Momenta Pharmaceuticals, Inc.
MOMENTA PHARMACEUTICALS INC (Form: 10-Q, Received: 05/10/2007 15:32:59)

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549


FORM 10-Q

 

(MARK ONE)

 

 

 

 

x

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

 

 

 

 

 

 

 

For the quarterly period ended March 31, 2007

 

 

 

 

 

 

o

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

 

 

For the Transition Period from            to           

Commission File Number 000-50797

Momenta Pharmaceuticals, Inc.
(Exact Name of Registrant as Specified in Its Charter)

Delaware

 

04-3561634

(State or Other Jurisdiction of

 

(I.R.S. Employer Identification No.)

Incorporation or Organization)

 

 

 

 

 

675 West Kendall Street, Cambridge, MA

 

02142

(Address of Principal Executive Offices)

 

(Zip Code)

 

(617) 491-9700
(Registrant’s Telephone Number, Including Area Code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.         Yes   x    No    o

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

Large accelerated filer    o                Accelerated filer    x                Non-accelerated filer    o

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

Indicate the number of shares outstanding of each of the Registrant’s classes of Common Stock as of May 7, 2007.

Class

 

Number of Shares

Common Stock $0.0001 par value

 

36,329,400

 

 




MOMENTA PHARMACEUTICALS, INC.
TABLE OF CONTENTS

Page

PART I. FINANCIAL INFORMATION

 

 

 

Item 1.

Financial Statements (unaudited)

3

 

 

 

 

Condensed Consolidated Balance Sheets as of March 31, 2007 and December 31, 2006 (unaudited)

3

 

 

 

 

Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2007 and 2006 (unaudited)

4

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2007 and 2006 (unaudited)

5

 

 

 

 

Notes to Unaudited Condensed Consolidated Financial Statements

6

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

12

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

18

 

 

 

Item 4.

Controls and Procedures

18

 

 

 

PART II. OTHER INFORMATION

 

 

 

 

Item 1A.

Risk Factors

20

 

 

 

Item 6.

Exhibits

36

 

 

 

SIGNATURES

37

 

Our logo, trademarks and service marks are the property of Momenta Pharmaceuticals, Inc. Other trademarks or service marks appearing in this Quarterly Report on Form 10-Q are the property of their respective holders.

2




PART I. FINANCIAL INFORMATION

Item 1.              Financial Statements

MOMENTA PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts)
(unaudited) 

 

 

March 31,
2007

 

December 31,
2006

 

Assets

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

16,184

 

$

22,351

 

Marketable securities

 

160,552

 

168,914

 

Unbilled collaboration revenue

 

1,975

 

4,727

 

Prepaid expenses and other current assets

 

1,311

 

2,069

 

Total current assets

 

180,022

 

198,061

 

 

 

 

 

 

 

Property and equipment, net of accumulated depreciation

 

15,433

 

13,603

 

Restricted cash

 

4,685

 

4,685

 

Other assets

 

36

 

36

 

Total assets

 

$

200,176

 

$

216,385

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

 

$

3,618

 

$

4,311

 

Accrued expenses

 

3,815

 

5,786

 

Deferred revenue

 

86

 

123

 

Line of credit obligations

 

903

 

883

 

Capital lease obligations

 

960

 

941

 

Lease financing liability

 

606

 

596

 

Deferred rent

 

174

 

122

 

Total current liabilities

 

10,162

 

12,762

 

 

 

 

 

 

 

Deferred revenue, net of current portion

 

13,552

 

13,552

 

Line of credit obligations, net of current portion

 

505

 

738

 

Capital lease obligations, net of current portion

 

3,762

 

3,998

 

Lease financing liability, net of current portion

 

2,165

 

2,321

 

Deferred rent, net of current portion

 

536

 

423

 

Total liabilities

 

30,682

 

33,794

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

Preferred stock, $0.01 par value; 5,000 shares authorized at March 31, 2007 and December 31, 2006, 100 shares of Series A Junior Participating Preferred Stock, $0.01 par value designated and no shares issued and outstanding

 

 

 

Common stock, $0.0001 par value; 100,000 shares authorized, 36,319 and 36,098 shares issued and outstanding at March 31, 2007 and December 31, 2006, respectively

 

4

 

4

 

Additional paid-in capital

 

311,934

 

308,061

 

Accumulated other comprehensive income

 

38

 

45

 

Accumulated deficit

 

(142,482

)

(125,519

)

Total stockholders’ equity

 

169,494

 

182,591

 

Total liabilities and stockholders’ equity

 

$

200,176

 

$

216,385

 

 

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

3




MOMENTA PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)
(unaudited)

 

 

Three Months
Ended March 31,

 

 

 

2007

 

2006

 

Collaboration revenue

 

$

2,242

 

$

2,506

 

Operating expenses:

 

 

 

 

 

Research and development*

 

13,772

 

9,445

 

General and administrative*

 

7,703

 

5,967

 

Total operating expenses

 

21,475

 

15,412

 

 

 

 

 

 

 

Loss from operations

 

(19,233

)

(12,906

)

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

Interest income

 

2,453

 

1,658

 

Interest expense

 

(183

)

(83

)

 

 

 

 

 

 

Net loss

 

$

(16,963

)

$

(11,331

)

 

 

 

 

 

 

Basic and diluted net loss per share

 

$

(0.48

)

$

(0.37

)

 

 

 

 

 

 

Shares used in computing basic and diluted net loss per share attributable to common stockholders

 

35,584

 

30,444

 

 


*Includes the following stock-based compensation expense:

Research and development

 

$

1,256

 

$

762

 

General and administrative

 

$

2,259

 

$

1,649

 

 

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

4




MOMENTA PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

 

 

Three Months Ended
March 31,

 

 

 

2007

 

2006

 

Operating activities:

 

 

 

 

 

Net loss

 

$

(16,963

)

$

(11,331

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

Depreciation and amortization

 

727

 

324

 

Stock-based compensation expense

 

3,515

 

2,411

 

(Accretion of discount)/amortization of premium on investments

 

(1,724

)

207

 

Changes in operating assets and liabilities:

 

 

 

 

 

Unbilled collaboration revenue

 

2,752

 

1,778

 

Prepaid expenses and other current assets

 

758

 

(549

)

Other assets

 

 

5

 

Accounts payable

 

(693

)

1,003

 

Accrued expenses

 

(1,971

)

(1,112

)

Deferred rent

 

165

 

651

 

Deferred revenue

 

(37

)

(37

)

Net cash used in operating activities

 

(13,471

)

(6,650

)

 

 

 

 

 

 

Investing activities:

 

 

 

 

 

Purchases of property and equipment

 

(2,557

)

(1,509

)

Purchases of marketable securities

 

(81,591

)

(21,181

)

Maturities of marketable securities

 

91,670

 

32,928

 

Net cash provided by investing activities

 

7,522

 

10,238

 

 

 

 

 

 

 

Financing activities:

 

 

 

 

 

Proceeds from issuance of common stock under stock plans

 

358

 

350

 

Payments on financed leasehold improvements

 

(146

)

 

Proceeds from capital lease obligations

 

 

895

 

Principal payments on capital lease obligations

 

(217

)

(66

)

Principal payments on line of credit

 

(213

)

(231

)

Net cash (used in) provided by financing activities

 

(218

)

948

 

Net (decrease) increase in cash and cash equivalents

 

(6,167

)

4,536

 

Cash and cash equivalents, beginning of period

 

22,351

 

25,890

 

Cash and cash equivalents, end of period

 

$

16,184

 

$

30,426

 

 

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

5




MOMENTA PHARMACEUTICALS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.               The Company

Business

Momenta Pharmaceuticals, Inc. (the “Company” or “Momenta”) was incorporated in the state of Delaware on May 17, 2001 and began operations in early 2002. Its facilities are located in Cambridge, Massachusetts. Momenta is a biotechnology company specializing in the detailed structural analysis of complex mixture drugs, applying its technology to the development of generic or follow-on versions of complex drug products as well as to the discovery and development of novel drugs.  

Basis of Presentation

The accompanying unaudited, consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments, consisting only of normal recurring accruals, considered necessary for a fair presentation of the results of these interim periods have been included. The results of operations for the three months ended March 31, 2007 are not necessarily indicative of the results that may be expected for the full year. These unaudited, condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2006, which was filed with the Securities and Exchange Commission (“SEC”) on March 15, 2007.

Reclassifications

Certain prior year amounts in collaboration revenue and research and development expenses of the unaudited, consolidated statements of operations have been reclassified to conform to the current year presentation. This reclassification has no impact on previously reported net loss attributable to common stockholders.

