name listed for Grantor on the signature pages hereof is the correct legal name of Grantor. Except as set forth on Schedule 5(e) , Grantor (or any predecessor by merger or otherwise) has not, within the five-year period preceding the date hereof, had a different name from the name listed for Grantor on the signature pages hereof.

SECTION 6. Further Assurances .

Grantor agrees that from time to time, at its expense, Grantor will promptly execute and deliver and will cause to be executed and delivered all further instruments and documents, and will take all further action, that may be necessary, or that Agent may reasonably request, in order to perfect and protect any security interest granted or purported to be granted hereby or to enable Agent to exercise and enforce its rights and remedies hereunder with respect to any Collateral. Without limiting the generality of the foregoing, Grantor will deliver such other instruments or notices, in each case, as may be necessary, or as Agent may reasonably request, in order to perfect and preserve the security interests granted or purported to be granted hereby or to enable Agent to exercise and enforce its rights and remedies hereunder with respect to any Collateral.

Grantor agrees to furnish Agent promptly upon reasonable request by Agent, with any information that is reasonably requested by Agent in order to complete such financing statements, continuation statements, or amendments thereto.

SECTION 7. Certain Covenants of Grantor . Grantor shall give Agent 30 days’ written notice before any change in Grantor’s name, identity, the address of its sole place of business, chief executive office, or where Grantor keeps its records regarding the Collateral, or corporate structure or reincorporation, reorganization, or taking of any other action that results in a change of the jurisdiction of organization of Grantor. Any such notice shall be accompanied by a revised Schedule 5(d) which shall replace Schedule 5(d) hereto and shall, upon effectiveness of the change set forth therein, become a part of this Agreement.

SECTION 8. Special Covenants With Respect to the Collateral .

(a) Except as otherwise permitted by the Purchase Agreement, Grantor shall not Transfer, or agree to Transfer, any Collateral; provided that Grantor may Transfer or agree to Transfer any Collateral in connection with the merger or consolidation of the Grantor or the assignment of such Grantor’s obligations and rights by operation of law so long as (A) the Person into which the Grantor has been merged or consolidated or which has acquired such Collateral of the Grantor has delivered evidence to Agent, in form and substance reasonably satisfactory to Agent, that such Person has assumed all of Grantor’s obligations under the Transaction Documents and (B) all steps have been taken satisfactory to Agent to assure to Agent of the continued perfection and priority of its security interest in the Collateral.

(b) Grantor shall, concurrently with the execution and delivery of this Agreement, execute and deliver to Agent one original of a Special Power of Attorney in the form of Exhibit I annexed hereto for execution of an assignment of the Collateral to Agent, or the implementation of the sale or other disposition of the Collateral pursuant to Agent’s good faith exercise of the rights and remedies granted hereunder; provided , however , Agent agrees that it will not exercise its rights under such Special Power of Attorney unless a Default has occurred and is continuing.

(c) Grantor further agrees that a breach of any of the covenants contained in this Section 8 (other than the covenant contained in Section 8(a)(i) ) will cause irreparable injury to Agent, that Agent has no adequate remedy at law in respect of such breach and, as a consequence, that each and every covenant contained in this Section 8 shall be specifically enforceable against Grantor, and Grantor hereby waives and agrees not to assert any defenses against an action for specific performance of such covenants (other than any such defense based on the assertion that Grantor had performed and is performing its obligations pursuant to such covenant(s)).

SECTION 9. Standard of Care .

The powers conferred on Agent hereunder are solely to protect its interest in the Collateral and shall not impose any duty upon it to exercise any such powers. Except for the exercise of good faith and of reasonable care in the accounting for monies actually received by Agent hereunder, Agent shall have no duty as to any Collateral or as to the taking of any necessary steps to preserve rights against prior parties or any other rights pertaining to any Collateral. Agent shall have exercised reasonable care in the custody and preservation of Collateral in its possession if such Collateral is accorded treatment substantially equal to that which Agent accords its own property.

SECTION 10. Remedies Upon Default .

(a) If, and only if, any Default shall have occurred and be continuing, Agent may, in good faith, exercise in respect of the Collateral all rights and remedies provided for herein, including, without duplication, any rights or remedies provided for under the Purchase Agreement, the UCC or under other applicable law, in all relevant jurisdictions.

(b) If, and only if, any Default shall have occurred and be continuing, Agent shall have the right (but not the obligation) to bring suit, in the name of Grantor, Agent or otherwise, to exercise the Agent’s rights as a secured party with respect to any Collateral (it being understood that this Section 10(b) shall not supersede Section 5.3 of the Purchase Agreement), in which event Grantor shall, at the request of Agent, do any and all lawful acts and execute any and all documents required by Agent in aid of such enforcement. Grantor shall promptly, upon demand, reimburse and indemnify Agent as provided in Section 12 hereof in connection with the exercise of its rights under this Section 10 .

SECTION 11. Application of Proceeds .

Except as expressly provided elsewhere in this Agreement, all proceeds net of enforcement expenses received by Agent, for the benefit of HC Royalty, in respect of any sale of, collection from, or other realization upon all or any part of the Collateral shall be applied in good faith to satisfy such item or part of the Secured Obligations as Agent may designate.

SECTION 12. Expenses .

Grantor agrees to pay to Agent upon demand the amount of any and all documented, reasonable out-of-pocket costs and expenses, including the reasonable fees and expenses of counsel and of any experts and agents, that Agent may reasonably and actually incur in connection with (i) the custody, preservation, use or operation of, or the sale of, collection from, or other realization upon, any of the Collateral during the continuance of a Default, (ii) the preservation of or exercise or enforcement of any of the rights of Agent hereunder during the continuance of a Default, or (iii) the failure by Grantor to perform or observe any of the provisions hereof, which failure, if reasonably capable of being cured within 30 days, continues without cure after such period.

SECTION 13. Continuing Security Interest; Termination .

This Agreement shall create a continuing security interest in the Collateral and shall (i) remain in full force and effect until termination of the Purchase Agreement in accordance with Section 7.1 thereof, (ii) be binding upon Grantor and its respective successors and assigns, and (iii) inure, together with the rights and remedies of Agent hereunder, to the benefit of Agent and its successors, transferees and assigns. Upon termination of the Purchase Agreement in accordance with Section 7.1 thereof, the security interest granted hereunder shall terminate and all rights to the Collateral shall revert to Grantor and Agent shall, at the expense of Grantor, execute such instruments of release and otherwise take such actions, or permit Grantor to take such actions, as Grantor may reasonably request to release the Collateral from the security interest granted hereby.

SECTION 14. Amendments .

(a) This Agreement or any term or provision hereof may not be amended, changed or modified except with the written consent of the Parties and the approval of such amendment, change or modification by each Party’s counsel. No waiver of any right hereunder shall be effective unless such waiver is signed in writing by the Party against whom such waiver is sought to be enforced.

(b) No failure or delay by either Party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege.

(c) No waiver or approval hereunder shall, except as may otherwise be stated in such waiver or approval, be applicable to subsequent transactions. No waiver or approval hereunder shall require any similar or dissimilar waiver or approval thereafter to be granted hereunder. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by applicable law.

SECTION 15. Notices .

All notices, consents, waivers and other communications hereunder shall be in writing and shall be delivered in accordance with Section 9.3 of the Purchase Agreement.

SECTION 16. Severability .

If one or more provisions of this Agreement are held to be invalid, illegal or unenforceable by a court of competent jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision of this Agreement, which shall remain in full force and effect, and the Parties shall replace such invalid, illegal or unenforceable provision with a new provision permitted by Applicable Law and having an economic effect as close as possible to the invalid, illegal or unenforceable provision. Any provision of this Agreement held invalid, illegal or unenforceable only in part or degree by a court of competent jurisdiction shall remain in full force and effect to the extent not held invalid, illegal or unenforceable.

SECTION 17. Headings and Captions .

The headings and captions in this Agreement have been inserted for convenience of reference only, are not to be considered a part hereof and shall in no way modify or restrict any of the terms or provisions hereof.

SECTION 18. Governing Law; Jurisdiction .

(a) This Agreement shall be governed by, and construed, interpreted and enforced in accordance with, the internal substantive laws of the State of New York, USA without giving effect to the rules thereof relating to conflicts of law thereof (other than Section 5-1401 of the General Obligations Law of the State of New York) and the obligations, rights and remedies of the Parties hereunder shall be determined in accordance with such laws. Each Party unconditionally and irrevocably consents to the exclusive jurisdiction of the courts of the State of New York, USA located in the County of New York and the Federal district court for the Southern District of New York located in the County of New York with respect to any suit, action or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby. Each Party hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection that it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement in any court referred to in this Section 18(a) . Each Party hereby irrevocably waives, to the fullest extent permitted by Applicable Law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. Each Party agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by Applicable Law.

(b) Each Party hereby irrevocably consents to service of process in the manner provided for notices in Section 15 . Nothing in this Agreement will affect the right of any party hereto to serve process on the other Party in any other manner permitted by Applicable Law. Each of the Parties waives personal service of any summons, complaint or other process, which may be made by any other means permitted by New York law.

SECTION 19. Waiver of Jury Trial .

EACH PARTY HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE OTHER PARTY HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE OTHER PARTY HERETO WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTY HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 19 .

SECTION 20. Counterparts; Effectiveness .

This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement shall become effective when each Party shall have received a counterpart hereof signed by the other Party. Any counterpart may be executed by facsimile or other electronic transmission, and such facsimile or other electronic transmission shall be deemed an original.

[SIGNATURE PAGE FOLLOWS]

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the date first above written.

INFINITY PHARMACEUTICALS, INC.

By: /s/Seth A. Tasker ______________________________

Name: Seth A. Tasker

Title: VP, General Counsel & Secretary

HCR COLLATERAL MANAGEMENT, LLC

By: /s/John Urquhart _______________________________
Name: John Urquhart
Title: Partner

SCHEDULES AND EXHIBITS OMITTED PURSUANT TO ITEM 601(a)(5) of REGULATION S-K

Schedule 2(b) Patents

Schedule 5(a) Form of Financing Statement

Schedule 5(b) Filing Offices

Schedule 5(d) Office Locations, Type and Jurisdiction of Organization

Schedule 5(e) Name Changes

Exhibit I Special Power of Attorney

ActiveUS 171605493v.9

OFFICE LEASE

1100 MASSACHUSETTS AVENUE, CAMBRIDGE, MA

Landlord : Sun Life Assurance Company of Canada

Tenant : Infinity Pharmaceuticals, Inc.

Date : April 3, 2019

This Lease consists of four parts:

Part I Cover Sheet

Part II Standard Lease Provisions

Part III Additional Provisions (if any) and

Part IV Exhibits

EXHIBIT A - Floor Plan of Premises

EXHIBIT B - Tenant Improvements

EXHIBIT C - Rules and Regulations

EXHIBIT D-1 – Letter of Credit Criteria

EXHIBIT D-2- Approved Letter of Credit

EXHIBIT E – Notice of Lease

EXHIBIT F – Termination of Notice of Lease

EXHIBIT G – Excluded Expenses

EXHIBIT H – Sample Janitorial Specs

PART I

COVER SHEET

The terms listed below shall have the following meanings throughout this Lease:



DATE OF LEASE:	April 3, 2019, the date on which Landlord has signed this Lease
LANDLORD:	Sun Life Assurance Company of Canada, a Canadian corporation
TENANT :	Infinity Pharmaceuticals, Inc., a Delaware corporation
TENANT'S ADDRESS :	Prior to occupancy of the Premises: 784 Memorial Drive, Cambridge, MA 02139 After occupancy of the Premises: The Premises With a copy to: DLA Piper LLP (US) 33 Arch Street Boston, Massachusetts 02110 Attn: Geoff Howell
MANAGER :	Paradigm Properties
MANAGER'S ADDRESS :	93 Summer Street, Boston, MA 02110
PREMISES :	The area consisting of approximately 10,097 rentable square feet on the fourth floor of the Building, as shown on Exhibit A attached hereto
BUILDING:	The building in which the Premises are located, with a street address of 1100 Massachusetts Avenue, Cambridge, Massachusetts 02138 and consisting of a total of approximately 46,960 square feet of space
PROPERTY :	The Building, other improvements and land (the "Lot")
TENANT'S PERCENTAGE :	21.5% (10,097 rentable square feet in the Premises divided by 46,960 rentable square feet in the Building)
PERMITTED USES:	Office purposes
TENANT IMPROVEMENTS :	See Exhibit B attached hereto



COMMENCEMENT DATE :	Date of Lease
RENT COMMENCEMENT DATE:	August 1, 2019
TERM :	A term commencing on the Commencement Date and expiring five (5) years after the Rent Commencement Date
BASE RENT :	Tenant shall pay Base Rent for the Premises in accordance with the following schedule (beginning on the Rent Commencement Date):
	Months	Rent Per Month	Annual Rent	Annual Rent p.r.s.f.
	1-12	$47,960.75	$575,529.00	$57.00
	13-24	$49,399.57	$592,794.87	$58.71
	25-36	$50,881.56	$610,578.72	$60.47
	37-48	$52,408.01	$628,896.08	$62.29
	49-60	$53,980.25	$647,762.96	$64.15

SECURITY DEPOSIT / LETTER OF CREDIT :	$300,000.00 (See Section 4 of Part III of this Lease)
COMMERCIAL GENERAL LIABILITY INSURANCE AMOUNT :	$3,000,000 combined single limit
BROKER(S) :	CBRE/New England (Landlord) and CBRE/New England (Tenant)
GUARANTOR(S):	N/A

TABLE OF CONTENTS OF STANDARD LEASE PROVISIONS

Page

ARTICLE I: PREMISES

1.1 Premises 1

1.2 Common Areas 1

ARTICLE II: TERM

2.1 Commencement 1

ARTICLE III: RENT

3.1 Base Rent 2

3.2 Additional Rent for Operating Expenses, Taxes, and Capital Costs 2

ARTICLE IV: DELIVERY OF PREMISES AND TENANT IMPROVEMENTS

4.1 Condition of Premises 4

4.2 Delay in Possession 5

4.3 Delivery and Acceptance of Possession 5

4.4 Early Occupancy 5

ARTICLE V: ALTERATIONS AND TENANT'S PERSONAL PROPERTY

5.1 Alterations 5

5.2 Tenant's Personal Property 6

ARTICLE VI: LANDLORD'S COVENANTS

6.1 Services Provided by Landlord 7

6.2 Repairs and Maintenance 7

6.3 Quiet Enjoyment 8

6.4 Insurance 8

ARTICLE VII: TENANT'S COVENANTS

7.1 Repairs, Maintenance and Surrender 8

7.2 Use 8

7.3 Assignment; Sublease 9

7.4 Indemnities 10

7.5 Tenant's Insurance 10

7.6 Payment of Taxes 11

7.7 Environmental Assurances 11

7.8 Americans With Disabilities Act 12

ARTICLE VIII: DEFAULT

8.1 Default 12

8.2 Remedies of Landlord and Calculation of Damages 13

ARTICLE IX: CASUALTY AND EMINENT DOMAIN

9.1 Casualty 15

9.2 Eminent Domain 16

ARTICLE X: RIGHTS OF PARTIES HOLDING SENIOR INTERESTS

10.1 Subordination 17

10.2 Mortgagee's Consent 17

ARTICLE XI: GENERAL

11.1 Representations by Tenant 17

11.2 Notices 17

11.3 No Waiver or Oral Modification 17

11.4 Severability 17

11.5 Requests by Tenant 18

11.6 Estoppel Certificate and Financial Statements 18

11.7 Waiver of Liability 18

11.8 Execution; Prior Agreements and No Representations 18

11.9 Brokers 18

11.10 Successors and Assigns 19

11.11 Applicable Law and Lease Interpretation 19

11.12 Costs of Collection, Enforcement and Disputes 19

11.13 Holdover 19

11.14 Force Majeure 19

11.15 Limitation On Liability 19

11.16 Notice of Landlord's Default 20

11.17 Lease not to be Recorded 20

11.18 Letter of Credit 20

11.19 Guaranty of Lease 20

11.20 OFAC 20

11.21 Authority of Landlord 20

PART II STANDARD LEASE PROVISIONS

ARTICLE I PREMISES

1.1 Premises .

(a) Demise of Premises . This Lease (the "Lease") is made and entered into by and between Landlord and Tenant and shall become effective as of the Date of Lease. In consideration of the mutual covenants made herein, Landlord hereby leases to Tenant, and Tenant hereby leases from Landlord, the Premises, on all of the terms and conditions set forth in this Lease.

