MEDICINES CO /DE (Form: 10-Q, Received: 05/10/2013 15:26:36)

Product or Product

in Development

Development Stage

Mechanism/Target

Clinical Indication(s)/Therapeutic Areas

Marketed Products

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)



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

For the quarterly period ended: March 31, 2013



o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (No Fee Required)

For the transition period from to

Commission file number 000-31191

THE MEDICINES COMPANY

(Exact name of registrant as specified in its charter)



Delaware (State or other jurisdiction of incorporation or organization)		04-3324394 (I.R.S. Employer Identification No.)

8 Sylvan Way Parsippany, New Jersey (Address of principal executive offices)		07054 (Zip Code)

Registrant's telephone number, including area code: (973) 290-6000

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes þ No o

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



Large accelerated filer þ	Accelerated filer o	Non-accelerated filer o	Smaller reporting company o
		(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No þ

As of May 6, 2013 there were 55,993,594 shares of Common Stock, $0.001 par value per share, outstanding (excluding 2,192,982 shares held in the treasury).

THE MEDICINES COMPANY

TABLE OF CONTENTS



Part I. Financial Information
Item 1 - Financial Statements	1
Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3 - Quantitative and Qualitative Disclosures about Market Risk	40
Item 4 - Controls and Procedures	41
Part II. Other Information	42
Item 1 - Legal Proceedings	42
Item 1A - Risk Factors	43
Item 5 - Other Information	67
Item 6 - Exhibits	67
Signatures	68
Exhibit Index	69
EX-10.1
EX-10.2
EX-31.1
EX-31.2
EX-32.1
EX-32.2

Part I. Financial Information

Item 1. Financial Statements

THE MEDICINES COMPANY

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts)

(unaudited)



	March 31, 2013			December 31, 2012
ASSETS
Current assets:
Cash and cash equivalents	$	228,391		$	519,446
Available for sale securities	23,692			50,875
Accrued interest receivable	150			348
Accounts receivable, net of allowances of approximately $23.9 million and $17.7 million at March 31, 2013 and December 31, 2012, respectively	90,435			85,893
Inventory	84,266			76,355
Deferred tax assets	13,881			13,881
Prepaid expenses and other current assets	18,828			9,577
Total current assets	459,643			756,375
Fixed assets, net	22,666			16,100
Intangible assets, net	458,531			119,576
Goodwill	144,262			14,671
Restricted cash	1,575			1,571
Deferred tax assets, net	—			46,625
Other assets	17,844			17,264
Total assets	$	1,104,521		$	972,182
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	10,078		$	25,378
Accrued expenses	104,472			107,453
Deferred revenue	1,221			2,375
Total current liabilities	115,771			135,206
Contingent purchase price	105,807			18,971
Deferred tax liabilities	36,247			—
Convertible senior notes (due 2017)	228,555			226,109
Other liabilities	5,767			5,674
Total liabilities	492,147			385,960
Stockholders' equity:
Preferred stock, $1.00 par value per share, 5,000,000 shares authorized; no shares issued and outstanding	—			—
Common stock, $0.001 par value per share, 125,000,000 shares authorized; 57,840,183 issued and 55,647,201 outstanding at March 31, 2013 and 56,153,140 issued and 53,960,158 outstanding at December 31, 2012, respectively	57			56
Additional paid-in capital	735,420			697,427
Treasury stock, at cost; 2,192,982 shares at March 31, 2013 and December 31, 2012, respectively	(50,000		)	(50,000		)
Accumulated deficit	(71,984		)	(60,411		)
Accumulated other comprehensive loss	(1,002		)	(766		)
Total The Medicines Company stockholders' equity	612,491			586,306
Non-controlling interest in joint venture	(117		)	(84		)
Total stockholders' equity	612,374			586,222
Total liabilities and stockholders' equity	$	1,104,521		$	972,182

See accompanying notes to unaudited consolidated financial statements.

THE MEDICINES COMPANY

CONSOLIDATED STATEMENTS OF (LOSS) INCOME

(in thousands, except per share amounts)

(unaudited)



	Three Months Ended March 31,
	2013			2012
Net revenue	$	155,753		$	126,610
Operating expenses:
Cost of revenue	56,714			38,663
Research and development	58,196			32,778
Selling, general and administrative	63,482			43,186
Total operating expenses	178,392			114,627
(Loss) income from operations	(22,639		)	11,983
Co-promotion income	3,750			—
Interest expense	(3,674		)	—
Other income	198			62
(Loss) income before income taxes	(22,365		)	12,045
Benefit from (provision for) income taxes	10,759			(4,474		)
Net (loss) income	(11,606		)	7,571
Net loss attributable to non-controlling interest	33			—
Net (loss) income attributable to The Medicines Company	$	(11,573	)	$	7,571
Basic (loss) earnings per common share attributable to The Medicines Company	$	(0.21	)	$	0.14
Diluted (loss) earnings per common share attributable to The Medicines Company	$	(0.21	)	$	0.14
Weighted average number of common shares outstanding:
Basic	54,047			54,037
Diluted	54,047			55,672

See accompanying notes to unaudited consolidated financial statements .

THE MEDICINES COMPANY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(in thousands)

(unaudited)



	Three Months Ended March 31,
	2013			2012
Net (loss) income	$	(11,606	)	$	7,571
Other comprehensive (loss) income:
Unrealized gain (loss) on available for sale securities	5			(89		)
Foreign currency translation adjustment	(241		)	302
Other comprehensive (loss) income	(236		)	213
Comprehensive (loss) income	$	(11,842	)	$	7,784

See accompanying notes to unaudited consolidated financial statements .

THE MEDICINES COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)



	Three Months Ended March 31,
	2013			2012
Cash flows from operating activities:
Net (loss) income	$	(11,606	)	$	7,571
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization	5,729			1,689
Amortization of net premiums and discounts on available for sale securities	131			98
Amortization of long term debt financing costs	283			—
Amortization of debt discount	2,445			—
Unrealized foreign currency transaction (gain), net	(72		)	(410		)
Non-cash stock compensation expense	4,611			3,115
Loss (gain) on disposal of fixed assets	19			(40		)
Deferred tax provision	(5,430		)	—
Excess tax benefit from share-based compensation arrangements	(3,648		)	(372		)
Adjustment to contingent purchase price	(364		)	564
Changes in operating assets and liabilities:
Accrued interest receivable	198			201
Accounts receivable	(4,872		)	7,059
Inventory	(7,994		)	(4,768		)
Prepaid expenses and other current assets	(8,991		)	(587		)
Accounts payable	(15,148		)	10,657
Accrued expenses	(2,217		)	(39,879		)
Deferred revenue	(1,124		)	12
Other liabilities	85			43
Net cash used in operating activities	(47,965		)	(15,047		)
Cash flows from investing activities:
Purchases of available for sale securities	—			(37,222		)
Proceeds from maturities and sales of available for sale securities	27,056			22,036
Purchases of fixed assets	(852		)	—
Acquisitions	(301,699		)	—
Acquisition of intangible assets				(36,678		)
Other investments	(875		)	—
Decrease in restricted cash	5			2,036
Net cash used in investing activities	(276,365		)	(49,828		)
Cash flows from financing activities:
Proceeds from issuances of common stock, net	29,735			3,880
Excess tax benefit from stock-based compensation arrangements	3,648			372
Net cash provided by financing activities	33,383			4,252
Effect of exchange rate changes on cash	(108		)	768
(Decrease) in cash and cash equivalents	(291,055		)	(59,855		)
Cash and cash equivalents at beginning of period	519,446			315,382
Cash and cash equivalents at end of period	$	228,391		$	255,527
Supplemental disclosure of cash flow information:
Taxes paid	$	1,400		$	14

See accompanying notes to unaudited consolidated financial statements .

THE MEDICINES COMPANY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

The Medicines Company ^® name and logo, Angiomax ^® , Angiox ^® , Cleviprex ^® and IONSYS ^TM are either registered trademarks or trademarks of The Medicines Company in the United States and/or other countries. All other trademarks, service marks or other tradenames appearing in this quarterly report on Form 10-Q are the property of their respective owners. Except where otherwise indicated, or where the context may otherwise require, references to “Angiomax” in this quarterly report on Form 10-Q mean Angiomax and Angiox collectively. References to “the Company,” “we,” “us” or “our” mean The Medicines Company, a Delaware corporation, and its subsidiaries.

1. Nature of Business

The Medicines Company (the Company) is a global biopharmaceutical company focused on saving lives, alleviating suffering and improving the economic efficiency of the world's leading hospitals. The Company markets Angiomax ^® (bivalirudin), Recothrom ^® Thrombin, topical (Recombinant) and Cleviprex ^® (clevidipine) injectable emulsion. The Company also has a pipeline of acute and intensive care hospital products in development, including four late-stage development product candidates, cangrelor, oritavancin, MDCO-157 and IONSYS ^TM (fentanyl iontophoretic transdermal system), and early stage development product candidates, MDCO-216 and ALN-PCS02 and ALN-PCSsc of its ALN-PCS program. The Company believes that these marketed products and products in development possess favorable attributes that competitive products do not provide, can satisfy unmet medical needs in the acute and intensive care hospital product market and offer, or, in the case of its products in development, have the potential to offer, improved performance to hospital businesses.

In addition to these products and product candidates, the Company sells a ready-to-use formulation of Argatroban and has a portfolio of ten generic drugs, which the Company refers to as its acute care generic products, that the Company has the non-exclusive right to market in the United States. The Company began selling three of its acute care generic products, midazolam, ondansetron and rocuronium, in the first quarter of 2013. The Company also co-promotes the oral tablet antiplatelet medicine BRILINTA ^® (ticagrelor) in the United States, as part of its global collaboration agreement with AstraZeneca LP (AstraZeneca).

2. Significant Accounting Policies

The Company's significant accounting policies are described in note 2 of the notes to the consolidated financial statements included in the Company's annual report on Form 10-K for the year ended December 31, 2012 as filed with the Securities and Exchange Commission (SEC).

Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information and with the instructions to Form 10-Q. Accordingly, they do not include all the information and footnotes required by GAAP for complete financial statements. In the opinion of management, the accompanying financial statements include all adjustments, consisting of normal recurring accruals, considered necessary for a fair presentation of the Company's financial position, results of operations, and cash flows for the periods presented.

The consolidated financial statements include the accounts of the Company and its wholly owned and majority owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. The Company records net income (loss) attributable to non-controlling interest, if any, in the Company's consolidated financial statements equal to the percentage of ownership interest retained in the respective operations by the non-controlling parties. The Company has no unconsolidated subsidiaries or significant investments accounted for under the equity method.

The Company's results of operations for the three months ended March 31, 2013 are not necessarily indicative of the results that may be expected from the Company for the entire fiscal year or any other quarter of the fiscal year ending December 31, 2013 . These consolidated financial statements should be read in conjunction with the Company's audited financial statements included in the Company's annual report on Form 10-K for the year ended December 31, 2012 as filed with the SEC.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs, expenses and accumulated other comprehensive loss that are

reported in the consolidated financial statements and accompanying disclosures. Actual results may be different. See note 2 of the notes to the consolidated financial statements in the Company's annual report on Form 10-K for the year ended December 31, 2012 as filed with the SEC for a discussion of the Company's critical accounting policies.

Loss Attributable to Noncontrolling Interest

In 2010, the Company and Windlas Healthcare Private Limited entered into a joint venture in India. Given the Company's majority ownership interest of approximately 74% of the joint venture company, the Medicines Company (India) Private Limited, the accounts of the Medicines Company (India) Private Limited have been consolidated with the Company's accounts, and a noncontrolling interest has been recorded for the noncontrolling investors' interests in the equity and operations of the Medicines Company (India) Private Limited. For the three months ended March 31, 2013 , the loss attributable to the noncontrolling interest in the Medicines Company (India) Private Limited was approximately $33,000 .

Treasury Stock

Treasury stock is recognized at the cost to reacquire the shares. Shares issued from treasury are recognized utilizing the first-in first-out method.

Contingencies

The Company may be, from time to time, a party to various disputes and claims arising from normal business activities. The Company continually assesses litigation to determine if an unfavorable outcome would lead to a probable loss or reasonably possible loss which could be estimated. In accordance with the guidance of the Financial Accounting Standards Board (FASB) on accounting for contingencies, the Company accrues for all contingencies at the earliest date at which the Company deems it probable that a liability has been incurred and the amount of such liability can be reasonably estimated. If the estimate of a probable loss is a range and no amount within the range is more likely than another, the Company accrues the minimum of the range. In the cases where the Company believes that a reasonably possible loss exists, the Company discloses the facts and circumstances of the litigation, including an estimable range, if possible.

Intangible Assets

Intangible assets with definite useful lives are amortized to their estimated residual values over their estimated useful lives and reviewed for impairment if certain events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

In-Process Research and Development

The cost of in-process research and development (IPR&D) acquired directly in a transaction other than a business combination is capitalized if the projects have an alternative future use; otherwise they are expensed. The fair values of IPR&D projects acquired in business combinations are capitalized. Several methods may be used to determine the estimated fair value of the IPR&D acquired in a business combination. The Company utilizes the "income method," which applies a probability weighting that considers the risk of development and commercialization to the estimated future net cash flows that are derived from projected sales revenues and estimated costs. These projections are based on factors such as relevant market size, patent protection, historical pricing of similar products and expected industry trends. The estimated future net cash flows are then discounted to the present value using an appropriate discount rate. This analysis is performed for each project independently. These assets are treated as indefinite-lived intangible assets until completion or abandonment of the projects, at which time the assets are amortized over the remaining useful life or written off, as appropriate. IPR&D intangible assets which are determined to have had a drop in their fair value are adjusted downward and an expense recognized on the earnings statement. These are tested at least annually or when a triggering event occurs that could indicate a potential impairment.

Goodwill

Goodwill represents the excess consideration in a business combination over the fair value of identifiable net assets acquired. Goodwill is not amortized, but subject to impairment testing at least annually or when a triggering event occurs that could indicate a potential impairment. The Company determines whether goodwill may be impaired by comparing the carrying value of its reporting unit to the fair value of its reporting unit. A reporting unit is defined as an operating segment.

Contingent Purchase Price from Business Combinations

Subsequen t to the acquisition date, the Company measures contingent consideration arrangements at fair value for each period with changes in fair value recognized in operating earnings. Changes in fair values reflect new information about related IPR&D assets and the passage of time. In the absence of new information, changes in fair value reflect only the passage of time as development work towards the achievement of the milestones progresses, and is accrued based on an accretion schedule.

Impairment of Long-Lived Assets

Long-lived assets, such as property, plant and equipment and certain other long-term assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset or asset group to the estimated undiscounted future cash flows expected to be generated by the asset or asset group. If the carrying amount of the assets exceed their estimated future undiscounted net cash flows, an impairment charge is recognized for the amount by which the carrying amount of the assets exceed the fair value of the assets.

Other Comprehensive Income

The Company's accumulated comprehensive loss is comprised of gains and losses on available for sale securities and recorded and presented net of income tax and foreign currency translation.

Recent Accounting Pronouncements

In February 2013, the FASB amended its guidance to require an entity to present the effect of certain significant reclassifications out of accumulated other comprehensive income on the respective line items in net income. The new accounting guidance does not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. The guidance is effective prospectively for fiscal years beginning after December 15, 2012. The Company adopted these new provisions for the quarter beginning January 1, 2013. As the guidance requires additional presentation only, there was no impact to the Company's consolidated results of operations or financial position.

3. Stock-Based Compensation

The Company recorded approximately $4.6 million and $3.1 million of stock-based compensation expense for the three months ended March 31, 2013 and March 31, 2012 , respectively, in each case, related to options, restricted stock or the Company's 2010 employee stock purchase plan (the 2010 ESPP). As of March 31, 2013 , there was approximately $25.9 million of total unrecognized compensation costs related to non-vested stock-based employee compensation arrangements granted under the Company's equity compensation plans. The Company expects to recognize those costs over a weighted average period of 1.42 years.

During the three months ended March 31, 2013 , the Company issued a total of 1,687,043 shares of its common stock upon the exercise of stock options, pursuant to restricted stock grants and pursuant to purchases under the 2010 ESPP. During the three months ended March 31, 2012 , the Company issued a total of 590,704 shares of its common stock upon the exercise of stock options, pursuant to restricted stock grants and pursuant to purchases under the 2010 ESPP. Cash received from the exercise of stock options and purchases through the 2010 ESPP during the three months ended March 31, 2013 and March 31, 2012 was approximately $29.7 million and $3.9 million , respectively, and is included within the financing activities section of the consolidated statements of cash flows.

At March 31, 2013 , there were an aggregate of 1,380,070 shares of common stock reserved for future issuance under the 2010 ESPP and for future grants under the Company's amended and restated 2004 stock incentive plan.

4. Earnings per Share

The following table sets forth the computation of basic and diluted (loss) earnings per share for the three months ended March 31, 2013 and 2012 :



	Three Months Ended March 31,
	2013			2012
	(in thousands, except per share amounts)
Basic and diluted
Net (loss) income attributable to The Medicines Company	$	(11,573	)	$	7,571

Weighted average common shares outstanding, basic	54,047			54,037
Plus: net effect of dilutive stock options and restricted common shares	—			1,635
Weighted average common shares outstanding, diluted	54,047			55,672

(Loss) earnings per share attributable to The Medicines Company, basic	$	(0.21	)	$	0.14
(Loss) earnings per share attributable to The Medicines Company, diluted	$	(0.21	)	$	0.14

Basic earnings per share is computed using the weighted average number of shares of common stock outstanding during the period, reduced where applicable for outstanding yet unvested shares of restricted common stock. The number of dilutive common stock equivalents was calculated using the treasury stock method. For the three months ended March 31, 2013 and 2012 , options to purchase 2,705,911 shares and 3,394,410 shares, respectively, of common stock that could potentially dilute basic earnings per share in the future were excluded from the calculation of diluted earnings per share as their effect would have been anti-dilutive.

For the three months ended March 31, 2013 and March 31, 2012 , 407,922 and 293,940 shares, respectively, of unvested restricted stock that could potentially dilute basic earnings per share in the future were excluded from the calculation of diluted earnings per common share as their effect would have been anti-dilutive.

In June 2012 , the Company issued, at par value, $275.0 million aggregate principal amount of 1.375% convertible senior notes due June 1, 2017 (the Notes) (see note 10 "Convertible Senior Notes”). In connection with the issuance of the Notes, the Company entered into convertible note hedge transactions with respect to its common stock (the Note Hedges) with several of the initial purchasers of the Notes, their affiliates and other financial institutions (the Hedge Counterparties). The options that are part of the Note Hedges are not considered for purposes of calculating the total shares outstanding under the basic and diluted net income per share, as their effect would be anti-dilutive. The Note Hedges are expected generally to reduce the potential dilution with respect to shares of the Company's common stock upon any conversion of the Notes in the event that the market price per share of the Company's common stock, as measured under the terms of the Note Hedges, is greater than the strike price of the Note Hedges, which initially corresponded to the conversion price of the Notes and is subject to anti-dilution adjustments substantially similar to those applicable to the conversion rate of the Notes. The shares of common stock issuable upon conversion of the Notes are not included for purposes of calculating the total shares outstanding under the diluted net loss per share, as the effect would be anti-dilutive. For the three months ended March 31, 2013, 873,776 shares issuable for the conversion of the Notes and the options under the Notes are not included for purposes of calculating the total shares outstanding under the basic and diluted net loss per share as the effect would be anti-dilutive.

In addition, in connection with the Note Hedges, the Company entered into warrant transactions with the Hedge Counterparties, pursuant to which the Company sold warrants (the Warrants) to the Hedge Counterparties to purchase, subject to customary anti-dilution adjustments, up to 9.8 million shares of the Company's common stock at a strike price of $34.20 per share. For the three months ended March 31, 2013 , the warrants did not have a dilutive effect on earnings per share because the average market price during the periods presented was below the strike price. The Warrants will have a dilutive effect with respect to the Company's common stock to the extent that the market price per share of the Company's common stock, as measured under the terms of the Warrants, exceeds the applicable strike price of the Warrants. However, subject to certain conditions, the Company may elect to settle all of the Warrants in cash.

5. Income Taxes

For the three months ended March 31, 2013 and 2012, the Company recorded a $10.8 million benefit for income taxes and a $4.5 million provision for income taxes, respectively, based upon its estimated federal, state and foreign tax liability for the year. The worldwide effective income tax rates for the Company for the three months ended March 31, 2013 and 2012 were 48.2% and 37.1% , respectively. The effective income tax rate for the three months ended March 31, 2013 reflects the effect of a one-time $2.2 million income tax benefit arising from the retroactive reinstatement of the research and development tax credit included in

The American Tax Relief Act of 2012 which was signed into law on January 2, 2013. Both the 2013 and 2012 effective income tax rates include a non-cash tax expense arising from purchase accounting for future contingent payments related to the Company's acquisition of Targanta Therapeutics Corporation (Targanta) and Incline Therapeutics, Inc. (Incline).

The Company continues to evaluate its ability to realize its deferred tax assets and liabilities on a periodic basis and will adjust such amounts in light of changing facts and circumstances including, but not limited to, future projections of taxable income, tax legislation, rulings by relevant tax authorities, the progress of ongoing tax audits and the regulatory approval of products currently under development. Any changes to the valuation allowance or deferred tax assets in the future would impact the Company's income taxes.

6. Cash, Cash Equivalents and Available for Sale Securities

The Company considers all highly liquid investments purchased with original maturities at the date of purchase of three months or less to be cash equivalents. Cash and cash equivalents included cash of $186.2 million and $504.7 million at March 31, 2013 and December 31, 2012 , respectively. Cash and cash equivalents at March 31, 2013 and December 31, 2012 also included investments of $42.2 million and $14.7 million , respectively, in money market funds and commercial paper with original maturities of less than three months.

At March 31, 2013 and December 31, 2012 , the Company held available for sale securities with a fair value totaling $23.7 million and $50.9 million , respectively. These available for sale securities included various U.S. government agency notes and corporate debt securities. At March 31, 2013 and December 31, 2012 , all of the available for sale securities were due within one year. The Company evaluates securities with unrealized losses to determine whether such losses are other than temporary. The Company has determined that there were no other than temporary declines in fair values of its investments as of March 31, 2013 .

Available for sale securities, including carrying value and estimated fair values, are summarized as follows:



	As of March 31, 2013								As of December 31, 2012
	Cost		Fair Value		Carrying Value		Unrealized Gain		Cost		Fair Value		Carrying Value		Unrealized Gain
	(in thousands)
U.S. government agency notes	$	7,036	$	7,040	$	7,040	$	4	$	7,093	$	7,097	$	7,097	$	4
Corporate debt securities	16,642		16,652		16,652		10		43,772		43,778		43,778		6
Total	$	23,678	$	23,692	$	23,692	$	14	$	50,865	$	50,875	$	50,875	$	10

Restricted Cash

The Company had restricted cash of $1.6 million at March 31, 2013 and December 31, 2012 , which consisted of $1.0 million collateral for outstanding letters of credit associated with the Company's lease for the office space in Parsippany, New Jersey. The funds are invested in certificates of deposit. The letter of credit permits draws by the landlord to cure defaults by the Company. In addition, as a result of the acquisition of Targanta in 2009, the Company had restricted cash of $0.3 million at March 31, 2013 and December 31, 2012 , respectively, in the form of a guaranteed investment certificate collateralizing an available credit facility. The Company also had restricted cash of $0.3 million at March 31, 2013 and December 31, 2012 , respectively, related to certain foreign tender requirements.

7. Fair Value Measurements

FASB ASC 820-10 “Fair Value Measurements and Disclosures” (ASC 820-10) provides a framework for measuring fair value under GAAP and requires expanded disclosures regarding fair value measurements. ASC 820-10 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820-10 also establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs, where available, and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:


Level 1	Quoted prices in active markets for identical assets or liabilities. The Company's Level 1 assets and liabilities consist of money market investments and U.S. treasury notes.

Level 2

Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. The Company's Level 2 assets and liabilities consist of U.S. government agency notes and corporate debt securities. Fair values are determined by utilizing quoted prices for similar assets and liabilities in active markets or other market observable inputs such as interest rates and yield curves.

Level 3

Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. The Company's Level 3 assets and liabilities consist of the contingent purchase price associated with the Company's acquisitions of Targanta and Incline. The fair value of the contingent purchase price was determined utilizing a probability weighted discounted financial model based on management's assessment of the likelihood of achievement of certain development, regulatory and sales milestones.

The following table sets forth the Company's assets and liabilities that were measured at fair value on a recurring basis at March 31, 2013 and December 31, 2012 by level within the fair value hierarchy. As required by ASC 820-10, assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company's assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability:



	As of March 31, 2013								As of December 31, 2012
Assets and Liabilities	Quoted Prices In Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance as of March 31, 2013		Quoted Prices In Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance as of December 31, 2012
	(in thousands)
Assets:
Money market	$	42,170	$	—	$	—	$	42,170	$	14,751	$	—	$	—	$	14,751
U.S. government agency notes	—		7,040		—		7,040		—		7,097		—		7,097
Corporate debt securities	—		16,652		—		16,652		—		43,778		—		43,778
Total assets at fair value	$	42,170	$	23,692	$	—	$	65,862	$	14,751	$	50,875	$	—	$	65,626
Liabilities:
Contingent purchase price	$	—	$	—	$	105,807	$	105,807	$	—	$	—	$	18,971	$	18,971
Total liabilities at fair value	$	—	$	—	$	105,807	$	105,807	$	—	$	—	$	18,971	$	18,971

The Company measures the contingent purchase price at fair value based on significant inputs not observable in the market, which causes it to be classified as a Level 3 measurement within the fair value hierarchy. The valuation of contingent purchase price uses assumptions and estimates the Company believes would be made by a market participant in making the same valuation. The Company assesses these assumptions and estimates on an on-going basis as additional data impacting the assumptions and estimates are obtained. Changes in the fair value of contingent purchase price related to updated assumptions and estimates are recognized within the consolidated statements of income.

Contingent purchase price may change significantly as additional data is obtained, impacting the Company’s assumptions regarding probabilities of successful achievement of related milestones used to estimate the fair value of the liability. In evaluating this information, considerable judgment is required to interpret the market data used to develop the assumptions and estimates. The estimates of fair value may not be indicative of the amounts that could be realized in a current market exchange. Accordingly,

the use of different market assumptions and/or different valuation techniques may have a material effect on the estimated fair value amounts, and such changes could materially impact the Company’s results of operations in future periods.

Level 3 Disclosures

The following table provides quantitative information associated with the fair value measurement of the Company’s Level 3 inputs:



	Fair Value as of
	March 31, 2013		Valuation Technique	Unobservable Input	Range (Weighted Average)
	(in thousands)
Targanta:
Contingent purchase price	$	14,307	Probability-adjusted discounted cash flow	Probabilities of success	20% - 38% (31%)
				Periods in which milestones are expected to be achieved	2013 - 2019
				Discount rate	11%
Incline:
Contingent purchase price	$	91,500	Probability-adjusted discounted cash flow	Probabilities of success	60% - 80% (75%)
				Periods in which milestones are expected to be achieved	2013-2017
				Discount Rate	22%



	Fair Value as of
	December 31, 2012		Valuation Technique	Unobservable Input	Range (Weighted Average)
	(in thousands)
Targanta:
Contingent purchase price	$	18,971	Probability-adjusted discounted cash flow	Probabilities of success	20% - 60% (49%)
				Periods in which milestones are expected to be achieved	2013 - 2019
				Discount rate	11%

The fair value of the contingent purchase price represents the fair value of the Company's liability for all potential payments under the Company's agreements with Targanta and Incline. The significant unobservable inputs used in the fair value measurement of the Company's contingent purchase prices are the probabilities of successful achievement of development, regulatory and sales milestones, which would trigger payments under the Targanta and Incline agreements, probabilities as to the periods in which the milestones are expected to be achieved and discount rates. Significant changes in any of the probabilities of success would result in a significantly higher or lower fair value measurement, respectively. Significant changes in the probabilities as to the periods in which milestones will be achieved would result in a significantly lower or higher fair value measurement, respectively.

The changes in fair value of the Company's Level 3 contingent purchase price during the three months ended March 31, 2013 and 2012 were as follows:



	Three Months Ended March 31,
	2013			2012
	(in thousands)
Balance at beginning of period	$	18,971		$	20,431
Fair value of contingent purchase price with respect to Incline as of January 4, 2013	87,200			—
Fair value adjustment to contingent purchase prices included in net (loss) income	(364		)	564
Balance at end of period	$	105,807		$	20,995

For the three months ended March 31, 2013 , the changes in the fair value of the contingent purchase price obligations resulted from the Company's purchase of Incline, the passage of time as development work for both IONSYS and oritavancin progress towards the achievement of milestones and a reduction in the probability of successfully obtaining regulatory approval of oritavancin by December 31, 2013. The reduction in the fair value of the Company's contingent purchase price with respect to Targanta was recognized as a gain of $4.7 million in selling general and administrative expenses on the consolidated statements of income for the three months ended March 31, 2013 .

No other changes in valuation techniques or inputs occurred during the three months ended March 31, 2013 . No transfers of assets between Level 1 and Level 2 of the fair value measurement hierarchy occurred during the three months ended March 31, 2013 .

8. Inventory

The major classes of inventory were as follows:



Inventory	March 31, 2013		December 31, 2012
	(in thousands)
Raw materials	$	42,707	$	40,244
Work-in-progress	29,295		26,594
Finished goods	12,264		9,517
Total	$	84,266	$	76,355

The Company reviews inventory, including inventory purchase commitments, for slow moving or obsolete amounts based on expected volume. If annual volume is less than expected, the Company may be required to make additional allowances for excess or obsolete inventory in the future.

9. Intangible Assets

The following information details the carrying amounts and accumulated amortization of the Company's intangible assets subject to amortization:



	As of March 31, 2013								As of December 31, 2012
	Weighted Average Useful Life	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
		(in thousands)
Identifiable intangible assets
Customer relationships	8 years	$	7,457	$	(4,487	)	$	2,970	$	7,457	$	(4,106	)	$	3,351
Distribution agreements	5.7 years	9,125		(4,069		)	5,056		9,125		(3,469		)	5,656
Trademarks	8 years	3,024		(1,820		)	1,204		3,024		(1,665		)	1,359
Product licenses	5.7 years	71,800		(4,930		)	66,870		39,000		(1,129		)	37,871
Cleviprex milestones	13 years	2,000		(169		)	1,831		2,000		(161		)	1,839
Total	6.1 years	$	93,406	$	(15,475	)	$	77,931	$	60,606	$	(10,530	)	$	50,076

In February 2013, pursuant to a master transaction agreement with Bristol-Myers Squibb Company (BMS), the Company acquired the right to sell, distribute and market Recothrom on a global basis for a two -year period (the collaboration term) and BMS transferred to the Company certain limited assets exclusively related to Recothrom, primarily the biologics license application for Recothrom and certain related regulatory assets. The Company valued the intangible assets obtained from BMS in the United States at $32.8 million and classified such assets as product license intangibles. The Company is amortizing the assets using a two year expected useful life (see note 13 “Acquisitions”).

The Company expects amortization expense related to its intangible assets to be $18.9 million for the nine months ended December 31, 2013 . The Company expects annual amortization expense related to its intangible assets to be $26.4 million , $6.0 million , $4.5 million , $4.6 million and $4.6 million for the years ending December 31, 2014, 2015, 2016, 2017 and 2018, respectively, with the balance of $13.0 million being amortized thereafter. The Company records amortization of customer relationships, distribution agreements and trademarks in selling, general and administrative expense on the consolidated statements of income. The Company records amortization of Cleviprex milestones and product licenses in cost of revenue on the consolidated statements of income.

The following information details the carrying amounts of the Company's intangible assets not subject to amortization:



	As of March 31, 2013					As of December 31, 2012
	Gross Carrying Amount		Adjustments	Net Carrying Amount		Gross Carrying Amount		Adjustments	Net Carrying Amount
	(in thousands)
Intangible assets not subject to amortization:
In-process research and development	$	323,500	—	$	323,500	$	69,500	—	$	69,500
Recothrom option	57,100		—	57,100		—		—	$	—
Total	$	380,600	—	$	380,600	$	69,500	—	$	69,500

The Company capitalized IPR&D of $254.0 million related to the Incline acquisition and capitalized the option value of $57.1 million related to the licensing agreement with BMS during the three months ended March 31, 2013 . The allocation of the preliminary purchase price to intangible assets is detailed in note 13 “Acquisitions”.

The changes in the carrying amount of goodwill for the three months ended March 31, 2013 :



	March 31, 2013
	(in thousands)
Balance at January 1, 2013	$	14,671
Goodwill resulting from the acquisition of Incline	104,491
Goodwill resulting from the acquisition of Recothrom	25,100
Balance at March 31, 2013	$	144,262

10. Convertible Senior Notes

In June 2012 , the Company issued, at par value, $275.0 million aggregate principal amount of the Notes. The Notes bear cash interest at a rate of 1.375% per year, payable semi-annually on June 1 and December 1 of each year, beginning on December 1, 2012 . The Notes will mature on June 1, 2017 . The net proceeds to the Company from the offering were $266.2 million after deducting the initial purchasers' discounts and commissions and the offering expenses payable by the Company.

The Notes are governed by an indenture dated as of June 11, 2012 (the Indenture), between the Company, as issuer, and Wells Fargo Bank, National Association, a national banking association, as trustee (the Trustee). The Notes do not contain any financial or operating covenants or any restrictions on the payment of dividends, the incurrence of other indebtedness, or the issuance or repurchase of securities by the Company.

The Notes are senior unsecured obligations of the Company and will rank senior in right of payment to the Company's future indebtedness, if any, that is expressly subordinated in right of payment to the Notes and equal in right of payment to the Company's existing and future unsecured indebtedness that is not so subordinated. The Notes are effectively junior in right of payment to any secured indebtedness of the Company to the extent of the value of the assets securing such indebtedness and are structurally junior to all existing and future indebtedness and other liabilities (including trade payables) incurred by the Company's subsidiaries.

Holders may convert their Notes at their option at any time prior to the close of business on the business day immediately preceding March 1, 2017 only under the following circumstances:

•

during any calendar quarter commencing on or after September 1, 2012 (and only during such calendar quarter), if the last reported sale price of the Company's common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price (described below) on each applicable trading day;


•	during the five business day period after any five consecutive trading day period (the Measurement Period) in which the trading price (as defined in the Indenture) per $1,000 principal amount of Notes for each trading day of the Measurement Period was less than 98% of the product of the last reported sale price of the Company's common stock and the conversion rate on each such trading day; or


•	upon the occurrence of specified corporate events, including a merger or a sale of all or substantially all of the Company's assets.

On or after March 1, 2017 , until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert their Notes at any time, regardless of the foregoing circumstances. Upon conversion, the Company will pay cash up to the aggregate principal amount of the Notes to be converted and deliver shares of the Company's common stock in respect of the remainder, if any, of the Company's conversion obligation in excess of the aggregate principal amount of the Notes being converted, subject to a daily share cap, as described in the Indenture. Holders of Notes will not receive any additional cash payment or additional shares representing accrued and unpaid interest, if any, upon conversion of a Note, except in limited circumstances. Instead, accrued but unpaid interest will be deemed to be paid by the cash and shares, if any, of the Company's common stock, together with any cash payment for any fractional share, paid or delivered, as the case may be, upon conversion of a Note.

The conversion rate for the Notes was initially, and remains, 35.8038 shares of the Company's common stock per $1,000 principal amount of Notes, which is equivalent to an initial conversion price of $27.93 per share of the Company's common stock.

The conversion rate and the conversion price are subject to customary adjustments for certain events, including, but not limited to, the issuance of certain stock dividends on the Company's common stock, the issuance of certain rights or warrants, subdivisions, combinations, distributions of capital stock, indebtedness, or assets, cash dividends and certain issuer tender or exchange offers, as described in the Indenture.

The Company may not redeem the Notes prior to maturity and is not required to redeem or retire the Notes periodically. However, upon the occurrence of a "fundamental change" (as defined in the Indenture), subject to certain conditions, in lieu of converting their Notes, holders may require the Company to repurchase for cash all or part of their Notes at a repurchase price equal to 100% of the principal amount of the Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date. Following certain corporate transactions that constitute a change of control, the Company will increase the conversion rate for a holder who elects to convert the Notes in connection with such change of control in certain circumstances.

The Indenture contains customary events of default with respect to the Notes, including that upon certain events of default (including the Company's failure to make any payment of principal or interest on the Notes when due and payable) occurring and continuing, the Trustee by notice to the Company, or the holders of at least 25% in principal amount of the outstanding Notes by notice to the Company and the Trustee, may, and the Trustee at the request of such holders (subject to the provisions of the Indenture) shall, declare 100% of the principal of and accrued and unpaid interest, if any, on all the Notes to be due and payable. In case of an event of default involving certain events of bankruptcy, insolvency or reorganization, involving the Company or a significant subsidiary, 100% of the principal of and accrued and unpaid interest on the Notes will automatically become due and payable. Upon a declaration of acceleration, such principal and accrued and unpaid interest, if any, will be due and payable immediately.

In accounting for the issuance of the Notes, the Company separated the Notes into liability and equity components. The carrying amount of the liability component was calculated by measuring the fair value of a similar liability that does not have an associated convertible feature. The carrying amount of the equity component representing the conversion option was determined by deducting the fair value of the liability component from the par value of the Notes as a whole. The excess of the principal amount of the liability component over its carrying amount, referred to as the debt discount, is amortized to interest expense over the five -year term of the Notes. The equity component is not re-measured as long as it continues to meet the conditions for equity classification.

In accounting for the transaction costs related to the issuance of the Notes, the Company allocated the total costs incurred to the liability and equity components of the Notes based on their relative values. Transaction costs attributable to the liability component are amortized to interest expense over the five-year term of the Notes, and transaction costs attributable to the equity component are netted with the equity components in stockholders’ equity.

The Notes consisted of the following:



Liability component	March 31, 2013			December 31, 2012
	(in thousands)
Principal	$	275,000		$	275,000
Less: Debt discount, net ⁽¹⁾	(46,445		)	(48,891		)
Net carrying amount	$	228,555		$	226,109

⁽¹⁾ Included in the consolidated balance sheets within convertible senior notes (due 2017) and amortized to interest expense over the remaining life of the Notes using the effective interest rate method.

The fair value of the Notes was approximately $248.4 million as of March 31, 2013 . The Company estimates the fair value of its Notes utilizing market quotations for debt that have quoted prices in active markets. Since the Notes do not trade on a daily basis in an active market, the fair value estimates are based on market observable inputs based on borrowing rates currently available for debt with similar terms and average maturities (Level 2). As of March 31, 2013 , the remaining contractual life of the Notes is approximately 4.2 years.

The following table sets forth total interest expense recognized related to the Notes:



	Three Months Ended March 31,
	2013		2012
	(in thousands)
Contractual interest expense	945		—
Amortization of debt issuance costs	283		—
Amortization of debt discount	2,445		—
Total	3,673		—
Effective interest rate of the liability component	6.02	%	—	%

Note Hedges . In June 2012 , the Company paid an aggregate amount of $58.2 million for the Note Hedges, which was recorded as a reduction of additional paid-in-capital in stockholders' equity. The Note Hedges cover approximately 9.8 million shares of the Company’s common stock, subject to anti-dilution adjustments substantially similar to those applicable to the Notes, have a strike price that corresponds to the initial conversion price of the Notes and are exercisable upon conversion of the Notes. The Note Hedges will expire upon the maturity of the Notes. The Note Hedges are expected generally to reduce the potential dilution with respect to shares of the Company's common stock upon conversion of the Notes in the event that the market price per share of the Company’s common stock, as measured under the terms of the Note Hedges, at the time of exercise is greater than the strike price of the Note Hedges. The Note Hedges are separate transactions entered into by the Company with the Hedge Counterparties and are not part of the terms of the Notes or the Warrants. Holders of the Notes and Warrants will not have any rights with respect to the Note Hedges. As of March 31, 2013 , the fair value of the Note Hedges was $112.3 million .

Warrants . The Company received aggregate proceeds of $38.4 million from the sale to the Hedge Counterparties of the Warrants to purchase up to 9.8 million shares of the Company's common stock, subject to customary anti-dilution adjustments, at a strike price of $34.20 per share, which the Company recorded as additional paid-in-capital in stockholders' equity. The Warrants will have a dilutive effect with respect to the Company's common stock to the extent that the market price per share of the Company's common stock, as measured under the terms of the Warrants, exceeds the applicable strike price of the Warrants. However, subject to certain conditions, the Company may elect to settle all of the Warrants in cash. The Warrants were anti-dilutive for the three months ended March 31, 2013 . The Warrants are separate transactions entered into by the Company with the Hedge Counterparties and are not part of the terms of the Notes or Note Hedges. Holders of the Notes and Note Hedges will not have any rights with respect to the Warrants. The Warrants also meet the definition of a derivative under current accounting principles. Because the Warrants are indexed to the Company's common stock and are recorded in equity in the Company's consolidated balance sheets, the Warrants are exempt from the scope and fair value provisions of accounting principles related to accounting for derivative instruments.

11. Treasury Stock

On June 5, 2012 , the Company's Board of Directors authorized the Company to use a portion of the net proceeds of the Notes offering to repurchase up to an aggregate of $50.0 million of its common stock. The Company repurchased 2,192,982 shares of its common stock in the second quarter of fiscal 2012 for an aggregate cost of $50.0 million .

As of March 31, 2013 , there were 2,192,982 shares of the Company's common stock held in treasury.

12. Restructuring Costs and Other, Net

On February 27, 2013, the Company commenced a workforce reduction plan intended to improve efficiency and better align its costs and employment structure with its strategic plans. As a result of the workforce reduction, the Company reduced its personnel by 66 employees. Upon signing release agreements, affected employees received severance payments and fully paid health care coverage and outplacement services for specified periods. The Company completed this workforce reduction in March 2013.

The Company recorded, in the aggregate, one-time charges of $6.3 million associated with the workforce reduction. The Company recorded these charges in cost of revenue, research and development expense and selling general and administrative expense based on the responsibilities of the affected employees. Of the charges related to the 2013 workforce reduction, $0.1 million were non-cash charges, the Company paid $1.8 million during the three months ended March 31, 2013 and the Company expects to pay out $4.3 million during the remainder of 2013.

In September 2011, the Company commenced the closure of its drug discovery research and development facility and operations in Leipzig, Germany and terminated ten employees at its Leipzig facility. The Company transferred active pre-clinical projects from Leipzig to its research and development facility in Montreal, Canada and the MDCO-2010 back-up compound to the clinical team in Parsippany, New Jersey. Upon signing release agreements, the terminated employees received severance and other benefits. The Company recorded, in the aggregate, charges of $2.2 million in 2011 associated with the 2011 Leipzig closure. These charges were recorded in research and development expenses in the Company's consolidated statements of income. Of these charges, $0.3 million related to asset write-offs were noncash charges. The Company paid out $0.3 million during 2011 and $0.8 million during 2012 . During 2012 , the Company recorded additional charges of $0.2 million relating to the 2011 Leipzig closure due the Saxony government in Leipzig recalling subsidies higher than originally estimated that were received by the Company during past three years. The Company expects to pay out $1.0 million during 2013 . The Company no longer has any research employees or research capabilities in Leipzig. The Company did not record any charges relating to the 2011 Leipzig closure during the three months ended March 31, 2013 .

See note 15 "Restructuring Costs and Other, Net" of the notes to the consolidated financial statements in the Company's annual report on Form 10-K for the year ended December 31, 2012 as filed with the SEC.

Details of the activities described above and the movement in the accrual during the three -month period ended March 31, 2013 are as follows:



	Balance as of December 31, 2012		Expenses, Net		Cash			Noncash			Balance as of March 31, 2013
	(in thousands)
2011 Leipzig closure other associated costs	$	1,009	$	—	$	—		—			$	1,009
Employee severance and other personnel benefits:
2013 workforce reduction	—		6,262		(1,841		)	(84		)	4,337
Total	$	1,009	$	6,262	$	(1,841	)	$	(84	)	$	5,346

13. Acquisitions

Incline Therapeutics, Inc .

In January 2013, the Company acquired Incline, a company focused on the development of IONSYS, a compact, disposable, needleless patient-controlled system for the short-term management of acute postoperative pain in the hospital setting.

Under the terms of the Company's agreement with Incline, the Company paid to the holders of Incline's capital stock and the holders of options to purchase shares of Incline's capital stock (collectively, the Incline equityholders) an aggregate of approximately $155.2 million in cash, which is subject to a post-closing purchase price adjustment process. In addition, the Company also paid approximately $13 million to Cadence Pharmaceuticals, Inc. (Cadence) to terminate Cadence's option to acquire Incline pursuant to an agreement between Cadence and Incline and deposited $18.5 million in cash into an escrow fund for the purposes of securing the indemnification obligations of the Incline equityholders to the Company for any and all losses for which the Company is entitled to indemnification pursuant to the merger agreement and to provide the source of recovery for any amounts payable to the Company as a result of the post-closing purchase price adjustment process.

The Company also agreed to pay up to $205 million in cash in the aggregate, less certain transaction expenses and taxes, upon its entering into a license agreement in Japan, achieving certain regulatory approval and certain sales milestones with respect to IONSYS.

The Company accounted for the transaction as a business combination and is in the process of finalizing the valuation of intangible assets and fair value of the contingent purchase price. As a result, the preliminary measurements of intangible assets, certain tangible assets, goodwill and deferred income tax assets described below are subject to change. The results of Incline's operations have been included in the consolidated statements of (loss) income from the date of acquisition.

Total estimated purchase price is summarized as follows:



	(in thousands)
Upfront cash consideration	$	186,699
Fair value of contingent purchase price	87,200
Total preliminary estimated purchase price	$	273,899

Below is a summary which details the preliminary allocation of assets acquired and liabilities assumed as a result of this acquisition:




Assets Acquired:	(in thousands)
Cash and cash equivalents	$	949
Prepaid expenses and other current assets	624
Fixed assets, net	6,551
In-process research and development	254,000
Goodwill	104,491
Other assets	34
Total Assets	$	366,649
Liabilities Assumed:
Accrued expenses	800
Contingent purchase price	87,200
Deferred tax liabilities	91,950
Total Liabilities	179,950

Total cash price paid upon acquisition	$	186,699

Recothrom

In February 2013, pursuant to a master transaction agreement with BMS, the Company acquired the right to sell, distribute and market Recothrom on a global basis for the collaboration term and BMS transferred to the Company certain limited assets exclusively related to Recothrom, primarily the biologics license application for Recothrom and certain related regulatory assets. BMS also granted to the Company, under the master transaction agreement, an option to purchase from BMS and its affiliates, following the expiration or earlier termination of the collaboration term, certain other assets, including certain patent and trademark rights, contracts, inventory, equipment and related books and records, held by BMS which are exclusively related to Recothrom.

Under the master transaction agreement, the Company paid to BMS a one-time collaboration fee equal to $105 million and a one-time option fee equal to $10 million . The Company did not assume, and if the Company exercises the option, it will not assume, any pre-existing liabilities related to the Recothrom business, contingent or otherwise, arising prior to the collaboration period, and the Company did not acquire, and if the Company exercises the option, it will not acquire, any significant tangible assets related to the Recothrom business. Under the master transaction agreement, the Company agreed to pay to BMS quarterly tiered royalty payments during the collaboration term equal to a percentage of worldwide net sales of Recothrom.

If the Company exercises the option, it would, at the closing of the purchase of the option assets, acquire such assets and assume certain liabilities of BMS and its affiliates related to the assets and to pay to BMS a purchase price equal to the net book value of inventory included in the acquired assets, plus either:


•	a multiple of average net sales over each of the two 12 -month periods preceding the closing of the purchase (unless the purchase closing occurs less than 24 months after February 8, 2013, in which case the measurement period would be the 12-month period preceding the purchase closing); or


•	if BMS has delivered a valid notice terminating the collaboration term early as a result of a material breach by the Company under the master transaction agreement, the amount described above plus an amount intended to give BMS the economic benefit of having received royalty fees for a 24 -month collaboration term.

In connection with the master transaction agreement, the Company also entered into a supply agreement with BMS. Under the supply agreement, BMS or one or more of its affiliates will manufacture Recothrom and serve as the exclusive supplier of the Recothrom to the Company during the collaboration term at specified purchase prices.

The Company accounted for the transaction as a business combination since it acquired the biologics license application for Recothrom and certain related regulatory assets, employees and an option to acquire certain other assets, including certain patent and trademark rights, contracts, inventory, equipment and related books and records, held by BMS which are exclusively related to Recothrom (inputs), including the infrastructure to the sell the product (processes) and net sales of Recothrom (outputs). In addition, the Company has control over sales and marketing of the product during the collaboration period. The Company is finalizing the valuation of intangible assets. As a result, the preliminary measurements of intangible assets, goodwill and product rights are subject to change.

Below is a summary which details the preliminary allocation of assets acquired as a result of this acquisition:




Assets Acquired:	(in thousands)
Product license	$	32,800
Option*	57,100
Goodwill	25,100
Total Assets	$	115,000
Total cash price paid upon acquisition	$	115,000

* Option will be carried at its cost basis until exercised.

The following unaudited pro forma financial information reflects the consolidated statement of income of the Company as if the acquisition of Incline and licensing for Recothrom had occurred as of January 1, 2012. The pro forma information includes adjustments for the amortization of intangible assets. The pro forma financial information is not necessarily indicative of the results of operations as they would have been had the transaction been effected on the assumed date.




	Three Months Ended March 31,
	2013			2012
	(in thousands, except per share amounts)
Net revenue	$	155,753		$	143,222
Net (loss) income	$	(12,260	)	$	1,122
Basic and diluted (loss) earnings per common share	$	(0.23	)	$	0.02

14. Accumulated Other Comprehensive Loss

The changes in accumulated other comprehensive loss are as follows:



	Foreign currency translation adjustment			Unrealized gain on available for sale securities		Total
	(in thousands)
Balance at December 31, 2012	$	(825	)	$	59	$	(766	)
Other comprehensive (loss) income before reclassifications	(241		)	5		(236		)
Amounts reclassified from accumulated other comprehensive income*	—			—		—
Total other comprehensive (loss) income	(241		)	5		(236		)
Balance at March 31, 2013	$	(1,066	)	$	64	$	(1,002	)

* Amounts reclassified affect other income in the consolidated statements of income.

15. Segment and Geographic Information

The Company manages its business and operations as one segment and is focused on advancing the treatment of acute and intensive care patients through the delivery of innovative, cost-effective medicines to the worldwide hospital marketplace. Revenues reported to date are derived primarily from the sales of Angiomax in the United States.

The geographic segment information provided below is classified based on the major geographic regions in which the Company operates.



	Three Months Ended March 31,
	2013				2012
	(in thousands)
Net revenue:
United States	$	144,196	92.6	%	$	115,978	91.6	%
Europe	10,385		6.7	%	9,156		7.2	%
Rest of world	1,172		0.7	%	1,476		1.2	%
Total net revenue	$	155,753			$	126,610



	March 31, 2013				December 31, 2012
	(in thousands)
Long-lived assets:
United States	$	641,854	99.8	%	$	161,909	99.5	%
Europe	1,156		0.2	%	743		0.5	%
Rest of world	292		—	%	148		0.1	%
Total long-lived assets	$	643,302			$	162,800

16. Contingencies

The Company may be, from time to time, a party to various disputes and claims arising from normal business activities. The Company accrues for loss contingencies at the earliest date at which the Company deems that it is probable that a liability has been incurred and the amount of such loss can be reasonably estimated.

Eagle Pharmaceuticals, Inc. (Eagle) Arbitration. The Company received a Demand for Arbitration filed by Eagle dated October 25, 2011. In the Demand for Arbitration, Eagle claims that the Company failed to meet its obligations under the license and development agreement between the Company, Eagle and certain other parties relating to the development of a new formulation

of Angiomax, and to the Company's efforts to seek and obtain regulatory approval, market and sell that new formulation. As a result, Eagle alleges that it has been damaged in an amount it believes exceeds $306.0 million . In January 2013, an arbitration hearing took place before a three person panel. In February 2013, the Company and Eagle submitted post-hearing briefs, and, in April 2013, post-hearing arguments took place. The hearing process is now complete and the three person arbitration panel is deciding the matter. The Company believes that any potential liability is not estimable at this time.

In addition, the Company is party to the legal proceedings described in Part II, Item 1, Legal Proceedings, of this quarterly report, which are principally patent litigation matters. The Company has assessed such legal proceedings and does not believe that it is probable that a liability has been incurred or that the amount of any potential liability can be reasonably estimated. As a result, the Company did not record any loss contingencies for any of these matters. While it is not possible to determine the outcome of the matters described in Part II, Item 1, Legal Proceedings, of this quarterly report, the Company believes that, the resolution of all such matters will not have a material adverse effect on its consolidated financial position or liquidity, but could possibly be material to the Company's consolidated results of operations in any one accounting period.

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

You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and accompanying notes included elsewhere in this quarterly report. In addition to the historical information, the discussion in this quarterly report contains certain forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated by the forward-looking statements due to our critical accounting estimates discussed below and important factors set forth in this quarterly report, including under “Risk Factors” in Part II, Item 1A of this quarterly report.

Overview

Our Business

We are a global biopharmaceutical company focused on saving lives, alleviating suffering and improving the economic efficiency of the world's leading hospitals. We market Angiomax ^® (bivalirudin), Recothrom ^® Thrombin, topical (Recombinant) and Cleviprex ^® (clevidipine) injectable emulsion. We also have a pipeline of acute and intensive care hospital products in development, including four late-stage development product candidates, cangrelor, oritavancin, MDCO-157 and IONSYS ^TM (fentanyl iontophoretic transdermal system), and early stage development product candidates, MDCO-216 and ALN-PCS02 and ALN-PCSsc of the ALN-PCS program. We believe that these marketed products and products in development possess favorable attributes that competitive products do not provide, can satisfy unmet medical needs in the acute and intensive care hospital product market and offer, or, in the case of our products in development, have the potential to offer, improved performance to hospital businesses.

In addition to these products and product candidates, we sell a ready-to-use formulation of Argatroban and have a portfolio of ten generic drugs, which we refer to as our acute care generic products, that we have the non-exclusive right to market in the United States. We began selling three of our acute care generic products, midazolam, ondansetron and rocuronium, in the first quarter of 2013. We also co-promote the oral tablet antiplatelet medicine BRILINTA ^® (ticagrelor) in the United States as part of our global collaboration agreement with AstraZeneca LP, or AstraZeneca .

The following chart identifies each of our marketed products and our products in development, their stage of development, their mechanism of action and the indications for which they have been approved for use or which they are intended to address. The following chart also identifies each of our acute care generic products and the therapeutic areas which they are intended to address. All of our marketed products and products in development, except for Recothrom, IONSYS and ALN-PCSsc, are administered intravenously. Recothrom is a topical hemostat, IONSYS is being developed to be administered transdermally and ALN-PCSsc is being developed as a subcutaneous injectable. All of our acute care generic products are injectable products.



Angiomax	Marketed	Direct thrombin inhibitor	U.S. - for use as an anticoagulant in combination with aspirin in patients with unstable angina undergoing percutaneous transluminal coronary angioplasty, or PTCA, and for use in patients undergoing percutaneous coronary intervention, or PCI, including patients with or at risk of heparin induced thrombocytopenia and thrombosis syndrome, or HIT/HITTS
			Europe - for use as an anticoagulant in patients undergoing PCI, adult patients with acute coronary syndrome, or ACS, and for the treatment of patients with ST-segment elevation myocardial infarction, or STEMI, undergoing primary PCI
Recothrom	Marketed in the United States and Canada	Recombinant human thrombin	For use as an aid to hemostasis to help control oozing blood and mild bleeding during surgical procedures
Cleviprex	Marketed in the United States Approved in Australia, Austria, Canada, France, Germany, the Netherlands, New Zealand, Sweden, Switzerland and the United Kingdom Marketing Authorization Application, or MAA, submitted for other European Union countries	Calcium channel blocker	U.S. - Blood pressure reduction when oral therapy is not feasible or not desirable Ex-U.S. - with indications for blood pressure control in perioperative settings
Ready-to-use Argatroban	Marketed in the United States	Direct thrombin inhibitor	Approved for prophylaxis or treatment of thrombosis in adult patients with HIT and for use as an anticoagulant in adult patients with or at risk for HIT undergoing PCI
Acute care generic products: Midazolam, Ondansetron and Rocuronium	Marketed in the United States	Various	Neurocritical care
Acute care generic products: Adenosine, Amiodarone, Esmolol and Milrinone	Approved in the United States	Various	Cardiovascular
Acute care generic products: Azithromycin and Clindamycin	Approved in the United States	Various	Serious infection
Acute care generic products: Haloperidol	Approved in the United States	Various	Neurocritical care
Products in Development



Cangrelor	Phase 3	Antiplatelet agent	Prevention of platelet activation and aggregation when oral therapy is not feasible or not desirable
Oritavancin	Phase 3	Antibiotic	Treatment of serious gram-positive bacterial infections, including acute bacterial skin and skin structure infections, or ABSSSI, and including infections that are resistant to conventional treatment
IONSYS	Pre-registration stage	Patient-controlled analgesia system	Short-term management of acute postoperative pain
MDCO-157 (IV clopidogrel)	Pre-registration stage	Platelet inhibitor	Platelet inhibition in patients suffering from ACS or patients recently experiencing myocardial infarction, or MI, stroke, or peripheral arterial disease when oral therapy is not feasible or not desirable
MDCO-216	Phase 1	Naturally occurring variant of a protein found in high-density lipoprotein, or HDL	Reversal cholesterol transport agent to reduce atherosclerotic plaque burden development and thereby reduce the risk of adverse thrombotic events
ALN-PCS program: ALN-PCS02 and ALN-PCSsc	Phase 1	PCSK-9 gene antagonist addressing low-density lipoprotein, or LDL, cholesterol disease modification	Treatment of hypercholesterolemia

Our revenues to date have been generated primarily from sales of Angiomax in the United States. We had net revenue from sales of Angiomax in the three months ended March 31, 2013 of approximately $142.9 million, net revenue from sales of Recothrom of approximately $8.6 million and net revenue from sales of Cleviprex and ready-to-use Argatroban of approximately $4.3 million in the aggregate. We commenced sales of Recothrom in February 2013.

We continue to expand our sales and marketing efforts outside the United States. We believe that by establishing operations outside the United States, we can increase our sales of Angiomax outside of the United States and be positioned to commercialize Cleviprex and Recothrom and our products in development, if and when they are approved and ready to be marketed outside of the United States.

Research and development expenses represent costs incurred for licenses of rights to products, clinical trials, nonclinical and preclinical studies, regulatory filings and manufacturing development efforts. We outsource much of our clinical trials, nonclinical and preclinical studies and all of our manufacturing development activities to third parties to maximize efficiency and minimize our internal overhead. We expense our research and development costs as they are incurred. Selling, general and administrative expenses consist primarily of salaries and related expenses, costs associated with general corporate activities and costs associated with marketing and promotional activities. Research and development expense, selling, general and administrative expense and cost of revenue also include stock-based compensation expense, which we allocate based on the responsibilities of the recipients of the stock-based compensation.

Angiomax Patent Litigation

The principal U.S. patents covering Angiomax include U.S. Patent No. 5,196,404, or the '404 patent, U.S. Patent No. 7,582,727, or the '727 patent, and U.S. Patent No. 7,598,343, or the '343 patent.

In the second half of 2009, the PTO issued to us the '727 patent and the '343 patent, covering a more consistent and improved Angiomax drug product and the processes by which it is made. The '727 patent and the '343 patent are set to expire in July 2028. In response to Paragraph IV Certification Notice letters we received with respect to abbreviated new drug applications, or ANDAs, filed by a number of parties with the FDA seeking approval to market generic versions of Angiomax, we have filed lawsuits against the ANDA filers alleging patent infringement of the '727 patent and '343 patent.

On September 30, 2011, we settled our '727 patent and '343 patent infringement litigation with Teva Pharmaceuticals USA, Inc. and its affiliates, which we collectively refer to as Teva. In connection with the Teva settlement, we entered into a license agreement with Teva under which we granted Teva a non-exclusive license under the '727 patent and '343 patent to sell a generic bivalirudin for injection product under a Teva ANDA in the United States beginning June 30, 2019 or earlier under certain conditions. The license agreement also contains a grant by Teva to us of an exclusive (except as to Teva), license under Teva’s bivalirudin patents and right to enforce Teva’s bivalirudin patents.

On January 22, 2012, we settled our patent litigation with APP, including our litigation with respect to the extension of the patent term of the '404 patent and our patent infringement litigation with respect to the '727 patent and the '343 patent. In connection with the APP settlement, we entered into a license agreement with APP under which we granted APP a non-exclusive license under the '727 patent and '343 patent to sell a generic bivalirudin for injection product under an APP ANDA in the United States beginning on May 1, 2019. In certain limited circumstances, the license to APP could become effective prior to May 1, 2019. In addition, in certain limited circumstances, this license to APP could include the right to sell a generic bivalirudin product under our NDA for Angiomax in the United States beginning on May 1, 2019 or, in certain limited circumstances, on June 30, 2019 or on a date prior to May 1, 2019.

We remain in patent infringement litigation involving the '727 patent and '343 patent with other ANDA filers, as described in Part II, Item 1, Legal Proceedings, of this quarterly report. If we are unable to maintain our market exclusivity for Angiomax in the United States through enforcement of our U.S. patents covering Angiomax, then Angiomax could be subject to generic competition earlier than May 1, 2019.

Business Development Activity

ALN-PCS Program . In February 2013, we entered into a license and collaboration agreement with Alnylam Pharmaceuticals, Inc., or Alnylam, to develop, manufacture and commercialize therapeutic products targeting the human PCSK-9 gene based on certain of Alnylam's RNAi technology. Under the terms of the agreement, we obtained the exclusive, worldwide right under Alnylam's technology to develop, manufacture and commercialize PCSK-9 products for the treatment, palliation and/or prevention of all human diseases. We paid Alnylam $25.0 million in an initial license payment and agreed to pay, upon achievement of certain milestones, up to $180.0 million, including up to $30.0 million in specified development milestones, $50.0 million in specified regulatory milestones and $100.0 million in specified commercialization milestones. In addition, Alnylam will be eligible to receive scaled double-digit royalties based on annual worldwide net sales of PCSK-9 products by us or our affiliates and sublicensees. Royalties to Alnylam are payable on a product-by-product and country-by-country basis until the last to occur of the expiration of patent rights in the applicable country that cover the applicable product, the expiration of non-patent regulatory exclusivities for such product in such country, and the twelfth anniversary of the first commercial sale of the product in such country. The royalties are subject to reduction in specified circumstances. We are also responsible for paying royalties, and in some cases milestone payments, owed by Alnylam to its licensors with respect to intellectual property covering these products.

Recothrom . In February 2013, pursuant to a master transaction agreement with BMS, we acquired the right to sell, distribute and market Recothrom on a global basis for a two-year period, which we refer to as the collaboration term, and certain limited assets exclusively related to Recothrom, primarily the biologics license application for Recothrom and certain related regulatory assets. BMS also granted to us, under the master transaction agreement, an option to purchase from BMS and its affiliates, following the expiration or earlier termination of the collaboration term, certain other assets, including certain patent and trademark rights, contracts, inventory, equipment and related books and records, held by BMS which are exclusively related to Recothrom.

Under the master transaction agreement, we paid to BMS a one-time collaboration fee equal to $105.0 million and a one-time option fee equal to $10.0 million. We did not assume, and if we exercise the option, we will not assume, any pre-existing liabilities related to the Recothrom business, contingent or otherwise, arising prior to the collaboration period, and we did not acquire, and if we exercise the option, we will not acquire, any significant tangible assets related to the Recothrom business. Under the master transaction agreement, we agreed to pay to BMS quarterly tiered royalty payments during the two-year collaboration term equal to a percentage of worldwide net sales of Recothrom.

If we exercise the option, we would acquire such assets and assume certain liabilities of BMS and its affiliates related to those assets and to pay to BMS a purchase price equal to the net book value of inventory included in the acquired assets, plus either:


•	a multiple of average net sales over each of the two 12-month periods preceding the closing of the purchase of the assets to be acquired in connection with exercising the option (unless such closing occurs less than 24 months after February 8, 2013, in which case the measurement period would be the 12-month period preceding such closing); or


•	if BMS has delivered a valid notice terminating the collaboration term early as a result of a material breach by us under the master transaction agreement, the amount described above plus an amount intended to give BMS the economic benefit of having received royalty fees for a 24-month collaboration term.

We accounted for the transaction as a business combination and are in the process of finalizing the valuation of intangible assets.

Incline Therapeutics, Inc . In January 2013, we acquired Incline Therapeutics, Inc., or Incline, a company focused on the development of IONSYS, a compact, disposable, needleless patient-controlled system for the short-term management of acute postoperative pain in the hospital setting.

Under the terms of our agreement with Incline, we paid to the holders of Incline's capital stock and the holders of options to purchase shares of Incline's capital stock, or collectively, the Incline equityholders, an aggregate of approximately $155.2 million in cash, which is subject to a post-closing purchase price adjustment process. In addition, we also paid approximately $13 million to Cadence Pharmaceuticals, Inc., or Cadence, to terminate Cadence's option to acquire Incline pursuant to an agreement between Cadence and Incline and deposited $18.5 million in cash into an escrow fund for the purposes of securing the indemnification obligations of the Incline equityholders to us for any and all losses for which we are entitled to indemnification pursuant to the merger agreement and to provide the source of recovery for any amounts payable to us as a result of the post-closing purchase price adjustment process.

Under the terms of our agreement with Incline, we agreed to pay up to $205 million in cash in the aggregate, less certain transaction expenses and taxes, upon our entering into a license agreement in Japan, achieving certain regulatory approval and certain sales milestones with respect to IONSYS.

We accounted for the Incline transaction as a business combination and are in the process of finalizing the valuation of intangible assets and fair value of the contingent purchase price.

Collaboration with AstraZeneca. On April 25, 2012, we entered into a global collaboration agreement with AstraZeneca, LP, or AstraZeneca, pursuant to which we and AstraZeneca agreed to collaborate globally to develop and commercialize certain acute ischemic heart disease compounds. Under the terms of the collaboration agreement, a joint development and research committee and a joint commercialization committee have been established to prepare and deliver a global development plan and a country-by-country collaboration and commercialization plan, respectively, related to BRILINTA and Angiomax and cangrelor. Implementation of these plans is subject to agreement between both parties. The first joint activity agreed upon by the parties under the global collaboration is a four-year co-promotion arrangement for BRILINTA in the United States. Pursuant to the agreement, our sales force began supporting promotion activities for BRILINTA in May 2012. Under the terms of the agreement, AstraZeneca paid us $2.5 million for conducting BRILINTA co-promotion activities in the second quarter of 2012. In addition, under the terms of the agreement, AstraZeneca paid us $7.5 million in base consideration for conducting BRILINTA co-promotion activities during the period from July 1, 2012 to December 31, 2012 and agreed to pay us $15.0 million in base consideration per year from 2013 through 2015 for conducting BRILINTA co-promotion activities, plus up to an additional $5.0 million per year from 2013 to 2015 if certain performance targets with respect to new prescriptions are achieved and $7.5 million in base consideration for conducting BRILINTA co-promotion activities during the period from January 1, 2016 until June 30, 2016, plus up to an additional $2.5 million in additional consideration for the same period if certain performance targets with respect to new prescriptions are achieved.

Convertible Senior Note Offering

On June 11, 2012, we completed our private offering of $275.0 million aggregate principal amount of our 1.375% convertible senior notes due 2017, or the Notes, and entered into an indenture with Wells Fargo Bank, National Association, a national banking association, as trustee, or the Trustee, governing the Notes, which we refer to as the Indenture. The net proceeds from the offering were $266.2 million, after deducting the initial purchasers' discounts and commissions and our offering expenses.

The Notes bear cash interest at a rate of 1.375% per year, payable semi-annually on June 1 and December 1 of each year. We made our first payment of cash interest on the Notes on December 1, 2012 in the aggregate amount of $1.8 million. The Notes will mature on June 1, 2017. The Notes do not contain any financial or operating covenants or any restrictions on the payment of dividends, the incurrence of other indebtedness, or the issuance or repurchase of securities by us.

The Notes are our senior unsecured obligations and will rank senior in right of payment to our future indebtedness, if any, that is expressly subordinated in right of payment to the Notes and equal in right of payment to our existing and future unsecured indebtedness that is not so subordinated. The Notes are effectively junior in right of payment to any of our secured indebtedness to the extent of the value of the assets securing such indebtedness and are structurally junior to all existing and future indebtedness and other liabilities, including trade payables, incurred by our subsidiaries.

Holders may convert their Notes at their option at any time prior to the close of business on the business day immediately preceding March 1, 2017 only under certain specified circumstances which are set forth in the Indenture. On or after March 1, 2017, until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert their Notes at any time, regardless of the foregoing circumstances. Upon conversion, we will pay cash up to the aggregate principal amount of the Notes to be converted and deliver shares of our common stock in respect of the remainder, if any, of our conversion obligation in excess of the aggregate principal amount of the Notes being converted, subject to a daily share cap, as described in the Indenture. Holders of Notes will not receive any additional cash payment or additional shares representing accrued and unpaid interest, if any, upon conversion of a note, except in limited circumstances. Instead, accrued but unpaid interest will be deemed to be paid by the cash and shares, in any, of our common stock, together with any cash payment for any fractional share, paid or delivered, as the case may be, upon conversion of a Note.

The conversion rate for the Notes was initially, and remains, 35.8038 shares of our common stock per $1,000 principal amount of Notes, which is equivalent to an initial conversion price of $27.93 per share of our common stock. The conversion rate and the conversion price are subject to customary adjustments for certain events, including, but not limited to, the issuance of certain stock dividends on our common stock, the issuance of certain rights or warrants, subdivisions, combinations, distributions of capital stock, indebtedness, or assets, cash dividends and certain issuer tender or exchange offers, as described in the Indenture.