2.               Summary of Significant Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ materially from those estimates.

Cash, Cash Equivalents, and Marketable Securities

The Company invests its excess cash in bank deposits, money market accounts, corporate debt securities and U.S. government obligations. The Company considers all highly liquid investments purchased with maturities of three months or less from the date of purchase to be cash equivalents. Cash equivalents are carried at fair value, which approximates cost, and primarily consist of money market funds maintained at major U.S. financial institutions. All marketable securities, which primarily represent marketable debt securities, have been classified as “available-for-sale.” Purchased premiums or discounts on debt securities are amortized to interest income through the stated maturities of the debt securities. Management determines the appropriate classification of its investments in debt securities at the time of purchase and evaluates such designation as of each balance sheet date. Unrealized gains and losses are included in accumulated other comprehensive income and reported as a separate component of stockholders’ equity. Realized gains and losses and declines in value judged to be other-than-temporary, if any, on available-for-sale securities are included in interest income. The cost of securities sold is based on the specific identification method. Interest earned on marketable securities is included in interest income.

6




Revenue Recognition

The Company uses revenue recognition criteria outlined in Staff Accounting Bulletin (“SAB”) No. 104, Revenue Recognition , and Emerging Issues Task Force (“EITF”) Issue No. 00-21, Revenue Arrangements with Multiple Deliverables . Accordingly, revenues from licensing and development agreements are recognized based on the performance requirements of the agreement. Non-refundable, up-front fees where the Company has an ongoing involvement or performance obligation are recorded as deferred revenue in the balance sheet and amortized into collaboration revenue in the statement of operations over the term of the performance obligation. Revenues from research and development services and expenses are recognized in the period the services are performed and the reimbursable costs are incurred, net of any amounts due to the collaborative partner for costs incurred during the period for shared development costs.

Research and Development

Research and development costs are expensed as incurred. Research and development costs include wages, benefits, facility and other research-related overhead expenses, as well as license fees and contracted research and development activities.

Stock-Based Compensation

Pursuant to the terms of the Company’s 2004 Stock Incentive Plan, as amended (the “Incentive Plan”), at December 31, 2006 the Company was authorized to issue up to 3,948,785 shares of common stock with annual increases (to be added on the first day of the Company’s fiscal years during the period beginning in fiscal year 2005 and ending on the second day of fiscal year 2013) equal to the lowest of (i) 1,974,393 shares, (ii) 5% of the then outstanding number of common shares or (iii) such other amount as the Board of Directors may authorize. The Company’s Board of Directors elected not to increase the number of authorized shares related to the Incentive Plan for 2005 and 2006.  Effective January 1, 2007, the Company’s Board of Directors increased the number of authorized shares by 1,802,053.

On January 1, 2006, the Company adopted the fair value recognition provisions of SFAS No. 123 (revised 2004), Share Based Payment , or SFAS 123R, using the modified prospective method. Under that method, compensation cost recognized in the three months ended March 31, 2007 includes (a) compensation cost for all share-based payments granted prior to, but not yet vested as of January 1, 2006, based on the grant date fair value estimated in accordance with the original provisions of SFAS No. 123, Accounting for Stock-Based Compensation , and (b) compensation cost for all share-based payments granted subsequent to January 1, 2006, based on the grant date fair value estimated in accordance with the provisions of SFAS 123R. In accordance with SFAS 123R, the estimated grant date fair value of each stock-based award is recognized as expense on a ratable basis over the requisite service period (generally the vesting period).

In accordance with SFAS 123R, the fair value of each option award is estimated on the date of grant using the Black-Scholes-Merton option-pricing model. Because of the Company’s limited history as a publicly-traded company, to estimate expected volatility the Company used a 50/50 blend of its own historic and implied volatility and an average of historic and implied volatilities of similar entities. For purposes of identifying similar entities, the Company considered characteristics such as industry, stage of life cycle and financial leverage. The expected term of option awards granted is derived from the average midpoint between vesting and the contractual term, as described in the SAB No. 107, Share-Based Payment . In the future, as information regarding post-vesting termination becomes more accessible, the Company will change its method of deriving the expected term. This change could impact the Company’s fair value of option awards granted in the future. The Company expects to refine its method of deriving expected term no later than January 1, 2008. The risk-free interest rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of grant.

In addition, the Company applies an expected forfeiture rate when amortizing stock-based compensation expense. The Company’s estimate of the forfeiture rate is based primarily upon annualized pre-vest termination rates. Pre-vest termination rates are calculated monthly by dividing the total number of options that were both unvested at the beginning of the month and that were cancelled by the total number of options that were unvested at the beginning of the month. These monthly rates are averaged and then annualized.

The unvested shares held by consultants have been and will be revalued using the Company’s estimate of fair value at each balance sheet date pursuant to EITF Issue No. 96-18, Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services, or EITF 96-18.  The charge to operations is

 

7




recorded in accordance with Financial Accounting Standards Board (“FASB”) Interpretation No. 28, Accounting for Stock Appreciation Rights and Other Variable Stock Option or Award Plans .

Restricted stock awards are measured on the date of grant based on the market value of the Company’s common stock and recognized as compensation expense over the explicit or implicit service periods.

Income Taxes

The Company accounts for income taxes under SFAS No. 109, Accounting for Income Taxes . Under this method, deferred tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates that will be in effect when the differences are expected to reverse. A valuation allowance is recorded when it is more likely than not that the deferred tax asset will not be recovered.

The Company adopted the provisions of Financial Accounting Standards Interpretation No. 48, Accounting for Uncertainty in Income Taxes - An Interpretation of FASB Statement No. 109 , or FIN 48, effective January 1, 2007. The Company did not recognize any liability for unrecognized tax benefits as a result of adopting FIN 48. The Company recognizes both accrued interest and penalties related to unrecognized tax benefits in income tax expense. The Company did not recognize any interest and penalties in the three-month periods ended March 31, 2007 and 2006, or since inception.

Comprehensive Loss

The Company reports comprehensive loss in accordance with SFAS No. 130, Reporting Comprehensive Income , or SFAS 130. SFAS 130 establishes rules for the reporting and display of comprehensive loss and its components. Accumulated other comprehensive income as of March 31, 2007 and March 31, 2006 consists entirely of unrealized gains and losses on available-for-sale securities. Comprehensive loss for the three months ended March 31, 2007 and March 31, 2006 was $17.0 million and $11.3 million, respectively. 

Net Loss Per Share

The Company computes net loss per share in accordance with SFAS No. 128, Earnings per Share, or SFAS 128. Under the provisions of SFAS 128, basic net loss per common share is computed by dividing net loss available to common stockholders by the weighted-average number of common shares outstanding during the reporting period. Diluted net loss per common share is computed by dividing net loss available to common stockholders by the weighted-average number of common shares and dilutive common share equivalents then outstanding. Potential common stock equivalent shares consist of the incremental common shares issuable upon the conversion of preferred stock, shares issuable upon the exercise of stock options and stock warrants. Since the Company has a net loss for all periods presented, the effect of all potentially dilutive securities is antidilutive. Accordingly, basic and diluted net loss per common share is the same.

Segment Reporting

The Company has adopted SFAS No. 131, Disclosure About Segments of an Enterprise and Related Information , which requires companies to report selected information about operating segments, as well as enterprise-wide disclosures about products, services, geographical areas, and major customers. Operating segments are determined based on the way management organizes its business for making operating decisions and assessing performance. The Company has only one operating segment, the discovery, development and commercialization of drug products. All of the Company’s revenues through March 31, 2007 have come from one collaborative partner.

3.               Collaboration Revenue

In November 2003, the Company entered into a collaboration and license agreement (the “2003 Sandoz Collaboration”) with Sandoz N.V. and Sandoz Inc. (“Sandoz”) to jointly develop and commercialize M-Enoxaparin, a generic version of Lovenox®, a low molecular weight heparin. Under the terms of this agreement, the Company and Sandoz agreed to exclusively work with each other to develop and commercialize M-Enoxaparin for medical indications within the United States.