(b) Relocation . Intentionally omitted.

(c) Access to Premises . Landlord shall have reasonable access to the Premises, at any time during the Term, to inspect Tenant's performance hereunder and to perform any acts required of or permitted to Landlord herein, including, without limitation, (i) the right to make any repairs or replacements Landlord deems necessary, (ii) the right to show the Premises to prospective purchasers and mortgagees, and (iii) during the last nine (9) months of the Term, the right to show the Premises to prospective tenants. Landlord shall at all times have a key to the Premises, and Tenant shall not change any existing lock(s), nor install any additional lock(s) without Landlord's prior consent. Except in the case of any emergency, any entry into the Premises by Landlord shall be on reasonable advance notice, and Tenant shall be provided the opportunity to have a representative accompany any such entry. Tenant may designate a secure area or areas within the Premises, not to exceed 5% of the Premises in the aggregate, where Landlord access will not be permitted without Tenant accompaniment other than in the case of an emergency.

1.2 Common Areas . Tenant shall have the right to use, in common with other tenants, the Building's common lobbies, corridors, stairways, and elevators necessary for access to the Premises, and the common walkways and driveways necessary for access to the Building, the common toilets, corridors and elevator lobbies of any multi-tenant floor, and the parking areas for the Building ("Common Areas"). Tenant's use of the Building parking areas shall be on an unreserved, non-exclusive basis and solely for Tenant's employees and visitors. Subject to Section 2 of Part III of this Lease, Landlord shall not be liable to Tenant, and this Lease shall not be affected, if any parking rights of Tenant hereunder are impaired by any law, ordinance or other governmental regulation imposed after the Date of Lease. If Landlord grants to any other tenant the exclusive right to use any particular parking spaces, neither Tenant nor its visitors shall use such spaces. Use of the Common Areas shall be only upon the terms of this Lease and the Rules and Regulations (as defined below). Landlord may at any time and in any manner make any changes, additions, improvements, repairs or replacements to the Common Areas that it considers desirable, provided that Landlord shall use reasonable efforts to minimize interference with Tenant's normal activities. Such actions of Landlord shall not constitute constructive eviction or give rise to any rent abatement or liability of Landlord to Tenant.

ARTICLE II TERM

2.1 Commencement. The Term of this Lease shall commence on the Commencement Date.

ARTICLE III RENT

3.1 Base Rent .

(a) Payment of Base Rent . Commencing on the Rent Commencement Date, Tenant shall pay the Base Rent each month in advance on the first day of each calendar month during the Term. If the Rent Commencement Date is other than the first day of the month, Tenant shall pay a proportionate part of such monthly installment on the Rent Commencement Date. An adjustment in the Base Rent for the last month of the Term shall be made if the Term does not end on the last day of the month. All payments shall be made to “Sun Life Assurance Company of Canada” at Manager's Address or to such other party or to such other place as Landlord may designate in writing, without prior demand and without abatement, deduction or offset except as expressly provided in this Lease. All charges to be paid by Tenant hereunder, other than Base Rent, shall be considered “Additional Rent” for the purposes of this Lease, and the words "rent" or "Rent" as used in this Lease shall mean both Base Rent and Additional Rent unless the context specifically or clearly indicates that only Base Rent is referenced.

(b) Late Payments . Tenant acknowledges that the late payment by Tenant to Landlord of any rent or other sums due under this Lease will cause Landlord to incur costs not contemplated by this Lease, the exact amount of such costs being extremely difficult and impracticable to ascertain. Therefore, if any rent or other sum due from Tenant is not received when due, Tenant shall pay to Landlord no later than ten (10) calendar days after the rental due date an additional sum equal to 5% of such overdue payment. In addition to such late charge, all such delinquent rent or other sums due to Landlord, including the late charge, shall bear interest beginning on the date such payment was due at the rate of ten percent (10%) per annum (provided that, should it become unlawful for Landlord to charge Tenant interest at a rate of ten percent (10%) per annum, then interest shall be charged at the maximum lawful rate permitted to be charged by Landlord). The notice and cure period provided in Paragraph 8.1(a) shall apply to the foregoing late charges and interest. If payments of any kind are returned for insufficient funds Tenant shall pay to Landlord an additional handling charge of $50.00. In addition, in the event that an Event of Default (as defined in Article VIII below) occurs, all unamortized abated rent which would have been due for the period of time between the Commencement Date and the Rent Commencement Date shall become immediately due and payable.

(c) Delivery of Letter of Credit; Good Standing. Upon Tenant’s execution hereof, Tenant shall deliver to Landlord (i) the Letter of Credit (hereinafter defined), and (ii) a certificate from the Secretary of State of Delaware confirming that Tenant is in good standing in Delaware.

3.2 Additional Rent for Operating Expenses, Taxes, and Capital Costs .

(a) Additional Rent . Beginning on the Commencement Date, Tenant shall pay to Landlord, as Additional Rent, for each Lease Year, the sum of (1) the Operating Expenses, and (2) the Capital Costs, times Tenant's Percentage ("Tenant's Share of Expenses").

(b) Definitions . As used herein, the following terms shall have the following meanings:

(i) Lease Year . Each successive 12 month period following the Commencement Date.

(ii) Operating Expenses . The total cost of operation of the Property, including, without limitation, (1) premiums and commercially reasonable deductibles for customary insurance carried with respect to the Property; (2) all costs of supplies, materials, equipment, and utilities used in or related to the operation, maintenance, and repair of the Property or any part thereof (including utilities, unless the cost of any utilities is to be paid for separately by Tenant pursuant to Paragraph 6.1(b)); (3) all labor costs, including

without limitation, salaries, wages, payroll and other employment taxes, unemployment insurance costs, and employee benefits; (4) all maintenance, management, janitorial, inspection, legal, accounting, and service agreement costs related to the operation, maintenance, and repair of the Property or any part thereof, including, without limitation, service contracts with independent contractors; (5) Taxes; (6) insurance endorsements or insurance policies purchased in order to repair, replace and re-commission the Building for re-certification pursuant to any Green Agency Rating (as defined below)(or, in the event the Building has not achieved any certification under any Green Agency Rating, such insurance that is purchased in order to facilitate rebuilding the building upon a casualty so as to achieve such certification) or support achieving energy and carbon reduction targets; and (7) all costs of maintaining, managing, reporting, commissioning, and recommissioning the Building or any part thereof that was designed and /or built to be sustainable and conform with any Green Agency Rating, and all costs of applying, reporting and commissioning the Building or any part thereof to seek certification under any Green Agency Rating. Any of the above services may be performed by Landlord or its affiliates, provided that fees for the performance of such services shall be reasonable and competitive with fees charged by unaffiliated entities for the performance of such services in comparable buildings in the area. Operating Expenses shall not include any of the expenses listed on Exhibit G attached hereto. In the event that the Building is less than 95% occupied during any year, then in determining the Operating Expenses, all Operating Expenses that may reasonably be determined to vary in accordance with the occupancy level of the Building, shall be grossed up to reflect 95% occupancy. The phrase “ Green Agency Ratings ” shall mean ay one or more of the following ratings, as same may be in effect or amended or supplemented from time to time: The U.S. EPA’s Energy Star® rating and/or Design to Earn Energy Star, the Green Building Initiative’s Green Globes ^TM for Continual Improvement of Existing Buildings (Green Globes ^TM -CIEB), the U.S. Green Building Council’s Leadership in Energy and Environmental Design (LEED) rating system, LEED EBOM (existing buildings operations and maintenance) and any applicable substitute third party or government mandated rating systems.

(iii) Taxes . Any form of assessment, rental tax, license tax, business license tax, levy, charge, tax or similar imposition imposed by any authority having the power to tax, including any city, county, state or federal government, or any school, agricultural, lighting, library, drainage, or other improvement or special assessment district, as against the Property or any part thereof or any legal or equitable interest of Landlord therein, or against Landlord by virtue of its interest therein, and any reasonable costs incurred by Landlord in any proceedings for abatement thereof, including, without limitation, attorneys' and consultants' fees, and regardless of whether any abatement is obtained. Real estate transfer taxes and Landlord's income and franchise taxes are excluded from Taxes.

(iv) Capital Costs . The annual cost of any capital improvements to the Property made by Landlord that are designed (x) to increase safety where required by code, ordinance or similar law, rule or regulation imposed after the Commencement Date, (y) to reduce Operating Expenses, or (z) to comply with any governmental law or regulation imposed after the Commencement Date, amortized over the useful life of such item as Landlord shall reasonably determine, together with a fixed annual interest rate equal to the Prime Rate plus 2% on the unamortized balance. The Prime Rate shall be the prime rate published in the Wall Street Journal on the date the construction is completed.

(c) Estimate of Tenant's Share of Expenses . Before each Lease Year, and from time to time as Landlord deems appropriate, Landlord shall give Tenant estimates for the coming Lease Year of Operating Expenses, Capital Costs, and Tenant's Share of Expenses. Landlord shall make reasonable efforts to provide estimates fifteen (15) days before the beginning of each Lease Year. Tenant shall pay one twelfth (1/12) of the estimated amount of Tenant's Share of Expenses with each monthly payment of Base Rent during the Lease Year. Each Lease Year, Landlord shall give Tenant a statement (the "Share of Expenses Statement") showing the Operating Expenses and Capital Costs for the prior Lease Year, a calculation of Tenant's Share of Expenses due for the prior Lease Year and a summary of amounts already paid by Tenant for the prior Lease Year. Landlord shall make reasonable efforts to provide the Share of Expenses Statement within one hundred twenty (120) days after the end of the prior Lease Year. Any underpayment by Tenant shall be paid to Landlord within thirty (30) days after delivery of the Share of Expenses Statement; any overpayment shall be credited against the next installment of Base Rent due, provided that any overpayment shall be paid to Tenant within thirty (30) days if the Term has ended. No delay by Landlord in providing any Share of Expenses Statement shall be deemed a waiver of Tenant's obligation to pay Tenant's Share of Expenses. Notwithstanding anything contained in this paragraph, the total rent payable by Tenant shall in no event be less than the Base Rent.

(d) Audit of Landlord's Expense Records .

(i) Not more than once per year, Tenant, at Tenant's sole expense, may audit Landlord's records relating to Operating Expenses, Taxes and Capital Costs at the Property for the preceding Lease Year only, by giving Landlord written notice of its desire to perform such an audit sixty (60) days after Tenant receives Landlord's Share of Expenses Statement. If Tenant fails to give such notice within such sixty (60) day period, the Share of Expenses Statement shall be deemed to be final and accepted by Tenant. Any such audit by Tenant shall be performed during normal business hours at Manager's office and shall not be undertaken by any firm which is compensated based on a percentage of Operating Expenses disallowed. If Tenant's audit establishes that Tenant has overpaid Tenant's Share of Expenses for the preceding Lease Year, Landlord shall reimburse Tenant for such overpayment within thirty (30) days thereafter. If Tenant's audit establishes that Tenant has underpaid Tenant's Share of Expenses for the preceding Lease Year, Tenant shall pay the full amount of such underpayment to Landlord within thirty (30) days thereafter. If Tenant’s audit reveals that Landlord overcharged Tenant by more than 5% for Tenant’s Share of Expenses, then Landlord shall reimburse Tenant for the reasonable out of pocket cost of Tenant’s audit.

(ii) If Landlord does not agree with Tenant’s audit, Landlord shall provide Tenant with notice of such disagreement (“Disagreement Notice”) and Tenant shall negotiate with each other in good faith to attempt to resolve the dispute. If the dispute is not settlement by agreement between the two parties within thirty (30) days after delivery of the Disagreement Notice to Tenant, the dispute shall be determined by a firm of independent certified public accountants (the “ Accountants ”) which firm shall be

mutually acceptable to Landlord and Tenant. The Accountants, Landlord and Tenant each shall have the right to review all records relating to the disputed items, and the parties shall be granted a hearing before the Accountants prior to the rendering of a determination by the Accountants. The determination of any such matter by the Accountants shall be final and binding upon both Landlord and Tenant, and the expenses involved in such determination shall be borne by the party against whom the decision is rendered by the Accountants; provided, if more than one item is disputed and the decision shall be against such party in respect of any item or items so disputed, the expenses shall be appointed based on the weighted average dollar amounts allocated to such items. If Landlord and Tenant are unable to agree upon and select the Accountants, Landlord and Tenant shall each select an Accountant, and such Accountants shall jointly select a third Accountant, and the third Accountant shall act as the “Accountant” for purposes of this Section.

ARTICLE IV DELIVERY OF PREMISES AND TENANT IMPROVEMENTS

4.1 Condition of Premises . Prior to the Commencement Date, Landlord shall remove the supplemental HVAC tower in the Premises; otherwise, Landlord shall deliver the Premises to Tenant in AS-IS condition. Landlord represents that, to Landlord’s knowledge, as of the Date of Lease, there are no matters of record which would prohibit Tenant from using the Premises for the Permitted Uses set forth in Part I of this Lease.

4.2 Delay in Possession . If Landlord is unable to deliver possession of the Premises to Tenant on or before the Commencement Date for any reason whatsoever, Landlord shall not be liable to Tenant for any loss or damage resulting therefrom and this Lease shall continue in full force and effect.

4.3 Delivery and Acceptance of Possession . Tenant's taking possession of any part of the Premises for the performance of its Tenant Improvements shall be deemed to be an acceptance and an acknowledgment by Tenant that (i) Tenant has had an opportunity to conduct, and has conducted, such inspections of the Premises as it deems necessary to evaluate its condition, (ii) except as otherwise specifically provided herein, Tenant accepts possession of the Premises in its then existing condition, "as-is", including all patent and latent defects, and (iii) neither Landlord, nor any of Landlord's agents, has made any oral or written representations or warranties with respect to such matters other than as set forth in this Lease.

4.4 Early Occupancy . N/A

ARTICLE V ALTERATIONS AND TENANT'S PERSONAL PROPERTY

5.1 Alterations .

(a) Landlord's Consent . Tenant shall not make any alterations, additions, installations, substitutes or improvements ("Alterations") in and to the Premises without first obtaining Landlord's written consent (the Tenant Improvements to be constructed by Tenant pursuant to Exhibit B of this Lease shall not be considered “Alterations”). Landlord shall not unreasonably withhold or delay its consent; provided, however, that Landlord shall have no obligation to consent to Alterations of a structural nature or Alterations that would violate any certificate of occupancy for the Premises or any applicable law, code or ordinance or the terms of any superior lease or mortgage affecting the Property. No consent given by Landlord shall be deemed as a representation or warranty that such Alterations comply with laws, regulations and rules applicable to the Property ("Laws"). Tenant shall pay Landlord's out of pocket costs of reviewing proposed Alterations and any other costs that may be incurred by Landlord as a result of such Alterations (excluding inspection costs, construction management costs, and similar costs which are covered by the 3% construction management fee, discussed below). Landlord shall charge a construction management fee equal to three

percent (3%) of the total cost of construction of the improvements. Such construction management fee shall be paid by Tenant, along with any construction costs pursuant to the terms hereof. Notwithstanding the foregoing, Tenant shall have the right to make non-structural, non-MEP (mechanical, electrical and plumbing) Alterations (including painting and carpeting) without the consent of Landlord (the “Permitted Alterations”), so long as (i) Tenant notifies Landlord in writing of its intention to do such work at least ten (10) days prior to the initiation of such work; (ii) the costs of such Alterations are less than $75,000.00 in any one Lease Year and are consistent in quality with the finish of the Premises; (iii) such Alterations do not cause additional loads on the Building and its systems in excess of the capacity serving the Premises and are not visible from the exterior of the Premises; (iv) Tenant obtains and furnishes to Landlord any required building permits; and (v) Tenant provides Landlord with the “as-built” plans and specifications of any such Alterations upon completion of any such Alterations to the extent that a building permit was required for the same, or if a building permit was not required for the same, Tenant provides Landlord with a detailed description of the Alterations completed.