We may not redeem the Notes prior to maturity and are not required to redeem or retire the Notes periodically. However, upon the occurrence of a "fundamental change", as defined in the Indenture, subject to certain conditions, in lieu of converting their Notes, holders may require us to repurchase for cash all or part of their Notes at a repurchase price equal to 100% of the principal amount of the Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date. Following certain corporate transactions that constitute a change of control, we will increase the conversion rate for a holder who elects to convert the Notes in connection with such change of control in certain circumstances.

The Indenture contains customary events of default with respect to the Notes, including that upon certain events of default, including our failure to make any payment of principal or interest on the Notes when due and payable, occurring and continuing, the Trustee by notice to us, or the holders of at least 25% in principal amount of the outstanding Notes by notice to us and the Trustee, may, and the Trustee at the request of such holders, subject to the provisions of the Indenture, shall, declare 100% of the principal of and accrued and unpaid interest, if any, on all the Notes to be due and payable. In case of an event of default involving certain events of bankruptcy, insolvency or reorganization, involving us or a significant subsidiary of ours, 100% of the principal of and accrued and unpaid interest on the Notes will automatically become due and payable. Upon a declaration of acceleration, such principal and accrued and unpaid interest, if any, will be due and payable immediately.

Convertible Note Hedge and Warrant Transactions

On June 5, 2012, we entered into convertible note hedge transactions and warrant transactions with several of the initial purchasers of the Notes, their respective affiliates and other financial institutions, which we refer to as the Hedge Counterparties. We used approximately $19.8 million of the net proceeds from the offering of the Notes to pay the cost of the convertible note hedge transactions, after such cost was partially offset by the proceeds to us from the sale of warrants in the warrant transactions.

We expect the convertible note hedge transactions to reduce the potential dilution with respect to shares of our common stock upon any conversion of the Notes in the event that the market price per share of our common stock, as measured under the terms of the convertible note hedge transactions, is greater than the strike price of the convertible note hedge transactions, which initially corresponds to the conversion price of the Notes and is subject to anti-dilution adjustments substantially similar to those applicable to the conversion rate of the Notes. The warrant transactions will have a dilutive effect with respect to our common stock to the extent that the market price per share of our common stock, as measured under the terms of the warrant transactions, exceeds the applicable strike price of the warrants. However, subject to certain conditions, we may elect to settle all of the warrants in cash.

Share Repurchase

We used approximately $50.0 million of the net proceeds of the offering of the Notes to repurchase 2,192,982 shares of our common stock in a privately negotiated transaction with one of the purchasers of the Notes. We repurchased the shares of our common stock in this transaction at a price of $22.80 per share, which was the last reported sale price per share of our common stock on June 5, 2012, the date that we priced the private offering of the Notes.

Ready-to-Use Argatroban Recall

In December 2011, Eagle Pharmaceuticals, Inc., or Eagle, conducted a voluntary recall of ready-to-use Argatroban due to the presence of particulate matter in some vials. As a result, we were not able to sell ready-to-use Argatroban from December 2011 to April 2012. In April 2012, we re-commenced selling ready-to-use Argatroban to existing and new customers.

Biogen Letter Agreement

On August 7, 2012, we and Biogen Idec MA Inc., or Biogen, entered into a letter agreement resolving a disagreement between the parties as to the calculation and amount of the royalties required to be paid to Biogen by us under our license agreement with Biogen. The letter agreement amends the license agreement providing, among other things, that effective solely for the period from January 1, 2013 through and including December 15, 2014, each of the royalty rate percentages payable by us as set forth in the license agreement shall be increased by one percentage point.

MDCO-2010 Clinical Trial Discontinuation

On October 4, 2012, we voluntarily discontinued our Phase 2b dose-ranging study of MDCO-2010, a serine protease inhibitor which was being developed to reduce blood loss during surgery. We took this action in response to serious unexpected patient safety issues encountered during the trial, which at the time the trial was discontinued, had enrolled 44 of a planned 90 patients in the first stage of the study.

While we continue to investigate the cause of the safety issues and any potential link to the study drug, we decided to end the trial and further development of MDCO-2010 because of the evidence of risk to patients. We are conducting an assessment of patient data from the study. Once this evaluation is completed and reviewed with experts in the field, we plan to publish our findings.

Workforce Reduction

On February 27, 2013, we commenced a workforce reduction plan intended to improve efficiency and better align our costs and employment structure with our strategic plans. As a result of the workforce reduction, we reduced our personnel by 66 employees. In the three months ended March 31, 2013 , we recorded, in the aggregate, charges of $6.3 million associated with the workforce reduction. We recorded these charges in cost of revenue, research and development expense and selling general and administrative expense based on the responsibilities of the affected employees. Of the approximately $6.3 million of charges related to the 2013 workforce re duction, $0.1 million were no n-cash charges, we paid $1.8 million during the three months ended March 31, 2013 and we expect to pay out $4.3 million during the remainder of 2013.

U.S. Health Care Reform

In March 2010, President Obama signed into law the Patient Protection and Affordable Care Act, or PPACA, which was amended by the Health Care and Education Reconciliation Act of 2010. The PPACA, as amended, contains numerous provisions that impact the pharmaceutical and healthcare industries that are expected to be implemented over the next several years. We are continually evaluating the impact of the PPACA on our business. As of the date of this quarterly report, we have not identified any provisions that currently materially impact our business or results of operations. However, we believe that the Biologics Price Competition and Innovation Act, or BPCIA, provisions of PPACA could impact our business or results of operations. Under the BPCIA, the FDA has the authority to approve biosimilar interchangeable versions of biological products through an abbreviated pathway following periods of data and marketing exclusivity. However, the potential impact of the PPACA and the BPCIA on our business and results of operations is inherently difficult to predict because many of the details regarding the implementation of this legislation have not been determined. In addition, the impact on our business and results of operations may change as and if our business evolves.

On July 9, 2012, President Obama signed the Food and Drug Administration Safety and Innovation Act, or FDASIA. Under the “Generating Antibiotic Incentives Now,” or GAIN, provisions of FDASIA, the FDA may designate a product as a qualified infectious disease product, or QIDP. A QIDP is defined as an antibacterial or antifungal drug for human use intended to treat serious or life-threatening infections, including those caused by either an antibacterial or antifungal resistant pathogen, including novel or emerging infectious pathogens or a so-called “qualifying pathogen” found on a list of potentially dangerous, drug-resistant organisms to be established and maintained by the FDA under the new law. The GAIN provisions describe several examples of “qualifying pathogens,” including methicillin-resistant Staphylococcus aureus, or MRSA, and Clostridium difficile. Upon the designation of a drug by the FDA as a QIDP, any non-patent exclusivity period awarded to the drug will be extended by an additional five years. This extension is in addition to any pediatric exclusivity extension awarded.

We are currently developing oritavancin for the treatment of ABSSSI, including infections caused by MRSA, and are exploring the development of oritavancin for other indications, including for the treatment of Clostridium difficile, prosthetic joint infections, anthrax and other Gram-positive bacterial infections. We believe that oritavancin may qualify as a QIDP and intend to request that oritavancin be designated as a QIDP. If we are successful in having oritavancin designated as a QIDP by the FDA under the

GAIN provisions of the new FDASIA legislation, we expect the non-patent exclusivity awarded to oritavancin upon approval of an NDA to be extended by an additional five years.

Results of Operations

Net Revenue:

Net revenue increased 23.0% to $155.8 million for the three months ended March 31, 2013 as compared to $126.6 million for the three months ended March 31, 2012 .

The following tables reflect the components of net revenue for the three months ended March 31, 2013 and 2012 :

Net Revenue



	Three Months Ended March 31,
	2013		2012		Change $		Change %
			(in thousands)
Angiomax	$	142,885	$	126,109	$	16,776	13.3	%
Recothrom	8,622		—		8,622		100.0	%
Cleviprex/Ready-to-Use Argatroban	4,246		501		3,745		747.5	%
Total net revenue	$	155,753	$	126,610	$	29,143	23.0	%

Net revenue increased by $29.1 million , or 23.0% , to $155.8 million in the three months ended March 31, 2013 compared to $126.6 million in the three months ended March 31, 2012 , reflecting increases of $28.2 million, or 24.3%, in the United States and $0.9 million, or 8.7%, in international markets. The net revenue increase was comprised of net volume increases of $21.7 million and price increases of $7.7 million, which were offset by the unfavorable impact from foreign exchange of $0.3 million.

Angiomax. Net revenue from sales of Angiomax increased by $16.8 million , or 13.3% , to $142.9 million in the three months ended March 31, 2013 compared to $126.1 million in the three months ended March 31, 2012 , primarily due to a price increase in the United States as of January 1, 2013 and increased unit sales globally. Net revenue in the United States in both the three months ended March 31, 2013 and 2012 reflect chargebacks related to the 340B Drug Pricing Program under the Public Health Services Act and rebates related to the PPACA. Under the 340B Drug Pricing Program, we offer qualifying entities a discount off the commercial price of Angiomax for patients undergoing PCI on an outpatient basis. Chargebacks related to the 340B Drug Pricing Program increased by $1.3 million to $10.7 million in the three months ended March 31, 2013 compared to $9.4 million in the three months ended March 31, 2012 , primarily due to higher amounts paid to eligible hospital customers. Rebates related to the PPACA increased by $0.1 million to $0.3 million in the three months ended March 31, 2013 compared to $0.2 million in the three months ended March 31, 2012 . Net revenue from sales of Angiomax outside the United States increased in the three months ended March 31, 2013 compared to the three months ended March 31, 2012 due to greater demand by existing hospital customers and the addition of new hospital customers in the United Kingdom, Italy, France, the Netherlands and Germany.

Recothrom. Net revenue from Recothrom was $8.6 million for the period from February 8, 2013, the date we commenced sales of Recothrom pursuant to the master transaction agreement with BMS, to March 31, 2013.

Cleviprex/Ready-to-Use Argatroban Net revenue from sales of Cleviprex and ready-to-use Argatroban increased by $3.7 million to $4.2 million in the three months ended March 31, 2013 from $0.5 million in the three months ended March 31, 2012 . Net revenue from sales of ready-to-use Argatroban was $3.1 million and from Cleviprex was $1.1 million in the three months ended March 31, 2013 . Net revenue from sales of Cleviprex was $0.5 million in the three months ended March 31, 2012 . We did not recognize any revenue from sales of ready-to-use Argatroban in the three months ended March 31, 2012 due to the recall of ready-to-use Argatroban in December 2011.

Cost of Revenue:

Cost of revenue in the three months ended March 31, 2013 was $56.7 million , or 36.4% of net revenue, compared to $38.7 million , or 30.5% of net revenue, in the three months ended March 31, 2012 .

Cost of revenue during both periods consisted of:


•	expenses in connection with the manufacture of our products sold;


•	royalty expenses under our agreements with Biogen and Health Research Inc., or HRI, related to Angiomax, our agreement with AstraZeneca related to Cleviprex and our agreement with Eagle related to ready-to-use Argatroban;


•	amortization of the costs of license agreements, product rights and other identifiable intangible assets, which result from product and business acquisitions; and


•	logistics costs related to Angiomax, Cleviprex and ready-to-use Argatroban, including distribution, storage, and handling costs.

Cost of revenue during the three months ended March 31, 2013 also includes expenses related to our license agreement with BMS for Recothrom, and expenses related to our supply agreement with BMS including product cost and logistics as well as royalties and amortization related to Recothrom.

Cost of Revenue



	Three Months Ended March 31,
	2013		% of Total		2012		% of Total
	(in thousands)				(in thousands)
Manufacturing/Logistics	$	18,651	33	%	$	11,105	28	%
Royalty	34,262		60	%	27,332		71	%
Amortization of product rights and intangible assets	3,801		7	%	226		1	%
Total cost of revenue	$	56,714	100	%	$	38,663	100	%

Cost of revenue increased by $18.1 million during the three months ended March 31, 2013 compared to the three months ended March 31, 2012 primarily due to an increase in royalty expense to Biogen due to higher royalty sales under our agreement with Biogen triggered by higher sales of Angiomax, the increased royalty rate which commenced on January 1, 2013 under the letter agreement entered into with Biogen on August 7, 2012 and royalties to BMS in connection with our sales of Recothrom which commenced in February 2013. Manufacturing and logistics costs increases were associated with Recothrom. The increase in amortization of product rights and intangible assets reflects the amortization of product rights and intangible assets associated with Recothrom.

Research and Development Expenses:

Research and development expenses increased to $58.2 million for the three months ended March 31, 2013 , compared to $32.8 million for the three months ended March 31, 2012 . The increase primarily reflects additional costs incurred in connection with our business development activities, including our acquisition of Incline and the payment of $25.0 million related to the license and collaboration agreement with Alnylam, our ongoing Phase 3 clinical trial of oritavancin and increased Angiomax administrative and headcount costs. The increase also reflects costs related to MDCO-216, including costs incurred related to the commencement of a Phase 1 study of MDCO-216 in healthy volunteers. These increases were offset by a decrease in administrative and headcount expenses related to MDCO-2010 associated with the closure of our drug discovery research and development facility and operations in Leipzig in September 2011 and decreased clinical trial expenses related to our Phase 3 clinical trial of cangrelor, which completed patient enrollment in October 2012.

We expect to continue to invest in the development of Angiomax, Cleviprex, cangrelor, oritavancin, IONSYS, MDCO-216 and MDCO-157 during the remainder of 2013 and that our research and development expenses will increase in 2013 from their levels in 2012. We expect research and development expenses in 2013 to include costs associated with our license and collaboration agreement with Alnylam, our ongoing Phase 3 clinical trial of oritavancin, global regulatory activities related to oritavancin, Cleviprex and cangrelor, manufacturing development activities for Angiomax, Cleviprex, cangrelor, MDCO-216 and IONSYS,

our evaluation of data related to our Phase 2 clinical trial program for MDCO-2010, our Phase 1 clinical trial of MDCO-216 and our product lifecycle management activities.

The following table identifies for each of our major research and development projects our spending for the three months ended March 31, 2013 and March 31, 2012 . Spending for past periods is not necessarily indicative of spending in future periods.

Research and Development Spending



	Three Months Ended March 31,
	2013			% of Total R&D		2012		% of Total R&D
	(In thousands)					(In thousands)
Angiomax
Clinical trials	$	1,666		3	%	$	1,584	5	%
Manufacturing development	5			—	%	38		—	%
Administrative and headcount costs	1,516			3	%	312		1	%
Total Angiomax	3,187			6	%	1,934		6	%
Cleviprex
Manufacturing development	37			—	%	181		1	%
Administrative and headcount costs	674			1	%	342		1	%
Total Cleviprex	711			1	%	523		2	%
Cangrelor
Clinical trials	1,148			2	%	12,358		38	%
Manufacturing development	946			2	%	618		2	%
Administrative and headcount costs	3,371			6	%	1,534		5	%
Total Cangrelor	5,465			10	%	14,510		45	%
Oritavancin
Clinical trials	8,166			14	%	7,599		23	%
Manufacturing development	3,146			5	%	306		1	%
Administrative and headcount costs	2,452			4	%	1,080		3	%
Total Oritavancin	13,764			23	%	8,985		27	%
MDCO-157
Clinical trials	383			1	%	12		—	%
Manufacturing development	81			—	%	158		—	%
Administrative and headcount costs	325			1	%	700		2	%
Total MDCO-157	789			2	%	870		2	%
MDCO-2010
Clinical trials	48			—	%	124		—	%
Manufacturing development	(1		)	—	%	222		1	%
Administrative and headcount costs	190			—	%	744		2	%
Total MDCO-2010	237			—	%	1,090		3	%
MDCO-216
Clinical trials	225			—	%	103		—	%
Manufacturing development	597			1	%	713		2	%
Administrative and headcount costs	966			2	%	279		1	%
Total MDCO-216	1,788			3	%	1,095		3	%
IONSYS
Clinical trials	750			1	%	—		—	%
Manufacturing development	1,061			2	%	—		—	%
Administrative and headcount costs	2,258			4	%	—		—	%
Total IONSYS	4,069			7	%	—		—	%
ALN-PCS Program
Administrative and headcount costs	25,000			43	%	—		—	%
Total ALN-PCS Program	25,000			43	%	—		—	%
Other	3,186			5	%	3,771		12	%
Total	$	58,196		100	%	$	32,778	100	%

Angiomax

Research and development spending related to Angiomax during the three months ended March 31, 2013 increased by approximately $1.3 million compared to the three months ended March 31, 2012 . Clinical trial costs increased by $0.1 million , primarily due to increased expenditures in connection with our EUROMAX trial. Manufacturing development spending related to Angiomax during the three months ended March 31, 2013 was relatively unchanged compared to the three months ended March 31, 2012 . Administrative and headcount costs increased by $1.2 million primarily due to our efforts to further develop Angiomax for use in additional patient populations and to additional Angiomax-related headcount globally.

We are conducting our EUROMAX trial at sites in seven European countries to assess whether the early administration of Angiox in STEMI patients intended for primary PCI presenting either via ambulance or to referral centers where PCI is not performed improves 30-day outcomes when compared to the current standard of care, heparin plus an optional glycoprotein IIb/IIIa receptor inhibitor, or GP IIb/IIIa inhibitor. We commenced enrollment in our EUROMAX clinical trial in March 2010. We expect to enroll approximately 2,200 patients in the EUROMAX trial and to complete enrollment in mid-2013.

We expect that our total research and development expenses relating to Angiomax will increase in 2013 as compared to 2012 levels in connection with our efforts to further develop Angiomax for use in additional patient populations, including our EUROMAX trial, as well as continued research and development expenses related to our product lifecycle management activities.

Cleviprex

Research and development expenditures for Cleviprex increased by approximately $0.2 million during the three months ended March 31, 2013 compared to the three months ended March 31, 2012 . The increase in 2013 was primarily due to regulatory costs in connection with our efforts to obtain marketing approval of Cleviprex outside the United States. These increased costs were partially offset by a decrease in manufacturing development costs related to product lifecycle activities.

We expect that we will incur increased research and development expenses in 2013 as compared to 2012 levels in connection with our efforts to obtain marketing approval of Cleviprex outside the United States, in preparation for our study of Cleviprex in the pediatrics setting and the continuation of product lifecycle management activities.

Cangrelor

Research and development expenditures related to cangrelor decreased by approximately $9.0 million in the three months ended March 31, 2013 compared to the three months ended March 31, 2012 . The decrease primarily reflects decreased clinical trial expenses related to our Phase 3 CHAMPION PHOENIX clinical trial, which completed patient enrollment in October 2012. The decrease was offset by an increase in costs associated with administrative and headcount expenses.

We expect total research and development expenses relating to cangrelor will decrease in 2013 compared to 2012 levels, primarily due to completion research and development activities associated with the CHAMPION PHOENIX clinical trial.

Oritavancin

Research and development expenditures related to oritavancin increased by approximately $4.8 million in the three months ended March 31, 2013 compared to the three months ended March 31, 2012 . This increase primarily reflects costs incurred relating to qualifying a secondary drug substance manufacturer.

In October 2012, we completed enrollment in the SOLO I clinical trial and, in April 2013, we completed enrollment in the SOLO II clinical trial. We expect to have final data from the SOLO II trial in the middle of 2013 and will determine the regulatory timeline for oritavancin at that time.

We expect that our research and development expenses relating to oritavancin will decrease in 2013 as compared to 2012 due to completion of enrollment of the SOLO I and SOLO II clinical trials.

MDCO-157

Research and development expenses related to MDCO-157 decreased by $0.1 million in the three months ended March 31, 2013 compared to the three months ended March 31, 2012 due to a reduction in administrative headcount costs, mostly offset by an increase in clinical costs related to a dose-response pharmacodynamic study in healthy volunteers.

The progress and results of our clinical development of MDCO-157 will dictate the level of our 2013 research and development expenses relating to the product candidate.

MDCO-2010

Research and development expenditures related to MDCO-2010 decreased by approximately $0.9 million in the three months ended March 31, 2013 compared to the three months ended March 31, 2012 . Costs incurred during the three months ended March 31, 2013 primarily related to our continued assessment of patient data from the Phase 2b dose ranging trial of MDCO-2010, which we commenced in the first quarter of 2012 and that we discontinued in October 2012, and administrative and headcount expenses.

We expect that our total research and development expenses relating to MDCO-2010 will decrease in 2013 as compared to 2012, as a result of our determination in October 2012 to discontinue the Phase 2b dose ranging trial of MDCO-2010 and further development of MDCO-2010 in October 2012. We still expect to incur limited costs in 2013 as we are conducting an assessment of patient data from the study.

MDCO-216

Research and development expenditures related to MDCO-216 increased by approximately $0.7 million in the three months ended March 31, 2013 as compared to the three months ended March 31, 2012 . Costs incurred during the three months ended March 31, 2013 primarily related to the Phase 1 study of MDCO-216 in healthy volunteers that we commenced in the three months ended March 31, 2013 and administrative and headcount expenses.

We expect that our total research and development expenses relating to MDCO-216 will increase in 2013 as compared to 2012, as we complete the Phase 1 study and commence manufacturing in the fourth quarter of 2013 of MDCO-216 for subsequent clinical development.

IONSYS

In January 2013, we acquired Incline, a company focused on the development of IONSYS, a compact, disposable, needleless patient-controlled system for the short-term management of acute postoperative pain in the hospital setting. Research and development costs related to IONSYS were $4.1 million for the three months ended March 31, 2013 . Costs incurred during the three months ended March 31, 2013 primarily related to administrative and headcount expenses and manufacturing development expenses.

ALN-PCS Program

In February 2013, we entered into a license and collaboration agreement with Alnylam to develop, manufacture and commercialize therapeutic products targeting the human PCSK-9 gene based on certain of Alnylam's RNAi technology. We refer to two of the licensed products, ALN-PCS02 and ALN-PCSsc, as our ALN-PCS program. Research and development cost related to the ALN-PCS program for the three months ended March 31, 2013 consisted of an upfront payment of $25.0 million made to Alnylam under the license and collaboration agreement.

Other Research and Development Expense

Research and development expenditures in this category include infrastructure costs in support of our product development efforts, which includes expenses for data management, statistical analysis, analysis of pre-clinical data, analysis of pharmacokinetic-pharmacodynamic data and product safety as well as expenses related to business development activities in connection with our efforts to evaluate early stage and late stage compounds for development and commercialization and other strategic opportunities. Spending in this category decreased by approximately $0.6 million during the three months ended March 31, 2013 compared to the three months ended March 31, 2012 primarily due to a decrease in administrative and headcount expenses.

Our success in further developing Angiomax and obtaining marketing approvals for Angiomax in additional countries and for additional patient populations, developing and obtaining marketing approvals for Cleviprex outside the United States, and developing and obtaining marketing approvals for our products in development, is highly uncertain. We cannot predict expenses

associated with ongoing data analysis or regulatory submissions, if any. In addition, we cannot reasonably estimate or know the nature, timing and estimated costs of the efforts necessary to continue the development of Angiomax, Cleviprex and our products in development, the period in which material net cash inflows are expected to commence from further developing Angiomax and Cleviprex, the timing and estimated costs of obtaining marketing approvals for Angiomax in additional countries and additional patient populations, the timing and estimated costs of obtaining marketing approvals for Cleviprex outside the United States, or the timing and estimated costs of developing and obtaining marketing approvals for our products in development, due to the numerous risks and uncertainties associated with developing and commercializing drugs, including the uncertainty of:


•	the scope, rate of progress and cost of our clinical trials and other research and development activities;


•	future clinical trial results;


•	the terms and timing of any collaborative, licensing and other arrangements that we may establish;


•	the cost and timing of regulatory approvals;


•	the cost and timing of establishing and maintaining sales, marketing and distribution capabilities;


•	the cost of establishing and maintaining clinical and commercial supplies of our products and product candidates;


•	the effect of competing technological and market developments; and


•	the cost of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights.

Selling, General and Administrative Expenses:



	Three Months Ended March 31,
	2013		2012		Change $		Change %
	(in thousands)
Selling, general and administrative expenses	$	63,482	$	43,186	$	20,296	47.0	%

The increase in selling, general and administrative expenses of approximately $20.3 million in the three months ended March 31, 2013 as compared to the three months ended March 31, 2012 reflects a $7.9 million increase in selling, marketing and promotional expense primarily as a result of the licensing of Recothrom, increased promotional efforts for Angiomax and Cleviprex globally and ready-to-use Argatroban in the United States and increased expenses incurred during the three months ended March 31, 2013 in preparation for the commercial sale of our Phase 3 product candidates, if and when approved.

General corporate and administrative expenses increased by $12.4 million due to $4.5 million of aggregate acquisition costs for Incline and the licensing of Recothrom, a $4.4 million increase for employee severance and other employee related termination costs associated with the 2013 reduction in force, an increase of $3.2 million in legal costs associated with our ongoing patent infringement litigation and Eagle arbitration and an increase in stock based compensation costs of $1.2 million. These increases were partially offset by $0.9 million decrease in accretion costs due to the fair value adjustments of our contingent purchase price associated with the Targanta and Incline acquisitions. Accretion costs of $4.3 million associated with our 2013 Incline acquisition were offset by a gain associated with a reduction in the probability of oritavancin successfully obtaining regulatory approval in the United States by December 31, 2013.

Co-promotion Income:



	Three Months Ended March 31,
	2013		2012		Change $		Change %
	(in thousands)
Co-promotion income	$	3,750	$	—	$	3,750	*

^* Represents an increase of or in excess of 100%

During the three months ended March 31, 2013 , we recorded income of approximately $3.8 million in connection with our collaboration with AstraZeneca for the co-promotion of BRILINTA in the United States. Pursuant to the agreement, our sales force began supporting promotion activities for BRILINTA in May 2012. We did not record co-promotion income in the three months ended March 31, 2012 .

Interest Expense:



	Three Months Ended March 31,
	2013			2012		Change $			Change %
	(in thousands)
Interest expense	$	(3,674	)	$	—	$	(3,674	)	*

^* Represents an increase of or in excess of 100%

During the three months ended March 31, 2013 , we recorded approximately $3.7 million in interest expense related to the Notes. We did not record interest expense in the three months ended March 31, 2012 . We issued the Notes on June 11, 2012 and have accrued interest from that date. We expect our interest expense from the Notes to increase in future periods as we record non-cash interest expense as a result of the amortization of the excess of the principal amount of the liability component of the Notes over its carrying amount over the term of the Notes.

Other Income:



	Three Months Ended March 31,
	2013		2012		Change $		Change %
	(in thousands)
Other income	$	198	$	62	$	136	*

^* Represents an increase in excess of 100%

Other income, which is comprised of interest income and gains and losses on foreign currency transactions increased by approximately $0.1 million to $0.2 million for the three months ended March 31, 2013 . This increase was primarily due to higher gains on foreign currency transactions in the three months ended March 31, 2013 .

Benefit (Provision) for Income Tax:



	Three Months Ended March 31,
	2013		2012			Change $		Change %
	(in thousands)
Benefit (provision) for income tax	$	10,759	$	(4,474	)	$	15,233	*

^* Represents a decrease in excess of 100%

We recorded a $10.8 million benefit for income taxes and a $4.5 million provision for income taxes for the three months ended March 31, 2013 and 2012, respectively, based on a loss before taxes of $22.4 million and income before taxes of $12.0 million for the same periods. Our effective income tax rates for the three months ended March 31, 2013 and 2012 were approximately 48.2% and 37.1% , respectively. Both the 2013 and 2012 effective tax rates include a non-cash tax expense arising from purchase accounting for in-process research and development, or IPR&D, acquired in our acquisition of Targanta Therapeutics Corporation, or Targanta. In 2013 effective tax rates include a non-cash tax expenses due to the purchase accounting for IPR&D acquired from Incline.

It is possible that our full-year effective tax rate could change because of discrete events, our mix of U.S. to foreign earnings, specific transactions, or the receipt of new information affecting our current projections.

We will continue to evaluate our future ability to realize our deferred tax assets on a periodic basis in light of changing facts and circumstances. These include but are not limited to projections of future taxable income, tax legislation, rulings by relevant tax authorities, the progress of ongoing tax audits, the regulatory approval of products currently under development and the ability to achieve future anticipated revenues.

Liquidity and Capital Resources

Sources of Liquidity

Since our inception, we have financed our operations principally through revenues from sales of Angiomax, the sale of common stock, convertible promissory notes and warrants and interest income. We had $252.1 million in cash, cash equivalents and available for sale securities as of March 31, 2013 .

Cash Flows

As of March 31, 2013 , we had $228.4 million in cash and cash equivalents, as compared to $519.4 million as of December 31, 2012 . The decrease in cash and cash equivalents in the three months ended March 31, 2013 was primarily due to $48.0 million of net cash used in operating activities and $276.4 million of net cash used in investing activities, which uses of cash were partially offset by $33.4 million of net cash provided by financing activities.

Net cash used in operating activities was $48.0 million in the three months ended March 31, 2013 , compared to net cash used in operating activities of $15.0 million in the three months ended March 31, 2012 . The decrease in cash was primarily due to the timing of changes in working capital. The cash used in operating activities in the three months ended March 31, 2013 included net loss of $11.6 million , primarily due to $25 million in an initial license payment to Alnylam, and a $40.1 million decrease resulting from changes in working capital items, which were offset by non-cash items of $3.7 million consisting primarily of stock-based compensation expense, deferred tax provision and depreciation and amortization. The changes in working capital items reflect a decrease in accounts payable and accrued expenses of $17.4 million primarily due to payments related to inventory of active pharmaceutical ingredient bivalirudin and payment of certain corporate expenses, an increase in accounts receivable of $4.9 million , which was due in part to the timing of receipts and related sales volume, an increase in inventory of $8.0 million due to purchases under our supply agreement with Teva API, Inc., or Teva API, which was formerly known as Plantex USA Inc., of certain minimum quantities of active pharmaceutical ingredient bivalirudin for our commercial supply, and an increase in prepaid and other current assets of $9.0 million primarily due to an increase in prepaid corporate income and ad valorem taxes.

Net cash used in operating activities was $15.0 million in the three months ended March 31, 2012. The cash used in operating activities in the three months ended March 31, 2012 included net income of $7.6 million and non-cash items of $4.6 million consisting primarily of stock-based compensation expense and depreciation and amortization, which were offset by a $27.3 million decrease resulting from changes in working capital items. The changes in working capital items reflect a decrease in accounts payable and accrued expenses of $29.2 million primarily due to payments related to inventory of active pharmaceutical ingredient bivalirudin and payment of certain corporate expenses, a decrease in accounts receivable of $7.1 million, which was due in part to the timing of receipts and related sales volume, and an increase in inventory of $4.8 million due to purchases under our supply agreement with Teva API of certain minimum quantities of the active pharmaceutical ingredient bivalirudin for our commercial supply.

During the three months ended March 31, 2013 , $276.4 million in net cash was used in investing activities, which reflected $301.7 million incurred in connection with our Incline and Recothrom transactions, consisting of $186.7 million used in the acquisition of Incline and $115 million used for the Recothrom transaction, the purchase of fixed assets and additional investment in Annovation Biopharma Inc., offset by $27.1 million in proceeds from the maturity and sale of available for sale securities.

During the three months ended March 31, 2012, $49.8 million in net cash was used in investing activities, which reflected $37.2 million used to purchase available for sale securities and $36.7 million used to acquire intangible assets related to our acute care generic products in connection with our settlement with APP and the reacquisition of our rights to sell Angiomax in Australia and New Zealand from CSL Limited, offset by $22.0 million in proceeds from the maturity and sale of available for sale securities and a $2.0 million decrease in restricted cash resulting from a reduction of our outstanding letter of credit associated with the lease of our principal executive offices in Parsippany, New Jersey.

Net cash provided by financing activities was $33.4 million in the three months ended March 31, 2013 , which reflected $29.7 million of proceeds from option exercises and $3.6 million in excess tax benefits and purchases of stock under our employee stock purchase plan.

We received $4.3 million in the three months ended March 31, 2012 in net cash provided by financing activities, which consisted of proceeds to us from option exercises, excess tax benefits and purchases of stock under our employee stock purchase plan.

Funding Requirements

We expect to devote substantial resources to our research and development efforts and to our sales, marketing and manufacturing programs associated with our products and products in development. We also will require cash to pay interest on the Notes and to make principal payments on the Notes at maturity or upon conversion. Our sources of funding to meet these requirements will depend upon many factors, including:


•	the extent to which Angiomax is commercially successful globally;

•

our ability to maintain market exclusivity for Angiomax in the United States through the enforcement of the '727 patent and the '343 patent during the period following the expiration of the patent term of the '404 patent on December 15, 2014 and the six month pediatric exclusivity on June 15, 2015 through at least May 1, 2019, the date on which we agreed APP may sell a generic version of Angiomax;


•	the extent to which Recothrom, Cleviprex, ready-to-use Argatroban and the acute care generic products for which we acquired the non-exclusive right to sell and distribute from APP are commercially successful in the United States;


•	the extent to which our global collaboration with AstraZeneca, including our four-year co-promotion arrangement for BRILINTA in the United States, is successful;


•	the extent to which we are successful in our efforts to establish a commercial infrastructure outside the United States;


•	the consideration paid by us in connection with acquisitions and licenses of development-stage compounds, clinical-stage product candidates, approved products, or businesses, and in connection with other strategic arrangements;


•	the progress, level, timing and cost of our research and development activities related to our clinical trials and non-clinical studies with respect to Angiomax, Cleviprex and our products in development;


•	the cost and outcomes of regulatory submissions and reviews for approval of Angiomax in additional countries and for additional indications, of Recothrom and Cleviprex outside the United States and of our products in development globally;


•	the continuation or termination of third-party manufacturing, distribution and sales and marketing arrangements;


•	the size, cost and effectiveness of our sales and marketing programs globally;


•	the amounts of our payment obligations to third parties as to our products and products in development; and


•	our ability to defend and enforce our intellectual property rights.

We believe that our cash on hand and the cash we generate from our operations will be sufficient to meet our ongoing funding requirements, other than for any material acquisition activity. If our existing cash resources, together with revenues that we generate from sales of our products and other sources, are insufficient to satisfy our funding requirements due to slower than anticipated sales of Angiomax, Recothrom, Cleviprex, ready-to-use Argatroban and the acute generic products for which we acquired the non-exclusive right to sell and distribute from APP or higher than anticipated costs globally, we may need to sell additional equity or debt securities or seek additional financing through other arrangements. Any sale of additional equity or debt securities may result in dilution to our stockholders. Debt financing may involve covenants limiting or restricting our ability to take specific actions, such as incurring additional debt or making capital expenditures. Moreover, our ability to obtain additional debt financing may be limited by the Notes. We cannot be certain that public or private financing will be available in amounts or on terms acceptable to us, if at all. Further, we may seek additional financing to fund our acquisitions of development stage compounds, clinical stage product candidates and approved products and/or the companies that have such products, and we may not be able to obtain such financing on terms acceptable to us or at all.

If we seek to raise funds through collaboration or licensing arrangements with third parties, we may be required to relinquish rights to products, product candidates or technologies that we would not otherwise relinquish or grant licenses on terms that may not be favorable to us. If we are unable to obtain additional financing, we may be required to delay, reduce the scope of, or eliminate one or more of our planned research, development and commercialization activities, which could harm our financial condition and operating results.

Certain Contingencies:

We may be, from time to time, a party to various disputes and claims arising from normal business activities. We accrue for loss contingencies at the earliest date at which we deem that it is probable that a liability has been incurred and the amount of such loss can be reasonably estimated.

Eagle Pharmaceuticals, Inc. Arbitration. We received a Demand for Arbitration filed by Eagle, dated October 25, 2011. In the Demand for Arbitration, Eagle claims that we failed to meet our obligations under the license and development agreement between us, Eagle and certain other parties relating to the development of a new formulation of our product, Angiomax, and to our efforts to seek and obtain regulatory approval, market and sell that new formulation. Eagle, as a result, alleges that it is entitled to an amount of damages totaling $306 million. In January 2013, an arbitration hearing took place before a three person panel. In February 2013, we and Eagle submitted post-hearing briefs, and, in April 2013, post-hearing arguments took place. The hearing process is now complete and the three person arbitration panel is deciding the matter. We believe that any potential liability is not estimable at this time.

Currently, we are party to the legal proceedings described in Part II, Item 1, Legal Proceedings, of this quarterly report. We have assessed such legal proceedings and do not believe that it is probable that a liability has been incurred and the amount of such liability can be reasonably estimated. As a result, we have not recorded a loss contingency related to these legal proceedings.

Contractual Obligations

Our long-term contractual obligations include commitments and estimated purchase obligations entered into in the normal course of business. These include commitments related to purchases of inventory of our products, research and development service agreements, income tax contingencies, operating leases, selling, general and administrative obligations, restricted cash in connection with our lease of our principal office space in Parsippany, New Jersey and royalties, milestone payments and other contingent payments due under our license and acquisition agreements as of December 31, 2012 .

In addition to the specified contractual obligations set forth in the contractual obligations table included in our annual report on Form 10-K for the year ended December 31, 2012 , the following obligations were incurred during the quarter ended March 31, 2013 :


•	Under the terms of our agreement with Incline, we agreed to pay up to $205 million in cash in the aggregate, less certain transaction expenses and taxes, upon our entering into a license agreement in Japan or achieving certain regulatory approval and sales milestones with respect to IONSYS.

•

Under a master transaction agreement with BMS, BMS granted to us an option to purchase from BMS and its affiliates, following the expiration or earlier termination of the collaboration term, certain other assets, including certain patent and trademark rights, contracts, inventory, equipment and related books and records, held by BMS which are exclusively related to Recothrom. If we exercise the option granted to us, at the closing of the purchase of the option assets, in consideration for such assets, we have agreed to pay to BMS a purchase price equal to the net book value of inventory included in the acquired assets, plus either:


◦	a multiple of average net sales over each of the two 12-month periods preceding the closing of the purchase (unless the purchase closing occurs less than 24 months after February 8, 2013, in which case the measurement period would be the 12-month period preceding the purchase closing); or


◦	if BMS has delivered a valid notice terminating the collaboration term early as a result of a material breach by us under the master transaction agreement, the amount described above plus an amount intended to give BMS the economic benefit of having received royalty fees for a 24-month collaboration term.

•

In February 2013, we entered into a license and collaboration agreement with Alnylam to develop, manufacture and commercialize therapeutic products targeting the human PCSK-9 gene based on certain of Alnylam's RNAi technology. Under the terms of the Agreement, Alnylam will be eligible to receive scaled double-digit royalties based on annual worldwide net sales of PCSK-9 products by us or our affiliates and sublicensees. Royalties to Alnylam are payable on a product-by-product and country-by-country basis until the last to occur of the expiration of patent rights in the applicable country that cover the applicable product, the expiration of non-patent regulatory exclusivities for such product in such country, and the twelfth anniversary of the first commercial sale of the product in such country. The royalties are subject to reduction in specified circumstances. We are also responsible for paying royalties, and in some cases milestone payments, owed by Alnylam to its licensors with respect to intellectual property covering these products.

Application of Critical Accounting Estimates

The discussion and analysis of our financial condition and results of operations is based on our unaudited consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles, or GAAP, for interim financial information and with the instructions to Form 10-Q. Accordingly, they do not include all the information and footnotes required by GAAP for complete financial statements. The preparation of these financial statements requires us to make estimates and judgments that affect our reported assets and liabilities, revenues and expenses, and other financial information. Actual results may differ significantly from these estimates under different assumptions and conditions. In addition, our reported financial condition and results of operations could vary due to a change in the application of a particular accounting standard.

We regard an accounting estimate or assumption underlying our financial statements as a “critical accounting estimate” where:


•	the nature of the estimate or assumption is material due to the level of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change; and


•	the impact of the estimates and assumptions on financial condition or operating performance is material.

Our significant accounting policies are more fully described in note 2 of our unaudited consolidated financial statements in this quarterly report and note 2 of our consolidated financial statements in our annual report on Form 10-K for the year ended December 31, 2012 . Not all of these significant accounting policies, however, require that we make estimates and assumptions that we believe are “critical accounting estimates.” We have discussed our accounting policies with the audit committee of our board of directors, and we believe that our estimates relating to revenue recognition, inventory, income taxes and stock-based compensation described under the caption “Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Application of Critical Accounting Estimates” in our annual report on Form 10-K for the year ended December 31, 2012 are “critical accounting estimates.”

Forward-Looking Information

This quarterly report on Form 10-Q includes forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. For this purpose, any statements contained herein regarding our strategy, future operations, financial position, future revenue, projected costs, prospects, plans and objectives of management, other than statements of historical facts, are forward-looking statements. The words “anticipates,” “believes,” “estimates,” “expects,” “intends,” “may,” “plans,” “projects,” “will,” “would” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. We cannot guarantee that we actually will achieve the plans, intentions or expectations expressed or implied in our forward-looking statements. There are a number of important factors that could cause actual results, levels of activity, performance or events to differ materially from those expressed or implied in the forward-looking statements we make. These important factors include our “critical accounting estimates” described in Part I, Item 2 of this quarterly report and the factors set forth under the caption “Risk Factors” in Part II, Item 1A of this quarterly report. Although we may elect to update forward-looking statements in the future, we specifically disclaim any obligation to do so, even if our estimates change, and readers should not rely on those forward-looking statements as representing our views as of any date subsequent to the date of this quarterly report.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Market risk is the risk of change in fair value of a financial instrument due to changes in interest rates, equity prices, creditworthiness, financing, exchange rates or other factors. Our primary market risk exposure relates to changes in interest rates in our cash, cash equivalents and available for sale securities. We place our investments in high-quality financial instruments,

primarily money market funds, corporate debt securities, asset backed securities and U.S. government agency notes with maturities of less than two years, which we believe are subject to limited interest rate and credit risk. We currently do not hedge interest rate exposure. At March 31, 2013 , we held $252.1 million in cash, cash equivalents and available for sale securities which had an average interest rate of approximately 0.39%. A 10 basis point change in such average interest rate would have had an approximate $0.1 million impact on our interest income. At March 31, 2013 , all cash, cash equivalents and available for sale securities were due on demand or within one year.

Most of our transactions are conducted in U.S. dollars. We do have certain agreements with parties located outside the United States. Transactions under certain of these agreements are conducted in U.S. dollars, subject to adjustment based on significant fluctuations in currency exchange rates. Transactions under certain other of these agreements are conducted in the local foreign currency. As of March 31, 2013 , we had receivables denominated in currencies other than the U.S. dollar. A 10% change in foreign exchange rates would have had an approximate $1.6 million impact on our other income and cash.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2013 . The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by us in the reports that we file or submit 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, 2013 , our chief executive officer and chief financial officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control over Financial Reporting

No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the quarter ended March 31, 2013 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Part II. Other Information

Item 1. Legal Proceedings

From time to time we are party to legal proceedings in the course of our business in addition to those described below. We do not, however, expect such other legal proceedings to have a material adverse effect on our business, financial condition or results of operations.

'727 Patent and '343 Patent Litigations

Hospira, Inc.

In July 2010, we were notified that Hospira, Inc., or Hospira, had submitted two ANDAs seeking permission to market its generic version of Angiomax prior to the expiration of the '727 patent and '343 patent. On August 19, 2010, we filed suit against Hospira in the U.S. District Court for the District of Delaware for infringement of the '727 patent and '343 patent. On August 25, 2010, the case was reassigned in lieu of a vacant judgeship to the U.S. District Court for the Eastern District of Pennsylvania. Hospira's answer denied infringement of the '727 patent and '343 patent and raised counterclaims of non-infringement and invalidity of the '727 patent and '343 patent. On September 24, 2010, we filed a reply denying the counterclaims raised by Hospira. The Hospira action was consolidated for discovery purposes with the then pending and now settled cases against Teva and APP. The case was reassigned back to the U.S. District Court for the District Court of Delaware. A Markman hearing was held on December 5, 2012. The Court has yet to issue a decision. The Court has set a schedule for the case including a September 23, 2013 trial date.

Mylan Pharmaceuticals, Inc.

In January 2011, we were notified that Mylan Pharmaceuticals, Inc. had submitted an ANDA seeking permission to market its generic version of Angiomax prior to the expiration of the '727 patent and '343 patent. On February 23, 2011, we filed suit against Mylan Inc., Mylan Pharmaceuticals Inc. and Bioniche Pharma USA, LLC, which we refer to collectively as Mylan, in the U.S. District Court for the Northern District of Illinois for infringement of the '727 patent and '343 patent. Mylan's answer denied infringement of the '727 patent and '343 patent and raised counterclaims of non-infringement and invalidity of the '727 patent and '343 patent. On April 13, 2011, we filed a reply denying the counterclaims raised by Mylan. On May 4, 2011 the Court set a pretrial schedule. Following a joint request, the Court issued an amended scheduling order on September 22, 2011. On November 29, 2011, Mylan moved to amend its answer to add counterclaims and affirmative defenses of inequitable conduct and unclean hands. Following motion practice, the Court granted Mylan's request to add counterclaims and affirmative defenses of inequitable conduct and to add affirmative defenses of unclean hands. On March 7, 2012, we filed a reply denying these counterclaims. A Markman hearing was held on July 30, 2012. The Court issued a Markman Order on August 6, 2012. The parties are conducting discovery and other pre-trial matters. No trial date has been set.

Dr. Reddy's Laboratories, Inc.

In March 2011, we were notified that Dr. Reddy's Laboratories, Ltd. and Dr. Reddy's Laboratories, Inc. had submitted an ANDA seeking permission to market its generic version of Angiomax prior to the expiration of the '727 and '343 patents. On April 28, 2011, we filed suit against Dr. Reddy's Laboratories, Ltd., Dr. Reddy's Laboratories, Inc. and Gland Pharma, Inc., which we refer to collectively as Dr. Reddy's, in the U.S. District Court for the District of New Jersey for infringement of the '727 patent and '343 patent. Dr. Reddy's answer denied infringement of the '727 patent and '343 patent and raised counterclaims of non-infringement and invalidity of the '727 patent and '343 patent. On May 11, 2012, Dr. Reddy's filed a motion for summary judgment. On October 2, 2012, the Court held oral argument on Dr. Reddy's summary judgment motion and conducted a Markman hearing. On October 15, 2012, the Court denied Dr. Reddy's summary judgment motion. A Markman decision was issued by the Court on January 2, 2013. On January 25, 2013, Dr. Reddy's filed a second summary judgment motion this time for non-infringement. During a March 13, 2013 status conference, the Dr. Reddy's and Sun Pharmaceuticals Industries LTD actions were consolidated. On April 17, 2013, during a conference with the Magistrate Judge, a final schedule was set for pretrial purposes for the consolidated matter. No trial date has been set.

Sun Pharmaceutical Industries LTD

In October 2011, we were notified that Sun Pharmaceutical Industries LTD had submitted an ANDA seeking permission to market its generic version of Angiomax prior to the expiration of the '727 and '343 patents. On November 21, 2011, we filed suit

against Sun Pharma Global FZE, Sun Pharmaceutical Industries LTD., Sun Pharmaceutical Industries Inc., and Caraco Pharmaceutical Laboratories, LTD., which we refer to collectively as Sun, in the U.S. District Court for the District of New Jersey for infringement of the '727 patent and '343 patent. The case has been assigned to the same judge and Magistrate Judge as the Dr. Reddy's action. Sun's answer denied infringement of the '727 patent and '343 patent. On June 7, 2012, the Court held an initial case scheduling conference. At a subsequent conference on March 13, 2013, the Court consolidated the Sun case with the Dr. Reddy's action. On April 17, 2013, during a conference with the Magistrate Judge, a final schedule was set for pretrial purposes for the consolidated matter. No trial date has been set.

Apotex Inc.

In March 2013, we were notified that Apotex Inc. had submitted an ANDA seeking permission to market its generic version of Angiomax prior to the expiration of the '727 and '343 patents. On May 1, 2013, we filed suit against Apotex Inc. and Apotex Corp., which we refer to collectively as Apotex, in the U.S. District Court for the District of New Jersey for infringement of the '727 and '343 patents. The case has been assigned to the same judge and Magistrate Judge as the Dr. Reddy's and Sun actions. Apotex has not yet filed an answer. The Court has not yet set any schedules.

Eagle Pharmaceuticals, Inc. Arbitration

We received a Demand for Arbitration filed by Eagle, dated October 25, 2011. In the Demand for Arbitration, Eagle claims that we failed to meet our obligations under the license and development agreement between us, Eagle and certain other parties relating to the development of a new formulation of our product, Angiomax, and to our efforts to seek and obtain regulatory approval, market and sell that new formulation. Eagle, as a result, alleges that it is entitled to an amount of damages totaling $306 million. In January 2013, an arbitration hearing took place before a three person panel. In February 2013, we and Eagle submitted post-hearing briefs, and, in April 2013, post-hearing arguments took place. The hearing process is now complete and the three person arbitration panel is deciding the matter.

Item 1A. Risk Factors

Investing in our common stock involves a high degree of risk. You should consider carefully the risks and uncertainties described below in addition to the other information included or incorporated by reference in this quarterly report. If any of the following risks actually occur, our business, financial condition or results of operations would likely suffer. In that case, the trading price of our common stock could fall. Updated risk factors associated with our business are set forth below.

Risks Related to Our Financial Results

Our business is very dependent on the commercial success of Angiomax. If Angiomax does not generate the revenues we anticipate, our business may be materially harmed

Angiomax has accounted for substantially all of our revenue since we began selling this product in 2001. We expect revenue from Angiomax to account for the significant majority of our revenue in 2013. The commercial success of Angiomax depends upon:

•


•	the continued acceptance by regulators, physicians, patients and other key decision-makers of Angiomax as a safe, therapeutic and cost-effective alternative to heparin and other products used in current practice or currently being developed;


•	our ability to further develop Angiomax and obtain marketing approval of Angiomax for use in additional patient populations and the clinical data we generate to support expansion of the product label;


•	the overall number of PCI procedures performed;


•	the ability of our third-party supply and manufacturing partners to provide us with sufficient quantities of Angiomax;


•	the impact of competition from existing competitive products and from competitive products that may be approved in the future;


•	the continued safety and efficacy of Angiomax;


•	to what extent and in what amount government and third-party payors cover or reimburse for the costs of Angiomax; and


•	our success and the success of our international distributors in selling and marketing Angiomax in Europe and in other countries outside the United States.

We continue to develop Angiomax for use in additional patient populations, including in patients with structural heart disease, patients undergoing peripheral angioplasty, carotid angioplasty and cardiovascular surgery and patients with or at risk of HIT/HITTS. We may not be successful in developing Angiomax and obtaining marketing approval of Angiomax for these additional patient populations. However, even if we are successful in obtaining approval for the use of Angiomax in additional patient populations, our ability to sell Angiomax for use in these additional patient populations may not result in higher revenue or income on a continuing basis.

As of March 31, 2013 , our inventory of Angiomax was $82.4 million and we had inventory-related purchase commitments totaling $17.7 million for the last three quarters of 2013, $26.6 million for 2014 and $7.5 million for 2015 for Angiomax bulk drug substance. If sales of Angiomax were to decline, we could be required to make an allowance for excess or obsolete inventory or increase our accrual for product returns, which could negatively impact our results of operations and our financial condition.

We may need to raise additional capital. If we are unable to obtain such capital on favorable terms or at all, we may not be able to execute on our business plans and our business, financial condition and results of operations may be adversely affected

We expect to devote substantial financial resources to our research and development efforts, clinical trials, nonclinical and preclinical studies and regulatory approvals and to our commercialization and manufacturing programs associated with our products and our products in development. We also will require cash to pay interest on the $275.0 million aggregate principal amount of our 1.375% convertible senior notes due 2017, or the Notes, and to make principal payments on the Notes at maturity or upon conversion. Our sources of funding to meet these requirements will depend upon many factors, including:


•	the extent to which Angiomax is commercially successful globally;

•


•	the extent to which Recothrom, Cleviprex, ready-to-use Argatroban and the acute care generic products that we acquired the non-exclusive right to sell and distribute from APP are commercially successful in the United States;


•	the extent to which our global collaboration with AstraZeneca, including our four-year co-promotion arrangement for BRILINTA in the United States, is successful;


•	the extent to which we are successful in our efforts to establish a commercial infrastructure outside the United States;


•	the consideration paid by us in connection with acquisitions and licenses of development-stage compounds, clinical-stage product candidates, approved products, or businesses, and in connection with other strategic arrangements;


•	the progress, level, timing and cost of our research and development activities related to our clinical trials and non-clinical studies with respect to Angiomax, Cleviprex and our products in development;


•	the cost and outcomes of regulatory submissions and reviews for approval of Angiomax in additional countries and for additional indications, of Recothrom and Cleviprex outside the United States and of our products in development globally;


•	the continuation or termination of third-party manufacturing, distribution and sales and marketing arrangements;


•	the size, cost and effectiveness of our sales and marketing programs globally;


•	the amounts of our payment obligations to third parties as to our products and products in development; and


•	our ability to defend and enforce our intellectual property rights.

If our existing resources, together with revenues that we generate from sales of our products and other sources, are insufficient to satisfy our funding requirements, we may need to sell equity or debt securities or seek additional financing through other arrangements. Public or private financing may not be available in amounts or on terms acceptable to us, if at all. If we seek to raise funds through collaboration or licensing arrangements with third parties, we may be required to relinquish rights to products, products in development or technologies that we would not otherwise relinquish or grant licenses on terms that may not be favorable to us. Moreover, our ability to obtain additional debt financing may be limited by the Notes. If we are unable to obtain additional financing, we may be required to delay, reduce the scope of, or eliminate one or more of our planned research, development and commercialization activities, which could adversely affect our business, financial condition and operating results.

If we seek to raise capital to fund acquisitions of development-stage compounds, clinical-stage product candidates, approved products, or businesses or for other reasons by selling equity or debt securities or through other arrangements, our stockholders could be subject to dilution and we may become subject to financial restrictions and covenants, which may limit our activities

If we seek to acquire any development-stage compounds, clinical-stage product candidates, approved products, or businesses or determine that raising additional capital would be in our interest and in the interest of our stockholders, we may seek to sell additional equity or debt securities or seek additional financings through other arrangements. Any sale of additional equity or debt securities may result in dilution to our stockholders and increased liquidity requirements. Moreover, our ability to obtain additional debt financing may be limited by the Notes. Debt financing may involve covenants limiting or restricting our ability to take specific actions, such as incurring additional debt or making capital expenditures. Our ability to comply with these financial restrictions and covenants could be dependent on our future performance, which is subject to prevailing economic conditions and other factors, including factors that are beyond our control such as foreign exchange rates, interest rates and changes in the level of competition. Failure to comply with the financial restrictions and covenants would adversely affect our business, financial condition and operating results.

Our revenue in the United States from sales of our products is completely dependent on our sole source distributor, Integrated Commercialization Solutions, or ICS, and our revenue outside the United States is substantially dependent on a limited number of international distributors. If the buying patterns of ICS or these international distributors for our products are not consistent with underlying hospital demand, then our revenue will be subject to fluctuation from quarter to quarter based on these buying patterns and not underlying demand for the products. Any change in these buying patterns could adversely affect our financial results and our stock price

We distribute Angiomax, Recothrom, Cleviprex, ready-to-use Argatroban and three of our acute care products in the United States through a sole source distribution model. Under this model, we currently sell Angiomax, Recothrom, Cleviprex, ready-to-use Argatroban and the three acute care generic products to our sole source distributor, ICS. ICS then sells Angiomax, Recothrom, Cleviprex, ready-to-use Argatroban and the three acute care generic products to a limited number of national medical and pharmaceutical wholesalers with distribution centers located throughout the United States and, in certain cases, directly to hospitals. We expect that we will also sell our other acute care generic products through the same sole source distribution model. Our revenue from sales of Angiomax, Recothrom, Cleviprex, ready-to-use Argatroban and the three acute care generic products in the United States is exclusively from sales to ICS pursuant to our agreement with them. We anticipate that our revenue from sales of our other acute care generic products that we sell will be exclusively from sales to ICS. In connection with a reduction in marketing, sales and distribution fees payable to ICS, in October 2010 we amended our agreement with ICS to extend the ICS payment terms under our distribution agreement with them from 30 days to 45 days, which can be further extended to 49 days if ICS pays by wire transfer. The amendment has caused, and we expect to continue to cause, an increase in accounts receivable. As a result of our relationship with ICS, we expect that our revenue will continue to be subject to fluctuation from quarter to quarter based on the buying patterns of ICS, which may be independent of underlying hospital demand.

In some countries outside the European Union and in a few countries in the European Union, we sell Angiomax to international distributors and these distributors then sell Angiomax to hospitals. Our reliance on a small number of distributors for international sales of Angiomax could cause our revenue to fluctuate from quarter to quarter based on the buying patterns of these distributors, independent of underlying hospital demand.

If inventory levels at ICS or at our international distributors become too high, these distributors may seek to reduce their inventory levels by reducing purchases from us, which could have a material and adverse effect on our revenue in periods in which such purchase reductions occur.

We may not realize the anticipated benefits of past or future acquisitions or product licenses and integration of these acquisitions and any products and product candidates acquired or licensed may disrupt our business and management

We have in the past and may in the future acquire or license additional development-stage compounds, clinical-stage product candidates, approved products, technologies or businesses. For example, recently we acquired Incline, obtained the exclusive right to promote, market and sell Recothrom from BMS and entered into a license and collaboration agreement with Alnylam, to develop, manufacture and commercialize RNAi therapeutics targeting the PCSK9 gene for the treatment of hypercholesterolemia and other human diseases. We may not realize the anticipated benefits of an acquisition, license or collaboration, each of which involves numerous risks. These risks include:


•	difficulty in integrating the operations, products or product candidates and personnel of an acquired company;


•	entry into markets in which we have no or limited direct prior experience and where competitors in such markets have stronger market positions;


•	failure to successfully further develop the acquired or licensed business, product, compounds, programs or technology or to achieve strategic objectives, including commercializing and marketing successfully the development stage compounds and clinical stage candidates that we acquire or license;


•	disruption of our ongoing business and distraction of our management and employees from other opportunities and challenges;


•	inability to retain personnel, key customers, distributors, vendors and other business partners of the acquired company, or acquired or licensed product or technology;

•

potential failure of the due diligence processes to identify significant problems, liabilities or other shortcomings or challenges of an acquired company, or acquired or licensed product or technology, including but not limited to, problems, liabilities or other shortcomings or challenges with respect to intellectual property, product quality, revenue recognition or other accounting practices, employee, customer or partner disputes or issues and other legal and financial contingencies and known and unknown liabilities;


•	liability for activities of the acquired company or licensor before the acquisition or license, including intellectual property infringement claims, violations of laws, commercial disputes, tax liabilities, and other known and unknown liabilities;


•	exposure to litigation or other claims in connection with, or inheritance of claims or litigation risk as a result of, an acquisition or license, including but not limited to, claims from terminated employees, customers, former stockholders or other third-parties; and


•	difficulties in the integration of the acquired company's departments, systems, including accounting, human resource and other administrative systems, technologies, books and records, and procedures, as well as in maintaining uniform standards, controls, including internal control over financial reporting required by the Sarbanes−Oxley Act of 2002 and related procedures and policies.

Acquisitions and licensing arrangements are inherently risky, and ultimately, if we do not complete an announced acquisition or license transaction or integrate an acquired business, or an acquired or licensed product or technology successfully and in a timely manner, we may not realize the benefits of the acquisition or license to the extent anticipated and the perception of the effectiveness of our management team and our company may suffer in the marketplace. If we cannot successfully integrate acquired businesses, or acquired or licensed products or technologies we may experience material negative consequences to our business, financial condition or results of operations. Future acquisitions or licenses could also result in dilutive issuances of our equity securities, the incurrence of debt, contingent liabilities, or amortization expenses, or impairment of goodwill, and restructuring charges, any of which could harm our business, financial condition or results of operations.

We have a history of net losses and may not achieve profitability in future periods or maintain profitability on an annual basis

We have incurred net losses in many years and on a cumulative basis since our inception. As of March 31, 2013 , we had an accumulated deficit of approximately $72.0 million . We expect to make substantial expenditures to further develop and commercialize our products, including costs and expenses associated with research and development, clinical trials, nonclinical and preclinical studies, regulatory approvals and commercialization. We anticipate needing to generate greater revenue in future periods from our marketed products and from our products in development in order to achieve and maintain profitability in light of our planned expenditures. If we are unable to generate greater revenue, we may not achieve profitability in future periods, and may not be able to maintain any profitability we do achieve. Our ability to generate future revenue will be substantially dependent on our ability to maintain market exclusivity for Angiomax. If we fail to achieve profitability or maintain profitability on a quarterly or annual basis within the time frame expected by investors or securities analysts, the market price of our common stock may decline.

Risks Related to Our Notes

Servicing the Notes will require a significant amount of cash, and we may not have sufficient cash flow from our business to pay the Notes

Our ability to make scheduled payments of the principal of, to pay interest on or to refinance the Notes depends on our future performance, which is subject to economic, financial, competitive and other factors beyond our control. Our business may not continue to generate cash flow from operations in the future sufficient to service our debt and make necessary capital expenditures. If we are unable to generate cash flow, we may be required to adopt one or more alternatives, such as selling assets, restructuring debt or obtaining additional equity capital on terms that may be unfavorable to us or highly dilutive. Our ability to refinance our indebtedness will depend on the capital markets and our financial condition at the time we seek such refinancing. We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on our debt obligations.

We may not have the ability to raise the funds necessary to settle conversions of the Notes or to repurchase the Notes upon a fundamental change, and our future debt may contain limitations on our ability to pay cash upon conversion or repurchase of the Notes

Holders of the Notes will have the right to require us to repurchase their Notes upon the occurrence of a fundamental change, as defined in the indenture with Wells Fargo Bank, National Association, a national banking association, as trustee, governing the Notes, which we refer to as the Indenture, at a repurchase price equal to 100% of their principal amount, plus accrued and unpaid interest, if any, as described in the Indenture. In addition, upon conversion of the Notes, we will be required to make with respect to each $1,000 in principal amount of Notes converted cash payments of at least the lesser of $1,000 and the sum of the daily conversion values as described in the Indenture. However, we may not have enough available cash or be able to obtain financing at the time we are required to repurchase Notes or to pay cash upon conversions of Notes. In addition, our ability to repurchase Notes or to pay cash upon conversions of Notes may be limited by law, by regulatory authority or by agreements governing our future indebtedness. Our failure to repurchase Notes at a time when the repurchase is required by the Indenture or to pay any cash payable on future conversions of the Notes as required by the Indenture would constitute a default under the Indenture. A default under the Indenture or the fundamental change itself could also lead to a default under agreements governing our future indebtedness. If the repayment of the related indebtedness were to be accelerated after any applicable notice or grace periods, we may not have sufficient funds to repay the indebtedness and repurchase the Notes or make cash payments upon conversions thereof.

The conditional conversion feature of the Notes, if triggered, may adversely affect our financial condition and operating results

Holders of the Notes are entitled to convert the Notes at any time during specified periods at their option upon the occurrence of certain conditions, which are set forth in the Indenture. If one or more holders elect to convert their Notes, we would be required to settle any converted principal through the payment of cash, which could adversely affect our liquidity. In addition, even if holders do not elect to convert their Notes, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of the Notes as a current rather than long-term liability, which would result in a material reduction of our net working capital.

The accounting method for convertible debt securities that may be settled in cash, such as the Notes, could have a material effect on our reported financial results

In May 2008, the Financial Accounting Standards Board, or FASB, issued FASB Staff Position No. APB 14-1, "Accounting for Convertible Debt Instruments That May Be Settled in Cash Upon Conversion (Including Partial Cash Settlement)", which has subsequently been codified as Accounting Standards Codification 470-20, "Debt with Conversion and Other Options", which we

refer to as ASC 470-20. Under ASC 470-20, an entity must separately account for the liability and equity components of the convertible debt instruments (such as the Notes) that may be settled entirely or partially in cash upon conversion in a manner that reflects the issuer's economic interest cost. The effect of ASC 470-20 on the accounting for the Notes is that the equity component is required to be included in the additional paid-in capital section of stockholders' equity on our consolidated balance sheet and the value of the equity component is treated as original issue discount for purposes of accounting for the liability component of the Notes. As a result, we will be required to record non-cash interest expense in current periods presented as a result of the amortization of the excess of the principal amount of the liability component of the Notes over its carrying amount over the term of the Notes. We will report lower net income in our financial results because ASC 470-20 will require interest expense to include the current period's amortization of the debt discount and transaction costs, as well as the Notes' contractual interest, which could adversely affect our reported or future financial results, the market price of our common stock and the trading price of the Notes.

In addition, under certain circumstances, convertible debt instruments (such as the Notes) that may be settled entirely or partly in cash are currently accounted for utilizing the treasury stock method, the effect of which is that the shares issuable upon conversion of the Notes are not included in the calculation of diluted earnings per share except to the extent that the conversion value of the Notes exceeds their principal amount. Under the treasury stock method, for diluted earnings per share purposes, the transaction is accounted for as if the number of shares of common stock that would be necessary to settle such excess, if we elected to settle such excess in shares, are issued. We cannot be sure that the accounting standards in the future will continue to permit the use of the treasury stock method. If we are unable to use the treasury stock method in accounting for the shares issuable upon conversion of the Notes, then our diluted earnings per share would be adversely affected.

We have incurred substantial indebtedness, and our leverage and maintenance of high levels of indebtedness may adversely affect our business, financial condition and results of operations

As a result of the sale of the Notes, we have a greater amount of debt than we have maintained in the past. Our maintenance of higher levels of indebtedness could have adverse consequences including:


•	impacting our ability to satisfy our obligations;


•	increasing our vulnerability to general adverse economic and industry conditions;


•	limiting our ability to obtain additional financing in the future;


•	increasing the portion of our cash flows that may have to be dedicated to interest and principal payments and may not be available for operations, research and development, working capital, capital expenditures, expansion, acquisitions or general corporate or other purposes;


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


•	placing us at a possible competitive disadvantage to less leveraged competitors and competitors that have better access to capital resources.

Risks Related to Commercialization

We face substantial competition, which may result in others discovering, developing or commercializing competing products before or more successfully than we do

Our industry is highly competitive. Competitors in the United States and other countries include major pharmaceutical companies, specialized pharmaceutical companies and biotechnology firms, universities and other research institutions. Many of our competitors have substantially greater research and development capabilities and experience, and greater manufacturing, marketing and financial resources, than we do.

Our competitors may develop, market or license products or other novel technologies that are more effective, safer, more convenient or less costly than any that have been or are being developed or sold by us, or may obtain marketing approval for their products from the FDA or equivalent foreign regulatory bodies more rapidly than we may obtain approval for ours. There are well established products, including generic products, that are approved and marketed for the indications for which Angiomax, Recothrom, Cleviprex, ready-to-use Argatroban and our acute care generic products are approved for and the indications for which we are developing our products in development. In addition, competitors are developing additional products for such indications. In the case of the ready-to-use Argatroban, GlaxoSmithKline markets a branded formulation of Argatroban and Sandoz markets generic formulations of ready-to-use Argatroban that compete with our ready-to-use formulation of Argatroban. In the case of

the acute care generic products, such products will compete with their respective brand name reference products and other equivalent generic products that may be sold by APP and other third-parties.

We compete, in the case of Angiomax, Recothrom, Cleviprex and ready-to-use Argatroban, and expect to compete, in the cases of our products in development, on the basis of product efficacy, safety, ease of administration, price and economic value compared to drugs used in current practice or currently being developed. If we are not successful in demonstrating these attributes, physicians and other key healthcare decision makers may choose other products over our products, switch from our products to new products or choose to use our products only in limited circumstances, which could adversely affect our business, financial condition and results of operations.

Angiomax faces significant competition from all categories of anticoagulant drugs, which may limit the use of Angiomax and adversely affect our revenue

Due to the incidence and severity of cardiovascular diseases, the market for anticoagulant therapies is large and competition is intense. There are a number of anticoagulant drugs currently on the market, awaiting regulatory approval or in development, including orally administered agents. Angiomax competes with, or may compete with in the future, these anticoagulant drugs to the extent Angiomax and any of these anticoagulant drugs are approved for the same or similar indications.

We have positioned Angiomax to compete primarily with heparin, platelet inhibitors such as GP IIb/IIIa inhibitors, and treatment regimens combining heparin and GP IIb/IIIa inhibitors. Because heparin is generic and inexpensive and has been widely used for many years, physicians and medical decision-makers may be hesitant to adopt Angiomax instead of heparin. GP IIb/IIIa inhibitors that Angiomax competes with include ReoPro from Eli Lilly and Johnson & Johnson/Centocor, Inc., Integrilin from Merck & Co., Inc., and Aggrastat from Iroko Pharmaceuticals, LLC and MediCure Inc. GP IIb/IIIa inhibitors are widely used and some physicians believe they offer superior efficacy to Angiomax. Physicians may choose to use heparin combined with GP IIb/IIIa inhibitors due to their years of experience with this combination therapy and reluctance to change existing hospital protocols and pathways. Physician resistance to the use of Angiomax due to either custom or efficacy could adversely affect our revenue.

In some circumstances, Angiomax competes with other anticoagulant drugs for the use of hospital financial resources. For example, many U.S. hospitals receive a fixed reimbursement amount per procedure for the angioplasties and other treatment procedures they perform. As this amount is not based on the actual expenses the hospital incurs, hospitals may choose to use either Angiomax or other anticoagulant drugs or a GP IIb/IIIa inhibitor but not necessarily more than one of these drugs. If hospitals do not choose Angiomax in these instances, our revenue will be adversely affected.

If we are unable to maintain our market exclusivity for Angiomax in the United States as a result of our inability to enforce our U.S. patents covering Angiomax, Angiomax could become subject to generic competition in the United States earlier than we anticipate. We have agreed that APP may sell a generic version of Angiomax beginning May 1, 2019 or earlier under certain conditions, and that Teva may sell a generic version of Angiomax beginning June 30, 2019, or earlier under certain conditions. Competition from generic equivalents that would be sold at a price that is less than the price at which we currently sell Angiomax could have a material adverse impact on our business, financial condition and operating results.