Under the 2003 Sandoz Collaboration, Sandoz makes certain payments to the Company. As mutually agreed, the Company provides, and Sandoz pays the Company, for full-time equivalent scientific, technical and/or management work. Sandoz is also responsible for funding substantially all of the other ongoing development and commercialization costs and

8




legal expenses incurred with respect to injectable M-Enoxaparin, subject to termination rights upon reaching agreed upon limits. In addition, Sandoz will, in the event there are no third party competitors marketing a Lovenox-Equivalent Product (as defined in the agreement) share profits with the Company. Alternatively, in certain circumstances, if there are third party competitors marketing a Lovenox-Equivalent Product, Sandoz will pay royalties to the Company on net sales of injectable M-Enoxaparin. If certain milestones are achieved with respect to injectable M-Enoxaparin under certain circumstances, Sandoz will make certain milestone payments to the Company, which would reach $55 million if all such milestones are achieved. A portion of the development expenses and certain legal expenses, which in the aggregate have exceeded a specified amount will be offset against profit-sharing amounts, royalties and milestone payments. Sandoz also may offset a portion of any product liability costs and certain other expenses arising from patent litigation against any profit-sharing amounts, royalties and milestone payments.

Revenues associated with the Company’s 2003 Sandoz Collaboration include an initial payment, reimbursement of development services and expenses, and potential future milestones, profit share payments and royalties. The initial payment represented reimbursement of specific development costs incurred prior to the date of the collaboration and is being recognized over the period of the Company’s substantial involvement. Amounts earned under the collaboration agreement are not refundable if the research or development is unsuccessful. To date, the Company has not earned any milestones or royalties under the 2003 Sandoz Collaboration. 

In July 2006, the Company entered into a series of agreements, including a Stock Purchase Agreement and an Investor Rights Agreement (each with Novartis Pharma AG), and a Memorandum of Understanding (“MOU”) with Sandoz AG (an affiliate of Novartis Pharma AG) (collectively referred to as the “2006 Sandoz Collaboration”). In connection with the 2006 Sandoz Collaboration, the Company sold 4,708,679 shares of common stock (the “Shares”) to Novartis Pharma AG for an aggregate purchase price of $75.0 million.

        Pursuant to the terms of the Investor Rights Agreement, Novartis Pharma AG is entitled to “piggyback” and demand registration rights with respect to the Shares, and has agreed until the earliest of (i) the termination of the MOU (or, if later entered into, a collaboration and license agreement between the parties), (ii) the Termination Date (as defined in the Investor Rights Agreement) and (iii) 24 months from the date of the closing of the purchase of the Shares, not to acquire any additional voting securities of the Company (other than an acquisition resulting in Novartis Pharma AG and its affiliates beneficially owning no greater than 13% of the Company’s total outstanding voting securities) nor make any public proposal for any merger, business combination or other extraordinary transaction or seek to control or influence the Company’s management, Board or policies.

Under the terms of the MOU, the Company will exclusively collaborate with Sandoz AG on the development and commercialization of four follow-on and complex generic products for sale in specified regions of the world.  Each party has granted the other an exclusive license under its intellectual property rights to develop and commercialize such products for all medical indications in the relevant regions. Costs will be borne by the parties in varying proportions, depending on the type of expense and the product.  The Company is also eligible to receive up to $188 million in milestone payments if all milestones are achieved for the four product candidates.  The parties will share profits from the sale of such products in varying proportions, depending on the product, with the Company receiving fifty percent of the profits with respect to its M356 product, a technology-enabled generic version of Copaxone®, which is a complex mixture drug indicated for reduction of the frequency of relapses in patients with Relapse-Remitting Multiple Sclerosis. Sandoz AG will indemnify the Company for various claims, and a certain portion of such indemnification costs may be offset against certain future payments received by the Company. In addition, the Company and Sandoz AG may negotiate additional collaboration agreements with respect to other mutually selected products and the Company has granted Sandoz AG the right to negotiate expanded territories for certain products already part of the collaboration.

Among other termination rights, the following termination rights apply to some of the products, on a product-by-product basis:  (i) if clinical trials are required, (ii) at Sandoz AG’s convenience within a certain time period or (iii) if Sandoz AG decides to permanently cease development and commercialization of a product.   The parties are negotiating the terms of a definitive collaboration and license agreement.  The terms of the MOU will remain in effect until such an agreement is executed; however, the MOU is binding in the absence of such agreement.

At March 31, 2007, the Company has recorded deferred revenue of $13.6 million representing the excess of the purchase price of $15.93 per share purchased by Novartis Pharma AG over the closing price of $13.05 per share (the “Premium”) on July 24, 2006, the last trading day of the Company’s common stock before execution of the 2006 Sandoz Collaboration. The

9




Company will commence amortization of the Premium as collaboration revenue when it can reasonably estimate the period of ongoing involvement or performance obligations under the 2006 Sandoz Collaboration. The Company expects to be able make such an estimate when a definitive collaboration and license agreement is executed with Sandoz AG. Through March 2007, the Company has not earned any collaboration revenues, milestones or royalties under the 2006 Sandoz Collaboration.

4.            Stock-Based Compensation

Total compensation cost for all share-based payment arrangements including stock options, restricted stock and the Company’s Employee Stock Purchase Plan (ESPP) for the three months ended March 31, 2007 and 2006 was $3.5 million and $2.4 million, respectively. 

The Company recorded stock-based compensation of $1.5 million related to outstanding employee stock option grants during each of the three month periods ended March 31, 2007 and 2006 and $5,000 and $0.2 million related to outstanding consultant stock option grants during the three months ended March 31, 2007 and 2006, respectively.  During the three months ended March 31, 2007, the Company awarded its annual merit grant to all employees of the Company consisting of stock options to purchase shares of the Company’s common stock for a total grant of 186,889 options. Using the Black-Scholes-Merton option-pricing model, the weighted average grant date fair value of option awards granted during the three months ended March 31, 2007 and 2006 was $8.78 and $14.70 per option, respectively, using the following assumptions:

 

Three Months
Ended
March 31,
2007

 

Three Months
Ended
March 31,
2006

 

Expected volatility

 

74

%

73

%

Expected dividends

 

 

 

Expected term (in years)

 

6

 

6

 

Risk-free interest rate

 

4.7

%

4.6

%

 

At March 31, 2007, the total unrecognized compensation costs related to nonvested employee stock option awards was $14.9 million. The cost is expected to be recognized over a weighted average period of 2.8 years. The unvested shares held by consultants have been and will be revalued using the Company’s estimate of fair value at each balance sheet date pursuant to EITF 96-18.

The Company recorded stock-based compensation expense of $1.9 million and $0.7 million related to outstanding restricted stock grants during the three months ended March 31, 2007 and 2006, respectively.  As of March 31, 2007, there was $8.0 million of unrecognized compensation cost related to nonvested restricted stock arrangements.  The cost is expected to be recognized over a weighted average period of 1.7 years.

During the three months ended March 31, 2007, holders of options issued under the Company’s stock plans exercised their right to acquire an aggregate of 30,509 shares of common stock. Additionally, the Company issued 15,001 shares of common stock to employees under the Company’s ESPP during the three months ended March 31, 2007.

5. Subsequent Event

On April 20, 2007, the Company entered into an Asset Purchase Agreement (the “Purchase Agreement”), with Parivid, LLC (“Parivid”), a data integration and analysis services provider to the Company, and S. Raguram, pursuant to which the Company acquired certain of the assets and assumed certain specified liabilities of Parivid related to the acquired assets, for $2.5 million in cash paid at closing and up to $11.0 million in contingent milestone payments in a combination of cash and/or stock in the manner and on the terms and conditions set forth in the Purchase Agreement.

The contingent milestone payments are structured to include (i) potential payments of no more than $2.0 million in cash if certain milestones are achieved within two years from the date of the Purchase Agreement and (ii) the issuance of up to $9.0 million of the Company’s common stock to Parivid if certain other milestones are achieved within fifteen years of the date of the Purchase Agreement.  In addition, upon the completion and satisfaction of those milestones that trigger the issuance of shares of the Company’s common stock, the Company has granted Parivid certain registration rights under the Securities Act of 1933, as amended, with respect to such shares.  The Company also entered into an employment agreement with S. Raguram pursuant to the terms of the Purchase Agreement.

As part of the Company’s acquisition of assets from Parivid, two previous collaboration agreements with Parivid were terminated.  S. Raguram, the principal owner and Chief Technology Officer of Parivid, is the brother of Ram Sasisekharan, a member of the Company’s Board of Directors.  Ram Sasisekharan received no consideration in connection

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with the execution of the Purchase Agreement. The Company recorded $1.0 million, $0.7 million and $1.0 million as research and development expense related to work performed by Parivid in the years ended December 31, 2006, 2005 and 2004, respectively.