(b) Workmanship . All Alterations shall be done at reasonable times in a first-class workmanlike manner, by contractors reasonably approved by Landlord, and according to plans and specifications previously approved by Landlord. All work shall be done in compliance with all Laws, and with all regulations of the Board of Fire Underwriters or any similar insurance body or bodies. Tenant shall be solely responsible for the effect of any Alterations on the Building's structure and systems, notwithstanding that Landlord has consented to the Alterations, and shall reimburse Landlord on demand for any out of pocket costs incurred by Landlord by reason of any faulty work done by Tenant or its contractors. Upon completion of Alterations, Tenant shall provide Landlord with a complete set of "as‑built" plans to the extent that a building permit was required for the same, or if a building permit was not required for the same, Tenant shall provide Landlord with a detailed description of the Alterations completed.

(c) Mechanics and Other Liens . Tenant shall keep the Property and Tenant's leasehold interest therein free of any liens or claims of liens, and shall discharge any such liens within fifteen (15) days of their filing. Before commencement of any work, Tenant shall provide evidence of such insurance as Landlord may require, naming Landlord as an additional insured. Tenant shall indemnify Landlord and hold it harmless from and against any cost, claim, or liability arising from any work done by or at the direction of Tenant.

(d) Removal of Alterations . Upon expiration or termination of this Lease, Tenant shall remove all Alterations, make any repair required by such removal, and restore the Premises to its condition prior to installation of the Alterations. Notwithstanding the foregoing, if Landlord receives and approves a written request from Tenant at the time Tenant requests approval for Alterations (or at the time Tenant installs such Alterations, in the event of Permitted Alterations), Tenant will not be obligated to remove such Alterations as Landlord agrees in writing may remain in the Premises upon expiration or termination of the Lease. Notwithstanding anything to the contrary in this Lease, Tenant shall have no obligation to remove any Tenant Improvements at the expiration or termination of this Lease.

(e) Sustainability . If the Building hereafter becomes certified under certain Green Agency Ratings, or if Landlord otherwise implements a Building-wide sustainable building practices, Landlord shall provide written notice to Tenant (the “Green Certification Notice”). In the event Landlord provides the Green Certification Notice, then thereafter any and all Alterations that affects at least fifty percent (50%) of the Premises will be performed in accordance with Landlord’s sustainability practices (as same may be in effect or amended or supplemented from time to time) and any Green Agency Ratings, as the same may change from time to time. In the event Landlord provides the Green Certification Notice, then thereafter Tenant further agrees to engage a qualified third party LEED or Green Globe Accredited

Professional or similarly qualified professional during the design phase through implementation of any Alterations covered by the preceding sentence, in order to review all plans, material procurement, demolition, construction and waste management procedures to ensure they are in full conformance to Landlord’s sustainability practices, as aforesaid, and Tenant agrees to register for LEED for Commercial Interiors certification for such Alterations.

5.2 Tenant's Personal Property .

(a) In General . Tenant may provide and install, and shall maintain in good condition, all trade fixtures, personal property, equipment, furniture and moveable partitions required in the conduct of its business in the Premises. All of Tenant's personal property, trade fixtures, equipment, furniture, movable partitions, and any Alterations not affixed to the Premises shall remain Tenant's property ("Tenant's Property").

(b) Landlord's Lien . Intentionally omitted.

(c) Payment of Taxes . Tenant shall pay before delinquency all taxes levied against Tenant's Property and any Alterations installed by or on behalf of Tenant to the extent separately assessed as reasonably demonstrated to Tenant. If any such taxes are levied against Landlord or its property, or if the assessed value of the Premises is increased by the inclusion of a value placed on Tenant's Property as evidenced by the records of the tax assessor, Landlord may, if Tenant fails to pay the same within 30 days following invoice, pay such taxes, and Tenant shall upon demand repay to Landlord the portion of such taxes resulting from such increase.

ARTICLE VI LANDLORD'S COVENANTS

6.1 Services Provided by Landlord .

(a) Services . Landlord shall provide services, utilities, facilities and supplies equal in quality to those customarily provided by landlords in comparable buildings of a similar design in the area in which the Property is located, including janitorial and cleaning services and snow and ice removal. Landlord’s sample janitorial specs are attached hereto as Exhibit H (the “Sample Janitorial Specs”), provided that the actual janitorial services provided by Landlord are subject to change from time to time, and the attachment of the Sample Janitorial Specs to the Lease shall not impose any obligation upon Landlord to provide services in accordance with the Sample Janitorial Specs. Landlord will replace light bulbs at Tenant’s request and at Tenant’s expense for parts and labor. Landlord shall provide reasonable additional Building operation services upon reasonable advance request of Tenant at the cost to provide the same as reasonably evidenced by Landlord (including overtime costs, if applicable). Landlord shall furnish space heating and cooling as normal seasonal changes may require to provide reasonably comfortable space temperature and ventilation for occupants of the Premises under normal business operation, daily from 8:00 a.m. to 6:00 p.m. (Saturdays from 9:00 a.m. to noon, but only if requested by Tenant by 5:00 p.m. on the immediately preceding Friday), Sundays and legal state holidays excepted. If Tenant shall require space heating or cooling outside the hours and days above specified, Landlord shall provide such service at Tenant's expense based on actual costs to provide such services (currently $55.00 per hour, subject to change) (plus overtime costs in the event Landlord’s property manager receives Tenant’s request for overtime space heating or cooling outside of regular business hours and Landlord’s property manager has to stay late at or return to the Property in order to furnish such requested overtime space heating or cooling) in accordance with any advance notice requirements established from time to time by Landlord.

(b) Utilities . If the Premises are separately metered as of the Commencement Date, Tenant shall pay all charges for all separately metered and separately billed gas, electricity, telephone and other utility services used, rendered or supplied upon or in connection with the Premises directly to the provider therefor and shall indemnify Landlord against liability or damage on such account. Notwithstanding anything herein to the contrary, Landlord shall cause the Premises to be separately metered for electricity as of the Commencement Date. The costs of any utilities which are not separately metered shall be included as an Operating Expense. If Landlord has reason to believe that Tenant is using a disproportionate share of any utility which is not separately metered, Landlord may, at Landlord's election, and at Landlord's expense, conduct an engineering audit to estimate Tenant's actual use. If such audit determines that Tenant is using more than its proportionate share of any utility and Tenant does not cease such excess use following notice from Landlord, Tenant shall reimburse Landlord for the cost of the audit and Tenant shall pay for any use above its proportionate share as Additional Rent. Landlord shall have the right from time to time, in its reasonable discretion, to select the company or companies providing electricity, gas, fuel, or any other utility services to the Building (provided that Tenant shall be permitted to select its own telecommunications provider). Landlord reserves the right to change electricity providers for the Building at any time and to purchase green or renewable energy. Tenant shall be required to provide a copy of the electric bill for the Premises to Landlord’s Property Manager each month, and, if requested by Landlord, Tenant shall also be required to submit to Landlord any other electricity consumption data and costs in a format deemed reasonably acceptable by Landlord.

(c) Graphics and Signs . Landlord shall provide, at Landlord’s expense as part of the Tenant Allowance, (i) Building-standard identification (utilizing Tenant’s logo, to the extent possible with Landlord’s current sign package) of Tenant's name and suite numerals at the main entrance door to the Premises, and (ii) Building-standard directory identification in the lobby directory. All signs, notices, graphics and decorations of every kind or character which are visible in or from the Common Areas or the exterior of the Premises shall be subject to Landlord's prior written approval, which Landlord shall have the right to withhold in its absolute and sole discretion.

(d) Right to Cease Providing Services . In case of Force Majeure or on a temporary basis in connection with any repairs, alterations or additions to the Property or the Premises, or any other acts required of or permitted to Landlord herein, Landlord may reduce or suspend service of the Building's utilities, facilities or supplies, provided that Landlord shall use reasonable diligence to restore such services, facilities or supplies as soon as possible. No such reduction or suspension shall constitute an actual or constructive eviction or disturbance of Tenant's use or possession of the Premises, provided, however, that if such reduction or suspension renders the Premises or access to the same unusable for Tenant’s business, for a period in excess of five (5) consecutive business days, Base Rent and Tenant’s Share of Expenses shall abate until utility service is restored.

6.2 Repairs and Maintenance . Landlord shall repair and maintain (i) the Common Areas, (ii) the structural portions of the Building, (iii) the exterior walls of the Building (including exterior windows and glazing), (iv) the roof, and (v) the basic plumbing, electrical, mechanical and heating, ventilating and air-conditioning systems serving the Premises, in the manner and to the extent customarily provided by landlords in similar buildings in the area. Tenant shall pay for such repairs as set forth in Paragraph 3.2. If any maintenance, repair or replacement is required because of any act, omission or neglect of duty by Tenant or its agents, employees, invitees or contractors, the cost thereof shall be paid by Tenant to Landlord as Additional Rent within thirty (30) days after billing.

6.3 Quiet Enjoyment . So long as Tenant pays the rent and performs its other obligations within applicable notice and cure periods, Landlord shall permit Tenant to peacefully and quietly hold and enjoy the Premises, subject to the provisions of this Lease.

6.4 Insurance . Landlord shall insure the Property, including the Building (but not Tenant Improvements and approved Alterations, if any), against damage by fire and standard extended coverage perils, and shall carry public liability insurance, all in such reasonable amounts as would be carried by a prudent owner of a similar building in the area. Landlord may carry any other forms of insurance as it or its mortgagee may deem advisable. Insurance obtained by Landlord shall not be in lieu of any insurance required to be maintained by Tenant. Landlord shall not carry any insurance on Tenant's Property, and shall not be obligated to repair or replace any of Tenant's Property.

ARTICLE VII TENANT'S COVENANTS

7.1 Repairs, Maintenance and Surrender .

(a) Repairs and Maintenance . To the extent not the responsibility of Landlord pursuant to this Lease, Tenant shall keep the Premises in good order and condition, reasonable wear and tear and casualty excepted, and shall promptly repair any damage to the Premises excluding glass in exterior walls. Tenant shall also repair any damage to the rest of the Property, including glass in exterior walls, if such damage is attributable to Tenant's negligence or misuse caused by Tenant or its agents, employees, or invitees, licensees or independent contractors. All repairs shall be made in a workmanlike manner and any replacements or substitutions shall be of a quality, utility, value and condition similar to or better than the replaced or substituted item. All Tenant lighting purchases (including, without limitation, lightbulbs) must comply with Landlord’s sustainability practices and, at Landlord’s request, shall be reported to Landlord in a format reasonably designated by Landlord. In the event Landlord provides Tenant with the Green Certification Notice, then thereafter, all maintenance and repairs made by Tenant must comply with Landlord’s sustainability practices and any applicable Green Agency Rating, as the same may change from time to time.

(b) Surrender . At the end of the Term, Tenant shall peaceably surrender the Premises in good order, repair and condition, except for reasonable wear and tear, and Tenant shall remove Tenant's Property and (if required by Landlord in accordance with this Lease) any Alterations, repairing any damage caused by such removal and restoring the Premises and leaving them clean and neat. At the end of the Term, Tenant shall “cut and remove” all cabling and telecommunications equipment which was installed by or on behalf of Tenant and runs within the Premises, and Tenant shall “cut and stay” all cabling and telecommunications equipment which was installed by or on behalf of Tenant and runs within the Building core. Any property not so removed within ten (10) days following notice to Tenant shall be deemed abandoned and may be retained by Landlord or may be removed and disposed of by Landlord in such manner as Landlord shall determine. Tenant shall be responsible for costs and expenses incurred by Landlord in removing any Alterations and disposing of any such abandoned property, making any incidental repairs and replacements to the Premises, and restoring the affected areas of the Premises, in each case to the extent Tenant fails to do so as and when required under this Lease.

(c) Supplemental Utilities Equipment . Tenant shall not install any supplemental HVAC, space heaters or other utilities or energy-intensive equipment (“Supplemental Utilities Equipment”) in the Premises without Landlord’s prior written consent. In the event that Landlord consents in writing to such installation, Tenant shall be responsible, all at its sole cost and expense, for the installation, maintenance, and repair of any of Supplemental Utilities Equipment, and, at Landlord’s election made at the time Landlord

approves such installation (provided that Tenant shall have asked Landlord in writing at the time Tenant requests consent for such installation whether such Supplemental Utilities Equipment must be removed from the Premises at the expiration or earlier termination of the Term), shall remove same from the Premises upon the expiration or termination of the Lease Term at Tenant’s sole cost and expense. Tenant agrees that it will maintain and repair any Supplemental Utilities Equipment, and major components thereof, in first-class condition, and any such equipment will be operated on sensors or timers that limit the operation of such Supplemental Utilities Equipment to hours of occupancy in the areas immediately adjacent to the occupying personnel.

7.2 Use .

(a) General Use . Tenant shall use the Premises only for the Permitted Uses, and shall not use or permit the Premises to be used in violation of any law or ordinance or of any certificate of occupancy issued for the Building or the Premises, or of the Rules and Regulations. Tenant shall not cause, maintain or permit any nuisance in, on or about the Property, or commit or allow any waste in or upon the Property. Tenant shall not use utility services in excess of amounts reasonably determined by Landlord to be within the normal range of demand for the Permitted Uses. In the event Landlord provides Tenant with the Green Certification Notice, then thereafter, Tenant shall not use or operate the Premises in any manner that will cause the Building or any part thereof not to conform with Landlord’s sustainability practices or the certification of the Building issued pursuant to any Green Agency Rating

(b) Obstructions and Exterior Displays . Tenant shall not obstruct any of the Common Areas or any portion of the Property outside the Premises, and shall not, except as otherwise previously approved by Landlord, place or permit any signs, decorations, curtains, blinds, shades, awnings, aerials or flagpoles, or the like, that may be visible from outside the Premises. Tenant shall use the standard window covering designated by Landlord for use throughout the Building to cover all windows in the Premises, provided that Tenant shall be permitted to use window coverings selected by Tenant after obtaining Landlord’s prior written consent, which consent shall not be unreasonably withheld so long as such alternate window coverings are consistent with the standard window coverings in the Building.

(c) Floor Load . Tenant shall not place a load upon the floor of the Premises exceeding the load per square foot such floor was designed to carry, as determined by applicable building code.

(d) Compliance with Insurance Policies . Tenant shall not keep or use any article in the Premises, or permit any activity therein, which is prohibited by any insurance policy covering the Building, or would result in an increase in the premiums thereunder.

(e) Rules and Regulations . Tenant shall observe and comply with the rules and regulations attached as Exhibit C (as they may be modified in accordance with this paragraph, the "Rules and Regulations"), and all reasonable, non-discriminatory modifications thereto as made by Landlord and put into effect from time to time by prior written notice to Tenant. Landlord shall not be responsible to Tenant for the violation or non-performance by any other tenant or occupant of the Building of the Rules and Regulations. In the event of a conflict between the terms of this Lease and the Rules and Regulations, the terms of this Lease shall govern.