Recothrom faces significant competition from all classes of topical hemostats and related sealant products, which may limit the use of Recothrom and adversely affect our revenue

Recothrom is a surgical hemostat that is applied topically during surgery to stop bleeding. There are a number of different classes of topical hemostats including:


•	the GELFOAM Plus hemostasis kit marketed by Baxter Healthcare Corporation;


•	mechanical hemostats, such as absorbable gelatin sponges;


•	collagen, cellulose, or polysaccharide-based hemostats applied as sponges, fleeces, bandages, or microspheres which do not contain thrombin or any other active biologic compounds;


•	active hemostats, which are thrombin products that may be derived from bovine or human pooled plasma purification or human recombinant manufacturing processes;


•	flowable hemostats, which consists of granular collagen or gelatin component that is mixed with saline or reconstituted thrombin to form a semi-solid, flowable putty; and


•	fibrin sealants, which consists of thrombin and fibrinogen that can be sprayed or applied directly to the bleeding surface.

The choice of a surgical hemostat depends on the surgical procedure, type and strength of bleeding, surgeon preference, price and availability of products within the operating room or hospital.

Recothrom competes with each of these types of surgical hemostats as well as other active hemostats. Recothrom is the only active hemostat that is not derived from bovine or human pooled plasma and can be used as a stand-alone product or in combination with a variety of other currently available mechanical and flowable hemostat products that are labeled for use with thrombin. Currently, there are two other stand-alone topical thrombin products commercially available in the United States, Thrombin-JMI, a bovine derived thrombin marketed by Pfizer, and Evithrom, a human pooled plasma thrombin marketed by Ethicon, Inc., a subsidiary of Johnson & Johnson. In addition, Baxter International, Inc. markets the GELFOAM Plus Hemostasis Kit, which is Pfizer Inc.'s GELFOAM sterile sponge co-packaged with human plasma-derived thrombin. Further, a number of companies, including Johnson & Johnson, Pfizer and Baxter International, Inc., currently market other hemostatic agents that may compete with Recothrom, including passive agents such as gelatin and collagen pads and flowable hemostats, as well as fibrin sealants and tissue glues. Many of these alternative hemostatic agents are relatively inexpensive and have been widely used for many years, and hospital purchasers continue to seek to limit growth of expenditures. Consequently, some physicians and hospital formulary decision-makers may be hesitant to adopt Recothrom. The active hemostat class has seen minor usage contraction recently while the flowable hemostats and fibrin sealants have shown growth. If physicians do not accept the potential advantages of Recothrom or resist the use of Recothrom due to either custom or cost containment measures, or the active hemostat class continues to decline, our revenues could be adversely affected.

If we are unable to successfully identify and acquire or license development stage compounds, clinical stage product candidates or approved products and develop or commercialize those compounds and products, our business, financial condition and results of operations may be adversely affected

Our business strategy is based on us selectively licensing or acquiring and then successfully developing and commercializing development stage compounds, clinical stage product candidates and approved products. Our success will be based in part on our ability to build and actively manage a portfolio of drugs that addresses unmet medical needs and creates value in patient therapy. However, the acquisition and licensing of pharmaceutical products is a competitive area. A number of more established companies, which have acknowledged strategies to license and acquire products, may have competitive advantages over us due to their size, cash flows and institutional experience. In addition, we may compete with emerging companies taking similar or different approaches to product acquisition.

Because of the intense competition for these types of product candidates and approved products, the cost of acquiring, in-licensing or otherwise obtaining rights to such candidates and products has grown dramatically in recent years and are often at levels that we cannot afford or that we believe are not justified by market potential. Any acquisition or license of product candidates or approved products that we pursue may not result in any short or long term benefit to us. We may incorrectly judge the value or worth of an acquired or licensed product candidate or approved product. Even if we succeed in acquiring product candidates, we may not be successful in developing them and obtaining marketing approval for them, manufacturing them economically or commercializing them successfully. We have previously acquired or licensed rights to clinical or development stage compounds and, after having conducted development activities, determined not to devote further resources to those compounds. For example, in October 2012, we voluntarily discontinued our clinical trials and further development of MDCO-2010, which we had acquired in connection with our acquisition of Curacyte Discovery in August 2008, in response to serious unexpected patient safety issues encountered during a clinical trial.

In addition, our future success would depend in part on our ability to manage any required growth associated with some of these acquisitions and licenses. Any acquisition might distract resources from the development of our existing product candidates and could otherwise negatively impact sales of our other marketed products. Furthermore, the development or expansion of any licensed or acquired product candidate or approved product may require a substantial capital investment by us, and we may not have these necessary funds to do so.

If we are unable to identify and acquire additional promising candidates or to develop and commercialize successfully those candidates we have, we will not be able to implement our business strategy and our business, operating results and financial condition may be materially and adversely affected.

If we are not able to convince hospitals to include our products on their approved formulary lists, our revenues may not meet expectations and our business, results of operations and financial condition may be adversely affected

Hospitals establish formularies, which are lists of drugs approved for use in the hospital. If a drug is not included on the formulary, the ability of our engagement partners and engagement managers to promote and sell the drug may be limited or denied. For example, in connection with the launch of Cleviprex, we experienced difficulties in getting Cleviprex included on hospitals'

formulary lists, in part because hospital formularies may limit the number of IV-AHT drugs in each drug class, and revenues from Cleviprex were adversely affected. If we fail to secure and maintain formulary inclusion for our products on favorable terms or are significantly delayed in doing so, we may have difficulty achieving market acceptance of our products and our business, results of operations and financial condition could be materially adversely affected.

If we are unable to negotiate and maintain satisfactory arrangements with group purchasing organizations with respect to the purchase of our products, our sales, results of operations and financial condition could be adversely affected

Our ability to sell our products to hospitals in the United States depends in part on our relationships with group purchasing organizations, or GPOs. Many existing and potential customers for our products become members of GPOs. GPOs negotiate pricing arrangements and contracts, sometimes on an exclusive basis, with medical supply manufacturers and distributors. These negotiated prices are then made available to a GPO's affiliated hospitals and other members. If we are not one of the providers selected by a GPO, affiliated hospitals and other members may be less likely to purchase our products, and if the GPO has negotiated a strict sole source, market share compliance or bundling contract for another manufacturer's products, we may be precluded from making sales to members of the GPO for the duration of the contractual arrangement. Our failure to renew contracts with GPOs may cause us to lose market share and could have a material adverse effect on our sales, financial condition and results of operations. We cannot assure you that we will be able to renew these contracts at the current or substantially similar terms. If we are unable to keep our relationships and develop new relationships with GPOs, our competitive position may suffer.

If the number of PCI procedures performed decreases, sales of Angiomax may be negatively impacted

The commercial success of Angiomax depends, in part, on the overall number of PCI procedures performed. The number of PCI procedures performed in the United States declined in 2007 due in part to the reaction to data from a clinical trial that was published in March 2007 in the New England Journal of Medicine entitled “Clinical Outcomes Utilizing Revascularization and Aggressive Drug Evaluation,” or “COURAGE”, and to the controversy regarding the use of drug-eluting stents. Since 2007, PCI procedure volume has remained similar to the 2007 levels and has not returned to the level of PCI procedures performed prior to the 2007 decline. With ongoing economic pressures on our hospital customers, PCI procedure volume might further decline and might not return to its previous levels. Because PCI procedures are the primary procedures during which Angiomax is used, a decline in the number of procedures may negatively impact sales of Angiomax, possibly materially.

If we are unable to successfully expand our business infrastructure and develop our global operations, our ability to generate future product revenue will be adversely affected and our business, results of operations and financial condition may be adversely affected

To support the global sales and marketing of Angiomax, Cleviprex and our products in development, if and when they are approved for sale and marketed outside the United States, we are developing our business infrastructure globally. Our ability to do this successfully will depend on our ability to expand our internal organization and infrastructure to accommodate additional anticipated growth. To manage the existing and planned future growth and the increasing breadth and complexity of our activities, we will need to continue building our organization and making significant additional investments in personnel, infrastructure, information management systems and other operational resources. If we are unable to expand our global operations successfully and in a timely manner, the growth of our business may be limited. Such expansion may be more difficult, more expensive or take longer than we anticipate. If we are not able to successfully market and sell our products globally, our business, results of operations and financial condition may be adversely affected.

Future rapid expansion could strain our operational, human and financial resources. For instance, we may be required to allocate additional resources to the expanded business, which we would have otherwise allocated to another part of our business. In order to manage expansion, we must:


•	continue to improve operating, administrative, and information systems;


•	accurately predict future personnel and resource needs to meet contract commitments;


•	track the progress of ongoing projects; and


•	attract and retain qualified management, sales, professional, scientific and technical operating personnel.

If we do not take these actions and are not able to manage our global business, then our global operations may be less successful than anticipated.

The success of our global operations may be adversely affected by international risks and uncertainties. If these operations are not successful, our business, results of operations and financial condition could be adversely affected

Our future profitability will depend in part on our ability to grow and ultimately maintain our product sales in foreign markets, particularly in Europe. For the year ended December 31, 2012 and the three months ended March 31, 2013 , we had $46.5 million and $11.6 million , respectively, in sales outside of the United States and we have historically encountered difficulty in selling Angiomax outside of the United States. Our foreign operations subject us to additional risks and uncertainties, particularly because we have limited experience in marketing, servicing and distributing our products or otherwise operating our business outside of the United States. These risks and uncertainties include:


•	political and economic determinations that adversely impact pricing or reimbursement policies;


•	our customers' ability to obtain reimbursement for procedures using our products in foreign markets;


•	compliance with complex and changing foreign legal, tax, accounting and regulatory requirements;


•	language barriers and other difficulties in providing long-range customer support and service;


•	longer accounts receivable collection times;


•	significant foreign currency fluctuations, which could result in increased operating expenses and reduced revenues;


•	trade restrictions and restrictions on direct investment by foreign entities;


•	reduced protection of intellectual property rights in some foreign countries; and


•	the interpretation of contractual provisions governed by foreign laws in the event of a contract dispute.

Our foreign operations could also be adversely affected by export license requirements, the imposition of governmental controls, political and economic instability, trade restrictions, changes in tariffs and difficulties in staffing and managing foreign operations.

If reimbursement by government payors or other third-party payors is not available or limited for our products, drug pricing is delayed or set at unfavorable levels or access to our products is reduced or terminated by governmental and other third-party payors, our ability to generate revenue would be adversely affected

Acceptable levels of coverage and reimbursement of drug treatments by government payors, such as Medicare and Medicaid programs, private health insurers and other organizations, have a significant effect on our ability to successfully commercialize our products. Reimbursement in the United States, Europe or elsewhere may not be available for any products we may develop or, if already available, may be decreased in the future. We may not get reimbursement or reimbursement may be limited if government payors, private health insurers and other organizations are influenced by the prices of existing drugs in determining whether our products will be reimbursed and at what levels. For example, the availability of numerous generic antibiotics at lower prices than branded antibiotics, such as oritavancin, if it were approved for commercial sale, could substantially affect the likelihood of reimbursement and the level of reimbursement for oritavancin. If reimbursement is not available or is available only at limited levels, we may not be able to commercialize our products, or may not be able to obtain a satisfactory financial return on our products.

In certain countries, particularly the countries of the European Union, the pricing of prescription pharmaceuticals and the level of reimbursement are subject to governmental control. In some countries, pricing and reimbursement are set with limited, if any, participation in the process by the marketing authorization holder. In addition, it can take an extended period of time after the receipt of initial approval of a product to establish and obtain reimbursement or pricing approval. Reimbursement approval also may be required at the individual patient level, which can lead to further delays. In addition, in some countries, it may take an extended period of time to collect payment even after reimbursement has been established. If prices are set at unsatisfactory levels, such prices may negatively impact our revenues from sales in those countries. An increasing number of countries are taking initiatives to attempt to reduce large budget deficits by focusing cost-cutting efforts on pharmaceuticals for their state-run health care systems. These international price control efforts have impacted all regions of the world, but have been most drastic in the European Union. Further, a number of European Union countries use drug prices from other countries of the European Union as “reference prices” to help determine pricing in their own countries. Consequently, a downward trend in drug prices for some countries could contribute to similar occurrences elsewhere. If reimbursement of our future products is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, we may be unable to achieve or sustain profitability.

Third-party payors, including Medicare and Medicaid increasingly are challenging prices charged for and the cost-effectiveness of medical products and services and they increasingly are limiting both coverage and the level of reimbursement for drugs. Also, the trend toward managed health care in the United States and the changes in health insurance programs may result in lower prices for pharmaceutical products and health care reform. The Patient Protection and Affordable Care Act of 2010, or the PPACA, may also have a significant impact on pricing as the legislation contains a number of provisions that are intended to reduce or limit the growth of healthcare costs. The provisions of the PPACA could, among other things, increase pressure on drug pricing and, as a result, the number of procedures that are performed. In addition to federal legislation, state legislatures and foreign governments have also shown significant interest in implementing cost-containment programs, including price controls, restrictions on reimbursement and requirements for substitution of generic products. The establishment of limitations on patient access to our drugs, adoption of price controls and cost-containment measures in new jurisdictions or programs, and adoption of more restrictive policies in jurisdictions with existing controls and measures could adversely impact our business and future results. If governmental organizations and third-party payors do not consider our products to be cost-effective compared to other available therapies, they may not reimburse providers or consumers of our products or, if they do, the level of reimbursement may not be sufficient to allow us to sell our products on a profitable basis.

Use or misuse of our products may result in serious injuries or even death to patients and may subject us to significant claims for product liability. If we are unable to obtain insurance at acceptable costs and adequate levels or otherwise protect ourselves against potential product liability claims, we could be exposed to significant liability

Our business exposes us to potential significant product liability risks which are inherent in the testing, manufacturing, marketing and sale of human healthcare products. Product liability claims might be made by patients in clinical trials, consumers, health care providers or pharmaceutical companies or others that sell our products. These claims may be made even with respect to those products that are manufactured in licensed and regulated facilities or otherwise possess regulatory approval for commercial sale or study.

These claims could expose us to significant liabilities that could prevent or interfere with the development or commercialization of our products. Product liability claims could require us to spend significant time and money in litigation or pay significant damages. With respect to our commercial sales and our clinical trials, we are covered by product liability insurance in the amount of $20.0 million per occurrence and $20.0 million annually in the aggregate on a claims-made basis. This coverage may not be adequate to cover all or any product liability claims that we face

As we continue to commercialize our products, we may wish to increase our product liability insurance. Product liability coverage is expensive. In the future, we may not be able to maintain or obtain such product liability insurance on reasonable terms, at a reasonable cost or in sufficient amounts to protect us against losses due to product liability claims.

We may not be able to manage our business effectively if we are unable to attract and retain key personnel and consultants

Our industry has experienced a high rate of turnover of management personnel in recent years. We are highly dependent on our ability to attract and retain qualified personnel for the acquisition, development and commercialization activities we conduct or sponsor. If we lose one or more of the members of our senior management, including our Chairman and Chief Executive Officer, Clive A. Meanwell, our President and Chief Financial Officer, Glenn P. Sblendorio, or other key employees or consultants, our ability to implement successfully our business strategy could be seriously harmed. Our ability to replace these key employees may be difficult and may take an extended period of time because of the limited number of individuals in our industry with the breadth of skills and experience required to acquire, develop and commercialize products successfully. Competition to hire from this limited pool is intense, and we may be unable to hire, train, retain or motivate such additional personnel.

An adverse decision in the arbitration between us and Eagle could have a material adverse effect on our financial condition

Risks Related to our Dependence on Third Parties for Manufacturing, Research and Development, and Distribution Activities

We have no manufacturing or supply capabilities and are completely dependent on third parties for the manufacture and supply of our products. We depend on a limited number of suppliers for the production of bulk drug substance for our products and products in development and to carry out fill-finish activities. If any of these suppliers does not or cannot fulfill its manufacturing or supply obligations to us, our ability to meet commercial demands for our products and to conduct clinical trials of our products and products in development could be impaired and our business could be harmed

We do not manufacture any of our products and do not plan to develop any capacity to manufacture them. We currently rely on a limited number of manufacturers and other third parties for bulk substance and to carry out fill-finish activities for our products and products in development. We expect to continue this manufacturing arrangement for Angiomax, Recothrom and all of our other approved products and products in development for the foreseeable future.

In the event that any third-party is unable or unwilling to carry out its respective manufacturing or supply obligations or terminates or refuses to renew its arrangements with us, we may be unable to obtain alternative manufacturing or supply on commercially reasonable terms on a timely basis or at all. In such cases, the third-party manufacturers have made no commitment to supply the drug product to us on a long-term basis and could reject our purchase orders. Only a limited number of manufacturers are capable of manufacturing our products and products in development. Consolidation within the pharmaceutical manufacturing industry could further reduce the number of manufacturers capable of producing our products, or otherwise affect our existing contractual relationships.

If we were required to transfer manufacturing processes to other third-party manufacturers and we were able to identify an alternative manufacturer, we would still need to satisfy various regulatory requirements. Satisfaction of these requirements could cause us to experience significant delays in receiving an adequate supply of our products and products in development and could be costly. Moreover, we may not be able to transfer processes that are proprietary to the manufacturer. Any delays in the manufacturing process may adversely impact our ability to meet commercial demands for our products on a timely basis, which could reduce our revenue, and to supply product for clinical trials of Angiomax, Cleviprex and our products in development, which could affect our ability to complete clinical trials of Angiomax and Cleviprex on a timely basis.

If third parties on whom we rely to manufacture and support the development and commercialization of our products do not fulfill their obligations or we are unable to establish or maintain such arrangements, the development and commercialization of our products may be terminated or delayed, and the costs of development and commercialization may increase

Our development and commercialization strategy involves entering into arrangements with corporate and academic collaborators, contract research organizations, distributors, third-party manufacturers, licensors, licensees and others to conduct development work, manage or conduct our clinical trials, manufacture our products and market and sell our products outside of the United States. We do not have the expertise or the resources to conduct many of these activities on our own and, as a result, are particularly dependent on third parties in many areas.

We may not be able to maintain our existing arrangements with respect to the commercialization or manufacture of our products or establish and maintain arrangements to develop, manufacture and commercialize our products in development or any additional product candidates or products we may acquire on terms that are acceptable to us. Any current or future arrangements for development and commercialization may not be successful. If we are not able to establish or maintain agreements relating to our products, our products in development or any additional products or product candidates we may acquire, our results of operations would be materially adversely affected.

Third parties may not perform their obligations as expected. The amount and timing of resources that third parties devote to developing, manufacturing and commercializing our products are not within our control. Our collaborators may develop, manufacture or commercialize, either alone or with others, products and services that are similar to or competitive with the products that are the subject of the collaboration with us. Furthermore, our interests may differ from those of third parties that manufacture or commercialize our products. Our collaborators may reevaluate their priorities from time to time, including following mergers and consolidations, and change the focus of their development, manufacturing or commercialization efforts. Disagreements that may arise with these third parties could delay or lead to the termination of the development or commercialization of our product candidates, or result in litigation or arbitration, which would be time consuming and expensive.

If any third party that manufactures or supports the development or commercialization of our products breaches or terminates its agreement with us, or fails to commit sufficient resources to our collaboration or conduct its activities in a timely manner, or fails to comply with regulatory requirements, such breach, termination or failure could:


•	delay or otherwise adversely impact the manufacturing, development or commercialization of our products, our products in development or any additional products or product candidates that we may acquire or develop;


•	require us to seek a new collaborator or undertake unforeseen additional responsibilities or devote unforeseen additional resources to the manufacturing, development or commercialization of our products; or


•	result in the termination of the development or commercialization of our products.

Our reliance on third-party manufacturers and suppliers to supply our products and product candidates may increase the risk that we will not have appropriate supplies of our products or our product candidates, which could adversely affect our business, results of operations and financial condition

Reliance on third-party manufacturers and suppliers entails risks to which we would not be subject if we manufactured products or products candidates ourselves, including:


•	reliance on the third party for regulatory compliance and quality assurance;


•	the possible breach of the manufacturing or supply agreement by the third party; and


•	the possible termination or nonrenewal of the agreement by the third party, based on its own business priorities, at a time that is costly or inconvenient for us.

For example, in December 2009 and March 2010 we conducted voluntary recalls of manufactured lots of Cleviprex due to the presence of visible particulate matter at the bottom of some vials that were manufactured for us by a third party. As a result, we were not able to supply the market with Cleviprex or sell Cleviprex from the first quarter of 2010 until April 2011. In addition, in December 2011 Eagle, the licensor and sole supplier of ready-to-use Argatroban, conducted a voluntary recall of the product due to the presence of particulate matter in some vials. As a result, we were not able to sell ready-to-use Argatroban from December 2011 to April 2012. In April 2012, we re-commenced selling ready-to-use Argatroban to existing and new customers.

Our products and products in development may compete with products and product candidates of third parties for access to manufacturing facilities. If we are not able to obtain adequate supplies of our products and products in development, it will be more difficult for us to compete effectively, market and sell our approved products and develop our products in development.

Our manufacturers are subject to ongoing, periodic, unannounced inspection by the FDA and corresponding state and foreign agencies or their designees to evaluate compliance with the FDA's cGMP, regulations and other governmental regulations and corresponding foreign standards. We cannot be certain that our present or future manufacturers will be able to comply with cGMP regulations and other FDA regulatory requirements or similar regulatory requirements outside the United States. We do not control compliance by our manufacturers with these regulations and standards. Failure of our third-party manufacturers or us to comply with applicable regulations could result in sanctions being imposed on us, including fines and other monetary penalties, injunctions, civil penalties, failure of regulatory authorities to grant marketing approval of our product candidates, delays, suspension or withdrawal of approvals, suspension of clinical trials, license revocation, seizures or recalls of product candidates or products, interruption of production, warning letters, operating restrictions and criminal prosecutions, any of which could significantly and adversely affect supplies of our products and products in development.

If we use hazardous and biological materials in a manner that causes injury or violates applicable law, we may be liable for damages

We conduct research and development activities that involve the controlled use of potentially hazardous substances, including chemical, biological and radioactive materials and viruses. In addition, our operations produce hazardous waste products. Federal, state and local laws and regulations in the United States and Canada govern the use, manufacture, storage, handling and disposal of hazardous materials. We may incur significant additional costs to comply with applicable laws in the future. Also, we cannot completely eliminate the risk of contamination or injury resulting from hazardous materials and we may incur liability as a result of any such contamination or injury. In the event of an accident, we could be held liable for damages or penalized with fines, and the liability could exceed our resources. We have only limited insurance for liabilities arising from hazardous materials. Compliance with applicable environmental laws and regulations is expensive, and current or future environmental regulations may restrict our research, development and production efforts, which could harm our business, operating results and financial condition.

If we fail to acquire and develop additional development-stage compounds, clinical-stage product candidates or approved products, it will impair our ability to grow our business

We have generated revenue from three products that we sell: Angiomax, Cleviprex and ready-to-use Argatroban. In order to generate additional revenue, our business plan is to acquire or license, and then develop and market, additional development-stage compounds, clinical-stage product candidates and approved products. From 2008 through February 2013, for instance, we acquired Curacyte Discovery, Targanta and Incline, licensed marketing rights to the ready-to-use formulation of Argatroban, licensed development and commercialization rights to MDCO-216, MDCO-157 and the ALN-PCS program, licensed the non-exclusive rights to sell and distribute ten acute care generic products and entered into a collaboration arrangement with BMS with respect to the commercialization of Recothrom. The success of this growth strategy depends upon our ability to identify, select and acquire or license pharmaceutical products that meet the criteria we have established. Because we have only the limited internal scientific research capabilities that we acquired in our acquisitions of Curacyte Discovery, Targanta and Incline, and we do not anticipate establishing additional scientific research capabilities, we are dependent upon pharmaceutical and biotechnology companies and other researchers to sell or license product candidates to us. In addition, proposing, negotiating and implementing an economically viable acquisition or license is a lengthy and complex process. Other companies, including those with substantially greater financial, marketing and sales resources, may compete with us for the acquisition or license of development-stage compounds, clinical-stage product candidates and approved products. We may not be able to acquire or license the rights to additional product candidates and approved products on terms that we find acceptable, or at all.

Risks Related to Regulatory Matters

If we do not obtain regulatory approvals for our product candidates in any jurisdiction or for our products in any additional jurisdictions, we will not be able to market our products and product candidates in those jurisdictions and our ability to generate additional revenue could be materially impaired

We must obtain approval from the FDA in order to sell our product candidates in the United States and from foreign regulatory authorities in order to sell our product candidates in other countries. In addition, we must obtain approval from foreign regulatory authorities in order to sell our U.S.-approved products in other countries. Obtaining regulatory approval is uncertain, time-consuming and expensive. Any regulatory approval we ultimately obtain may limit the indicated uses for the product or subject the product to restrictions or post-approval commitments that render the product commercially non-viable. Securing regulatory approval requires the submission of extensive non-clinical and clinical data, information about product manufacturing processes and inspection of facilities and supporting information to the regulatory authorities for each therapeutic indication to establish the product's safety and efficacy. If we are unable to submit the necessary data and information, for example, because the results of clinical trials are not favorable, or if the applicable regulatory authority delays reviewing or does not approve our applications, we will be unable to obtain regulatory approval. Delays in obtaining or failure to obtain regulatory approvals may:


•	delay or prevent the successful commercialization of any of the products or product candidates in the jurisdiction for which approval is sought;


•	diminish our competitive advantage; and


•	defer or decrease our receipt of revenue.

The regulatory review and approval process to obtain marketing approval takes many years and requires the expenditure of substantial resources. This process can vary substantially based on the type, complexity, novelty and indication of the product involved. Regulatory authorities have substantial discretion in the approval process and may refuse to accept any application or may decide that data are insufficient for approval and require additional pre-clinical, clinical or other studies. In addition, varying interpretations of the data obtained from pre-clinical and clinical testing could delay, limit or prevent regulatory approval of a product. Moreover, recent events, including complications experienced by patients taking FDA-approved drugs, have raised questions about the safety of marketed drugs and may result in new legislation by the U.S. Congress or foreign legislatures and increased caution by the FDA and comparable foreign regulatory authorities in reviewing applications for marketing approval.

We conducted our SOLO I and SOLO II clinical trials of oritavancin pursuant to a Special Protocol Assessment, or SPA, with the FDA. Many companies which have been granted SPAs have ultimately failed to obtain final approval to market their drugs. Since we are developing oritavancin under an SPA, based on protocol designs negotiated with the FDA, we may be subject to enhanced scrutiny. Additionally, even if the primary endpoints in the SOLO trials are achieved, an SPA does not guarantee approval. An SPA is not binding on the FDA if public health concerns unrecognized at the time the SPA was entered into become evident; the data, assumptions or information underlying the SPA request change or are called into question; other new scientific concerns regarding product safety or efficacy arise; or if we fail to comply with the agreed upon trial protocols. The FDA may raise issues of safety, study conduct, bias, deviation from the protocol, statistical power, patient completion rates, changes in scientific or

medical parameters or internal inconsistencies in the data prior to making its final decision. The FDA may also seek the guidance of an outside advisory committee prior to making its final decision.

The procedures to obtain marketing approvals vary among countries and can involve additional clinical trials or other pre-filing requirements. The time required to obtain foreign regulatory approval may differ from that required to obtain FDA approval. The foreign regulatory approval process may include all the risks associated with obtaining FDA approval, or different or additional risks. We may not obtain foreign regulatory approvals on a timely basis, if at all. Approval by the FDA does not ensure approval by the regulatory authorities in other countries, and approval by one foreign regulatory authority does not ensure approval by the FDA or regulatory authorities in other foreign countries. We may not be able to file for regulatory approvals and may not receive necessary approvals to commercialize our products and products in development in any market.

We cannot expand the indications for which we are marketing our products unless we receive regulatory approval for each additional indication. Failure to expand these indications will limit the size of the commercial market for our products

In order to market our products for expanded indications, we will need to conduct appropriate clinical trials, obtain positive results from those trials and obtain regulatory approval for such proposed indications. Obtaining regulatory approval is uncertain, time-consuming and expensive. The regulatory review and approval process to obtain marketing approval for a new indication can take many years and require the expenditure of substantial resources. This process can vary substantially based on the type, complexity, novelty and indication of the product involved. The regulatory authorities have substantial discretion in the approval process and may refuse to accept any application. Alternatively, they may decide that any data submitted is insufficient for approval and require additional pre-clinical, clinical or other studies, which studies could require the expenditure of substantial resources. Even if we undertook such studies, we might not be successful in obtaining regulatory approval for these indications or any other indications in a timely manner or at all. In addition, varying interpretations of the data obtained from pre-clinical and clinical testing could delay, limit or prevent regulatory approval of a new indication for a product. If we are unsuccessful in expanding the product label of our products, the size of the commercial market for our products will be limited.

For example, in May 2008, we received a non-approvable letter from the FDA with respect to an sNDA that we submitted to the FDA seeking approval of an additional indication for Angiomax for the treatment of patients with ACS in the emergency department. In its May 2008 letter, the FDA indicated that the basis of their decision involved the appropriate use and interpretation of non-inferiority trials, including the ACUITY trial. If we determine to pursue these indications, the FDA may require that we conduct additional studies of Angiomax, which studies could require the expenditure of substantial resources. Even if we undertook such studies, we might not be successful in obtaining regulatory approval for these indications or any other indications in a timely manner or at all. If we are unsuccessful in expanding the Angiomax product label, the size of the commercial market for Angiomax will be limited.

Clinical trials of product candidates are expensive and time-consuming, and the results of these trials are uncertain. If we are unable to conduct clinical trials that demonstrate the safety and efficacy of our product candidates on a timely basis, then our costs of developing the product candidates may increase and we may not be able to obtain regulatory approval for our product candidates on a timely basis or at all

Before we can obtain regulatory approvals to market any product for a particular indication, we will be required to complete pre-clinical studies and extensive clinical trials in humans to demonstrate the safety and efficacy of such product for such indication.

Clinical testing is expensive, difficult to design and implement, can take many years to complete and is uncertain as to outcome. Success in pre-clinical testing or early clinical trials does not ensure that later clinical trials will be successful, and interim results of a clinical trial do not necessarily predict final results. An unexpected result in one or more of our clinical trials can occur at any stage of testing. For example, in October 2012, we voluntarily discontinued our Phase 2b dose-ranging study of MDCO-2010, a serine protease inhibitor which we were developing to reduce blood loss during surgery, in response to serious unexpected patient safety issues encountered during the trial. Further, in November 2009, we discontinued enrollment in our Phase 3 clinical trials of cangrelor prior to completion after the independent Interim Analysis Review Committee for the program reported to us that the efficacy endpoints of the trial program would not be achieved.

We may experience numerous unforeseen events during, or as a result of, the clinical trial process that could delay or prevent us from receiving regulatory approval or commercializing our products, including:


•	our clinical trials may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional clinical trials which even if undertaken cannot ensure we will gain approval;


•	data obtained from pre-clinical testing and clinical trials may be subject to varying interpretations, which could result in the FDA or other regulatory authorities deciding not to approve a product in a timely fashion, or at all;


•	the cost of clinical trials may be greater than we currently anticipate;


•	regulators, ethics committees or institutional review boards may not authorize us to commence a clinical trial or conduct a clinical trial at a prospective trial site;


•	we, or the FDA or other regulatory authorities, might suspend or terminate a clinical trial at any time on various grounds, including a finding that participating patients are being exposed to unacceptable health risks. For example, we have in the past voluntarily suspended enrollment in one of our clinical trials to review an interim analysis of safety data from the trial; and


•	the effects of our product candidates may not be the desired effects or may include undesirable side effects or the product candidates may have other unexpected characteristics.

The rate of completion of clinical trials depends in part upon the rate of enrollment of patients. Patient enrollment is a function of many factors, including the size of the patient population, the proximity of patients to clinical sites, the eligibility criteria for the trial, the existence of competing clinical trials and the availability of alternative or new treatments. In particular, the patient population targeted by some of our clinical trials may be small. Delays in patient enrollment in any of our current or future clinical trials may result in increased costs and program delays.

If we or the contract manufacturers manufacturing our products and product candidates fail to comply with the extensive regulatory requirements to which we, our contract manufacturers and our products and product candidates are subject, our products could be subject to restrictions or withdrawal from the market, the development of our product candidates could be jeopardized, and we could be subject to penalties

The research, testing, manufacturing, labeling, safety, advertising, promotion, storage, sales, distribution, import, export and marketing, among other things, of our products, both before and after approval, are subject to extensive regulation by governmental authorities in the United States, Europe and elsewhere throughout the world. Both before and after approval of a product, quality control and manufacturing procedures must conform to current good manufacturing practice, or cGMP. Regulatory authorities, including the FDA, periodically inspect manufacturing facilities to assess compliance with cGMP. Our failure or the failure of contract manufacturers to comply with the laws administered by the FDA, the EMA or other governmental authorities could result in, among other things, any of the following:


•	delay in approving or refusal to approve a product;


•	product recall or seizure;


•	suspension or withdrawal of an approved product from the market;


•	delays in, suspension of or prohibition of commencing, clinical trials of products in development;


•	interruption of production;


•	operating restrictions;


•	untitled or warning letters;


•	injunctions;


•	fines and other monetary penalties;


•	the imposition of civil or criminal penalties;


•	disruption of importing and exporting activities; and


•	unanticipated expenditures.

We may incur significant liability if it is determined that we are promoting the “off-label” use of any of our products

Physicians may prescribe drug products for uses that are not described in the product's labeling and that differ from those approved by the FDA or other applicable regulatory agencies. Off-label uses are common across medical specialties. Although the FDA and other regulatory agencies do not regulate a physician's choice of treatments, the FDA and other regulatory agencies do restrict communications on the subject of off-label use. Companies may not promote drugs for off-label uses. The FDA and other regulatory and enforcement authorities actively enforce laws and regulations prohibiting promotion of off-label uses and the promotion of products for which marketing approval has not been obtained. A company that is found to have promoted off-label uses may be subject to significant liability, including civil and administrative remedies as well as criminal sanctions.

Notwithstanding the regulatory restrictions on off-label promotion, the FDA and other regulatory authorities allow companies to engage in truthful, non-misleading, and non-promotional scientific exchange concerning their products. We engage in medical education activities and communicate with investigators and potential investigators regarding our clinical trials. If the FDA or another regulatory or enforcement authority determines that our communications regarding our marketed products are not in compliance with the relevant regulatory requirements and that we have improperly promoted off-label uses, we may be subject to significant liability, including civil and administrative remedies as well as criminal sanctions.

If we do not comply with federal, state and foreign laws and regulations relating to the health care business, we could face substantial penalties

We and our customers are subject to extensive regulation by the federal government, and the governments of the states and foreign countries in which we may conduct our business. In the United States, the laws that directly or indirectly affect our ability to operate our business include the following:


•	the Federal Anti-Kickback Law, which prohibits persons from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce either the referral of an individual or furnishing or arranging for a good or service for which payment may be made under federal health care programs such as Medicare and Medicaid;


•	other Medicare laws and regulations that prescribe the requirements for coverage and payment for services performed by our customers, including the amount of such payment;


•	the Federal False Claims Act, which imposes civil and criminal liability on individuals and entities who submit, or cause to be submitted, false or fraudulent claims for payment to the government;


•	the Federal False Statements Act, which prohibits knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false statement in connection with delivery of or payment for health care benefits, items or services; and


•	various state laws that impose similar requirements and liability with respect to state healthcare reimbursement and other programs.

If our operations are found to be in violation of any of the laws and regulations described above or any other law or governmental regulation to which we or our customers are or will be subject, we may be subject to civil and criminal penalties, damages, fines, exclusion from the Medicare and Medicaid programs and the curtailment or restructuring of our operations. Similarly, if our customers are found to be non-compliant with applicable laws, they may be subject to sanctions, which could also have a negative impact on us. Any penalties, damages, fines, curtailment or restructuring of our operations would adversely affect our ability to operate our business and our financial results. Any action against us for violation of these laws, even if we successfully defend against it, could cause us to incur significant legal expenses, divert our management's attention from the operation of our business and damage our reputation.

Failure to comply with the U.S. Foreign Corrupt Practices Act, or FCPA, as well as the anti-bribery laws of the nations in which we conduct business, could subject us to penalties and other adverse consequences

We are subject to the FCPA, which generally prohibits U.S. companies from engaging in bribery or other prohibited payments to foreign officials for the purpose of obtaining or retaining business and requires companies to maintain accurate books and records and internal controls, including at foreign-controlled subsidiaries. In addition, we are subject to other anti-bribery laws of the nations in which we conduct business that apply similar prohibitions as the FCPA. Our employees or other agents may engage in prohibited conduct without our knowledge under our policies and procedures and the Foreign Corrupt Practices Act and

other anti-bribery laws that we may be subject to for which we may be held responsible. If our employees or other agents are found to have engaged in such practices, we could suffer severe penalties and other consequences that may have a material adverse effect on our business, financial condition and results of operations.

Risks Related to Our Intellectual Property

If we are unable to maintain our market exclusivity for Angiomax in the United States as a result of our inability to enforce our U.S. patents covering Angiomax, Angiomax could be subject to generic competition earlier than we anticipate. Generic competition for Angiomax would have a material adverse effect on our business, financial condition and results of operations

The principal U.S. patents covering Angiomax include the '404 patent, the '727 patent and the '343 patent. The '404 patent was set to expire in March 2010, but the term was extended to December 15, 2014 by the PTO under the Hatch-Waxman Act. As a result of our study of Angiomax in the pediatric setting, we are entitled to a six-month period of pediatric exclusivity following expiration of the '404 patent. In the second half of 2009, the PTO issued to us the '727 patent and the '343 patent, covering a more consistent and improved Angiomax drug product and the processes by which it is made. The '727 patent and the '343 patent are set to expire in July 2028. In response to Paragraph IV Certification Notice letters we received with respect to ANDAs filed by a number of parties with the FDA seeking approval to market generic versions of Angiomax, we have filed lawsuits against the ANDA filers alleging patent infringement of the '727 patent and '343 patent.

On September 30, 2011, we settled our patent infringement litigation with Teva. In connection with the Teva settlement we entered into a license agreement with Teva under which we granted Teva a non-exclusive license under the '727 patent and '343 patent to sell a generic bivalirudin for injection product under a Teva ANDA in the United States beginning June 30, 2019 or earlier under certain conditions.

On January 22, 2012, we settled our patent infringement litigation with APP. In connection with the APP settlement, we entered into a license agreement with APP under which we granted APP a non-exclusive license under the '727 patent and '343 patent to sell a generic bivalirudin for injection product under an APP ANDA in the United States beginning on May 1, 2019. In certain limited circumstances, the license to APP could include the right to sell a generic bivalirudin product under our NDA for Angiomax in the United States beginning on May 1, 2019 or, in certain limited circumstances, on June 30, 2019 or on a date prior to May 1, 2019.

We remain in infringement litigation involving the '727 patent and '343 patent with the other ANDA filers, as described in Part II, Item 1, Legal Proceedings, of this quarterly report.

If we are unable to maintain our market exclusivity for Angiomax in the United States as a result of our inability to enforce our U.S. patents covering Angiomax, Angiomax could become subject to generic competition in the United States earlier than May 1, 2019. Competition from generic equivalents that would be sold at a price that is less than the price at which we currently sell Angiomax could have a material adverse impact on our business, financial condition and operating results.

Following our settlements with Teva and APP, we submitted the settlement documents for each settlement to the U.S. Federal Trade Commission, or the FTC, and the U.S. Department of Justice, or the DOJ. The FTC and the DOJ could seek to challenge our settlements with Teva and APP, or a third party could initiate a private action under antitrust or other laws challenging our settlements with Teva and APP. While we believe our settlements are lawful, we may not prevail in any such challenges or litigation, in which case the other party might obtain injunctive relief, remedial relief, or such other relief as a court may order. In any event, we may incur significant costs in the event of an investigation or in defending any such action and our business and results of operations could be materially impacted if we fail to prevail against any such challenges.

If we breach any of the agreements under which we license rights to products or technology from others, we could lose license rights that are material to our business or be subject to claims by our licensors

We license rights to products and technology that are important to our business, and we expect to enter into additional licenses in the future. For instance, we have exclusively licensed patents and patent applications relating to each of our products and products in development. Under these agreements, we are subject to a range of commercialization and development, sublicensing, royalty, patent prosecution and maintenance, insurance and other obligations.

Any failure by us to comply with any of these obligations or any other breach by us of our license agreements could give the licensor the right to terminate the license in whole, terminate the exclusive nature of the license or bring a claim against us for damages. Any such termination or claim, particularly relating to our agreements with respect to Angiomax, could have a material adverse effect on our financial condition, results of operations, liquidity or business. Even if we contest any such termination or

claim and are ultimately successful, such dispute could lead to delays in the development or commercialization of potential products and result in time-consuming and expensive litigation or arbitration. In addition, on termination we may be required to license to the licensor any related intellectual property that we developed.

If we are unable to obtain or maintain patent protection for the intellectual property relating to our products, the value of our products will be adversely affected

The patent positions of pharmaceutical companies like us are generally uncertain and involve complex legal, scientific and factual issues. We cannot be certain that our patents and patent applications, including our own and those that we have rights through licenses from third parties will adequately protect our intellectual property. Our success protecting our intellectual property depends significantly on our ability to:


•	obtain and maintain U.S. and foreign patents, including defending those patents against adverse claims;


•	secure patent term extension for the patents covering our approved products;


•	protect trade secrets;


•	operate without infringing the proprietary rights of others; and


•	prevent others from infringing our proprietary rights.

We may not have any additional patents issued from any patent applications that we own or license. If additional patents are granted, the claims allowed may not be sufficiently broad to protect our technology. In addition, issued patents that we own or license may be challenged, narrowed, invalidated or circumvented, which could limit our ability to stop competitors from marketing similar products or limit the length of term of patent protection we may have for our products, and we may not be able to obtain patent term extension to prolong the terms of the principal patents covering our approved products. Changes in patent laws or in interpretations of patent laws in the United States and other countries may diminish the value of our intellectual property or narrow the scope of our patent protection.

In addition, the U.S. Supreme Court has ruled on several patent cases in recent years, either narrowing the scope of patent protection available in certain circumstances or weakening the rights of patent owners in certain situations. This combination of events has created uncertainty with respect to the value of patents, once obtained, and with regard to our ability to obtain patents in the future. Depending on decisions by the U.S. Congress, the federal courts, and the PTO, the laws and regulations governing patents could change in unpredictable ways that would weaken our ability to obtain new patents or to enforce our existing patents and patents that we might obtain in the future.

Our patents also may not afford us protection against competitors with similar technology. Because patent applications in the United States and many foreign jurisdictions are typically not published until eighteen months after filing, or in some cases not at all, and because publications of discoveries in the scientific literature often lag behind actual discoveries, neither we nor our licensors can be certain that others have not filed or maintained patent applications for technology used by us or covered by our pending patent applications without our being aware of these applications.

We exclusively license patents and patent applications for each of our products and products in development, for which we own the patents and patent applications, and we license on a non-exclusive basis the acute care generic products from APP which are not covered by any patents or patent applications. The patents covering our approved products and our product candidates are currently set to expire at various dates:

Angiomax. The principal U.S. patents covering Angiomax include the '404 patent, the '727 patent and the '343 patent. The '404 patent, was set to expire in March 2010, but the term was extended to December 15, 2014 by the PTO under the Hatch-Waxman Act. As a result of our study of Angiomax in the pediatric setting, we are entitled to a six-month period of pediatric exclusivity following expiration of the '404 patent.

In the second half of 2009, the PTO issued to us the '727 patent and the '343 patent, covering a more consistent and improved Angiomax drug product and the processes by which it is made. The '727 patent and the '343 patent are set to expire in July 2028 and are also entitled to a six-month period of pediatric exclusivity following expiration of the patents. In response to Paragraph IV Certification Notice letters we received with respect to abbreviated new drug applications, or ANDAs, filed with the FDA seeking approval to market generic versions of Angiomax, we have filed lawsuits against the ANDA filers alleging patent infringement of the '727 patent and '343 patent. In September 2011, we settled our patent infringement litigation with Teva. In connection with

the settlement, we entered into a license agreement with Teva under which we granted Teva a non-exclusive license under the '727 patent and '343 patent to sell a generic bivalirudin for injection product under a Teva ANDA in the United States beginning June 30, 2019 or earlier under certain conditions. The license agreement also contains a grant by Teva to us of an exclusive (except as to Teva), license under Teva’s bivalirudin patents and right to enforce Teva’s bivalirudin patents. In January 2012, we settled our patent infringement litigation with APP. In connection with the settlement, we entered into a license agreement with APP under which we granted APP a non-exclusive license under the '727 patent and '343 patent to sell a generic bivalirudin for injection product under an APP ANDA in the United States beginning on May 1, 2019. In addition, in certain limited circumstances, the license to APP could include the right to sell a generic bivalirudin product under our NDA for Angiomax in the United States beginning on May 1, 2019 or, in certain limited circumstances, on June 30, 2019 or on a date prior to May 1, 2019. We remain in infringement litigation involving the '727 patent and '343 patent with the other ANDA filers. If we are unable to maintain our market exclusivity for Angiomax in the United States through enforcement of our U.S. patents covering Angiomax, Angiomax could be subject to generic competition earlier than May 1, 2019.

In Europe, the principal patent covering Angiomax expires in 2015.

Recothrom . We have exclusively licensed from BMS rights to patents and patent applications covering Recothrom's pharmaceutical compositions, formulations and methods of manufacturing. The expiration dates of these patents range from 2013 to 2030 in the United States. BMS has also filed and is currently prosecuting a number of patent applications relating to Recothrom in the United States and in foreign countries. As a biologic, we believe Recothrom is entitled to regulatory exclusivity as a “reference product” in the United States expiring in January 2020. The FDA, however, has not issued any regulations or final guidance explaining how it will implement the abbreviated BLA provisions enacted in 2010 under the BPCIA, including the exclusivity provisions for reference products. It is thus possible that the FDA will decide to interpret the provisions in such a way that our products are not considered to be reference products for purposes of the statute or to be entitled to any period of data or marketing exclusivity. Even if our products are considered to be reference products eligible for exclusivity, such exclusivity will not prevent other companies marketing competing versions of Recothrom, including competing recombinant thrombin product, if such companies can complete, and FDA permits the submission of and approves, full BLAs with complete human clinical data packages for such products.

Cleviprex . The principal U.S. patent for Cleviprex is U.S. Patent No. 5,856,346, or the '346 patent, which was set to expire in January 2016, but the term has been extended to January 2021 by the PTO under the Hatch-Waxman Act. We have filed for patent term extensions, also known as supplementary protection certificates, in European countries where we received regulatory approval and expect to file for supplementary protection certificates in other European countries as we receive approvals. In Europe, the principal patent covering Cleviprex will expire in November 2014 if no patent term extension is obtained. In addition, we have filed and are currently prosecuting a number of patent applications relating to Cleviprex covering compositions of matter and uses in the United States, Europe and other foreign countries.

Ready-to-Use Argatroban . We exclusively licensed from Eagle rights to two U.S. patents covering certain formulations of Argatroban. Our exclusive license is limited to the United States and Canada. The patents are set to expire in September 2027. In February 2012, we were notified that Sandoz had submitted an ANDA seeking permission to market its second generic version of ready-to-use Argatroban prior to the expiration of these patents. On March 29, 2012, Eagle, which directed and controlled the enforcement of its intellectual property rights with respect to ready-to-use Argatroban, filed suit against Sandoz in the U.S. District Court for the District of New Jersey for infringement of its ready-to-use Argatroban patents. In November 2012, Eagle advised us that it entered into a settlement agreement with Sandoz, and as part of the settlement, Eagle agreed to give Sandoz the right to introduce an authorized generic version of ready-to-use Argatroban.

Cangrelor . The principal U.S. and European patents for cangrelor are set to expire in February 2014 if no patent term extension is obtained. In addition, we have issued patents directed to cangrelor pharmaceutical compositions which expire in 2017 and 2018 if no patent term extension is obtained. We have also filed and are currently prosecuting a number of patent applications related to cangrelor.

Oritavancin . The principal patent for oritavancin in both the United States and Europe will expire in November 2015 if no patent term extension is obtained. We have issued patents directed to the process of making oritavancin. These patents are set to expire in 2017 if no patent term extension is obtained. In April 2013, the PTO issued to us a patent covering the use of oritavancin in treating certain skin infections. Upon its issuance, the resulting patent will expire in August 2029 if no patent term extension is obtained. We have also filed and are prosecuting a number of patent applications relating to oritavancin and its uses.

IONSYS . As a result of our acquisition of Incline, we acquired a portfolio of patents and patent applications covering the IONSYS device and its uses. Some of these patents and patent applications were exclusively licensed from ALZA Corporation. The expiration dates of patents covering the IONSYS device and its use range from September 2014 to September 2031 in the

United States. In Europe, the expiration date of patents covering the IONSYS device range from June 2015 to January 2021. We are also currently prosecuting patent applications relating to IONSYS in the United States and in certain foreign countries.

MDCO-157 . We have exclusively licensed from Ligand Pharmaceuticals rights to patent and patent applications covering MDCO-157 formulations and its uses. The principal U.S. patent, U.S. Patent No. 8,343,995, is set to expire in April 2028 if no patent term extension is obtained. The corresponding patent application is pending in Europe, and if issued, will expire in April 2028. We are also prosecuting a number of patent applications relating to MDCO-157 in the United States and in certain foreign countries.

MDCO-216 . We are maintaining a number of U.S. patents with respect to MDCO-216, including patents that claim the use of MDCO-216 in certain disease indications. One of these U.S. patents is directed to the use of MDCO-216 for the treatment of ACS and is set to expire in October 2024 if no patent term extension is obtained. We have also filed and are prosecuting a number of patent applications related to the use and production of MDCO-216 in the United States, Europe and other foreign countries. As a biologic, we believe MDCO-216 is entitled to receive 12 years of regulatory exclusivity as a "reference product" in the United States and 10 years of regulatory exclusivity in Europe from the date of the initial marketing approval of MDCO-216, if approved.

ALN-PCS Program . We have exclusively licensed from Alnylam patents covering RNAi therapeutics targeting PCSK9 for the treatment of hypercholesterolemia and other human diseases. These patents generally expire between 2015 and 2023 both in the United States and in certain foreign countries. In addition, Alnylam has filed and is prosecuting patent applications that are specifically directed to PCSK9 product being developed under the license.

We plan to file applications for patent term extension for our products in development upon their approval. If we do not receive patent term extensions for the periods requested by us or at all, our patent protection for our products in development could be limited.

We are a party to a number of lawsuits that we brought against pharmaceutical companies that have notified us that they have filed ANDAs seeking approval to market generic versions of Angiomax. We cannot predict the outcome of these lawsuits. Involvement in litigation, regardless of its outcome, is time-consuming and expensive and may divert our management's time and attention. During the period in which these matters are pending, the uncertainty of their outcome may cause our stock price to decline. An adverse result in these matters whether appealable or not, will likely cause our stock price to decline. Any final, unappealable, adverse result in these matters will likely have a material adverse effect on our results of operations and financial conditions and cause our stock price to decline.

If upon expiration of our agreement with Lonza Braine, Lonza Braine breaches our agreement and fails to transfer the technology that was used to develop the Chemilog process, we would be unable to employ the Chemilog process to manufacture Angiomax bulk drug substance, which could cause us to experience delays in the manufacturing process and increase our manufacturing costs in the future

Our agreement with Lonza Braine for the supply of Angiomax bulk drug substance requires that Lonza Braine transfer the technology that was used to develop the Chemilog process to a secondary supplier of Angiomax bulk drug substance or to us or an alternate supplier at the expiration of the agreement, which is currently scheduled to occur in September 2016, but is subject to automatic renewals of consecutive three-year periods unless either party provides notice of non-renewal at least one year prior to the expiration of the initial term or any renewal term. If Lonza Braine fails or is unable to transfer successfully this technology, we would be unable to employ the Chemilog process to manufacture our Angiomax bulk drug substance, which could cause us to experience delays in the manufacturing process and increase our manufacturing costs in the future.

If we are not able to keep our trade secrets confidential, our technology and information may be used by others to compete against us

We rely significantly upon unpatented proprietary technology, information, processes and know-how. We seek to protect this information by confidentiality agreements and invention assignment agreements with our employees, consultants and other third-party contractors, as well as through other security measures. We may not have adequate remedies for any breach by a party to these confidentiality agreements or invention assignment agreements. In addition, our competitors may learn or independently develop our trade secrets. If our confidential information or trade secrets become publicly known, they may lose their value to us.

If we infringe or are alleged to infringe intellectual property rights of third parties, our business may be adversely affected

Our research, development and commercialization activities, as well as any product candidates or products resulting from these activities, may infringe or be claimed to infringe patents or patent applications under which we do not hold licenses or other rights.

Third parties may own or control these patents and patent applications in the United States and abroad. These third parties could bring claims against us or our collaborators that would cause us to incur substantial expenses and, if successful against us, could cause us to pay substantial damages. Further, if a patent infringement suit were brought against us or our collaborators, we or they could be forced to stop or delay research, development, manufacturing or sales of the product or product candidate that is the subject of the suit.

As a result of patent infringement claims, or in order to avoid potential claims, we or our collaborators may choose or be required to seek a license from the third party and be required to pay license fees or royalties or both. These licenses may not be available on acceptable terms, or at all. Even if we or our collaborators were able to obtain a license, the rights may be nonexclusive, which could result in our competitors gaining access to the same intellectual property. Ultimately, we could be prevented from commercializing a product, or be forced to cease some aspect of our business operations, if, as a result of actual or threatened patent infringement claims, we or our collaborators are unable to enter into licenses on acceptable terms. This could harm our business significantly.

There has been substantial litigation and other proceedings regarding patent and other intellectual property rights in the pharmaceutical and biotechnology industries. In addition to infringement claims against us, we may become a party to other patent litigation and other proceedings, including interference proceedings declared by the PTO and opposition proceedings in the European Patent Office, regarding intellectual property rights with respect to our products and technology. Patent litigation and other proceedings may also absorb significant management time. The cost to us of any patent litigation or other proceeding, even if resolved in our favor, could be substantial. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their substantially greater financial resources. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could have a material adverse effect on our ability to compete in the marketplace. Patent litigation and other proceedings may also absorb significant management time.

Risks Related to Our Common Stock

Fluctuations in our operating results could affect the price of our common stock

Our operating results may vary from period to period based on factors including the amount and timing of sales of and underlying hospital demand for our products, our customers' buying patterns, the timing, expenses and results of clinical trials, announcements regarding clinical trial results and product introductions by us or our competitors, the availability and timing of third-party reimbursement, including in Europe, sales and marketing expenses and the timing of regulatory approvals. If our operating results do not meet the expectations of securities analysts and investors as a result of these or other factors, the trading price of our common stock will likely decrease.

The warrant transactions and the derivative transactions that we entered into in connection with the convertible note hedge and warrant transactions may affect the price of our common stock

In connection with sale of the Notes, we entered into convertible note hedge and warrant transactions with several of the initial purchasers of the Notes, their affiliates and other financial institutions, or the Hedge Counterparties. Upon settlement, the warrants could have a dilutive effect on our earnings per share and the market price of our common stock to the extent that the market price per share of our common stock exceeds the then applicable strike price of the warrants. However, subject to certain conditions, we may elect to settle all of the warrants in cash.

In connection with establishing their hedges of the convertible note hedge and warrant transactions, the Hedge Counterparties or their affiliates entered into various derivative transactions with respect to our common stock. These parties may modify their hedge positions in the future by entering into or unwinding various derivatives with respect to our common stock and/or purchasing or selling our common stock or other securities of ours in secondary market transactions prior to the maturity of the Notes (and are likely to do so during any observation period related to a conversion of the Notes). These activities could cause a decrease or avoid an increase in the market price of our common stock.

Our stock price has been and may in the future be volatile. This volatility may make it difficult for you to sell common stock when you want or at attractive prices

Our common stock has been and in the future may be subject to substantial price volatility. From January 1, 2010 to May 6, 2013 , the last reported sale price of our common stock ranged from a high of $34.61 per share to a low of $7.00 per share. The

value of your investment could decline due to the effect upon the market price of our common stock of any of the following factors, many of which are beyond our control:


•	achievement or rejection of regulatory approvals of our product candidates and our products;


•	regulatory actions by the FDA or a foreign jurisdiction limiting or revoking the use of our products;


•	changes in securities analysts' estimates of our financial performance;


•	changes in valuations of similar companies;


•	variations in our operating results;


•	acquisitions and strategic partnerships;


•	announcements of technological innovations or new commercial products by us or our competitors or the filing of ANDAs, NDAs or BLAs for products competitive with ours;


•	disclosure of results of clinical testing or regulatory proceedings by us or our competitors;


•	the timing, amount and receipt of revenue from sales of our products and margins on sales of our products;


•	changes in governmental regulations;


•	developments in patent rights or other proprietary rights, particularly with respect to our U.S. Angiomax patents;


•	the extent to which Angiomax is commercially successful globally;

•


•	significant new litigation;


•	developments or issues with our contract manufacturers;


•	changes in our management; and


•	general market conditions.

We believe that period-to-period comparisons of our financial results will not necessarily be indicative of our future performance. If our revenues in any particular period do not meet expectations, we may not be able to adjust our expenditures in that period, which could cause our operating results to suffer. If our operating results in any future period fall below the expectations of securities analysts or investors, our stock price may fall by a significant amount.

The stock markets in general, and The NASDAQ Global Market and the market for biopharmaceutical companies in particular, have experienced extreme price and volume fluctuations recently. These fluctuations often have been unrelated or disproportionate to the operating performance of these companies. These broad market and industry factors may adversely affect the market price of our common stock, regardless of our actual operating performance.

Our corporate governance structure, including provisions in our certificate of incorporation and by-laws and Delaware law, may prevent a change in control or management that security holders may consider desirable

The General Corporation Law of the State of Delaware and our certificate of incorporation and by-laws contain provisions that might enable our management to resist a takeover of our company or discourage a third party from attempting to take over our company. These provisions include


•	Section 203 of the Delaware General Corporation Law, which provides that we may not enter into a business combination with an interested stockholder for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the business combination is approved in the manner prescribed in Section 203;


•	our board of directors has the authority to issue, without a vote or action of stockholders, up to 5,000,000 shares of a new series of preferred stock and to fix the price, rights, preferences and privileges of those shares, each of which could be superior to the rights of holders of our common stock;


•	our directors are elected to staggered terms, which prevents our entire board of directors from being replaced in any single year;


•	our directors may be removed only for cause and then only by the affirmative vote of the holders of at least 75% of the votes which all stockholders would be entitled to cast in any annual election of directors;


•	the size of our board of directors is determined by resolution of the board of directors;


•	any vacancy on our board of directors, however occurring, including a vacancy resulting from an enlargement of our board, may only be filled by vote of a majority of our directors then in office, even if less than a quorum;


•	only our board of directors, the chairman of the board or our president may call special meetings of stockholders;


•	our by-laws may be amended, altered or repealed by (i) the affirmative vote of a majority of our directors, subject to any limitations set forth in the by-laws, or (ii) the affirmative vote of the holders of at least 75% of the votes which all the stockholders would be entitled to cast in any annual election of directors;


•	stockholders must provide us with advance notice, and certain information specified in our by-laws, in connection with nominations or proposals by such stockholder for consideration at an annual meeting;


•	stockholders may not take any action by written consent in lieu of a meeting; and

•

our certificate of incorporation may only be amended or repealed by the affirmative vote of a majority of our directors and the affirmative vote of the holders of at least 75% of the votes which all the stockholders would be entitled to cast in any annual election of directors (and plus any separate class vote that might in the future be required pursuant to the terms of any series of preferred stock that might be outstanding at the time any of these amendments are submitted to stockholders).

These provisions could have the effect of delaying, deferring, or preventing a change in control of us or a change in our management that stockholders may consider favorable or beneficial. These provisions could also discourage proxy contests and make it more difficult for stockholders to elect directors and take other corporate actions. These provisions could also limit the price that investors might be willing to pay in the future for shares of our common stock or our other securities.

Our business could be negatively affected as a result of the actions of activist shareholders

Proxy contests have been waged against many companies in the biopharmaceutical industry over the last few years. If faced with a proxy contest, we may not be able to successfully defend against the contest, which would be disruptive to our business. Even if we are successful, our business could be adversely affected by a proxy contest because:


•	responding to proxy contests and other actions by activist shareholders may be costly and time-consuming and may disrupt our operations and divert the attention of management and our employees;


•	perceived uncertainties as to our future direction may result in our inability to consummate potential acquisitions, collaborations or in-licensing opportunities and may make it more difficult to attract and retain qualified personnel and business partners; and


•	if individuals are elected to our board of directors with a specific agenda different from ours, it may adversely affect our ability to effectively and timely implement our strategic plan and create additional value for our stockholders.

Item 5. Other Information

2013 Annual Cash Incentive Program

We have an annual cash incentive program, which is designed to provide cash bonus awards to our employees, including our named executive officers. In April 2013, our board of directors approved the following performance measures under the annual cash incentive program for 2013:


•	minimum worldwide net revenue growth rate relative to 2012;


•	minimum net operating profit growth rate relative to 2012;


•	to manage operating expenses within a certain range of our budget;


•	to create financial value from transactions;


•	to achieve significant Phase 3 product progression;


•	to achieve significant Phase 1-2 product progression;


•	to increase our global market reach;


•	to improve employee engagement metrics relative to 2012;


•	to achieve a minimum operating income per employee growth rate relative to 2012;


•	to implement revised compliance policies and procedures and have no significant compliance issues in 2012; and


•	to execute our communication plan.

Item 6. Exhibits

Exhibits

See the Exhibit Index on the page immediately preceding the exhibits for a list of exhibits filed as part of this quarterly report, which Exhibit Index is incorporated herein by this reference.

SIGNATURES

Pursuant to the requirements 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.

THE MEDICINES COMPANY



Date:	May 10, 2013	By:	/s/ Glenn P. Sblendorio
			Glenn P. Sblendorio
			President and Chief Financial
			Officer (Principal Financial and Accounting Officer)

EXHIBIT INDEX



Exhibit Number		Description
10.1*		License and Asset Transfer Agreement, dated June 21, 2010, by and between ALZA Corporation and Incline Therapeutics, Inc., a wholly owned subsidiary of the registrant

10.2*		License and Collaboration Agreement, effective as of February 3, 2013, by and between Alnylam Pharmaceuticals, Inc. and the registrant

31.1		Chairman and Chief Executive Officer Certification pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2		Chief Financial Officer Certification pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1		Chairman and Chief Executive Officer Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2		Chief Financial Officer Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101		The following materials from The Medicines Company Quarterly Report on Form 10-Q for the quarter ended March 31, 2013, formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated Balance Sheet, (ii) the Consolidated Statement of Income, (iii) the Consolidated Statement of Cash Flow, and (iv) Notes to Consolidated Financial Statements.


*	Confidential treatment requested as to certain portions, which portions have been omitted and filed separately with the Securities and Exchange Commission.



				Exhibit 10.1

	Confidential Materials omitted and filed separately with the Securities and Exchange Commission. Asterisks denote omissions.

Execution Copy

LICENSE AND ASSET TRANSFER AGREEMENT

BY AND BETWEEN

ALZA CORPORATION

AND

INCLINE THERAPEUTICS, INC.

TABLE OF CONTENTS

Article 1 Definitions. 1

Article 2 License Grant. 9


2.1.	License Grants to Incline. 9


2.2.	Sublicensing. 10


2.3.	Right of First Negotiation for Other Opioid Products. 10


2.4.	Right of First Negotiation for Other Products. 11


2.5.	Retained Rights 12


2.6.	Diligence 12


2.7.	Development Reports 12


2.8.	Provision of Licensed Know-How 12

Article 3 Purchase and Sale of Assets; Assignment and Assumption of Liabilities. 12


3.1.	Sale of Transferred Assets 12


3.2.	Excluded Assets 14


3.3.	Assumed Liabilities 15


3.4.	Excluded Liabilities 15


3.5.	Product Liability 16

Article 4 The Closing; Post-Closing Covenants. 16


4.1.	Closing and Closing Conditions 16


4.2.	ALZA's Responsibilities at the Closing 17


4.3.	Incline's Responsibilities at the Closing 17


4.4.	Agreements Relating to Electronic Transfer, Delivery and Digitization

of Hard Copy Documents; Physical Delivery of Transferred Assets;

and Transfer of Governmental Filings and Authorizations 17


4.5.	Improperly Transferred Documents 19


4.6.	No Continuing Obligations 20


4.7.	Costs and Taxes. 20


4.8	Allocation 21


4.9.	Risk of Loss 21


4.10.	Trademark and Domain Name Assignment, Recording and Other Obligations 21


4.11.	Incline's Post-Closing Covenants. 21


4.12.	ALZA's Post-Closing Covenant 23


4.13.	Pharmacovigalence Covenants 23

Article 5 Financial Provisions. 23


5.1.	Upfront Payment 23


5.2.	Milestone Payments 23


5.3.	Royalty Payments 25


5.4.	Adjustments in Royalty Rates. 26


5.5.	Royalty Reports 27


5.6.	Reimbursement of Payments Under ALZA Third Party Licenses 27


5.7.	Other Financial Provisions. 27

Article 6 Intellectual Property. 30


6.1.	Prosecution of Patents. 30


6.2.	Enforcement of Licensed Patents. 30


6.3.	Marking 31

Article 7 Confidential Information. 31


7.1.	Confidentiality Obligations 31


7.2.	Exceptions 31


7.3.	Authorized Disclosure and Use. 35


7.4.	SEC Filings and Other Disclosures 35


7.5.	Public Announcements 36

Article 8 Representations and Warranties. 36


8.1.	Representations and Warranties of Each Party 36


8.2.	Additional Representations and Warranties of ALZA. 37


8.3.	Additional Representations and Warranties of Incline 37


8.4.	Disclaimer of Warranties. 38


8.5.	No Implication 38

Article 9 Indemnification and Insurance. 38


9.1.	Survival 38


9.2.	Indemnification by ALZA 39


9.3.	Indemnification by Incline 39


9.4.	Scope of ALZA's Liability 39


9.5.	Claims 39


9.6.	Defense of Third Party Claims 40


9.7.	Exclusive Remedy. 40


9.8.	Calculation of Damages 41


9.9.	Mitigation 41


9.10.	No Limitation on Right to Contest 41


9.11.	Limitations of Indemnification 41


9.12.	Insurance 41

Article 10 Term and Termination. 41


10.1.	Term 41


10.2.	Termination for Cause 41


10.3.	Termination for Incline Bankruptcy 42


10.4.	Effects of Termination 42


10.5.	No Waiver 42


10.6.	Consequences of Termination 43


10.7.	Termination Not Sole Remedy 43


10.8.	Survival of Obligations 43


10.9.	Rights in Bankruptcy 43

Article 11 Dispute Resolution. 43


11.1.	Escalating; Decision Making Authority 43


11.2.	Mediation 44


11.3.	Arbitration 44


11.4.	Jury Trial. 47


11.5.	Termination 47

Article 12 Miscellaneous. 47


12.1.	No Reliance by Incline; Own Due Diligence 47


12.2.	Performance by Affiliates 47


12.3.	Entire Agreement 47


12.4.	Binding Effect 48


12.5.	Assignment 48


12.6.	No Third Party Beneficiaries 48


12.7.	Use of Names 48


12.8.	No Waiver 48


12.9.	Modifications and Amendments 48

12.10. Independent Contractors 48

12.11. Notices and Deliveries 48

12.12. Severability 49

12.13. Governing Law; Submission to Jurisdiction 49

12.14. Specific Enforcement 50

12.15. Advice of Counsel 50

12.16. Counterparts 50

12.17. Payment of Expenses 50

12.18. Compliance with Laws 50

12.19. Construction 50

Exhibits

Exhibit A - Form of Bill of Sale

Exhibit B - Form of Trademark Assignment

Exhibit C - Form of Domain Name Assignment

Exhibit D - Form of NDA and IND Assignments

Exhibit E - Form of Press Release

Schedules

Schedule 1.4 - ALZA Third Party Licenses

Schedule 1.18 - Fentanyl Analogs

Schedule 1.28 - Licensed Know-How

Schedule 1.29 - Licensed Patents

Schedule 1.44 - Product Domain Names

Schedule 1.45 - Product Trademarks

Schedule 3.1.2(a) - Clinical Trial Data

Schedule 3.1.2(b) and 3.1.2(c) - Manufacturing Data and Other Test Data

Schedule 3.1.4 - Manufacturing Equipment

Schedule 3.1.5 - Other Tangible Items

Schedule 3.1.6 - Market Research Materials

Schedule 3.1.7 - Governmental Filings and Authorizations

Schedule 4.5 - Third Party Confidentiality Obligations

Schedule 4.7.3 - NDA and MAA Maintenance Reimbursements

Schedule 4.8 - Purchase Price Allocation

Schedule 4.11.5 - ALZA Employees Not Subject to Non-Solicit

Schedule 8.2 - ALZA Employees

LICENSE AND ASSET TRANSFER AGREEMENT

This License and Asset Transfer Agreement (this “ Agreement ”) is made as of June 21, 2010 (the “ Execution Date ”), by and between ALZA Corporation, a Delaware corporation (“ ALZA ”) and Incline Therapeutics, Inc., a Delaware corporation (“ Incline ”). ALZA and Incline may each be referred to herein individually as a “ Party ” and collectively as the “ Parties .”

BACKGROUND


1.	ALZA has developed the ALZA Product (as defined below) and owns or controls the rights to certain intangible assets relating to the ALZA Product, such as patents, patent applications and know-how, as well as certain tangible assets relating to the ALZA Product.


2.	Incline desires to acquire from ALZA rights in and to such intangible and tangible assets, pursuant to and subject to the terms and conditions of this Agreement.

Contemporaneously with this Agreement, Incline completed a financing transaction made pursuant to that certain Series A Convertible Preferred Stock Purchase Agreement, effective as of the date hereof, by and among Incline, Frazier Healthcare VI, LP and certain other investors (the “ Stock Purchase Agreement ”) and entered into the Option Agreement, executed as of the date hereof, between Incline and Cadence Pharmaceuticals, Inc. (the “ Option Agreement ”).