6. Recently Issued Accounting Standards

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements, or SFAS 157, which is effective for fiscal years beginning after November 15, 2007. SFAS 157 defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS 157 codifies the definition of fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. SFAS 157 clarifies the principle that fair value should be based on the assumptions market participants would use when pricing the asset or liability and establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. The Company has not completed its evaluation of the effects of adopting this standard, however, the Company does not believe the adoption will have a material impact on the Company’s financial statements.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities, or SFAS 159, which is effective for fiscal years beginning after November 15, 2007.  SFAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. The Company is currently analyzing the effect, if any, SFAS 159 will have on its consolidated financial position and results of operations.

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

Our Management’s Discussion and Analysis of Financial Condition and Results of Operations includes the identification of certain trends and other statements that may predict or anticipate future business or financial results. There are important factors that could cause our actual results to differ materially from those indicated. See “Risk Factors” in Item 1A. of Part II of this Quarterly Report on Form 10-Q.

Business Overview

We are a biotechnology company specializing in the detailed structural analysis of complex mixture drugs.  We apply our technology to the development of generic versions of complex drug products as well as to the discovery and development of novel drugs.  Through detailed analysis of the molecular structure of complex sugars and other complex mixtures, we believe our proprietary technology enables us to define the specific sequences contained in complex drugs, including those structures that had previously not been described due to a lack of available technology.  We apply our technology to the discovery and development of novel drugs by gaining a deeper understanding of the role of sugars in disease, such as the roles that complex sugars play in cellular function, disease and drug action based on our analytical capabilities. With our capabilities, we have developed a diversified pipeline of complex generic and novel drug candidates, as well as a novel drug discovery program.

Our business strategy is to apply our technology to develop generic versions of complex drugs, such as M-Enoxaparin and M356, to generate product revenue, that we anticipate will contribute to funding our novel drug discovery and development programs. Over the long term, we expect to generate additional value by leveraging our understanding of sugars to create novel therapeutics, which potentially could address critical unmet medical needs in a wide range of disease areas, including oncology, cardiovascular disease, infectious disease, inflammation and immunology.

Our most advanced product candidate, M-Enoxaparin, is designed to be a technology-enabled generic version of Lovenox®, a widely prescribed low molecular weight heparin, or LMWH.  In 2003, we formed a collaboration with Sandoz N.V. and Sandoz Inc., collectively Sandoz, affiliates of Novartis AG, to jointly develop, manufacture and commercialize M-Enoxaparin, which we refer to as the 2003 Sandoz Collaboration.  On August 29, 2005, Sandoz submitted an Abbreviated New Drug Application, or ANDA, to the FDA for M-Enoxaparin, which was amended in 2006 to include a paragraph IV certification stating that Sanofi-Aventis’ patents for Lovenox® listed in the FDA’s listing of approved drug products known as the Orange Book, are, among other things, invalid or unenforceable.  In July 2006, we entered into a series of agreements with Novartis Pharma AG and Sandoz AG, including a Memorandum of Understanding, or MOU, with Sandoz AG, collectively referred to as the 2006 Sandoz Collaboration.  Under the terms of the MOU, we expanded the geographic markets covered by our collaboration efforts related to M-Enoxaparin to include the European Union and further agreed to exclusively collaborate with Sandoz AG on the development and commercialization of three other follow-on and complex generic products.

Since our inception in May 2001, we have incurred annual net losses. As of March 31, 2007, we had an accumulated deficit of $142.5 million.  We expect to incur substantial and increasing losses for the next several years as we develop our product candidates, expand our research and development activities and prepare for the commercial launch of our product candidates. Additionally, we plan to continue to evaluate possible acquisitions or licensing of rights to additional technologies, products or assets that fit within our growth strategy. Accordingly, we will need to generate significant revenues to achieve and then maintain profitability.

Since our inception, we have had no revenues from product sales. Our revenues have all been derived from our 2003 Sandoz Collaboration and primarily consist of amounts earned by us for reimbursement by Sandoz of research and development services and development costs for M-Enoxaparin.  In June 2004, we completed an initial public offering of 6,152,500 shares of common stock, the net proceeds of which were $35.3 million after deducting underwriters’ discounts and expenses. In July 2005, we raised $122.3 million in a follow-on public offering, net of expenses, from the sale and issuance of 4,827,300 shares of our common stock. In September 2006, in connection with the 2006 Sandoz Collaboration, we sold 4,708,679 shares of common stock to Novartis Pharma AG for an aggregate purchase price of $75.0 million. To date, we have devoted substantially all of our capital resource expenditures to the research and development of our product candidates.

The biotechnology and pharmaceutical industries in which we compete are undergoing, and are expected to continue to undergo, rapid and significant technological change. We expect competition to intensify as technological advances are made

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or new biotechnology products are introduced. To become and remain profitable, we must succeed in rapidly developing and commercializing drugs with significant market potential. This will require us to be successful in a range of challenging activities for which we are only in the preliminary stages: developing drugs; obtaining regulatory approval for them; and manufacturing, marketing and selling them. We have invested a significant portion of our time, financial resources and collaboration efforts in the development of our most advanced product candidate, M-Enoxaparin. Our successful development and commercialization of M-Enoxaparin, in collaboration with Sandoz, depends on several factors, including: using our technology to successfully demonstrate to the FDA that M-Enoxaparin is therapeutically equivalent to Lovenox; meeting any other FDA requirements for marketing approval;  successfully manufacturing M-Enoxaparin in a consistent, cost-effective and reproducible manner and at a commercial scale; achieving a favorable outcome in any patent litigation with Sanofi-Aventis relating to enoxaparin, or a third party achieving a favorable outcome in the pending patent litigation with Sanofi-Aventis; achieving market acceptance of M-Enoxaparin in the medical community and with third-party payors; and FDA approval of other generic versions of Lovenox.

Recent Developments

On April 20, 2007, we entered into an Asset Purchase Agreement, or the Purchase Agreement, with Parivid, LLC, or Parivid, a provider of data integration and analysis services to us, and S. Raguram, pursuant to which we acquired certain of the assets and assumed certain specified liabilities of Parivid related to the acquired assets, for $2.5 million in cash paid at closing and up to $11.0 million in contingent milestone payments in a combination of cash and/or stock.  

The contingent milestone payments are structured to include (i) potential payments of no more than $2.0 million in cash if certain milestones are achieved within two years from the date of the Purchase Agreement and (ii) the issuance of up to $9.0 million of our common stock to Parivid if certain other milestones are achieved within fifteen years of the date of the Purchase Agreement.  In addition, upon the completion and satisfaction of those milestones that trigger the issuance of shares of our common stock, we granted Parivid certain registration rights under the Securities Act of 1933, as amended, with respect to such shares.  We also entered into an employment agreement with S. Raguram pursuant to the terms of the Purchase Agreement.

As part of our acquisition of assets from Parivid, two previous collaboration agreements we had in place with Parivid were terminated.  S. Raguram, the principal owner and Chief Technology Officer of Parivid, is the brother of Ram Sasisekharan, a member of our Board of Directors.  Ram Sasisekharan received no consideration in connection with the execution of the Purchase Agreement. We recorded $1.0 million, $0.7 million and $1.0 million as research and development expense related to work performed by Parivid in the years ended December 31, 2006, 2005 and 2004, respectively. 

Financial Operations Overview

Revenue

We have not yet generated any revenue from product sales and are uncertain whether or not we will generate any revenue from the sale of products over the next several years. We have recognized, in the aggregate, $40.5 million of revenue from our inception through March 31, 2007. This revenue was derived entirely from our 2003 Sandoz Collaboration.  We will seek to generate revenue from a combination of research and development payments, profit sharing payments, milestone payments and royalties in connection with our 2003 and 2006 Sandoz Collaborations and similar future collaborative or strategic relationships. We expect that any revenue we generate will fluctuate from quarter to quarter as a result of the timing and amount of research and development and other payments received under our collaborative or strategic relationships, and the amount and timing of payments we receive upon the sale of our products, to the extent any are successfully commercialized. 

Research and Development

Research and development expenses consist of costs incurred in identifying, developing and testing product candidates. These expenses consist primarily of salaries and related expenses for personnel, license fees, consulting fees, contract research and manufacturing, and the costs of laboratory equipment and facilities. We expense research and development costs as incurred.