(f) Sustainability Practices . In the event Landlord provides Tenant with a Green Certification Notice, then thereafter, all of Tenant’s construction and maintenance methods and procedures, material purchases, and disposal of waste must be in compliance with minimum standards and specifications

for tenant interiors as required by such rating, provided that such compliance does not result in more than a de minimis amount of additional costs to Tenant, in addition to all governmental requirements.

(g) Energy/Carbon Reduction . Tenant shall use energy efficient bulbs in task lighting; use of lighting controls; daylighting measures to avoid overlighting interior spaces; closing shades on the south side of the building to avoid over heating the space; turning off lights and equipment at the end of the work day; and purchasing ENERGY STAR® qualified equipment, including but not limited to lighting, office equipment, commercial and residential quality kitchen equipment, vending and ice machines; and purchasing products certified by the U.S. EPA’s Water Sense® program, provided that such compliance does not result in more than a de minimis amount of additional costs to Tenant.

(h) Recycling and Waste Management. Tenant covenants and agrees, at its sole cost and expense: (i) to comply with all present and future governmental requirements regarding the collection, sorting, separation, and recycling of garbage, trash, rubbish and other refuse (collectively, “trash”); (ii) to comply with Landlord’s recycling policy, as stated in the Rules and Regulations (as such policy may be amended or supplemented from time to time), as part of Landlord’s sustainability practices where it may be more stringent than applicable governmental requirements, including without limitation, recycling such categories of items designated by Landlord and transporting such items to any recycling areas designated by Landlord; (iii) to sort and separate its trash and recycling into such categories as are provided by governmental requirements or Landlord’s then-current sustainability practices; (iv) that each separately sorted category of trash and recycling shall be placed in separate receptacles as directed by Landlord; (v) that Landlord reserves the right to refuse to collect or accept from Tenant any waste that is not separated and sorted as required by governmental requirements, and to require Tenant to arrange for such collection at Tenant’s sole cost and expense, utilizing a contractor satisfactory to Landlord; and (vi) that Tenant shall pay all costs, expenses, fines, penalties or damages that may be imposed on Landlord or Tenant by reason of Tenant’s failure to comply with the provisions of this Subsection (h).

7.3 Assignment; Sublease .

(a) General Prohibition . Tenant shall not assign its rights under this Lease nor sublet the whole or any part of the Premises without Landlord's prior written consent, which shall not be unreasonably withheld, conditioned or delayed. Landlord’s consent shall not be considered unreasonably withheld (by way of example and not limitation) if (i) the proposed assignee’s creditworthiness does not meet the same criteria Landlord uses to select comparable Building tenants or if the proposed subtenant does not have sufficient credit to meet its obligations under the sublease as reasonably determined by Landlord; (ii) the proposed subtenant’s or assignee’s business is not suitable for the Building when considering the business of the other tenants and the Building’s profile or reputation; (iii) the proposed subtenant or assignee is already a tenant or occupant of the Building and Landlord has similarly sized space in the Building available for lease; or (iv) Landlord then has available for lease in the Building a similarly sized space. In the event that Landlord grants such consent, Tenant shall remain primarily liable to Landlord for the payment of all rent and for the full performance of the obligations under this Lease and fifty percent (50%) of any excess rents collected by Tenant (less upfront costs paid by Tenant, including but not limited to commissions, fees, free rent or other concessions, and tenant improvements) shall be paid to Landlord. Tenant shall be responsible for payment of all out of pocket costs incurred by Landlord in connection with any such request for Landlord's consent to a proposed assignment or subletting, as provided in Paragraph 11.5, in an amount not to exceed $2,500.00 per request. Any assignment or subletting which does not conform with this Paragraph 7.3 shall be void and a default hereunder. Landlord may withhold its consent for any assignment or sublease if the proposed assignee or subtenant has a proposed use or operation in the Premises which may or will cause the

Building or any part thereof not to conform with the environmental and green building clauses in this Lease, as reasonably evidenced by Landlord.

(b) Recapture . In addition to, but not in limitation of, the foregoing: in the event of a request by Tenant for Landlord's consent to a proposed assignment of the Lease or a proposed subletting of forty percent (40%) or more of the floor area of the Premises, Landlord, at Landlord's sole option, may terminate the Lease. Landlord shall exercise any such option by written notice given to Tenant within thirty (30) days after Landlord's receipt of such request from Tenant, and in each case such termination shall take effect as of the date set forth in Landlord's said notice, which shall be not less than sixty (60) days and not more than one hundred twenty (120) days after the date of Landlord's said notice. If Landlord exercises any such option to terminate the Lease, Tenant shall surrender possession of the Premises on or before the date set forth in Landlord's notice, in accordance with the provisions of this Lease relating to the surrender of the Premises at expiration of the Term. Landlord's failure to exercise such option to terminate the Lease shall not be construed as Landlord's consent to the proposed assignment or subletting. Notwithstanding the foregoing, Tenant shall have the right to rescind its request for an assignment or sublease within fifteen (15) days after receipt of a notice from Landlord electing to terminate this Lease, in which case Landlord’s termination notice shall be deemed null and void and this Lease shall continue in full force and effect.

(c) Permitted Transfers . Notwithstanding anything to the contrary in this Lease, Tenant shall have the right without the prior consent of Landlord, but after at least 15 days’ prior written notice to Landlord (provided, however, that if advance notice is prohibited under applicable laws or any commercially reasonable confidentiality agreement, Tenant may provide such notice within ten (10) business days after then transaction deemed an assignment or subletting) to assign the Lease or sublet the Premises to any Affiliate (as defined below), or an entity (a “Surviving Entity”) into which Tenant merges or that acquires substantially all of the assets or stock of Tenant or that otherwise succeeds to Tenant’s interest by operation of law (excluding through bankruptcy) such as through a corporate reorganization (the Surviving Entity or Affiliate are also referred to as a “Permitted Transferee”); provided: (i) Tenant delivers to Landlord the Transfer Information (as defined below); (ii) the Surviving Entity shall have a tangible net worth at least equal to the net worth of Tenant immediately prior to such transfer (disregarding any transfer of assets made to devalue Tenant within the prior twelve (12) months) or otherwise reasonably acceptable to Landlord taking into account the fact that the originally named Tenant is not being released; (iii) the originally named Tenant shall not be released or discharged from any liability under this Lease by reason of such assignment or subletting, and the Permitted Transferee shall assume (to the extent not assumed by operation of law) in writing all of the obligations and liabilities of Tenant under this Lease; (iv) the use of the Premises shall not change; (v) such assignment or subletting is not principally for the purpose of transferring the leasehold estate created by this Lease; and (vi) if such assignment or subletting is to an Affiliate, such transferee shall remain an Affiliate throughout the Term and if such transferee shall cease being an Affiliate, Tenant shall notify Landlord in writing of such change and such transfer shall then be subject to Landlord’s approval in accordance with the terms of Section 7.3(a) above. An “Affiliate” means a corporation, limited liability company, partnership, or other registered entity, 50% or more of whose equity interest is owned, directly or indirectly, by the same persons or entities owning 50% or more of Tenant’s equity interests, a subsidiary, or a parent corporation. The “Transfer Information” means the following information: (i) a copy of the fully executed assignment and assumption agreement, or sublease agreement, as applicable; (ii) a copy of the then-current financials of the transferee (either audited or certified by the chief financial officer of the transferee); and (iii) such other reasonably requested information by Landlord needed to confirm or determine Tenant’s compliance with the terms and conditions of this Section.

(d) Prohibition on Early Assignments . Notwithstanding any provision in this Lease to the contrary, except in the event of a Permitted Transferee, Landlord, in Landlord’s sole and absolute

discretion, may withhold and refuse to consent to any proposed assignment of this Lease requested by Tenant during the first twenty four (24) months of the Lease term, or the first twenty four (24) months of any renewal or extension of the Lease Term. Tenant acknowledges and agrees that Landlord’s withholding of, or refusal to grant, consent to any proposed assignment of this Lease during such period shall be deemed reasonable for all purposes of this Lease.

(e) Assignment Defined . For purposes of this Paragraph 7.3, "assignment" shall include, without limitation: (i) any transfer of Tenant's interest in this Lease by operation of law; (ii) any merger or consolidation of Tenant with or into any other firm or corporate entity, whether in a single transaction or a series of transactions; (iii) the transfer or sale of a controlling interest in Tenant, whether by sale of its capital stock or otherwise, provided that transfers or sales or issuances of publically traded stock shall not be deemed an assignment; or (iv) any agreement by which Tenant agrees to enter into or execute any assignment or other transfer of the Lease at the direction of any other party, or assigns Tenant's rights in and to the income arising from any such assignment or transfer to another party.

7.4 Indemnities .

(a) Tenant . Tenant, at Tenant's expense, shall defend, indemnify and hold harmless Landlord and Landlord's agents, employees, invitees, licensees and contractors from and against any cost, claim, action, liability or damage of any kind arising from (i) Tenant's use and occupancy of the Premises or the Property, or any activity done or permitted by Tenant, in, on or about the Premises, (ii) any breach or default by Tenant of its obligations under this Lease, or (iii) any negligent, tortious or illegal act or omission of Tenant, its agents, employees, invitees, licensees or contractors. The obligations of Tenant under this paragraph shall survive the expiration or termination of this Lease. Nothing in this paragraph shall relieve Landlord from, or require Tenant to indemnify Landlord against, liability for damages to property or injury to person caused by the negligence or willful misconduct of Landlord or its agents, employees or contractors. All property kept, stored or maintained in the Premises shall be at the sole risk of Tenant.

(b) Landlord . Landlord, at Landlord's expense, shall defend, indemnify and hold harmless Tenant and Tenant's agents, employees, invitees, licensees and contractors from and against any cost, claim, action, liability or damage of any kind arising from (i) any breach or default by Landlord of its obligations under this Lease, or (ii) any negligent, tortious or illegal act or omission of Landlord, its agents, employees, invitees, licensees or contractors. The obligations of Landlord under this paragraph shall survive the expiration or termination of this Lease. Nothing in this paragraph shall relieve Tenant from, or require Landlord to indemnify Tenant against, liability for damages to property or injury to person caused by the negligence or willful misconduct of Tenant or its agents, employees or contractors.

7.5 Tenant's Insurance . Tenant shall at all times during the term of the Lease maintain the following types of insurance in the following minimum amounts:



1	Commercial General Liability	$1,000,000 per occurrence/location $2,000,000 annual aggregate Additional Insureds : Landlord Property Management Company Lender, as applicable Bentall Kennedy (US) Limited Partnership, Including their agents, affiliates, members, directors, officers, & employees Coverage to include : Premises/Operations Liability Products/Completed Operations Broad Form Contractual Liability Bodily Injury/Death Broad Form Property Damage Written on occurrence basis Host liquor liability, if Tenant is serving alcohol in the Premises Liquor Liability, if tenant is business of selling or serving alcohol No Exclusion for demolition, excavating, collapse, underground work, and blasting
2	Automobile Liability including owned, non-owned, leased, and hired	$1,000,000 combined bodily injury and property damage and uninsured motorist
3	Excess CGL, Auto, and Employers Liability/Umbrella Liability	$5,000,000 per occurrence, on form at least as broad as underlying policies
4	Workers Compensation Employer Liability	Statutory $1,000,000/accident/employee
5	Property Insurance	Tenant is solely responsible for insuring its own personal property, belongings, equipment, inventory, etc.
6	Business Interruption	12 months on an Actual Loss Sustained basis



Additional Contract Terms:		Minimum AM Best Rating is A- VII Tenant’s policy shall be endorsed to provide Landlord 30 days written notice of cancellation or non-renewal (10 days for non-payment), if commercially reasonably available. CGL, Auto, Excess/Umbrella, and Employer Liability policies should include cross liability or severability of interests clause. Deductibles above $25,000 and self-insured retentions must be declared to the Landlord prior to execution of leases. Certificate of Insurance should include the ISO form of Additional Insured Endorsement Tenant’s policies should be primary and non-contributory Lease should contain a mutual waiver of subrogation. Certificate of Insurance should be addressed to: Landlord c/o Property Manager

Tenant shall also carry such higher limits or other insurance as may be reasonably required from time to time by Landlord in accordance with the standards customarily applied by institutional lenders respecting office property in the area where the Building is located.

A certificate of insurance evidencing such insurance and in form acceptable to Landlord shall be furnished to Landlord upon Tenant’s execution of this Lease and prior to the renewal date and at such other times as may be reasonably requested by Landlord. Such insurance may be furnished by Tenant under any blanket policy carried by it or under a separate policy therefor provided that any such policy contains an endorsement that includes Landlord, Bentall Kennedy (US) LP and Manager, references the Premises as a covered location. If Tenant fails to acquire or maintain any insurance or provide any certificate required by this paragraph within 10 days following notice, Landlord may, but shall not be required to, obtain such insurance or certificates and the costs associated with obtaining such insurance or certificates, with interest thereon, at the Default Rate until paid, shall be payable by Tenant to Landlord on demand as Additional Rent.

7.6 Payment of Taxes . If at any time during the Term, any political subdivision of the state in which the Property is located, or any other governmental authority, levies or assesses against Landlord a tax or excise on rents or other tax (excluding income tax), however described, including but not limited to assessments, charges or fees required to be paid, by way of substitution for or as a supplement to real estate taxes, or any other tax on rent or profits in substitution for or as a supplement to a tax levied against the Property, Building or Landlord's personal property, then Tenant will pay to Landlord as Additional Rent its proportionate share based on Tenant's Percentage of said tax or excise.

7.7 Environmental Assurances .

(a) Covenants .

(i) Tenant shall not cause any Hazardous Materials to be used, generated, stored or disposed of on, under or about, or transported to or from, the Premises unless the same is specifically approved in advance by Landlord in writing other than small quantities of retail, household, and office chemicals customarily sold over-the-counter to the public and which are related to Tenant's Permitted Uses.

(ii) Tenant shall comply with all obligations imposed by Environmental Laws, and all other restrictions and regulations upon the use, generation, storage or disposal of Hazardous Materials at, to or from the Premises.

(iii) Tenant shall deliver promptly to Landlord true and complete copies of all notices received by Tenant from any governmental authority with respect to the use, generation, storage or disposal by Tenant of Hazardous Materials at, to or from the Premises and shall immediately notify Landlord both by telephone and in writing of any unauthorized discharge of Hazardous Materials or of any condition that poses an imminent hazard to the Property, the public or the environment that is caused by Tenant or any Tenant Party.

(iv) Tenant shall complete fully, truthfully, in all material respects, and promptly any questionnaires sent by Landlord with respect to Tenant's use of the Premises and its use, generation, storage and disposal of Hazardous Materials at, to or from the Premises.

(v) Tenant shall permit entry onto the Premises by Landlord or Landlord's representatives at any reasonable time to verify and monitor Tenant's compliance with its covenants set forth in this Paragraph 7.7 and to perform other environmental inspections of the Premises in accordance with this Lease.

(vi) If Landlord conducts any environmental inspections because it has reason to believe that Tenant's activities have or are likely to result in a violation of Environmental Laws or a release of Hazardous Materials on the Property, and such inspections disclose a violation of the terms of this Section 7.7 by Tenant then Tenant shall pay to Landlord, as Additional Rent, the out of pocket costs incurred by Landlord for such inspections.

(vii) Tenant shall cease immediately upon notice from Landlord any activity which violates or creates a risk of violation of any Environmental Laws.

(viii) After notice to and approval by Landlord, Tenant shall promptly remove, clean-up, dispose of or otherwise remediate, in accordance with Environmental Laws and good commercial practice, any Hazardous Materials in violation of this Lease on, under or about the Property resulting from Tenant's activities on the Property.