NOW, THEREFORE, in consideration of the various promises and covenants set forth herein, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties hereby agree as follows:


Article 1

Definitions

The terms in this Agreement with initial letters capitalized shall have the meaning set forth below or, if not listed below, the meaning designated where first used in this Agreement, and capitalized plural/singular or other forms of defined words or phrases shall have the corresponding meaning.

1.1 “ Affiliate ” means, with respect to a Party, any corporation or other business entity that directly or indirectly, through one or more intermediaries, controls or is controlled by, or is under common control with such Party, but only for so long as such control shall continue. For the purposes of this definition, the term “control” as used with respect to any Party, means the possession of at least 50% of the voting stock or other ownership interest of the other corporation or entity, or the power to direct or cause the direction of the management and policies of the corporation or other entity or the power to elect or appoint at least 50% of the members of the governing body of the corporation or other entity through the ownership of the outstanding voting securities or by contract or otherwise.

1.2 “ ALZA Product ” means the iontophoretic transdermal system providing delivery of fentanyl under the influence of an electric current which is from a source external to the human

body (i.e., non-naturally occurring) that was developed and Controlled by ALZA prior to the Execution Date, also known as IONSYS ^TM .

1.3 “ ALZA Proprietary Compound ” means any active pharmaceutical compound or substance, other than a Fentanyl Analog, owned, licensed, or otherwise controlled by ALZA or its Affiliates as of the Execution Date or during the Term anywhere in the Territory.

1.4 “ ALZA Third Party Licenses ” means the agreements between ALZA and a Third Party set forth on Schedule 1.4 .

1.5 “ ALZA- [**] License Agreement ” means that certain [**], between ALZA and [**].

1.6 “ Bankruptcy ” means, with respect to a Party, that: (a) the Party has been declared insolvent or bankrupt by a court of competent jurisdiction; or (b) a voluntary or involuntary petition in bankruptcy has been filed in any court of competent jurisdiction against the Party and such petition has not dismissed within one hundred twenty (120) days after filing; or (c) the Party has made or executed an assignment of substantially all of its assets for the benefit of creditors.

1.7 “ Commercialization ” means any activities directed toward or including marketing, promoting, distributing, offering for sale, and selling a product, including importing a product for such purposes. When used as a verb, “Commercialize” shall mean to engage in Commercialization.

1.8 “ Commercially Reasonable Efforts ” means, with respect to the efforts to be expended by Incline with respect to a specified objective, those reasonable, diligent, good faith efforts to accomplish such objective as a similarly capitalized pharmaceutical or medical device company, as the case may be, in the United States would normally use to accomplish a similar objective under similar circumstances with respect to a product owned by such company.

1.9 “ Competing Product ” means [**].

1.10 “ Confidential Information ” means, with respect to a Party, unpublished or proprietary information or material that is Controlled or developed, in whole or in part, by such Party, whether tangible or intangible, where such information or material is disclosed to the other Party hereunder or is information that is designated herein as Confidential Information of such Party.

1.11 “ Contract Year ” means the twelve (12) month period beginning on January 1 and ending on December 31 of each calendar year, provided , however , that the first Contract Year shall be the period of time beginning on the Closing Date and ending on December 31, 2010.

1.12 “ Control ” or “ Controlled ” means, with respect to an item of information or intellectual property right, including know-how or Patent Right, possession (whether by ownership or license, other than pursuant to this Agreement) of the ability to transfer or grant a license, sublicense or other right with respect to such item or right as provided for herein without violating the terms of any contract or other arrangements with any Third Party.

1.13 “ Damages ” means losses, liabilities, damages, deficiencies, costs and expenses directly incurred or suffered (and, if applicable, reasonable attorneys' fees associated therewith).

1.14 “ EMEA ” means the European Regulatory Authority known as the European Medicines Agency and any successor agency thereto.

1.15 “ Encumbrance ” means any charge, claim, condition, equitable interest, lien, license, option, pledge, security interest, mortgage, right of way, easement, encroachment, servitude, right of first offer or first refusal, buy/sell agreement and any other restriction or covenant with respect to, or condition governing the use, construction, voting (in the case of any security or equity interest), transfer, receipt of income or exercise of any other attribute of ownership which would, individually or in the aggregate, have a material adverse effect on Incline's ability to develop and Commercialize a Product.

1.16 “ Europe ” means the countries of the European Union, and all other countries encompassed by the area bordered by the Ural Mountains, Ural River and Caspian Sea in the east, the Caucasus Mountains and the Black Sea with its outlets, Bosporus and Dardanelles in the south.

1.17 “ FDA ” means the United States Food and Drug Administration or any successor agency in the United States with responsibilities comparable to those of the United States Food and Drug Administration.

1.18 “ Fentanyl Analog ” means fentanyl and those other compounds listed on Schedule 1.18 hereto, and any salt, polymorph, or any other bioequivalent form of any such compounds.

1.19 “ First Commercial Sale ” means, on a country-by-country basis, the first commercial sale of a Product to a Third Party in an arms' length transaction in the country in the Territory by or on behalf of Incline, its Affiliates or sublicensees following receipt of applicable Regulatory Approval of such Product in such country.

1.20 “ GAAP ” means the generally accepted accounting principles in the United States applied on a consistent basis.

1.21 “ Generic Drug ” means, as to any given pharmaceutical drug product approved by the FDA under a New Drug Application, a pharmaceutical drug product that (A) is not and will not be marketed under the approval of such New Drug Application and that (B) (i) contains as its active ingredient(s) the same active ingredient(s) as such approved product, and (ii) obtained or is intended to obtain, regulatory approval from the FDA under an Abbreviated New Drug Application or Section 505(b)(2) New Drug Application.

1.22 “ Hedge-able Currency ” means [**].

1.23 “ Incline Compound ” means any active pharmaceutical compound exclusively owned, licensed or otherwise controlled by Incline on a worldwide basis that is not (a) a Fentanyl Analog, (b) a Generic Drug owned, licensed or otherwise controlled by ALZA or its Affiliates during the Term anywhere in the Territory or (c) an ALZA Proprietary Compound.

1.24 “ Incline Combination ” means a combination of (a) one or more Incline Compounds and (b) either (i) one or more Fentanyl Analogs or (ii) one or more Other Generic Compounds.

1.25 “ IND ” means an effective Notice of Claimed Investigational Exemption for a New Drug or Investigational New Drug Application, as defined in Title 21, Part 312, of the Code of Federal Regulations, on file with the FDA before the commencement of clinical trials of a Product in humans, or any comparable filing with the Regulatory Authority of a country other than the United States.

1.26 “ Innovator Protection ” means, with respect to a given Product in a given country in the Territory, that (a) at least one Valid Claim of a Licensed Patent in such country covers such Product, its manufacture, or use, and/or (b) such Product has Regulatory Exclusivity in such country.

1.27 “ Liability ” means, with respect to any Person, any liability or obligation of such Person whether known or unknown, whether asserted or unasserted, whether determined, determinable or otherwise, whether absolute or contingent, whether accrued or unaccrued, whether liquidated or unliquidated, whether incurred or consequential, whether due or to become due and whether or not required under GAAP to be accrued on the financial statements of such Person.

1.28 “ Licensed Know-How ” means the inventions and other know-how Controlled by ALZA and contained in the ALZA invention records set forth on Schedule 1.28 , and related laboratory notebook records solely to the extent that such related laboratory notebook records relate to such ALZA invention records. Incline understands and acknowledges that the inventions contained in the ALZA invention records set forth on Schedule 1.28 may be jointly owned with Third Parties and that such invention records are subject to such Third Party ownership interests.

1.29 “ Licensed Patents ” means the patents and patent applications owned by ALZA and set forth on Schedule 1.29 and all Patent Rights arising therefrom, as well as any Patent Rights owned by ALZA arising from the Licensed Know-How.

1.30 “ MAA ” means (a) a marketing authorization application filed with (i) the EMEA under the centralized EMEA filing procedure or (ii) a Regulatory Authority in any European country if the centralized EMEA filing procedure is not used, to obtain marketing approval or (b) any other equivalent or related regulatory submission, such as a Type II variation, to gain approval to market a Product in any country in the European Union.

1.31 “ Major EU Countries ” means the United Kingdom, France, Italy, Germany and Spain.

1.32 “ NDA ” means (a) a New Drug Application submitted to the FDA to obtain marketing approval for a Product in the United States or (b) any other equivalent or related regulatory submission, such as an sNDA, ANDA or sANDA, to gain approval to market a Product in the United States.

1.33 “ Net Sales ” means the gross invoiced amount of sales of all Products by Incline and its Affiliates, sublicensees and distributors to Third Parties, less the following deductions actually incurred, allowed, paid, accrued, or specifically allocated, provided that all such deductions shall be commercially reasonable and actually deducted and not recouped:


(a)	normal and customary trade, cash and quantity discounts, allowances and credits actually allowed or paid including cash coupons and retroactive price reductions;


(b)	credits or allowances actually granted for damaged Products, returns or rejections of Products, price adjustments and billing errors;


(c)	rebates, chargebacks and discounts (or equivalents thereof) granted to managed health care organizations, pharmacy benefit managers (or equivalents thereof), federal, state/provincial, local and other governments, their agencies and purchasers and reimbursers or to trade customers that are directly attributable to the Products;


(d)	commissions paid to Third Party distributors, brokers or agents;


(e)	sales taxes, VAT taxes and other Taxes directly linked to the sales of the Products to the extent included in the gross amount invoiced;


(f)	transportation costs, including insurance, for outbound freight related to delivery of the Products directly chargeable to the Products, but only to the extent that such expenses are separately delineated in the applicable invoices; and


(g)	customs duties, surcharges and other governmental charges incurred in connection with the exportation or importation of the Products.

each as determined on a country by country basis, in each case as accounted for by Incline in accordance with GAAP, as consistently applied.

Net Sales shall include the amount of fair market value of all other consideration in respect of the Products, whether such consideration is in kind or in other form and shall not include (i) any reimbursement received by Incline, its Affiliate, sublicensee or distributor, as applicable, in respect of the use of a Product in a country solely as part of a clinical trial prior to the receipt of marketing authorization required to commence commercial sales of such Product in such country, or (ii) any revenue generated under patient access or compassionate use programs prior to the receipt of marketing authorization required to commence commercial sales of such Product in a country.

In the event that any discounts, reductions, payments or rebates are offered for a Product where such Product is sold to a customer as part of a grouped set of products, the applicable discount, reduction, payment or rebate for such Product in such arrangement shall be based on the weighted average discount, reduction, payment or rebate of such grouped set of products; each to the extent consistent with Incline's usual course of dealing for its products other than such Product, if any.


1.34	“ Other Generic Compound ” means [**].

1.35 “ Other Generic-Fentanyl Combination ” means [**].

1.36 “ Other Product ” means an iontophoretic transdermal system that [**].

1.37 “ Other Opioid Compound ” means [**].

1.38 “ Other Opioid-Fentanyl Combination ” means a combination of one or more Fentanyl Analogs and one or more Other Opioid Compounds.

1.39 “ Other Opioid-Generic Combination ” means a combination of one or more Other Opioid Compounds and one or more Other Generic Compounds.

1.40 “ Other Opioid Product ” means an iontophoretic transdermal system that [**].

1.41 “ Patent Right(s) ” means, with respect to a particular invention, any and all (a) United States or foreign patents claiming the invention, (b) U.S. or foreign patent applications claiming the invention, including all provisional applications, substitute applications, inventor's certificates, registration patents, confirmation patents, continuations, continuations-in-part, divisions, renewals, and all patents granted thereon, (c) all patents-of-addition, reissues, reexaminations and extensions or restorations by existing or future extension or restoration mechanisms, including supplementary protection certificates or the equivalent thereof, of the foregoing, and (d) any other form of government-issued right for the invention substantially equivalent to any of the foregoing.

1.42 “ Person ” means any natural person, corporation, firm, business trust, joint venture, association, organization, company, partnership or other business entity, or any government, or any agency or political subdivisions thereof.

1.43 “ Product ” means an iontophoretic transdermal system providing delivery under the influence of an electric current which is from a source external to the human body (i.e., non-naturally occurring) of one or more Fentanyl Analogs.

1.44 “ Product Domain Names ” means the internet domain names set forth on Schedule 1.44 .

1.45 “ Product Trademarks ” means the registered trademarks “IONSYS” and “E-TRANS” or trademark applications for “IONSYS” and “E-TRANS” in certain countries in the Territory, as set forth in Schedule 1.45 .

1.46 “ Prosecuting ” means, with regard to a specified Patent Right, preparing, filing, prosecuting, maintaining, and defending such Patent Right, including with respect to any reexamination, reissue, interference, or opposition proceedings. For the avoidance of doubt, “Prosecuting” excludes any infringement suits or other legal proceedings to enforce the specified Patent Right, regardless of whether or not such proceedings involve the defense of the Patent Right in suit. When used as a noun, “Prosecution” shall mean the act of Prosecuting.

1.47 “ Quarter ” or “ Quarterly ” means each three month period ending March 31, June 30, September 30 or December 31 of each Contract Year during the Term.

1.48 “ Regulatory Approval ” means the technical, medical and scientific licenses, registrations, authorizations and approvals (including approvals of NDAs and labeling approvals) of the applicable Regulatory Authority necessary for the commercial manufacture, distribution, marketing, promotion, offer for sale, use, import, export and sale of a Product in a regulatory jurisdiction.

1.49 “ Regulatory Authority ” means any applicable supranational, European Union, federal, national, regional, state or local regulatory agency, department, bureau, commission, council or other government entity with authority over the development, manufacture, use, marketing and/

or sale (including approval of NDAs and other marketing authorization applications) of a pharmaceutical product in any regulatory jurisdiction throughout the world, including the FDA in the United States and the EMEA in the EU.

1.50 “ Regulatory Exclusivity ” means any rights or protections which are recognized, afforded or granted by the FDA, EMEA or any other Regulatory Authority in any country or region of the Territory, in association with the Regulatory Approval of a Product, providing such Product: (a) a period of marketing exclusivity, during which a Regulatory Authority recognizing, affording or granting such marketing exclusivity shall refrain from either reviewing or approving a marketing authorization application or similar regulatory submission, submitted by a Third Party seeking to market a Competing Product, or (b) a period of data exclusivity, during which a Third Party seeking to market a Competing Product is precluded from either referencing or relying upon, without an express right of reference from the dossier holder, such Product's clinical dossier or relying on previous Regulatory Authority findings of safety or effectiveness with respect to such Product to support the submission, review or approval of a marketing authorization application or similar regulatory submission before the applicable Regulatory Authority. Regulatory Exclusivity shall include rights conferred in the United States pursuant to the Hatch-Waxman Amendments to the Federal Food, Drug and Cosmetic Act, the Orphan Drug Act or the Best Pharmaceuticals for Children Act or in the European Union pursuant to Section 10.1(a)(iii) of Directive 2001/EC/83.

1.51 “ Royalty Period ” means, with respect to a given Product in a given country in the Territory, the period of time commencing on the date of First Commercial Sale of such Product in such country and extending until the later of (a) the date on which there is no Innovator Protection for such Product in such country and (b) twenty (20) years from the date of First Commercial Sale of such Product in such country.

1.52 “ Series A Financing ” means the Series A financing of Incline in an amount up to $43,000,00 by Frazier Healthcare VI, LP, 5AM Ventures III, L.P., Technology Partners, Adams Street Partners, Saints Capital Partners, Emergent Medical Partners, Wilson Sonsini Goodrich & Rosati, and other investors.

1.53 “ Sublicensed Patent Right s” means [**].

1.54 “ Tax ” and “ Taxes ” means all taxes, charges, duties, fees, levies or other assessments, including income, excise, property, business, goods and services, sales or use, value added, profits, license, withholding (with respect to compensation or otherwise), payroll, employment, net worth, capital gains, transfer, stamp, social security, environmental, occupation and franchise taxes, imposed by any government entity, and including any interest, penalties and additions attributable thereto.

1.55 “ Territory ” means the world, including all countries, possessions, and jurisdictions; provided, however, that in the event this Agreement is terminated pursuant to Section 10.2 only with respect to a Region, such Region shall automatically be excluded from the Territory as of the effective date of such termination.

1.56 “ Third Party ” means any Person other than a Party or any of its Affiliates.

1.57 “ Trademarks ” means trademarks, servicemarks, trade dress, logos and all applications,

registrations and renewals therefor.

1.58 “ Transferred IP ” means the Product Trademarks, Transferred Know-How and Product Domain Names included as Transferred Assets pursuant to Sections 3.1.1 , 3.1.2 and 3.1.3 , respectively.

1.59 “ Valid Claim ” means a claim (a) of any issued and unexpired patent that has not been dedicated to the public, disclaimed, revoked or held unenforceable or invalid by a decision of a court or governmental agency of competent jurisdiction (including a patent office, where applicable) from which no appeal can be taken, or with respect to which an appeal is not taken within the time allowed for appeal, and that has not been disclaimed or admitted to be invalid or unenforceable through reissue, disclaimer or otherwise.

1.60 Additional Definitions . Each of the following definitions are found in the body of this Agreement as indicated:



	Section
Adverse Event	4.13
Agreement	Preamble
ALZA Indemnitees	9.3
ALZA-Medtronic Agreement	4.11.6
ALZA ROFN Notice	2.3.2
Appeal Arbitrator	11.3.6
Assumed Liabilities	3.3
Claim	9.5
Closing	4.1.1
Closing Date	4.1.1
Controlling Party	6.2.3
CPR	11.2
[**]	4.12
Execution Date	Preamble
Excluded Assets	3.2
Excluded Liabilities	3.4
Expedited Arbitration Dispute	11.3.1
Financial Records	5.7.4
Financing Commitments	8.3.1
Improperly Transferred Documents	4.5
Incline Indemnitees	9.2
Incline Notice Period	2.3.3
Incline Notification	2.3.3
Incline ROFN Notice	2.4.1
Indemnified Party	9.5
Indemnifying Party	9.5
Indemnity Basket	9.4
Indemnity Cap	9.4
Infringer	6.2.1
Initial Selected Product Negotiation Period	2.4.2
Key Terms	2.4.2
Manufacturing Data	3.1.2
Market Research Materials	3.1.6



Milestone Three	5.2.1
Negotiation Period	2.3.3
Option Agreement	Background
Other Opioid Product License Agreement	2.3.2
Other Product License Agreement	2.4.1
Other Product Third Party Agreements	2.4.6
Privileged Information	6.1.4
Region	10.2
Right of First Negotiation	2.3.3
ROFN Period	2.3.1
ROW Countries	10.2
Second Selected Product Negotiation Period	2.4.3
Stock Purchase Agreement	Background
Term	10.1
Third Party Claim	9.6
Third Party Negotiation Period	2.3.4
Title 11	10.9
Total Relevant Sales	5.4.2
Transferred Assets	3.1
Transferred Know-How	3.1.2
Upfront Purchase Price	5.1


Article 2	License Grant

2.1 License Grants to Incline .

2.1.1 Subject to the terms and conditions of this Agreement and the terms and conditions of the ALZA Third Party Licenses, ALZA hereby grants to Incline, effective as of the Closing Date, an exclusive (including with regard to ALZA and its Affiliates) license under the Licensed Patents owned by ALZA and the Licensed Know-How owned by ALZA to make, have made, use, import, export, sell, offer for sale, have sold and otherwise exploit the Products in the Territory.

2.1.2 Subject to the terms and conditions of this Agreement, ALZA hereby grants to Incline, effective as of the Closing Date, a non-exclusive sublicense under the Sublicensed Patent Rights, to make, have made, use, import, export, sell, offer for sale, have sold and otherwise exploit the Products (to the extent such Products are “ALZA Products” as such term is defined in the ALZA-[**] License Agreement) in the Territory. Incline understands and acknowledges that such sublicense is at all times subject to the terms and conditions of the ALZA-[**] License Agreement and that ALZA has only non-exclusive rights to such Sublicensed Patent Rights. ALZA agrees that it will not amend or modify the ALZA-[**] License Agreement in a manner that would adversely affect Incline's sublicense rights under this Section 2.1.2 , nor will it terminate early the ALZA-[**] License Agreement, without prior consent from Incline, which consent shall not be unreasonably withheld. ALZA shall promptly provide to Incline any notice from any Third Party to the ALZA-[**] License Agreement regarding any allegation of material breach by ALZA of the ALZA-[**] License Agreement.

2.1.3 The Parties acknowledge that, as of the Execution Date, ALZA has provided to Incline (a) a complete and accurate copy of the ALZA-[**] License Agreement, including all amendments and (b) copies of the other ALZA Third Party Licenses.

2.2 Sublicensing .

2.2.1 Subject to the terms and conditions of the ALZA Third Party Licenses, Incline may sublicense the rights granted to it under Section 2.1 to one or more of its Affiliates or Third Parties at any time. Each such sublicense (a) shall be subject and subordinate to, and consistent with, the terms and conditions of this Agreement, (b) shall not in any way diminish, reduce or eliminate any of Incline's obligations under this Agreement, (c) shall require each such sublicensee to comply with all applicable terms of this Agreement, including to keep books and records, and permit ALZA to audit (either directly or through an independent auditor) such books and records, and (d) shall provide that any such sublicensee shall not further sublicense except on terms consistent with this Section 2.2 . Incline shall provide ALZA with a complete copy of each such sublicense agreement within thirty (30) days after the execution thereof; provided that Incline may redact such portions of any such agreement that do not relate to such sublicense or the terms thereof.

2.2.2 Incline shall remain responsible for its obligations hereunder and for the performance of its sublicensees (including making all payments due to ALZA by reason of any Net Sales of the Products as provided in Section 5.2 and Section 5.3 ), and shall ensure that any such sublicensees comply with all relevant provisions of this Agreement. In the event of any uncured material breach by any sublicensee under a sublicense agreement that would constitute a material breach of Incline's obligations under this Agreement, Incline shall promptly inform ALZA in writing and shall use Commercially Reasonable Efforts to address such default; provided , however , that any such uncured material breach by such sublicensee of an obligation that would constitute a material breach of Incline's obligations under this Agreement shall be deemed an uncured material breach of Incline hereunder unless Incline cures such material breach within the time and pursuant to the terms provided under Section 10.2 hereof.

2.2.3 Upon an early termination of Incline's license rights under this Agreement, ALZA shall offer any Third Party sublicensee under a sublicense granted by Incline pursuant to Section 2.2.1 that was in effect on the effective date of termination of Incline's license rights under this Agreement the right to enter into a license agreement directly with ALZA on substantially the same terms and conditions under which such rights and licenses were granted to such sublicensee, provided that such sublicensee (a) is not then in breach of its sublicense, (b) agrees to comply with all the terms of this Agreement to the extent applicable to the rights sublicensed to it by Incline, and (c) such agreement does not include obligations upon ALZA that exceed the obligations of ALZA under this Agreement.

2.3 Right of First Negotiation for [**].

2.3.1 For purposes of this Agreement, the “ ROFN Period ” means the period beginning on the Closing Date and ending [**] years thereafter.

2.3.2 If, at any time during the ROFN Period, ALZA wishes to [**], then, prior to entering into any negotiations of the terms of such [**] with such Third Party, ALZA will give written notice to Incline of its desire to negotiate such [**] (the “ ALZA ROFN Notice ”). The ALZA ROFN Notice shall be deemed ALZA's Confidential Information and shall identify [**]. Notwithstanding the foregoing, [**]”

2.3.3 Incline shall have the first right to negotiate with ALZA with respect to the terms of the [**] described in the ALZA ROFN Notice (the “ Right of First Negotiation ”) on the terms and conditions set forth below in this Section 2.3 . In the event that Incline elects to exercise its Right of First Negotiation with respect to such [**], Incline will have [**] days after receipt of the ALZA ROFN Notice for such [**] (the “ Incline Notice Period ”) to so notify ALZA (the “ Incline Notification ”). Upon receipt by ALZA of the Incline Notification, the Parties shall enter into good faith exclusive negotiations for a [**] day period following the receipt of the Incline Notification (the “ Negotiation Period ”). The Negotiation Period can be extended by written agreement of ALZA and Incline.

2.3.4 In the event that (a) Incline exercises its Right of First Negotiation with respect to such [**], but the Parties do not [**] within the Negotiation Period or (b) Incline does not exercise its Right of First Negotiation with respect to such [**] during the Incline Notice Period, then ALZA may, during the [**] month period following the end of the Negotiation Period or the Incline Notice Period, as the case may be (the “ Third Party Negotiation Period ”), negotiate and enter into an [**], provided that the [**].

2.3.5 If no Other Opioid Product License Agreement with a Third Party is consummated during the Third Party Negotiation Period, ALZA's right to enter into an Other Opioid Product License Agreement with a Third Party with respect to such Other Opioid Product will again become subject to Incline's Right of First Negotiation pursuant to the terms and conditions provided above in this Section 2.3 .

2.4 Right of First Negotiation for Other Products .

2.4.1 If, at any time during the ROFN Period, Incline wishes to [**], then Incline shall give written notice to ALZA of its desire to negotiate such [**] (the “ Incline ROFN Notice ”). The Incline ROFN Notice shall be deemed Incline's Confidential Information, shall identify [**]. The Incline ROFN Notice shall identify no more than [**].

2.4.2 Upon receipt of the Incline ROFN Notice, the Parties shall enter into good faith exclusive negotiations for a [**] day period following ALZA's receipt of the Incline ROFN Notice (the “[**] Negotiation Period ”) to attempt to agree upon the key terms of [**] (the “ Key Terms ”). The Key Terms shall include, at a minimum, [**] Negotiation Period can be extended by written agreement of ALZA and Incline.

2.4.3 In the event the Parties agree upon a non-binding term sheet including the Key Terms by the end of the [**] Negotiation Period, then for an additional period of [**] days (the “[**] Negotiation Period ”) the Parties shall proceed to conduct diligence with respect to the [**]. During the [**] Negotiation Period, ALZA shall review any [**]. At the conclusion of such review, ALZA shall determine in good faith, and promptly notify Incline, whether or not the rights under the [**] Negotiation Period can be extended by written agreement of ALZA and Incline.

2.4.4 In the event that the Parties do not (i) proceed to the [**] Product Negotiation Period or (ii) [**] Negotiation Period, then ALZA shall thereafter have no further obligation to Incline with respect to the [**].

2.4.5 Incline shall not exercise its rights under Section 2.4 [**]. Each Incline ROFN Notice, whether it is the [**] election of a Right of First Negotiation under Section 2.4 with respect to a [**], shall count toward the limit under this Section 2.4.5 .

2.4.6 Incline acknowledges and understands that the [**] under Section 2.3 and Section 2.4 are subject to, among other things, [**]. Incline also acknowledges and understands that nothing in Section 2.3 or Section 2.4 obligates ALZA to [**] that might be granted pursuant to Section 2.3 or Section 2.4 . Incline further acknowledges and understands that [**] pursuant to Section 2.3 or Section 2.4 (a) might be [**].

2.5 Retained Rights . Any rights of ALZA not expressly granted to Incline under the provisions of this Agreement shall be retained by ALZA, including: (a) the rights to exploit the Licensed Patents and Licensed Know-How to the extent they cover technologies or products other than the Products (subject to Incline's rights under Section 2.3 ), including the right to develop and Commercialize products for the iontophoretic transdermal delivery of any ALZA Proprietary Compound; and (b) the right to develop and Commercialize an iontophoretic transdermal system providing delivery of any compound or substance other than a Product (subject to Incline's rights under Section 2.3 ).

2.6 Diligence . During the Term, Incline, either itself or through one or more Affiliates or Third Party sublicensees, shall use Commercially Reasonable Efforts to develop, obtain Regulatory Approval for and Commercialize at least one Product (including a Product that delivers fentanyl) in the United States and the Major EU Countries.

2.7 Development Reports . With respect to any Product, on a semiannual basis no later than thirty (30) days following each June 30 and December 31 during each Contract Year until the First Commercial Sale of such Product in any country in the Territory, Incline shall submit to ALZA a written report describing in reasonable detail the development work conducted by Incline on such Product during the just-ended semiannual period and Incline's future development plans for such Product, which such report shall be the Confidential Information of Incline.

2.8 Provision of Licensed Know-How . At the Closing, ALZA shall, and shall cause its Affiliates to, provide Incline with copies of the invention records set forth on Schedule 1.28 and both (i) complete laboratory notebooks that contain information exclusively related to such invention records; and (ii) where laboratory notebooks contain information exclusively related to such invention records, as well as other information not subject to this Agreement, only those portions of such laboratory notebook records that exclusively relate to such invention records.

Article 3 Purchase and Sale of Assets; Assignment and Assumption of Liabilities

3.1 Sale of Transferred Assets . Upon the terms and subject to the conditions of this Agreement and the ALZA Third Party Licenses, at the Closing, ALZA shall, and shall cause its Affiliates to, irrevocably sell, convey, assign and transfer to Incline, and Incline shall purchase,

receive and assume from ALZA and its Affiliates, all of ALZA's or its Affiliate's right, title and interest in and to the following as they exist as of the Closing Date (collectively, the “ Transferred Assets ”) free and clear of any Encumbrances, in exchange for the payment of the consideration described in Article 5 and the assumption by Incline of the Assumed Liabilities:

3.1.1 Trademarks . The Product Trademarks, including any goodwill associated with the Product Trademarks.

3.1.2 Know-How . The following reasonably relevant tangible and written know-how, data, information, including in any reports and records, to the extent relating exclusively to the ALZA Product, owned or Controlled by ALZA as of the Closing Date (collectively, the “ Transferred Know-How ”), in tangible or electronic form, subject to the terms of any written agreement with any Third Party relating to such Transferred Know-How or any applicable laws or regulations (such as those relating to health care compliance):

(a) Clinical Trial Data . Clinical trial data and documentation (including protocols, investigator brochures, interim and final reports, case report forms, safety data, raw data, batch records, laboratory records, data tables, data files and summaries, original signed investigator financial disclosure forms, IRB approvals and SAS programs) exclusively related to the ALZA Product, as summarized on Schedule 3.1.2(a) ;

(b) Other Test Data . Data and documentation, including study reports, exclusively related to those non-clinical (including chemistry, manufacture and control) or preclinical tests conducted with respect to or using the ALZA Product, as summarized on Schedule 3.1.2(b) and 3.1.2(c) ;

(c) Manufacturing Data . Standard operating procedures, quality assurance, quality control and release protocols, qualification and validation reports, development reports, analytical methods, stability data and reports, batch records and environmental safety reports exclusively related to the manufacture, storage and release of the ALZA Product, as summarized on Schedule 3.1.2(b) and 3.1.2(c) (the “ Manufacturing Data ”); and

(d) Lab Notebooks . Copies of laboratory notebook records to the extent such laboratory notebook records exclusively relate to the Licensed Patents and Licensed Know-How; to the extent transferable.

3.1.3 Domain Names . The Product Domain Names.

3.1.4 Manufacturing Equipment . To the extent transferable, the machinery, equipment, manuals, change control documents, drawings and tools owned by ALZA, including equipment related to the three manufacturing lines at ALZA's Vacaville facilities, exclusively related to the ALZA Product, as summarized on Schedule 3.1.4 , together with ALZA's interest in respect of transferrable warranties relating thereto.

3.1.5 Other Tangible Items . Those tangible items exclusively related to the ALZA Product, including testing and research equipment, that are summarized on Schedule 3.1.5 .

3.1.6 Business Records . Subject to Section 4.11.2 , the Third Party market research materials exclusively related to the ALZA Product and in ALZA's possession and Control (but excluding records or files not reasonably separable from market research documents or databases that do not exclusively relate to the ALZA Product) set forth on Schedule 3.1.6 (the “ Market Research Materials ”).

3.1.7 Governmental Filings and Authorizations . To the extent transferable and in ALZA's Control, (a) the NDAs and MAAs related exclusively to the ALZA Product and (b) the INDs filed with the FDA related exclusively to the ALZA Product, as identified on Schedule 3.1.7 . ALZA shall also provide copies of regulatory filings materially related to the NDAs and MAAs identified on Schedule 3.1.7 and copies of material correspondence relating thereto.

3.1.8 Rights and Claims . All rights, privileges, claims and causes of action of ALZA or its Affiliates (regardless of whether or not such claims or causes of action have been asserted by ALZA) arising out of or relating to the ownership, performance or use of the Transferred Assets or the ALZA Product.

3.2 Excluded Assets . Notwithstanding anything to the contrary set forth in this Agreement, Incline is not purchasing any asset of ALZA or its Affiliates that does not constitute a Transferred Asset, including the following (collectively, the “ Excluded Assets ”):

3.2.1 Accounts Receivable. All accounts receivable, notes receivable and similar rights to receive payments;

3.2.2 Cash and Cash Equivalents . All cash and cash equivalents (including marketable securities and other investment assets);

3.2.3 Benefit Plans . All the assets of and all the assets relating to and all rights under any employee benefit or welfare plan or any related contract between any Person and ALZA or any of its Affiliates;

3.2.4 Certain Records . (a) Any personnel records maintained by ALZA or any of its Affiliates, (b) records (including accounting records) relating to Taxes paid or payable by ALZA or any of its Affiliates with respect to the Transferred Assets or the ALZA Product, and (c) records prepared in connection with the transactions contemplated by this Agreement, including bids received from other Persons and analyses relating to the ALZA Product;

3.2.5 Real Property . (a) any real property and any buildings, improvements and fixtures thereon; and (b) any leasehold interests, including any prepaid rent, security deposits and options to renew or purchase in connection therewith, of ALZA or any of its Affiliates;

3.2.6 Insurance. All current and prior insurance policies arranged or maintained by ALZA or any of its Affiliates and all rights of any nature with respect thereto, including all rights to insurance recoveries thereunder and to assert claims with respect to any such insurance recoveries, whether arising before or after the Closing;

3.2.7 Tax Claims. Refunds and credits, claims for refunds or credits and rights to receive refunds or credits from any taxing authority with respect to Taxes paid or to be paid by ALZA or any of its Affiliates;

3.2.8 Intellectual Property. Except for the intellectual property rights identified in Sections 3.1.1 , 3.1.2 and 3.1.3 , all other intellectual property rights owned or licensed by ALZA, including the Licensed Patents and the Licensed Know-How;

3.2.9 IT Systems . All property in the nature of databases, software programs, computer hardware, source code and object code owned or licensed by ALZA (including any obtained through its Affiliates), excluding the software included within the ALZA Product.

3.3 Assumed Liabilities . At the Closing, Incline will assume (and on and after the Closing, Incline will satisfy, perform and otherwise discharge when due, and on the terms and subject to the conditions of Article 9 , will indemnify, defend and hold harmless the ALZA Indemnitees with respect to) the following specified obligations and liabilities of ALZA and its Affiliates (collectively, the “ Assumed Liabilities ”), and no other liabilities or obligations:

3.3.1 all Liabilities that Incline has expressly agreed to reimburse, bear or pay pursuant to Section 4.7 .

3.4 Excluded Liabilities . Incline is not assuming any Liabilities of ALZA or its Affiliates with respect to the ownership, possession, manufacture, research, development, Commercialization, use or operation of any Product, including the ALZA Product, or Transferred Assets or the exploitation of the inventions claimed by the Licensed Patents or Licensed Know-How by ALZA or its Affiliates prior to the Closing (collectively, the “ Excluded Liabilities ”). All Excluded Liabilities shall be retained by and remain Liabilities of ALZA or its Affiliates. Without limiting the generality of the foregoing, the Excluded Liabilities shall expressly include the following Liabilities of ALZA or its Affiliates:

3.4.1 all Liabilities arising from any FDA, EMEA or other Regulatory Authority action or notification with respect to the development, administration, promotion or sale of any Product, including the ALZA Product, by ALZA or its Affiliates prior to the Closing;

3.4.2 accounts payable or other Liabilities for goods and services with respect to the development, marketing, manufacture and distribution of any Product, including the ALZA Product, developed or sold by ALZA or its Affiliates prior to the Closing;

3.4.3 all Taxes accruing prior to the Closing from the ownership, possession or use of any Product, including the ALZA Product, or Transferred Assets; and

3.4.4 all Liabilities relating to the Transferred Assets or any Product, including the ALZA Product, and arising under, based upon, or relating to, any environmental law, environmental claim or hazardous substances, in each case, arising prior to the Closing.

3.4.5 Transferred Assets Subject to Third-Party Consent . To the extent that the sale, assignment, transfer, conveyance or delivery or attempted sale, assignment, transfer, conveyance or delivery to Incline (or one of its Affiliates) of any Transferred Asset is prohibited by any

applicable law or would require any governmental or Third Party authorizations, approvals, consents or waivers and such authorizations, approvals, consents or waivers shall not have been obtained prior to the Closing, this Agreement shall not constitute a sale, assignment, transfer, conveyance or delivery, or any attempted sale, assignment, transfer, conveyance or delivery, thereof. For a period of [**] months after the Closing, the Parties shall cooperate with each other to obtain promptly such authorizations, approvals, consents or waivers; provided, however, that ALZA shall not be required to pay any consideration or make any concession therefor. If authorization, approval, consent or waiver is obtained, ALZA shall assign, transfer, convey or deliver any such Transferred Asset to Incline at no additional cost. If not obtained, ALZA will be deemed to have fulfilled its obligations under this Agreement and under no circumstances shall any payments due pursuant to Article 5 be reduced or ALZA or its Affiliates be subject to any liability on account of the failure to obtain any such authorization, approval, consent or waiver. Pending the earlier of obtaining such authorization, approval, consent or waiver or the expiration of such [**]-month period, the Parties shall cooperate with each other in any reasonable and lawful arrangements designed to provide to Incline the benefits of use of any such Transferred Asset. Incline further agrees that no representation, warranty or covenant of ALZA contained in this Agreement shall be breached or deemed breached, and no condition to Incline's obligations to close the transactions contemplated by this Agreement shall be deemed not satisfied as a result of (i) the failure to obtain any such consent or as a result of any such default or termination; or (ii) any lawsuit, action, claim, proceeding or investigation commenced or threatened by or on behalf of any Person arising out of or relating to the failure to obtain any consent or any such default or termination.

3.5 Product Liability . Notwithstanding any other provision in this Agreement, (a) ALZA shall be responsible for any product liability claims arising from the ownership, possession, manufacture, research, development, Commercialization, use or operation of any Product, including the ALZA Product, by ALZA or its Affiliates or sublicensees, successors and assigns prior to the Closing and (b) Incline shall be responsible for any product liability claims arising from the ownership, possession, manufacture, research, development, Commercialization, use or operation of any Product by Incline, its Affiliates, sublicensees or successors and assigns on or after the Closing.

Article 4 The Closing; Post-Closing Covenants

4.1 Closing and Closing Conditions .

4.1.1 The Closing . Except as provided in Section 4.4.3, the closing of the purchase and sale of the Transferred Assets and the assumption of the Assumed Liabilities (the “ Closing ”) shall take place on the third business day following the Execution Date or such other date as ALZA and Incline mutually agree (the “ Closing Date ”). The Closing shall be deemed to occur and be effective at 11:59 P.M., local time, on the date of such closing. The Closing will occur on the Closing Date so long as the conditions set forth in Section 4.1.2 and Section 4.1.3 have been satisfied or waived by or on such date. Until the occurrence of the Closing, none of the assets or liabilities of ALZA shall be transferred to or assumed by Incline, as the case may be.

4.1.2 Condition Precedent to Incline's Obligations at the Closing . All of the obligations of Incline hereunder are subject to fulfillment, prior to or at the Closing, of ALZA's obligations under Section 4.2 .

4.1.3 Conditions Precedent to ALZA's Obligations at the Closing . All of the obligations of ALZA hereunder are subject to the fulfillment, prior to or at the Closing, of Incline's obligations under Section 4.3 .

4.2 ALZA's Responsibilities at the Closing . At the Closing, ALZA shall execute and deliver to Incline a general assignment and bill of sale in the form of Exhibit A , general IND and NDA assignments in the form of Exhibit D and such other instruments of conveyance, assignment and transfer as may be necessary to sell, convey, assign and transfer to Incline good and valid title to the Transferred Assets free and clear of any Encumbrances; provided, that, notwithstanding the foregoing provisions of this Section 4.2 , for any Transferred Assets that are Product Trademarks or Product Domain Names, ALZA shall as soon as practicable following the Closing execute and deliver to Incline a general trademark assignment in the form of Exhibit B and a general domain name assignment in the form of Exhibit C consistent with ALZA's obligations under Section 4.10 .

4.3 Incline's Responsibilities at the Closing . At or following the Closing (as expressly provided below), Incline shall:

4.3.1 execute and deliver to ALZA such agreements and instruments as may be necessary for Incline to assume and undertake to pay, perform and discharge as and when due the Assumed Liabilities;

4.3.2 issue to ALZA the consideration specified in Section 5.1 ;

4.3.3 reimburse ALZA for its expenses pursuant to Section 4.7.2 and Section 4.7.3 ;

4.3.4 have received, from one or more Third Party investors, a minimum of $[**] (including the $[**] of initial seed capital paid to Incline in the form of a convertible note) of investment in the first tranche of the Series A Financing pursuant to the Stock Purchase Agreement; and

4.3.5 have received not less than $[**] in connection with the grant of the Third Party option pursuant to the Option Agreement.

4.4 Agreements Relating to Electronic Transfer, Delivery and Digitization of Hard Copy Documents; Physical Delivery of Transferred Assets; and Transfer of Governmental Filings and Authorizations .

4.4.1 Delivery by Electronic Transfer . ALZA and Incline agree that any of the Transferred Assets of the type that can be transmitted to Incline electronically (including the Transferred Know-How and copies of regulatory filings and approvals) shall be so delivered to Incline as soon as reasonably practicable following the Closing in intangible form as contained on hard drives or other data storage devices and shall not be delivered to Incline on any tangible medium. ALZA shall have no obligation to maintain or provide backup or duplicate copies of these and any other materials after the transfer contemplated herein.

4.4.2 Delivery and Digitization of Hard Copy Documents . Transferred Assets that exist as hard copy or paper files shall be delivered to Incline upon transfer of the MAA from ALZA to Incline and assumption by Incline of the responsibilities under the MAA. Upon such transfer and assumption, Incline shall make arrangements with a Third Party vendor reasonably acceptable to ALZA to create an electronic copy and database of the Transferred Assets that exist as hard copy or paper files and documents prior to the transfer of these documents from ALZA's facilities as soon as reasonably practicable following the Closing. Incline shall provide ALZA, at Incline's expense, with a complete duplicate copy of the electronic database created by the activities contemplated herein, as soon as reasonably practicable following the Closing. ALZA shall have no obligation to maintain or provide duplicate copies of these and any other materials after the transfer contemplated herein.

4.4.3 Physical Delivery of Transferred Assets . Incline shall make arrangements with a Third Party vendor reasonably acceptable to ALZA to remove from ALZA's facilities, upon terms and conditions acceptable to ALZA, and transport the Transferred Assets (except for those Transferred Assets to be delivered pursuant to Section 4.4.1 and except as provided below in this Section 4.4.3 ), as soon as reasonably practicable following the Closing (or, with respect to the documents referenced in Section 4.4.2 above, as soon as reasonably practicable following digitization), but in no event later than [**] days following the Execution Date for all Transferred Assets other than the manufacturing equipment referenced in Section 3.1.4 . Such delivery shall be made Ex Works (Incoterms 2000) ALZA's facilities. ALZA shall reasonably cooperate with Incline to permit Incline to remove such Transferred Assets from ALZA's facilities. If, despite ALZA's reasonable cooperation, such Transferred Assets located in ALZA's facilities are not completely removed by [**] days following the Execution Date, Incline shall incur a penalty fee of $[**] on the first day of each subsequent month that the Transferred Assets have not been removed. ALZA shall have no obligation sixty (60) days following the Execution Date to retain such Transferred Assets. With respect to the manufacturing equipment referenced in Section 3.1.4 (other than the [**] manufacturing line), ALZA shall make arrangements with a Third Party vendor reasonably acceptable to Incline, to remove from ALZA's facilities, no earlier than July 12, 2010 and no later than July 23, 2010, and ship such equipment to Incline's designated warehouse or delivery sites in [**], and all title and interest in and to such equipment shall remain with ALZA until delivery by the Third Party vendor, at which point title shall transfer to Incline. All risk of loss of or damage to such equipment shall be borne entirely by Incline, and Incline shall be responsible for obtaining, at its own cost, insurance for such risk of loss during such transport . Incline shall reimburse ALZA for all costs associated with such transport of such equipment within three (3) days of invoice therefor. With respect to the [**] manufacturing line, Incline shall make arrangements with a Third Party vendor reasonably acceptable to ALZA to remove from ALZA's facilities, upon terms and conditions acceptable to ALZA, and transport such manufacturing line no earlier than July 12, 2010 and no later than July 23, 2010, and ship the [**] manufacturing line to a warehouse determined by Incline for no consideration and for the sole purpose of disposing of the equipment, with all title to and interest in such manufacturing line, and all risk of loss passing to Incline as of the Closing Date. If, despite ALZA's reasonable cooperation, the manufacturing equipment referenced in Section 3.1.4 located in ALZA's facilities is not completely removed by July 23, 2010 for shipment, Incline shall incur a penalty fee of $[**] on the first day of each subsequent month that such equipment has not been removed for shipment. ALZA shall have no obligation following July 23, 2010 to retain the manufacturing equipment referenced in Section 3.1.4 .

4.4.4 Transfer of Governmental Filings and Authorizations . Incline will use its best efforts to assume each of the IND, NDA and MAA as soon as possible after the Closing and ALZA shall cooperate with Incline to effectuate such transfer by using reasonable efforts to: (1) provide Incline with available information within ALZA's Control; and/or (2) communicate as necessary with the Regulatory Authority responsible for the IND, NDA and MAA, including providing documentation controlled by ALZA in its sole discretion (which ALZA may direct Incline to prepare) and required by such Regulatory Authority to effect such transfer. Incline shall deliver evidence of its assumption of the IND and NDA to the FDA within one business day of receipt of confirmation from ALZA that it has delivered evidence of its assignment of the IND and NDA to the FDA. If, despite ALZA's reasonable cooperation, the IND or NDA or both are not assigned to Incline and the obligations thereunder are not assumed by Incline by September 1, 2010, Incline shall incur a penalty fee of $[**] on such day, and the first day of each subsequent month thereafter that such filings and obligations are not assigned and assumed. ALZA shall have no obligation following December 31, 2010 to continue to maintain the IND or NDA and may after such date take any and all actions to terminate such filings. If, despite ALZA's reasonable cooperation, the MAA is not assigned to Incline and the obligations thereunder are not assumed by Incline by January 1, 2011, Incline shall incur a penalty fee of $[**] on such day, and the first day of each subsequent month thereafter that such filings and obligations are not assigned and assumed. ALZA shall have no obligation following April 30, 2011 to continue to maintain the MAA and may after such date take any and all actions to terminate such filings. In addition to the foregoing and notwithstanding anything herein to the contrary, ALZA's cooperation shall not include responsibility for any operational activities such as those related to product development or supply chain that may be required to effect transfer and ALZA shall not have any Liability or be responsible for any Damages related to ALZA's maintenance of the IND, NDA or MAA prior to the assumption of such filings by Incline or for the inability of such filings to be transferred to Incline.

4.5 Improperly Transferred Documents . If at any point after the Closing, either Party (or its Affiliates and sublicensees) discovers that any portion of the Transferred Assets (a) does not relate to the Products, (b) is not otherwise necessary or useful for the development, manufacture, Commercialization or use of the Products, (c) relates solely to any technology proprietary to or Controlled by ALZA or any of its Affiliates (including technology employing microprojections or needles or transdermal delivery devices other than the Products) other than the technology described in the definition of “Product,” (d) includes, to the extent such Party can reasonably assess, the confidential information of a Third Party, (e) relates to ALZA Proprietary Compounds or compounds proprietary to any Third Party, or (f) includes Confidential Information of ALZA or its Affiliates that applies generally to ALZA's or its Affiliate's businesses and not exclusively and specifically to the Products (any such documents or files, “ Improperly Transferred Documents ”), then such Party shall promptly notify the other Party of such discovery and provide a general description of the Improperly Transferred Documents. Promptly after such notification, Incline shall return to ALZA or destroy, at ALZA's direction and expense, all tangible materials that disclose or embody the information or know-how in the Improperly Transferred Documents described in subclauses (a) through (f) above. Incline acknowledges that it (and its Affiliates and sublicensees) shall have no right to use the information or know-how contained in any Improperly Transferred Documents for any purpose, including the development and Commercialization of the Products and shall treat it as ALZA's Confidential Information. Incline acknowledges that ALZA may have confidentiality obligations to certain Third Parties, including the Third Parties who are parties to the agreements set forth on Schedule 4.5 hereto, and that Incline has not been authorized to access or use any portion of the Transferred Assets

that may be subject to any confidentiality obligations to such Third Parties under such agreements, which will be considered Improperly Transferred Documents until such time if any as any consent of such Third Party to the use of such information by Incline is so obtained from such Third Party. If any document or file in the Transferred Assets contains both information related to the Products and any of the types of information described in subclauses (a) through (f) above, Incline, with reasonable assistance from ALZA, will work together to separate such information or redact the improper portion of the information document or file to the extent practicable so that the document or file no longer contains the types of information described in subclauses (a) through (f).

4.6 No Continuing Obligations . After completion of the delivery of the Transferred Assets pursuant to Section 4.4 , ALZA shall not have any obligation to provide any further information, documents, electronic files or assistance to Incline with respect to the Products.

4.7 Costs and Taxes .

4.7.1 Incline shall reimburse ALZA for out-of-pocket expenses reasonably incurred by ALZA or its Affiliates after the Closing and until the delivery of all Transferred Assets in connection with the sale of the Transferred Assets, including (a) all reasonable out of pocket costs and fees associated with duplicating, digitizing, moving and transferring to Incline the Transferred Assets and (b) all reasonable out of pocket costs and fees associated with the [**] consultants that have been retained by ALZA to prepare for the transfer of the Transferred Assets to Incline. Incline shall provide such reimbursement within [**] days after ALZA submits to Incline reasonable evidence that ALZA has incurred such costs and fees.

4.7.2 Incline shall reimburse ALZA for out-of-pocket expenses incurred by ALZA or its Affiliates in connection with the maintenance of the Licensed Patents from August 2009 until the Closing, including its outside legal expenses. Incline shall not be obligated to reimburse ALZA under this Section 4.7.2 unless and until Incline receives documentation from ALZA evidencing such expenses.

4.7.3 Incline shall reimburse ALZA for out-of-pocket expenses incurred by ALZA or its Affiliates from January 1, 2010 until the Closing related to annual maintenance fees paid with respect to the NDA and MAA related to the ALZA Product, as set forth in Schedule 4.7.3 .

4.7.4 The reimbursement amounts due and payable pursuant to Section 4.7.2 and Section 4.7.3 shall be paid to ALZA pursuant to Section 4.3.3 and shall be in addition to the Upfront Purchase Price.

4.7.5 Any sales or use Taxes that are or may be payable by ALZA in connection with the sale (by ALZA) or purchase (by Incline) of the manufacturing equipment described in Section 3.1.4 or other tangible items described in Section 3.1.5 shall be borne and paid solely by Incline when due; provided , however , that if any such amount shall be paid by ALZA, Incline shall, subject to receipt of reasonably satisfactory evidence of ALZA's payment thereof, promptly reimburse ALZA. ALZA and Incline shall file all necessary Tax returns and other documentation required to be filed by it with respect to all such Taxes, and, if required by applicable law, the Parties shall, and shall cause their Affiliates

to, join in the execution of any such Tax returns and other documentation; provided , however , that for the purposes of preparing any sales Tax return, ALZA shall use the purchase price allocation prepared in accordance with Section 4.8 for such purpose. Furthermore, ALZA agrees, to the extent possible, to reasonably cooperate with Incline to minimize any sales Tax payable. Any transfer Taxes other than sales or use Taxes with respect to the items described in Sections 3.1.4 and 3.1.5 shall be borne [**] percent ([**]%) by ALZA and [**] percent ([**]%) by Incline. Any property Taxes based on the value of the Transferred Assets payable with respect to a Taxable period that includes the Closing Date shall be borne by the Parties on a pro rated basis regardless of the date the Tax becomes due and payable as follows: (a) ALZA shall bear the portion of the Tax equal to the Tax multiplied by a fraction with a numerator equal to the number of days in the Taxable period prior to the Execution Date and a denominator equal to the total number of days in the Taxable period and (b) Incline shall bear the remaining portion of such Tax. For the avoidance of doubt, ALZA shall bear and pay any income or franchise Taxes incurred by ALZA as a result of the sale by ALZA of the Transferred Assets. Except as provided in this Section 4.7.5 and Section 5.7.3 , Incline shall be solely responsible for all Taxes accruing on or after the Closing Date from the ownership, possession or use of the Products or Transferred Assets.

4.8 Allocation . ALZA has prepared an allocation of the purchase price, including the milestone and royalty payments, if any, paid pursuant to Article 5, among the Transferred Assets in accordance with Code Section 1060 and the Treasury regulations thereunder. ALZA, Incline and their Affiliates shall be obligated to file Tax returns in all respects and for all purposes consistent with such allocation prepared by ALZA and set forth on Schedule 4.8 .

4.9 Risk of Loss . All risk of loss with respect to the Transferred Assets (whether or not covered by insurance) shall be on ALZA up to the time of the Closing, whereupon such risk of loss with respect to the Transferred Assets conveyed at such Closing shall pass to Incline. Notwithstanding the foregoing, ALZA will use Commercially Reasonable Efforts until such time as delivery thereof has been completed pursuant to Section 4.4 , to continue to maintain the Transferred Assets in the manner maintained by it or its Affiliates prior to the Closing.

4.10 Trademark and Domain Name Assignment, Recording and Other Obligations. Notwithstanding anything to the contrary set forth in this Agreement, it shall be Incline's responsibility (a) to prepare the applicable country trademark assignments and domain name assignments, to record such assignments following execution thereof by ALZA (or its applicable Affiliate) and to pay all costs associated with such recordations, provided, that ALZA shall, and shall cause its Affiliates to, execute and deliver to Incline such assignments as soon as practicable following the Closing in the forms set forth on Exhibit B and Exhibit C in order to effectuate the assignment of such trademarks and domain names to Incline, with such obligation of ALZA and its Affiliates continuing for one year following the Closing; (b) to apply for its own marketing authorizations for the Products to the relevant Regulatory Authorities where it is not within the power of ALZA to cause, by giving notice to the applicable Regulatory Authority, the transfer directly to Incline of the existing marketing authorizations identified as Transferred Assets and (c) to bear the fees and other costs in accordance with Section 4.7 .

4.11 Incline's Post-Closing Covenants .

4.11.1 No Use of Excluded Trademarks. Incline hereby covenants that after the Closing,

neither Incline nor any of its Affiliates shall use in any manner any Trademark of ALZA or any of its Affiliates (other than the Product Trademarks), in connection with the research, development, manufacture or Commercialization of Products or any other product, including the names JOHNSON & JOHNSON and ALZA.

4.11.2 Market Research Materials . Incline hereby agrees and acknowledges that its use of any information in the Market Research Materials shall be entirely at Incline's own risk and that ALZA shall have no responsibility (financial or otherwise) with respect to Incline's use of the information in such Market Research Materials after the Closing. Accordingly, Incline shall not, and shall cause its Affiliates not to, sue ALZA, whether at law or in equity, with respect to the contents of such Market Research Materials or the result of Incline's use of such Market Research Materials.

4.11.3 Insurance. The coverage under all insurance policies related to the Transferred Assets and Products arranged or maintained by ALZA or its Affiliates is only for the benefit of ALZA and its Affiliates, and not for the benefit of Incline. As of the Closing, and in accordance with Section 9.12 , Incline agrees to arrange for its own insurance policies with respect to the Transferred Assets and Products covering all periods and agrees not to seek, through any means, to benefit from any of ALZA's or its Affiliates' insurance policies which may provide coverage for claims relating in any way to the Transferred Assets or Products.

4.11.4 Other Technologies. Incline hereby agrees and acknowledges that nothing in this Agreement is intended to grant Incline any intellectual property rights related to microprojection delivery or other drug delivery owned or Controlled by ALZA or its Affiliates, including the Patent Rights granted to [**], between ALZA and [**].

4.11.5 No Solicitation . For two (2) years following the Closing Date, Incline shall not, and shall cause its Affiliates not to, solicit, recruit, offer employment to, employ, engage as a consultant, lure or entice away, or in any other manner persuade or attempt to persuade, any employee of ALZA or an Affiliate to leave the employ of ALZA or any of its Affiliates, provided , however , that this Section 4.11.5 does not preclude Incline or any of its Affiliates from employing any such employee who (a) seeks employment with Incline in response to a general advertisement or other similar method not specifically directed towards employees of ALZA or its Affiliates, (b) responds to a solicitation by an independent recruiting firm, (c) has first contacted Incline on his or her own initiative or (d) was terminated by ALZA or an Affiliate prior to commencement of subsequent employment discussions between Incline and such employee. Nothing in this Section 4.11.5 shall prevent Incline from hiring the individuals listed on Schedule 4.11.5 . In the event that, subject to the terms and conditions of this Agreement (including this Section 4.11.5 ), Incline employs or otherwise engages any individual who is listed on Schedule 4.11.5 , ALZA agrees to waive any confidentiality provision set forth in any employment agreement between ALZA and such individual to the extent that such provision would prevent such individual from disclosing information related solely to the Transferred Assets, inventions claimed in the Licensed Patents, or Licensed Know-How in exercise of Incline's rights under this Agreement.

4.11.6 ALZA- [**] Agreement . Incline hereby agrees to provide to ALZA the information, communications and notices that ALZA is required to provide to [**], by

and between ALZA and [**], as amended and supplemented (the “ ALZA- [**] Agreement ”), including the information, communications and notices required under Sections 3.2(c), 4.4 and 7.1 of the ALZA-[**] Agreement, with respect to Incline's activities related to or covered by the Licensed Patents that were transferred from [**] to ALZA under the ALZA-[**] Agreement.

4.12 ALZA's Post-Closing Covenant . If Incline enters into a consulting arrangement with [**] on or after the Closing Date, ALZA hereby agrees to waive any and all claims against [**] for breach of the Letter Agreement dated as of September 29, 2003 between ALZA and [**], as amended, arising from [**] disclosure of ALZA's Confidential Information related exclusively to the Transferred Assets to Incline pursuant to and during the term of such consulting arrangement.

4.13 Pharmacovigilance Covenants . Prior to transfer of the IND, NDA and MAA to Incline, Incline will ensure that it has access to adequate pharmacovigilance capabilities to support all regulatory safety reporting obligations associated with the transfer of the ALZA Product; in particular, having appointed a “Qualified Person” for pharmacovigilance in compliance with the requirements of Vol 9A of the Rules Governing Medicinal Products in the European Union. Upon Incline's assumption of any of the IND, NDA or MAA, ALZA will provide Incline with copies of all regulatory reporting forms for any Adverse Event it receives within [**] calendar days for 7-day expedited reports and [**] calendar days for all other reports to allow Incline to comply with its obligations under applicable law. Upon acceptance of transfer of the IND, NDA and MAA from ALZA, Incline will acknowledge to ALZA in writing its acceptance and immediately assume regulatory safety reporting obligations under each filing. If at any point ALZA holds one or more of the IND, NDA and MAA but has transferred one or more of the IND, NDA and MAA to Incline, Incline will provide ALZA with copies of all Adverse Event reports it receives within [**] calendar days to allow ALZA to continue to comply with its remaining obligations under applicable law. For purposes of this Section 4.13 , an “ Adverse Event ” means any untoward or undesirable occurrence in a patient or trial subject administered a pharmaceutical product, an event which is not necessarily causally related to the product- consistent with the corresponding term used in the ICH guidelines (E2A, E2C and E2D) relating to the collection, maintenance analysis and reporting of an adverse event or experience.

Article 5 Financial Provisions

5.1 Upfront Payment . Incline shall pay to ALZA $[**] million on or before the Closing Date (the “ Upfront Purchase Price ”). Such payment shall be non-refundable and non-creditable.

5.2 Milestone Payments . Any milestone payment payable by Incline pursuant to this Section 5.2 shall be with respect to events occurring after the Closing Date and made no more than once with respect to the achievement of each such milestone event.

5..2.1 Development and Commercial Milestone Payments . Incline shall pay to ALZA the amounts set forth in the table below opposite the corresponding milestone event within thirty (30) days after the first occurrence of such event:



Milestone Event	Payment
First acceptance of the filing of an MAA in the European Union for approval to market a Product in the European Union.	$[**] million
First approval of an NDA by the FDA to market a Product in the United States.	$[**] million
First Commercial Sale of a Product in the United States (“ Milestone Three ”); provided , however , that payment upon achievement of this milestone is subject to Section 5.2.2 .	$[**] million
First Commercial Sale of a Product in any country in the European Union.	$[**] million

5.2.2 Milestone Three . In the event that either (i) the FDA requires that Incline, as a condition precedent to Regulatory Approval in the United States, conduct new clinical studies with a primary objective of demonstrating efficacy or safety in order to receive such Regulatory Approval, or (ii) Incline believes, in good faith and after exerting reasonable business judgment, that the conduct of one or more new clinical studies [**] are required to be conducted prior to Regulatory Approval in order to gain Regulatory Approval in the United States, based on written correspondence received from the FDA and provided to ALZA, and Incline on such basis of (i) or (ii) above so conducted such clinical trial(s) prior to receipt of Regulatory Approval and written evidence of the cost and conduct of such clinical trials is provided to ALZA, Incline shall have the right to offset against the amount otherwise due upon achievement of Milestone Three the amounts actually expended by Incline (internal and Third Party costs) on such clinical trials prior to receipt of Regulatory Approval, up to a limit of $[**] million. For the avoidance of doubt, the minimum payment due upon achievement of Milestone Three shall be $[**] million.

5.2.3 Sales Milestone Payments . Incline shall pay to ALZA the amounts set forth in the table below opposite the corresponding milestone event within [**] days after the end of the Quarter in which Incline first achieves such milestone event:



Milestone Event	Payment
United States
The first time cumulative Net Sales in the United States exceeds $[**] million during a period of four (4) consecutive Quarters	$[**] million
The first time cumulative Net Sales in the United States exceeds $[**] million during a period of four (4) consecutive Quarters	$[**] million
The first time cumulative Net Sales in the United States exceeds $[**] million during a period of four (4) consecutive Quarters	$[**] million
The first time cumulative Net Sales in the United States exceeds $[**] million during a period of four (4) consecutive Quarters	$[**] million
Outside the United States
The first time cumulative Net Sales outside the United States exceeds $[**] million during a period of four (4) consecutive Quarters	$[**] million
The first time cumulative Net Sales outside the United States exceeds $[**] million during a period of four (4) consecutive Quarters	$[**] million
The first time cumulative Net Sales outside the United States exceeds $[**] million during a period of four (4) consecutive Quarters	$[**] million
The first time cumulative Net Sales outside the United States exceeds $[**] million during a period of four (4) consecutive Quarters	$[**] million

For the avoidance of doubt, Incline may achieve more than one of the milestone events described above in the same Quarter or period of four (4) consecutive Quarters in the same territory.

If any of the milestone events described above are achieved after less than a full period of four (4) consecutive Quarters, then the applicable milestone payment shall be due and payable to ALZA within [**] days after the end of the Quarter in which the milestone event was met, and shall not be withheld until the completion of the full period of four (4) consecutive Quarters.

For illustrative purposes only, Incline would pay milestones for sales of the Products in the United States as follows:



Quarter	Quarterly Net Sales (in millions)	Cumulative Net Sales (in millions) in Prior 4 Quarters	Milestone(s) Triggered	Milestone Payment due to ALZA [**] days after end of Quarter (in millions)
[**]	[**]	[**]	[**]	[**]
[**]	[**]	[**]	[**]	[**]
[**]	[**]	[**]	[**]	[**]
[**]	[**]	[**]	[**]	[**]
[**]	[**]	[**]	[**]	[**]
[**]	[**]	[**]	[**]	[**]


5.3	Royalty Payments . In consideration of the transfers and licenses (as the case may be) specified herein, including the sale of Transferred Assets and the license grant in Section 2.1 , Incline shall pay royalties to ALZA as follows:

5.3.1 United States . Subject to Section 5.4 , during the Royalty Period applicable to the United States, Incline shall pay to ALZA the following royalties on Net Sales in the United States by Incline, its Affiliates and sublicensees:

(a) [**] percent ([**]%) of annual Net Sales in the United States during a Contract Year for that portion of the annual aggregate Net Sales in the United States that is less than or equal to $[**] million;

(b) [**] percent ([**]%) of annual Net Sales in the United States during a Contract Year for that portion of the annual aggregate Net Sales in the United States that is greater than $[**] million and less than or equal to $[**] million;

(c) [**] percent ([**]%) of annual Net Sales in the United States during a Contract Year for that portion of the annual aggregate Net Sales in the United States that is greater than $[**] million and less than or equal to $[**] million; and

(d) [**] percent ([**]%) of annual Net Sales in the United States during a Contract Year for that portion of the annual aggregate Net Sales in the United States that is greater than $[**] million.

5.3.2 Outside of the United States . Subject to Section 5.4 , during the Royalty Period applicable to any country in the Territory other than the United States, Incline shall pay to ALZA the following royalties on Net Sales in such country by Incline, its Affiliates and sublicensees:

(a) [**] percent ([**]%) of annual Net Sales in all countries in the Territory other than the United States during a Contract Year for that portion of the annual aggregate Net Sales in all countries in the Territory other than the United States that is less than or equal to $[**] million;

(b) [**] percent ([**]%) of annual Net Sales in all countries in the Territory other than the United States during a Contract Year for that portion of the annual aggregate Net Sales in all countries in the Territory other than the United States that is greater than $[**] million and less than or equal to $[**] million;

(c) [**] percent ([**]%) of annual Net Sales in all countries in the Territory other than the United States during a Contract Year for that portion of the annual aggregate Net Sales in all countries in the Territory other than the United States that is greater than $[**] million and less than or equal to $[**] million; and

(d) [**] percent ([**]%) of annual Net Sales in all countries in the Territory other than the United States during a Contract Year for that portion of the annual aggregate Net Sales in all countries in the Territory other than the United States that is greater than $[**] million.

5.4 Adjustments in Royalty Rates .

5.4.1 Absence of Innovator Protection . On a country-by-country basis, if there is no Innovator Protection for a Product in a country, then Incline shall pay to ALZA during the Royalty Period applicable to such Product in such country a reduced royalty rate on Net Sales by Incline, its Affiliates and sublicensees in such country equal to [**] percent ([**]%) of the royalty rate applicable under Section 5.3.1 or 5.3.2 .

5.4.2 Product Competition . In the event that, with respect to a Product in a country in the Territory, at least one Competing Product is sold by a Third Party, and the total unit sales of all Competing Products during a particular Quarter in such country are greater than [**] percent ([**]%) of the Total Relevant Sales (as defined below) for such Product in such country, then Incline shall pay to ALZA a royalty rate on Net Sales by Incline, its Affiliates or sublicensees in any such country at a rate equal to the product obtained by multiplying the royalty rate applicable to such country under Section 5.3.1 or 5.3.2 (as modified by Section 5.4.1 ) by the factor [**]. For the purposes of this Section 5.4.2 , (a) “ Total Relevant Sales ” means, with respect to a particular Product in a particular country in the Territory in a Quarter, the total combined unit sales of such Product in such country in such Quarter by Incline, its Affiliates or sublicensees; and (b) no product sold illegally or without the applicable required regulatory approval shall be considered to be a Competing Product.

5.4.3 No Adjustment for Third Party Licenses . If Incline enters into an agreement with a Third Party to obtain a license under a Patent Right or other right that Incline reasonably believes or expects to be necessary to Commercialize a Product in the Territory, then Incline shall be responsible for paying one hundred percent (100%) of the amounts owed to such Third Party pursuant to such agreement without any offset against the payments Incline is required to make to ALZA hereunder.

5.5 Royalty Reports . Commencing with the First Commercial Sale of a Product in any country in Territory, Incline shall deliver to ALZA, within [**] days after the last day of each Quarter (each such Quarter being sometimes referred to herein as a “reporting period”) a written report or reports setting forth for such reporting period the following information on a country-by-country basis: (a) gross invoiced sales and total deductions used to calculate Net Sales of the Products sold by Incline, its Affiliates and its sublicensees during the reporting period; (b) the number of units of the Products sold by Incline, its Affiliates and its sublicensees during the reporting period; (c) the basis for any adjustments to the royalty payable for the sale of the Products; (d) currency exchange rates used in determining the royalties (e) the calculation of the royalty due hereunder for the sale of the Products; (f) any withholding Taxes required to be paid from such royalty payments and (g) the exchange rate used, if any, in determining the amount due or performing any necessary currency conversion.

5.6 Reimbursement of Payments Under ALZA Third Party Licenses . If ALZA is required to make any payment to a Third Party under an ALZA Third Party License as a result of the activities of Incline, its Affiliates or its Third Party sublicensees related to the Licensed Patents or any Product on or after the Closing Date (including payments to indemnify such Third Party), Incline shall reimburse ALZA [**] percent ([**]%) of such payment actually made by ALZA within [**] days after receiving written notice from ALZA that such reimbursement is due and owing. Incline may not offset any payments made to ALZA pursuant to this Section 5.6 against any other payments Incline is required to make to ALZA under this Agreement.

5.7 Other Financial Provisions .

5.7.1 Currency, Timing and Mode of Payment .

(a) The milestone payments owed pursuant to Section 5.2 shall be paid in U.S. dollars and the calculation of Net Sales outside the United States with respect to such milestone payments shall be made in U.S. dollars regardless of the countries in which the sales are made. Net Sales made in currencies other than U.S. dollars shall be converted into U.S. dollars using a fixed exchange rate as described in Section 5.7.2 . The fixed exchange rate shall apply to all payments related to the Net Sales recognized during the period for which that fixed exchange rate applies, independent of the actual invoice date.