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The following summarizes our primary research and development programs:

Development Programs

M-Enoxaparin

Our most advanced product candidate, M-Enoxaparin, is designed to be a generic version of Lovenox.  Lovenox is a widely-prescribed LMWH used for the prevention and treatment of deep vein thrombosis, or DVT, and to support the treatment of acute coronary syndromes, or ACS.   Under our 2003 Sandoz Collaboration, we work with Sandoz exclusively to develop, manufacture and commercialize M-Enoxaparin in the U.S. and Sandoz is responsible for funding substantially all of the U.S.-related M-Enoxaparin development, regulatory, legal and commercialization costs. The total cost of development and commercialization, and the timing of M-Enoxaparin product launch, are subject to uncertainties relating to the development, regulatory approval and legal processes. In accordance with our 2003 Sandoz Collaboration, Sandoz submitted ANDAs to the FDA for M-Enoxaparin in syringe and vial forms seeking approval to market M-Enoxaparin in the United States. The syringe ANDA was subsequently amended in 2006 to include a paragraph IV certification stating that Sanofi-Aventis’ patents listed in the Orange Book for Lovenox are, among other things, invalid and unenforceable.

The FDA is currently reviewing the M-Enoxaparin ANDAs, including our manufacturing data and technology and characterization methodology. In parallel, and in collaboration with Sandoz, we are focused on activities related to supporting the FDA’s review of the ANDA and preparing for the commercialization of M-Enoxaparin, if and when approved, by advancing manufacturing, supply chain, and sales and marketing objectives.

Our 2006 Sandoz Collaboration expanded our collaboration efforts related to M-Enoxaparin to include the European Union.  Under the 2006 Sandoz Collaboration, we will share certain development, regulatory, legal and commercialization costs as well as a portion of the profits, if any.

M118

M118 is a novel anticoagulant drug that was rationally designed with the goal of providing improved clinical anticoagulant properties to support the treatment of patients diagnosed with ACS and stable angina.  We believe that M118 has the potential to provide baseline anticoagulant therapy to treat patients with ACS or stable angina who require invasive treatment, as well as those ACS patients who are medically managed, or do not require invasive treatment.  M118 is designed to be a reversible and monitorable anticoagulant that can be administered intravenously or subcutaneously and have a pharmacokinetic profile similar to other LMWHs.  We believe that these properties of M118 have the potential to provide greater flexibility than other therapies presently used to treat patients diagnosed with ACS and stable angina. 

In July 2006, we filed our Investigational New Drug Application, or IND, with the FDA for our M118 intravenous injection product, and in October 2006 began Phase I clinical trials to evaluate its human safety, tolerability and pharmacokinetic profile.  In April 2007, we filed our IND for our M118 subcutaneous product.

M356

M356 is targeted to be a technology-enabled generic version of Copaxone®, a complex drug consisting of a mixture of polypeptide chains. Copaxone is indicated for reduction of the frequency of relapses in patients with Relapse-Remitting Multiple Sclerosis.  Multiple sclerosis is a chronic disease of the central nervous system characterized by inflammation and neurodegeneration.  In North America, Copaxone is marketed through Teva Neuroscience LLC, a wholly owned subsidiary of Teva Pharmaceutical Industries Ltd., and distributed by Sanofi-Aventis. Teva and Sanofi-Aventis have an additional collaborative arrangement for the marketing of Copaxone in Europe and other markets, under which Copaxone is either co-promoted with Teva or is marketed solely by Sanofi-Aventis.  Under our 2006 Sandoz Collaboration, we and Sandoz jointly develop, manufacture and commercialize M356. We are responsible for funding substantially all of the U.S.-related M356 development costs, with Sandoz responsible for regulatory, legal and commercialization costs. Outside of the U.S., we and Sandoz share equally the development costs, with Sandoz responsible for commercialization and legal costs.

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Glycoproteins

Our glycoprotein program is focused on extending our technology for the analysis of complex sugars to glycoproteins.  The goal of the program is to facilitate the development of follow-on versions of major marketed glycoprotein drugs.  In addition, we believe we can assist pharmaceutical and biotechnology companies in developing improved versions of their branded glycoprotein products by analyzing and modifying the sugar structures contained in the products. 

Most glycoprotein drugs have been approved by the FDA under the Biological Licensing Application, or BLA, regulatory pathway. These glycoprotein drugs, which include drugs like erythropoietin, blood clotting factors and interferon beta, exist as complex mixtures and contain various modifications, including branched sugars that vary from molecule to molecule, that affect their key clinical properties. Many of these products have not been thoroughly characterized to date given their complexity and the inadequacies in standard analytic technology. This makes them ideal candidates for application of Momenta’s characterization technology.

Under our 2006 Sandoz Collaboration, we are currently applying our technology to develop two follow-on proteins in partnership with Sandoz.  We refer to these two product candidates as M178 and M249.

M-Dalteparin

M-Dalteparin is targeted to be a technology-enabled generic version of Fragmin®, a LMWH product.  Fragmin is indicated for the prevention of DVT and selected indications in ACS.  In September 2005, Eisai Inc., a U.S. pharmaceutical subsidiary of Eisai Co. Ltd., obtained U.S. promotion rights to Fragmin from Pfizer Inc.  Fragmin is marketed by Pfizer in Europe and by Kissei Pharmaceutical Co., Ltd. in Japan.  Through our technology, we believe we have the ability to analyze Fragmin and develop a generic product that can be demonstrated to be therapeutically equivalent to Fragmin.  The M-Dalteparin program has been reprioritized in light of other more commercially attractive opportunities.

Discovery Program

We are also applying our analytical capabilities to drug discovery.  Our discovery program is focused on the role that complex sugars play in biological systems, including regulating the development and progression of disease. Our initial focus is in the area of cancer, which is a disease characterized by unregulated cell growth, where we are seeking to discover sugar sequences with anti-cancer properties for development as therapeutics. Sugars play a part in the conversion of normal cells into cancerous cells, the regulation of tumor growth and tumor invasion and metastasis. We believe that our technology can provide us with a better understanding of the role of sugars in disease, enabling us to discover novel sugar therapeutics, as well as to discover new disease mechanisms that can be targeted with other small molecule and biologic drugs.   

General and Administrative

General and administrative expenses consist primarily of salaries and other related costs for personnel in executive, finance, legal, accounting, investor relations, business development and human resource functions. Other costs include facility and insurance costs not otherwise included in research and development expenses and professional fees for legal and accounting services and other general expenses.

Results of Operations

Three Months Ended March 31, 2007 and 2006

Revenue

Revenues for the three months ended March 31, 2007 and 2006 were $2.2 million and $2.5 million, respectively, which were entirely attributable to our 2003 Sandoz Collaboration.  These revenues consist of amounts earned by us for reimbursement by Sandoz of research and development services and reimbursement of development costs for M-Enoxaparin and amortization of the initial payment received under our 2003 Sandoz Collaboration. Under the 2003 Sandoz Collaboration, Sandoz bears the costs of commercial activities.  The decrease in revenues is a result of the decrease in

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reimbursable development activities.  As we prepare for the launch of M-Enoxaparin, development activities are decreasing while commercial activities are increasing.

We have not recognized any revenue to date from the 2006 Sandoz Collaboration. We will commence amortization of the $13.6 million representing the excess of the purchase price of $15.93 per share of common stock purchased by Novartis Pharma AG over the closing price of $13.05 per share on July 24, 2006, the last trading day of our common stock before execution of the 2006 Sandoz Collaboration, as collaboration revenue when we can reasonably estimate the period of ongoing involvement or performance obligations under the 2006 Sandoz Collaboration. We expect to be able make such an estimate later in 2007 when a definitive collaboration and license agreement is executed with Sandoz AG.

Research and Development

The following table summarizes the primary components of our research and development expense for our principal research and development programs for the three months ended March 31, 2007 and 2006:

 

 

(in thousands)

 

Research and Development Program

 

2007

 

2006

 

Development programs

 

$

12,142

 

$

7,175

 

Discovery programs

 

997

 

1,273

 

Other research

 

633

 

997

 

 

 

 

 

 

 

Total research and development expense

 

$

13,772

 

$

9,445

 

 

Research and development expense for the three months ended March 31, 2007 was $13.8 million compared to $9.4 million during the three months ended March 31, 2006.  The increase of $4.4 million from 2006 to 2007 principally resulted from an increase of $1.7 million in personnel and related costs, $1.1 million in manufacturing and research provided by third parties, $0.6 million in lab expenses, $0.5 million in stock-based compensation and $0.3 million in facilities costs.

The increase in expenditures on our development programs of $5.0 million was primarily related to the expenses of our M356 and glycoprotein programs.  The decrease in expenditures on our discovery program of $0.3 million was primarily attributed to decreased drug delivery program expenditures of $0.7 million due to the termination of the program in late 2006, offset by increased disease biology program expenditures of $0.4 million.

The decrease in other research expense of $0.3 million was primarily due to a decrease in headcount and headcount related costs relating to general technology development and support activities.