(b) Indemnification . Tenant shall indemnify, defend with counsel acceptable to Landlord and hold Landlord harmless from and against any claims, damages, costs, liabilities or losses

(including, without limitation, any decrease in the value of the Property, loss or restriction of any area of the Property, and adverse impact of the marketability of the Property or Premises) arising out of Tenant's use, generation, storage or disposal of Hazardous Materials at, to or from the Premises.

(c) Definitions . Hazardous Materials shall include but not be limited to substances defined as "hazardous substances", "toxic substances", or "hazardous wastes" in the federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended; the federal Hazardous Materials Transportation Act, as amended; and the federal Resource Conservation and Recovery Act, as amended; those substances defined as "hazardous substances", "materials", or "wastes" under the law of the state in which the Premises are located; and as such substances are defined in any regulations adopted and publications promulgated pursuant to said laws ("Environmental Laws"); materials containing asbestos or urea formaldehyde; gasoline and other petroleum products; flammable explosives; radon and other natural gases; and radioactive materials.

(d) Survival . The obligations of Tenant in this Paragraph 7.7 shall survive the expiration or termination of this Lease.

(e) Existing Hazardous Materials . Landlord represents that, to Landlord’s knowledge, as of the Date of Lease, no Hazardous Materials are present at the Property in violation of applicable Environmental Laws. Landlord shall be responsible at Landlord’s expense to remediate any Hazardous Materials present on or in the Premises prior to the Lease Commencement Date, to the extent such remediation is required by applicable Environmental Laws.

(f) Migration of Hazardous Materials Not Caused by Tenant . Notwithstanding anything herein to the contrary, Tenant shall not be responsible for the remediation of any Hazardous Materials which migrate into the Premises to the extent such migration was not caused by Tenant or any Tenant Party.

7.8 Americans With Disabilities Act . Landlord shall comply with the Americans with Disabilities Act of 1990 ("ADA") and the regulations promulgated thereunder with respect to the Building excluding the Premises and, prior to the Commencement Date with respect to the Premises. Tenant shall comply with the ADA and the regulations thereunder that are promulgated after the Commencement Date with respect to the Premises. Subject to the foregoing, Tenant hereby expressly assumes all responsibility for the compliance of activities conducted by Tenant within the Premises with the ADA relating to the Premises. Any Alterations to the Premises made by Tenant for the purpose of complying with the ADA or which otherwise require compliance with the ADA shall be done in accordance with this Lease; provided, that Landlord's consent to such Alterations shall not constitute either Landlord's assumption, in whole or in part, of Tenant's responsibility for compliance with the ADA, or representation or confirmation by Landlord that such Alterations comply with the provisions of the ADA. Notwithstanding the foregoing, in the event Landlord is required to install Building wide ADA improvements which affect the Premises, and provided that the need for such Building wide ADA improvements was not caused or triggered by any act or omission of Tenant, then Landlord shall install such improvements in the Premises, and Tenant shall reimburse Landlord for Tenant’s Percentage of the cost of such Building wide improvements to the extent that they are Capital Costs in accordance with Section 3.2 above.

ARTICLE VIII DEFAULT

8.1 Default . The occurrence of any one or more of the following events shall constitute an “Event of Default” hereunder by Tenant:

(a) The failure by Tenant to make any payment of Base Rent or Additional Rent or any other payment required hereunder, as and when due, where such failure shall continue for a period of five (5) days after written notice thereof from Landlord to Tenant; provided, that Landlord shall not be required to provide such notice more than once during any twelve (12) month period with respect to non‑payment of Rent, the second such non‑payment constituting a default without requirement of notice;

(b) The failure by Tenant to observe or perform any of the express or implied covenants or provisions of this Lease to be observed or performed by Tenant, other than as specified in clause (a) above, where such failure shall continue for a period of more than thirty (30) days after written notice thereof from Landlord to Tenant; provided, however, that if the nature of Tenant's default is such that more than thirty (30) days are reasonably required for its cure, then Tenant shall not be deemed to be in default if Tenant commences such cure within said thirty (30) day period, diligently prosecutes such cure to completion, and completes such cure no later than ninety (90) days from the date of such notice from Landlord;

(c) The failure by Tenant, Guarantor (if any), or any present or future guarantor of all or any portion of Tenant's obligations under this Lease to pay its debts as they become due, or Tenant or any such Guarantor (if any) becoming insolvent, filing or having filed against it a petition under any chapter of the United States Bankruptcy Code, 11 U.S.C. Paragraph 101 et seq . (or any similar petition under any insolvency law of any jurisdiction) and such petition is not dismissed within sixty (60) days thereafter, proposing any dissolution, liquidation, composition, financial reorganization or recapitalization with creditors, making an assignment or trust mortgage for the benefit of creditors, or if a receiver, trustee, custodian or similar agent is appointed or takes possession with respect to any property or business of Tenant or Guarantor (if any) and is not discharged within 60 days thereafter; or

(d) If the leasehold estate under this Lease or any substantial part of the property or assets of Tenant or of Guarantor of this leasehold is taken by execution, or by other process of law, or is attached or subjected to any involuntary encumbrance if such attachment or other seizure remains undismissed or undischarged for a period of ten business (10) days after the levy thereof.

8.2 Remedies of Landlord and Calculation of Damages .

(a) Remedies . In the event of an Event of Default by Tenant, whether or not the Term shall have begun, in addition to any other remedies available to Landlord at law or in equity, Landlord may, at its option and without further notice exercise any or all of the following remedies:

(i) Terminate the Lease and upon notice to Tenant of termination of the Lease all rights of Tenant hereunder shall thereupon come to an end as fully and completely as if the date such notice is given were the date originally fixed for the expiration of the Term, and Tenant shall then quit and surrender the Premises to Landlord and Landlord shall have the right, without judicial process, to re-enter the Premises. No such expiration or termination of the Lease shall relieve Tenant of its liability and obligations under the Lease.

(ii) Accelerate the payment of Base Rent and all Additional Rent under this Lease for the remainder of the Term and terminate the Lease in the same manner, and with the same force and effect, as provided in clause (i) above.

(iii) Enter the Premises and cure any default by Tenant and in so doing, Landlord may make any payment of money or perform any other act. All out of

pocket sums so paid by Landlord, and all incidental costs and expenses, including reasonable attorneys' fees, shall be considered Additional Rent under this Lease and shall be payable to Landlord within 5 days following demand, together with interest from the date of demand to the date of payment at the rate of interest applicable to late payments of Base Rent under this Lease.

(b) Calculation of Damages . If this Lease is terminated as provided in Paragraph 8.2(a)(i) above, Tenant, until the end of the Term, or what would have been such Term in the absence of any such event, shall be liable to Landlord, as damages for Tenant's default, for the amount of the Base Rent and all Additional Rent and other charges which would be payable under this lease by Tenant if this Lease were still in effect, less the net proceeds of any reletting of the Premises actually collected by Landlord after deducting all Landlord's out of pocket expenses in connection with such reletting, including, without limitation, all repossession costs, brokerage and management commissions, operating expenses, legal expenses, reasonable attorneys' fees, alteration costs and expenses of preparation of the Premises for such reletting. Tenant shall pay such damages to Landlord monthly on the days on which the Base Rent would have been payable as if this Lease were still in effect, and Landlord shall be entitled to recover from Tenant such damages monthly as the same shall arise.

If Base Rent and Additional Rent are accelerated and this Lease is terminated as provided in Paragraph 8.2(a)(ii) above, Tenant shall be liable to pay to Landlord, in one payment, as damages for Tenant's default, an amount equal to the total amount of Base Rent and Additional Rent reserved in this Lease from the date of default to the date of expiration of the Term, less the fair market rental value of the Premises for such period, discounted at a fixed annual interest rate equal to the Federal Funds Rate as published in the Wall Street Journal on the date of Landlord's election to accelerate the rents hereunder.

Whether or not the Lease is terminated, Landlord shall in no way be responsible or liable for any failure to relet the Premises or for any failure to collect any rent upon such reletting.

(c) No Limitations . Nothing contained in this Lease shall limit or prejudice the right of Landlord to prove for and obtain in proceedings for bankruptcy or insolvency by reason of the termination of this Lease, an amount equal to the maximum allowed by any statute or rule of law in effect at the time when, and governing the proceedings in which, the damages are to be provided, whether or not the amount be greater, equal to, or less than the amount of the loss or damages referred to above.

(d) Cumulative Remedies . Landlord's remedies under this Lease are cumulative and not exclusive of any other remedies to which Landlord may be entitled in case of Tenant's default or threatened default under this Lease, including, without limitation, the remedies of injunction and specific performance.

ARTICLE IX CASUALTY AND EMINENT DOMAIN

9.1 Casualty .

(a) Casualty in General . If, during the Term, the Premises, the Building or the Lot, are wholly or partially damaged or destroyed by fire or other casualty, and the casualty renders the Premises totally or partially inaccessible or unusable by Tenant in the ordinary conduct of Tenant's business, then Landlord shall, within thirty (30) days of the date of the damage, give Tenant a notice ("Damage Notice") stating whether, according to Landlord's good faith estimate, the damage can be repaired within six (6) months ("Repair Period"), without the payment of overtime or other premiums. The parties' rights and

obligations shall then be governed according to whether the casualty is an Insured Casualty or an Uninsured Casualty as set forth in the following paragraphs.

(b) Insured Casualty . If the casualty results from a risk, the loss to Landlord from which is fully covered by insurance maintained by Landlord or for Landlord's benefit (except for any deductible amount), it shall be an "Insured Casualty" and governed by this Paragraph 9.1(b). In such event, if the Damage Notice states that the repairs can be completed within the Repair Period without the payment of overtime or other premiums, then Landlord shall promptly proceed to make the repairs, this Lease shall remain in full force and effect, and Base Rent and Tenant’s Share of Expenses shall be equitably reduced, during the period between the casualty and completion of the repairs, in proportion to the portion of the Premises that is inaccessible or unusable during that period. If the Damage Notice states that the repairs cannot, in Landlord's estimate, be completed within the Repair Period without the payment of overtime or other premiums, then either party may, terminate this Lease by written notice given to the other within thirty (30) days after the giving of the Damage Notice. If either party elects to terminate this Lease, the lease shall terminate as of the date of the occurrence of such damage or destruction and Tenant shall vacate the Premises thirty (30) days from the date of the written notice terminating the Lease. If neither party so terminates, then this Lease shall remain in effect, Landlord shall make repairs, and Base Rent shall be proportionately reduced as set forth above during the period when the Premises is inaccessible or unusable and is not used by Tenant.

(c) Uninsured Casualty . If the casualty is not an Insured Casualty as set forth in the previous paragraph, it shall be an "Uninsured Casualty" governed by this Paragraph 9.1(c). In such event, if the Damage Notice states that the repairs can be completed within the Repair Period without the payment of overtime or other premiums, Landlord may elect, by written notice given to Tenant within thirty (30) days after the Damage Notice, to make the repairs, in which event this Lease shall remain in effect and Base Rent shall be proportionately reduced as set forth above. If Landlord does not so elect to make the repairs, or if the Damage Notice states that the repairs cannot be made within the Repair Period, this Lease shall terminate as of the date of the casualty and Tenant shall vacate the Premises ten (10) business days from the date of Landlord's written notice to Tenant terminating the Lease.

(d) Casualty within final six months of Term . Notwithstanding anything to the contrary contained in this Paragraph 9.1, if the Premises or the Building is wholly or partially damaged or destroyed within the final six (6) months of the Term of this Lease, Landlord shall not be required to repair such casualty and either Landlord or Tenant may elect to terminate this Lease.

(e) Tenant Improvements and Alterations . If Landlord elects to or is otherwise required to repair after a casualty in accordance with this Paragraph 9.1, then Landlord, to the extent insurance proceeds are received on a timely basis and in sufficient amount, shall cause Tenant Improvements and approved Alterations to be repaired and restored. If the insurance proceeds are not available on a timely basis for Landlord’s use or are in an amount insufficient to repair and restore Tenant’s Improvements and approved Alterations, such delay or insufficiency shall not limit or affect Tenant’s obligations hereunder. Landlord shall have no responsibility for any personal property placed or kept in or on the Premises or the Building by Tenant or Tenant's agents, employees, invitees or contractors and Landlord shall not be required to repair any damage to, or make any repairs to or replacements of, such personal property.

(f) Exclusive Remedy . This Paragraph 9.1 shall be Tenant's sole and exclusive remedy in the event of damage or destruction to the Premises or the Building. No damages, compensation or claim shall be payable by Landlord for any inconvenience, any interruption or cessation of Tenant's business, or any annoyance, arising from any damage to or destruction of all or any portion of the Premises or the Building.

(g) Waiver of Subrogation . Landlord and Tenant shall cause each insurance policy obtained by each of them to provide that the insurer waives all right of recovery by way of subrogation against either Landlord or Tenant in connection with any loss or damage covered by such policy.

9.2 Eminent Domain .

(a) Eminent Domain in General . If the whole of the Premises, or so much of the Premises or access to the same as to render the balance unusable by Tenant, shall be taken or appropriated under the power of eminent domain or condemnation (a "Taking"), either Landlord or Tenant may terminate this Lease and the termination date shall be the date of the Order of Taking, or the date possession is taken by the Taking authority, whichever is earlier. If any part of the Property is the subject of a Taking and such Taking materially affects the normal operation of the Building or Common Areas, Landlord may elect to terminate this Lease. A sale by Landlord under threat of a Taking shall constitute a Taking for the purpose of this Paragraph 9.2. No award for any partial or entire Taking shall be apportioned. Landlord shall receive (subject to the rights of Landlord's mortgagees) and Tenant hereby assigns to Landlord any award which may be made and any other proceeds in connection with such Taking, together with all rights of Tenant to such award or proceeds, including, without limitation, any award or compensation for the value of all or any part of the leasehold estate; provided that nothing contained in this Paragraph 9.2(a) shall be deemed to give Landlord any interest in or to require Tenant to assign to Landlord any separate award made to Tenant for (i) the taking of Tenant's Property, or (ii) interruption of or damage to Tenant's business, or (iii) Tenant's moving and relocation costs.

(b) Reduction in Base Rent . In the event of a Taking which does not result in a termination of the Lease, Base Rent shall be proportionately reduced based on the portion of the Premises rendered unusable, and Landlord shall restore the Premises (including the Tenant Improvements and any approved Alterations) or the Building to the extent of available proceeds or awards from such Taking. Landlord shall not be required to repair or restore any damage to Tenant's Property.

(c) Sole Remedies . This Paragraph 9.2 sets forth Tenant's and Landlord's sole remedies for Taking. Upon termination of this Lease pursuant to this Paragraph 9.2, Tenant and Landlord hereby agree to release each other from any and all obligations and liabilities with respect to this Lease except such obligations and liabilities which arise or accrue prior to such termination.

ARTICLE X RIGHTS OF PARTIES HOLDING SENIOR INTERESTS

10.1 Subordination . This Lease shall be subject and subordinate to the lien of any and all mortgages, deeds of trust and other instruments in the nature of a mortgage, ground lease or other matters or record ("Senior Interests") which now or at any time hereafter encumber the Property and Tenant shall, within twenty (20) days of Landlord's request, execute and deliver to Landlord such recordable written instruments as shall be necessary to show the subordination of this Lease to such Senior Interests. Notwithstanding the foregoing, if any holder of a Senior Interest succeeds to the interest of Landlord under this Lease, then, at the option of such holder, this Lease shall continue in full force and effect and Tenant shall attorn to such holder and to recognize such holder as its landlord. Landlord shall obtain, from any lender hereafter holding a mortgage on the Building such lender’s standard Subordination, Non-Disturbance and Attornment Agreement. Landlord represents that there is currently no mortgage encumbering Landlord’s interest in the Property.