(b) All royalty payments to ALZA pursuant to Section 5.3 shall be paid in the same currencies in which sales of a Product were made ( e.g. , Incline shall pay royalties in U.S. Dollars for Net Sales in the United States or in Euros for Net Sales in the European Union); provided that if (a) sales of a Product were made in a currency other than a Hedge-able Currency, or (b) the equivalent value in U.S. Dollars of a royalty based on sales in any given currency, on a currency-by-currency basis, would be less than $1 million on an annual basis, then such amounts shall be converted into U.S. Dollars using a fixed exchange rate as described in Section 5.7.2 .

5.7.2 Payments and Exchange Rate . All payments to ALZA pursuant to this Agreement shall be made by wire transfer in the requisite amount to the account designated by ALZA from time to time. Whenever for the purposes of calculating Net Sales outside the United States for both milestone payments owed pursuant to Section 5.2 and the royalties payable under Section 5.3 , conversion from any foreign currency shall be required, all amounts shall first be calculated in the currency of sale and then converted into United States dollars by applying the following:

(a) Exchange rates for calculating Net Sales outside of the United States during a given Contract Year shall be determined by the October preceding such Contract Year and shall be based upon the exchange rates set forth in Bloomberg, a Third Party service.

(b) Exchange rates shall be reset annually using the procedure set forth in Section 5.7.2(a) . The exchange rates for each Contract Year shall apply to all Net Sales outside of the United States recognized during such Contract Year and in no event shall the exchange rates for a given Contract Year be applicable to payments based on Net Sales outside of the United States recognized in prior periods.

5.7.3 Tax Withholding . Incline shall make all payments to ALZA under this Agreement without deduction or withholding for Taxes except to the extent that any such deduction or withholding is required by law, rule or regulation in effect at the time of payment.

Any Tax required to be withheld on or deducted from amounts payable under this Agreement by Incline shall promptly be paid by Incline on behalf of ALZA to the appropriate governmental authority, and Incline shall furnish ALZA with proof of payment of such Tax. Any such Tax required to be withheld or deducted shall be an expense of and borne by ALZA. Incline and ALZA shall cooperate with respect to all documentation required by any taxing authority or reasonably requested by Incline to secure a reduction in the rate of applicable withholding Taxes.

5.7.4 Maintenance of Financial Records . Incline shall keep and shall cause its Affiliates and sublicensees to keep books and accounts of record in connection with the sale of the Products, including records of gross invoiced sales, Net Sales, exchange rates and royalty payments (collectively, “ Financial Records ”), in accordance with GAAP, in sufficient detail to permit accurate determination of all figures necessary for verification of royalties to be paid hereunder. Incline and its Affiliates and sublicensees shall maintain such Financial Records for a period of at least [**] years after the end of the Contract Year in which they were generated.

5.7.5 Audit . Upon [**] days prior written notice from ALZA, Incline shall permit an independent certified public accounting firm of internationally recognized standing selected by ALZA and reasonably acceptable to Incline, to examine, at ALZA's sole expense, the relevant Financial Records of Incline and its Affiliates and sublicensees as may be reasonably necessary to verify the accuracy of the royalty reports provided by Incline pursuant to Section 5.5 and the payment of royalties hereunder. An examination by ALZA under this Section 5.7.5 shall occur not more than once in any calendar year and shall be limited to the pertinent Financial Records for any calendar year ending not more than [**] years before the date of the request. The accounting firm shall be provided access to such Financial Records at Incline's facility(ies) where such Financial Records are normally kept and such examination shall be conducted during Incline's normal business hours. Incline may require the accounting firm to sign a standard non-disclosure agreement before providing the accounting firm access to Incline's facilities or records. Upon completion of the audit, the accounting firm shall provide both ALZA and Incline a written report disclosing any discrepancies in the royalty reports submitted by Incline or the royalties paid by Incline, if any, and, in each case, the specific details concerning any discrepancies. Any information provided by Incline to the accounting firm and the written report of the accounting firm shall be the Confidential Information of Incline.

5.7.6 Underpayments/Overpayments . If such independent public accounting firm's written report shows any underpayment of royalties, Incline shall remit to ALZA within [**] days after Incline's receipt of such report so concluding (or, if later, within [**] days after resolution of a bona fide objection by Incline to the findings in such report), (a) the amount of such underpayment and (b) if such underpayment exceeds [**]percent ([**]%) of the total amount owed to ALZA for the Contract Year(s) then being examined, the reasonable fees and expenses of such independent public accountant performing the examination, subject to reasonable substantiation thereof. If such independent public accounting firm's written report shows any overpayment of royalties, Incline shall receive a credit equal to such overpayment against the royalties otherwise payable to ALZA.

5.7.7 Interest Du e. In case of any delay in payment by Incline to ALZA, interest on the

overdue payment shall accrue at an annual interest rate, compounded monthly, equal to the prime rate as reported in The Wall Street Journal, as determined for each month on the last business day of that month, plus [**] percent ([**]%), assessed from the day payment was initially due. The foregoing interest shall be due from Incline without any special notice.

5.7.8 Form of Consideration for Convenience . The Parties acknowledge that the value of rights assigned or licensed, as the case may be, by ALZA to Incline is comprised of many components, including intellectual property of various types, such as Licensed Patents, Licensed Know-How, trademarks, domain names, Transferred Know-How, manufacturing equipment, regulatory filings, and other non-financial consideration, and that in view of this and other terms of this Agreement, and for the convenience of the Parties, various of the royalty obligations set forth above are intended to account for such multi-component value as an aggregate.

Article 6 Intellectual Property

6.1 Prosecution of Patents .

6.1.1 Licensed Patents . Incline acknowledges that the Licensed Patents are not Transferred Assets and that ALZA will retain ownership of the Licensed Patents.

(a) Incline, through counsel of its choosing, shall have primary responsibility for and control over obtaining and Prosecuting throughout the Territory the Licensed Patents in ALZA's name at Incline's sole cost. ALZA shall promptly after the Closing provide Incline notice of the identity of its designated patent representative (or another designee upon notice to Incline) and, notwithstanding the foregoing, Incline shall keep ALZA's designated patent representative reasonably informed of such Prosecution and provide ALZA's patent representative with copies of material correspondence (including applications, office actions and responses) relating to Prosecution of any Licensed Patents. ALZA's patent representative may provide comments and directions, and Incline shall reasonably consider all such comments and directions with respect to any Prosecution actions to be taken. In addition, Incline shall not take any action that would have a materially adverse impact on the scope, validity and enforceability of any claim within the Licensed Patents without ALZA's prior written approval, which shall not be unreasonably withheld or delayed.

(b) In order to facilitate ALZA's right to comment and direct , Incline shall provide copies of all such material correspondence promptly after receipt by Incline and any proposed responses by Incline at least [**] business days prior to any filing or response deadlines, or within [**] business days of Incline's receipt of any official correspondence if such correspondence only allows for [**] days or less to respond, and ALZA shall provide any comments and directions in sufficient time to allow Incline to meet applicable filing requirements and deadlines. In no event shall Incline be required to delay any submission, filing or response past any deadline that is not extendable. Incline also authorizes ALZA's patent counsel to communicate directly with Incline's outside patent counsel.

Incline shall keep ALZA reasonably apprised (e.g., [**]) of the status of the Licensed Patents throughout the world.

6.1.2 Election Not to Continue Prosecution; Abandonment . If Incline is no longer interested in Prosecuting a Licensed Patent in a particular country in the Territory, then Incline shall so notify ALZA promptly in writing of its intention in good time to transfer control of Prosecution and to enable ALZA to meet any deadlines by which an action must be taken to establish or preserve any such rights in such Licensed Patent in such country and ALZA shall have the right to file for, or continue to Prosecute, or otherwise pursue such Licensed Patents in such country, and Incline shall fully cooperate with ALZA in regard to transfer of Prosecution and provide all reasonable assistance as requested by ALZA.

6.1.3 Patent Term Extensions . Incline shall file all applications for patent term extensions of Licensed Patents and take all actions necessary to obtain patent extensions, to the extent reasonably expected to be available under advice of competent patent counsel, including: (a) patent term adjustments under 35 U.S.C. 154 to remedy U.S. Patent and Trademark Office delay during Prosecution; (b) patent extensions under 35 U.S.C. 156 to remedy delays due to Regulatory Approval; (c) interim term extensions; (d) extensions under the General Agreement on Tariffs and Trade Act; and (e) private extensions via Congressional legislation, or like statutes of any of the foregoing in countries other than the United States, such as for a Supplementary Certificate of Protection of the Member States of the European Union, for the Licensed Patents. ALZA agrees to sign such further documents and take such further actions as may be reasonably requested by Incline in order for Incline to obtain such patent extensions. If Incline reasonably declines to pursue such patent extensions, then Incline shall give sufficient written notice to allow ALZA, who, as owner of such Licensed Patents shall at all times retain the right, at its sole discretion, to file all such applications and take all such actions necessary to obtain such patent extensions and Incline shall fully cooperate with ALZA in regard thereto and provide all reasonable assistance as requested by ALZA, including execution of documents required for any such patent extensions. ALZA may provide comments and directions with respect to any patent extensions filed by Incline, and Incline shall reasonably consider all such comments and directions.

6.1.4 Common Interest . All advice and communications exchanged between the Parties, including between Incline's outside patent counsel and patent counsel representing ALZA and patent counsel representing Incline, regarding the Licensed Patents or their Prosecution (“ Privileged Information ”), shall be deemed Confidential Information of both Parties. In addition, the Parties acknowledge and agree that, with regard to such Prosecution of the Licensed Patents, the interests of the Parties as licensor and licensee are to obtain Valid Claims, and as such, are aligned and common. The Parties agree and acknowledge that they have not waived, nor shall either Party waive or take any action to destroy, any legal privilege concerning such Privileged Information, including privilege under the common interest doctrine and similar or related doctrines.

6.1.5 Orange Book Listing . As of the Closing Date, Incline shall have the responsibility to list eligible Licensed Patents in the FDA “Approved Drug Products with

Therapeutic Equivalence Evaluations” (Orange Book), or like compilations of health authorities of any countries in the Territory, where such listing is available or required, and to make any updates or corrections to such listings. Incline shall keep ALZA reasonably informed of such listings. ALZA agrees to cooperate at Incline's reasonable request in connection with its listings required by applicable law.

6.1.6 Access to Original Lab Notebooks . Upon reasonable notice from Incline, ALZA shall permit Incline to access at Incline's sole cost, during normal business hours, the originals of any laboratory notebooks that contain information related exclusively to the inventions claimed in the Licensed Patents for purposes of Prosecuting such Licensed Patents or any Patent Rights arising from such Licensed Patents, including defending any patent interferences to which Incline is a party, directly or on behalf of ALZA.

6.2 Enforcement of Licensed Patents .

6.2.1 Notification . Each Party shall promptly report in writing to the other Party during the Term any known infringement or suspected infringement of any of the Licensed Patents in the Territory by a Third Party (an “ Infringer ”), and shall provide the other Party with all available details or evidence supporting said infringement or suspected infringement, including the identity of the Infringer and a description of the alleged infringement. Each Party shall promptly notify the other of any Third Party communications pertaining to any Licensed Patent that the Party receives pursuant to the Drug Price Competition and Patent Term Restoration Act of 1984 or similar such notice (including under any laws in countries in the Territory other than the United States), including notices pursuant to Sections 101 and 103 of such act from persons who have filed an abbreviated NDA (ANDA) or a NDA under Section 505(b)(2) of the Federal Food, Drug and Cosmetic Act.

6.2.2 Institution of Proceedings . Incline shall have the first right, but not the obligation, to take any reasonable measures it deems appropriate to stop such infringing activities by any Infringer manufacturing, using or Commercializing a Competing Product in any part of the Territory, including initiating or prosecuting an infringement or other appropriate suit or action against such Infringer. In the event Incline elects not to take action pursuant to this Section 6.2.2 , Incline shall so notify ALZA promptly in writing of its intention in good time to enable ALZA to meet any deadlines by which an action must be taken to establish or preserve any enforcement rights and ALZA shall have the right, but not the obligation, to take any such reasonable measures to stop such infringing activities by such Infringer

6.2.3 Procedures . Each Party shall give the other Party sufficient advance notice of its intent to file any suit pursuant to Section 6.2.2 and the reasons therefore and each Party shall provide the other Party with a sufficient opportunity to provide comments and directions regarding such filings, provided , however , that the commenting Party shall provide any such comments and directions promptly and sufficiently in advance of any filing dates, to the extent reasonably possible, to allow for consideration by the Party filing the suit (the “ Controlling Party ”), and further provided that it shall be within the Controlling Party's reasonable discretion whether to incorporate such comments or directions. The Parties shall keep each other reasonably and timely informed of the status and progress of the litigation, including furnishing copies of communications,

pleadings, and other documents and keeping each Party informed of settlement efforts, and shall obtain comments, directions and strategy from the other Party, including during pre-trial motions and discovery, provided , however , that it shall be within the Controlling Party's reasonable discretion whether to incorporate such comments, directions or strategy. The Controlling Party has a right to enter into any settlement, provided that (a) the Controlling Party shall not enter into any settlement, consent, judgment or other disposition without the prior written consent of the other Party (which consent shall not unreasonably be withheld or delayed) if such settlement includes a finding or agreement that any Patent Right is invalid or unenforceable, and (b) if any rights are granted in such settlement, consent, judgment, or other disposition to a Third Party to continue any activity upon which the suit was based, such rights shall be limited to the product or activity that was the subject of the suit. The Controlling Party shall have the sole and exclusive right to select counsel for any such suit and action and shall pay all expenses of the suit, including attorneys' fees and court costs. Upon request by the Controlling Party, the other Party shall give the Controlling Party all reasonable information, documents and assistance in connection with such suit for infringement. If necessary for the Controlling Party to prosecute any legal action, the other Party shall join the legal action as a party, using the Controlling Party's counsel, at the Controlling Party's cost.

6.2.4 Recoveries . Any amounts recovered by either Party pursuant to Section 6.2.2 or Section 6.2.5 , whether by settlement or judgment, shall be used to reimburse the Parties for their reasonable, documented out-of-pocket costs and expenses (including attorneys' fees) incurred in making such recovery (which amounts shall be allocated pro rata if insufficient to cover the totality of such expenses), with any remainder being paid to the Controlling Party, provided that in the event a court awards Incline any damages to compensate for lost sales, Incline shall owe ALZA a portion of such damages paid in the form of a royalty, at a rate as determined in accordance with Section 5.3 based on the deemed Net Sales attributable to any received award of lost profits or other compensation for lost sales. The Controlling Party pursuing any action under Section 6.2.2 shall bear all payments awarded against or agreed to be paid by such Party pursuant to such action or in connection with the underlying infringement, including any costs or expenses incurred that exceed the amounts recovered by the Controlling Party.

6.2.5 Declaratory Judgments . Each Party shall provide the other Party with immediate written notice of any declaratory judgment action or other claim or action brought by a Third Party in any jurisdiction that alleges the invalidity, unenforceability or non-infringement of any Licensed Patent. For any such declaratory judgment action or other claim or action brought by a Third Party manufacturing, using or Commercializing a Competing Product in any part of the Territory, Incline shall have the first right, but not the obligation, at its own expense, to control the defense of the Licensed Patents in any such declaratory judgment action. Incline shall notify ALZA within fifteen (15) business days of receiving written notice of such declaratory judgment action as to whether it intends to elect to control the defense of such declaratory judgment action (or if appropriate such lesser period as is necessary so as to give ALZA a reasonable period in which to respond to such declaratory judgment action). If, after the expiration of such period, Incline has not notified ALZA of its intent to control the defense of such declaratory judgment action, then ALZA shall have the right, but not the obligation, to control such defense of such declaratory judgment action, provided that Incline shall fully cooperate with ALZA in the event that ALZA determines to control the defense of

such declaratory judgment action. Such cooperation shall include being a named party where reasonably requested by ALZA in any action so defended by ALZA. Neither Party shall make any admission, consent to the entry of any judgment or enter into any settlement with respect to any declaratory judgment action involving any Licensed Patent without the prior written consent of the other Party (which consent shall not unreasonably be withheld or delayed) if such admission, judgment or settlement includes a finding or agreement that any Licensed Patent is invalid or unenforceable, or would enjoin or grant other equitable relief against the other Party. Each Party shall cooperate (including by executing any documents required to enable the other Party to participate in such litigation) with the other Party in the defense of any declaratory judgment action brought by a Third Party relating to the Licensed Patents in accordance with this Section 6.2.5 and shall have the right to consult with the other Party and to participate in and be represented by counsel of its choosing in such litigation at its own expense.


6.3	Marking . Incline, its Affiliates and its sublicensees shall mark the Products with a notice in accordance with 35 U.S.C. § 287 and similar marking provisions in countries other than the United States in the Territory -

Article 7 Confidential Information

7.1 Confidentiality Obligations . During the Term of this Agreement and for a period of [**] years thereafter, each Party shall treat as confidential all Confidential Information of the other Party, shall not use such Confidential Information except as set forth in this Agreement, and shall not disclose, directly or indirectly, such Confidential Information to any Third Party except as expressly provided for herein. Without limiting the foregoing, each of the Parties shall use at least the same degree of care which it uses to prevent the disclosure of its own Confidential Information of like importance to prevent the disclosure of Confidential Information disclosed to it by the other Party under this Agreement. Each Party shall disclose Confidential Information of the other Party only to its directors, officers, employees, consultants and advisors and those of its Affiliates who, in such Party's sole discretion, have a need to know such information in order for such Party to carry out the activities and transactions contemplated by this Agreement, and shall ensure that such Persons comply with the restrictions on use and disclosure set forth in this Article 7 . Each Party shall promptly notify the other Party of any misuse or unauthorized disclosure of the other Party's Confidential Information. With respect to Confidential Information pertaining to the subject matter of this Agreement, the confidentiality provisions hereof will govern and supersede as of the Execution Date any confidentiality provisions under prior agreements between the Parties with respect to such Confidential Information. For the avoidance of doubt, the confidentiality agreements between Frazier Healthcare VI, LP and Cadence Pharmaceuticals, Inc. and ALZA, dated February 10, 2009, shall remain in effect and shall not be superseded by the confidentiality provisions contained herein. This Section 7.1 shall not prohibit Incline from publishing papers containing information related to Incline's use of the Licensed Know-How owned by ALZA as permitted under Section 2.1.1 , including oral presentations and abstracts, in scientific and medical journals, publications, meetings and conferences, provided however, that Incline files a patent application to protect any patentable subject matter prior to such publication.

7.2 Exceptions . Notwithstanding Section 7.1 , neither Party shall have liability to the other with regard to any Confidential Information of the other which (a) was generally available to the

public or otherwise part of the public domain at the time of its disclosure to the receiving Party, (b) became generally available to the public or otherwise part of the public domain after its disclosure or development, as the case may be, other than through any act or omission of the receiving Party, (c) was known by the receiving Party, without an obligation to the other Party to keep such information confidential, at the time of disclosure by the disclosing Party and the receiving Party has documentary or other competent evidence to that effect, (d) was disclosed to the receiving Party, without restriction, by a Third Party who, to the knowledge of the receiving Party, had no obligation to the disclosing Party not to disclose such information to others, or (e) was independently discovered or developed by or on behalf of the receiving Party without the use of or reference to any Confidential Information belonging to the disclosing Party and the receiving Party has documentary or other competent evidence to that effect.

7.3 Authorized Disclosure and Use .

7.3.1 Disclosure . Notwithstanding the foregoing provisions of Section 7.1 , each Party may disclose Confidential Information belonging to the other Party solely to the extent such disclosure is reasonably necessary to (a) file or Prosecute patent applications as contemplated by this Agreement, (b) prosecute or defend litigation, and (c) comply with applicable laws and regulations, including to the extent reasonable necessary to obtain Regulatory Approval and pricing and reimbursement approval. In addition, Incline shall have the right to disclose to Cadence Pharmaceuticals, Inc. (“ Cadence ”) during the term of the Option Agreement, this Agreement, including its terms and subject matter (including activities and the results of activities conducted hereunder) to the extent necessary to comply with Incline's obligations under the Option Agreement or as necessary for Cadence to conduct its diligence with respect to Incline in its deliberations as to whether or not to exercise its option to acquire Incline under the Option Agreement, under terms of confidentiality no less strict than those contained in this Agreement.

7.3.2 Advanced Notice . In the event a Party deems it reasonably necessary to disclose Confidential Information belonging to the other Party pursuant to Section 7.3.1 above, or is otherwise compelled to disclose Confidential Information belonging to the other Party by a court or other tribunal of competent jurisdiction, the receiving Party shall (a) give prompt notice of such disclosure to the other Party so that the other Party may seek a protective order or other remedy from said court or tribunal and (b) disclose only that portion of the Confidential Information that, in the opinion of its legal counsel, is legally required to be disclosed. The receiving Party shall exercise reasonable efforts to ensure that any such information so disclosed shall be accorded confidential treatment by said court or tribunal.

7.3.3 Use . Notwithstanding the foregoing provisions of Section 7.1 but subject to Section 4.5 , each Party shall have the right to use the other Party's Confidential Information in carrying out its responsibilities or exercising its rights under this Agreement, or as otherwise expressly authorized by this Agreement.

7.4 SEC Filings and Other Disclosures . Either Party may disclose the terms of this Agreement only (a) to the extent required, in the reasonable opinion of such Party's outside legal counsel, to comply with the rules and regulations promulgated by the United States Securities and Exchange Commission or similar security regulatory authorities in other countries, or the rules and regulations of any national exchange on which it is listed, (b) in connection with a

prospective acquisition, merger, financing or license for such Party, to prospective acquirers or merger candidates or to existing or potential investors or licensees, (c) in the case of ALZA, to its directors, officers, employees, consultants and advisors and those of its Affiliates who, in such ALZA's sole discretion, have a need to know such information in order for ALZA to carry out the activities and transactions contemplated by this Agreement, or (d) in the case of Incline, to its shareholders holding information rights, provided that prior to such disclosure each such prospective acquirer, candidate, investor, licensee or shareholder receiving disclosure pursuant to clause (b) or (d) shall agree in writing to be bound by obligations of confidentiality and non-use at least equivalent in scope to those set forth in this Article 7 . If a Party must disclose this Agreement or any of the terms hereof in accordance with Section 7.4(a) , such Party agrees, at its own expense, to seek confidential treatment of portions of this Agreement or such terms, as may be reasonably requested by the other Party. Notwithstanding the foregoing, ALZA shall have the right to review and comment (provided such comments are received within five (5) business days) on the contents of any Incline registration statement or other offering document ( e.g. , a prospectus) to the extent it contains the name of or any information about ALZA or any of its Affiliates in connection with this Agreement; it being understood and agreed that, except in the case such disclosure may, upon advice of counsel acceptable to both Incline and ALZA, be required by applicable law, ALZA's reasonable approval shall be required for any disclosure referring to it or any of its Affiliates.

7.5 Public Announcements . A press release, deemed agreed upon by the Parties, is attached to this Agreement as Exhibit E . Except for issuing such press release, and except as provided in Section 7.4 , no Party shall originate any publicity, news release or public announcements, written or oral, whether to the public, press, stockholders or otherwise, relating to the execution of this Agreement or any of the terms of this Agreement or any amendment hereto without the prior written consent of the other Party.

Article 8 Representations and Warranties

8.1 Representations and Warranties of Each Party . Each Party hereby represents and warrants to the other Party as follows:

8.1.1 Organization and Good Standing . As of the Execution Date, it is a legal entity duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation.

8.1.2 Authority . As of the Execution Date, it has the full right, power and authority to enter into this Agreement and this Agreement has been duly executed by such Party and constitutes a legal, valid and binding obligation of such Party, enforceable in accordance with its terms, subject to (a) laws of general application relating to bankruptcy, insolvency and the relief of debtors; and (b) rules of law governing specific performance, injunctive relief and other equitable remedies.

8.1.3 No Conflicts . The execution, delivery and performance of this Agreement by such Party does not conflict with any material agreement, instrument or understanding, oral or written, to which it is a party or by which it is bound, nor to the knowledge of such Party, violate any material law or regulation of any court, governmental body or administrative or other agency having jurisdiction over it.

8.2 Additional Representations and Warranties of ALZA .

8.2.1 Transferred Assets . Subject to Section 8.2.2 below, in addition to the representations and warranties made by ALZA under Section 8.1 , ALZA hereby represents and warrants to Incline as of the Execution Date that ALZA owns good and valid title to, or otherwise has the right to transfer (or cause to be transferred), the Transferred Assets as provided for herein, free and clear of all Encumbrances.

8.2.2 Limitation . Incline and ALZA acknowledge and agree that the employees listed in Schedule 8.2 were employees of ALZA and were closely involved in the management and operations relating to the ALZA Product and certain other Products, and Incline has had a reasonable opportunity to interview such employees. ALZA shall in no event be liable to Incline, any other Incline Indemnitee or any other Person for any breach of ALZA's representations and warranties contained in this Agreement to the extent that any such employees had, or reasonably should have had as a result of their involvement with ALZA prior to the Execution Date, (a) knowledge of any material fact or facts which reasonably gives rise to such breach or (b) knowledge, as of the Execution Date, that ALZA was making a material misstatement, omission, misrepresentation, or inaccuracy herein, or was in breach of any of the representations or warranties contained in the Agreement. Incline and ALZA agree that, in any dispute or legal proceeding, Incline shall bear the burden of proof that no such former employee had knowledge (or should not reasonably have had such knowledge) of such breach or of the material facts giving rise to such breach.

8.2.3 Licensed Patents . ALZA hereby represents and warrants to Incline that, to the best of ALZA's knowledge as of the Execution Date, certain of the Licensed Patents set forth on Schedule 1.29 constitute all of the Patent Rights owned or Controlled by ALZA or its Affiliates as of the Execution Date [**].

8.3 Additional Representations and Warranties of Incline . In addition to the representations and warranties made by Incline under Section 8.1 , Incline hereby represents and warrants to ALZA as of the Execution Date that:

8.3.1 Financing . Incline has delivered to ALZA true and complete copies of all agreements relating to the Series A Financing and the Option Agreement (such agreements, the “ Financing Commitments ”). Each of the Financing Commitments, in the form so delivered, is in full force and effect and is a legal, valid and binding obligation of Incline and the other parties thereto. The Series A Financing, when funded in accordance with the Financing Commitments, and the Option Agreement shall provide Incline with funds sufficient to satisfy Incline's obligation under Section 5.1 (Upfront Payment).

8.3.2 Diligence . Incline acknowledges that it has had conducted, under the advice of counsel of its own selection, its independent due diligence evaluation in connection with the transactions contemplated by this Agreement, and that all rights transferred hereunder, licensed or assigned, are accepted as is, without any warranties except as expressly provided for in this Agreement.

8.3.3 Commercialization . Incline acknowledges that it is solely responsible on and

after the Closing for (a) all research, development and Commercialization activities related to the Products and (b) acquiring the Regulatory Approvals with the relevant Regulatory Authorities as necessary to Commercialize the Products in the Territory. Incline also acknowledges that ALZA provides no warranty with respect to the success of the Products, including whether or not Incline will be successful in acquiring the relevant Regulatory Approvals to Commercialize the Products in the Territory.

8.4 Disclaimer of Warranties .

8.4.1 EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS AGREEMENT, ALZA AND ITS AFFILIATES MAKE NO REPRESENTATIONS AND EXTEND NO WARRANTIES OR CONDITIONS OF ANY KIND, EITHER EXPRESS OR IMPLIED, WITH RESPECT TO THE PRODUCTS, TRANSFERRED ASSETS, LICENSED KNOW-HOW OR LICENSED PATENTS INCLUDING WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND NON-INFRINGEMENT, AND ANY SUCH OTHER REPRESENTATIONS OR WARRANTIES ARE HEREBY EXPRESSLY DISCLAIMED. ALZA AND ITS AFFILIATES HEREBY DISCLAIM ANY REPRESENTATION OR WARRANTY THAT THE DEVELOPMENT, MANUFACTURE OR COMMERCIALIZATION OF ANY PRODUCT WILL BE SUCCESSFUL.

8.4.2 INCLINE HEREBY ACKNOWLEDGES AND AGREES THAT IT IS PURCHASING THE TRANSFERRED ASSETS AND LICENSING THE LICENSED KNOW-HOW AND LICENSED PATENTS ON AN "AS IS, WHERE IS" BASIS WITHOUT WARRANTY WITH RESPECT TO COMPLETENESS, ACCURACY, VALIDITY, NON-INFRINGEMENT, COMPLIANCE WITH REGULATORY STANDARDS OR REGULATIONS OR FITNESS FOR A PARTICULAR PURPOSE OR ANY OTHER KIND OF WARRANTY WHETHER EXPRESS OR IMPLIED.

8.5 No Implication . Except as expressly stated herein, nothing in the Agreement shall be construed as:

(a) A warranty or representation by ALZA as to the validity or patentability or scope of any of the Licensed Patents or Licensed Know-How;

(b) A warranty or representation by ALZA that anything that has been or shall be made, used, sold, offered for sale, or imported under the licenses granted under Section 2.1 is or shall be free from infringement of patents of Third Parties; and

(c) A grant by implication, estoppel, or otherwise, of any licenses or rights under patents or other intellectual property of ALZA (including such licenses or rights granted to ALZA through its Affiliates and/or Third Parties) other than that expressly included in this Agreement.

Article 9 Indemnification and Insurance

9.1 Survival . Except for the representations and warranties set forth in Sections 8.1.1 (Organization and Good Standing) and 8.1.2 (Authority), all representations and warranties

contained in this Agreement shall survive the Execution Date until the date that is [**] months from the Execution Date, and shall then expire and be of no force or effect. The representations and warranties set forth in Sections 8.1.1 (Organization and Good Standing) and 8.1.2 (Authority) and the covenants contained in this Agreement shall survive [**] except as otherwise specified herein.

9.2 Indemnification by ALZA . Subject to Section 8.2.2 and Section 9.4 , ALZA hereby agrees to indemnify, defend and hold harmless Incline and its Affiliates, and their respective directors, officers, employees, agents and representatives (collectively, the “ Incline Indemnitees ”) from and against any and all Damages which any Incline Indemnitee may incur or suffer to the extent such arise out of or result from (a) any of the Excluded Liabilities or Excluded Assets or (b) the breach of any representation, warranty, covenant or agreement made by ALZA in this Agreement, in each case except to the extent caused by the gross negligence or willful misconduct of an Incline Indemnitee

9.3 Indemnification by Incline . Incline hereby agrees to indemnify, defend and hold harmless ALZA and its Affiliates, and their respective directors, officers, employees, agents and representatives (collectively, the “ ALZA Indemnitees ”) from and against any and all Third Party Claims and related Damages which any ALZA Indemnitee may incur or suffer to the extent such arise or result from (a) the ownership, possession, manufacture, research, development, Commercialization, use or operation of any Product or the Transferred Assets, including the use of any information in the Market Research Materials, or exploitation of the inventions claimed by the Licensed Patents, by Incline, its Affiliates, sublicensees or successors and assigns on or after the Closing, (b) any of the Assumed Liabilities or (c) the breach of any representation, warranty, covenant or agreement made by Incline in this Agreement (including the use of any Improperly Transferred Documents by Incline or any of its Affiliates or sublicensees in breach of Section 4.5 ), except to the extent caused by the gross negligence or willful misconduct of an ALZA Indemnitees.

9.4 Scope of ALZA's Liability . Indemnification shall be available to the Incline Indemnitees under Section 9.2 only to the extent the aggregate amount of Damages otherwise due to the Incline Indemnitees for all claims for such indemnification exceeds $200,000 (the “ Indemnity Basket ”) and then indemnification shall be available to the Incline Indemnitees for the amount of all payments due to the Incline Indemnitees in excess of such amount, but only for all such Damages up to $3,750,000 (the “ Indemnity Cap ”). In addition, Incline agrees and acknowledges that in no event shall ALZA be liable for any loss of or damage to any of the manufacturing equipment set forth in Schedule 3.1.4 during transport from ALZA to Incline's warehouse or facility, as provided in Section 4.4.3, and that Incline's sole remedy in event of such loss or damage shall be as provided under the relevant insurance obtained by Incline with respect to such risk of loss or damage during such transport.

9.5 Claims . Any Incline Indemnitee or ALZA Indemnitee claiming it may be entitled to indemnification under this Article 9 (the “ Indemnified Party ”) shall give prompt written notice to the other Party (the “ Indemnifying Party ”) of each matter, action, cause of action, claim, demand, fact or other circumstances upon which a claim for indemnification (a “ Claim ”) hereunder may be based. Such notice shall contain, with respect to each Claim, such facts and information as are then reasonably available, the estimated amount of Damages and the specific basis for indemnification hereunder. Failure to give prompt notice of a Claim hereunder shall not affect the Indemnifying Party's obligations hereunder, except to the extent the Indemnifying

Party is prejudiced by such failure.

9.6 Defense of Third Party Claims . The Indemnified Party shall permit the Indemnifying Party, at the Indemnifying Party's option and expense, to assume the complete defense of any Claim based on any action, suit, proceeding, claim, demand or assessment by any Third Party (a “ Third Party Claim ”) with full authority to conduct such defense and to settle or otherwise dispose of the same and the Indemnified Party shall reasonably cooperate with the Indemnifying Party at the Indemnifying Party's request and expense in such defense; provided the Indemnifying Party shall not, in defense of any Third Party Claim, except with the consent of the Indemnified Party (which consent shall not be unreasonably withheld or delayed), consent to the entry of any judgment or enter into any settlement (a) which provides for any relief other than the payment of monetary damages and/or (b) which does not include as an unconditional term thereof the giving by the Third Party claimant to the Indemnified Party of a release from all liability in respect thereof. After notice to the Indemnified Party of the Indemnifying Party's election to assume the defense of any Third Party Claim, the Indemnifying Party shall be liable to the Indemnified Party only for such legal or other expenses subsequently incurred by the Indemnified Party in connection with the defense thereof at the request of the Indemnifying Party. As to those Third Party Claims with respect to which the Indemnifying Party does not elect to assume control of the defense, the Indemnified Party shall afford the Indemnifying Party an opportunity to participate in such defense, at its cost and expense, and shall consult with the Indemnifying Party prior to settling or otherwise disposing of any of the same.

9.7 Exclusive Remedy .

9.7.1 Subject to Section 9.7.2 , except in the event of fraud or intentional misrepresentation, (a) the sole and exclusive remedy of Incline and any other Incline Indemnitee with respect to any claims arising out of or relating to this Agreement, whether arising in contract, tort or otherwise, shall be the right of Incline or such Incline Indemnitee, as the case may be, to make claims of indemnification for Damages pursuant to the provisions of Section 9.2 , and (b) the sole and exclusive remedy of ALZA and any other ALZA Indemnitee with respect to any Third Party Claims arising out of or relating to this Agreement, whether arising in contract, tort or otherwise, shall be the right of ALZA or such ALZA Indemnitee, as the case may be, to make claims of indemnification for Damages pursuant to the provisions of Section 9.3 . In furtherance of the foregoing, each Party hereby waives, to the fullest extent permitted under applicable law, any and all other rights, remedies, claims and causes of action it or any of its Affiliates may have (excluding rights, claims or causes of action of any Party for fraud and intentional misrepresentation), from and after the Execution Date, against the other Party or its Affiliates.

9.7.2 The provisions of Section 9.7.1 shall not restrict the right of any Party to seek specific performance or other equitable remedies in connection with any breach of any of the covenants contained herein. In addition to the foregoing and notwithstanding anything herein to the contrary, ALZA shall not have any Liability or be responsible for any Damages arising out of or with respect to the manner in which Incline operates the Transferred Assets after the Closing.

9.7.3 With respect to any Damages arising under this Agreement, Incline agrees that it shall only seek such Damages from ALZA, and Incline hereby waives the right to seek

Damages from or equitable remedies, such as injunctive relief, against any Affiliate of ALZA or any director, officer or employee of ALZA (or any of its Affiliates).

9.8 Calculation of Damages . Except as otherwise provided in this Article 9 , in any case where the Indemnified Party subsequently recovers from Third Parties any amount in respect of a matter with respect to which an Indemnifying Party has indemnified it pursuant to this Article 9 , such Indemnified Party shall promptly pay over to the Indemnifying Party the amount so recovered (after deducting therefrom the full amount of the expenses incurred by it in procuring such recovery), but not in excess of any amount previously so paid by the Indemnifying Party to or on behalf of the Indemnified Party in respect of such matter.

9.9 Mitigation . Each Party agrees that it shall, and it shall cause its Affiliates to, use its or their reasonable efforts to mitigate any Damages to be indemnified under this Article 9 .

9.10 No Limitation on Right to Contest . Nothing in this Article 9 shall be construed as a limitation on the Indemnifying Party's right to contest in good faith whether the Indemnified Party is entitled to indemnification pursuant to this Article 9 with respect to a particular claim.

9.11 Limitations of Indemnification . SUBJECT TO AND WITHOUT LIMITING THE INDEMNIFICATION OBLIGATIONS OF EACH PARTY WITH RESPECT TO THIRD PARTY CLAIMS, NO PARTY OR ANY OF ITS AFFILIATES SHALL BE LIABLE TO THE OTHER PARTY UNDER ANY CONTRACT, WARRANTY, NEGLIGENCE, TORT, STRICT LIABILITY OR OTHER LEGAL OR EQUITABLE THEORY FOR ANY SPECIAL, INDIRECT, INCIDENTAL, PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES OR FOR LOST PROFITS, MILESTONES OR ROYALTIES, ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ITS SUBJECT MATTER.

9.12 Insurance . During the Term of this Agreement and for a period of at least [**] years following the termination of this Agreement, Incline shall maintain, at its sole cost and expense, general liability insurance, including product liability coverage, with bodily injury, death and property damage limits, in such amounts and with such scope of coverage as is consistent with drug industry standards for Products of a similar nature. Incline shall have its insurance carrier furnish to ALZA certificates stating that all insurance required under this Agreement is in force. Such certificates shall indicate any deductible and self-insured retention and the effective expiration dates of the policies. All certificates are to stipulate that ALZA shall be given [**] days written notice of all cancellation, non-renewal or material changes in policy. ALZA shall be named as an additional insured on all insurance policies obtained by Incline in accordance with this Section 9.12 .

Article 10 Term and Termination

10.1 Term . The term of this Agreement shall commence on the Execution Date and shall continue until the expiration and satisfaction of all payment obligations hereunder (including under Article 5 ), unless this Agreement is terminated earlier in accordance with this Article 10 (the “ Term ”). This Agreement may be terminated by ALZA, by written notice to Incline, if the Closing shall not have occurred on or before [**] business days after the Execution Date.

10.2 Termination for Cause . In the event that a Party commits a material breach of its

obligations under this Agreement that is not cured within the [**] day period (or such other time period as mutually agreed by the Parties) after receipt of written notice from the non-breaching Party, the non-breaching Party may terminate this Agreement upon written notice to the breaching Party; provided, however, that (a) a breach of this Agreement that solely relates to the United States shall give rise to a termination right only as to the United States, (b) a breach of this Agreement that relates solely to any country in Europe shall give rise to a termination right only as to Europe and (c) a breach of this Agreement that relates solely to any country in the Territory that is not the United States or any country in Europe (the “ ROW Countries ”) shall give rise to a termination right in all of the ROW Countries (the United States, Europe and the ROW Countries each referred to hereinafter as a “ Region ”). To the extent the allegedly breaching Party disputes a claim of material breach pursuant to Article 11 following receipt of written notice from the non-breaching Party, any effectiveness of the termination of this Agreement as a result of such material breach shall be tolled until such dispute is resolved pursuant to Article 11 . Termination of this Agreement by a Party pursuant to this Section 10.2 shall be without prejudice to any of its other rights conferred on it by this Agreement, and in addition to any other remedies that may be available to it under law.

10.3 Termination for Incline Bankruptcy . ALZA may terminate this Agreement at any time during the Term in the event of an Incline Bankruptcy.

10.4 Effects of Termination . In the event of termination by either Party under Section 10.2 or a termination by ALZA under Section 10.3 , the following shall apply:

10.4.1 Termination of License . All rights to the Licensed Patents and Licensed Know-How licensed herein shall revert to ALZA, and all licenses granted herein by ALZA to Incline with respect to the Products and all rights of first negotiation set forth in Section 2.3 and Section 2.4 shall terminate.

10.4.2 Assignment of Government Filings . At no expense to ALZA or any of its Affiliates, Incline shall assign and promptly transfer to ALZA or its Affiliates, as requested by ALZA, all Regulatory Approvals (including government authorizations) that were included as part of the Transferred Assets.

10.4.3 Assignment of Trademarks and Domain Names . At no expense to ALZA or any of its Affiliates, Incline shall assign and promptly transfer to ALZA or its Affiliates, as requested by ALZA, the Product Trademarks and Product Domain Names that were included as part of the Transferred Assets.

10.4.4 License to Know-How . Incline hereby grants to ALZA a non-exclusive, fully paid-up, royalty-free, irrevocable license, with the right to sublicense through multiple tiers, under the Transferred Know-How.

10.4.5 Termination by Region . In the event of termination by ALZA pursuant to Section 10.2 solely with respect to a Region, the effects of termination described in this Section 10.4 shall apply solely with respect to the relevant Region.

10.5 No Waiver . The right of a Party to terminate this Agreement, as provided in this Article 10 , shall not be affected in any way by its waiver or failure to take action with respect to any prior default by the other Party.

10.6 Consequences of Termination . Except as otherwise provided herein, upon termination of this Agreement, each Party shall promptly return to the other Party all remaining records and materials in its possession or control containing the other Party's Confidential Information. Notwithstanding the foregoing, one copy of such records may be retained by legal counsel solely for evidentiary purposes.

10.7 Termination Not Sole Remedy . Termination is not the sole remedy under this Agreement and, whether or not termination is effected, all other remedies shall remain available except as expressly agreed to otherwise herein.

10.8 Survival of Obligations . The termination of this Agreement shall not relieve the Parties of any obligations accruing prior to such termination, and any such termination shall be without prejudice to the rights of either Party against the other.

10.8.1 Termination for Cause or Termination for Incline Bankruptcy . If this Agreement is terminated by either Party pursuant to Section 10.2 or by ALZA pursuant to Section 10.3 , the following provisions, as well as (a) any other Sections or defined terms referred to in such provisions or necessary to give them effect and (b) any other provision that by its terms expressly survives termination of this Agreement, shall survive any termination of this Agreement: Section 4.11 (Incline's Post-Closing Covenants), Article 7 (Confidential Information), including Section 7.5 (Public Announcements), Article 9 (Indemnification and Insurance), Section 10.4 (Effects of Termination), this Section 10.8 (Survival of Obligations), Article 11 (Dispute Resolution) and Article 12 (Miscellaneous).

10.8.2 Termination for Failure to Close. If this Agreement is terminated by ALZA pursuant to Section 10.1, the following provisions, as well as (a) any other Sections or defined terms referred to in such provisions or necessary to give them effect and (b) any other provision that by its terms expressly survives termination of this Agreement, shall survive any termination of this Agreement: Article 7 (Confidential Information), including Section 7.5 (Public Announcements), this Section 10.8 (Survival of Obligations), Article 11 (Dispute Resolution) and Article 12 (Miscellaneous).

10.9 Rights in Bankruptcy . All rights and licenses granted to Incline and ALZA under or pursuant to this Agreement, for all purposes of Section 365(n) of Title 11 of the United States Code (“ Title 11 ”), are licenses of rights to “intellectual property” as defined in Title 11, and, in the event that a case under Title 11 is commenced by or against ALZA, its Affiliates or successors, on the one hand, or Incline, its Affiliates or successors, on the other hand, the Party licensed hereunder shall have all of the rights set forth in Section 365(n) of Title 11 to the maximum extent permitted thereby. All rights of Incline and ALZA under this Section 10.9 and under Section 365(n) of Title 11 are in addition to and not in substitution of any and all other rights, powers, and remedies that it may have under this Agreement, Title 11, and any other applicable law.

Article 11 Dispute Resolution

11.1 Escalating; Decision Making Authority . In the case of any disputes between the Parties

arising from this Agreement, the Parties shall discuss and negotiate in good faith a solution acceptable to the Parties and in the spirit of this Agreement. If, after negotiating in good faith pursuant to the foregoing sentence, the Parties fail to reach agreement within [**] days, then the matter shall be referred to the President of ALZA and the Chief Executive Officer of Incline for resolution at the request of either Party. If these executives fail, after good faith discussions, to reach an amicable agreement on the matter within [**] business days of submission to the executives, then either Party may upon written notice to the other submit the dispute to non-binding mediation pursuant to Section 11.2 .

11.2 Mediation . Any dispute, controversy or claim arising out of or related to this Agreement, or the interpretation, application, breach, termination or validity thereof, including any claim of inducement by fraud or otherwise, which claim would, but for this provision, be submitted to arbitration shall, before submission to arbitration, first be mediated through non‑binding mediation in accordance with The CPR Mediation Procedure then in effect of the International Institute for Conflict Prevention & Resolution or its successor (“ CPR ”) available at www.cpradr.org , except where that procedure conflicts with the following provisions, in which case these provisions control.

11.2.1 The mediation shall be conducted in New York, New York and shall be attended by a senior executive with authority to resolve the dispute from each of the Parties.

11.2.2 The mediator shall be neutral, independent, disinterested and shall be selected from a professional mediation firm such as ADR Associates, JAMS or CPR.

11.2.3 The Parties shall promptly confer in an effort to select a mediator by agreement. In the absence of such an agreement within [**] days of initiation of the mediation, the mediator shall be selected by [**] as follows: [**].

11.2.4 The mediator shall confer with the Parties to design procedures to conclude the mediation within no more than [**] days after initiation. Under no circumstances may the commencement of arbitration under Section 11.3 be delayed more than [**] days from the date of written notice by a Party under Section 11.1 to submit such issue to mediation absent contrary agreement of the Parties.

11.2.5 Each Party agrees not to use the period or pendency of the mediation to disadvantage the other Party procedurally or otherwise. No statements made by either side during the mediation may be used by the other or referred to during any subsequent proceedings.

11.2.6 Each Party has the right to pursue provisional relief from any court, such as attachment, preliminary injunction, replevin, etc., to avoid irreparable harm, maintain the status quo, or preserve the subject matter of the arbitration, even though mediation has not been commenced or completed.

11.3 Arbitration . Any claim, dispute or controversy arising from or related to this Agreement or to the interpretation, application, breach, termination or validity of this Agreement, including any claim of inducement of this Agreement by fraud or otherwise, that is not settled by the procedures set forth in Section 11.1 or Section 11.2 above, shall be submitted for resolution to arbitration pursuant to the CPR Rules for Non-Administered Arbitration (available at

www.cpradr.org ), except where those rules conflict with these provisions, in which case these provisions control. Expedited Arbitration Disputes (as defined below) shall be handled under the provisions of this Section 11.3 procedure. The arbitration shall be held in New York City, New York.

11.3.1 Other than with respect to Expedited Arbitration Disputes, the panel shall consist of three (3) arbitrators chosen from the [**]. However, if the aggregate of all amounts in dispute is less than $[**] (any such dispute, an “ Expedited Arbitration Dispute ”), then [**]. Each arbitrator shall be neutral, independent, disinterested, impartial, shall abide by The CPR-Georgetown Commission Proposed Model Rule for the Lawyer as Third Party Neutral available at www.cpradr.org/cpr-george.html and shall be able to make a commitment to dedicate sufficient time to the arbitration to enable the arbitration to be conducted within the time limits set forth in Section 11.3.2 below.

11.3.2 The Parties agree to (a) discuss within [**] days of initiation of the arbitration whether they can select the arbitrator(s) by mutual agreement, after which [**] day period either Party shall be free to refer the selection of the arbitrator(s) to the CPR as provided in Section 11.3.3 below if such Party is not satisfied that the Parties shall be able to select the arbitrator(s) by mutual agreement in a timely manner, (b) to meet with the arbitrator(s) within [**] days of selection and (c) to agree at that meeting or before upon procedures for discovery and as to the conduct of the hearing which shall result in the hearing being concluded within no more than [**] months after selection of the arbitrator(s) and in the award being rendered within [**] days of any post-hearing briefing, which briefing shall be completed by both sides within [**] days after the conclusion of the hearings, or within [**] days of the conclusion of the hearings if there is no post-hearing briefing.

11.3.3 In the event the Parties cannot agree upon selection of the arbitrators and the disputed matter is an Expedited Arbitration Dispute, the CPR shall select the arbitrator based on the rankings each Party gives the slate proposed by the CPR and any challenges for cause, which the rankings and challenges shall be provided by the Parties to the CPR [**] business days following receipt of the CPR's slate. The CPR shall endeavor to make the selection [**] business days following receipt of the Parties' rankings and challenges. In the event the Parties cannot agree upon selection of the arbitrators and the disputed matter is not an Expedited Arbitration Dispute, the Parties shall select arbitrators as follows: [**].

11.3.4 In the event the Parties cannot agree upon procedures for conduct of the hearing meeting on the schedule set forth in Section 11.3.2 above, then the arbitrator(s) shall set dates for the hearing, any post-hearing briefing and the issuance of the award in accordance with the Section 11.3.2 schedule. In addition, in the event the Parties cannot agree upon procedures for discovery as set forth in Section 11.3.2 above, the arbitrator(s) shall provide that discovery be limited so that the Section 11.3.2 schedule may be met without difficulty and so that neither side obtains more than a total of [**]. In no event shall the arbitrator(s), absent agreement of the Parties, allow more than [**] days per side for the hearing or more than a total of [**] days for the hearing. Multiple hearing days shall be scheduled consecutively to the greatest extent possible.

11.3.5 The arbitrator(s) must render their award by application of the substantive law of

the State of New York and are not free to apply “amiable compositeur” or “natural justice and equity.” The arbitrator(s) shall render a written opinion setting forth findings of fact and conclusions of law with the reasons therefor stated. A transcript of the evidence adduced at the hearing shall be made and shall, upon request, be made available to either Party. The arbitrator(s) shall have power to exclude evidence on grounds of hearsay (subject to all hearsay exceptions set forth in the United States Federal Rules of Evidence), prejudice beyond its probative value, redundancy, or irrelevance and no award shall be overturned by reason of such ruling on evidence. To the extent possible, the arbitration hearings and award shall be maintained in confidence. Except as set forth below, the decision of the arbitrator(s) shall be final and not subject to further review, except pursuant to the Federal Arbitration Act.

11.3.6 In the event the panel's award with respect to a disputed matter other than an Expedited Arbitration Dispute exceeds $[**] in monetary damages, then the losing Party may obtain review of the arbitrators' award or decision by a single appellate arbitrator (the “ Appeal Arbitrator ”) selected from the CPR Panels of Distinguished Neutrals by agreement or, failing agreement within [**] business days, pursuant to the selection procedures specified in Section 11.3.3 above for Expedited Arbitration Disputes, except that the Parties may [**]. If CPR cannot provide such services, the Parties shall together select another provider of arbitration services that can. No Appeal Arbitrator shall be selected unless he or she can commit to rendering a decision within [**] days following oral argument as specified in this Section 11.3.6 . Any such review must be initiated within [**] days following the rendering of the award referenced in Section 11.3.5 above.

11.3.7 In any arbitration appeal pursuant to Section 11.3.6 , the Appeal Arbitrator shall make the same review of the arbitration panel's ruling and its bases that the U.S. Court of Appeals of the Circuit where the arbitration hearings are held would make of findings of fact and conclusions of law rendered by a district court after a bench trial and then modify, vacate or affirm the arbitration panel's award or decision accordingly, or remand to the panel for further proceedings. The Appeal Arbitrator shall consider only the arbitration panel's findings of fact and conclusions of law, pertinent portions of the hearing transcript and evidentiary record as submitted by the Parties, opening and reply briefs of the Party pursuing the review, and the answering brief of the opposing Party, plus a total of no more than [**] hours of oral argument evenly divided between the Parties. The Party seeking review must submit its opening brief and any reply brief within [**] and [**] days, respectively, following the date of the award under review, whereas the opposing Party must submit its responsive brief within [**] days of that date. Oral argument shall take place within [**] months after the date of the award under review, and the Appeal Arbitrator shall render a decision within [**] days following oral argument. That decision shall be final and not subject to further review, except pursuant to the Federal Arbitration Act.

11.3.8 The Parties consent to the non-exclusive jurisdiction of the Federal District Court for the district in New York, New York for the enforcement of these provisions and the entry of judgment on any award rendered hereunder (including after review of the Appeal Arbitrator where such an appeal is pursued).

11.3.9 Each Party has the right before or, if the arbitrator(s) cannot hear the matter within an acceptable period, during the arbitration to seek and obtain from the

appropriate court provisional remedies such as attachment, preliminary injunction and replevin, to avoid irreparable harm, maintain the status quo, or preserve the subject matter of the arbitration.

11.4 Jury Trial . EACH PARTY HERETO WAIVES ITS RIGHT TO TRIAL OF ANY ISSUE BY JURY.

11.5 Termination . Notwithstanding the foregoing, the provisions of Article 11 shall not prevent the Parties from terminating this Agreement in accordance with Article 10 , provided that the arbitrators may settle any dispute in respect of the circumstances and validity of a termination of this Agreement.

Article 12 Miscellaneous

12.1 No Reliance by Incline; Own Due Diligence. Incline is relying on its own investigation, examination and valuation of the Products and Transferred Assets in effecting the transactions covered and intended by this Agreement. Incline has made all inspections and investigations of the Products and the Transferred Assets deemed necessary or desirable by Incline. Incline is purchasing the Transferred Assets based on the results of its inspections and investigations, and not on any representation or warranty of ALZA or any of its Affiliates not expressly set forth in this Agreement. In light of these inspections and investigations and the representations and warranties made to Incline by ALZA herein, Incline is relinquishing any right to any claim based on any representations and warranties other than those expressly set forth in this Agreement.

12.2 Performance by Affiliates . To the extent that this Agreement imposes obligations on Affiliates of a Party, such Party agrees to cause its Affiliates to perform such obligations. Any obligation of a Party to the other Party under this Agreement, which obligation is performed, satisfied or fulfilled by an Affiliate of such Party, shall be deemed to have been performed, satisfied or fulfilled by such Party.

12.3 Entire Agreement . This Agreement, together with the Exhibits and Schedules expressly contemplated hereby and attached hereto, constitutes and contains the entire understanding and agreement between the Parties respecting the subject matter of this Agreement and cancels and supersedes any and all prior or contemporaneous negotiations, correspondence, understandings and agreements between the Parties, whether oral or written, regarding such subject matter. Before signing this Agreement, the Parties have had numerous conversations including preliminary discussions, formal negotiations and informal conversations at meals and social occasions, and have generated correspondence and other writings, in which the Parties discussed the transaction which is the subject of this Agreement and their aspirations for success. In such conversations and writings, individuals representing the Parties may have expressed their judgments and beliefs concerning the intentions, capabilities, and practices of the Parties, and may have forecasted future events. The Parties recognize that such conversations and writings often involve an effort by both sides to be positive and optimistic about the prospects for the transaction. However, it is also recognized that all business transactions contain an element of risk, as does the transaction contemplated by this Agreement, and that it is normal business practice to limit the legal obligations of contracting Parties to only those promises and representations which are essential to their transaction so as to provide certainty as to their respective future rights and remedies. Accordingly, this Agreement is intended to define the full

extent of the legally enforceable undertakings and representations of the Parties hereto, and no promise or representation, written or oral, which is not set forth explicitly in such agreements is intended by either Party to be legally binding. Each of the Parties acknowledge that in deciding to enter into this Agreement and to consummate the transaction contemplated hereby and thereby, none of them has relied upon any statements or representations, written or oral, other than those explicitly set forth herein or therein.

12.4 Binding Effect . This Agreement and the rights and obligations hereunder shall be binding upon and inure solely to the benefit of the Parties hereto, their respective successors and permitted assigns.

12.5 Assignment . Neither Party may assign its rights or delegate its duties under this Agreement without the prior written consent of the other Party, provided that ALZA may transfer this Agreement to an Affiliate without the prior written consent of Incline and further provided that any Party may transfer this Agreement to a successor in connection with the merger or consolidation of such Party with or into a Third Party or the sale of all or substantially all of its assets or that portion of its business pertaining to the subject matter of this Agreement, in each case without the prior written consent of the other Party. Any permitted assignee shall assume all obligations of its assignor under this Agreement.

12.6 No Third Party Beneficiaries . Other than as explicitly set forth herein, nothing contained herein is intended to confer upon any Person, other than the Parties to this Agreement and their respective successors and permitted assigns, any rights or remedies under or by reason of this Agreement.

12.7 Use of Names . Except as expressly provided, no right is granted by this Agreement to a Party to use in any manner the name or any other trade name of the other Party or its Affiliates in connection with this Agreement.

12.8 No Waiver . No waiver, modification or amendment of any provision of this Agreement shall be valid or effective unless made in writing and signed by a duly authorized officer of each Party. The failure of either Party to assert a right hereunder or to insist upon compliance with any term or condition of this Agreement shall not constitute a waiver of that right or excuse a similar subsequent failure to perform any such term or condition.

12.9 Modifications and Amendments. This Agreement shall not be altered or otherwise amended except pursuant to an instrument in writing executed and delivered by each of the Parties hereto.

12.10 Independent Contractors . Each Party is an independent contractor and not an agent or employee of the other Party under this Agreement. Nothing contained in this Agreement is intended nor is to be construed so as to constitute ALZA or Incline as partners or joint venturers with respect to this Agreement. No Party shall have any express or implied right or authority to assume or create any obligations on behalf of or in the name of the other Parties or to bind the other Parties to any other contract, agreement or undertaking with any Third Party except as may be explicitly provided for herein or authorized in writing.

12.11 Notices and Deliveries . Any notice, request, instruction or other communication to be given hereunder by either Party to the other Party shall be in writing and shall be deemed to have

been sufficiently given when it is received, whether delivered in person, transmitted by facsimile with contemporaneous confirmation of successful transmission, delivered by registered letter postage prepaid (or its equivalent) or delivered by postage prepaid certified overnight by an internationally recognized courier service, to the Party to which it is directed at its address shown below or such other address as such Party shall have last given by notice to the other Parties.

If to Incline:

Incline Therapeutics, Inc.

6 01 Union, Two Union Square, Suite 3200

Seattle, WA 98101

Facsimile: 206-621- 1848

Attention: Chief Executive Officer

with a copy to:

Cooley LLP

3175 Hanover St.

Palo Alto, CA 94306

Facsimile: 650-849-7400

Attention: Barbara Kosacz, Esq.

If to ALZA:

ALZA Corporation

6500 Paseo Padre Parkway

Fremont, CA 94555

Facsimile: 510-248-2366

Attention: Legal Department

with a copy to:

Office of General Counsel

Johnson & Johnson

One Johnson & Johnson Plaza

New Brunswick, NJ 08933

Facsimile: 732-524-2788

12.12 Severability . It is the desire and intent of the Parties hereto that the provisions of this Agreement shall be enforced to the fullest extent permissible under the laws in each jurisdiction in which enforcement is sought. Accordingly, if any particular provision of this Agreement shall be determined to be invalid or unenforceable, such provision shall be deemed amended to delete therefrom the portion thus determined to be invalid or unenforceable, such deletion to apply to the extent of such invalidity or unenforceability, without affecting in any way the remaining provisions hereof only with respect to the operation of such provision in the particular jurisdiction in which such determination is made.

12.13 Governing Law; Submission to Jurisdiction . This Agreement shall be governed by and

interpreted in accordance with the laws of the State of New York without reference to its choice of laws or conflicts of law provisions. Each Party (a) submits to the exclusive jurisdiction of the state and federal courts sitting in New York, New York, with respect to actions or proceedings arising out of or relating to this Agreement in which a Party brings an action in aid of arbitration, (b) agrees that all claims in respect of such action or proceeding may be heard and determined only in any such court, and (c) agrees not to bring any action or proceeding arising out of or relating to this Agreement in any other court, other than an action or proceeding seeking injunctive relief or brought to enforce an arbitration ruling issued pursuant to Section 11.3 . Each Party waives any defense of inconvenient forum to the maintenance of any action or proceeding so brought and waives any bond, surety or other security that might be required of the other Party with respect thereto. Each Party may make service on the other Party by sending or delivering a copy of the process to the Party to be served at the address and in the manner provided for the giving of notices in Section 12.11 . Nothing in this Section 12.13 , however, shall affect the right of any Party to serve legal process in any other manner permitted by New York law.

12.14 Specific Enforcement . The Parties agree that irreparable damage would occur and that the Parties would not have any adequate remedy at law if any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the Parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement, this being in addition to any other remedy to which any Party is entitled at law or in equity.

12.15 Advice of Counsel . Each Party acknowledges and agrees it has participated in the drafting of this Agreement. In interpreting and applying the terms and provisions of this Agreement, the Parties agree that no presumption shall exist or be implied against the Party which drafted such terms and provisions.

12.16 Counterparts . This Agreement may be executed in any number of counterparts (including by facsimile or electronic transmission), each of which need not contain the signature of more than one Party, but all such counterparts taken together shall constitute one and the same agreement.

12.17 Payment of Expenses. Except as otherwise set forth in this Agreement, all costs and expenses associated with this Agreement and the transactions contemplated thereby shall be borne by the Party incurring such expenses.

12.18 Compliance with Laws . Each Party shall comply with all applicable laws, rules, regulations and orders of the United States and applicable foreign countries and supra-governmental organizations and all jurisdictions and any agency or court thereof in connection with this Agreement and the transactions contemplated thereby.

12.19 Construction . Except where the context requires otherwise, whenever used the singular includes the plural, the plural includes the singular, the use of any gender is applicable to all genders and the word “or” has the inclusive meaning represented by the phrase “and/or”. Whenever this Agreement refers to a number of days, unless otherwise specified, such number refers to calendar days. The headings of this Agreement and any descriptions of Attachments and Exhibits or descriptions of cross‑references are for convenience of reference only and do not

define, describe, extend or limit the scope or intent of this Agreement or the scope or intent of any provision contained in this Agreement. The terms “including,” “include(s),” “such as,” and “for example” as used in this Agreement mean including the generality of any description preceding such term and shall be deemed to be followed by “without limitation”.

[Signature Page Follows]

IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by their respective duly authorized officers as of the Execution Date, each copy of which shall for all purposes be deemed to be an original.

ALZA CORPORATION

By: ___ /s/ Luis E. Toca _____________________

Name: ______ Luis E. Toca ____________________

Title: ______ Treasurer ______________________

INCLINE THERAPEUTICS, INC.

By: ___ /s/ Alan Levy ___________________

Name: Alan Levy, PhD

Title: Chief Executive Officer

EXHIBIT A

BILL OF SALE

THIS BILL OF SALE, is made as of [CLOSING DATE], 2010, by and between ALZA Corporation, a Delaware corporation (“ Assignor ”) and Incline Therapeutics, Inc., a Delaware corporation (“ Assignee ”).

RECITALS

WHEREAS, Assignor and Assignee are parties to a License and Asset Transfer Agreement dated as of [CLOSING DATE], 2010 (the “ Agreement ”); and

WHEREAS, Assignor and Assignee now desire to carry out the intent and purpose of the Agreement by Assignor's execution and delivery to Assignee of this instrument evidencing the sale, conveyance, assignment, transfer and delivery to Assignee of the Transferred Assets; provided , that the Excluded Liabilities shall not be assumed pursuant to the Agreement;

NOW, THEREFORE, in consideration of the foregoing premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

1. Definitions . All capitalized terms not otherwise defined herein shall have the meaning ascribed to them in the Agreement.

2. Sale of the Transferred Assets . Upon the terms and subject to the conditions of the Agreement and the ALZA Third Party Licenses, Assignor and its Affiliates do hereby irrevocably sell, convey, assign and transfer to Assignee, and Assignee does hereby purchase, receive and assume from Assignor and its Affiliates, all of Assignor's or its Affiliate's right, title and interest in and to the Transferred Assets free and clear of any Encumbrances TO HAVE AND TO HOLD the Transferred Assets unto Assignee, its successors and assigns, FOREVER. Notwithstanding the foregoing sentence, as provided under the Agreement, with respect to the manufacturing equipment referenced in Section 3.1.4 which is other than the [**] manufacturing line, Assignor shall make arrangements with a Third Party vendor reasonably acceptable to Assignee, to remove from Assignor's facilities, no earlier than July 12, 2010 and no later than July 23, 2010, and ship such equipment to Assignee's designated warehouse or delivery sites in [**] at the following addresses:

[**]

All right, title and interest in and to such equipment shall remain with Assignor until delivery by the Third Party vendor to such delivery sites, at which point all of Assignor's rights, title and interest in and to such equipment shall transfer to Assignee free and clear of any Encumbrances TO HAVE AND TO HOLD such equipment unto Assignee, its successors and assigns, FOREVER.

3. Appointment . Assignor hereby constitutes and appoints Assignee and its successors and assigns as its true and lawful attorney in fact in connection with the transactions contemplated by this instrument, with full power of substitution, in the name and stead of

Assignor but on behalf of and for the benefit of Assignee and its successors and assigns, to demand and receive any and all of the assets, properties, rights and business hereby conveyed, assigned, and transferred or intended so to be, and to give receipt and releases for and in respect of the same and any part thereof, and from time to time to institute and prosecute, in the name of Assignor or otherwise, for the benefit of Assignee or its successors and assigns, proceedings at law, in equity, or otherwise, which Assignee or its successors or assigns reasonably deem proper in order to collect or reduce to possession or endorse any of the Transferred Assets and to do all acts and things in relation to the assets which Assignee or its successors or assigns reasonably deem desirable.

4. Governing Law. This Bill of Sale shall be construed and enforced in accordance with the laws (other than the conflict of law rules) of the State of New York.

5. General . In the event that any provision of this Bill of Sale be construed to conflict with a provision in the Agreement, the provision in the Agreement shall control. This instrument shall be binding upon and shall inure to the benefit of the respective successors and assigns of Assignee and Assignor. This Bill of Sale may be executed in one or more counterparts, each of which shall be deemed an original but all of which together will constitute one and the same instrument.

IN WITNESS WHEREOF, the undersigned has executed this instrument under seal of Assignee on the date first above written.

ALZA CORPORATION, as Assignor

By:______________________________

Name:

Title:

INCLINE THERAPEUTICS, INC., as Assignee

By:______________________________

Name:

Title:

EXHIBIT B

FORM OF TRADEMARK ASSIGNMENT

This Trademark Assignment is made as of [CLOSING DATE], by and between [ALZA Corporation] [______], a [Delaware corporation] [_____], and Incline Therapeutics, Inc. a Delaware corporation (the “ Assignee ”).

RECITALS

WHEREAS, pursuant to the License and Asset Transfer Agreement, dated as of [EXECUTION DATE], 2010, by and between [the Assignor] [ALZA Corporation] and the Assignee (the " Agreement "), the Assignor wishes to transfer to the Assignee, and the Assignee wishes to acquire from the Assignor, the Trademarks set forth on Schedule A hereto; and

WHEREAS, the Assignor has agreed to execute this Trademark Assignment at the Closing.

NOW, THEREFORE, in consideration of the foregoing premises and for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged by Assignee, the parties agree as follows:

1. Definitions . All capitalized terms not otherwise defined herein shall have the meaning ascribed to them in the Agreement.

2. Assignment of Rights in Trademarks. The Assignor does hereby transfer and assign to the Assignee, and the Assignee hereby accepts the transfer and assignment of, all of the Assignor's right, title, and interest in and to the Trademarks, together with (i) the material relevant supporting documents, such as registration and renewal confirmations, if any; (ii) all the goodwill associated with the Trademarks; and (iii) all claims for damages by reason of past infringement of the Trademarks with the right to sue and collect for the same; the same to be held and enjoyed by the said Assignee, and its successors and assigns from and after the date hereof as fully and entirely as the same would have been held and enjoyed by the said Assignor had this Trademark Assignment not been made.

3. Governing Law. Except to the extent that U.S. federal law preempts state law with respect to the matters covered hereby, this Trademark Assignment shall be governed by and construed in accordance with the laws of the State of New York without regard to any choice of law principle that would dictate the laws of another jurisdiction.

4. General . This instrument shall be binding upon and shall inure to the benefit of the respective successors and assigns of Assignee and Assignor. This Trademark Assignment may be executed in one or more counterparts, each of which shall be deemed an original but all of which together will constitute one and the same instrument.

[ Signature Pages Follow ]

IN WITNESS WHEREOF, the undersigned has caused its duly authorized officer to execute this Trademark Assignment as of the date first written above.

[ALZA CORPORATION] [______], as Assignor

By:______________________________

Name:

Title:

[STATE]

COUNTY OF

This instrument was executed before me on this ___ day of ___________, 200_, by ____________________(name), the _____________________ (title) of ALZA Corporation, a Delaware corporation, on behalf of said corporation.

WITNESS my hand and official seal.

_______________________________

Notary Public in and for [STATE]

_______________________________

Printed or Typed Name of Notary

My Commission Expires ______________

IN WITNESS WHEREOF, the undersigned has caused its duly authorized officer to execute this Trademark Assignment as of the date first written above.

INCLINE THERAPEUTICS, INC., as Assignee

By:______________________________

Name:

Title:

[STATE]

COUNTY OF

This instrument was executed before me on this ___ day of ___________, 200_, by ____________________(name), the _____________________ (title) of Incline Therapeutics Inc., a Delaware corporation, on behalf of said corporation.

WITNESS my hand and official seal.

_______________________________

Notary Public in and for [STATE]

_______________________________

Printed or Typed Name of Notary

My Commission Expires ______________

Schedule A

Trademarks

[_____________]

EXHIBIT C

FORM OF DOMAIN NAME ASSIGNMENT

This Domain Name Assignment is made as of [CLOSING DATE], 2010 by and between [ALZA Corporation] [______], a [Delaware corporation] [_____] (“ Assignor ”), and Incline Therapeutics, Inc., a Delaware corporation (“ Assignee ”).

WHEREAS, pursuant to the License and Asset Transfer Agreement, dated as of [EXECUTION DATE], 2010, by and between the Assignee and [Assignor] [ALZA Corporation] (the “ Agreement ”), the Assignor wishes to transfer and assign to the Assignee, and the Assignee wishes to acquire from the Assignor, the Domain Names set forth on Schedule A hereto ; and

WHEREAS, the Assignor has agreed to execute this Domain Name Assignment (the “ Assignment ”) at the Closing.