General and Administrative

General and administrative expense for the three months ended March 31, 2007 was $7.7 million compared to $6.0 million during the three months ended March 31, 2006.  The increase of $1.7 million was primarily due to an increase of $1.1 million in personnel and related costs and $0.6 million in stock-based compensation.

Interest Income and Expense

Interest income increased to approximately $2.5 million for the three months ended March 31, 2007 from approximately $1.7 million for the three months ended March 31, 2006, primarily due to higher average investment balances as a result of the proceeds from the issuance of common stock to Novartis Pharma AG in September 2006.  Interest expense increased to approximately $0.2 million for the three months ended March 31, 2007 from approximately $0.1 million for the three months ended March 31, 2006, due to additional amounts drawn from our equipment line of credit during 2006.

Liquidity and Capital Resources

We have financed our operations since inception primarily through the sale of equity securities, payments from our 2003 Sandoz Collaboration, borrowings from our lines of credit and capital lease obligations.

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At March 31, 2007 we had $176.7 million in cash, cash equivalents and marketable securities. In addition, we also hold $4.7 million in restricted cash that serves as collateral for letters of credit related to our facility leases.  Net cash used in operating activities for the three months ended March 31, 2007 and 2006 was $13.5 million and $6.6 million, respectively. The use of cash in each period was primarily a result of net losses associated with our research and development activities and administrative costs.

Net cash provided by investing activities for the three months ended March 31, 2007 and 2006 was $7.5 million and $10.2 million, respectively.  In the first three months of 2007, we used $81.6 million of cash to purchase marketable securities and had $91.7 million in maturities of marketable securities.

Net cash used in financing activities for the three months ended March 31, 2007 was $0.2 million. We received proceeds of $0.3 million from stock option exercises and purchases of common shares through our Employee Stock Purchase Plan, offset by principal payments of $0.1 million on financed leasehold improvements related to our corporate facility and $0.4 million on our line of credit and lease agreement obligations.  Net cash provided by financing activities for the three months ended March 31, 2006 was $0.9 million. We had net borrowings of $0.8 million on an equipment lease agreement entered into in December 2005, and received proceeds of $0.3 million from stock option exercises and purchases of common shares through our Employee Stock Purchase Plan, offset by principal payments of $0.2 million on our line of credit obligations.

We anticipate that our current cash, cash equivalents and short-term investments will be sufficient to fund our operations through at least 2008. However, our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement that involves risks and uncertainties, and actual results could vary materially.

Contractual Obligations

Our major outstanding contractual obligations relate to license maintenance obligations, short and long-term line of credit obligations and capital and operating lease obligations. The disclosures relating to our contractual obligations in our Annual Report on Form 10-K for the year ended December 31, 2006 have not materially changed since we filed that report.

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. On an on-going basis, we evaluate our estimates and judgments, including those related to revenue, accrued expenses and certain equity instruments. Prior to the initial public offering of our stock, we also evaluated our estimates and judgments regarding the fair valuation assigned to our common stock. We base our estimates on historical experience, known trends and events and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our financial statements.

Revenue

We record revenue on an accrual basis as it is earned and when amounts are considered collectible. Revenues received in advance of performance obligations or in cases where we have a continuing obligation to perform services are deferred and recognized over the performance period. Revenues from milestone payments that represent the culmination of a separate earnings process are recorded when the milestone is achieved. Contract revenues are recorded as the services are performed. When we are required to defer revenue, the period over which such revenue should be recognized is subject to estimates by management and may change over the term of the performance obligation.

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Accrued Expenses

As part of the process of preparing financial statements, we are required to estimate accrued expenses. This process involves identifying services which have been performed on our behalf, and estimating the level of service performed and the associated cost incurred for such service as of each balance sheet date in our financial statements. Examples of estimated expenses for which we accrue include contract service fees paid to contract manufacturers in conjunction with the production of clinical drug supplies and to contract research organizations. In connection with such service fees, our estimates are most affected by our understanding of the status and timing of services provided relative to the actual levels of services incurred by such service providers. The majority of our service providers invoice us monthly in arrears for services performed. In the event that we do not identify certain costs, which have begun to be incurred, or we under- or over-estimate the level of services performed or the costs of such services, our reported expenses for such period would be too low or too high. The date on which certain services commence, the level of services performed on or before a given date and the cost of such services are often determined based on subjective judgments. We make these judgments based upon the facts and circumstances known to us and in accordance with generally accepted accounting principles.

Stock-Based Compensation

We adopted Statement of Financial Accounting Standards, or SFAS, No. 123 (revised 2004), Share Based Payment , or SFAS 123R, effective January 1, 2006 under the modified prospective transition method. SFAS 123R requires the recognition of the fair value of stock-based compensation expense in our operations, and accordingly the adoption of SFAS No. 123R fair value method has had and will continue to have a significant impact on our results of operations, although it will have no impact on our overall financial position. Option valuation models require the input of highly subjective assumptions, including stock price volatility and expected term of an option. Changes in market price directly affect volatility and could cause future stock-based compensation expense to vary significantly in future reporting periods.  The compensation cost for stock options and our ESPP that has been incurred during the three months ended March 31, 2007 is $1.6 million.  At March 31, 2007, the total unrecognized compensation cost related to non-vested stock options was $14.9 million. The cost is expected to be recognized over a weighted average period of 2.8 years.

Due to our limited historical share options exercise data and the characteristics of our share options, we follow the simplified method of estimating the expected term, as described in the U.S. Securities and Exchange Commission, or SEC, issued Staff Accounting Bulletin, or SAB, No. 107, Share-Based Payments, or SAB 107. The expected term is derived from the average midpoint between vesting and the contractual term. We update these assumptions on a quarterly basis to reflect recent historical data. Additionally, we are required to estimate forfeiture rates to estimate the number of shares that will vest in a period to which the fair value is applied.

The value of our restricted stock awards is recognized as compensation cost in our consolidated statement of operations over each award’s explicit or implicit service periods.  We estimate an award’s implicit service period based on our best estimate of the period over which an award’s vesting conditions will be achieved.  We reevaluate these estimates on a quarterly basis and will recognize any remaining unrecognized compensation as of the date of an estimate revision over the revised remaining implicit service period.  At March 31, 2007, the total unrecognized compensation cost related to non-vested restricted stock awards was $8.0 million.  The costs are expected to be recognized over a weighted-average period of 1.7 years.

Item 3.                              Quantitative and Qualitative Disclosures About Market Risk.

We are exposed to market risk related to changes in interest rates. Our current investment policy is to maintain an investment portfolio consisting mainly of U.S. money market and high-grade corporate securities, directly or through managed funds, with maturities of twenty-four months or less. Our cash is deposited in and invested through highly rated financial institutions in North America. Our marketable securities are subject to interest rate risk and will fall in value if market interest rates increase. If market interest rates were to increase immediately and uniformly by 10% from levels at March 31, 2007, we estimate that the fair value of our investment portfolio would decline by an immaterial amount. While our cash and investment balances have increased as a result of our initial and follow-on public offerings, we have the ability to hold our fixed income investments until maturity, and therefore we would not expect our operating results or cash flows to be affected to any significant degree by the effect of a change in market interest rates on our investments.

Item 4.                              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, 2007. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act of 1934, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act of 1934 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 of 1934 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. Our management

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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, 2007, 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.

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 fiscal quarter ended March 31, 2007 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1A.       Risk Factors

Statements contained or incorporated by reference in this Quarterly Report on Form 10-Q that are not based on historical fact are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act. These forward-looking statements regarding future events and our future results are based on current expectations, estimates, forecasts, projections, intentions, goals, strategies, plans, prospects and the beliefs and assumptions of our management including, without limitation, our expectations regarding results of operations, general and administrative expenses, research and development expenses, current and future development and manufacturing efforts, regulatory filings, clinical trial results and the sufficiency of our cash for future operations. Forward-looking statements can be identified by terminology such as “anticipate,” “believe,” “could,” “could increase the likelihood,” “hope,” “target,” “project,” “goals,” “potential,” “predict,” “might,” “estimate,” “expect,” “intend,” “is planned,” “may,” “should,” “will,” “will enable,” “would be expected,” “look forward,” “may provide,” “would” or similar terms, variations of such terms or the negative of those terms.

We cannot assure investors that our assumptions and expectations will prove to have been correct. Important factors could cause our actual results to differ materially from those indicated or implied by forward-looking statements. Such factors that could cause or contribute to such differences include those factors discussed below. We undertake no intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. If any of the following risks actually occur, our business, financial condition or results of operations would likely suffer.