10.2 Mortgagee's Consent . No assignment of the Lease and no agreement to make or accept any surrender, termination or cancellation of this Lease (other than the exercise of termination rights expressly provided in the Lease) and no agreement to modify so as to reduce the Rent, change the Term, or otherwise

materially change the rights of Landlord under this Lease, or to relieve Tenant of any obligations or liability under this Lease, shall be binding on a mortgagee of which Tenant has prior written notice unless consented to by Landlord's mortgagees of record, if any.

ARTICLE XI GENERAL

11.1 Representations by Tenant . Tenant represents and warrants that any financial statements provided by it to Landlord were true, correct and complete in all material respects when provided, and that no material adverse change has occurred since that date that would render them inaccurate or misleading. Tenant represents and warrants that those persons executing this Lease on Tenant's behalf are duly authorized to execute and deliver this Lease on its behalf, and that this Lease is binding upon Tenant in accordance with its terms, and simultaneously with the execution of this Lease, Tenant shall deliver or provide evidence of such authority to Landlord in form satisfactory to Landlord.

11.2 Notices . Any notice required or permitted hereunder shall be in writing. Notices shall be addressed to Landlord c/o Manager at Manager's Address and to Tenant at Tenant's Address. Any communication so addressed shall be deemed duly given when delivered or when delivery is refused if delivered by hand, by Federal Express (or other guaranteed one day delivery service) or by registered or certified mail, return receipt requested. Either party may change its address by giving notice to the other.

11.3 No Waiver or Oral Modification . No provision of this Lease shall be deemed waived by Landlord or Tenant except by a signed written waiver. No consent to any act or waiver of any breach or default, express or implied, by Landlord or Tenant, shall be construed as a consent to any other act or waiver of any other breach or default.

11.4 Severability . If any provision of this Lease, or the application thereof in any circumstances, shall to any extent be invalid or unenforceable, the remainder of this Lease shall not be affected thereby, and each provision hereof shall be valid and enforceable to the fullest extent permitted by law.

11.5 Requests by Tenant . Tenant shall pay, on demand, all reasonable out of pocket costs incurred by Landlord, including without limitation reasonable attorneys' fees, in connection with any matter requiring Landlord's review or consent or any other requests made by Tenant under this Lease, regardless of whether such request is granted by Landlord.

11.6 Estoppel Certificate and Financial Statements .

(a) Estoppel Certificate .

(i) Within seven (7) days after written request by Landlord, Tenant shall execute, acknowledge and deliver to Landlord a written statement certifying (A) that this Lease is unmodified and in full force and effect, or is in full force and effect as modified and stating the modifications; (B) the amount of Base Rent currently payable by Tenant to Landlord; (C) Tenant's Percentage and Tenant's Share of Expenses currently payable by Tenant to Landlord; (D) the date to which Base Rent and Tenant's Share of Expenses have been paid in advance; (E) the amount of any security deposited with Landlord; (vi) that, to the knowledge of Tenant, Landlord is not in default hereunder or, if Landlord is claimed to be in default, stating the nature of any claimed default, and (F) such other matters as may be reasonably requested by Landlord. Any such statement may be relied upon by a purchaser, assignee or lender. Tenant's failure to execute and deliver such statement within the time required shall be a default under this Lease and shall also be conclusive upon Tenant that this Lease is in full force and effect and has not been modified except as

represented by Landlord; and there are no uncured defaults in Landlord's performance and Tenant has no right of offset, counterclaim or deduction against rent.

(ii) In the event Tenant is applying for a line of credit or similar financing, and the lender requires an estoppel certificate from Landlord to approve such financing to Tenant, then, within fifteen (15) days after written request by Tenant (which request must state in bold, capitalized letters “ RESPONSE REQUIRED WITHIN 15 DAYS ”) Landlord shall execute, acknowledge and deliver to Tenant a statement certifying (A) that this Lease is unmodified and in full force and effect, or is in full force and effect as modified and stating the modifications; (B) that, to the knowledge of Landlord, Tenant is not in default hereunder or, if Tenant is claimed to be in default, stating the nature of any claimed default, and (C) such other matters as may be reasonably requested by such lender.

(b) Financial Statements . Tenant shall, without charge therefor, at any time, within seven (7) days following a request by Landlord, deliver to Landlord, or to any other party designated by Landlord, a true and accurate copy, in all material respects, of Tenant's most recent financial statements. All requests made by Tenant regarding renewals or expansions must be accompanied by Tenant's most recent financial statements. The foregoing requirements shall not apply so long as Tenant’s financial statements are available to the public online. All requests made by Tenant regarding subleases, or assignments must be accompanied by Tenant's prospective subtenant's and prospective assignee's most recent financial statements.

11.7 Waiver of Liability . Notwithstanding anything to the contrary set forth in this Lease, Landlord and Tenant each hereby waive all rights of recovery against the other and against the officers, employees, agents, and representatives of the other, on account of loss by or damage to the waiving party or its property or the property of others under its control, to the extent that such loss or damage is insured against under any insurance policy that either may have in force at the time of the loss or damage. Each party shall notify its insurers that the foregoing waiver is contained in this Lease.

11.8 Execution, Prior Agreements and No Representations . This Lease shall not be binding and enforceable until executed by authorized representatives of Landlord and Tenant. This Lease contains all of the agreements of the parties with respect to the subject matter hereof and supersedes all prior dealings, whether written or oral, between them with respect to such subject matter. Each party acknowledges that the other has made no representations or warranties of any kind except as may be specifically set forth in this Lease.

11.9 Brokers . Each party represents and warrants that it has not dealt with any real estate broker or agent in connection with this Lease or its negotiation except Brokers. Brokers shall be paid a commission by Landlord pursuant to a separate agreement. Each party shall indemnify the other and hold it harmless from any cost, expense, or liability (including costs of suit and reasonable attorneys' fees) for any compensation, commission or fees claimed by any other real estate broker or agent in connection with this Lease or its negotiation by reason of any act or statement of the indemnifying party. The Brokers listed in Part I shall not by reason of such listing have any automatic claim to any commission in connection with future extensions, expansions, modifications or renewals of this Lease.

11.10 Successors and Assigns . This Lease shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns; provided, however, that only the original Landlord named herein shall be liable for obligations accruing before the beginning of the Term, and thereafter the original Landlord named herein and each successive owner of the Premises shall be liable only for obligations accruing during the period of their respective ownership.

11.11 Applicable Law and Lease Interpretation . This Lease shall be construed, governed and enforced according to the laws of the state in which the Property is located. In construing this Lease, paragraph headings are for convenience only and shall be disregarded. Any recitals herein or exhibits attached hereto are hereby incorporated into this Lease by this reference. Time is of the essence of this Lease and every provision contained herein. The parties acknowledge that this Lease was freely negotiated by both parties, each of whom was represented by counsel; accordingly, this Lease shall be construed according to the fair meaning of its terms, and not against either party.

11.12 Costs of Collection, Enforcement and Disputes . Tenant shall pay all costs of collection, including reasonable attorneys' fees, incurred by Landlord in connection with any default by Tenant unless such default is contested by Tenant and Tenant prevails. If either Landlord or Tenant institutes any action to enforce the provisions of this Lease or to seek a declaration of rights hereunder, the prevailing party shall be entitled to recover its reasonable attorneys' fees and court costs as part of any award. Landlord and Tenant hereby waive trial by jury in any action, proceeding or counterclaim brought by either of the parties hereto against the other, on or in respect to any matter whatsoever arising out of or in any way connected with this Lease, the relationship of Landlord and Tenant hereunder, Tenant's use or occupancy of the Premises, and/or claim of injury or damage.

11.13 Holdover . If Tenant holds over in occupancy of the Premises after the expiration of the Term, Tenant shall become a tenant at sufferance only on a month-to-month basis subject to the terms and conditions herein specified, so far as applicable. Tenant shall pay rent during the holdover period, at a base rental rate equal to one hundred fifty percent (150%) of the Base Rent in effect at the end of the Term, plus the amount of Tenant's Share of Expenses then in effect. If Tenant fails to vacate the Premises within ten (10) days after the expiration or earlier termination of this Lease, then Tenant shall also be liable for all damages sustained by Landlord on account of such holding over.

11.14 Force Majeure . If Landlord or Tenant is prevented from or delayed in performing any act required of it hereunder, and such prevention or delay is caused by strikes, labor disputes, inability to obtain labor, materials, or equipment, inclement weather, acts of God, governmental restrictions, regulations, or controls, judicial orders, enemy or hostile government actions, civil commotion, fire or other casualty, or other causes beyond such party's reasonable control ("Force Majeure"), the performance of such act shall be excused for a period equal to the period of prevention or delay. A party's financial inability to perform its obligations shall in no event constitute Force Majeure. Nothing in this Paragraph 11.14 shall excuse or delay Tenant's obligation to pay any rent or other charges due under this Lease.

11.15 Limitation On Liability .

(a) Landlord . Landlord’s partners, directors, officers, shareholders, trustees or beneficiaries, shall not be liable to Tenant for any damage to or loss of personal property in, or to any personal injury occurring in, the Premises. Landlord shall not be liable to Tenant for any damage to or loss of personal property in, or to any personal injury occurring in, the Premises unless such damage, loss or injury is the result of the gross negligence or willful misconduct of Landlord or its agents as determined by a final non-appealable judicial proceeding. The obligations of Landlord under this Lease do not constitute personal obligations of the individual partners, directors, officers, shareholders, trustees or beneficiaries of Landlord, and Tenant shall not seek recourse against the partners, directors, officers, shareholders, trustees or beneficiaries of Landlord, or any of their personal assets for satisfaction of any liability with respect to this Lease. In the event of any default by Landlord under this Lease, Tenant's sole and exclusive remedy shall be against Landlord's interest in the Property and Tenant’s damages shall not include consequential, special, exemplary or punitive damages.

(b) Tenant . Tenant shall not be liable to Landlord for any claim against Tenant or Tenant’s agents, employees and invitees, for loss of business opportunity or other special or consequential losses or damages, except in the event of a holdover in accordance with Section 11.13 above and/or in the event of a default by Tenant of its environmental covenants and/or obligations set forth in Section 7.7 of this Lease.

11.16 Notice of Landlord's Default . The failure by Landlord to observe or perform any of the express or implied covenants or provisions of this Lease to be observed or performed by Landlord shall not constitute a default by Landlord unless such failure shall continue for a period of more than thirty (30) days after written notice thereof from Tenant to Landlord specifying Landlord's default; provided, however, that if the nature of Landlord's default is such that more than thirty (30) days are reasonably required for its cure, then Landlord shall not be deemed to be in default if Landlord commences such cure within said thirty (30) day period and diligently prosecutes such cure to completion. Tenant shall, simultaneously with delivery to Landlord, provide written notice specifying the Landlord default to the holder of any first mortgage or deed of trust covering the Premises whose name and address have been furnished to Tenant in writing.

11.17 Lease not to be Recorded . Tenant agrees that it will not record this Lease. At Tenant’s request, Landlord shall execute and deliver to Tenant a Notice of Lease in the form attached hereto as Exhibit E (“the “Notice of Lease”), provided that Tenant shall have executed and delivered to Landlord a Termination of Notice of Lease in the form attached hereto as Exhibit F (the “Termination of Notice of Lease”). Tenant shall be permitted to record the Notice of Lease, at Tenant’s expense, in the land records of the county in which the Premises is located. Landlord shall hold the Termination of Notice of Lease in escrow and shall have the right to record it at such time as this Lease terminates or expires.

11.18 Letter of Credit . Within ten (10) days following Tenant’s execution and delivery of this Lease, and as a condition to the effectiveness of this Lease, Tenant shall deliver to Landlord an irrevocable letter of credit (“Letter of Credit”) issued by a major banking institution reasonably acceptable to Landlord (the "Bank") in the amount of $300,000.00. Landlord approves JPMorgan Chase Bank as the Bank. The Letter of Credit shall comply with the Letter of Credit Criteria attached hereto as Exhibit D-1 . The parties acknowledge that the form of Letter of Credit attached as Exhibit D-2 is acceptable for the purposes of this Lease. The Letter of Credit shall provide that Landlord may draw from time to time upon such Letter of Credit to the extent that Landlord certifies to the Bank as to any one or more of the following: (a) that Landlord is owed Base Rent or Additional Rent, or both, or other amounts which Tenant is obligated to pay under the Lease which remain unpaid beyond applicable notice and grace periods, (b) that the Letter of Credit has not been renewed or replaced as required below, or (c) that a default beyond applicable notice and grace periods has occurred under the Lease. Such Letter of Credit shall be replaced or renewed, and such replacement or renewal Letter of Credit shall be delivered to Landlord, not later than thirty (30) days prior to expiration thereof. If Landlord draws upon the Letter of Credit as permitted above, Tenant shall within 10 days following request by Landlord deliver a replacement Letter of Credit to Landlord or otherwise restore the Security Deposit to its original amount. Tenant shall not have the right to call upon Landlord to draw upon the Letter of Credit or to apply all or any part of the proceeds therefrom to cure any default or fulfill any obligation of Tenant, but such use shall be solely in the discretion of Landlord. In the event the Letter of Credit is drawn upon by Landlord because such Letter of Credit is about to expire and has not been replaced or renewed by Tenant in accordance with the provisions of this Section, the proceeds of such Letter of Credit and all interest accrued thereon shall be held in escrow by Landlord or its agent as security for Tenant's obligations hereunder until such time as Tenant shall have delivered Landlord a replacement Letter of Credit. Upon any conveyance of the Premises by Landlord to Landlord's grantee or transferee, the Letter of Credit shall be delivered by Landlord to Landlord's grantee or transferee. Upon any such delivery and notice thereof

to Tenant, Tenant hereby releases Landlord herein named of any and all liability with respect to the Letter of Credit, its application and return, and Tenant agrees to look solely to such grantee or transferee for all matters regarding such Letter of Credit, including any pending claims or disputes Tenant may have regarding the misapplication of the Letter of Credit during the term of Landlord's ownership of the Premises. It is further understood that this provision shall also apply to subsequent grantees and transferees.

11.19 Guaranty of Lease . N/A

11.20 OFAC .

(a) Tenant . Neither Tenant nor any of its affiliates, nor, to the knowledge of Tenant, any of their respective partners, members, shareholders or other equity owners (expressly excluding any shareholders or other equity owners holding an interests through publicly traded interests), and none of their respective employees, officers, directors, representatives or agents, is a person or entity with whom U.S. persons or entities are restricted from doing business under regulations of the Office of Foreign Asset Control (“OFAC”) of the Department of the Treasury (including those named on OFAC's Specially Designated and Blocked Persons List) or under any statute, executive order (including the September 24, 2001, Executive Order Blocking Property and Prohibiting Transactions with Persons Who Commit, Threaten to Commit, or Support Terrorism), or other governmental action.

(b) Landlord . Neither Landlord nor any of its affiliates is a person or entity with whom U.S. persons or entities are restricted from doing business under regulations of the Office of Foreign Asset Control (“ OFAC ”) of the Department of the Treasury (including those named on OFAC's Specially Designated and Blocked Persons List) or under any statute, executive order (including the September 24, 2001, Executive Order Blocking Property and Prohibiting Transactions with Persons Who Commit, Threaten to Commit, or Support Terrorism), or other governmental action.

11.21 Authority of Landlord . Bentall Kennedy (U.S.) Limited Partnership (“Owner’s Representative”) has executed this Lease in a representative capacity as Landlord’s authorized signatory. Such Owner’s Representative executes, not personally but solely in the representative capacity so designated. No personal liability or personal responsibility is assumed by, nor shall at any time be asserted or enforced against, the Owner’s Representative on account of this Lease, whether expressed or implied.

IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease, which includes the cover sheet, the foregoing Standard Provisions, Additional Provisions, if any, and Exhibits attached to this Lease, with the intent that each of the parties shall be legally bound thereby and that this Lease shall become effective as of the Date of Lease.