1. Definitions . All capitalized terms not otherwise defined herein shall have the meaning ascribed to them in the Agreement.

2. Assignment of Rights in Domain Names . Assignor hereby transfers and assigns all of the Assignor's right, title and interest to the Domain Names to Assignee.

3. Further Assurances . For a period of two (2) years following the Closing, Assignor shall execute and deliver to Assignee such documents and take such actions as requested by Assignee to register, evidence or perfect Assignee's rights under this Agreement. Without limiting the above, with respect to the Domain Names, Assignor shall on request of Assignee, (i) in the presence of a notary public, sign and complete any documentation required by the [Registrar] to change the name of the registrant of the Domain Names from the Assignor to the Assignee; (ii) have a notary public notarize such document(s) as designated therein, and (iii) send Assignee original executed copies of such agreement(s) via overnight courier.

4. Governing Law . This Domain Name Assignment shall be governed by and construed in accordance with the laws of the State of New York without regard to any choice of law principle that would dictate the laws of another jurisdiction.

5. General . This instrument shall be binding upon and shall inure to the benefit of the respective successors and assigns of Assignee and Assignor. This Domain Name Assignment may be executed in one or more counterparts, each of which shall be deemed an original but all of which together will constitute one and the same instrument.

IN WITNESS WHEREOF, the undersigned has caused its duly authorized officer to execute this Domain Name Assignment as of the date first written above.

[ALZA CORPORATION] [_______], as Assignor

By:______________________________

Name:

Title:

INCLINE THERAPEUTICS, INC., as Assignee

By:______________________________

Name:

Title:

Schedule A

Domain Names

[_____________]

EXHIBIT D

FORM OF NDA AND IND ASSIGNMENTS

[Incline Letterhead]



	[Effective Date, 2010]
Bob A. Rappaport, MD Director Food and Drug Administration Center for Drug Evaluation and Research Division of Anesthesia and Analgesia Products 5901-B Ammendale Road Beltsville, MD 20705-1266	IND 41,574 Serial No.: E-TRANS ^® (fentanyl HCl) System General Correspondence Transfer of IND Ownership

Dear Dr. Rappaport ,

Effective with the date of this letter, Incline Therapeutics, Inc. accepts sponsorship and responsibility, as outlined in 21 CFR 312 for Investigational New Drug Application (IND) 41,574 for E-TRANS ^® (fentanyl HCl) System. A copy of the transfer letter from Johnson & Johnson Pharmaceutical Research & Development, L.L.C (J&JPRD) on behalf of ALZA Corporation is included for reference.

All future correspondence relating to the IND should be directed to:

[_____________]

Incline Therapeutics, Inc.

601 Union, Two Union Square, Suite 3200

Seattle, WA 98101

Phone: [_____________]

Facsimile: 206-621-1848

Incline Therapeutics Inc. has received a complete copy of the IND, including amendments and all official correspondence to date from J&JPRD.

Incline Therapeutics will adhere to all appropriate regulations (including 21 CFR 312.33) to submit timely updates to the IND including pharmacovigilance reporting and IND annual reports.

All future submissions to the IND will be in paper format. Under separate cover, Incline will request a waiver for the eCTD format.

If you have any questions or require any additional information, please do not hesitate to contact [INCLINE CONTACT] at [INCLINE CONTACT PHONE].

Sincerely,

Incline Therapeutics Inc.

Name:____________________

Title: _____________________

[Incline Letterhead]



	[Effective Date, 2010]
Bob A. Rappaport, MD Director Food and Drug Administration Center for Drug Evaluation and Research Division of Anesthesia and Analgesia Products 5901-B Ammendale Road Beltsville, MD 20705-1266	NDA 21-388: IONSYS ^™ (fentanyl iontophoretic transdermal system) General Correspondence Transfer of NDA Ownership

Dear Dr. Rappaport ,

In accordance with the provisions of 21 CFR § 314.72, we are notifying you of acceptance of a transfer in ownership of the New Drug Application (NDA) 21-388 for IONSYS ^™ (fentanyl iontophoretic transdermal system). Effective as of the close of business on [EFFECTIVE DATE], 2010, ownership of, and all rights to, the NDA have been transferred from ALZA Corporation to Incline Therapeutics, Inc. Incline Therapeutics, Inc. commits to all agreement, promises and conditions made by the former owner and contained in the NDA. A copy of the transfer letter from Johnson & Johnson Pharmaceutical Research & Development, L.L.C (J&JPRD) on behalf of ALZA Corporation is included for reference.

All future correspondence relating to the NDA should be directed to:

[_____________]

Incline Therapeutics, Inc.

601 Union, Two Union Square, Suite 3200

Seattle, WA 98101

Phone: [_____________]

Facsimile: 206-621-1848

Incline Therapeutics has been provided a complete copy of the NDA including all supplements, safety reports, annual reports and correspondence pertaining thereto.

Incline Therapeutics will adhere to all appropriate regulations (including 21 CFR 314.70 and 314.72) to submit timely updates and changes to the NDA including pharmacovigilance reporting, annual reports and changes to the labeling and branding, as appropriate.

All future submissions to the NDA will be in paper format. Under separate cover, Incline will request a waiver for the eCTD format.

If you have any questions or require any additional information, please do not hesitate to contact [INCLINE CONTACT] at [INCLINE CONTACT PHONE].

Sincerely,

Incline Therapeutics Inc.

Name:____________________

Title: _____________________





		[Effective Date, 2010]
Bob A. Rappaport, MD Director Food and Drug Administration Center for Drug Evaluation and Research Division of Anesthesia and Analgesia Products 5901-B Ammendale Road Beltsville, MD 20705-1266		IND 41,574 Serial No.: E-TRANS ^® (fentanyl HCl) System General Correspondence Transfer of IND Ownership

Dear Dr. Rappaport:

Reference is made to Investigational New Drug Application (IND) 41,574 for E-TRANS ^® (fentanyl HCl) System. Effective as of the date of this letter, Johnson & Johnson Pharmaceutical Research & Development, L.L.C (J&JPRD) on behalf of ALZA Corporation, is transferring ownership of the above-cited IND to Incline Therapeutics, Inc. As of that date Incline Therapeutics Inc. will assume all responsibilities related to the IND and the development of E-TRANS System. Incline Therapeutics has been provided a complete copy of the IND and all amendments, safety reports, annual reports and correspondence pertaining thereto.

All future correspondence relating to the IND should be directed to:

[_____________]

Incline Therapeutics, Inc.

601 Union, Two Union Square, Suite 3200

Seattle, WA 98101

Phone: [_____________]

Facsimile: 206-621-1848

Incline Therapeutics will submit a letter of acknowledgement and acceptance of responsibility for the IND. Incline Therapeutics will also state that they have received a complete copy of the IND.

This submission is being provided in electronic format. J&JPRD utilizes either McAfee VirusScan Enterprise or Microsoft ForeFront Client Security to ensure that this submission is free of computer viruses and spyware. J&JPRD authorizes the CDER to use similar software as appropriate.

Should you have any questions and/or comments, please contact me directly at (908) 704-4756.

Sincerely,

Johnson & Johnson Pharmaceutical Research & Development, L.L.C.

Michael H. Kaufman

Director, Regulatory Affairs



		[Effective Date, 2010]
Bob A. Rappaport, MD Director Food and Drug Administration Center for Drug Evaluation and Research Division of Anesthesia and Analgesia Products 5901-B Ammendale Road Beltsville, MD 20705-1266		NDA 21-388: IONSYS ^™ (fentanyl iontophoretic transdermal system) General Correspondence Transfer of NDA Ownership

Dear Dr. Rappaport:

Reference is made to New Drug Application (NDA) 21-388 for IONSYS ^™ (fentanyl iontophoretic transdermal system). In accordance with 21 CFR §314.72 we herewith notify the Agency that effective as of the date of this letter, Johnson & Johnson Pharmaceutical Research & Development, L.L.C (J&JPRD) on behalf of ALZA Corporation, is transferring ownership of, and all rights to, the above-cited NDA to Incline Therapeutics, Inc. Incline Therapeutics has been provided a complete copy of the NDA including all supplements, safety reports, annual reports and correspondence pertaining thereto.

All future correspondence relating to the NDA should be directed to:

[_____________]

Incline Therapeutics, Inc.

601 Union, Two Union Square, Suite 3200

Seattle, WA 98101

Phone: [_____________]

Facsimile: 206-621-1848

Incline Therapeutics will submit a letter of acknowledgement and acceptance of responsibility for the NDA. Incline Therapeutics will also state that they have received a complete copy of the NDA.

Should you have any questions and/or comments, please contact me directly at (908) 704-4756.

Sincerely,

Johnson & Johnson Pharmaceutical Research & Development, L.L.C.

Michael H. Kaufman

Director, Regulatory Affairs

EXHIBIT E

FORM OF PRESS RELEASE

Incline Therapeutics Announces Acquisition of IONSYS™ and $43 Million Series A Financing

REDWOOD CITY, CA - June [Day], 2010 - Incline Therapeutics, Inc., a privately-held, hospital-focused specialty pharmaceutical company, announced today that it has entered into an agreement to acquire the rights to IONSYS™ (fentanyl iontophoretic transdermal system) from ALZA Corporation and completed a $43 million Series A financing.

IONSYS™ Acquisition

Under the terms of the agreement, Incline will receive an exclusive, worldwide license to IONSYS and will acquire certain other assets related to IONSYS.

IONSYS™ (fentanyl iontophoretic transdermal system) is an investigational product candidate intended to provide patient-controlled analgesia for adult inpatients requiring opioids following surgery. IONSYS is a compact, needle-free, self-contained, pre-programmed system designed to be applied to the skin on the upper arm or chest and activated by patients double clicking a button on the system. A generally imperceptible electrical current then actively delivers a small dose of the short-acting opioid analgesic fentanyl directly through the skin and into the systemic circulation.

IONSYS was approved by both the U.S. Food and Drug Administration (FDA) and the European Medicines Agency (EMA) in 2006; however, IONSYS is not currently marketed anywhere in the world. Before marketing IONSYS, regulatory approval must be sought from both the FDA and EMA for new patient safety features being developed into the system. Additionally, FDA approval will require an acceptable Risk Evaluation and Mitigation Strategy (REMS) to manage risks associated with fentanyl contained in IONSYS, which is subject to potential abuse and misuse.

“We believe IONSYS is an exceptional asset around which to form Incline Therapeutics,” said Alan Levy, Ph.D., Chief Executive Officer and Director of Incline. “We look forward to building upon the product to accelerate the development of IONSYS toward potential approval and launch.”

Series A Financing

The $43 million Series A equity financing was led by Frazier Healthcare Ventures. The venture syndicate also includes 5AM Ventures, Technology Partners, Adams Street Partners, Saints Capital Partners, and Emergent Medical Partners. In connection with the financing, James Topper, M.D., Ph.D., General Partner of Frazier Healthcare Ventures, James Young, Ph.D., Venture Partner of 5AM Ventures, Jim Glasheen, Ph.D., General Partner of Technology Partners, and Terry Gould, Partner and Head of Direct Investments of Adams Street Partners, have joined the Incline board of directors.

“Incline represents a unique investment opportunity around a late-stage product candidate with seven completed Phase III clinical trials, prior regulatory approvals, and substantial manufacturing capacity,” said Dr. Topper of Frazier Healthcare Ventures. “Further, we are pleased to join such an experienced management team, several of whom we have worked closely with in previous ventures.”

Cadence Option Agreement

Separately, Cadence Pharmaceuticals, Inc. announced today that Incline has granted Cadence an option to acquire the company. In connection with the transaction, Ted Schroeder, President and CEO of Cadence, has been appointed as Cadence's representative on the Incline board of directors.

About Inpatient Post-Operative Pain Management

More than 20 million inpatient surgical procedures requiring pain management are estimated to occur in the United States each year. Current treatment methods include bolus injections, regional nerve blockade, epidural infusions, and intravenous patient-controlled analgesia (IV PCA). IV PCA systems are controlled infusions pumps that deliver a prescribed amount of an intravenous opioid when a patient activates a button connected to the pump. Although it is estimated that approximately 50% of patients receive IV PCA after surgery, IV PCA has been associated with programming, medication, and pump errors, IV line infections, needlestick injuries, and limited patient mobility.

About Incline Therapeutics, Inc.

Incline Therapeutics is a hospital-focused specialty pharmaceutical company focused on the development of IONSYS (fentanyl iontophoretic transdermal system). Incline is financed by leading life science venture capital firms and led by a management team with significant pharmaceutical and medical device industry experience. The company is based in Redwood City, California.

Incline™ is a trademark of Incline Therapeutics, Inc.

Cadence™ is a trademark of Cadence Pharmaceuticals, Inc.

# # #

Contact: David Socks

President and Chief Operating Officer

Incline Therapeutics, Inc.

Phone: 858-436-1414

Schedule 1.4

ALZA Third Party Licenses

Confidential treatment omitted and filed separately with the Securities and Exchange Commission. A total of one page was omitted.

[**].

Schedule 1.18

Fentanyl Analogs

Confidential treatment omitted and filed separately with the Securities and Exchange Commission. A total of two pages were omitted.

[**].

Schedule 1.28

Licensed Know-How

The following invention records with respect to the ALZA Product, in each case only to the extent available and applicable. It is expressly understood by Incline that ALZA makes no representation that the invention records provided to Incline are comprehensive or complete individually or in aggregate. Incline agrees and acknowledges that ALZA shall be obligated to provide to Incline only those records which ALZA has identified as of the Closing Date as contained within its storage sites and pertaining to the items listed below.

Confidential treatment omitted and filed separately with the Securities and Exchange Commission. A total of one page was omitted.

[**].

Schedule 1.29

Licensed Patents

Patents



Country	Filing Date	Filing No.	Grant Date	Grant No.	Short Title

Confidential Materials omitted and filed separately with the Securities and Exchange Commission. A total of 29 pages were omitted.

[**]

Schedule 1.44

Product Domain Names



Domain Name	Registry	Registration Date	Expiration Date

Confidential treatment omitted and filed separately with the Securities and Exchange Commission. A total of three pages were omitted.

[**].

Schedule 1.45

Product Trademarks

Confidential treatment omitted and filed separately with the Securities and Exchange Commission. A total of ten pages were omitted.

[**].

Schedule 3.1.2(a)

Clinical Trial Data

The following Clinical Trial Data with respect to the ALZA Product, in each case only to the extent available and applicable. It is expressly understood by Incline that ALZA makes no representation that the Clinical Trial Data is comprehensive or complete individually or in aggregate. Incline agrees and acknowledges that ALZA shall be obligated to provide to Incline only those records and documents which ALZA has identified as of the Closing Date as contained within its storage sites and pertaining to the items listed below.

Confidential treatment omitted and filed separately with the Securities and Exchange Commission. A total of two pages were omitted.

[**].

Schedule 3.1.2(b) and 3.1.2(c)

Manufacturing Data and Other Test Data

The following Manufacturing and Other Test Data with respect to the ALZA Product, in each case only to the extent available and applicable. It is expressly understood by Incline that ALZA makes no representation that the Manufacturing Data and Other Test Data is comprehensive or complete, individually or in aggregate. Incline agrees and acknowledges that ALZA shall be obligated to provide to Incline only those records and documents which ALZA has identified as of the Closing Date as contained within its storage sites and pertaining to the items listed below.

Confidential treatment omitted and filed separately with the Securities and Exchange Commission. A total of one page was omitted.

[**].

Schedule 3.1.4

Manufacturing Equipment

Confidential treatment omitted and filed separately with the Securities and Exchange Commission. A total of one page was omitted.

[**].

Schedule 3.1.5

Other Tangible Items

The following Other Tangible Items to the extent available and applicable. It is expressly understood by Incline that ALZA makes no representation that the Other Tangible Items are available or functional.

Confidential treatment omitted and filed separately with the Securities and Exchange Commission. A total of one page was omitted.

[**].

Schedule 3.1.6

Market Research Materials

The following Market Research Materials with respect to the ALZA Product, in each case only to the extent available and applicable. It is expressly understood by Incline that ALZA makes no representation that the Market Research Materials are comprehensive or complete, individually or in aggregate. Incline agrees and acknowledges that ALZA shall be obligated to provide to Incline only those records and documents which ALZA has identified as of the Closing Date as contained within its storage sites and pertaining to the items listed below.

Confidential treatment omitted and filed separately with the Securities and Exchange Commission. A total of one page was omitted.

[**].

Schedule 3.1.7

Governmental Filings and Authorizations

[**]

The following Governmental Filings and Authorizations and related materials with respect to the ALZA Product IND, NDA and MAA, in each case only to the extent available and applicable. It is expressly understood by Incline that ALZA makes no representation that the Governmental Filings and Authorizations documentation is comprehensive or complete, individually or in aggregate. Incline agrees and acknowledges that ALZA shall be obligated to provide to Incline only those records and documents which ALZA has identified as of the Closing Date as contained within its storage sites and pertaining to the items listed below.

Confidential treatment omitted and filed separately with the Securities and Exchange Commission. A total of one page was omitted.

[**].

Schedule 4.5

Third Party Confidentiality Obligations

Confidential treatment omitted and filed separately with the Securities and Exchange Commission. A total of two pages were omitted.

[**].

Schedule 4.7.3

NDA and MAA Maintenance Reimbursements


•	€[**] for MAA Annual Maintenance Fees paid in 2010.

Schedule 4.8

Purchase Price Allocation

Machinery & Equipment $[**]

Patents, Trademarks and Other


Intangible Property	Any milestone and royalty payments made pursuant to Article 5 of this Agreement.

Schedule 4.11.5

ALZA Employees Not Subject to Non-Solicit

[**]

Schedule 8.2

ALZA Employees

[**]



				Exhibit 10.2
	Confidential Materials omitted and filed separately with the Securities and Exchange Commission. Asterisks denote omissions.

Execution Version

LICENSE AND COLLABORATION AGREEMENT

by and between

ALNYLAM PHARMACEUTICALS, INC.

and

THE MEDICINES COMPANY

LICENSE AND COLLABORATION AGREEMENT

THIS LICENSE AND COLLABORATION AGREEMENT (this “ Agreement ”), effective as of February 3, 2013 (the “ Effective Date ”), by and between Alnylam Pharmaceuticals, Inc., a corporation organized and existing under the laws of the State of Delaware (“ Alnylam ”) and, The Medicines Company, a corporation organized and existing under the laws of Delaware (“ MedCo ”).

RECITALS:

WHEREAS , Alnylam owns or controls certain fundamental intellectual property relating to RNA interference, and is developing proprietary therapeutic products in the Field Targeting the human PCSK9 gene, including ALN-PCS02 and ALN-PCSsc (all as defined below);

WHEREAS , MedCo desires to develop and commercialize such products in the Territory (as defined below);

WHEREAS , Alnylam desires to collaborate with MedCo in the further development of such products in the Territory as set forth herein; and

WHEREAS , Alnylam and MedCo believe that a license and collaboration for such purpose on the terms and conditions of this Agreement would be desirable.

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

1. DEFINITIONS

Unless specifically set forth to the contrary herein, the following terms, whether used in the singular or plural, shall have the respective meanings set forth below:


1.1	[Intentionally Omitted].

1.2 “ Acquired Party ” has the meaning set forth in Section 6.7.

1.3 “Acquirer” has the meaning set forth in Section 6.7.

1.4 “ Additional Alnylam In-Licenses ” means the agreements set forth in Section C of Schedule D .

1.5 “ Affiliate ” means, with respect to a Person, any other Person which controls, is controlled by, or is under common control with the applicable Person. For purposes of this definition, “control” shall mean: (a) in the case of corporate entities, direct or indirect ownership of at least fifty percent (50%) of the stock or shares (or such lesser percentage which is the maximum allowed to be owned by a foreign corporation in a particular jurisdiction) entitled to vote for the election of directors, or otherwise having the power to control or direct the affairs of such Person; and (b) in the case of non-corporate entities, direct or indirect ownership of at least fifty percent (50%) of the equity interest or the power to direct the management and policies of such non-corporate entities.

1.6 “ ALN-PCS02 ” means the siRNA Product Controlled by Alnylam comprising the siRNA [**]) formulated in a lipid-based nanoparticle, as further described on Schedule A .

1.7 “ ALN-PCSsc ” means an siRNA Product Controlled by Alnylam comprising an siRNA conjugated with a triantennary Ga1NAc molecule, as further described on Schedule B .

1.8 “ Alnylam Collaboration IP ” means (a) any improvement, discovery or Know-How, patentable or otherwise, first conceived or reduced to practice or, with respect to inventions and discoveries other than patentable inventions, otherwise identified, discovered, made or developed, solely by individuals who are employees, agents or consultants of Alnylam or its Affiliates and Controlled by Alnylam at any time during the Term, in each case in the conduct of the Collaboration, and (b) any Patent Rights which claim such improvements, discoveries or Know-How. Alnylam Collaboration IP excludes Alnylam's interest in Joint Collaboration IP. Patent Rights constituting Alnylam Collaboration IP are either Alnylam Core Technology Patent Rights or Alnylam Product-Specific Patent Rights, as the case may be.

1.9 “ Alnylam Core Technology Patent Rights ” means Patent Rights Controlled by Alnylam at any time during the Term that are reasonably necessary or useful to Develop, Manufacture or Commercialize Licensed Products, in each case other than Alnylam Product-Specific Patent Rights and Patent Rights comprising Joint Collaboration IP. Alnylam Core Technology Patent Rights includes the Patent Rights set forth on Schedule C-1 and may include Patent Rights that constitute Alnylam Collaboration IP.

1.10 “Alnylam Indemnitees” has the meaning set forth in Section 10.1.

1.11 “Alnylam In-Licenses” means (a) the Existing Alnylam In-Licenses and (b) any agreement between Alnylam (or its Affiliates) and a Third Party entered into after the Effective Date pursuant to which Alnylam acquires Control of Know-How or Patent Rights that are reasonably necessary or useful to Develop, Manufacture or Commercialize Licensed Products in the Field in the Territory, but in the case of any such agreement described in clause (b), solely to the extent that such agreement is designated as an Alnylam In-License pursuant to Section 6.4.2.2.

1.12 “Alnylam Know-How” means Know-How Controlled by Alnylam at any time during the Term that is reasonably necessary or useful to Develop, Manufacture and/or Commercialize Licensed Products in the Field in the Territory.

1.13 “ Alnylam Patent Rights ” means Alnylam Core Technology Patent Rights and Alnylam Product-Specific Patent Rights.

1.14 “ Alnylam Product-Specific Patent Rights ” means Patent Rights Controlled by Alnylam at any time during the Term that solely claim (a) an siRNA Targeting the human PCSK9 gene contained in a Licensed Product, and pharmaceutical compositions thereof; (b) an siRNA Product or specific components thereof to the extent that such components are unique to said siRNA Products; (c) methods of using the compositions described in clause (a) or (b) above as a human therapeutic or prophylactic, or to Target the human PCSK9 gene, or to inhibit expression of human PCSK9, and foreign equivalents of such method claims; (d) methods and compositions directed to the synthesis or analysis of the compositions described in clause (a) or (b); or (e) Alnylam Collaboration IP that is applicable solely to a Licensed Product; provided, however , that (y) any such patents that include claims that are directed to subject matter applicable to siRNA or siRNA delivery in general will not be considered Alnylam Product-Specific Patent Rights but will be considered Alnylam Core Technology Patent Rights. Alnylam Product-Specific Patent Rights

excludes Joint Collaboration IP, includes the Patent Rights set forth on Schedule C-2 and may include Patent Rights that constitute Alnylam Collaboration IP.

1.15 “Alnylam Technology” means, collectively, Alnylam Know-How, Alnylam Patent Rights, Alnylam Collaboration IP and Alnylam's interest in Joint Collaboration IP.

1.16 “Bankrupt Party” has the meaning set forth in Section 6.5.

1.17 “Breaching Party” has the meaning set forth in Section 12.2.2.

1.18 “ Bulk Drug Product ” means formulated Bulk Drug Substance in bulk form prior to filling and finishing.

1.19 “ Bulk Drug Substance ” means an siRNA (including chemical modifications and covalent conjugates) or other active ingredient in bulk form manufactured for use as an active pharmaceutical ingredient in a Licensed Product.

1.20 “ Business Day ” means a day on which banking institutions in Boston, Massachusetts, USA and Parsippany, New Jersey, USA are open for business, excluding any Saturday or Sunday.

1.21 “Calendar Quarter” means the respective periods of three (3) consecutive calendar months ending on March 31, June 30, September 30 and December 31 of each Calendar Year; provided , that (a) the first Calendar Quarter of the Term shall begin on the Effective Date and end on the first to occur of March 31, June 30, September 30 or December 31 thereafter and the last Calendar Quarter of the Term shall end on the last day of the Term, and (b) the first Calendar Quarter of a Royalty Term for a Licensed Product in a country shall begin on the First Commercial Sale of such Licensed Product in such country and end on the first to occur of March 31, June 30, September 30 or December 31 thereafter and the last Calendar Quarter of a Royalty Term shall end on the last day of such Royalty Term.

1.22 “Calendar Year” means each successive period of twelve (12) months commencing on January 1 and ending on December 31; provided , that (a) the first Calendar Year of the Term shall begin on the Effective Date and end on the first December 31 thereafter and the last Calendar Year of the Term shall end on the last day of the Term, and (b) the first Calendar Year of a Royalty Term for a Licensed Product in a country shall begin on the First Commercial Sale of such Licensed Product in such country and end on the first December 31 thereafter and the last Calendar Year of the Term shall end on the last day of such Royalty Term.

1.23 “ Challenge ” has the meaning set forth in Section 12.2.4.

1.24 “ Challenging Party ” has the meaning set forth in Section 12.2.4.

1.25 “ Change of Control ” means, with respect to a Party, any of the following: (a) the sale or disposition of all or substantially all of the assets of such Party or its direct or indirect controlling Affiliate to a Third Party, other than to an entity of which more than fifty percent (50%) of the voting capital stock are owned after such sale or disposition by shareholders of such Party or its direct or indirect controlling Affiliate (in either case, whether directly or indirectly through any parent entity); or (b) (i) the acquisition by a Third Party, alone or together with any of its Affiliates, other than an employee benefit plan (or related trust) sponsored or maintained by such Party or any of its Affiliates, of more than fifty percent (50%) of the outstanding shares of voting capital stock of such Party or its direct or indirect controlling Affiliate, or

(ii) the acquisition, merger or consolidation of such Party or its direct or indirect controlling Affiliate with or into another Person, other than, in the case of this clause (b), an acquisition or a merger or consolidation of such Person or its controlling Affiliate in which the holders of shares of voting capital stock of such Person or its controlling Affiliate, as the case may be, immediately prior to such acquisition, merger or consolidation will beneficially own, directly or indirectly, at least fifty percent (50%) of the shares of voting capital stock of the acquiring Third Party or the surviving corporation in such acquisition, merger or consolidation, as the case may be, immediately after such acquisition, merger or consolidation.

1.26 “ Clinical Study ” means a Phase I Study, Phase II Study, Phase III Study, or Pivotal Study, as applicable; but excluding any Post-Approval Studies.

1.27 “ Collaboration ” means the activities of the Parties in the Development and Manufacture of Licensed Products under this Agreement and/or the Development Supply Agreement.

1.28 “Combination Product” has the meaning set forth in Section 1.89.

1.29 “[**]” has the meaning set forth in Section 7.4.4.

1.30 “[**]” has the meaning set forth in Section 7.4.4.

1.31 “ Commercialization ” or “ Commercialize ” means any and all activities directed to marketing, promoting, distributing, importing, exporting, offering to sell and/or selling a product, including the conduct of Post-Approval Studies, and activities directed to obtaining pricing and reimbursement approvals, as applicable.

1.32 “ Commercially Reasonable Efforts ” means (a) with respect to the obligations of a Party under this Agreement that relate to the Development, Manufacture or Commercialization of a Licensed Product, the carrying out of such obligations in a diligent, expeditious and sustained manner using efforts and resources, including reasonably necessary personnel and financial resources, that biopharmaceutical companies of comparable size to, and comparable resources of, such Party typically devote to their own products of similar market potential at a similar stage in development or product life, taking into account the following factors to the extent reasonable and relevant: issues of safety and efficacy, product profile, competitiveness of such Licensed Product and alternative Third Party products (but not alternative products Controlled by the Party to which the efforts obligation applies which are not Licensed Products) in the marketplace, the patent or other proprietary position of such Licensed Product, the regulatory structure involved and the potential profitability of such Licensed Product marketed or to be marketed, but excluding from consideration any financial considerations of MedCo to Alnylam under this Agreement; provided , however , that to the extent the obligations of MedCo under this Agreement relate to the Development, Manufacture or Commercialization of a Licensed Product for China, such efforts and resources shall instead be those that MedCo typically devotes to its own products of similar market potential at a similar stage in development or product life, taking into account the factors set forth above; and (b) with respect to other obligations under this Agreement, the carrying out of such obligations in a diligent, expeditious and sustained manner using efforts and resources, including reasonably necessary personnel and financial resources, that biopharmaceutical companies of comparable size and resources typically devote to similar obligations.

1.33 “ Competitive Infringement ” has the meaning set forth in Section 11.4.1.

1.34 “ Confidential Information ” means with respect to a Party but subject to Section 8.1(a)(i)-(iv), any and all confidential or proprietary information and data, including (with respect to Alnylam as the

disclosing Party) Alnylam Technology, (with respect to MedCo as the disclosing Party) MedCo Technology, and all other scientific, pre-clinical, clinical, regulatory, manufacturing, marketing, financial and commercial information or data, whether communicated in writing or orally or by any other method, which is provided by one Party to the other Party in connection with this Agreement. Alnylam Technology is Confidential Information of Alnylam. MedCo Technology is Confidential Information of MedCo. Joint Collaboration IP is the Confidential Information of both Parties, with each Party being considered both the disclosing Party and the receiving Party.

1.35 “ Control ”, “ Controls ” or “ Controlled by ” means, with respect to any Know-How, Patent Right or other intellectual property right and a Party, the ability of such Party or its Affiliates (whether by ownership or license, other than pursuant to a license granted under this Agreement) to assign, transfer, or grant access to, or a license or sublicense of, such item or right as provided for herein without violating the terms of any agreement or other arrangement with any Third Party; provided that, with respect to rights to any Third Party Know-How, Patent Rights or other intellectual property right that are licensed to, or otherwise obtained by, (i) a Party or its Affiliates pursuant to an agreement entered into by such Party or any of its Affiliates after the Effective Date or (ii) Alnylam or its Affiliates pursuant to any Additional Alnylam In-License, such Third Party Know-How, Patent Rights or other intellectual property right shall be deemed not to be under the Control of such Party or its Affiliates, or Alnylam or its Affiliates, respectively, unless and until the agreement pursuant to which such rights are obtained becomes an In-License pursuant to Section 6.4.2.

1.36 “ Costs ” means (a) with respect to the Development, (i) the direct and documented out-of-pocket costs and expenses incurred by a Party or its Affiliates in conducting activities under the Transaction Agreements, and (ii) FTE Costs of internal personnel that are attributable or reasonably allocable to such activities, in each case as determined in accordance with GAAP, and (b) with respect to the supply of Licensed Product by Alnylam pursuant to Sections 5.1(a)(i) and (ii), the reasonable internal and external costs of Alnylam incurred in Manufacturing or having Manufactured such Licensed Product (i) to the extent that such Licensed Product is Manufactured by Alnylam, the fully allocated cost of Manufacture of such Licensed Product, consisting of direct material and direct labor costs, plus Manufacturing overhead attributable to such Licensed Product (including facilities start-up costs, all directly incurred Manufacturing variances and a reasonable allocation of related Manufacturing administrative and facilities costs for such Licensed Product, but excluding corporate administrative overhead and/or costs associated with excess capacity), all calculated strictly in accordance with GAAP consistently applied by Alnylam, and (ii) to the extent that such Licensed Product is Manufactured by a Third Party manufacturer, the actual fees paid by Alnylam to the Third Party for the Manufacture, supply and packaging of such Licensed Product and any reasonable costs, including direct labor costs, actually incurred by Alnylam in managing or overseeing the Third Party relationship.

1.37 “ Cover ,” “ Covering ” or “ Covers ” means, as to a product and Patent Rights, that, in the absence of a license granted under, or ownership of, such Patent Rights, the research, development, manufacture, use, offer for sale, sale, or importation of such product would infringe such Patent Rights or, as to a pending claim included in such Patent Rights, the research, development, manufacture, use, offer for sale, sale, or importation of such product would infringe such Patent Rights if such pending claim were to issue in an issued patent.

1.38 “ Development ,” “ Developing ” or “ Develop ” means the research and development of Licensed Products, including activities related to the generation, characterization, optimization, construction, expression, use and production of Licensed Products, any other research and development activities related to the testing and qualification of Licensed Products, including toxicology studies,

statistical analysis and report writing, pre-clinical testing, Clinical Studies and regulatory affairs, product approval and registration activities, but excluding Post-Approval Studies.

1.39 “ Development Costs Cap ” has the meaning set forth in Section 2.3.1.

1.40 “ Development Supply Agreement ” has the meaning set forth in Section 5.1.

1.41 “ Dispute ” has the meaning set forth in Section 13.12.

1.42 “ Effective Date ” has the meaning set forth in the preamble.

1.43 “ EMA ” means the European Medicines Agency and any successor governmental authority having substantially the same function.

1.44 “ EU ” means the European Union, as its membership may be altered from time to time, and any successor thereto.

1.45 “[**]” has the meaning set forth in Section 7.4.4.

1.46 [Intentionally Omitted].

1.47 “Existing Alnylam In-Licenses” means (a) the Third Party agreements identified as such in Section A of Schedule D and (b) any Additional Alnylam In-License included within the definition of Existing Alnylam In-Licenses pursuant to Section 6.4.2.3.

1.48 “Existing Alnylam Third Party Agreements” means the Third Party agreements identified as such in Section B of Schedule D .

1.49 “ Extra Early Development Costs ” has the meaning set forth in Section 2.3.1.

1.50 “ FDA ” means the United States Food and Drug Administration and any successor governmental authority having substantially the same function.

1.51 “ Field” means the treatment, palliation and/or prevention of all human diseases.

1.52 “ Finished Product ” means the finished product formulation of a Licensed Product, containing Bulk Drug Product, filled into unit packages (but excluding, in the case of supply by Alnylam or its Affiliates, any automated delivery device such as an “autoinjector”) for final labeling and packaging.

1.53 “First Commercial Sale” means, with respect to a Licensed Product in a country, the first sale by MedCo or its Related Parties for end use or consumption of such Licensed Product in such country after all Regulatory Approvals legally required for such sale have been granted by the Regulatory Authority of such country.

1.54 “ FTE ” means [**] hours of work devoted to or in support of the Development or Manufacture of a Licensed Product, that is carried out by one or more qualified scientific or technical employees or contract personnel of a Party or its Affiliates.

1.55 “ FTE Cost ” means, for any period, the FTE Rate multiplied by the number of FTEs in such period; provided , however , that for purposes of such calculation, no individual may account for more than one FTE in any Calendar Year.

1.56 “ FTE Rate ” means [**] U.S. Dollars ($[**]) per FTE, increased annually beginning on January 1, 2014 and thereafter on January 1 of each succeeding year by the percentage increase in the CPI as of December 31 of the then most recently ended calendar year over the level of the CPI on December 31, 2012. As used in this definition, “ CPI ” shall mean the Consumer Price Index - Urban Wage Earners and Clerical Workers, U.S. City Average, All Items, 1982-84 = 100, published by the United States Department of Labor, Bureau of Labor Statistics (or its successor equivalent index) in the United States.

1.57 “ GAAP ” means generally accepted accounting principles as practiced in the United States or, to the extent applicable, IFRS (International Financial Reporting Standards).

1.58 “ Generic Competition ” has the meaning set forth in Section 7.4.3.

1.59 “ Generic Product ” means, with respect to a Licensed Product in a country, another pharmaceutical product that (a) is sold by a Third Party other than a Related Party of MedCo under license from Medco in such country, (b) is authorized for use in such country in one or more of the indications for which such Licensed Product has Regulatory Approval in such country, (c) contains the same active ingredient(s) as such Licensed Product or a bioequivalent thereof, and (d) was approved for sale in such country by reference to the same or a subset of the same information that was used for obtaining the Regulatory Approval for such Licensed Product in such country without such Third Party being granted a license to such information by MedCo or its Related Parties.

1.60 “ Governmental Authority ” means any applicable government authority, court, tribunal, arbitrator, agency, legislative body, commission or other instrumentality of (a) any government of any country or territory, (b) any state, province, county, city or other political subdivision thereof or (c) any supranational body.

1.61 “ IND ” means an Investigational New Drug application, Clinical Trial Application or similar application or submission for approval to conduct human clinical investigations filed with or submitted to a Regulatory Authority in conformance with the requirements of such Regulatory Authority.

1.62 “ Indemnitee ” has the meaning set forth in Section 10.3.

1.63 “ Initial Development Budget ” has the meaning set forth in Section 2.2.1.

1.64 “ Initial Development Plan ” has the meaning set forth in Section 2.2.1.

1.65 “ In-Licenses ” means, collectively, the Alnylam In-Licenses and the MedCo In-Licenses.

1.66 “ Joint Collaboration IP ” means, collectively, (a) any improvement, discovery or Know-How, patentable or otherwise, first conceived or reduced to practice or, with respect to inventions and discoveries other than patentable inventions, otherwise identified, discovered, made or developed, jointly by individuals who are employee(s), agent(s) or consultant(s) of Alnylam or its Affiliates, on the one hand, and individuals who are employee(s), agent(s) or consultant(s) of MedCo or its Affiliates, on the other hand, in the conduct of the Collaboration, and (b) any Patent Rights which claim such improvements, discoveries or Know-How during the Term.

1.67 “Joint Steering Committee” or “JSC” means the joint steering committee as more fully described in Section 4.1.

1.68 “ Know-How ” means any biological materials and other tangible materials or intangible information, including inventions, practices, methods, protocols, formulas, knowledge, know-how, trade secrets, processes, assays, skills, experience, techniques, governmental or regulatory correspondence (including conversation logs), and results of experimentation and testing, including pharmacological, toxicological and pre-clinical and clinical test data and analytical and quality control data, patentable or otherwise.

1.69 “ Laws ” means all applicable laws, statutes, rules, regulations, orders, judgments, injunctions, ordinances or other pronouncements having the binding effect of law of any Governmental Authority.

1.70 “Lead Product” has the meaning set forth in Section 2.2.2.

1.71 “Licensed Compound” has the meaning set forth in Section 1.89.

1.72 “ Licensed Product ” means any siRNA Product, including ALN-PCS02 and ALN-PCSsc.

1.73 “ Licensing Party ” has the meaning set forth in Section 6.4.2.2.

1.74 “ Licensor Party ” has the meaning set forth in Section 12.2.4.

1.75 “ Losses ” has the meaning set forth in Section 10.1.

1.76 “ Major Market Country ” means the United States, the United Kingdom, France, Germany, Italy, Spain, Japan, or China.

1.77 “ Manufacturing ” or “ Manufacture ” means, as applicable, all activities associated with the production, manufacture, processing, filling, finishing, packaging, labeling, shipping, and storage of a Licensed Product (including Bulk Drug Substance, Bulk Drug Product and Finished Product), including process and formulation development, process validation, stability testing, manufacturing scale-up, pre-clinical, clinical and commercial manufacture and analytical development, product characterization, quality assurance and quality control development, testing and release.

1.78 “ MedCo Collaboration IP ” means (a) any improvement, discovery or Know-How, patentable or otherwise, first conceived or reduced to practice or, with respect to inventions and discoveries other than patentable inventions, otherwise identified, discovered, made or developed, solely by individuals who are employees, agents or consultants of MedCo or its Affiliates and Controlled by MedCo at any time during the Term, in each case in the conduct of the Collaboration or otherwise under this Agreement, and (b) any Patent Rights which claim such improvements, discoveries or Know-How. MedCo Collaboration IP excludes MedCo's interest in Joint Collaboration IP.

1.79 “ MedCo Commercialization Plan ” has the meaning set forth in Section 3.2.

1.80 “ MedCo Development Plan ” has the meaning set forth in Section 2.2.3.

1.81 “ MedCo Improvements ” means any improvement, discovery or Know-How, patentable or otherwise, that (a) is first conceived or reduced to practice, or with respect to inventions and discoveries other than patentable inventions, otherwise identified, discovered, made or developed, solely by individuals who are employees, agents or consultants of MedCo or its Affiliates in the course of conducting Development, Manufacturing or Commercialization activities with respect to Licensed Products under this Agreement, (b) is Controlled by MedCo or its Affiliates, and (c) constitutes (i) a new use or method of use of, or a new indication for, a Licensed Product, or (ii) an improvement that would otherwise be dominated by Alnylam Technology, including, as applicable, formulation technology. For clarity, MedCo Improvements excludes device technology for the administration of a pharmaceutical product to a human.

1.82 “ MedCo Indemnitees ” has the meaning set forth in Section 10.2.

1.83 “ MedCo In-License ” means any agreement between MedCo (or its Affiliates) and a Third Party pursuant to which MedCo Controls Know-How or Patent Rights that are reasonably necessary or useful for the Development, Manufacture and/or Commercialization of Licensed Products in the Territory, but solely to the extent, if any, that such agreement is designated as a MedCo In-License pursuant to Section 2.4(b).

1.84 “MedCo Know-How” means Know-How in MedCo Collaboration IP and MedCo's rights in Know-How comprising Joint Collaboration IP.

1.85 “ MedCo Patent Rights ” means Patent Rights in MedCo Collaboration IP (other than MedCo's rights in Patent Rights comprising Joint Collaboration IP).

1.86 “ MedCo Technology ” means, collectively, MedCo Know-How, MedCo Patent Rights, MedCo Collaboration IP and MedCo's interest in Joint Collaboration IP.

1.87 “MicroRNA Mimic” means a double-stranded or single-stranded oligonucleotide or analog thereof with a substantially similar base composition as a particular microRNA and which is designed to mimic the activity of such microRNA.

1.88 “NDA” means a New Drug Application, Biologics License Application, Marketing Authorization Application or similar application or submission filed with a Regulatory Authority in a country or group of countries to obtain marketing approval for a biological, pharmaceutical or other therapeutic or prophylactic product in that country or in that group of countries.

1.89 “ Net Sales ” means, for any period and for any country in the Territory, the total aggregate amount billed during such period in such country by MedCo, its Affiliates and its Sublicensees in such country for all sales of the Licensed Products to Third Parties (other than to a Sublicensee of MedCo or its Affiliates) after deducting, if not previously deducted, from the amount invoiced or received, the following deductions to the extent actually applied or taken with respect to such sales of Licensed Products:

(a) discounts (including trade, cash and quantity discounts), cash and non-cash coupons, charge back payments and rebates granted to managed health care organizations or to federal, state and local governments, their agencies, and purchasers and reimbursers or to customers;

(b) actually granted credits, allowances, discounts to and chargebacks for claims, spoiled, damaged or outdated goods, rejections or returns of the Licensed Products, including Licensed Products returned in connection with recalls or withdrawals;

(d) actual freight and insurance costs incurred in transporting the Licensed Product to customers;

(e) discounts or rebates or other payments required by applicable Law, including any governmental special medical assistance programs;

(f) customs duties, surcharges and other governmental charges incurred in connection with the exportation or importation of the Licensed Product;

(g) fee-for-service wholesaler fees, GPO administrative fees, inventory management fees paid to wholesalers, and any similar fees reasonably allocated to the Licensed Product, to the extent consistent with the usual course of dealing of MedCo or the applicable Related Party for its products other than a Licensed Product;

(h) amounts that are written off as uncollectible in accordance with the accounting procedures of MedCo or the applicable Related Party, consistently applied; provided , that if any such written-off amounts are subsequently collected, such collected amounts shall be included in Net Sales in the period in which they are subsequently collected; and

(i) any other deduction to revenue that is not described above which is required to be recorded as an adjustment to gross revenue for financial reporting purposes.

Such amounts shall be determined from the books and records of MedCo or its Related Parties, maintained in accordance with GAAP, consistently applied.

If any Licensed Product is sold as a Combination Product (as defined below), the Net Sales from the Combination Product, for the purposes of determining milestones and royalties, shall be determined by multiplying the Net Sales of the Combination Product during the applicable Calendar Quarter, by the fraction, A/(A+B), where A is the average sale price of a Sole Compound Product (as defined below) when sold separately in finished form and B is the average sale price of the other active compounds or active ingredients included in the Combination Product when sold separately in finished form, in each case during the applicable Calendar Quarter or, if sales of both the Sole Compound Product and the other active compounds or active ingredients did not occur in such period, then in the most recent Calendar Quarter in which sales of both occurred. If such average sale price cannot be determined for both the Sole Compound Product and all other active compounds or active ingredients included in the Combination Product, Net Sales for the purposes of determining milestones and royalties shall be calculated by multiplying the Net Sales of the Combination Product by the fraction of C/(C+D) where C is the fair market value of the Sole Compound Product and D is the fair market value of all other active compounds or active ingredients included in the Combination Product. In such event, MedCo shall in good faith make a determination of the respective fair market values of the Sole Compound Product and all other active compounds or active ingredients included in the Combination Product, and shall notify Alnylam of such determination and provide Alnylam with MedCo's basis for such determination. If Alnylam in good faith does not agree with such determination, Alnylam shall give MedCo written notice of its disagreement within thirty (30) days after receiving the relevant report pursuant to Sections 7.3 or 7.4, and the provisions of Section 13.12 shall apply. “ Licensed Compound ” means an siRNA Product subject to a license granted by Alnylam to MedCo

under Section 6.1. “ Combination Product ” means a product that contains one or more Licensed Compounds and one or more therapeutically active compounds or active ingredients that are not Licensed Compounds. “ Sole Compound Product ” means a product containing no active compounds or active ingredients other than a Licensed Compound.

In the case of any sale or other disposal for value, such as barter or counter-trade, of Licensed Product, or part thereof, other than in an arm's length transaction exclusively for cash, Net Sales shall be calculated as above on the value of the non-cash consideration received or the fair market price (if higher) of the Licensed Product in the country of sale or disposal, as determined in accordance with GAAP.

Sales between or among MedCo and its Related Parties shall be excluded from the computation of Net Sales, but Net Sales shall include sales to the first Third Party (other than a Sublicensee of MedCo or its Affiliate) thereafter by MedCo or its Related Parties.

1.90 Non-Acquired Party ” has the meaning set forth in Section 6.7.

1.91 “Non-Bankrupt Party” has the meaning set forth in Section 6.5.

1.92 “Non-Breaching Party” has the meaning set forth in Section 12.2.2.

1.93 “Party” means MedCo and/or Alnylam.

1.94 “Patent Rights” means all patents (including all reissues, extensions, substitutions, confirmations, re-registrations, re-examinations, supplementary protection certificates and patents of addition) and patent applications (including all provisional applications, requests for continuation, continuations, continuations-in-part and divisionals) and all equivalents of the foregoing in any country of the world.

1.95 “Payee” has the meaning set forth in Section 7.9.1.

1.96 “Paying Party” has the meaning set forth in Section 7.9.1.

1.97 “ [**] ” means the [**].

1.98 “ Person ” shall mean any natural person, corporation, unincorporated organization, partnership, association, joint stock company, joint venture, limited liability company, trust, Governmental Authority, or any other entity.

1.99 “ Pharmacovigilance Agreement ” has the meaning set forth in Section 2.6.3.

1.100 “Phase I Completion” means [**].

1.101 “ Phase I Study ” means a study in humans which provides for the introduction into humans of a product, conducted in healthy volunteers or patients, to obtain initial information on product safety, tolerability, pharmacological activity or pharmacokinetics, as more fully defined in 21 C.F.R. § 312.21(a) (or the equivalent thereof outside the United States).

1.102 “Phase I/II Study” means a single study in humans that includes a Phase I Study and a Phase II Study.

1.103 “ Phase II Study ” means a study in humans of the safety, dose ranging or efficacy of a product, as further defined in 21 C.F.R. § 312.21(b) (or the equivalent thereof outside the United States).

1.104 “ Phase III Study ” means a study in humans of the efficacy and safety of a product, which is prospectively designed to demonstrate statistically whether such product is effective and safe for use in a particular indication in a manner sufficient (alone or together with one or more other such studies) to file an application for Regulatory Approval for such product, as further defined in 21 C.F.R. § 312.21(c) (or the equivalent thereof outside the United States).

1.105 “Pivotal Study” means a controlled pivotal clinical study of a product that is prospectively designed to demonstrate statistically whether such product is effective and safe for use in a particular indication in a manner sufficient to obtain Regulatory Approval to market such product in a Major Market Country.

1.106 “ Post-Approval Study ” means a clinical study of a Licensed Product initiated in a country after receipt of Regulatory Approval for such Licensed Product in such country.

1.107 “ Pre-Existing Affiliates ” has the meaning set forth in Section 6.7.

1.108 “ Product Trademark(s) ” means the trademark(s) and service mark(s) for use in connection with the distribution, marketing, promotion and sale of Licensed Products, and/or accompanying logos, trade dress and/or indicia of origin. Product Trademarks specifically excludes the corporate names and logos of the Parties and their Related Parties.

1.109 “ Regulatory Approval” means any and all approvals, licenses, registrations or authorizations of any Regulatory Authority that are necessary for the marketing and sale of a pharmaceutical product in a country or group of countries, including pricing and/or reimbursement approval in any country in which pricing and/or reimbursement approval is required by applicable Laws.

1.110 “ Regulatory Authority ” means any applicable government regulatory authority involved in granting approvals for the Development, Manufacturing and/or Commercialization of any Licensed Product, including the FDA and the EMA.

1.111 “Regulatory Lead” has the meaning set forth in Section 2.6.1.

1.112 “ Regulatory Exclusivity ” means, with respect to a Licensed Product in a country, any exclusive marketing right, data exclusivity right, orphan drug designation, or another exclusive right which would prevent a Generic Product version of such Licensed Product from being marketed or sold in such country, conferred by any Governmental Authority with respect to such Licensed Product in such country, other than a Patent Right.

1.113 “ Related Party ” means, with respect to a Party, such Party's Affiliates and permitted Sublicensees.

1.114 “Royalty Term” has the meaning set forth in Section 7.4.2.

1.115 “Sales Milestone” has the meaning set forth in Section 7.3.

1.116 “Selection Date” has the meaning set forth in Section 2.2.2.

1.117 “siRNA” means a double-stranded ribonucleic acid (RNA) composition designed to act primarily through an RNA interference mechanism that consists of either (a) two separate oligomers of native or chemically modified RNA that are hybridized to one another along a substantial portion of their lengths, or (b) a single oligomer of native or chemically modified RNA that is hybridized to itself by self-complementary base-pairing along a substantial portion of its length to form a hairpin.

1.118 “siRNA Product” means an siRNA composition designed to Target the human PCSK9 gene through an RNA interference mechanism, and which is not a microRNA, microRNA antagonist or MicroRNA Mimic.

1.119 “Sole Compound Product” has the meaning set forth in Section 1.89.

1.120 “ Sublicensed Party ” has the meaning set forth in Section 6.4.1.2.

1.121 “ Sublicensee ” means, with respect to MedCo or Alnylam, as the case may be, a Third Party to whom such Party grants a sublicense under any Alnylam Technology or MedCo Technology, respectively, to Develop, Manufacture or Commercialize a Licensed Product in the Field pursuant to Section 6.1.3 or Section 6.2.3, and, with respect to Alnylam, a Third Party to whom Alnylam grants a sublicense pursuant to Section 6.2.3 under any MedCo Improvements licensed to Alnylam pursuant to Section 6.2.2.

1.122 “ Sublicensor Party ” has the meaning set forth in Section 6.4.1.2.

1.123 “ Target” or “Targeting ” means, with respect to an siRNA and a target gene, that such siRNA antagonizes the expression of the messenger RNA of such target gene, and with respect to a product and a target gene, that such product contains an siRNA that antagonizes the expression of the messenger RNA of such target gene.

1.124 “Term” has the meaning set forth in Section 12.1.

1.125 “Territory” means all countries of the world.

1.126 “Third Party” means an entity other than the Parties and their Affiliates.

1.127 “ Third Party License Payment ” means royalties, upfront fees, milestones or other amounts payable under an In-License.

1.128 “Transaction Agreements” means, collectively, this Agreement, the Development Supply Agreement, any quality agreement between the Parties with respect to the supply of Licensed Product and the Pharmacovigilance Agreement.

1.129 “ United States ” means the United States of America and its territories, possessions and commonwealths.

1.130 “ Valid Claim ” means a claim of: (a) an issued and unexpired Patent Right, which claim has not been (i) revoked or held unenforceable, unpatentable or invalid by a decision of a court or other governmental agency of competent jurisdiction, which is not appealable or has not been appealed within the time allowed for appeal, or (ii) abandoned, disclaimed, denied or admitted to be invalid or unenforceable

through reissue, re-examination or disclaimer or otherwise, or (b) a patent application that has been pending less than [**] from the date of filing of the earliest patent application from which such patent application claims priority, which claim has not been cancelled, withdrawn or abandoned, or finally rejected by an administrative agency action from which no appeal can be taken.


2.	DEVELOPMENT COLLABORATION

2.1 Overview . Prior to the Effective Date, Alnylam has been engaged in the Development of Licensed Products. Under this Agreement, the Parties will collaborate in the further Development of Licensed Products, with Alnylam retaining all responsibility for the Development of Licensed Products until Phase I Completion as set forth in the Initial Development Plan, and MedCo assuming all other responsibility for the Development of Licensed Products. Initially the Collaboration will include the Development of both ALN-PCS02 and ALN-PSCsc in parallel. In accordance with the process described below, the Parties intend to select one of ALN-PCS02 or ALN-PSCsc for ongoing Development prior to the initiation of IND-enabling studies described in the Initial Development Plan.

2.2 Development Plans .

2.2.1 Initial Global Development Plan . The Development activities to be undertaken by Alnylam with respect to Licensed Products in the Territory prior to Phase I Completion will be set forth in a written workplan and timetable (the “ Initial Development Plan ”), which plan includes the Development activities to be undertaken (and all of which will be conducted by Alnylam) with respect to Licensed Products prior to Phase I Completion, and an estimated budget for such Development activities (“ Initial Development Budget ”). A draft of the Initial Development Plan is attached hereto as Schedule E . Alnylam shall submit an update to the Initial Development Plan for review and approval by the JSC of any material modifications or updates within forty-five (45) days of the Effective Date and thereafter on at least a semi-annual basis. The JSC shall have the right to modify the Initial Development Plan during such review and approval but only to the extent consistent with the budget and timelines contained in the Initial Development Plan attached hereto as Schedule E or as otherwise agreed by the Parties.

2.2.2 Selection of Lead Product . Within thirty (30) days after the Selection Date (as defined below), the JSC shall designate one of ALN-PCS02 and ALN-PCSsc as the product to continue to Develop under the Collaboration (the designated product, the “ Lead Product ”). “ Selection Date ” means [**].

2.2.3 MedCo Development Plan . The global Development activities to be undertaken with respect to Licensed Products by MedCo, or, to the extent agreed upon by the Parties in writing, by Alnylam following Phase I Completion, will be set forth in a rolling [**] written workplan and timetable (the “ MedCo Development Plan ”) to be prepared, subject to JSC approval, by MedCo. Within [**] days after filing of the IND for the Lead Product in accordance with the Initial Development Plan, MedCo shall provide the initial MedCo Development Plan to the JSC for review and approval. The MedCo Development Plan shall subsequently be updated by MedCo from time to time and no less frequently than twice per Calendar Year, subject to JSC approval.

2.3 Responsibilities for Development Activities .

2.3.1 Initial Development Plan . Alnylam shall be responsible for the global Development of Licensed Products and all Development activities with respect thereto through Phase I Completion as set forth in the Initial Development Plan. Alnylam shall be responsible for one hundred percent (100%) of all Costs for the Development activities that are conducted by Alnylam for the Licensed Product in the Territory

pursuant to the Initial Development Plan up to a total of (a) [**] dollars ($[**]), prior to the receipt by Alnylam of the Milestone Payment in Section 7.2(a)(i), or (b) [**] ($[**]), upon receipt by Alnylam of the Milestone Payment in Section 7.2(a)(i) (such amount in (a) or (b), the relevant “ Development Costs Cap ”); provided , however , that, Alnylam shall also bear any Costs for Development activities conducted by Alnylam pursuant to the Initial Development Plan that exceed such amount to the extent such excess Costs [**]. MedCo shall be responsible for all Costs with respect to Development activities for the Licensed Product pursuant to the Initial Development Plan that (a) are conducted by Alnylam, (b) are in excess of the then-applicable Development Costs Cap, and (c) are approved by the JSC (the “ Extra Early Development Costs ”).

2.3.2 MedCo Development Plan . MedCo shall be responsible for all Development activities with respect to Licensed Products under the MedCo Development Plan and, as and to the extent mutually agreed by the Parties in writing, Alnylam will assist MedCo in such Development activities under the MedCo Development Plan. MedCo shall be responsible for one hundred percent (100%) of all costs and expenses with respect to such Development activities that are conducted by or on behalf of MedCo and, if agreed upon in writing by the Parties, all Costs with respect to such Development activities that are conducted by Alnylam after Phase I Completion pursuant to the MedCo Development Plan.

2.3.3 Development and Certain Supply Costs . Within thirty (30) days following the end of each Calendar Quarter in which Costs are incurred by Alnylam under the Initial Development Plan or the MedCo Development Plan or pursuant to Section 5.1(a), Alnylam shall prepare and deliver to MedCo a quarterly report summarizing such Costs incurred during such period. Alnylam shall submit any additional information reasonably requested by MedCo related to such Costs included in its report within [**] Business Days after its receipt of such request. Alnylam shall issue concurrently an invoice to MedCo for any Extra Early Development Costs incurred by Alnylam and/or any Costs incurred by Alnylam pursuant to the MedCo Development Plan in conducting activities to be conducted by Alnylam as agreed upon in writing by the Parties, and MedCo shall pay all amounts within [**] days after its receipt of the invoice. Alnylam and its Affiliates shall keep complete and accurate records in sufficient detail to enable the payments payable hereunder to be determined. Commencing after Alnylam first issues such an invoice, MedCo shall have the right to audit the records of Alnylam with respect to any such Costs included in such reports, in accordance with Section 7.5.

2.4 Diligence .

(a) After the JSC's selection of the Lead Product, MedCo will use Commercially Reasonable Efforts to (i) Develop at least one Licensed Product and obtain Regulatory Approval of at least one Licensed Product in each Major Market Country and (ii) subject to Section 2.3.2, perform the Development activities under the MedCo Development Plan.

(b) Alnylam will use Commercially Reasonable Efforts to perform the Development activities under the Initial Development Plan and, subject to Section 2.3.2, those activities under the MedCo Development Plan which Alnylam has agreed in writing to undertake; provided , however , that except as expressly provided in this Agreement or otherwise agreed to in writing by Alnylam, in no event will Alnylam be required to perform any activities under the Initial Development Plan or the MedCo Development Plan with respect to Licensed Products that would require Alnylam to incur Costs in excess of the then-applicable Development Costs Cap, unless paid or payable by MedCo as Extra Early Development Costs. Alnylam will be excused from its obligation to perform its affected Development and Manufacturing obligations with respect to Licensed Products under the Transaction Agreements during any period of time with respect to which Alnylam cannot perform such obligations to the extent that, (i) Alnylam becomes aware that the

performance of such obligations would infringe Patent Rights that MedCo Controls and are reasonably necessary for such performance by Alnylam, and (ii) Alnylam is not protected by any safe harbor provisions with respect to claims that it would infringe such Patent Rights. The Parties agree to promptly discuss in good faith a mutually agreed resolution to such a situation. If the Parties agree in writing that MedCo will grant Alnylam a license or sublicense under such Patent Rights, then unless otherwise agreed by the Parties in writing, such Patent Rights will be considered MedCo Patent Rights, and if such Patent Rights are licensed to MedCo or its Affiliate by a Third Party, such sublicense shall be subject to the relevant license agreement to MedCo or its Affiliate from such Third Party and such agreement shall be designated a MedCo In-License.

2.5 Records and Reports .

2.5.1 Prior to the date that is [**] days after Phase I Completion, Alnylam shall prepare and deliver to the JSC a quarterly written report summarizing Alnylam's Development activities for Licensed Products performed to date (or updating such report for activities performed since the last such report submitted hereunder, as applicable). Within [**] days after Phase I Completion Alnylam shall deliver to the JSC a final report of Alnylam's Development activities for the Licensed Products. After Phase I Completion, MedCo shall prepare and deliver to the JSC, by no later than each [**] (for the period ending December 31 of the prior Calendar Year), written reports summarizing Development activities for Licensed Products performed to date (or updating such report for activities performed since the last such report submitted hereunder, as applicable), with Alnylam providing to MedCo, in accordance with the MedCo Development Plan, written reports summarizing Alnylam's activities (if any) under the MedCo Development Plan. Each Party will provide the members of the JSC with written copies of all materials they intend to present at a JSC meeting. The JSC may also request at any time specific material data or information related to Collaboration activities or that a written report be prepared in advance of any meeting summarizing certain material data and information arising out of the conduct of the Collaboration activities, and the Party or appropriate committee to whom such request is made shall promptly provide to the other Party or JSC such report, data or information.

2.5.2 Each Party will maintain scientific records, in sufficient detail and in good scientific manner appropriate for patent and regulatory purposes, which will fully and properly reflect all work done and results achieved in the performance of the Development activities with respect to Licensed Products by such Party. Each Party will have the right, during normal business hours and upon reasonable notice, to inspect and copy (or request the other Party to copy) all records of the other Party maintained in connection with the work done and results achieved in the performance of such Development activities, but solely to the extent access to such records is necessary for such Party to exercise its rights under this Agreement. All such records, and the information disclosed therein, will be maintained as Confidential Information by the recipient Party in accordance with Article 8.

2.6 Regulatory Matters .

2.6.1 Regulatory Filings and Interactions . Alnylam shall be the “ Regulatory Lead ” with respect to Licensed Products through Phase I Completion and MedCo shall be the Regulatory Lead with respect to Licensed Products thereafter. Except as otherwise provided in the Initial Development Plan or Section 2.6.2, (a) each Party will own the INDs, the NDAs and related regulatory documents submitted to the applicable Regulatory Authorities by it with respect to Licensed Products and (b) the Regulatory Lead will, as to Licensed Products, (i) oversee, monitor and coordinate all regulatory actions, communications and filings with, and submissions to, each Regulatory Authority, (ii) be responsible for interfacing, corresponding and meeting with each Regulatory Authority, and (iii) be responsible for maintaining all

regulatory filings. Alnylam will promptly notify the JSC in writing of all material communications received by it from Regulatory Authorities regarding the Licensed Products and of all filings and submissions made by it to Regulatory Authorities regarding the Licensed Products; provided , however , that after Phase I Completion, Alnylam shall not communicate with any Regulatory Authority regarding any Licensed Product without MedCo's prior written consent, except as required by Law or as requested or required by a Regulatory Authority. MedCo shall provide Alnylam with written notice of (x) all filings and submissions for Regulatory Approval regarding any Licensed Product in the Territory in a timely manner; and (y) all Regulatory Approvals obtained or denied and the filing of any IND for any Licensed Product within fifteen (15) days after such event; provided , however , that in all circumstances except as required by Law, MedCo shall inform Alnylam of such event prior to public disclosure of such event by MedCo.

2.6.2 IND Transfer; Right of Reference . Upon MedCo's written request Alnylam will use Commercially Reasonable Efforts to promptly transfer to MedCo, at Alnylam's expense, Alnylam's IND for the Lead Product after Phase I Completion, and any other Alnylam Know-How reasonably requested by MedCo with respect to any such IND. During the Term, each Party will have the right to reference the other Party's INDs, NDAs and other filings with and submissions to Regulatory Authorities with respect to Licensed Products for the purpose of conducting its Development activities under the Initial Development Plan and the MedCo Development Plan, and in the case of MedCo, to otherwise obtain Regulatory Approval of Licensed Products in the Territory.

2.6.3 Pharmacovigilance . Within [**] months after the Effective Date, the Parties will develop and agree in writing upon a pharmacovigilance agreement (“ Pharmacovigilance Agreement ”) that will include safety data exchange procedures governing the coordination of collection, investigation, reporting, and exchange of information concerning any adverse experiences, and any product quality and product complaints involving adverse experiences, related to Licensed Products, sufficient to enable each Party to comply with its legal and regulatory obligations.

2.7 Information Exchange . Prior to Phase I Completion, Alnylam shall provide, and shall have its Affiliates provide, to MedCo, without additional compensation, all material Know-How Controlled by Alnylam and/or its Related Parties (as applicable) relating to Licensed Products, including copies of (a) pre-clinical and clinical safety and efficacy data, (b) protocols and investigator brochures, and (c) regulatory filings, that are reasonably necessary or useful for MedCo (or its Related Parties) to perform its obligations or exploit its rights under this Agreement with respect to such Licensed Products. Promptly after Phase I Completion and on an ongoing basis throughout the Term, as requested by the JSC and to the extent not already provided to MedCo, Alnylam shall provide, and shall have its Affiliates provide, to MedCo, without additional compensation, all material Alnylam Know-How that relates to the Licensed Products, including copies of (i) pre-clinical and clinical safety and efficacy data, (ii) protocols and investigator brochures and (iii) regulatory filings, in each case that are reasonably necessary or useful for MedCo (or its Related Parties) to perform its obligations or exploit its rights under this Agreement with respect to such Licensed Products. The transfer of Alnylam Know-How reasonably necessary or useful for the Manufacture of Licensed Products by Alnylam and its Affiliates to MedCo will also be subject to the provisions of Section 5.2 and the Development Supply Agreement.

2.8 Third Parties . The Parties shall be entitled to utilize the services of Third Party contract research and contract manufacturing organizations to perform their respective Development and Manufacturing activities under this Agreement; provided , that (a) each Party shall ensure that such Third Parties it utilizes operate in a manner consistent with the terms of this Agreement and (b) each Party shall remain at all times fully liable for its responsibilities under this Agreement. Each Party shall ensure that any agreements with such Third Parties shall include confidentiality and non-use provisions that are no

less stringent than those set forth in Section 8.1 of this Agreement and shall use Commercially Reasonable Efforts to obtain ownership of, and/or a fully sublicenseable license under and to, any Know-How and Patent Rights that are developed or used by such Third Parties in the performance of such agreement and are reasonably necessary or useful to Develop, Manufacture and/or Commercialize Licensed Products in the Field.

3. COMMERCIALIZATION OF THE LICENSED PRODUCTS

3.1 Responsibility and Diligence . As between the Parties, MedCo shall have the sole right and be solely responsible, at its expense, for all Commercialization activities relating to Licensed Products in the Field in the Territory. MedCo shall use Commercially Reasonable Efforts, through itself or its Related Parties, to Commercialize at least one Licensed Product in the Field in at least each Major Market Country after receipt of Regulatory Approval of such Licensed Product in the Field in such Major Market Country.

3.2 MedCo Commercialization Plan . No less than [**] months in advance of the reasonably expected first Regulatory Approval in the Territory with respect to a Licensed Product, and on an annual basis thereafter, MedCo shall prepare and deliver to Alnylam, a written non-binding plan that summarizes the Commercialization activities to be undertaken with respect to Licensed Products in the Territory in the next Calendar Year and, to the extent commercially reasonable, MedCo's plans to obtain further Regulatory Approvals and Commercialize Licensed Products in countries in the Territory in which MedCo is not then Commercializing Licensed Products, and the dates by which such activities are targeted to be accomplished (the “ MedCo Commercialization Plan ”). The MedCo Commercialization Plan shall subsequently be updated and modified by MedCo, from time to time and no less frequently than once per Calendar Year.

3.3 Advertising and Promotional Materials . MedCo will be responsible for the creation, preparation, production, reproduction and filing with the applicable Regulatory Authorities, of relevant written sales, promotion and advertising materials relating to Licensed Products for use in the Territory. All such promotional materials will be compliant with all Laws, and substantially consistent with the MedCo Commercialization Plan. To the extent permitted by Law, MedCo and its Related Parties shall use Commercially Reasonable Efforts to include Alnylam's (or its designee's) name with reasonable prominence on Licensed Product promotional materials related to the Licensed Product in the Territory in acknowledgement of Alnylam's contributions to the Licensed Product.

3.4 Reporting Obligations. MedCo shall prepare and deliver to Alnylam, by no later than each [**] following the first Regulatory Approval of a Licensed Product in the Field in the Territory (for the period ending December 31 of the prior Calendar Year), written reports summarizing MedCo's Commercialization activities for Licensed Products performed to date (or updating such report for activities performed since the last such report submitted hereunder, as applicable). In addition, MedCo shall provide Alnylam with written notice of the First Commercial Sale of each Licensed Product in the Territory within [**] days after such event; provided , however , that in all circumstances except as required by Law, MedCo shall inform Alnylam of such event prior to public disclosure of such event by MedCo. MedCo shall also provide such other information to Alnylam as Alnylam may reasonably request with respect to MedCo's Commercialization activities with respect to Licensed Products.

3.5 Sales and Distribution . MedCo and its Related Parties shall have the sole right and shall be responsible for the pricing of Licensed Products, booking sales, warehousing and distribution of Licensed Products in the Territory. Moreover, MedCo and its Related Parties shall have the sole right and shall be solely responsible for handling all returns of commercialized Licensed Product, as well as all aspects of

Licensed Product order processing, invoicing and collection, distribution, inventory and receivables, in the Territory.

3.6 Recalls, Market Withdrawals or Corrective Actions . In the event that any Regulatory Authority issues or requests a recall or takes a similar action in connection with the Licensed Product in the Territory, or in the event MedCo determines that an event, incident or circumstance has occurred that may result in the need for a recall or market withdrawal in the Territory, MedCo shall, within [**] hours after it receives such information from such Regulatory Authority or makes such determination, advise Alnylam thereof by telephone, facsimile or e-mail.