The following discussion includes two revised risk factors (“We will need to develop or acquire additional technologies as part of our efforts to analyze the chemical composition of complex mixtures other than heparins,”  and “If we are not able to demonstrate therapeutic equivalence for our generic versions of complex drugs, including M-Enoxaparin, to the satisfaction of the FDA, we will not obtain regulatory approval for commercial sale of our generic product candidates, and our future results of operations will be adversely affected”), that reflect developments subsequent to the discussion of risk factors included in our most recent Annual Report on Form 10-K.

Risks Relating to Our Business

We have a limited operating history and have incurred a cumulative loss since inception. If we do not generate significant revenues, we will not be profitable.

We have incurred significant losses since our inception in May 2001. At March 31, 2007, our accumulated deficit was approximately $142.5 million. We have not generated revenues from the sale of any products to date. We expect that our annual operating losses will increase over the next several years as we expand our drug commercialization, development and discovery efforts. To become profitable, we must successfully develop, and obtain regulatory approval for, our existing drug candidates, and effectively manufacture, market and sell any drugs we develop. Accordingly, we may never generate significant revenues and, even if we do generate significant revenues, we may never achieve profitability.

To become and remain profitable, we must succeed in developing and commercializing drugs with significant market potential. This will require us to be successful in a range of challenging activities: developing drugs; obtaining regulatory approval for them; and manufacturing, marketing and selling them. We may never succeed in these activities and may never generate revenues that are significant or large enough to achieve profitability. Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to become and remain profitable would cause the market price of our common stock to decrease and could impair our ability to raise capital, expand our business, diversify our product offerings or continue our operations.

If we fail to obtain approval for and commercialize our most advanced product candidate, M-Enoxaparin, we may have to curtail our product development programs and our business would be materially harmed.

We have invested a significant portion of our time, financial resources and collaboration efforts in the development of our most advanced product candidate, M-Enoxaparin, a technology-enabled generic version of Lovenox. Our near-term ability to generate revenues and our future success, in large part, depends on the development and commercialization of M-Enoxaparin.

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In accordance with our 2003 Sandoz Collaboration, Sandoz submitted an ANDA to the FDA on August 29, 2005 seeking approval to market M-Enoxaparin in the United States. FDA approval of an ANDA is required before marketing of a generic equivalent of a drug previously approved under an NDA. If we are unable to satisfactorily demonstrate therapeutic equivalence, if the FDA disagrees with our characterization approach or does not agree that M-Enoxaparin is equivalent to Lovenox, or if we otherwise fail to meet FDA requirements for the ANDA (including but not limited to manufacturing and bioequivalence requirements) or obtain FDA approval for, and successfully commercialize, M-Enoxaparin, we may never realize revenue from this product and we may have to curtail our other product development programs. As a result, our business would be materially harmed.

Patent litigation with Sanofi-Aventis, the innovator of Lovenox, may cause delays and additional expense in the commercialization of M-Enoxaparin.  If we are not successful in commercializing M-Enoxaparin or are significantly delayed in doing so, our business would be materially harmed, which could include without limitation the curtailment of our other development programs.

Companies that produce branded pharmaceutical products for which there are unexpired patents listed in the FDA’s listing of approved drug products, the Orange Book, often bring patent infringement litigation against applicants seeking FDA approval to manufacture and market generic forms of the branded products before patent expiration.  Litigation against Sandoz, us or others with respect to Lovenox may cause delays and additional expense in the commercialization of M-Enoxaparin.

Currently, Sanofi-Aventis has two listed patents for Lovenox in the Orange Book, the ‘618 Patent and the ‘743 Reissue Patent.  Sanofi-Aventis has reported that the claims of the ‘618 Patent are identical or substantially identical to the corresponding claims of the ‘743 Reissue Patent.  According to Sanofi-Aventis, by operation of law, the ‘618 Patent ceases to exist and has been replaced by the ‘743 Reissue Patent.  According to the Orange Book, the ‘743 Reissue Patent expires February 14, 2012.

Sanofi-Aventis has brought lawsuits for patent infringement; one against Amphastar and Teva, and a second, separate patent infringement lawsuit pending against Sandoz.

Amphastar/Teva Patent Infringement Lawsuit

In September 2003, prior to issuance of the ‘743 Reissue Patent, Sanofi-Aventis announced that it received individual notices from Amphastar and Teva indicating that each had submitted with the FDA its own ANDA with a paragraph IV certification for enoxaparin.  Sanofi-Aventis sued Amphastar and Teva for patent infringement, and in response Amphastar and Teva asserted claims of non-infringement, invalidity and/or unenforceability of the ‘618 Patent, as well as various counterclaims, and sought related declaratory judgment relief against Sanofi-Aventis.   In September 2005, Amphastar and Teva each subsequently amended their own ANDAs to include a second paragraph IV certification for the ‘743 Reissue Patent.

On June 16, 2005, the District Court granted summary judgment in the Amphastar/Teva case, finding that the ‘743 Reissue Patent was unenforceable due to Aventis’ inequitable conduct before the United States Patent and Trademark Office, or USPTO.  Thereafter, Sanofi-Aventis appealed the decision to the U.S. Court of Appeals for the Federal Circuit, or the Court of Appeals.  On April 10, 2006, the Court of Appeals determined that, although there were no issues of material fact with respect to the materiality of certain information withheld from the USPTO, there remained genuine issues of material fact regarding the intent to deceive the USPTO.  Accordingly, the Court of Appeals reversed the District Court’s ruling and remanded the case to the District Court for further proceedings consistent with the Court of Appeals’ decision.  The District Court held a bench trial in December 2006 focused only on inequitable conduct.  On February 7, 2007 the District Court ruled in favor of Amphastar and Teva holding both the ‘618 Patent and the ‘743 Reissue Patent unenforceable by virtue of inequitable conduct before the USPTO.  Sanofi-Aventis has filed a Notice to Appeal appeal this ruling.  If Sanofi-Aventis is successful in its appeal, all other remaining issues regarding invalidity, non-infringement and unenforceability could be subsequently tried by the District Court, if necessary.

Sandoz Patent Infringement Lawsuit

In August 2005, Sandoz filed an ANDA with the FDA to obtain approval for the commercial manufacture, use and sale of enoxaparin.  In 2006, Sandoz amended its ANDA by filing with the FDA a paragraph IV certification, stating, among

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other things, that the ‘618 Patent and ‘743 Reissue Patent are invalid and unenforceable.  Sanofi-Aventis brought a patent infringement suit against Sandoz in August 2006.  In response to Sanofi-Aventis’ lawsuit, Sandoz asserted, among other things, claims of invalidity and/or unenforceability of the ‘743 Reissue Patent.  At this time, no trial date has been set for this litigation.  Sandoz has moved to dismiss the suit based upon the District Court decision in the Amphastar/Teva case, and that  motion is pending.

Continuing litigation could delay or prevent the introduction of M-Enoxaparin and Sanofi-Aventis’ efforts to litigate against potential generic challengers to protect its intellectual property around Lovenox may not be limited to enforcement of the ‘743 Reissue Patent.  Pharmaceutical companies also frequently sue generic challengers over potential infringement of patents that are not listed in the Orange Book.  Presently, we are not aware of any litigation relating to non-Orange Book patents, but it is possible that Sanofi-Aventis will initiate such litigation against us, Sandoz, Teva, Amphastar, or others in the future.  If Sanofi-Aventis were to initiate litigation relating to a non-Orange Book patents, this litigation could significantly delay, impair or prevent our ability to commercialize M-Enoxaparin and our business would be materially harmed.

Under our 2003 Sandoz Collaboration, in most circumstances, the decision as to when to begin marketing M-Enoxaparin will be determined jointly by us and Sandoz.  Sandoz, however, has sole discretion over the decision as to when to begin marketing M-Enoxaparin under certain circumstances.  Sandoz could decide to market M-Enoxaparin prior to final resolution of either the Teva and Amphastar or Sandoz litigation matters, which could result in significant damages, including possibly treble damages, in the event Sanofi-Aventis is successful in either patent litigation case.  Although Sandoz has agreed to indemnify us for patent liability damages, Sandoz’s has the right to offset certain of these liabilities against the profit-sharing amounts, the royalties and the milestone payments otherwise due to us from the marketing of M-Enoxaparin.