TENANT:

INFINITY PHARMACEUTICALS, INC. , a Delaware

corporation

By: /s/Seth Tasker

Name: Seth Tasker

Title: Vice President

Date: April 5, 2019

By: /s/Adelene Q. Perkins

Name: Adelene Q. Perkins

Title: Treasurer

Date: March 21, 2019

LANDLORD:

SUN LIFE ASSURANCE COMPANY OF CANADA, a Canadian corporation

By: Bentall Kennedy (U.S.) Limited Partnership, a Washington limited partnership, its real estate advisor

By: Bentall Kennedy (U.S.) G.P. LLC, a Washington limited liability company, its General Partner

By: /s/Philip Down

Name: Philip Down

Title:

Date: March 25, 2019

By: /s/Matt Sargent

Name: Matt Sargent

Title: Vice President

Date: March 25, 2019

PART III ADDITIONAL PROVISIONS

The following provisions ("Additional Provisions") identified below and attached and/or set forth below are included as part of the Lease between Landlord and Tenant. Capitalized terms used in any of the Additional Provisions and not otherwise defined shall have the meanings given such terms in Part I and Part II of this Lease. Unless express reference is made to a provision in Part I and Part II of this Lease for the purpose of modifying such provision, in the event of any conflict between the Additional Provisions and the provisions of Part I and Part II of this Lease, the provisions contained in the Additional Provisions shall control.

1. Renewal Option .

(a) Provided that at the time such option is exercised and at the expiration of the initial Lease Term, (i) Tenant has not been in monetary default under the Lease beyond applicable grace periods within the immediately preceding twelve (12) month period, and is not then in default under the Lease, (ii) Tenant has not assigned this Lease or sublet the Premises, except to a Permitted Transferee, (iii) Tenant or a Permitted Transferee continues to occupy the Premises, (iv) Tenant is using the Premises for the Permitted Uses set forth in Part I of this Lease, and (v) Tenant's financial statements indicate a net worth at least $4,500,000.00, Tenant shall have the option (“ Renewal Option ”) to renew the term of this Lease for one (1) additional two (2) year term (“ Renewal Term ”) on the same terms and conditions as are contained in this Lease, except that the Base Rent (including annual increases) for the Renewal Term shall be the greater of (x) the Base Rent in effect for the last year of the initial Lease Term set forth in Part I of this Lease for the first year of the Renewal Term, subject to annual increases at market escalations for each successive 12 month period of the Renewal Term, or (y) the then “Fair Market Rent” of the Premises, determined as set forth below.

(b) The term “Fair Market Rent” shall mean the rent (including annual increases) that a tenant would pay upon leasing space similar to the Premises in a comparable building in Cambridge, Massachusetts taking into consideration such factors as the location of the Building within Cambridge, Massachusetts; the amount of net rentable space leased; the length of the lease in question; the value of the leasehold improvements existing in the Premises, the suitability of the continued use of the improvements, and the resulting cost savings to Tenant; escalations in Base Rent over the term of the lease that are being included in comparable leases, in comparable buildings for comparable spaces; appropriate inducements and concessions then being included in such comparable leases for preparation of comparable space, including but not limited to so-called free or abated rents; the location and quality of the Building as compared to comparable buildings; and the credit standing of Tenant.

(c) In order to exercise the Renewal Option, Tenant must give to Landlord written notice of Tenant’s intent to enter negotiations with Landlord no less than nine (9) months, nor more than twelve (12) months, prior to the expiration of the initial Lease Term. Upon receipt of Tenant’s written notice, Landlord and Tenant shall negotiate in good faith to reach agreement on the “Fair Market Rent” for the Premises for the Renewal Term. If Tenant and Landlord are unable to reach agreement on a Fair Market Rent for the Premises within thirty (30) days after Landlord's receipt of Tenant's counter-proposal, then within five (5) days after such 30-day period, each party shall select an independent commercial real estate broker, licensed in Massachusetts and with at least five (5) years of commercial leasing experience, to determine a Fair Market Rent. If the lower proposed Fair Market Rent is within ten percent (10%) of the higher Fair Market Rent, the average of the two will be the final Fair Market Rent for the Renewal Term; if not, the two brokers will jointly select a third broker with similar qualifications, and the average of the

third broker’s Fair Market Rent and the next closest Fair Market Rent will be the final Fair Market Rent for the Renewal Term. Each party shall pay its own broker and fifty percent (50%) of the cost of the third broker.

2. Parking .

(a) Tenant’s Parking . Throughout the initial Term of this Lease, Tenant shall lease six (6) parking spaces in the Building garage (including one (1) tandem space) (the “ Garage Parking Spaces ”), at a cost currently of $275.00 per month per space, and five (5) spaces at the surface parking lot located at 890 Massachusetts Avenue (the “ Off-Site Parking Spaces ”), at a cost currently of $150.00 per month per space. All parking rates are subject to market increases. In the event Landlord elects to redevelop the property located at 890 Massachusetts Avenue, Landlord shall have the right to terminate Tenant’s right to lease the Off-Site Parking Spaces upon ninety (90) days' prior written notice to Tenant. In the event that any of Tenant’s parking spaces are lost due to casualty, condemnation, or any other reason, Tenant shall not be obligated to pay Landlord the monthly parking fee for such parking spaces as Tenant is no longer able to use.

(b) Termination Right for Substantial Loss of Parking . Notwithstanding anything in the Lease to the contrary, in the event that (i) more than fifty percent (50%) of Tenant’s Garage Parking Spaces are lost due to casualty, condemnation or other event not consented to or requested by Tenant, and (ii) Tenant’s right to lease the Off-Site Parking Spaces has been terminated or such Off-Site Parking Spaces have otherwise been reduced to less than three (3) spaces, and (iii) following Tenant’s request, Landlord notifies Tenant in writing that it will not provide Tenant with at least three (3) alternative parking spaces (collectively, the “ Parking Termination Conditions ”), then Tenant shall have the option to terminate this Lease upon written notice to Landlord which must be delivered no later than thirty (30) days after the date the Parking Termination Conditions are met. Failure by Tenant to deliver such written termination notice within such thirty (30) day period shall constitute a waiver by Tenant of its right to terminate the Lease pursuant to this Section, and the Lease shall continue in full force and effect, and Landlord shall not be liable to Tenant, and the Lease shall not be affected, if any additional parking rights of Tenant hereunder are lost.

3. Green Provisions . Notwithstanding anything in the Lease to the contrary, Tenant shall only be required to comply with the Green Agency Ratings and/or sustainable building practices provisions of Sections 5.1(e), 7.1(a), 7.1(c), 7.2(f), 7.2(g) and 7.2(h) of the Lease and Section 2 of Exhibit B to the Lease to the extent that the additional costs incurred by Tenant by virtue of such compliance are reasonable and immaterial.

4. Reduction of Letter of Credit . Notwithstanding anything to the contrary contained in this Lease, provided that Tenant has never been in default under the Lease beyond applicable notice and cure periods, and is not in default under the Lease at the time of the Letter of Credit Reduction (as defined below), then upon Tenant’s written request to be delivered at any time on or after August 1, 2021, the Letter of Credit may be reduced to $150,000.00 (the “ Letter of Credit Reduction ”). The Letter of Credit shall be reduced by Tenant’s delivering to Landlord either (x) an amendment to the existing Letter of Credit acceptable to Landlord, reducing the amount of the existing Letter of Credit to the amount of the of the Letter Credit Reduction, or (y) a replacement Letter of Credit acceptable to Landlord, in the reduced amount of the Letter of Credit Reduction. If a new Letter of Credit is so delivered, Landlord shall after such delivery, return the prior Letter of Credit to Tenant.

PART IV EXHIBITS

EXHIBIT A

FLOOR PLAN

EXHIBIT B

TENANT IMPROVEMENTS

1. Tenant Improvements . Tenant accepts the Premises in AS-IS condition, provided Tenant shall be responsible for making improvements to the Premises based on plans approved in writing in advance by Landlord (the “ Tenant Improvements ”), which approval shall not be unreasonably withheld, conditioned or delayed. The cost of the Tenant Improvements shall be borne by Tenant, provided that Tenant shall receive from Landlord an allowance (the " Tenant Allowance ") of up to Fifty Five Dollars ($55.00) per rentable square foot of the Premises to reimburse Tenant for the cost of design, permitting, architectural/construction drawings, demolition, construction and supervision of the Tenant Improvements to the Premises (excluding telephone, computer and voice data lines, wiring, cabling, furniture, equipment, fixtures and similar costs, which shall be at Tenant’s sole expense). Notwithstanding the foregoing, a portion of the Tenant Allowance in an amount not to exceed $8.25 per rentable square foot of the Premises may be used to reimburse Tenant for costs incurred in connection with the installation of telephone, computer and voice data lines, wiring and cabling in the Premises. Tenant shall be permitted to install cabling and telecommunications lines which run within the Building core, provide that all such cabling and telecommunications lines are marked and easily identifiable and are not comingled with the existing base Building wiring as determined by Landlord. Once installed, the Tenant Improvements shall become a part of the Premises and the sole property of Landlord. The parties acknowledge that the construction management fees of Landlord’s property manager shall equal $5,553.35. The Tenant Allowance shall be paid by the Landlord to the Tenant based on monthly draws for work completed less retainage (as described below), using standard AIA forms, as certified in writing to Tenant by Tenant’s architect and to Landlord by Tenant and Landlord’s property manager. Each such monthly draw shall be paid by Landlord within thirty (30) days after receipt from Tenant of conditional lien waivers from all contractors and subcontractors for trades exceeding $5,000.00 involved in the construction of the Tenant Improvements, and paid invoices/receipts for all work done to date in the Premises, provided that Landlord shall retain a portion of the Tenant Allowance in an amount equal to five percent (5%) of the total project costs (i.e., the retainage) until the Tenant Improvement work has been completed and Tenant has provided Landlord with (i) lien waivers conditioned only upon final payment from all contractors and subcontractors for trades exceeding $5,000.00 involved in the construction of the Tenant Improvements and (ii) paid invoices/receipts for all work done in the Premises. Any amount not drawn by Tenant for the Tenant Improvements described on the approved plans within twelve (12) months after the date the plans are approved shall be retained by Landlord, and in no event may any portion of the Tenant Allowance be used to pay or offset Base Rent or Additional Rent.

2. Green Provisions . Tenant acknowledges and agrees that the Tenant Improvements must be designed consistent with the U.S. Green Building Council’s Leadership in Energy and Environmental Design (LEED) rating system. Tenant further agrees to engage a third party LEED or Green Globe Accredited Professional or similarly qualified professional with respect to the design and construction of the Tenant Improvements.

3. Restrooms . Tenant shall be permitted to install additional toilet stalls and update the restrooms within the Premises with new Building standard finishes, subject to obtaining Landlord’s prior written approval of the same (which approval shall not be unreasonably withheld), provided that such improvements shall be made at Tenant’s expense, based on plans approved in advance in writing by Landlord.

EXHIBIT C

RULES AND REGULATIONS

1. The driveways, parking areas, plazas, sidewalks, entrances, passages, courts, vestibules, stairwells, corridors or halls shall not be obstructed or encumbered by any tenant or used for any purpose other than ingress and egress to and from the premises.

2. No awnings, canopies, or other projections shall be attached to the outside walls of the building. No drapes, curtains, blinds, shades, or screens shall be attached to or hung in, or used in connection with, any window or door or the premises without the prior written consent of Landlord.

3. Tenants are prohibited from displaying any sign, picture, advertisement or notice on the inside or outside of the building, or the premises, except the usual name signs on the doors leading to the premises, which shall conform to the requirements of the management of the building, and excepting also the name strips on the directory board of the building and Tenant’s approved exterior signage. The directory board of the building will be maintained by Landlord. In the event of the violation of the foregoing by any tenant, Landlord may remove same without any liability, and may charge the expense incurred by such removal to the tenant.

4. The sash doors, windows, and doors that reflect or admit light and air into the halls, passageways or other public places in the building shall not be covered or obstructed by any tenant, nor shall any bottles, parcels or other articles be placed on the windowsills or perimeter fan coil consoles.

5. No showcases or other articles shall be put in front of or affixed to any part of the exterior of the building nor placed in the halls, corridors, or vestibules without the prior written consent of Landlord.

6. The water and wash closets and other plumbing fixtures shall not be used for any purposes other than those for which they were constructed, and no sweepings, rubbish, rags or other substances shall be thrown therein. All damages resulting from any misuse of the fixtures shall be borne by the tenant who, or whose servants, employees, agents, visitors or licensees, shall have caused the same.

7. Other than as part of customary picture and decoration hanging, no tenant shall mark, paint, drill into, or in any way deface any part of the premises or the building of which they form a part. No boring, cutting or stringing of wires shall be permitted, except with the prior written consent of Landlord, and as Landlord may direct. No tenant shall lay any type of floor covering without first obtaining Landlord's written permission.

8. No bicycles, vehicles or animals of any kind (other than service animals) shall be brought into or kept in or about the premises, and no cooking shall be done or permitted by any tenant on the premises (other than customary office microwaves and coffee makers). Notwithstanding the foregoing, Landlord shall permit a small number of bicycles in the building provided that no other tenant of the building complains. No tenant shall cause or permit any unusual or objectionable odors to be produced upon or permeate from the premises.

9. No tenant shall make or permit to be made, any unseemly or disturbing noises or disturb or interfere with occupants of this building, or premises, or neighboring buildings.

10. No tenant, and no servants, employees, agents, visitors or licensees of any tenant, shall at any time bring or keep upon the premises any inflammable, combustible or explosive fluid, chemical or substance except those found in normal office and/or cleaning supplies.

11. Tenants are prohibited from installing additional locks upon any of the doors or having duplicate keys made for any of the doors leading to the premises. (All necessary keys will be furnished to the tenants by Landlord). Each tenant must, upon the termination of tenancy, return all keys to Landlord. Notwithstanding the foregoing, Tenant shall be permitted to change locks and/or install additional locks provided Tenant provides Landlord with keys to all such locks.

12. Landlord shall have the right to prohibit any advertising by any tenant which, in Landlord's reasonable opinion, tends to impair the reputation of the building or their desirability for offices, and upon written notice from Landlord, the tenants shall refrain from or discontinue such advertising.

13. The premises shall not be used for lodging or sleeping.

14. The requirements of tenants will be attended to only upon application at the office of the building. Building employees shall not perform any work or do anything outside of their regular duties, unless under special instructions from the office of the building.

15. Canvassing, soliciting and peddling in the building are prohibited and each tenant shall cooperate to prevent the same.

16. Intentionally omitted.

17. Landlord reserves the right to make such other and further reasonable written Rules and Regulations as in its judgment may from time to time be needful and proper, and upon delivery of the same to the tenants they shall become binding upon the parties hereto. In the event of a conflict between the terms and provisions of the Lease and these or any future Rules and Regulations, the terms and conditions of the Lease shall control.

EXHIBIT D-1

LETTER OF CREDIT CRITERIA

1. The letter of credit shall be clean, irrevocable and unconditional.

2. The letter of credit shall be in the amount specified in Section 11.18 of the Lease captioned “ Letter of Credit ”.

3. The letter of credit shall be issued in favor of:

Sun Life Assurance Company of Canada

c/o NewTower Trust Company

Attn: President

7315 Wisconsin Avenue, Suite 350 West

Bethesda, MD 20814

4. The letter of credit shall be effective immediately on its issuance.

5. The letter of credit shall either be issued by a national bank which is a member of the New York Clearing House and which has a banking office dedicated to the administration and payment of letters of credit in a location approved by Landlord. The issuing bank must have been assigned by (a) Standard & Poors Investor Services a Counterparty Credit Rating of BBB+ or better, and/or (b) a Bauer Financial Star Rating of 3.5 stars or better. The identity of the issuing bank and of any confirming bank shall be reasonably satisfactory to Landlord.