3.7 Commercialization Expenses . As between the Parties, MedCo shall bear all costs and expenses incurred in connection with the Commercialization of Licensed Products in the Territory.

4. COLLABORATION MANAGEMENT

4.1 Joint Steering Committee . The Parties hereby establish a joint steering committee (the “ JSC ”) to facilitate the Collaboration as follows:

4.1.1 Composition of the Joint Steering Committee . The Development of Licensed Products hereunder shall be conducted under the direction of the JSC, which shall comprise [**] representatives of MedCo and [**] representatives of Alnylam. Each Party shall appoint its respective representatives to the JSC from time to time, and may substitute one or more of its representatives, in its sole discretion, effective upon notice to the other Party of such change. Each Party shall have at least one JSC representative who is a senior employee (vice president level or above), and all JSC representatives shall be employees of the relevant Party and have appropriate expertise and ongoing familiarity with the Collaboration. Additional non-voting representatives or consultants may from time to time, by mutual consent of the Parties, be invited to attend JSC meetings, subject to all representatives (including the designated voting representatives) and consultants undertaking confidentiality obligations in a written agreement (which may have been executed prior to the Effective Date) that are substantially comparable to the requirements of Section 8.1. All proceedings for the JSC shall take place in English. Each Party shall bear its own expenses relating to attendance at such meetings by its representatives.

4.1.2 JSC Chairperson . The JSC chairperson shall be an employee of Alnylam prior to Phase I Completion and an employee of MedCo thereafter. The JSC chairperson's responsibilities shall include (a) scheduling meetings at least once per Calendar Quarter, but more frequently if the JSC determines it necessary; (b) setting agendas for meetings with solicited input from other members; (c) coordinating the delivery of draft minutes to the JSC for review and final approval; and (d) conducting meetings, including ensuring that objectives for each meeting are set and achieved. The JSC chairperson shall have no greater authority on the JSC than any other representative of the JSC.

4.1.3 JSC Responsibilities . The JSC shall have the following responsibilities with respect to the Collaboration:

(a) reviewing reports and updates provided by Alnylam regarding the Development of Licensed Products under the Initial Development Plan, including material modifications and updates to the Initial Development Plan provided by Alnylam in accordance with Section 2.2.1, providing Alnylam with feedback regarding same and approving such updates and modifications to the Initial Development Plan in accordance with Section 2.2.1;

(b) [**];

(d) reviewing reports and updates provided by MedCo regarding the Development of Licensed Products in the Territory, including reviewing and approving the MedCo Development Plan and updates thereto in accordance with Section 2.2.3;

(e) ensuring coordination between the Parties with respect to Development activities in the Territory for Licensed Products under the MedCo Development Plan (to the extent the Parties have agreed in writing that Alnylam should perform any such activities), and regulatory and pharmacovigilance requirements and matters to the extent necessary for the Parties to perform their duties or exercise their rights hereunder and for the Parties to comply with the Pharmacovigilance Agreement and the requirements of Law and Regulatory Authorities, respectively;

(f) regularly assessing the progress of Alnylam in its conduct of the Initial Development Plan and the progress of MedCo in its conduct of the MedCo Development Plan, against the respective timelines contained therein;

(g) reviewing Alnylam Technology that would be reasonably helpful to MedCo's Development of Licensed Products and determine which of such Alnylam Technology should be transferred to MedCo; and

(h) performing such other activities as the Parties agree in writing shall be the responsibility of the JSC.

For purposes of clarity, the JSC shall not have the authority to modify the terms of this Agreement.

4.1.4 Meetings . The first JSC meeting shall be held within [**] months after the Effective Date, and the JSC shall thereafter meet in accordance with a schedule established by mutual written agreement of the Parties, but no less frequently than [**] per Calendar Quarter, with the location for such meetings alternating between Alnylam's and MedCo's US facilities (or such other locations as are mutually agreed by the Parties). Alternatively, the JSC may meet by means of teleconference, videoconference or other similar communications equipment, but at least [**] meetings per Calendar Year shall be conducted in person.

4.2 Appointment of Subcommittees, Project Teams and Collaboration Managers . The JSC shall be empowered to create such subcommittees of itself and project teams as it may deem appropriate or necessary. Each such subcommittee and project team shall report to the JSC, which shall have authority to approve or reject recommendations or actions proposed thereby subject to the terms of this Agreement. The provisions of Sections 4.1.1 and 4.1.4 shall apply to each subcommittee, mutatis mutandis , unless otherwise determined by the JSC.

4.3 Minutes . A secretary shall be appointed for each meeting and shall prepare minutes of the meeting, which shall provide a description in reasonable detail of the discussions held at the meeting and a list of any actions, decisions or determinations approved by the JSC. The JSC secretary shall have no greater authority on the JSC than any other representative of the JSC.

4.4 Decision-Making .

4.4.1 With respect to decisions of the JSC, the representatives of each Party shall have collectively one vote on behalf of such Party. For each meeting of the JSC, at least one (1) representative of each Party shall constitute a quorum and each Party shall use Commercially Reasonable Efforts to have its representative(s) participate in each JSC meeting. Action on any matter may be taken at a meeting, by teleconference, videoconference or by written agreement. The JSC shall attempt to resolve any and all disputes before it for decision by consensus.

4.4.2 If the JSC is unable to reach a consensus with respect to a dispute for a period in excess of [**] days, then the dispute shall be submitted to the Chief Executive Officers of Alnylam and MedCo for resolution.

4.4.3 If such escalated dispute cannot be resolved for a period in excess of [**] days, then:

[**].

4.4.4 Notwithstanding the foregoing, MedCo may not exercise its final decision-making authority (i) to require Alnylam to undertake obligations beyond those for which it is responsible, or forgo any rights, under this Agreement, (ii) to cause Alnylam to incur any Costs above the then-applicable Development Costs Cap with respect to which MedCo has not otherwise agreed to reimburse Alnylam under this Agreement, (iii) to require Alnylam to take or decline to take any action that would result in a violation of any Law or any agreement with any Third Party or the infringement of intellectual property rights of Third Parties, (iv) in a manner that excuses MedCo from any of its obligations specifically enumerated under this Agreement, or (v) to expand or narrow the responsibilities of the JSC.

4.5 Dissolution of JSC . The JSC shall be dissolved upon the First Commercial Sale of the last Licensed Product that is expected to be Developed in the Territory; provided , that after the fifth (5th) anniversary of the Effective Date Alnylam shall have the right, but not the obligation, to dissolve the JSC. Upon the dissolution of the JSC, MedCo shall have the sole rights and authority to take any action that had been within the JSC's purview.

5. MANUFACTURE AND SUPPLY OF THE LICENSED PRODUCT

5.1 Responsibilities for Licensed Product Supply .

(a) Alnylam will be solely responsible for (i) obtaining supply of Finished Product reasonably required for the conduct of Alnylam's obligations under the Initial Development Plan through Phase I Completion, and (ii) supplying MedCo with the quantity of Finished Product reasonably required for the first Phase II Study of the Lead Product conducted under the MedCo Development Plan (which, for clarity, may be the Phase II Study portion of a Phase I/II Study of the Lead Product initiated pursuant to the Initial Development Plan), in each case at Alnylam's expense for the Costs of such Licensed Product, but only to the extent that such Costs, when added to the Development Costs incurred by Alnylam pursuant to the Initial Development Plan, do not exceed the then-applicable Development Costs Cap, unless paid or payable by MedCo as Extra Early Development Costs.

(b) MedCo will have the sole right and responsibility to Manufacture and supply Licensed Product for Development and Commercialization in the Territory under the MedCo Development Plan (except that Alnylam shall be responsible for supplying Licensed Product as described in clause (a)(ii) above), subject to the successful completion of the transfer of Alnylam Know-How to MedCo or its designated Third Party(ies) contract manufacturers pursuant to Section 5.3 and the Development Supply Agreement.

5.2 Development Supply Agreement . Within [**] months after the Effective Date, the Parties will negotiate in good faith and enter into a supply and technical transfer agreement (the “ Development Supply Agreement ”) pursuant to which Alnylam will (a) subject to the terms of Section 5.3, promptly provide MedCo or Third Party contract manufacturer(s) selected by MedCo and reasonably acceptable to Alnylam with Alnylam Know-How reasonably necessary or useful for the Manufacture of the Bulk Drug Substance, Bulk Drug Product and Finished Product, as the case may be, and shall make available its personnel on a reasonable basis to consult with MedCo with respect thereto, all at MedCo's expense for the Costs reasonably incurred by Alnylam in connection with such technology transfer activities; and (b) supply Finished Product to MedCo as set forth in Section 5.1(a)(ii). The terms and conditions of the Development Supply Agreement shall be commercially reasonable and consistent with industry standards, as well as, if applicable, Alnylam's agreements with its Third Party contract manufacturers.

5.3 Technology Transfer . Subject to the terms of the Development Supply Agreement, as soon as reasonably practicable, but in no event later than the fifth (5th) anniversary of the Effective Date, Alnylam shall initiate a technology transfer to MedCo, or to its Third Party manufacturer(s) of Licensed Product, selected by MedCo and reasonably acceptable to Alnylam, of Alnylam Know-How that is reasonably necessary or useful for the Manufacture of the Licensed Product, and shall make available its personnel on a reasonable basis to consult with MedCo or such Third Party manufacturer(s) with respect thereto, all at MedCo's expense, including the Costs reasonably incurred by Alnylam in connection with such technology transfer activities. MedCo shall reimburse Alnylam such Costs incurred with respect to such Manufacturing technology transfer within [**] days after receipt of an invoice therefor. Alnylam and its Affiliates shall keep complete and accurate records in sufficient detail to enable the payments payable hereunder to be determined. Alnylam shall not be required to perform technology transfer to more than one Third Party manufacturer for each stage of the Licensed Product supply chain (i.e., Bulk Drug Substance, Bulk Drug Product and Finished Product). Promptly after MedCo's written request, Alnylam shall use Commercially Reasonable Efforts to assign to MedCo any manufacturing agreement between Alnylam and a Third Party that is solely related to the manufacture of Licensed Products. Such assignment shall be subject to the terms and conditions of such agreement, including any required consents of such Third Party and MedCo's written agreement to assume all the obligations of Alnylam under such agreement to be undertaken after such assignment, but Alnylam shall remain solely responsible for its obligations under such agreement arising prior to such assignment. Except as provided in the immediately preceding sentence, MedCo shall be solely responsible for contracting with such Third Party manufacturer (and any other Third Party manufacture to whom Alnylam has initiated technology transfer as set forth in this Section 5.3) for the supply of such Licensed Product and Alnylam shall have no obligations under such agreement between MedCo and such Third Party manufacturer. Alnylam shall use Commercially Reasonable Efforts to obtain any such consent in a form reasonably acceptable to MedCo.

5.4 Additional Licensed Product Supply . MedCo agrees to consider, and the Parties agree to discuss in good faith, the manufacture and supply of Bulk Drug Substance, Bulk Drug Product and/or Finished Product by Alnylam (or its designee) to MedCo for MedCo's further Development activities and/or for Commercial sale in the Territory; provided , however , that nothing in the foregoing sentence shall be construed to require the Parties to agree to such an arrangement.

6. LICENSES

6.1 License Grants to MedCo .

6.1.1 Development and Commercialization License . Subject to the terms and conditions of this Agreement, including Section 6.1.4, Alnylam hereby grants MedCo a non-transferable (except as provided in Section 13.1), sublicenseable (subject to Section 6.1.3), exclusive license under Alnylam Technology to Develop and Commercialize Licensed Products in the Field in the Territory. Such license shall be royalty-bearing for the Royalty Term applicable to each Licensed Product in each country in the Territory, and, after the expiration of the Royalty Term applicable to such Licensed Product in such country, shall convert to a fully paid-up, irrevocable, perpetual, non-exclusive, sublicenseable (subject to Section 6.1.3) license to Develop and Commercialize such Licensed Product in the Field in such country.

6.1.2 Manufacturing License . Subject to the terms and conditions of this Agreement, including those set forth in Article 5 and Section 6.1.4, Alnylam hereby grants MedCo a non-transferable (except as provided in Section 13.1), sublicenseable (subject to Section 6.1.3), worldwide, royalty-bearing, exclusive license under Alnylam Technology to Manufacture Licensed Products for Development of Licensed Products after Phase I Completion and for Commercialization in the Field in the Territory. Such license shall be royalty-bearing for the Royalty Term applicable to each Licensed Product in each country in the Territory, and, after the expiration of the Royalty Term applicable to such Licensed Product in such country, shall convert to a fully paid-up, irrevocable, perpetual, non-exclusive, sublicenseable (subject to Section 6.1.3) license to Manufacture such Licensed Product for Development of Licensed Products after Phase I Completion and for Commercialization in the Field in such country.


6.1.3	Sublicensing Terms .

(a) MedCo shall have the right to sublicense any of its rights under Section 6.1.1 and 6.1.2 to any of its Affiliates or to any Third Party without the prior written consent of Alnylam, subject to the requirements of this Section 6.1.3, except that Alnylam's prior written consent shall be required for any sublicense to a Third Party of either (i) all or substantially all of MedCo's rights under this Agreement, or (ii) all or substantially all of MedCo's rights to Develop and Commercialize Licensed Products in the United States.

(b) Each sublicense granted by MedCo pursuant to this Section 6.1.3 shall be subject to the terms and conditions of this Agreement and shall contain terms and conditions consistent with those in this Agreement. MedCo shall promptly provide Alnylam with a copy of the fully executed sublicense agreement covering any Commercialization sublicense granted hereunder, and each such sublicense agreement shall contain the following provisions: (i) a requirement that the Sublicensee comply with confidentiality and non-use provisions that are no less stringent than Section 8.1 with respect to Alnylam's Confidential Information; provided, however , that if such sublicense agreement contains a sublicense of Licensed Product sales rights, such sublicense agreement shall also contain the following provisions: (x) a requirement that the Sublicensee submit applicable sales or other reports to MedCo to the extent necessary or relevant to the reports required to be made or records required to be maintained under this Agreement; and (y) the audit requirement set forth in Section 7.5; and (ii) subject to Section 6.4, any other provisions applicable to a Sublicensee required under any Alnylam In-License or necessary to allow Alnylam or its Affiliates to comply with its obligations thereunder, to the extent that MedCo had been made aware of such provisions prior to entering into such sublicense, including any such provision regarding diligence, insurance, indemnification, confidentiality, reporting, audits, publication, data sharing or regulatory matters.

(c) If MedCo becomes aware of a material breach of any sublicense by a Sublicensee of the rights granted to MedCo under this Section 6.1, MedCo shall promptly notify Alnylam of the particulars of the same and use Commercially Reasonable Efforts to cause the Sublicensee to comply with all the terms of the sublicense necessary for MedCo's compliance with the terms of this Agreement. In the event that (i) the Sublicensee has failed to cure a material breach of such obligations within [**] days after notice of such breach and (ii) such material breach also constitutes a breach of this Agreement, MedCo shall terminate the sublicense at the request of Alnylam; provided , however , that, if such Sublicensee disputes that it has materially breached such obligations, or disputes that it has not timely cured a breach of such obligations, MedCo shall not be obligated to terminate such sublicense until such dispute is resolved by settlement, or in a final, non-appealable decision of a court or arbitrator, finding that such Sublicensee had materially breached such sublicense and had not timely cured such material breach. Notwithstanding any sublicense, MedCo shall remain primarily liable to Alnylam for the performance of all of MedCo's obligations under, and MedCo's compliance with all terms and conditions of, this Agreement.

6.1.4 Retained Rights . Notwithstanding the license grants in Sections 6.1.1 and 6.1.2, Alnylam retains the rights under Alnylam Technology (a) to Develop and Manufacture Licensed Products in the Field in the Territory solely for the purpose and only to the extent necessary for the performance of its obligations under the Transaction Agreements, and (b) for all internal basic and preclinical research purposes, in each case including the right to collaborate with and issue sublicenses to academic collaborators and/or Third Party contractors involved in such research activities.


6.2	License Grants to Alnylam .

6.2.1 Development and Manufacturing License . Subject to the terms and conditions of this Agreement, MedCo hereby grants Alnylam a non-transferable (except as provided in Section 13.1), sublicenseable (subject to Section 6.2.3), non-exclusive, worldwide, royalty-free license, under MedCo Technology, to perform Alnylam's Development and Manufacturing obligations with respect to Licensed Products under the Transaction Agreements.

6.2.2 MedCo Improvements License . Subject to the terms and conditions of this Agreement, MedCo hereby grants Alnylam a non-transferable (except as provided in Section 13.1), sublicenseable (subject to Section 6.2.3), worldwide, non-exclusive, royalty-free license under any MedCo Improvements to research, develop, manufacture and/or commercialize products containing siRNA molecules in the Field and in the Territory. Such license is subject to the exclusive license grants to MedCo under Section 6.1 and the terms of Section 9.5.1.

6.2.3 Sublicensing Terms .

(a) Alnylam shall have the right to sublicense any of its rights under Section 6.2.1 to any of its Affiliates or to any Third Party contractor without the prior written consent of MedCo, subject to the requirements of this Section 6.2.3. Alnylam shall have the right to sublicense any of its rights under Section 6.2.2 or Section 12.3(b) to any of its Affiliates or to any Third Party without the prior written consent of MedCo, subject to the requirements of this Section 6.2.3.

(b) Each sublicense granted by Alnylam pursuant to this Section 6.2.3 shall be subject to the terms and conditions of this Agreement and shall contain terms and conditions consistent with those in this Agreement. Each such sublicense agreement shall contain the following provisions: (i) a requirement that the Sublicensee comply with confidentiality and non-use provisions that are no less stringent than

Section 8.1 with respect to MedCo's Confidential Information, and (ii) subject to Section 6.4, any other provisions applicable to a Sublicensee required under any MedCo In-License or necessary to allow MedCo or its Affiliates to comply with its obligations thereunder, to the extent that Alnylam had been made aware of such provisions prior to entering into such sublicense, including any such provision regarding diligence, insurance, indemnification, confidentiality, reporting, audits, publication, data sharing or regulatory matters.

(c) If Alnylam becomes aware of a material breach of any sublicense by a Sublicensee of the rights granted to Alnylam under this Section 6.2 or Section 12.3(b), Alnylam shall promptly notify MedCo of the particulars of the same and use Commercially Reasonable Efforts to cause the Sublicensee comply with all the terms of the sublicense necessary for Alnylam's compliance with the terms of this Agreement. In the event that (i) the Sublicensee has failed to cure a material breach of such obligations within [**] days after notice of such breach and (ii) such material breach also constitutes a breach of this Agreement, Alnylam shall terminate the sublicense at the request of MedCo; provided , however , that, if such Sublicensee disputes that it has materially breached such obligations, or disputes that it has not timely cured a breach of such obligations, Alnylam shall not be obligated to terminate such sublicense until such dispute is resolved by settlement, or in a final, non-appealable decision of a court or arbitrator, finding that such Sublicensee had materially breached such sublicense and had not timely cured such material breach. Notwithstanding any sublicense, Alnylam shall remain primarily liable to MedCo for the performance of all of Alnylam's obligations under, and Alnylam's compliance with all terms and conditions of, this Agreement.

6.3 Joint Collaboration IP . Subject to the rights and licenses granted to, and the obligations of, each Party under this Agreement, including MedCo's obligations under Section 7.4 during the Term, each Party shall have the right to exploit its interest in Joint Collaboration IP without the consent of and without accounting to the other Party.

6.4 In-Licenses and Existing Alnylam Third Party Agreements .

6.4.1 Compliance with In-Licenses .

6.4.1.1 All licenses and other rights granted to MedCo under this Article 6 (including any sublicense rights) are subject to the rights and obligations of Alnylam and its Affiliates under the Alnylam In-Licenses and the Existing Alnylam Third Party Agreements. All licenses and other rights granted to Alnylam under this Article 6 and Section 12.3(b) (including any sublicense rights) are subject to the rights and obligations of MedCo and its Affiliates under the MedCo In-Licenses.

6.4.1.2 Subject to Section 6.4.1.3, (a) each Party (the “ Sublicensed Party ”) granted a sublicense under any of the In-Licenses of the other Party (the “ Sublicensor Party ”) shall comply with all applicable terms and conditions of the In-Licenses of the Sublicensor Party to the extent (i) required by the terms of such In-Licenses with respect to a sublicense under the terms of such In-License to the extent applicable to (A) the Sublicensed Party's rights or obligations relating to the Development, Manufacture or Commercialization of Licensed Products under any of the Transaction Agreements or (B) the filing, prosecution, maintenance, extension, defense, enforcement, patent challenge or the further sublicensing of the Alnylam Technology (if Alnylam is the Sublicensor Party) or the MedCo Technology (if MedCo is the Sublicensor Party) to the extent relevant to the Sublicensed Party's rights or obligations relating to the Development, Manufacture or Commercialization of Licensed Products under any of the Transaction Agreements, and (ii) the Sublicensed Party has been given written notice or provided a copy of such provisions

on or prior to the later of (x) the Effective Date or (y) the date on which such In-License is first required to have been provided to the Sublicensed Party hereunder ( provided that, with respect to an amendment thereto, such amendment is consistent with the last sentence of Section 6.4.4), and (b) each Sublicensed Party shall perform and take such actions as may be required to allow the Sublicensor Party to comply with its obligations under the Sublicensor Party's In-Licenses, to the extent (i) applicable to (A) the Sublicensed Party's rights or obligations relating to the Development, Manufacture or Commercialization of Licensed Products under any of the Transaction Agreements or (B) the filing, prosecution, maintenance, extension, defense, enforcement, patent challenge or the further sublicensing of the Alnylam Technology (if Alnylam is the Sublicensor Party) or the MedCo Technology (if MedCo is the Sublicensor Party) to the extent relevant to the Sublicensed Party's rights or obligations relating to the Development, Manufacture or Commercialization of Licensed Products under any of the Transaction Agreements and (ii) that the Sublicensed Party had been given written notice or provided a copy of such provisions on or prior to the later of (x) the Effective Date or (y) the date on which such In-License is first required to have been provided to the Sublicensed Party hereunder ( provided that, with respect to an amendment thereto, such amendment is consistent with the last sentence of Section 6.4.4), including any such obligations relating to sublicensing, patent matters, confidentiality, reporting, audit rights, indemnification and diligence. Without limiting the foregoing, each Sublicensed Party shall prepare and deliver to the Sublicensor Party any additional reports required under the applicable In-Licenses of the Sublicensor Party, in each case reasonably sufficiently in advance to enable the Sublicensor Party to comply with its obligations under the applicable In-Licenses, to the extent that the Sublicensed Party had been made aware of such provisions with reasonably sufficient time prior to the date on which such compliance is required in order for such Sublicensed Party, or its Related Parties, to properly prepare such reports, using Commercially Reasonable Efforts, including reasonably sufficient time to gather, analyze, format and review the relevant information (to the extent not already required to be provided to the Sublicensor Party under any Transaction Agreement other than pursuant to an In-License Agreement of the Sublicensor Party).

6.4.1.3 The Parties acknowledge that the terms of any In-License may be subject to interpretation. The Parties shall cooperate with each other in good faith to support each Sublicensed Party in complying with its obligations, in accordance with this Section 6.4, under an In-License pursuant to which such Sublicensed Party has been granted a sublicense pursuant to this Agreement. Without limitation to the foregoing, the Parties shall, from time to time, upon the reasonable request of either Party, discuss the terms of any In-License and agree upon, to the extent reasonably possible, a consistent interpretation of the terms of such In-License in order to, as fully as possible without imposing an unreasonable burden on the normal business activities of any Party, allow the Sublicensor Party and the Sublicensed Party to comply with the terms of such In-License, without imposing an unreasonably higher burden on one Party than the other with respect to compliance with the terms of such In-License. Promptly after a Party reaches a conclusion or obtains information that such interpretation is or may be incorrect, it shall share such conclusion or information with the other Party and the Parties shall discuss such conclusion or information.

6.4.1.4 Each Sublicensor Party shall ensure that, to the fullest extent permitted under the relevant In-License, any Confidential Information of the Sublicensed Party disclosed to the relevant Third Party as required by such In-License shall be protected as confidential information of the Sublicensor Party in accordance with such In-License.

6.4.1.5 Each Sublicensor Party agrees, upon the Sublicensed Party's request, to provide the Sublicensed Party with copies of any In-Licenses to which the Sublicensed Party is a party (other

than any amendments or side letters thereto which are not materially relevant to the rights granted to, and the obligations imposed on, the Sublicensed Party under this Agreement). Each Sublicensor Party shall promptly provide the Sublicensed Party with a copy of any amendment, including any side letter, to any In-License of the Sublicensor Party, to the extent relevant in any way to the rights or obligations of the Sublicensed Party and whether or not such amendment is consistent with the obligations of the Sublicensor Party under the last sentence of Section 6.4.4. Confidential Information of the Sublicensor Party or its counterparty may be redacted from such copies, except to the extent that such information is required in order to enable the Sublicensed Party to comply with its obligations to the Sublicensor Party under this Agreement with respect to such In-License or in order to enable the Sublicensor Party to ascertain compliance with the provisions of this Agreement.

6.4.1.6 If the Sublicensor Party receives written notice from the relevant Third Party that the Sublicensor Party is in material breach of its In-License such that it would materially adversely affect the rights of the Sublicensed Party under this Agreement, and if the Sublicensor Party determines that it cannot or chooses not to cure or otherwise resolve any such alleged breach or default, then the Sublicensor Party shall so notify the Sublicensed Party within ten (10) Business Days of such determination.

6.4.1.7 To the extent that the Sublicensor Party receives written notice from the relevant Third Party that the Sublicensed Party is in material breach of an obligation imposed on the Sublicensed Party under an In-License of the Sublicensor Party pursuant to this Section 6.4, the Sublicensor Party shall promptly provide the Sublicensed Party with a copy of such breach notice, and any other relevant documents, received from such Third Party, but in no event more than five (5) Business Days after the Sublicensor Party's receipt thereof.

6.4.2 New In-Licenses; Additional Alnylam In-Licenses .

6.4.2.1 Alnylam Negotiation of Future Alnylam In-Licenses. Subject to Section 6.4.2.4, in the event that Alnylam or its Affiliate determines to enter into an agreement with a Third Party after the Effective Date pursuant to which Alnylam or its Affiliate would acquire a license under Patent Right(s) that Covers the development, manufacture or commercialization of pharmaceutical products comprised of siRNA compositions (other than microRNAs, microRNA antagonists or MicroRNA Mimics) in the Field and the Territory, and if such a license with respect to Licensed Products in the Field is available, then Alnylam shall use best efforts to ensure that the terms of such license applicable to Licensed Products in the Field are not materially less favorable than the terms applicable to other pharmaceutical products containing siRNA compositions in the Field under such license agreement.

6.4.2.2 Acceptance of Future Alnylam In-Licenses. In the event that Alnylam (the “Licensing Party” ) or its Affiliate enters into an agreement with a Third Party after the Effective Date that meets the criteria set forth in clause (b) of the definition of Alnylam In-License, then Alnylam will promptly provide MedCo with notice and a copy of the applicable Third Party agreement. Within thirty (30) days following receipt of such notice, MedCo will decide, in its sole discretion, whether to accept the applicable Third Party agreement as an Alnylam In-License, and provide notice of such decision to Alnylam. In the event that MedCo declines to accept such agreement as an Alnylam In-License, any rights granted to MedCo thereunder will not be deemed to be “Controlled” by Alnylam or licensed to MedCo under this Agreement, and will not be subject to the payment provisions under this Agreement relating to In-Licenses. In the event that MedCo

accepts such Third Party agreement as an Alnylam In-License, such agreement will thereafter be included within the definition of Alnylam In-License, and any rights granted to Alnylam thereunder will be deemed to be “Controlled” by Alnylam and sublicensed to MedCo pursuant to the terms of this Agreement.

6.4.2.3 Additional Alnylam In-Licenses. MedCo shall have the option, exercisable during the Term upon written notice to Alnylam, and on an Additional Alnylam In-License by Additional Alnylam In-License basis, to expand the definition of Alnylam Patent Rights under this Agreement to include the Patent Rights Controlled by Alnylam under such Additional Alnylam In-License. Upon receipt of such written notice from MedCo, then such agreement will thereafter be included within the definition of Existing Alnylam In-Licenses, and all rights granted to Alnylam thereunder will be deemed to be “Controlled” by Alnylam and sublicensed to MedCo under this Agreement effective as of the date of such written notice, and Schedule D will be updated accordingly.

6.4.2.4 Product-Specific Rights . As between the Parties, MedCo and its Affiliates shall have the sole right to enter into an agreement with a Third Party after the Effective Date to acquire a license with respect to Licensed Products in the Field under any Patent Right that (a) Covers the Development, Manufacture or Commercialization of any Licensed Product and (b) if such license had been acquired by Alnylam, would be an Alnylam Product-Specific Patent Right.

6.4.3 Payments Under In-Licenses .

6.4.3.1 Alnylam shall bear [**] percent ([**]%) of any Third Party License Payments under the Alnylam In-Licenses, other than the payments described in Section 6.4.3.2, that become payable based on the licensing or sublicensing to MedCo of rights thereunder, or the exercise by MedCo of rights hereunder, with respect to Licensed Products.

6.4.3.2 Subject to Sections 6.1.3(a), and 7.4.5 (to the extent applicable), MedCo shall bear [**] percent ([**]%) of, and shall reimburse Alnylam for:

(a)

[**], and, if MedCo exercises its option pursuant to Section 6.4.2.3 with respect to [**], under the [**], that become payable based on the Manufacture or Commercialization by MedCo or its Related Parties of Licensed Products; provided , however , that (i) such [**], as the case may be, shall not [**] as set forth as of the Effective Date in such [**], as applicable, and (ii) the [**] taken together shall not exceed (x) with respect to [**], (A) on or prior to [**], and (B) after [**] (as defined on Schedule D ), [**] (as defined on Schedule D ) and, [**], which cover [**], [**]; and (y) with respect to [**], (A) on or prior to [**], and (B) after [**], which cover [**],


(b)	[], other than the [], that become payable based on the Manufacture or Commercialization by MedCo or its Related Parties of Licensed Products []; provided , however , that the [] under each [] shall not [] as set forth as of the Effective Date in such [**],


(c)	[], other than the [], that become payable based on the Development, Manufacturing or Commercialization by MedCo or its Related Parties of Licensed Products, not to exceed [**] provided by Alnylam to MedCo pursuant to Section 6.4.2.2, and


(d)	[] that become payable based on [] thereunder, or [**] hereunder, with respect to Licensed Products.

6.4.3.3 With respect to the calculation of royalties payable by MedCo pursuant to Section 6.4.3.2(a), (b) or (c), if any such royalties are calculated based on the total sales during any relevant period of any Licensed Product(s) and any other products which are not Licensed Products, then the royalties shall be allocated pro rata to such Licensed Product(s) and other products such that MedCo, on the one hand, and Alnylam and its Affiliates and other licensees, on the other hand, bear their pro rata portion of such royalties based on the total sales of such Licensed Product(s) and such other products during the relevant time period. Subject to the confidentiality and non-use obligations of Article 8, the Parties shall share any reasonably necessary information in order to properly calculate the royalty payments due from MedCo in accordance with this Section 6.4.3.3 and any overpayment by MedCo hereunder shall be promptly refunded to MedCo. Schedule H provides a non-limiting example of the calculations with respect to this Section 6.4.3.3.

6.4.3.4 With respect to any milestone payments payable by MedCo pursuant to Section 6.4.3.2(c), if any such milestone payments are due only on the first product to achieve the relevant milestone event under the relevant Alnylam In-License, and a Licensed Product is the first such product, then, upon the achievement of such milestone event by each of the next two (2) products which are not Licensed Products to achieve such milestone event, Alnylam shall pay to MedCo [**] of the milestone payment paid by MedCo with respect to such milestone event. If a Licensed Product is not the first product to achieve the relevant milestone event, but is the second or third product to achieve the relevant milestone event, then MedCo agrees to reimburse Alnylam for [**] of such milestone payment.

6.4.3.5 Alnylam shall invoice MedCo for amounts payable by MedCo pursuant to Sections 6.4.3.2 and 6.4.3.4, and MedCo shall pay all such amounts to Alnylam within thirty (30) days after its receipt of the invoice. Alnylam and its Affiliates and sublicensees shall keep complete and accurate records in sufficient detail to enable the calculation of royalty payments by MedCo in accordance with Section 6.4.3.3, and the payments to or from MedCo pursuant to Section 6.4.3.4, to be determined. MedCo shall have the right to audit such records of Alnylam in accordance with Section 7.5.

6.4.4 Maintenance of In-Licenses . Each Sublicensor Party and its Affiliates shall use its Commercially Reasonable Efforts to maintain its good standing under each of its In-Licenses (including by not initiating any patent challenges which could result in the termination of any such In-License in accordance with its terms and promptly forwarding to the relevant Third Party all reports, payments and other information and material provided by the Sublicensed Party to the Sublicensor Party which, in accordance with the terms of such In-License, are to be forwarded or paid to the relevant Third Party). Without the prior written consent of the Sublicensed Party, neither Sublicensor Party nor its Affiliates shall (a) breach any of its material obligations or waive any of its rights under any of its In-Licenses, (b) amend any of its In-Licenses in any manner that would be materially adverse to the rights granted to the Sublicensed Party under this Agreement, or (c) terminate any of its In-Licenses, including by failure to satisfy any of its diligence obligations thereunder.

6.5 Bankruptcy . All rights and licenses granted under or pursuant to this Agreement by a Party to the other, including those set forth in Sections 6.1 and 6.2, are and shall otherwise be deemed to be, for purposes of Section 365(n) of the U.S. Bankruptcy Code, licenses of right to “intellectual property” as defined under Section 101 of the U.S. Bankruptcy Code. The Parties agree that the Parties and their

respective Related Parties, as sublicensees of such rights under this Agreement, shall retain and may fully exercise all of their rights and elections under the U.S. Bankruptcy Code and any foreign counterpart thereto. The Parties further agree that that upon commencement of a bankruptcy proceeding by or against a Party (the “ Bankrupt Party ”) under the Bankruptcy Code, the other Party (the “ Non-Bankrupt Party ”) will be entitled to a complete duplicate of, or complete access to (as the Non-Bankrupt Party deems appropriate), all such intellectual property and all embodiments of such intellectual property. Such intellectual property and all embodiments of such intellectual property will be promptly delivered to the Non-Bankrupt Party (a) upon any such commencement of a bankruptcy proceeding and upon written request by the Non-Bankrupt Party, unless the Bankrupt Party elects to continue to perform all of its obligations under this Agreement, or (b) if not delivered under (a) above, upon the rejection of this Agreement by or on behalf of the Bankrupt Party and upon written request by the Non-Bankrupt Party. The Bankrupt Party (in any capacity, including debtor-in-possession) and its successors and assigns (including any trustee) agrees not to interfere with the exercise by Non-Bankrupt Party or its Related Parties of its rights and licenses to such intellectual property and such embodiments of intellectual property in accordance with this Agreement, and agrees to assist the Non-Bankrupt Party and its Related Parties in obtaining such intellectual property and such embodiments of intellectual property in the possession or control of Third Parties as reasonably necessary or desirable for the Non-Bankrupt Party to exercise such rights and licenses in accordance with this Agreement. The foregoing provisions are without prejudice to any rights the Non-Bankrupt Party may have arising under the Bankruptcy Code or other Laws.

6.6 No Other Rights . Except as otherwise expressly provided in this Agreement, under no circumstances shall a Party, as a result of this Agreement, obtain any ownership interest or other right in any Know-How, Patent Rights or other intellectual property rights of the other Party, including items owned, controlled or devel-oped by the other Party, or provided by the other Party to the receiving Party at any time pursuant to this Agreement.

6.7 No Reach Through to Acquirer IP . Notwithstanding anything in this Agreement to the contrary, following the closing of a Change of Control of a Party (the “ Acquired Party ”), the Parties agree that the other Party (the “ Non-Acquired Party ”) shall not obtain rights or access to the Patent Rights or Know-How controlled by the Acquirer (as defined below) or any of the Affiliates of such Acquirer (other than the Acquired Party and its Affiliates which exist immediately prior to the closing of such Change of Control (such Affiliates, the “ Pre-Existing Affiliates ”)); and the Acquirer and its Affiliates (other than the Acquired Party and its Pre-Existing Affiliates) shall not obtain rights or access to the Patent Rights or Know-How controlled by the Non-Acquired Party or any of its Affiliates pursuant to this Agreement, or be bound by the restrictions set forth in Section 9.5.1. For clarity but without limitation, the Non-Acquired Party's rights in all Patent Rights and Know-How Controlled by the Acquired Party or any of its Pre-Existing Affiliates, which Patent Rights and Know-How exist as of the date of the closing of such Change of Control and are then licensed hereunder to the Non-Acquired Party, shall remain licensed to such Non-Acquired Party after the date of the closing of such Change of Control in accordance with and subject to the terms and conditions of this Agreement and shall not be affected in any manner by virtue of such Change of Control. “ Acquirer ” means, with respect to the Acquired Party, the Third Party that acquires such Acquired Party or its direct or indirect controlling Affiliate, or that acquires all or substantially all of the assets of the Acquired Party or its direct or indirect controlling Affiliate.

7. CERTAIN FINANCIAL TERMS

7.1 Upfront Fee . As partial consideration for the licenses and other rights granted by Alnylam to MedCo under this Agreement, and to fund Alnylam's Development Costs under the Initial Development Plan up to the Development Costs Cap under this Agreement, within five (5) days after the Effective Date,

MedCo shall pay Alnylam a non-refundable, non-creditable initial payment of Twenty-Five Million U.S. Dollars ($25,000,000).

7.2 Development Milestone Fees .

(a) As partial consideration for the licenses and other rights granted in this Agreement, and to fund Alnylam's Development Costs under the Initial Development Plan up to the Development Costs Cap under this Agreement, MedCo shall make the non-refundable, non-creditable milestone payments to Alnylam set forth below no later than [**] days after the earliest date on which MedCo becomes aware that the corresponding milestone event has first been achieved with respect to a Licensed Product.



Milestone Event	Milestone Payment
(i) First dosing of a subject in a Phase I Study of a Licensed Product	$10,000,000
[**]	[**]
[**]	[**]
[**]	[**]
[**]	[**]

(b) Each milestone payment by MedCo to Alnylam hereunder shall be payable only once, regardless of the number of times achieved with respect to a Licensed Product or the Licensed Products and in no event shall the total milestone payments under this Section 7.2 exceed [**] dollars ($[**]).

(d) MedCo shall provide Alnylam with written notice of the achievement by MedCo or any of its Related Parties of any milestone event set forth in Section 7.2(a)(ii)-(v) within [**] days after MedCo becomes aware of such event; provided, however , that, except as required by Law, MedCo shall inform Alnylam of such event prior to any public disclosure of such event by MedCo.

(e) Alnylam shall provide MedCo with written notice of the achievement by Alnylam or any of its Related Parties of any milestone event set forth in Section 7.2(a)(i) within [**] after Alnylam becomes aware of such event; provided, however , that, except as required by Law, Alnylam shall inform MedCo of such event prior to any public disclosure of such event by Alnylam.

7.3 Sales Milestone Fees . As partial consideration for the licenses and other rights granted in this Agreement, MedCo shall make the non-refundable, non-creditable milestone payments to Alnylam set forth below no later than [**] after the end of the Calendar Year in which the corresponding milestone event (a “ Sales Milestone ”) has first been achieved with respect to the Licensed Products.



Aggregate Calendar Year Net Sales of the Licensed Products in the Territory Equals or Exceeds (in U.S. Dollars) :	Milestone Payment
[**]	[**]
[**]	[**]
[**]	[**]

With respect to the foregoing Sales Milestones, payment shall be made only once for each milestone regardless of the number of times aggregate Calendar Year Net Sales for Licensed Products in the Territory reach a particular dollar threshold and in no event shall the total milestone payments under this Section 7.3 exceed [**] dollars ($[**]). If Licensed Products achieve a higher Sales Milestone in a Calendar Year without having first achieved a lower Sales Milestone in any previous Calendar Year, then the milestone payment(s) for the lower Sales Milestone(s) shall be due and payable to Alnylam concurrently with the milestone payment for the higher Sales Milestone that has been achieved. For example, if aggregate Net Sales of the Licensed Products in the Territory are $[**] in the first Calendar Year, and then $[**] in the next Calendar Year, then MedCo will owe Alnylam a milestone payment of $[**] with respect to the second Calendar Year ($[**] for the $[**] milestone and $[**] for the $[**] milestone).

7.4 Royalties .

7.4.1 Royalties Payable on Licensed Products . Subject to the terms and conditions of this Agreement, as partial consideration for the licenses and other rights granted in this Agreement MedCo shall pay to Alnylam royalties on aggregate Net Sales by MedCo and its Related Parties of all Licensed Products in the Territory, as follows:



Aggregate Calendar Year Net Sales of all Licensed Products in the Territory	Royalty (as a percentage of Net Sales)
[**]	[**]
[**]	[**]
[**]	[**]
[**]	[**]

Royalties on aggregate Net Sales shall be paid at the rate applicable to the portion of such aggregate Net Sales within each of the Net Sales levels above during such Calendar Year.

7.4.2 Royalty Term . The period during which the royalties set forth in Section 7.4.1 shall be payable, on a Licensed Product-by-Licensed Product and country-by-country basis, shall commence with the First Commercial Sale of such Licensed Product in such country and continue until the latest of (a) the expiration of the last Valid Claim of any Patent Right that is (i) included in Alnylam Technology or MedCo Improvements, and (ii) Covers the manufacture, use, offer for sale, sale or importation of the Licensed Product in such country of sale, (b) the expiration of Regulatory Exclusivity for such Licensed Product in such country, and (c) the twelfth (12 ^th ) anniversary of the First Commercial Sale of the Licensed Product in such country (each such period, a “ Royalty Term ”).

7.4.3 Royalty Adjustment for Generic Competition . Subject to Section 7.4.6, the royalties to be paid by MedCo to Alnylam pursuant to this Section 7.4 shall be reduced by [**] percent ([**]%) with respect to Net Sales in a country of the Territory of any Licensed Product as to which Generic Competition exists. “ Generic Competition ” means, with respect to a Licensed Product in any country in the Territory in a given Calendar Quarter, that, during such Calendar Quarter, one or more Generic Products are commercially available in such country and such Generic Products have a combined market share (calculated on the basis of the number of units sold) of at least [**] percent ([**]%) of the aggregate market share of Licensed Products and Generic Products (based on data provided by IMS International, or if such data is not available, such other reliable data source as reasonably agreed by the Parties).

7.4.4 [**].

7.4.5 Royalty Adjustment for Necessary Third Party IP . Subject to Section 7.4.6, (a) if MedCo or any of its Related Parties is required to obtain a license or similar right from any Third Party under any Patent Rights that would be infringed by the practice of the Alnylam Patent Rights with respect to Licensed Products in the Field, and if MedCo or any of its Related Parties is required to pay to such Third Party a royalty, license fees or milestone payments to obtain such license or similar right with respect to the Development, Manufacture or Commercialization of Licensed Products in the Field, then the royalties to be paid by MedCo to Alnylam on Net Sales of a Licensed Product pursuant to this Section 7.4 in a Calendar Quarter shall be reduced by [**] percent ([**]%) of the amount of such royalty, license fees or milestone payments reasonably attributable to the Development, Manufacture or Commercialization of such Licensed Product and actually paid to such Third Party to the extent MedCo, directly or indirectly, bears the cost of such payment in such Calendar Quarter, and (b) the royalties to be paid by MedCo to Alnylam on Net Sales of a Licensed Product pursuant to this Section 7.4 in a Calendar Quarter shall be reduced by [**] percent ([**]%) of the amount of any payments made by MedCo to Alnylam pursuant to Section 6.4.3.2(c) reasonably attributable to the Development, Manufacture or Commercialization of such Licensed Product and actually paid to such Third Party to the extent MedCo, directly or indirectly, bears the cost of such payment in such Calendar Quarter.

7.4.6 Royalty Floor . Notwithstanding the foregoing provisions of this Section 7.4, in no event during the applicable Royalty Term for a Licensed Product in a country of the Territory shall the royalties payable to Alnylam hereunder for such Licensed Product in such country for any Calendar Quarter be reduced pursuant to Sections 7.4.3, 7.4.4, and 7.4.5 to less than [**] percent ([**]%) of the royalties payable pursuant to Section 7.4.1 as to such Licensed Product in such country for such Calendar Quarter.

7.4.7 Reports; Payment of Royalty . During the Term, following the First Commercial Sale of the Licensed Product in the Territory, MedCo shall furnish to Alnylam a written report within [**] days after the end of each Calendar Quarter showing, on a Licensed Product-by-Licensed Product and country-by-country basis, the gross sales of each Licensed Product in each country of the Territory, deductions from gross sales (itemized by deduction category) for each Licensed Product for each country of the Territory included in the calculation of Net Sales, the Net Sales in each country of the Territory of Licensed Product during the reporting period, a calculation of royalty adjustments pursuant to Section 7.4 (if any) for such period and the royalties payable under this Agreement. Quarterly reports shall be due no later than the [**] day following the end of each Calendar Quarter. In addition, to the extent required under Sections 6.1.3(b) or 6.4.1, MedCo shall prepare and deliver to Alnylam any additional reports as required under the Alnylam In-Licenses and to determine any payments due under Section 6.4. Royalties shown to have accrued by each royalty report shall be due and payable on the date such royalty report is due. Along with the last report for a Calendar Year provided hereunder, MedCo will provide a final report for such entire Calendar Year that includes a calculation of [**] (if any) for such period, and a statement on whether any reconciling payments must be made at such time to effect the intent of Section 7.4.4. Within [**] days after such statement is provided, the Party that owes any amounts to the other Party to effect such reconciliation will pay the relevant amount to the other Party. MedCo and its Related Parties shall keep complete and accurate records in sufficient detail to enable the royalties and other payments payable hereunder, and, to the extent required under Sections 6.1.3(b) or 6.4.1, by Alnylam to Third Parties under the Alnylam In-Licenses, to be determined.

7.4.8 Blended Royalty Rates . The Parties acknowledge and agree that the Patent Rights and Know-How licensed pursuant to this Agreement justify royalty rates of differing amounts with respect to the sales of Licensed Products, which rates could be applied separately to Licensed Products involving the

exercise of such Licensed Patents and/or the incorporation of such Know-How, and that, if such royalties were calculated separately, royalties relating to Patent-Rights and royalties relating to Know-How would last for different terms. Notwithstanding the foregoing, the Parties have determined, for reasons of convenience, that blended royalty rates for the Patent Rights and the Know-How licensed hereunder, as set forth above, will apply during a single Royalty Term.

7.5 Audits .

7.5.1 Upon the written request of a Party and not more than [**], the other Party and its Related Parties shall permit an independent certified public accounting firm of internationally-recognized standing selected by the requesting Party and reasonably acceptable to the other Party, at the requesting Party's expense except as set forth below, to have access during normal business hours to such of the records of the other Party as may be reasonably necessary to verify the accuracy of the royalty, Cost reimbursement and other reports hereunder for any Calendar Year ending not more than [**] Calendar Years prior to the date of such request for the sole purpose of verifying the basis and accuracy of costs incurred under Section 2.3.1, to the extent Alnylam has provided notice thereof to MedCo pursuant to Section 2.3.3, and payments made under Sections 2.3.3, 6.4 and, if applicable, 12.3 and Articles 5, 7 and 11. The records for any Calendar Year may be audited no more than once.

7.5.2 If such accounting firm identifies a discrepancy made during such period, the appropriate Party shall pay the other Party the amount of the discrepancy, together with late-payment interest in accordance with Section 7.7, within [**] days after the date the requesting Party delivers to the other Party such accounting firm's written report so concluding, or as otherwise agreed by the Parties in writing. The fees charged by such accounting firm shall be paid by the requesting Party, unless such discrepancy results from a reporting error by the other Party and represents an underpayment by such other Party of at least five percent (5%) of the total amounts due from such other Party hereunder, or represents an overpayment to such other Party of at least five percent (5%) of the total amounts due to such other Party hereunder, in a Calendar Year, in which case such fees, to the extent reasonable, shall be paid by the other Party.

7.5.3 To the extent required under Sections 6.1.3(b) or 6.4.1, and subject to Section 6.4, MedCo shall comply with all applicable audit requirements in the Alnylam In-Licenses and shall include in each sublicense granted by it pursuant to this Agreement a provision requiring its Sublicensees to make reports to Alnylam, to keep and maintain records of sales made pursuant to such sublicense and to grant access to such records by the independent accountants of the Person(s) that are also party to such Alnylam In-Licenses to the same extent required of MedCo under this Agreement.

7.5.4 Unless an audit for a Calendar Year has been commenced prior to the [**] anniversary of the end of such Calendar Year, the calculation of royalties, Cost reimbursement and other payments payable with respect to such Calendar Year shall be binding and conclusive upon both Parties, and each Party and its Related Parties shall be released from any further liability or accountability with respect to such royalties or expense reimbursement for such Calendar Year, upon such [**] anniversary. If an audit for a Calendar Year has been commenced prior to the [**] anniversary of the end of such Calendar Year, the calculation of royalties, Cost reimbursement and other payments payable with respect to such Calendar Year shall be binding and conclusive upon both Parties, and each Party and its Related Parties shall be released from any further liability or accountability with respect to such royalties or expense reimbursement for such Calendar Year, following the conclusion of such audit.

7.5.5 Each Party shall treat all financial information subject to review under this Section 7.5 or under any sublicense agreement as the audited Party's Confidential Information in accordance with the

confidentiality and non-use provisions of this Agreement, and shall cause its accounting firm to enter into an acceptable confidentiality agreement with the audited Party and/or its Related Parties obligating it to retain all such information in confidence pursuant to such confidentiality agreement.

7.6 Payment Exchange Rate . All payments to be made under this Agreement shall be made in United States dollars and shall be paid by bank wire transfer in immediately available funds to such bank account in the United States as may be designated in writing by the receiving Party from time to time. In the case of Net Sales made or expenses incurred by a Party and its Related Parties in currencies other than United States dollars, the rate of exchange to be used in computing the amount of United States dollars due shall be the rate of exchange utilized by such Party in its worldwide accounting system and calculated in accordance with generally accepted accounting principles in the United States consistently applied, prevailing on the last day of each Calendar Quarter for royalty payments.

7.7 Late Payments . Any amount owed by a Party to the other Party under this Agreement that is not paid on or before the date such payment is due shall bear interest at a rate per annum equal to the lesser of (a) the then current one (1) month London Inter-Bank Offering Rate for US Dollars, as quoted on the British Banker's Association's website currently located at www.bba.org.uk (or such other source as may be mutually agreed by the Parties), plus [**] percentage points, per annum or (b) the highest rate permitted by Law, calculated on the number of days such payments are paid after such payments are due and compounded monthly.

7.8 Blocked Payments . If, by reason of Laws in any jurisdiction in the Territory, it becomes impossible or illegal for a Party to transfer milestone payments, royalties or other payments under this Agreement to the other Party, the payor shall promptly notify the payee. During any such period described above, the payor shall deposit such payments in local currency in the relevant jurisdiction to the credit of the payee in a recognized banking institution designated by the payee or, if none is designated by the payee within a period of [**] days, in a recognized banking institution selected by the payor and identified in a written notice given to the payee.

7.9 Taxes .

7.9.1 The Parties acknowledge and agree that, as of the Effective Date, no deduction for any tax withholding shall be required with respect to the payments due under this Agreement. Each Party (the “ Paying Party ”) shall use reasonable efforts to minimize tax withholding on payments made to the other Party (the “ Payee ”). Notwithstanding such efforts, if the Paying Party concludes that tax withholdings under the Laws of any country are required with respect to payments to the Payee, the Paying Party shall promptly notify the Payee and allow the Payee [**] Business Days to determine whether there are actions the Payee can lawfully undertake to avoid such withholding. The Paying Party shall refrain from making such payment until the earliest to occur of: (a) such [**] Business Day period has expired; (b) the Payee instructs the Paying Party that the Payee intends to take actions that will reduce, or obviate the need for, such withholding, in which case the Paying Party shall make such payment (and future payments subject to the same or similar treatment), subject to no or such reduced withholding of tax, only after (i) it is instructed to do so by the Payee and (ii) it has received written advice from the Payee's counsel, in form and substance reasonably satisfactory to the Paying Party, that such actions have been taken, are lawful and are effective to so reduce or eliminate such withholding; or (c) the Payee instructs the Paying Party to make such payment and withhold the required amount of tax and pay it to the appropriate Governmental Authority in accordance with applicable Laws, in which case, the Paying Party shall take such actions and shall promptly thereafter provide the Payee with copies of receipts or other evidence of such withheld amount and such payment, including to the extent reasonably available to the Paying Party, such evidence

as is reasonably required and sufficient to allow the Payee to document such tax withholdings adequately for purposes of claiming foreign tax credits and similar benefits. The Parties will cooperate reasonably in completing and filing documents required under the provisions of any applicable tax Laws or under any other applicable Law, in connection with the making of any required tax withholding payment, or in connection with any claim to a refund of, or credit for, any such payment. Each Party will reasonably cooperate with the other Party (at such other Party's expense and request) to minimize such taxes imposed on such other Party in accordance with applicable Laws.

7.9.2 Notwithstanding the foregoing, if, as a result of (a) the assignment of this Agreement by the Paying Party to an Affiliate or a Third Party outside of the United States or (b) the exercise by the Paying Party of its rights under this Agreement through an Affiliate or Third Party outside of the United States, foreign withholding tax in excess of the foreign withholding tax amount that would have been payable in the absence of such assignment or exercise of rights becomes payable with respect to amounts due to the Payee hereunder, such amount due to the Payee will be increased so that the amount actually paid to the Payee (after withholding of the excess withholding tax) equals the amount that would have been payable to the Payee in the absence of such excess withholding.

7.9.3 For clarity, the provisions of Sections 7.9.1 and 7.9.2 shall not apply to taxes imposed on a Party's net income.

7.10 Invoices . To the extent necessary for the Paying Party to comply with applicable Law or GAAP, the Paying Party may require the other Party to issue an invoice to the Paying Party for any amount due by the Paying Party hereunder prior to the Paying Party paying such amount.

7.11 Good Faith Disputes Over Payment Obligations , With respect to any payment due or purported to be due hereunder, the portion of any such payment which is disputed in good faith shall not be owed until the dispute is resolved, and the Parties shall use good faith efforts to promptly resolve such dispute; provided , however , that any such amount finally determined to be due shall be paid with interest pursuant to Section 7.7 from the date originally due (without regard to this Section 7.11).


8.	CONFIDENTIALITY AND PUBLICATION

8.1 Nondisclosure Obligation .

(a) All Confidential Information disclosed by one Party to the other Party hereunder shall be maintained in confidence by the receiving Party and shall not be disclosed to a Third Party or used for any purpose except as set forth herein without the prior written consent of the disclosing Party, except that no information or data shall be considered Confidential Information to the extent that such information or data:


(i)	is known by the receiving Party at the time of its receipt, and not through a prior disclosure by the disclosing Party, as documented by the receiving Party's business records;


(ii)	is in the public domain or publicly known by use and/or publication before its receipt from the disclosing Party (or, with respect to Joint Collaboration IP, before its development hereunder), or thereafter enters the public domain or becomes publicly known through no fault of the receiving Party;


(iii)	is subsequently disclosed to the receiving Party by a Third Party who may lawfully do so and is not under an obligation of confidentiality to the disclosing Party; or


(iv)	is developed by the receiving Party independently of Confidential Information received from the disclosing Party (including any Joint Collaboration IP), as documented by the receiving Party's business records.

(b) Notwithstanding the obligations of confidentiality and non-use set forth above and in Section 8.2 below, a receiving Party may provide Confidential Information disclosed to it, and disclose the existence and terms of this Agreement, as may be reasonably required in order to perform its obligations and to exploit its rights under this Agreement, to (i) Related Parties, and their employees, directors, agents, consultants, advisors and/or other Third Parties for the performance of its obligations hereunder (or for such entities to determine their interest in performing such activities) in accordance with this Agreement, in each case who are obligated to keep such Confidential Information confidential on terms no less stringent than those in this Section 8.1; (ii) Governmental Authorities or other Regulatory Authorities in order to obtain patents in accordance with this Agreement, or otherwise perform its obligations or exploit its rights under this Agreement; provided , that such Confidential Information shall be disclosed only to the extent reasonably necessary to do so; (iii) the extent required by Law, including by the rules or regulations of the United States Securities and Exchange Commission or similar regulatory agency in a country other than the United States or of any stock exchange or listing entity; (iv) any bona fide actual or prospective underwriters, investors, lenders, other financing sources, acquirers, permitted sublicensees, collaborators or strategic partners and to consultants and advisors of such Party, in each case who are obligated to keep such Confidential Information confidential on terms no less stringent than those in this Section 8.1; and (v) Third Parties to the extent a Party is required to do so pursuant to the terms of an In-License.

If a Party is required by Law to disclose Confidential Information that is subject to the non-disclosure provisions of this Section 8.1 or Section 8.2, such Party shall, to the extent permitted by Law, promptly inform the other Party of the disclosure that is being sought in order to provide the other Party an opportunity to challenge or limit the disclosure obligations. Confidential Information that is required to be disclosed by Law shall remain otherwise subject to the confidentiality and non-use provisions of this Section 8.1 and Section 8.2. If either Party concludes that a copy of this Agreement must be filed with the United States Securities and Exchange Commission or similar regulatory agency in a country other than the United States, such Party will provide the other Party with a copy of this Agreement showing any provisions hereof as to which the Party proposes to request confidential treatment, will provide the other Party with an opportunity to comment on any such proposed redactions and to suggest additional redactions, and will take such Party's reasonable and timely comments into consideration before filing the Agreement.

8.2 Publication and Publicity .

8.2.1 Publication . MedCo and Alnylam each acknowledge the other Party's interest in publishing the results of the Collaboration. Each Party also recognizes the mutual interest in obtaining valid patent protection and in protecting trade secret information. Consequently, except for disclosures permitted pursuant to Section 8.1, 8.2.2(b) or 8.2.2(c), either Party wishing to make a publication or public presentation of Development results that contains the Confidential Information of the other Party shall deliver to the other Party a copy of the proposed written publication or presentation at least [**] days prior to submission for publication or presentation. The reviewing Party shall have the right (a) to propose modifications to the publication or presentation for patent reasons, trade secret reasons or business reasons, which proposals the publishing Party may accept or reject in its discretion, and (b) to request a reasonable delay in publication or presentation in order to protect patentable information in accordance with Article 11. If the reviewing

Party requests a delay pursuant to clause (b), the publishing Party shall delay submission or presentation for a period of an additional [**] days to enable the non-publishing Party to file patent applications protecting such Party's rights in such information in accordance with Article 11. With respect to any proposed publications or disclosures by clinical investigators or academic or non-profit collaborators, such materials shall be subject to review under this Section 8.2 to the extent that MedCo or Alnylam, as the case may be, has the right and ability (after using Commercially Reasonable Efforts to obtain such right and ability) to do so.

8.2.2 Publicity .

(a) Except as set forth in Section 8.1 above and clause (b) below, the terms of this Agreement may not be disclosed by either Party, and no Party shall use the name, trademark, trade name or logo of the other Party or its employees in any publicity, news release or disclosure relating to this Agreement or its subject matter, without the prior express written permission of the other Party, except as may be required by Law or expressly permitted by the terms of the Transaction Agreements.

(b) Following the execution of this Agreement, the Parties shall issue a joint press release agreed to by the Parties and substantially in the form set forth in Schedule F . After such initial press release, except as provided in Sections 8.1, 8.2.2(a), or 8.2.2(c), neither Party shall issue a press release or public announcement relating to this Agreement without the prior written approval of the other Party, which approval shall not be unreasonably withheld, conditioned or delayed, except that a Party may (i) once a press release or other public statement is approved in writing by both Parties, make subsequent public disclosure of the information contained in such press release or other written statement without the further approval of the other Party, and (ii) issue a press release or public announcement as required, in the reasonable judgment of such Party, by Law, including by the rules or regulations of the United States Securities and Exchange Commission or similar regulatory agency in a country other than the United States or of any stock exchange or listing entity.

(c) Either Party may issue a press release or make a public disclosure relating to this Agreement or the Parties' activities under this Agreement to the extent that such disclosure describes the commencement and/or “top-line” results of Clinical Trials of a Licensed Product conducted by such Party, the achievement by such Party of any material Development events with respect to a Licensed Product or the filing for or receipt of Regulatory Approval with respect to the Licensed Product by such Party or its Related Parties in the Territory, or amounts paid to either Party in respect of the achievement of any milestone events. Prior to making any such disclosure, the Party making the disclosure shall provide the other Party with a draft of such proposed disclosure at least five (5) Business Days (or, to the extent faster timely disclosure of a material event is required by Law or stock exchange or stock market rules, such shorter period of time sufficiently in advance of the disclosure so that the other Party will have the opportunity to comment upon the disclosure and the disclosing Party will be able to comply with its obligations) prior to making any such disclosure, for the other Party's review and comment, which shall be considered in good faith by the disclosing Party.

(d) Subject to Sections 8.2.1 and 8.2.2(c), MedCo and its Related Parties may make public announcements or disclosures reasonably necessary or useful to Develop or Commercialize the Licensed Products in the Field in the Territory, including disclosures necessary to recruit subjects to clinical trials and disclosures to advertise, promote and otherwise Commercialize the Licensed Products.

9. REPRESENTATIONS, WARRANTIES AND COVENANTS; INDEMNIFICATION

9.1 Mutual Representations and Warranties . Each Party represents and warrants to the other Party that as of the Effective Date:

9.1.1 It is duly organized and validly existing under the laws of its jurisdiction of incorporation or formation, and has full corporate or other power and authority to enter into this Agreement, and to carry out the provisions hereof.

9.1.2 It is duly authorized to execute and deliver this Agreement, and to perform its obligations hereunder, and the person or persons executing this Agreement on its behalf has been duly authorized to do so by all requisite corporate action.

9.1.3 This Agreement is legally binding upon it and enforceable in accordance with its terms. The execution, delivery and performance of this Agreement by it does not conflict with any agreement, instrument or understanding, oral or written, to which it is a party and by which it may be bound, or with its charter or by-laws.

9.1.4 It has not granted, and will not grant, during the Term, any right to any Affiliate or Third Party that would conflict with the rights granted to the other Party hereunder.

9.1.5 Neither it nor any of its Affiliates has been debarred or is subject to debarment.

9.2 Representations and Warranties of Alnylam . Except as provided in Schedule G , Alnylam represents and warrants to MedCo that as of the Effective Date:

9.2.1 (a) Alnylam is the sole and exclusive owner of, or otherwise has the right to license to MedCo as set forth in this Agreement, pursuant to an Alnylam In-License (or will Control pursuant to an Additional Alnylam In-License at such time that such Additional Alnylam In-License is included as an Alnylam In-License pursuant to Section 6.4.2.3), the Alnylam Technology. (b) All of the Alnylam Technology licensed to MedCo hereunder in the Territory that is solely and exclusively owned by Alnylam or its Affiliates is free and clear of liens, charges or encumbrances, other than licenses granted to Third Parties that are not inconsistent with the rights and licenses granted to MedCo under this Agreement. (c) The Alnylam Technology and the Patent Rights licensed by Alnylam pursuant to the Additional Alnylam In-Licenses constitute all the intellectual property that Alnylam or its Affiliates own or have rights under that are or may be reasonably necessary or useful for the Development, Manufacturing and Commercialization of the Licensed Products.

9.2.2 Alnylam has sufficient legal and/or beneficial title and ownership of, or sufficient license rights under, the Alnylam Patent Rights listed in Schedule C to grant the licenses to such Alnylam Patent Rights granted to MedCo pursuant to this Agreement.

9.2.3 (a) To Alnylam's knowledge, Schedule C-1 sets forth a complete and accurate list of the Alnylam Core Technology Patent Rights. (b) To Alnylam's knowledge, Schedule C-2 sets forth a complete and accurate list of the Alnylam Product-Specific Patent Rights. (c) Schedules C-1 and C-2 collectively set forth a complete and accurate list of the Alnylam Patent Rights owned, either solely or jointly, by Alnylam or its Affiliates. (d) To Alnylam's knowledge, Schedules C-1 and C-2 collectively set forth a complete and accurate list of the Alnylam Patent Rights licensed, either exclusively or nonexclusively, to Alnylam or its Affiliates. (e) To Alnylam's knowledge, each issued Alnylam Patent Right remains in full

force and effect. (f) Alnylam or its Affiliates have timely paid all filing and renewal fees payable with respect to such Alnylam Patent Rights for which Alnylam controls prosecution and maintenance. (g) Schedules C-1 and C-2 indicate whether each Alnylam Patent Right is owned exclusively by Alnylam or its Affiliates, is owned jointly by Alnylam and one or more Affiliates or Third Parties, or is licensed to Alnylam or its Affiliates. (h) For each Alnylam Patent Right that is owned, but not owned exclusively, by Alnylam or its Affiliates, or that is licensed to Alnylam or its Affiliates, Schedules C-1 and C-2 identify the Third Party owner(s) and, if applicable, the Alnylam In-License pursuant to which Alnylam Controls such Alnylam Patent Right. (i) For each Alnylam Product-Specific Patent Right that is licensed, but not exclusively licensed, to Alnylam or its Affiliates, Schedule C-2 indicates the non-exclusive nature of the license. (j) For each Alnylam Core Technology Patent Right family (other than Patent Rights licensed from Isis Pharmaceuticals, Inc.) that is licensed, but not exclusively licensed, to Alnylam or its Affiliates, Schedule C-1 indicates the non-exclusive nature of the license. (k) Alnylam or its Affiliates is/are the sole and exclusive owner(s) of all Patent Rights identified in Schedules C-1 or C-2 as being owned exclusively by Alnylam or its Affiliates and Alnylam Controls all other Patent Rights identified on such schedules. (l) To Alnylam's knowledge, Schedule C-3 sets forth a complete and accurate list of the Patent Rights licensed to Alnylam pursuant to the Additional Alnylam In-Licenses and which, if MedCo exercises its option pursuant to Section 6.4.2.3 with respect to the relevant Additional Alnylam In-License on the Effective Date, would be considered “Controlled” by Alnylam.

9.2.4 (a) To Alnylam's knowledge, the Alnylam Product-Specific Patent Rights, are, or, upon issuance, will be, valid and enforceable patents and no Third Party has challenged or threatened to challenge the scope, validity or enforceability of any Alnylam Product-Specific Patent Right (including, by way of example, through opposition or the institution or written threat of institution of interference, nullity or similar invalidity proceedings before the United States Patent and Trademark Office or any analogous foreign Governmental Authority). (b) Alnylam has complied with all applicable Laws, including any duties of candor to applicable patent offices, in connection with its filing, prosecution and maintenance of the Alnylam Patent Rights for which Alnylam controls filing, prosecution and maintenance.

9.2.5 (a) Section A and Section C of Schedule D sets forth a complete and accurate list of all agreements between Alnylam or any of its Affiliates, on the one hand, and a Third Party(ies), on the other hand, entered into on or prior to the Effective Date and pursuant to which Alnylam or any of its Affiliates licenses or acquires any intellectual property rights owned or controlled by Alnylam or its Affiliates which are reasonably necessary or useful to Develop, Manufacture or Commercialize Licensed Products in the Field. (b) Alnylam and its Affiliates have not granted any Third Party, and are not under any obligation to grant any Third Party, any right to Develop, Manufacture or Commercialize Licensed Products in the Field in the Territory, except for the non-exclusive licenses granted to the Third Parties pursuant to the Existing Alnylam Third Party Agreements. (c) Alnylam Controls all Know-How and Patent Rights licensed to Alnylam under the Existing Alnylam In-Licenses that are necessary or useful for MedCo to Develop, Manufacture and/or Commercialize Licensed Products in the Field in the Territory. (d) Without limiting the generality of the foregoing, (i) Alnylam has obtained all necessary consents (if any) and fulfilled all necessary conditions (if any) to sublicense to MedCo under this Agreement such Know-How and Patent Rights licensed to Alnylam or its Affiliates under the Existing Alnylam In-Licenses, and (ii) Alnylam has obtained all necessary consents (if any) under the Existing Alnylam Third Party Agreements to grant the licenses to MedCo to Alnylam Technology that are purported to be granted to MedCo pursuant to this Agreement. (e) At such time that an Additional Alnylam In-License is included as an Alnylam In-License pursuant to Section 6.4.2.3, Alnylam will Control all Know-How, if any, and Patent Rights licensed to Alnylam or its Affiliates under such Additional Alnylam In-License that is necessary or useful for MedCo to Develop, Manufacture and/or Commercialize Licensed Products in the Field in the Territory.

9.2.6 To Alnylam's knowledge, neither Alnylam nor its Affiliates are in breach or default under any Existing Alnylam In-License or Additional Alnylam In-License, and neither Alnylam nor its Affiliates have received any written notice of breach or default with respect to any Existing Alnylam In-License or Additional Alnylam In-License.

9.2.7 Alnylam has provided MedCo with true and complete copies of all Existing Alnylam In-Licenses, Additional Alnylam In-Licenses and Existing Alnylam Third Party Agreements; provided , however , that, (a) to the extent that the terms of any such agreements require Alnylam to redact any provisions thereof before providing such agreements, or relevant portion thereof, to MedCo, Alnylam has provided MedCo with copies of such agreements, which are true and complete to the fullest extent possible under such agreements and that any provisions or portions which have not been provided to MedCo either (i) are not relevant to any obligations owed by MedCo, or rights granted to MedCo, under such agreement or any Transaction Agreement or (ii) have been summarized by Alnylam to MedCo in writing, and such summary is true and complete in all material respects; and (b) Alnylam is not required by this Section 9.2.7 to provide to MedCo copies of any amendment or side letter to any Existing Alnylam In-License, Additional Alnylam In-License or Existing Alnylam Third Party Agreement which is not materially relevant to the rights granted to, and the obligations imposed on, MedCo under this Agreement.