6. The letter of credit shall have an expiration date no earlier than the first anniversary of the date of its issuance and shall provide for its automatic renewal from year to year unless terminated by the issuing bank by notice to Landlord given not less than sixty (60) days prior to its expiration date. Notice to Landlord shall be in writing, made by (i) United States Postal Service, certified mail, return receipt requested; or (ii) reputable express or courier service. Notice to Landlord shall be addressed to the following parties:

Sun Life Assurance Company of Canada

c/o NewTower Trust Company

Attn: President

7315 Wisconsin Avenue, Suite 350 West

Bethesda, MD 20814

Facsimile: 240.235.9961

And to:

Sun Life Assurance Company of Canada

c/o Bentall Kennedy (U.S.) Limited Partnership

Attn: LOC Administrator

1201 Third Avenue, Suite 3000

Seattle, WA 98101

Facsimile: 206.682.4769

And to:

Sun Life Assurance Company of Canada

c/o Bentall Kennedy (U.S.) Limited Partnership

Attn: Product Sector Head – Asset Management

7315 Wisconsin Avenue, Suite 200 West

Bethesda, MD 20814

Facsimile: 301.656.9339

And to:

Sun Life Assurance Company of Canada

c/o Paradigm Properties

93 Summer Street

Boston, MA 02110

The final expiration date of the letter of credit and all renewals of it shall be no earlier than sixty (60) days following the end of the Lease Term.

7. The letter of credit may be drawn at the designated banking office specified in the letter of credit of the issuing bank. The letter of credit shall allow for draws to be made at sight on a draft drawn by Sun Life Assurance Company of Canada or any officer of Bentall Kennedy (U.S.) G.P., LLC or by facsimile at the facsimile number set forth therein, and the issuing bank will determine honor or dishonor on the basis of presentation by facsimile alone, and will not require the examination of originals. The draft shall be approved as to form by Landlord.

8. The letter of credit must allow for one draw in the whole amount or multiple partial draws. Landlord shall not be required to deliver any certificate, affidavit or other writing to the issuer expressing the basis for the draw as a condition to any draw.

9. The letter of credit shall be transferable and any applicable transfer fees shall by paid for by Tenant.

10. The letter of credit shall provide the address of the issuing bank for sending notices after its issuance and that Beneficiary shall only be required to submit a notice letter to issuing bank at the address specified therein for any change of address of the Beneficiary.

11. The letter of credit shall provide that if the original letter of credit is lost, stolen or destroyed while in the Landlord’s possession, then issuing bank shall provide Landlord with a duplicate original of the letter of credit upon presentation of a copy of the letter of credit and signed original of an affidavit of lost letter of credit in the form attached to the letter of credit.

12. The letter of credit shall be governed by the International Standby Practices (ISP 98 published by the International Chamber of Commerce.

13. Issuer shall waive all waiting periods whether under Uniform Commercial Code Section 5-112 or otherwise.

14. The letter of credit shall otherwise be in such form and shall be subject to such requirements as Landlord may reasonably require.

EXHIBIT D-2

APPROVED LETTER OF CREDIT

[-VALUE DATE-

OUR L/C NO.: XXXXXX



DOCUMENTARY CREDIT NUMBER:	XXXXXX
DATE OF ISSUE:	-VALUE DATE-
BENEFICIARY:	SUN LIFE ASSURANCE COMPANY OF CANADA C/O NEWTOWER TRUST COMPANY 7315 WISCONSIN AVENUE, STE 350 WEST, BETHESDA, MARYLAND 20814
APPLICANT:	[APPLICANT NAME] [APPLICANT ADDRESS] [APPLICANT CITY/STATE/ZIP]
DATE AND PLACE OF EXPIRY:	[AT LEAST ONE YEAR FROM DATE OF ISSUANCE] AT OUR COUNTERS
DOCUMENTARY CREDIT AMOUNT	USD
AVAILABLE WITH:	JPMORGAN CHASE BANK, N.A CHICAGO, ILLINOIS USA BY PAYMENT

WE HEREBY ISSUE THIS LETTER OF CREDIT FOR THE ACCOUNT OF APPLICANT/OBLIGOR,**NAME AND FULL ADDRESS INCLUDING CITY AND STATE** ON BEHALF OF ACCOUNT PARTY, **NAME**.

FUNDS UNDER THIS CREDIT ARE AVAILABLE AT SIGHT WITH JPMORGAN CHASE BANK N.A. UPON PRESENTATION OF THE BENEFICIARY’S DRAFT(S), DRAWN ON US AT SIGHT, STATING THE AMOUNT OF THE DEMAND AND MARKED “DRAWN UNDER JPMORGAN CHASE BANK, N.A.’S LETTER OF CREDIT NO. [PLEASE INSERT].” A COPY OF THE SIGHT DRAFT IS ATTACHED HERETO AS EXHIBIT A [PLEASE PROVIDE].

IT IS A CONDITION OF THIS LETTER OF CREDIT THAT IT SHALL BE DEEMED AUTOMATICALLY EXTENDED WITHOUT AMENDMENT FOR ONE YEAR FROM THE PRESENT OR ANY FUTURE EXPIRATION DATE, UNLESS AT LEAST SIXTY (60) DAYS PRIOR TO THE THEN CURRENT EXPIRATION DATE WE SEND NOTICE IN WRITING TO YOU BY RECEIPTED MEANS (COURIER/MESSENGER, REGISTERED/CERTIFIED MAIL OR HAND DELIVERY) AT THE ABOVE ADDRESS, (OR TO ANY OTHER SUCH ADDRESS THAT THE BENEFICIARY MAY NOTIFY TO US IN WRITING) THAT WE ELECT NOT TO AUTOMATICALY EXTEND THIS STANDBY LETTER OF CREDIT FOR ANY ADDITIONAL PERIOD (NOTICE OF NON-EXTENSION).

PARTIAL AND MULTIPLE DRAWINGS ARE PERMITTED.

[INSERT CLAUSE ALLOWING DRAWS BY FAX]

[INSERT TRANSFER CLAUSE & ATTACH TRANSFER FORM AS EXHIBIT B]

WE ENGAGE WITH YOU THAT DOCUMENTS PRESENTED UNDER AND IN CONFORMITY WITH THE TERMS AND CONDITIONS OF THIS CREDIT WILL BE DULY HONORED WITHIN THREE (3) BUSINESS DAYS AFTER PRESENTATION IF PRESENTED ON OR BEFORE THE EXPIRATION AT OUR COUNTERS AT 131 SOUTH DEARBORN STREET, 5 ^TH FLOOR, MAIL CODE IL1-0236, ATTN: STANDBY LETTER OF CREDIT UNIT, CHICAGO, IL 60603-5506 OR BY FACSIMILE. ALL PAYMENTS DUE HEREUNDER SHALL BE MADE BY WIRE TRANSFER TO THE BENEFICIARY’S ACCOUNT PER THEIR INSTRUCTIONS. ALL DEMANDS MUST BE PRESENTED IN ENGLISH. WE AGREE THAT WE SHALL HAVE NO DUTY OR RIGHT TO INQUIRE AS TO THE CONTENT OF ANY STATEMENT PRESENTED HEREUNDER, AND THE PRESENTATION OF THE BENFICIARY’S DRAFT IN COMPLIANCE WITH THE TERMS AND CONDITIONS OF THIS LETTER OF CREDIT SHALL AUTOMATICALLY RESULT IN PAYMENT TO THE BENEFICIARY.

IF THE ORIGINAL LETTER OF CREDIT IS LOST, STOLEN, MUTILATED OR DESTROYED, WE AGREE TO ISSUE A TRUE COPY OF THE ORIGINAL LETTER OF CREDIT, SUBJECT TO OUR RECEIPT OF AN INDEMNITY FROM THE BENEFICIARY IN OUR STANDARD FORM AS WE MAY REQUIRE.

THIS LETTER OF CREDIT MAY BE CANCELLED PRIOR TO EXPIRATION PROVIDED THE ORIGINAL LETTER OF CREDIT (AND AMENDMENTS, IF ANY) ARE RETURNED TO JPMORGAN CHASE BANK, N.A., CHICAGO, IL WITH A STATEMENT SIGNED BY THE BENEFICIARY STATING THAT THE ATTACHED LETTER OF CREDIT IS NO LONGER REQUIRED AND IS BEING RETURNED TO THE ISSUING BANK FOR CANCELLATION.

******************************************************************************

IF THE UNDERLYING OBLIGATION FALLS UNDER ONE OF THE CATEGORIES SPECIFIED IN BANK’S COMPLIANCE DIRECTIVES, THE FOLLOWING CLAUSE WILL BE ADDED.

******************************************************************************

WE MUST COMPLY WITH ALL SANCTIONS, EMBARGO AND OTHER LAWS AND REGULATIONS OF THE U.S. AND OF OTHER APPLICABLE JURISDICTIONS TO THE EXTENT THEY DO NOT CONFLICT WITH SUCH U.S. LAWS AND REGULATIONS (“APPLICABLE RESTRICTIONS”). SHOULD DOCUMENTS BE PRESENTED INVOLVING ANY COUNTRY, ENTITY, VESSEL OR INDIVIDUAL LISTED IN OR OTHERWISE SUBJECT TO ANY APPLICABLE RESTRICTION, WE SHALL NOT BE LIABLE FOR ANY DELAY OR FAILURE TO PAY, PROCESS OR RETURN SUCH DOCUMENTS OR FOR ANY RELATED DISCLOSURE OF INFORMATION.

******************************************************************************

THIS LETTER OF CREDIT IS SUBJECT TO AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, AND, EXCEPT AS OTHERWISE EXPRESSLY STATED HEREIN, IS SUBJECT TO THE INTERNATIONAL STANDBY PRACTICES, INTERNATIONAL CHAMBER OF COMMERCE - PUBLICATION NO. 590 (“ISP98”), AND IN THE EVENT OF ANY CONFLICT, THE LAWS OF THE STATE OF NEW YORK WILL CONTROL, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS.

PLEASE ADDRESS ALL CORRESPONDENCE REGARDING THIS LETTER OF CREDIT TO THE ATTENTION OF THE STANDBY LETTER OF CREDIT UNIT, 131 DEARBORN STREET, 5 ^TH FLOOR, MAIL CODE IL1-0236, CHICAGO, IL 60603-5506, INCLUDING THE LETTER OF CREDIT NUMBER MENTIONED

ABOVE. FOR TELEPHONE ASSISTANCE, PLEASE CONTACT THE STANDBY CLIENT SERVICE UNIT AT 1-800-634-1969, OR 1-813-432-1210, AND HAVE THIS LETTER OF CREDIT NUMBER AVAILABLE.

EXHIBIT G

EXCLUDED EXPENSES

(a) All costs of tenant concessions;

(b) Amounts reimbursed to Landlord by Landlord’s insurance, and amounts which would have been reimbursable to Landlord if Landlord had maintained all insurance Landlord is required under this Lease to maintain;

(c) The cost of any kind of service furnished directly to any other tenant in the Building which Tenant performs for itself or pays for itself, such as electricity and telecommunication services, and if separately charged to Tenant by Landlord, after-hours HVAC;

(d) Salaries and fringe benefits of employees above the grade of Building manager;

(e) Costs incurred in connection with the sale, financing, refinancing, mortgaging, or other change of ownership of the Property;

(f) Expenses for sculptures, paintings or other major artwork (beyond Building-standard decoration) located at the Property;

(g) Payments to parties related to Landlord for services or supplies or materials to the extent the costs of such services, supplies or materials exceeds the costs that would have been paid had such services or supplies or materials been provided on a competitive basis by parties unaffiliated with Landlord;

(h) Capital expenses which are not Capital Costs (as defined in the Lease);

(i) Landlord's and/or Property’s charitable or political contributions;

(j) Costs incurred by Landlord arising from the gross negligence or willful misconduct of Landlord or its agents or employees or contractors or the violation by Landlord of the terms of any encumbrance on the Property or leases of the same;

(k) Expenses incurred by Landlord, and reimbursed by insurance, for repairs or other work occasioned by fire, windstorm, or other insurable casualty or condemnation;

(l) Expenses for the replacement of any item covered under warranty;

(m) Cost to correct, and any penalty or fine incurred by Landlord due to, Landlord's violation of any federal, state or local law or regulation;

(n) The portion of employee expenses which reflects that portion of such employee's time which is not spent directly and solely in the operation of the Property;

(o) Landlord's general corporate overhead and administrative expenses, including, without limitation, costs, fees and expenses associated with the formation and administration of the ownership entity constituting Landlord, except if it is related solely to the Property;

(p) Reserves;

(q) Any real estate brokerage commissions or other costs incurred in procuring tenants or any fee in lieu of such commission;

(r) Any advertising and marketing costs expenses incurred in connection with the marketing of any rentable space;

(s) Any ground rents payable by Landlord;

(t) Depreciation costs;

(u) Uncollected debts owed to Landlord by other parties;

(v) Fees and interest payable for any mortgage loans encumbering the Building;

(w) Costs of testing, abatement and remediation of environmental contamination not caused or permitted by Tenant;

(x) Landlord’s personal income taxes;

(y) Expenses incurred by Landlord for travel, entertainment or gifts;

(z) Costs to repair structural defects on the Building;

(aa) Costs of works or services for particular tenants (including Tenant) that are separately reimbursable to Landlord by such Tenant;

(bb) Expenses that are not paid or incurred in respect of the Property (or the property located at 890 Massachusetts Avenue, to the extent Tenant’s Off-Site Parking Spaces are available to Tenant) but rather in respect of other real property owned by Landlord or affiliates of Landlord;

(cc) Cost and expenses of enforcing leases against tenants, including legal fees; and

(dd) Management fees in excess of four percent (4%) of gross revenues from the Property.

Exhibit 31.1

CERTIFICATION PURSUANT TO RULES 13A-14(A) AND 15D-14(A)

UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED

I, Adelene Q. Perkins, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Infinity Pharmaceuticals, Inc. (the “Registrant”);

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(s) 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(s) 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: May 7, 2019		/s/Adelene Q. Perkins
		Adelene Q. Perkins Chief Executive Officer (Principal Executive Officer)

Exhibit 31.2

CERTIFICATION PURSUANT TO RULES 13A-14(A) AND 15D-14(A)

UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED

I, Lawrence E. Bloch, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Infinity Pharmaceuticals, Inc. (the “Registrant”);

(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: May 7, 2019		/s/Lawrence E. Bloch, M.D., J.D.
		Lawrence E. Bloch, M.D., J.D.
		President
		(Principal Financial Officer & Principal Accounting Officer)

Exhibit 32.1

STATEMENT PURSUANT TO 18 U.S.C. §1350, AS ADOPTED

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to 18 U.S.C. §1350, the undersigned certifies that, to her knowledge, this Quarterly Report on Form 10-Q for the period ended March 31, 2019 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in this report fairly presents, in all material respects, the financial condition and results of operations of Infinity Pharmaceuticals, Inc.



Date: May 7, 2019		/s/Adelene Q. Perkins
		Adelene Q. Perkins
		Chief Executive Officer
		(Principal Executive Officer)

A signed original of this written statement required by Section 906 has been provided to Infinity Pharmaceuticals, Inc. and will be retained by Infinity Pharmaceuticals, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

Exhibit 32.2

STATEMENT PURSUANT TO 18 U.S.C. §1350, AS ADOPTED

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to 18 U.S.C. §1350, the undersigned certifies that, to his knowledge, this Quarterly Report on Form 10-Q for the period ended March 31, 2019 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in this report fairly presents, in all material respects, the financial condition and results of operations of Infinity Pharmaceuticals, Inc.



Date: May 7, 2019		/s/Lawrence E. Bloch, M.D., J.D.
		Lawrence E. Bloch, M.D., J.D.
		President
		(Principal Financial Officer & Principal Accounting Officer)