9.2.8 To Alnylam's knowledge, the use, Development, Manufacture or Commercialization by Alnylam or MedCo (or their respective Related Parties) of any Licensed Product as formulated and manufactured as of the Effective Date, or as intended to be formulated and manufactured as of the Effective Date, (a) does not and will not infringe any issued, valid and enforceable patent of any Third Party or (b) will not infringe the claims of any published Third Party patent application when and if such claims were to issue in scope that was valid and enforceable.

9.2.9 There is no (a) claim, demand, suit, proceeding, arbitration, inquiry, investigation or other legal action of any nature, civil, criminal, regulatory or otherwise, pending or, to Alnylam's knowledge, threatened against Alnylam or any of its Affiliates or (b) judgment or settlement against or owed by Alnylam or any of its Affiliates, in each case in connection with the Alnylam Technology or any Licensed Product.

9.2.10 To Alnylam's knowledge, the Development of Licensed Product in the Territory to date has been conducted by Alnylam and its Affiliates and its subcontractors, in compliance (in all material respects) with all applicable Laws.

9.3 [Intentionally Omitted] .

9.4 Warranty Disclaimer . EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS AGREEMENT, NEITHER PARTY MAKES ANY REPRESENTATION OR EXTENDS ANY WARRANTY OF ANY KIND, EITHER EXPRESS OR IMPLIED, TO THE OTHER PARTY WITH RESPECT TO ANY TECHNOLOGY, LICENSED PRODUCT, GOODS, SERVICES, RIGHTS OR OTHER SUBJECT MATTER OF THIS AGREEMENT AND HEREBY DISCLAIMS ALL IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND NON-INFRINGEMENT WITH RESPECT TO ANY AND ALL OF THE FOREGOING. EACH PARTY HEREBY DISCLAIMS ANY REPRESENTATION OR WARRANTY THAT THE DEVELOPMENT, MANUFACTURE OR COMMERCIALIZATION OF THE LICENSED PRODUCTS PURSUANT TO THIS AGREEMENT WILL BE SUCCESSFUL OR THAT ANY PARTICULAR SALES LEVEL WITH RESPECT TO THE LICENSED PRODUCTS WILL BE ACHIEVED.

9.5 Certain Covenants .

9.5.1. Exclusivity . During the Term but subject to this Agreement including Sections 6.1.4 and 6.7, neither Party or its Affiliates will, without the prior written agreement of the other Party, alone or with or for an Affiliate or Third Party, or grant any Third Party a license to, research, develop, manufacture or commercialize in any country any product directed to the human PCSK9 gene, other than a Licensed Product pursuant to this Agreement. For purposes of this Section 9.5.1, “directed to” means, with respect to a compound, molecule or siRNA and a target, that such compound, molecule or siRNA modulates the expression or activity of such target, influences the expression or activity of such target or otherwise antagonizes or inhibits the expression or activity of such target, and with respect to a product and a target, that such product contains a compound, molecule or siRNA that modulates the expression or activity of such target, influences the expression or activity of such target or otherwise antagonizes or inhibits the expression or activity of such target.

9.5.2. Compliance . Each Party and its Related Parties shall conduct the Collaboration and the Development, Manufacture and Commercialization of the Licensed Product in material accordance with all Laws and industry standards, including current governmental regulations concerning good laboratory practices, good clinical practices and good manufacturing practices.

9.5.3. Debarment . Neither Party nor any of its Affiliates will use in any capacity, in connection with the Collaboration or the performance of its obligations under this Agreement, any person or entity that has been debarred pursuant to Section 306 of the United States Federal Food, Drug, and Cosmetic Act, as amended, or that is the subject of a conviction described in such section. Each Party agrees to inform the other Party in writing immediately if it learns that (a) it or any person or entity that is performing activities in the Collaboration or under this Agreement, is debarred or is subject to debarment or is the subject of a conviction described in Section 306, or (b) any action, suit, claim, investigation or legal or administrative proceeding is pending or, to the notifying Party's knowledge, is threatened, relating to the debarment or conviction of the notifying Party or any person or entity used in any capacity by such Party or any of its Affiliates in connection with the Collaboration or the performance of its other obligations under this Agreement

10. INDEMNIFICATION; LIMITATION OF LIABILITY; INSURANCE

10.1 General Indemnification by MedCo . MedCo shall indemnify, hold harmless, and defend Alnylam, its Related Parties, and their respective directors, officers, employees and agents (“ Alnylam Indemnitees ”) from and against any and all Third Party claims, suits, losses, liabilities, damages, costs, fees and expenses (including reasonable attorneys' fees) (collectively, “ Losses ”) to the extent such Losses arise out of or result from, directly or indirectly, (a) any breach of, or inaccuracy in, any representation or warranty made by MedCo in the Transaction Agreements or any breach or violation of any covenant or agreement of MedCo in the Transaction Agreements, (b) the negligence or willful misconduct by or of MedCo and its Related Parties, and their respective directors, officers, employees and agents, in the performance of MedCo's obligations under the Transaction Agreements, or (c) the Development, Manufacture or Commercialization of Licensed Products by MedCo or its Related Parties. MedCo shall have no obligation to indemnify the Alnylam Indemnitees to the extent that the Losses arise out of or result from, directly or indirectly, any breach of, or inaccuracy in, any representation or warranty made by Alnylam in the Transaction Agreements, or any breach or violation of any covenant or agreement of Alnylam in the Transaction Agreements, or the negligence or willful misconduct by or of any of the Alnylam Indemnitees.

10.2 General Indemnification by Alnylam . Alnylam shall indemnify, hold harmless, and defend MedCo, its Related Parties and their respective directors, officers, employees and agents (“ MedCo Indemnitees ”) from and against any and all Losses to the extent such Losses arise out of or result from,

directly or indirectly, (a) any breach of, or inaccuracy in, any representation or warranty made by Alnylam in the Transaction Agreements or any breach or violation of any covenant or agreement of Alnylam in the Transaction Agreements, (b) the negligence or willful misconduct by or of Alnylam and its Related Parties, and their respective directors, officers, employees and agents, in the performance of Alnylam's obligations under the Transaction Agreements, (c) the Development, Manufacture or Commercialization of Licensed Products by Alnylam or its Related Parties pursuant to the Initial Development Plan, the Development Supply Agreement or Section 12.3, or (d) the exercise by Alnylam or its Related Parties of its rights in Section 6.2.2. Alnylam shall have no obligation to indemnify the MedCo Indemnitees to the extent that the Losses arise out of or result from, directly or indirectly, any breach of, or inaccuracy in, any representation or warranty made by MedCo in the Transaction Agreements, or any breach or violation of any covenant or agreement of MedCo in the Transaction Agreements, or the negligence or willful misconduct by or of any of the MedCo Indemnitees.

10.3 Indemnification Procedure . In the event of any such claim against any MedCo Indemnitee or Alnylam Indemnitee (individually, an “ Indemnitee ”), the indemnified Party shall promptly notify the other Party in writing of the claim once the indemnified Party learns of it, and the indemnifying Party shall manage and control, at its sole expense, the defense of the claim and its settlement. The Indemnitee shall cooperate with the indemnifying Party, at the indemnifying Party's reasonable request and expense, and may, at its option and expense, be represented in any such action or proceeding. The indemnifying Party shall not be liable for any settlements, litigation costs or expenses incurred by any Indemnitee without the indemnifying Party's written authorization. The indemnifying Party shall not settle any such claim without the Indemnitee's consent, unless such settlement requires only payments by the indemnifying Party. Notwithstanding the foregoing, if the indemnifying Party believes that any of the exceptions to its obligation of indemnification of the Indemnitees set forth in Sections 10.1 or 10.2 may apply, the indemnifying Party shall promptly notify the Indemnitees, which shall then have the right to be represented in any such action or proceeding by separate counsel at their expense; provided , that the indemnifying Party shall be responsible for payment of such expenses if the Indemnitees are ultimately determined to be entitled to indemnification from the indemnifying Party for the matters to which the indemnifying Party notified the Indemnitees that such exception(s) may apply. To the extent that an indemnification obligation hereunder results in payments to a Third Party which are described in Section 6.4.3, the provisions of Sections 10.1 through 10.3 shall be subject to the provisions of Section 6.4.3 to the extent Section 6.4.3 is applicable.

10.4 Limitation of Liability . NEITHER PARTY HERETO WILL BE LIABLE FOR SPECIAL, INCIDENTAL, CONSEQUENTIAL OR PUNITIVE DAMAGES ARISING OUT OF THIS AGREEMENT OR THE EXERCISE OF ITS RIGHTS HEREUNDER, INCLUDING LOST PROFITS ARISING FROM OR RELATING TO ANY BREACH OF THIS AGREEMENT, REGARDLESS OF ANY NOTICE OF SUCH DAMAGES, EXCEPT AS A RESULT OF A PARTY'S WILLFUL MISCONDUCT, A MATERIAL BREACH OF THE CONFIDENTIALITY AND NON-USE OBLIGATIONS IN ARTICLE 8, OR A BREACH OF THE EXCLUSIVITY PROVISION IN SECTION 9.5.1. NOTHING IN THIS SECTION 10.4 IS INTENDED TO LIMIT OR RESTRICT THE INDEMNIFICATION RIGHTS OR OBLIGATIONS OF EITHER PARTY.

10.5 Insurance . Each Party shall maintain insurance during the Term and for a period of at least [**] years after the last commercial sale of any Licensed Product under this Agreement by such Party or its Related Parties, with a reputable, solvent insurer in an amount appropriate for its business and products of the type that are the subject of this Agreement, and for its obligations under this Agreement. Specifically, each Party shall maintain product liability insurance of at least [**] U.S. Dollars ($[**]) per occurrence. Upon reasonable request, each Party shall provide the other Party with evidence of the existence and maintenance of such insurance coverage.

10.6 Obligations with Respect to IP Representations, Warranties and Covenants . In the event that Alnylam has materially breached any of its representations, warranties or covenants under Sections 9.2 or 6.4.4 and such breach has a material adverse effect on the rights of MedCo under this Agreement, then Alnylam shall use Commercially Reasonable Efforts to remedy such breach and obtain the right from the relevant Affiliate or Third Party in order to Control the relevant intellectual property such that it is considered Alnylam Technology and licensed or sublicensed to MedCo hereunder, and Alnylam shall bear any additional incremental payments that may be owed to such Affiliate or Third Party with respect to such remedy and such rights, license and sublicense, including any costs and expenses that might otherwise reasonably be imposed on MedCo or its Related Parties with respect to such consent or such rights, license or sublicense, other than the payment of royalties in accordance with Section 6.4.3 as set forth as of the Effective Date under any Existing Alnylam In-License (or any Additional Alnylam In-License, as the case may be) with respect to sales of Licensed Products by MedCo or its Related Parties. For clarity, the foregoing shall not be deemed to be MedCo's sole remedy with respect to such breach.

11. INTELLECTUAL PROPERTY OWNERSHIP, PROTECTION AND RELATED MATTERS

11.1 Inventorship . Inventorship for patentable inventions conceived or reduced to practice during the course of the performance of activities pursuant to this Agreement shall be determined in accordance with United States patent laws for determining inventorship.

11.2 Ownership . Alnylam shall own the entire right, title and interest in and to all inventions and discoveries (and Patent Rights claiming patentable inventions therein) first conceived or reduced to practice or, with respect to inventions and discoveries other than patentable inventions, otherwise identified, developed, made or discovered, solely by employees or consultants of Alnylam or acquired solely by Alnylam in the course of conducting the Collaboration. MedCo shall own the entire right, title and interest in and to all inventions and discoveries (and Patent Rights claiming patentable inventions therein) first conceived or reduced to practice or, with respect to inventions and discoveries other than patentable inventions, otherwise identified, developed, made or discovered, solely by employees or consultants of MedCo or acquired solely by MedCo in the course of conducting the Collaboration. The Parties shall jointly own any inventions and discoveries (and Patent Rights claiming patentable inventions therein) first conceived or reduced to practice or, with respect to inventions and discoveries other than patentable inventions, otherwise identified, developed, made or discovered, jointly in the course of conducting the Collaboration.

11.3 Prosecution and Maintenance of Patent Rights .

11.3.1 MedCo Technology and Product-Specific Technology . MedCo has the sole right and responsibility to, at MedCo's discretion, file, conduct prosecution, and maintain (including the defense of any interference, opposition or any other pre- or post-grant proceedings or challenges), all Patent Rights comprising MedCo Technology (other than Joint Collaboration IP), in MedCo's name.

11.3.2 Alnylam Technology .

(a) Subject to Sections 11.3.2(b) and 11.3.2(c), Alnylam has the sole right and responsibility to, at Alnylam's discretion, file, conduct prosecution, and maintain (including the defense of any interference, opposition or any other pre- or post-grant proceedings or challenges), all Patent Rights comprising Alnylam Technology (other than Joint Collaboration IP), in Alnylam's name. Alnylam agrees to use Commercially Reasonable Efforts to prosecute and maintain such Alnylam Patent Rights in the

Major Market Countries, and to prosecute and maintain Alnylam Product-Specific Patent Rights in all other countries reasonably requested by MedCo.

(b) Alnylam shall provide MedCo, sufficiently in advance for MedCo to comment, with copies of all patent applications and other material submissions and correspondence intended to be filed with any patent counsel or patent authorities pertaining to Patent Rights comprising Alnylam Product-Specific Patent Rights, and Alnylam shall consider in good faith MedCo's reasonable and promptly provided comments and advice with respect to the prosecution or maintenance strategy with respect to such Patent Rights; provided , however , that if Alnylam determines that MedCo's comments or advice are not reasonable, Alnylam shall promptly notify MedCo thereof and the Parties shall promptly discuss such determination. If the Parties cannot promptly reach agreement with respect to such issue, the Parties shall hire an outside patent attorney, mutually agreeable to the Parties, to determine which Party's approach is more likely to obtain the broadest enforceable patent coverage for the Licensed Products in the Field, and the Parties shall implement such approach. In the event that MedCo fails to provide any such comments or advice reasonably in advance of a patent office deadline, Alnylam shall in good faith file a response designed to obtain the broadest enforceable patent coverage for the Licensed Products in the Field. Alnylam shall promptly provide MedCo with copies of all material correspondence received from any patent counsel or patent authorities pertaining to Patent Rights comprising Alnylam Product-Specific Patent Rights.

(c) In the event that Alnylam elects not to seek or continue to seek or maintain patent protection on any Alnylam Product-Specific Patent Rights, subject to the terms and conditions of any applicable Alnylam In-License or Existing Alnylam Third Party Agreement, Alnylam shall notify MedCo of such decision in sufficient time so as to permit MedCo to decide whether to seek, prosecute and maintain such Patent Right and to take any necessary actions without losing patent protection, and MedCo shall have the right (but not the obligation), at its expense, to seek, prosecute and maintain in any country patent protection on such Alnylam Product-Specific Patent Rights in the name of Alnylam. Alnylam shall use Commercially Reasonable Efforts to make available to MedCo its documentation, and its authorized attorneys, agents or representatives, and such of its employees, as are reasonably necessary to assist MedCo in obtaining and maintaining the patent protection described under this Section 11.3.2(c). Alnylam shall sign or use Commercially Reasonable Efforts to have signed all legal documents necessary to file and prosecute such patent applications or to obtain or maintain such patents.

11.3.3 Joint Collaboration IP .

(a) Alnylam shall have the first right to, at Alnylam's discretion, file, prosecute and maintain (including the defense of any interference, opposition or any other pre- or post-grant proceedings or challenges), all Patent Rights comprising Joint Collaboration IP, in the names of both Alnylam and MedCo. Alnylam shall provide MedCo, sufficiently in advance for MedCo to comment, with copies of all patent applications and other material submissions and correspondence intended to be filed with any patent counsel or patent authorities pertaining to Patent Rights comprising Joint Collaboration IP, and Alnylam shall consider in good faith MedCo's reasonable and promptly provided comments and advice with respect to the prosecution or maintenance strategy with respect to such Patent Rights; provided , however , that if Alnylam determines that MedCo's comments or advice are not reasonable, Alnylam shall promptly notify MedCo thereof and the Parties shall promptly discuss such determination. If the Parties cannot promptly reach agreement with respect to such issue, the Parties shall hire an outside patent attorney, mutually agreeable to the Parties, to determine which Party's approach is more likely to obtain the broadest enforceable patent coverage for the Licensed Products in the Field, and the Parties shall implement such approach. In the event that MedCo fails to provide any such comments or advice reasonably in advance of a patent office deadline, Alnylam shall in good faith file a response designed to obtain the broadest

enforceable patent coverage for the Licensed Products in the Field. Alnylam shall promptly provide MedCo with copies of all material correspondence received from any patent counsel or patent authorities pertaining to Patent Rights comprising Joint Collaboration IP. Each Party shall sign, or use Commercially Reasonable Efforts to have signed, all legal documents necessary to file and prosecute patent applications or to obtain or maintain patents in respect of such Joint Collaboration IP, at its own cost.

(b) In the event that Alnylam elects not to file or continue to prosecute or maintain patent protection on any Joint Collaboration IP in the Territory, Alnylam shall notify MedCo of such decision in sufficient time so as to permit MedCo to decide whether to seek, prosecute and maintain such Patent Right and to take any necessary actions without losing patent protection, and MedCo shall have the right (but not the obligation), to file, prosecute and maintain in any country Patent Rights comprising Joint Collaboration IP in the names of both Alnylam and MedCo. Alnylam shall use Commercially Reasonable Efforts to make available to MedCo its documentation, and its authorized attorneys, agents or representatives, and such of its employees, as are reasonably necessary to assist MedCo in obtaining and maintaining the patent protection described under this Section 11.3.3(b). Alnylam shall sign or use Commercially Reasonable Efforts to have signed all legal documents necessary to file and prosecute such patent applications or to obtain or maintain such patents.

11.3.4 Cooperation . With respect to the rights granted to a Party under Sections 11.3.2 or 11.3.3, each Party hereby agrees: (a) to make its employees, agents and consultants reasonably available to the other Party (or to the other Party's authorized attorneys, agents or representatives), to the extent reasonably necessary to enable such Party to undertake patent prosecution; (b) to provide the other Party with copies of all material correspondence pertaining to prosecution with the patent offices; (c) to cooperate, if necessary and appropriate, with the other Party in gaining patent term extensions wherever applicable to Patent Rights licensed under this Agreement; and (d) to endeavor in good faith to coordinate its efforts with the other Party to minimize or avoid interference with the prosecution and maintenance of the other Party's patent applications.

11.3.5 Patent Expenses . Except as provided below with respect to Alnylam Product-Specific Patent Rights and Patent Rights comprising Joint Collaboration IP in the Territory, the patent filing, prosecution and maintenance expenses incurred after the Effective Date with respect to Patent Rights comprised of Alnylam Technology and MedCo Technology shall be borne by each Party having the right to file, prosecute and maintain such Patent Rights under this Section 11.3. MedCo shall reimburse Alnylam on a Calendar Quarter basis (and within thirty (30) days after receipt of an invoice) with respect to the out-of-pocket patent filing, prosecution and maintenance expenses incurred by Alnylam after the Effective Date with respect to the Alnylam Product-Specific Patent Rights in the Territory, up to [**] ($[**]) of such expenses per Calendar Year. The Parties shall share equally the out-of-pocket patent filing, prosecution and maintenance expenses incurred with respect to Patent Rights comprising Joint Collaboration IP. Each Party shall keep complete and accurate records with respect to such amount required to be paid by the other Party, and such other Party shall have the right to audit such records in accordance with Section 7.5.

11.3.6 Patent Term Extension . MedCo will determine, in its sole discretion, a strategy of seeking available patent term extension, restorations and supplementary protection certificates (“ SPC ”) and other extensions from among Alnylam Product-Specific Patent Rights, MedCo Patent Rights and Patent Rights comprising Joint Collaboration IP, to the extent applicable, that will be designed to maximize patent protection and commercial value for the Licensed Products in the Field in the Territory, and the Parties, subject to the provisions of any In-License, will seek patent term extensions, restorations, SPCs and other extensions in all relevant countries in the Territory for such Patent Rights as selected by MedCo in accordance with that strategy. If MedCo determines not to so file for any extension, restoration or SPC

for any of such Patent Rights in any relevant country of the Territory, it will give notice of such determination to Alnylam at least [**] days prior to the date on which such a filing must be made or the right to do so is lost, and Alnylam will have the right to make such filing. Where required under national law, Alnylam will make the filings for such extensions, restorations and SPCs for Alnylam Product-Specific Patents and, as applicable, will make, or cooperate with MedCo to make, the filing for Patent Rights comprising Joint Collaboration IP in the Territory, in each case as directed by MedCo. Each Party will execute such authorizations and other documents and take such other actions as may be reasonably requested by the other Party to obtain any such extensions, restorations and SPCs in the Territory.

11.4 Third Party Infringement .

11.4.1 Notices . Each Party shall promptly report in writing to the other Party any (a) known or suspected infringement of any Alnylam Technology, MedCo Technology or Joint Collaboration IP or (b) unauthorized use or misappropriation of any Confidential Information or Know-How of a Party by a Third Party of which it becomes aware, in each case to the extent such infringing, unauthorized or misappropriating activities involve, as to a Licensed Product, a Generic Product or competing product in the Field (“ Competitive Infringement ”), and shall provide the other Party with all available evidence of such infringement, unauthorized use or misappropriation.

11.4.2 Rights to Enforce .

(a) MedCo Technology . Subject to the provisions of any In-License, MedCo shall have the sole and exclusive right to initiate an infringement or other appropriate suit anywhere in the world against any Third Party as to any infringement, or suspected infringement of, any Patent Rights, or of any use or suspected use without proper authorization of any Know-How, comprising MedCo Patent Rights, MedCo Know-How (other than MedCo's interest in Joint Collaboration IP), or MedCo Collaboration IP. MedCo will consider in good faith any request from Alnylam to initiate an infringement or other appropriate suit against any Third Party with respect to a Competitive Infringement in the Territory of MedCo Patent Rights, MedCo Know-How (other than MedCo's interest in Joint Collaboration IP) or MedCo Collaboration IP; provided , however , that MedCo shall not be required to initiate any such suit or permit Alnylam to initiate any such suit.

(b) Alnylam Technology and Joint Collaboration IP . Subject to the provisions of any In-License or Existing Alnylam Third Party Agreement, MedCo shall have the first right to initiate an infringement or other appropriate suit or action anywhere in the world against any Third Party with respect to any Competitive Infringement in the Territory of any Alnylam Product-Specific Patent Rights, Joint Collaboration IP (with respect to which MedCo shall consider Alnylam's input in good faith), or, with Alnylam's prior written consent, Alnylam Core Technology Patent Right or Alnylam Know-How (other than Alnylam's interest in Joint Collaboration IP). Alnylam will consider in good faith any request from MedCo to initiate an infringement or other appropriate suit against any Third Party with respect to a Competitive Infringement in the Territory of any Alnylam Core Technology Patent Right or such Alnylam Know-How (other than Alnylam's interest in Joint Collaboration IP); provided , however , that Alnylam shall not be required to initiate any such suit or permit MedCo to initiate any such suit.

(c) Step-In Right . If within [**] days after MedCo's receipt of a notice of a Competitive Infringement with respect to any Alnylam Product-Specific Patent Right or Joint Collaboration IP (or at least ten (10) days before the loss of the right to take an action as described in Section 11.4.2(b) and permitted hereunder with respect to such Competitive Infringement, except if MedCo has notified Alnylam in writing that it intends to, and actually does, take action as described in Section 11.4.2(b) and permitted hereunder

against such Competitive Infringement), MedCo does not take any action as described in Section 11.4.2(b) and permitted hereunder against such Competitive Infringement in the relevant country in the Territory, Alnylam may in its sole discretion, bring and control any legal action in connection therewith at its sole expense.

11.4.3 Procedures; Expenses and Recoveries . The Party having the right to initiate any infringement suit under Section 11.4.2 above shall have the sole and exclusive right to select counsel for any such suit and shall pay all expenses of the suit, including attorneys' fees and court costs and reimbursement of the other Party's reasonable out-of-pocket expense in rendering assistance requested by the initiating Party. If required under applicable Law in order for the initiating Party to initiate and/or maintain such suit, or if either Party is unable to initiate or prosecute such suit solely in its own name or it is otherwise advisable to obtain an effective legal remedy, in each case, the other Party shall join as a party to the suit and will execute and cause its Affiliates to execute all documents, and take all actions, reasonably necessary for the initiating Party to initiate litigation and maintain such action. In addition, at the initiating Party's request, the other Party shall provide other reasonable assistance to the initiating Party in connection with an infringement suit at no charge to the initiating Party except for reimbursement by the initiating Party of reasonable out-of-pocket expenses incurred in rendering such assistance. The non-initiating Party shall have the right to participate and be represented in any such suit under Section 11.4.2(b) or 11.4.2(c) by its own counsel at its own expense. If the Parties obtain from a Third Party, in connection with any such suit under Section 11.4.2(b) or 11.4.2(c), any damages, license fees, royalties or other compensation (including any amount received in settlement of such litigation), such amounts shall be allocated in all cases as follows:


(i)	first, to reimburse each Party for all out-of-pocket expenses of the suit incurred by the Parties, including attorneys' fees and disbursements, court costs and other litigation expenses and, to the extent that such recovery is insufficient to fully reimburse each Party, each Party will be reimbursed pro rata in accordance with each Party's out-of-pocket expenses; and

(ii)

second, the balance shall be paid as follows: (A) damages designated by the relevant court as multiple or punitive damages shall be paid [**] percent ([**]%) to the Party initiating the suit and [**] percent ([**]%) to the other Party; and (B) any other amounts shall be paid to MedCo, but, to the extent that MedCo would otherwise owe a royalty to Alnylam if MedCo or its Related Parties had sold the relevant Licensed Product subject to the Competitive Infringement in the Field in the relevant country in the Territory, such balance shall be considered “Net Sales” for purposes of determining royalties owed to Alnylam hereunder.

11.5 Trademarks . MedCo and its Related Parties have the sole right to use any trademark it owns or controls for Licensed Products in the Territory at its sole discretion, and each Party and its Related Parties shall retain all right, title and interest in and to its and their respective corporate names and logos. MedCo will develop one or more Product Trademark(s) for use by MedCo and its Related Parties in the Territory to Commercialize Licensed Products which have received Regulatory Approval in the Field in the Territory. MedCo (or its Related Parties, as appropriate) shall own all rights to such Product Trademarks and all goodwill associated therewith, throughout the Territory, and the rights to any Internet domain names incorporating the applicable Product Trademarks or any variation or part of such Product Trademarks used as its URL address or any part of such address. For the avoidance of doubt, neither Party shall have any right to use the other Party's or the other Party's Related Parties' corporate names or logos in connection with Commercialization of Licensed Products without the prior written consent of the other Party.

12. TERM AND TERMINATION

12.1 Term . This Agreement shall be effective as of the Effective Date and, unless terminated earlier pursuant to Section 12.2, this Agreement shall continue in effect on a Licensed Product-by-Licensed Product and country-by-country basis until expiration of the last Royalty Term to expire under this Agreement (“ Term ”). Upon expiration of the Term, all licenses of MedCo granted by Alnylam under Article 6 shall become fully paid-up, irrevocable, perpetual, non-exclusive, sublicenseable licenses.

12.2 Termination Rights.

12.2.1 Termination for Convenience. MedCo shall have the right to terminate this Agreement at any time after the Effective Date on four (4) months prior written notice to Alnylam.

12.2.2 Termination for Cause . This Agreement may be terminated at any time during the Term upon written notice by either Party (the “ Non-Breaching Party ”) if the other Party (the “ Breaching Party ”) is in material breach of its obligations hereunder and has not cured such breach within ten (10) days in the case of a payment breach, or within sixty (60) days in the case of all other breaches, after notice requesting cure of the breach, or, if cure of such breach other than non-payment cannot reasonably be effected within such sixty (60) day period, to deliver to the Non-Breaching Party a plan reasonably calculated to cure such breach within a timeframe that is reasonably prompt in light of the circumstances then prevailing, but in no event more than [**]. Following delivery of such a plan, the Breaching Party will carry out the plan and cure the breach. If the Breaching Party fails to cure a material breach of this Agreement as provided above, then the Non-Breaching Party may terminate this Agreement upon written notice to the Breaching Party.

12.2.3 Termination for Failure to Designate a Lead Product . Alnylam shall have the right to terminate this Agreement upon thirty (30) days prior written notice to MedCo in the event that a Lead Product has not been designated by the JSC (or by the Chief Executive Officer of MedCo pursuant to Section 4.4.3) prior to the earlier of: (a) thirty (30) days after Alnylam reaches the Development Costs Cap described in Section 2.3.1(a) and provides notice thereof to MedCo pursuant to Section 2.3.3, unless MedCo has agreed to pay or has paid the relevant Extra Early Development Costs; and (b) on or prior to June 30, 2015.

12.2.4 Challenges of Patent Rights . In the event that a Party (the “ Challenging Party ”) or any of its Related Parties (a) commences or participates in any action or proceeding (including any patent opposition, re-examination or any other pre- or post-grant challenge or proceeding), or otherwise asserts any claim, challenging or denying the validity or enforceability (such an action or proceeding, a “ Challenge ”) of any of the Patent Rights licensed to such Challenging Party by the other Party (the “ Licensor Party ”) under this Agreement or any claim thereof or (b) actively assists any other person or entity in bringing or prosecuting any action or proceeding (including any patent opposition, re-examination or any other pre- or post-grant challenge or proceeding) challenging or denying the validity or enforceability of any of such Patent Rights or any claim thereof, then (i) such Challenging Party shall give notice thereof to such Licensor Party within [**] days of taking such action or of learning that its Related Party has taken such action, and (ii) such Licensor Party will have the right, in its sole discretion, to give notice to such Challenging Party that this Agreement will terminate thirty (30) days following such notice (or such longer period as such Licensor Party may designate in such notice), and, unless, with respect to a challenge brought by such Challenging Party, such Challenging Party withdraws, or, with respect to a challenge brought by

its Affiliates, causes, or, with respect to a challenge brought by its Sublicensee, uses Commercially Reasonable Efforts to cause, to be withdrawn, all such challenge(s) within such thirty (30)-day (or longer) period, this Agreement will so terminate. Notwithstanding the foregoing, in such event, MedCo, as the Licensor Party under this Agreement, may only terminate the licenses it has granted under this Agreement to Alnylam as the Challenging Party with respect to the Patent Rights that are the subject of the Challenge. In the event that such Licensor Party is not permitted under Law to terminate this Agreement such that the licenses with respect to all the Patent Rights under this Agreement are terminated, then the Parties agree to construe this provision to permit such Licensor Party to terminate only the licenses to that portion of such Patent Rights with respect to which such Licensor Party may terminate consistent with Law.

12.3 Effect of Termination . Without limiting any other legal or equitable remedies that either Party may have, if this Agreement is terminated by Alnylam, or by MedCo in accordance with Section 12.2.1, then:

(a)

If this Agreement is terminated by MedCo pursuant to Section 12.2.1, then MedCo's obligation under Section 9.5.1 shall survive for a period of eight (8) months after the effective date of termination, and if this Agreement is terminated by Alnylam pursuant to Sections 12.2.2 or 12.2.4, then MedCo's obligations under Section 9.5.1 shall survive for a period of twelve (12) months after the effective date of termination.

(b)

Subject to the terms and conditions of this Agreement (including Sections 6.4.1 and 6.4.4 with respect to the MedCo In-Licenses (if any) applicable to the rights granted to Alnylam pursuant to this Section 12.3(b)), MedCo shall and hereby does grant Alnylam a non-transferable (except as provided in Section 13.1), sublicenseable (subject to Section 6.2.3), worldwide, non-exclusive, royalty-bearing license, under any MedCo Technology that is produced, generated, conceived and/or reduced to practice as a result of the Development, Manufacturing or Commercialization activities of MedCo under this Agreement to Develop, Manufacture and Commercialize Licensed Products in the Field in the Territory. The Parties shall negotiate in good faith the royalty to be paid to MedCo by Alnylam in exchange for, and reflecting the then net present value of, the foregoing license, and, in the event that the Parties cannot mutually agree upon such amount within [**] days following the effective date of termination, the Parties will, as soon as reasonably practicable and in no event later than [**] days following the expiration of such [**]-day period, mutually decide upon an independent Third Party valuation firm with substantial experience in valuing licenses of intellectual property rights for the commercialization of pharmaceutical and biotechnology products, which shall make a final and binding determination of the net value of such license and both Parties shall promptly provide all reasonable materials and information requested by such valuation firm and shall share equally in the expenses of such valuation firm.

(c)

MedCo shall use Commercially Reasonable Efforts to as promptly as practicable transfer to Alnylam or Alnylam's designee (i) possession and ownership of all governmental or regulatory correspondence, conversation logs, filings and approvals (including all Regulatory Approvals and pricing and reimbursement approvals) in MedCo's or its Affiliates' possession and Control relating to the Development, Manufacture or Commercialization of the Licensed Products and all Product Trademarks, (ii) copies of all data, reports, records and materials, and other sales and marketing related information in MedCo's or its Affiliates' possession and Control to the extent that such data, reports, records, materials or other information relate to the Development, Manufacture or Commercialization of Licensed Products, including all non-clinical and clinical data relating to Licensed Products, and

customer lists and customer contact information and all adverse event data in MedCo's possession and Control, and (iii) all records and materials in MedCo's possession and Control containing Confidential Information of Alnylam. MedCo shall further appoint Alnylam as MedCo's and/or MedCo's Affiliates' agent for all Licensed Product-related matters involving Regulatory Authorities in the Territory until all such Regulatory Approvals and other regulatory filings have been transferred to Alnylam or its designee,


(d)	if the effective date of termination is after First Commercial Sale, then MedCo shall appoint Alnylam as its exclusive distributor of the Licensed Product in the Territory and grant Alnylam the right to appoint sub-distributors, until such time as all such Regulatory Approvals in the Territory have been transferred to Alnylam or its designee,

(e)

if MedCo or its Affiliates are Manufacturing Licensed Product, then at Alnylam's option, MedCo shall supply the Licensed Product to Alnylam in the Territory on commercially reasonable terms to be negotiated in good faith by the Parties, until such time as all such Regulatory Approvals in the Territory have been transferred to Alnylam or its designee, Alnylam has obtained all necessary manufacturing approvals or Alnylam has procured or developed its own source(s) of Licensed Product supply,


(f)	if Alnylam so requests, MedCo shall use Commercially Reasonable Efforts to assign to Alnylam any Third Party agreements solely relating to the Development, Manufacture or Commercialization of the Licensed Product to which MedCo is a party, subject to any required consents of such Third Party, which MedCo shall use Commercially Reasonable Efforts to obtain promptly,


(g)	MedCo shall promptly transfer and assign to Alnylam all of MedCo's and its Affiliates' rights, title and interests in and to the Product Trademark(s) owned by MedCo or its Affiliates and used for the Licensed Products in the Field in the Territory,


(h)	MedCo shall transfer to Alnylam any inventory of Licensed Products Controlled by MedCo or its Affiliates as of the termination date, on commercially reasonable terms to be negotiated in good faith by the Parties,


(i)	MedCo shall use Commercially Reasonable Efforts to provide, at Alnylam's reasonable expense, any other assistance reasonably requested by Alnylam for the purpose of allowing Alnylam or its designee to proceed expeditiously with the Development, Manufacture and Commercialization of Licensed Products in the Territory, and


(j)	MedCo shall execute all documents and take all such further actions as may be reasonably requested by Alnylam in order to give effect to the foregoing clauses.

12.4 Effect of Expiration or Termination; Survival . Expiration or termination of this Agreement shall not relieve the Parties of any obligation accruing prior to such expiration or termination. Any expiration or termination of this Agreement shall be without prejudice to the rights of either Party against the other accrued or accruing under this Agreement prior to expiration or termination, including the obligation to pay royalties for the Licensed Product sold prior to such expiration or termination. The provisions of Articles 10 (other than Section 10.6) and 13, Sections 6.1.4(b), 6.3, 6.5, 6.6, 6.7, 8.1, 8.2.2, 9.4, 11.1, 11.2, 11.3.3, 11.3.4 (with respect to the rights granted to each Party under Section 11.3.3), 11.3.5 (with respect to Joint Collaboration IP), 12.3 (if applicable) and 12.4, Section 7.4.7 (with respect to any

royalty report for the last Calendar Quarter), Sections 7.5 through 7.11 (with respect to amounts owed prior to expiration or termination of this Agreement or amounts due thereafter pursuant to Section 12.4), and the last sentences of Sections 6.1.1, 6.1.2 or 12.1 (with respect to the licenses which have converted as set forth therein on or before the expiration or termination of this Agreement) shall survive any expiration or termination of this Agreement. Except as set forth in this Article 12, upon termination or expiration of this Agreement all other rights and obligations of the Parties under this Agreement cease.

13. MISCELLANEOUS

13.1 Assignment . Except as provided in this Section 13.1, this Agreement may not be assigned or otherwise transferred, nor may any right or obligation hereunder be assigned or transferred, by either Party without the written consent of the other Party. However, either Party may, without the other Party's written consent, assign this Agreement and its rights and obligations hereunder in whole or in part to an Affiliate or to a Person that acquires, by merger, sale of assets or otherwise, all or substantially all of the business of the assigning Party to which the subject matter of this Agreement relates. The Parties acknowledge that MedCo is considering the potential assignment of all or a significant portion of its obligations under this Agreement to a Third Party joint venture in which MedCo may hold a non-controlling equity interest, and Alnylam agrees to discuss in good faith with MedCo such an assignment together with appropriate financial and other protections for Alnylam; provided , however , that nothing in the foregoing sentence shall be construed to require Alnylam to agree to such an assignment. The assigning Party shall remain responsible for the performance by its assignee of this Agreement or any obligations hereunder so assigned. Any assignment of the rights or obligations of this Agreement not in accordance with the foregoing shall be void.

13.2 Governing Law . This Agreement shall be construed and the respective rights of the Parties determined in accordance with the substantive laws of the State of New York, notwithstanding any provisions of New York law governing conflicts of laws to the contrary, and the patent laws of the relevant jurisdiction without reference to any rules of conflict of laws.

13.3 Entire Agreement; Amendments . This Agreement and, when executed, the other Transaction Agreements, contain the entire understanding of the Parties with respect to the subject matter hereof, and supersedes all previous arrangements with respect to the subject matter hereof, whether written or oral, including the Mutual Confidential Disclosure Agreement made as of January 16, 2012 by the Parties. This Agreement (including the Schedules hereto) may be amended, or any term hereof modified, only by a written instrument duly-executed by authorized representatives of both Parties.

13.4 Severability . If any provision hereof should be held invalid, illegal or unenforceable in any respect in any jurisdiction, the Parties shall substitute, by mutual consent, valid provisions for such invalid, illegal or unenforceable provisions, which valid provisions in their economic effect are sufficiently similar to the invalid, illegal or unenforceable provisions that it can be reasonably assumed that the Parties would have entered into this Agreement with such valid provisions. In case such valid provisions cannot be agreed upon, the invalid, illegal or unenforceable of one or several provisions of this Agreement shall not affect the validity of this Agreement as a whole, unless the invalid, illegal or unenforceable provisions are of such essential importance to this Agreement that it is to be reasonably assumed that the Parties would not have entered into this Agreement without the invalid, illegal or unenforceable provisions.

13.5 Headings . The captions to the Articles and Sections hereof are not a part of this Agreement, but are merely for convenience to assist in locating and reading the several Articles and Sections hereof.

13.6 Interpretation . Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms and any noun shall include the corresponding singular and plural forms. The words “include”, “includes” and “including” shall be deemed to be followed by the phrase “but not limited to.” The word “will” shall be construed to have the same meaning and effect as the word “shall.” “$” or “(D)(d)ollar” means U.S. Dollars. With respect to any license grant, “exclusive” means exclusive as between the licensor Party and the licensed Party to the fullest extent possible, in light of any rights already granted by the licensor Party to Third Parties prior to the date on which such license is first granted and in light of any limitations on the rights granted to the licensor Party by its licensors. Unless the context requires otherwise, (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein or therein), (b) any reference to any Laws herein shall be construed as referring to such Laws as from time to time enacted, repealed or amended, (c) any reference herein to any Person shall be construed to include the Person's successors and permitted assigns, (d) the words “herein”, “hereof' and “hereunder”, and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (e) all references herein to Articles, Sections or Schedules shall be construed to refer to Articles, Sections and Schedules of this Agreement, (f) the word “or” shall be construed to have the same meaning and effect as “and/or”, and (g) a term not defined herein but reflecting a different part of speech than a term which is defined herein shall be interpreted in a correlative manner.

13.7 Waiver of Rule of Construction . Each Party has had the opportunity to consult with counsel in connection with the review, drafting and negotiation of this Agreement. Accordingly, the rule of construction that any ambiguity in this Agreement shall be construed against the drafting Party shall not apply.

13.8 No Implied Waivers; Rights Cumulative . No failure on the part of Alnylam or MedCo to exercise, and no delay in exercising, any right, power, remedy or privilege under this Agreement, or provided by statute or at law or in equity or otherwise, shall impair, prejudice or constitute a waiver of any such right, power, remedy or privilege or be construed as a waiver of any breach of this Agreement or as an acquiescence therein, nor shall any single or partial exercise of any such right, power, remedy or privilege preclude any other or further exercise thereof or the exercise of any other right, power, remedy or privilege. Except as expressly provided in this Agreement, no right or remedy herein conferred upon or reserved to either Party is intended to be exclusive of any other right or remedy.

13.9 Notices . All notices which are required or permitted hereunder shall be in writing and sufficient if delivered personally, sent by facsimile (and promptly confirmed by personal delivery, registered or certified mail or overnight courier), sent by nationally-recognized overnight courier or sent by registered or certified mail, postage prepaid, return receipt requested, addressed as follows:

If to Alnylam, to: Alnylam Pharmaceuticals, Inc.

300 Third Street

Cambridge, MA 02142

Attention: Legal Department

Facsimile No.: (617) 551-8101

With a copy to: Faber Daeufer Itrato & Cabot PC

950 Winter Street

Waltham, MA 02451

Attention: Sumy C. Daeufer, Esq.

Facsimile No.: (781) 795-4747


If to MedCo, to:	The Medicines Company

8 Sylvan Way

Parsippany, NJ 07054

Attention: President

Facsimile No.: (862) 207-6119

With a copy to: The Medicines Company

8 Sylvan Way

Parsippany, NJ 07054

Attention: General Counsel

Facsimile No.: (862) 207-6062

or to such other address as the Party to whom notice is to be given may have furnished to the other Party in writing in accordance herewith. Any such notice shall be deemed to have been given: (a) when delivered if personally delivered or sent by facsimile on a Business Day (or if delivered or sent on a non-Business Day, then on the next Business Day); (b) on receipt if sent by overnight courier; and/or (c) on receipt if sent by mail.

13.10 Compliance with Export Regulations . Neither Party shall export any technology licensed to it by the other Party under this Agreement except in compliance with U.S. export laws and regulations.

13.11 Force Majeure . Neither Party shall be held liable to the other Party nor be deemed to have defaulted under or breached this Agreement for failure or delay in performing any obligation under this Agreement to the extent that such failure or delay is caused by or results from causes beyond the reasonable control of the affected Party, potentially including embargoes, war, acts of war (whether war be declared or not), insurrections, riots, civil commotions, strikes, lockouts or other labor disturbances, fire, floods, or other acts of God, or acts, omissions or delays in acting by any Governmental Authority or the other Party. The affected Party shall notify the other Party of such force majeure circumstances as soon as reasonably practical, and shall promptly undertake all reasonable efforts necessary to cure such force majeure circumstances.

13.12 Dispute Resolution . In the event that the Parties do not resolve any dispute, controversy or claim arising from, or related to, this Agreement or to the breach hereof (collectively, “ Dispute ”) and neither Party has final decision-making authority as to such Dispute pursuant to Section 4.4, and a Party wishes to pursue the matter, such Party may file suit to have such Dispute adjudicated in a court of competent jurisdiction.

13.13 Independent Contractors . It is expressly agreed that Alnylam and MedCo shall be independent contractors and that the relationship between Alnylam and MedCo shall not constitute a partnership, joint venture or agency. Alnylam shall not have the authority to make any statements, representations or commitments of any kind, or to take any action, which shall be binding on MedCo,

without the prior written consent of MedCo, and MedCo shall not have the authority to make any statements, representations or commitments of any kind, or to take any action, which shall be binding on Alnylam without the prior written consent of Alnylam.

13.14 Counterparts . The Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Facsimile signatures and signatures transmitted via PDF shall be treated as original signatures.

13.15 Performance by Affiliates . Each Party shall have the right to have any of its obligations hereunder performed by, any of its Affiliates and the performance of such obligations by any such Affiliate(s) shall be deemed to be performance by such Party; provided , however , that such Affiliate shall be bound by the corresponding obligations of such Party and such Party shall be responsible for ensuring the performance of its obligations under this Agreement and that any failure of any Affiliate performing obligations of such Party hereunder shall be deemed to be a failure by such Party to perform such obligations.

13.16 Binding Effect; No Third Party Beneficiaries . As of the Effective Date, this Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors and permitted assigns. Except as expressly set forth in this Agreement, no person or entity other than the Parties and their respective permitted assignees hereunder shall be deemed an intended beneficiary hereunder or have any right to enforce any obligation of this Agreement.

[THE REMAINDER OF THIS PAGE HAS BEEN LEFT INTENTIONALLY BLANK]

IN WITNESS WHEREOF, the Parties have executed this Agreement as of the Effective Date.


THE MEDICINES COMPANY	ALNYLAMPHARMACEUTICALS, INC.

BY: /s/ Glenn Sblendorio BY: /s/ John M. Maraganore

NAME: Glenn Sblendorio NAME: John M. Maraganore, Ph.D.

TITLE: President and CFO TITLE: Chief Executive Officer

SCHEDULE A

ALN-PCS02

ALN-PCS02 is an investigational ribonucleic acid interference (RNAi) therapeutic agent that is comprised of active pharmaceutical ingredient [**] (see sequence & diagram below), a synthetic small interfering RNA (siRNA) that is Targeted to the PCS messenger RNA (mRNA) in a [**] lipid nanoparticle formulation (see description below).

Confidential Materials omitted and filed separately with the Securities and Exchange Commission. A total of 5 pages were omitted. [**]

SCHEDULE B

ALN-PCSsc

ALN-PCSsc is an investigational ribonucleic acid interference (RNAi) therapeutic agent that is comprised of an active pharmaceutical ingredient which is a synthetic small interfering RNA (siRNA) that is Targeted to the PCS messenger RNA (mRNA) and covalently linked on the 3′ end of the sense strand to a triantennary N -acetylgalactosamine (GalNAc ₃ ) ligand (see diagram below). The active pharmaceutical ingredient may be [**] (see sequence & diagram below).

Confidential Materials omitted and filed separately with the Securities and Exchange Commission. A total of 2 pages were omitted. [**]

SCHEDULE C

Alnylam PATENT RIGHTS

SCHEDULE C-1

ALNYLAM CORE TECHNOLOGY PATENT RIGHTS

See attached.

Confidential Materials omitted and filed separately with the Securities and Exchange Commission. A total of 183 pages were omitted. [**]

SCHEDULE C-2

ALNYLAM PRODUCT-SPECIFIC PATENT RIGHTS

See attached.

Confidential Materials omitted and filed separately with the Securities and Exchange Commission. A total of 8 pages were omitted. [**]

SCHEDULE C-3

PATENT RIGHTS IN ADDITIONAL ALNYLAM IN-LICENSES

See attached.

Confidential Materials omitted and filed separately with the Securities and Exchange Commission. A total of 16 pages were omitted. [**]

SCHEDULE D

EXISTING Alnylam IN-LICENSES,

EXISTING ALNYLAM THIRD PARTY AGREEMENTS AND ADDITIONAL ALNYLAM IN-LICENSES

A. As of the Effective Date, Existing Alnylam In-Licenses are the following Third Party agreements:

1. Co-Exclusive License Agreement between Max Planck Innovation GmbH (formerly Garching Innovation GmbH) and Alnylam Pharmaceuticals, Inc., dated December 20, 2002, as amended by Amendment dated July 2, 2003, the Requirements Amendment effective June 15, 2005, the Waiver Amendment effective August 9, 2007 and the Amendment to the Alnylam Co-Exclusive License Agreement dated as of March 14, 2011, by and between Alnylam Pharmaceuticals, Inc., on the one hand, and Whitehead Institute for Biomedical Research, Massachusetts Institute of Technology and Max-Planck-Innovation GmbH, on the other hand; and Co-Exclusive License Agreement between Max Planck Innovation GmbH (formerly Garching Innovation GmbH) and Alnylam Europe AG (formerly Ribopharma AG), dated July 30, 2003 (collectively, the “ Garching Agreements ”)

2. Amended and Restated Strategic Collaboration & License Agreement between Isis Pharmaceuticals, Inc. and Alnylam Pharmaceuticals, Inc., dated April 28, 2009, as amended by letter agreement dated August 27, 2012 (“ Isis Agreement ”)

3. Sponsored Research Agreement dated as of July 27, 2009 by and among Alnylam, The University of British Columbia (“ UBC ”) and AlCana Technologies, Inc. (“ AlCana ”)

4. Supplemental Agreement among Tekmira Pharmaceuticals Corporation (“ Tekmira ”), Protiva Biotherapeutics Inc. (“ Protiva ”), UBC and AlCana

5. Sublicense Agreement dated January 8, 2007 between Alnylam and Tekmira (as successor in interest to Inex Pharmaceuticals Corporation)

6. Cross-License Agreement by and among Alnylam, Tekmira and Protiva dated November 12, 2012 and Settlement Agreement and General Release dated November 12, 2012 by and among Tekmira, Protiva, Alnylam and AlCana

B. As of the Effective Date, Existing Alnylam Third Party Agreements are the following Third Party agreements:

1. License and Collaboration Agreement among F. Hoffmann-La Roche Ltd, Hoffman-La Roche Inc., and Alnylam Pharmaceuticals, Inc., dated July 8, 2007, as amended by letter amendment dated May 29, 2008 (assigned to Arrowhead Research Corporation in October 2011)

2. License and Collaboration Agreement between Takeda Pharmaceutical Company Limited and Alnylam Pharmaceuticals, Inc., dated May 27, 2008, as supplemented or amended by letter agreements dated August 18, 2009 and March 16, 2011

C. As of the Effective Date, the Additional Alnylam In-Licenses are the following Third Party agreements:

[**]

SCHEDULE E

INITIAL DEVELOPMENT PLAN

Confidential Materials omitted and filed separately with the Securities and Exchange Commission. A total of 5 pages were omitted. [**]

SCHEDULE F

JOINT PRESS RELEASE

Contacts:



The Medicines Company	Alnylam Pharmaceuticals, Inc.
Michael Mitchell Head of Global Communications 973-290-6097 michael.mitchell@themedco.com	Cynthia Clayton Vice President, Investor Relations and Corporate Communications 617-551-8207 Amanda Sellers (Media) Spectrum 202-955-6222 x2597

DRAFT - Not for Release

The Medicines Company and Alnylam Form Strategic Alliance to

Develop and Commercialize RNAi Therapeutics Targeting PCSK9 for the

Treatment of Hypercholesterolemia

The Medicines Company Obtains Exclusive Global License to Advance ALN-PCS

RNAi Therapeutic Program

Alnylam to Receive $25 Million in Upfront Payment in Addition to Milestone Payments and Royalties on Product Sales

Companies to Host Conference Call Today at 8:30 a.m. ET to Discuss Collaboration

Parsippany, N.J. and Cambridge, Mass., February 4, 2013 - The Medicines Company (Nasdaq: MDCO) and Alnylam Pharmaceuticals, Inc. (Nasdaq: ALNY), a leading RNAi therapeutics company, announced today that they have formed an exclusive global alliance for the development and commercialization of Alnylam's ALN-PCS RNAi therapeutic program for the treatment of hypercholesterolemia.

“This new alliance unites two organizations with a shared culture and commitment to innovation. In my view and past experience, there could be no stronger partner for our ALN-PCS program than The Medicines Company, which has demonstrated industry-wide leadership in the advancement of cardiovascular medicines to patients and remarkable success in its strategy of in-licensing, developing, and

commercializing breakthrough products,” said John Maraganore, Ph.D., Chief Executive Officer of Alnylam. “For Alnylam, this new partnership enables the advancement of ALN-PCS, an important program within our 'Alnylam 5x15' product development and commercialization strategy focused on RNAi therapeutics directed toward genetically validated targets. We believe that the ALN-PCS program holds great promise for the development of a significant therapeutic option for patients with hypercholesterolemia, and that the unique mechanism of action for ALN-PCS could provide a differentiated and potentially best-in-class strategy for PCSK9 antagonism.”

“Our focus on acute and intensive care medicine has led us to a leadership position with Angiomax and potentially with cangrelor in the management of patients in extreme risk as a consequence of the rupture of their vulnerable coronary artery plaque at and around the time of acute coronary syndromes. Meantime, we have made progress with MDCO-216 (ApoA-1 Milano), a turbocharged form of HDL-C ('good cholesterol') which has the potential to modify disease through reverse cholesterol transport,” said Clive Meanwell, M.D., Ph.D., Chairman and Chief Executive Officer of The Medicines Company. “Now, this exciting collaboration with Alnylam leaders in their field of RNAi adds a second potentially disease modifying approach and more cutting edge technology to our portfolio. We have seen that PCSK9 gene silencing can substantially reduce LDL-cholesterol in patients and has epidemiological and disease mechanisms studies suggest this can further reduce the risks of the world's number one killer, coronary artery disease. Clearly we see the complementarity of approaches which increase 'good cholesterol' (HDL-C) and decrease 'bad cholesterol' (LDL-C). We look forward to working with our colleagues at Alnylam for whom we have the greatest respect and admiration based upon earlier collaborations particularly around Angiomax, which was invented by John Maraganore.”

PCSK9 (proprotein convertase subtilisin/kexin type 9) is a protein that regulates low-density lipoprotein (LDL) receptor levels on hepatocytes; gain-of-function human mutations in PCSK9 are associated with hypercholesterolemia while loss-of-function mutations are associated with lower levels of LDL cholesterol and a reduced risk of cardiovascular disease. ALN-PCS is a PCSK9 synthesis inhibitor that reduces intracellular and extracellular levels of PCSK9 resulting in lowered plasma levels of LDL-C. MDCO-216 is a naturally occurring variant of a protein found in high-density lipoprotein, or HDL. It is a reverse cholesterol transport agent designed to reduce atherosclerotic plaque burden development and thereby reduce the risk of adverse thrombotic events.

Under this alliance, The Medicines Company and Alnylam intend to collaborate on the advancement of the ALN-PCS program. Alnylam's ALN-PCS program includes ALN-PCS02 an intravenously administered RNAi therapeutic which has completed a Phase I trial, and ALN-PCSsc a subcutaneously administered RNAi therapeutic currently in pre-clinical development. Alnylam will continue the program while funded by The Medicines Company for an estimated one to two years to complete certain pre-clinical and Phase I clinical studies. The Medicines Company will then lead and fund development from Phase II forward and commercialize the ALN-PCS program if successful. Under the terms of the agreement, The Medicines Company will make an upfront cash payment of $25 million to Alnylam. Alnylam may also receive potential development and commercial milestone payments of up to $180 million. Alnylam will be eligible to receive scaled double-digit royalties on global products sales of ALN-PCS products.

Alnylam has completed a Phase I trial of ALN-PCS02 in healthy volunteer subjects with elevated baseline LDL-C. Results showed that administration of a single intravenous dose of drug, in the absence of concomitant lipid-lowering agents such as statins, resulted in statistically significant and durable reductions of PCSK9 plasma levels of up to 84% and lowering of LDL-C of up to 50%. ALN-PCS02 was shown to be generally safe and well tolerated in this study and there were no serious adverse events related to study drug administration. Alnylam has also presented pre-clinical data from its ALN-PCSsc program

demonstrating potent knockdown of the PCSK9 target gene with an ED ₅₀ of less than 0.3 mg/kg after a single subcutaneous dose.

“Cardiovascular disease remains the leading cause of mortality worldwide, with elevated LDL-C a major modifiable risk factor. New strategies are needed to dramatically and rapidly reduce LDL-C and prevent acute cardiovascular events that result from the rupture of cholesterol rich plaque when patients are at their most vulnerable,” said Daniel J. Rader, M.D., professor of Medicine and chief, Division of Translational Medicine and Human Genetics, at the Perelman School of Medicine at the University of Pennsylvania. “As a key regulator of the LDL receptor, liver-expressed PCSK9 is one of the most important and best validated new targets in molecular medicine for the treatment of hypercholesterolemia. The ALN-PCS data generated to date are very encouraging and I look forward to continued clinical studies that highlight the unique mechanistic approach of PCSK9 synthesis inhibitors.”

Dr. Rader serves as a member of Alnylam's Scientific Advisory Board and as a consultant on Alnylam's ALN-PCS program, and Alnylam and Dr. Rader collaborate on research for which Alnylam provides materials.

Conference Call Information

The Medicines Company and Alnylam will host a conference call today at 8:30 a.m. ET to discuss this new collaboration. To access the call, please dial 877-312-7507 (domestic) or 631-813-4828 (international) five minutes prior to the start time and refer to conference ID 96998933. A replay of the call will be available beginning at 11:30 a.m. ET. To access the replay, please dial 855-859-2056 (domestic) or 404-537-3406 (international) and refer to conference ID 96998933. A live audio webcast of the presentation will be available on The Medicines Company website at www.themedicinescompany.com , and on the News & Investors section of the Alnylam's website, www.alnylam.com

About Hypercholesterolemia

Hypercholesterolemia is a condition characterized by very high levels of cholesterol in the blood which is known to increase the risk of coronary artery disease, the leading cause of death in the U.S. Some forms of hypercholesterolemia can be treated through dietary restrictions, lifestyle modifications (e.g., exercise and smoking cessation) and medicines such as statins. However, a large proportion of patients with hypercholesterolemia are not achieving target LDL-C goals with statin therapy, including genetic familial hypercholesterolemia patients, acute coronary syndrome patients, high-risk patient populations (e.g., patients with coronary artery disease, diabetics, symptomatic carotid artery disease, etc.) and other patients that are statin intolerant. Severe forms of hypercholesterolemia are estimated to affect more than 500,000 patients worldwide, and as a result, there is a significant need for novel therapeutics to treat patients with hypercholesterolemia whose disease is inadequately managed by existing therapies.

About ALN-PCS

ALN-PCS is a systemically delivered RNAi therapeutic targeting the gene proprotein convertase subtilisin/kexin type 9 (PCSK9), a target validated by human genetics that is involved in the metabolism of low-density lipoprotein cholesterol (LDL-C, or “bad” cholesterol). ALN-PCS therapies are PCSK9 synthesis inhibitors that lower levels of both intracellular and extracellular PCSK9, thereby phenocopying the human genetics observed in loss of function or null human PCSK9 mutations ( N. Engl. J. Med. (2006) 354:1264-1272; Am. J. Hum. Genet. (2006) 79: 514-523). PCSK9 synthesis inhibition through an RNAi mechanism has the potential to lower tissue and circulating plasma PCSK9 protein levels resulting in higher LDL receptor levels in the liver, and subsequently lower LDL-C levels in the blood stream. Lower LDL-C is associated with a decreased risk of cardiovascular disease, including myocardial infarction and stroke.

About RNA Interference (RNAi)

RNAi (RNA interference) is a revolution in biology, representing a breakthrough in understanding how genes are turned on and off in cells, and a completely new approach to drug discovery and development. Its discovery has been heralded as “a major scientific breakthrough that happens once every decade or so,” and represents one of the most promising and rapidly advancing frontiers in biology and drug discovery today which was awarded the 2006 Nobel Prize for Physiology or Medicine. RNAi is a natural process of gene silencing that occurs in organisms ranging from plants to mammals. By harnessing the natural biological process of RNAi occurring in our cells, the creation of a major new class of medicines, known as RNAi therapeutics, is on the horizon. Small interfering RNA (siRNA), the molecules that mediate RNAi and comprise Alnylam's RNAi therapeutic platform, target the cause of diseases by potently silencing specific mRNAs, thereby preventing disease-causing proteins from being made. RNAi therapeutics have the potential to treat disease and help patients in a fundamentally new way.

About The Medicines Company

The Medicines Company (Nasdaq: MDCO) provides medical solutions to improve health outcomes for patients in acute and intensive care hospitals worldwide. These solutions comprise medicines and knowledge that directly impact the survival and well being of critically ill patients.

The Medicines Company Forward-Looking Statement

Statements contained in this press release about The Medicines Company that are not purely historical, and all other statements that are not purely historical, may be deemed to be forward-looking statements for purposes of the safe harbor provisions under The Private Securities Litigation Reform Act of 1995. Without limiting the foregoing, the words “believes,” “anticipates” and “expects” and similar expressions are intended to identify forward-looking statements. These forward-looking statements involve known and unknown risks and uncertainties that may cause the Company's actual results, levels of activity, performance or achievements to be materially different from those expressed or implied by these forward-looking statements. Important factors that may cause or contribute to such differences include whether the Company's products will advance in the clinical trials process on a timely basis or at all, whether the Company will make regulatory submissions for product candidates on a timely basis, whether its regulatory submissions will receive approvals from regulatory agencies on a timely basis or at all, whether physicians, patients and other key decision makers will accept clinical trial results, and such other factors as are set forth in the risk factors detailed from time to time in the Company's periodic reports and registration statements filed with the Securities and Exchange Commission including, without limitation, the risk factors detailed in the Company's Quarterly Report on Form 10-Q filed on November 9, 2012, which are incorporated herein by reference. The Company specifically disclaims any obligation to update these forward-looking statements.

About Alnylam Pharmaceuticals

Alnylam is a biopharmaceutical company developing novel therapeutics based on RNA interference, or RNAi. The company is leading the translation of RNAi as a new class of innovative medicines with a core focus on RNAi therapeutics for the treatment of genetically defined diseases, including ALN-TTR for the treatment of transthyretin-mediated amyloidosis (ATTR), ALN-AT3 for the treatment of hemophilia and rare bleeding disorders (RBD), ALN-AS1 for the treatment of acute intermittent porphyria (AIP), ALN-PCS for the treatment of hypercholesterolemia, and ALN-TMP for the treatment of hemoglobinopathies. As part of its “Alnylam 5x15 ^TM ” strategy, the company expects to have five RNAi therapeutic products for genetically defined diseases in clinical development, including programs in advanced stages, on its own or with a partner by the end of 2015. Alnylam has additional partnered programs in clinical or development stages, including ALN-RSV01 for the treatment of respiratory syncytial virus (RSV) infection and ALN-VSP for the treatment of liver cancers. The company's leadership position on RNAi therapeutics and intellectual property have enabled it to form major alliances with leading companies including Merck,

Medtronic, Novartis, Biogen Idec, Roche, Takeda, Kyowa Hakko Kirin, Cubist, Ascletis, Monsanto, Genzyme, and The Medicines Company. In addition, Alnylam holds a significant equity position in Regulus Therapeutics Inc., a company focused on discovery, development, and commercialization of microRNA therapeutics. Alnylam has also formed Alnylam Biotherapeutics, a division of the company focused on the development of RNAi technologies for applications in biologics manufacturing, including recombinant proteins and monoclonal antibodies. Alnylam's VaxiRNA™ platform applies RNAi technology to improve the manufacturing processes for vaccines; GlaxoSmithKline is a collaborator in this effort. Alnylam scientists and collaborators have published their research on RNAi therapeutics in over 100 peer-reviewed papers, including many in the world's top scientific journals such as Nature , Nature Medicine , Nature Biotechnology , and Cell . Founded in 2002, Alnylam maintains headquarters in Cambridge, Massachusetts. For more information, please visit www.alnylam.com.

About “Alnylam 5x15™”

The “Alnylam 5x15” strategy, launched in January 2011, establishes a path for development and commercialization of novel RNAi therapeutics directed toward genetically defined targets for diseases with high unmet medical need. Products arising from this initiative share several key characteristics including: a genetically defined target and disease; the potential to have a major impact in a high unmet need population; the ability to leverage the existing Alnylam RNAi delivery platform; the opportunity to monitor an early biomarker in Phase I clinical trials for human proof of concept; and the existence of clinically relevant endpoints for the filing of a new drug application (NDA) with a focused patient database and possible accelerated paths for commercialization. By the end of 2015, the company expects to have five such RNAi therapeutic programs in clinical development, including programs in advanced stages, on its own or with a partner. The “Alnylam 5x15” programs include ALN-TTR for the treatment of transthyretin-mediated amyloidosis (ATTR), ALN-AT3 for the treatment of hemophilia and rare bleeding disorders (RBD), ALN-AS1 for the treatment of acute intermittent porphyria (AIP), ALN-PCS for the treatment of hypercholesterolemia, ALN-TMP for the treatment of hemoglobinopathies, and other programs. Alnylam intends to focus on developing and commercializing certain programs from this product strategy itself in North and South America, Europe, and other parts of the world; these include ALN-TTR, ALN-AT3, and ALN-AS1; the company will seek global development and commercial alliances for other programs.

Alnylam Forward-Looking Statements

Various statements in this release concerning Alnylam's future expectations, plans and prospects, including without limitation, statements regarding Alnylam's views with respect to the potential for RNAi therapeutics, including the potential for the ALN-PCS program, including ALN-PCS02 and ALN-PCSsc, its expectations regarding the receipt of upfront and potential development and commercialization milestones and royalty payments on worldwide net sales, if any, under The Medicines Company agreement, and Alnylam's expectations regarding its “Alnylam 5x15” product strategy, constitute forward-looking statements for the purposes of the safe harbor provisions under The Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including, without limitation, Alnylam's ability to successfully demonstrate the efficacy and safety of its drug candidates and the pre-clinical and clinical results for these product candidates, including ALN-PCS02 and ALN-PCSsc, which may not support further development of such product candidates, both our and The Medicines Company's ability to successfully advance ALN-PCS02 and/or ALN-PCSsc resulting in the potential payment of milestones and royalties to us, actions of regulatory agencies, which may affect the initiation, timing and progress of clinical trials for such product candidates, obtaining, maintaining and protecting intellectual property, obtaining regulatory approval for products, competition from others using technology similar to Alnylam's and others developing products for similar uses, and Alnylam's ability to establish and maintain strategic business alliances, including its collaboration with The Medicines Company, and new business initiatives, as well as those risks more fully

discussed in the “Risk Factors” filed with Alnylam's current report on Form 8-K filed with the Securities and Exchange Commission (SEC) on January 14, 2013 and in other filings that Alnylam makes with the SEC. In addition, any forward-looking statements represent Alnylam's views only as of today and should not be relied upon as representing its views as of any subsequent date. Alnylam does not assume any obligation to update any forward-looking statements.

SCHEDULE G

DISCLOSURE SCHEDULE

Section 9.2.1(a):

- Reference is made to certain claims alleged by the plaintiffs in the action entitled:

[**]

Section 9.2.2:

- Reference is made to certain claims alleged by the plaintiff in the [**] Litigation.

Section 9.2.5(c):

- Reference is made to certain claims alleged by the plaintiff in the [**] Litigation.

Section 9.2.8:

- [**]

Section 9.2.9(a):

- Reference is made to certain claims alleged by the plaintiff in the [**] Litigation.

Section 9.2.9(b):

- Reference is made to the [**]

SCHEDULE H

EXAMPLE FOR SECTION 6.4.3.3

If, with respect to a particular Alnylam In-License, royalties are payable with respect to aggregate net sales of all products covered by such Alnylam In-License, and are not determined on a product-by-product basis, according to the following tiered royalty rates:



Aggregate Calendar Year net sales by Alnylam, its Affiliates or any of its sublicensees of all products	Royalty (as a percentage of such net sales)
[**]	[**]
[**]	[**]
[**]	[**]
[**]	[**]

And if sales are made during each of the four Calendar Quarters of the relevant Calendar Year as shown in the table below, then royalties owed by MedCo pursuant to such Alnylam In-License shall be as shown in such table:



Sales By	Calendar Quarter 1	Calendar Quarter 2	Calendar Quarter 3	Calendar Quarter 4
[**]	[**]	[**]	[**]	[**]
[**]	[**]	[**]	[**]	[**]
[**]	[**]	[**]	[**]	[**]
[**]	[**]	[**]	[**]	[**]
[**]	[**]	[**]	[**]	[**]

EXHIBIT 31.1

CERTIFICATIONS

I, Clive A. Meanwell, certify that:


1.	I have reviewed this Quarterly Report on Form 10-Q of The Medicines Company;


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


c)	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


d)	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and


5.	The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):


a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and


b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.



		/s/ Clive A. Meanwell
		Clive A. Meanwell
		Chairman and Chief Executive Officer
Dated:	May 10, 2013

EXHIBIT 31.2

CERTIFICATIONS

I, Glenn P. Sblendorio, certify that:


1.	I have reviewed this Quarterly Report on Form 10-Q of The Medicines Company;


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


c)	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


d)	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and


5.	The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):


a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and


b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.



		/s/ Glenn P. Sblendorio
		Glenn P. Sblendorio
		President and Chief Financial Officer
Dated:	May 10, 2013

EXHIBIT 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of The Medicines Company (the “Company”) for the period ended March 31, 2013 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Clive A. Meanwell, Chairman and Chief Executive Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:


(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and


(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.



		By:	/s/ Clive A. Meanwell
			Clive A. Meanwell
			Chairman and Chief Executive Officer
Dated:	May 10, 2013

A signed original of this written statement required by Section 906 has been provided to The Medicines Company and will be retained by The Medicines Company and furnished to the SEC or its staff upon request

EXHIBIT 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of The Medicines Company (the “Company”) for the period ended March 31, 2013 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Glenn P. Sblendorio, President and Chief Financial Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:


(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and


(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.



		By:	/s/ Glenn P. Sblendorio
			Glenn P. Sblendorio
			President and Chief Financial Officer
Dated:	May 10, 2013