Litigation involves many risks and uncertainties, and there is no assurance that Amphastar, Teva, Sandoz or we will prevail in any lawsuit with Sanofi-Aventis.  In addition, Sanofi-Aventis has significant resources and any litigation with Sanofi-Aventis could last a number of years, potentially delaying or prohibiting the commercialization of M-Enoxaparin.  If we are not successful in commercializing M-Enoxaparin or are significantly delayed in doing so, we may have to curtail our other product development programs and our business would be materially harmed.

If other generic versions of enoxaparin are approved and successfully commercialized, our business would suffer.

In March 2003, Amphastar and Teva each submitted ANDAs for generic versions of Lovenox with the FDA.  In addition, other third parties, including without limitation Sanofi-Aventis, may seek approval to market generic versions of Lovenox in the United States.  If a competitor obtains FDA approval or obtains licenses from Sanofi-Aventis to market an authorized generic, the resulting financial returns to us would be materially adversely affected.  Under these circumstances, we may not gain any competitive advantage and the resulting market price for our M-Enoxaparin product may be lower, we may be delayed from commercial launch or we may not be able to launch our product at all. Also, we may never achieve significant market share for M-Enoxaparin if one or more third parties markets generic versions of Lovenox.  Under the Hatch-Waxman Act, any developer of a generic drug that is first to have its ANDA accepted for review by the FDA, and whose submission includes a paragraph IV certification, is eligible to receive a 180-day period of generic market exclusivity.  Sandoz was not the first applicant to file an enoxaparin ANDA with a paragraph IV certification, so we will be forced to wait until the expiration of Teva and/or Amphastar’s exclusivity period before the FDA will be able to finally approve our application. As a result, Teva and/or Amphastar may have the opportunity to establish long term supply agreements with institutional customers before we can enter the market, which would hinder our ability to penetrate the market for generic enoxaparin products

The 2003 Sandoz Collaboration contains terms which specify the sharing of commercial returns of M-Enoxaparin between us and Sandoz.  Under circumstances when one or more third parties successfully commercialize a generic version of Lovenox, significantly less favorable economic terms would be triggered under our collaboration with Sandoz. Consequently, if other generic versions of Lovenox are approved and commercialized, our revenues for M-Enoxaparin would be reduced and, as a result, our business, including our near-term financial results and our ability to fund future discovery and development programs, would suffer.

If our other generic versions of our generic and novel drug products are approved and successfully commercialized, our business would suffer.

We expect that certain of our generic product candidates may face intense and increasing competition from other manufacturers of generic and/or branded products.  As patents for branded products and related exclusivity periods expire,

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manufacturers of generic products may receive regulatory approval for generic equivalents and may be able to achieve significant market penetration. As this happens, or as branded manufacturers launch authorized generic versions of such products, market share, revenues and gross profit typically decline, in some cases, dramatically. If any of our generic product offerings, including M-Enoxaparin, enter markets with a number of competitors, we may not achieve significant market share, revenues or gross profit. In addition, as other generic products are introduced to the markets in which we participate, the market share, revenues and gross profit of our generic products could decline.

We utilize new technologies in the development of some of our products that have not been reviewed or accepted by regulatory authorities.

Some of our products in current or future development, including M-Enoxaparin and M356, may be based on new technologies that have not previously been formally reviewed or accepted by the FDA or other regulatory authorities. It is possible that the FDA’s review and acceptance of our technologies may take time and resources, require independent third-party analysis or not be accepted by the FDA and other regulatory authorities. For some of our products, the regulatory approval path and requirements may not be clear, which could add significant delay and expense. Delays or failure to obtain regulatory approval of any of the products that we develop would adversely affect our business.

If we experience manufacturing difficulties or are unable to obtain sufficient quantities of raw materials or manufacture sufficient quantities of M-Enoxaparin, our development and commercialization efforts may be materially harmed.

We have limited personnel with experience in, and we do not own facilities for, manufacturing any products. We depend upon third parties to provide raw materials, manufacture the drug substance, produce the final drug product and provide certain analytical services with respect to M-Enoxaparin. We or our third party contractors may have difficulty meeting FDA manufacturing requirements, including but not limited to, reproducibility, validation and scale-up, and continued compliance with current good manufacturing practices requirements.  In addition, we or our third party contractors may have difficulty producing M-Enoxaparin in the quantities necessary to meet anticipated market demand.  If we are unable to satisfy the FDA requirements for approval or to produce M-Enoxaparin in sufficient quantities to meet the requirements for the launch of the product or to meet future demand, our revenues and gross margins could be adversely affected.

We will need to develop or acquire additional technologies as part of our efforts to analyze the chemical composition of complex mixtures other than heparins.

To date, our analytical techniques and methods have been primarily focused on the characterization of complex mixtures composed of linear sugars, such as those found in the heparin class of drugs. In order to adequately analyze other complex mixtures, such as glycoproteins, we will need to develop or acquire new technologies. Our inability to develop or acquire and apply these new technologies would impair our ability to develop improved, next-generation or follow-on versions of existing products. Our inability to develop or acquire additional technology for the characterization of complex mixtures other than heparins could reduce the likelihood of our success developing other products.

Competition in the biotechnology and pharmaceutical industries is intense, and if we are unable to compete effectively, our financial results will suffer.

The markets in which we intend to compete are undergoing, and are expected to continue to undergo, rapid and significant technological change. We expect competition to intensify as technological advances are made or new biotechnology products are introduced. New developments by competitors may render our current or future product candidates and/or technologies non-competitive, obsolete or not economical. Our competitors’ products may be more efficacious or marketed and sold more effectively than any of our products.

Many of our competitors have:

·                    significantly greater financial, technical and human resources than we have at every stage of the discovery, development,  manufacturing and commercialization process;

·                     more extensive experience in commercializing generic drugs, preclinical testing, conducting clinical trials, obtaining regulatory approvals, challenging patents and in manufacturing and marketing pharmaceutical products;

·                     products that have been approved or are in late stages of development; and

·                     collaborative arrangements in our target markets with leading companies and research institutions.

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If we successfully develop and obtain approval for our drug candidates, we will face competition based on many different factors, including:

·                     the safety and effectiveness of our products;

·                     the timing and scope of regulatory approvals for these products;

·                     the availability and cost of manufacturing, marketing and sales capabilities;

·                     the effectiveness of our marketing and sales capabilities;

·                     the price of our products;

·                     the availability and amount of third-party reimbursement for our products; and

·                     the strength of our patent position.

Our competitors may develop or commercialize products with significant advantages in regard to any of these factors. Our competitors may therefore be more successful in commercializing their products than we are, which could adversely affect our competitive position and business.

If we are unable to establish and maintain key customer arrangements, sales of our products, and therefore revenues, would decline.

Generic pharmaceutical products are sold through various channels, including retail, mail order, and to hospitals through group purchasing organizations, or GPOs. As enoxaparin is primarily a hospital-based product, we expect to derive a large percentage of our future revenue for M-Enoxaparin through contracts with GPOs. Currently, a relatively small number of GPOs control a substantial portion of generic pharmaceutical sales to hospital customers. In order to establish and maintain contracts with these GPOs, we believe that we, in collaboration with Sandoz, will need to maintain adequate drug supplies, remain price competitive, comply with FDA regulations and provide high-quality products. The GPOs with whom we hope to establish contracts may also have relationships with our competitors and may decide to contract for or otherwise prefer products other than ours, limiting access of M-Enoxaparin to certain hospital segments. Our sales could also be negatively affected by any rebates, discounts or fees that are required by our customers, including the GPOs, wholesalers, distributors, retail chains or mail order services, to gain and retain market acceptance for our products. M356 is primarily distributed through retail channels and mail order services. If we are unable to establish and maintain arrangements with all of these customers, future sales of our products, including M-Enoxaparin and M356, our revenues and our profits would suffer.

Even if we receive approval to market our drug candidates, the market may not be receptive to our drug candidates upon their commercial introduction, which could prevent us from being profitable.

Even if our drug candidates are successfully developed, our success and growth will also depend upon the acceptance of these drug candidates by physicians and third-party payors. Acceptance of our product development candidates will be a function of our products being clinically useful, being cost effective and demonstrating superior therapeutic effect with an acceptable side effect profile as compared to existing or future treatments. In addition, even if our products achieve market acceptance, we may not be able to maintain that market acceptance over time.

Factors that we believe will materially affect market acceptance of our drug candidates under development include:

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

·                     the safety, efficacy and ease of administration of our products;

·                     the competitive pricing of our products;

·                     the success of our physician education and marketing programs;

·                     the sales and marketing efforts of competitors; and

·                     the availability and amount of government and third-party payor reimbursement.

If our products do not achieve market acceptance, we will not be able to generate sufficient revenues from product sales to maintain or grow our business.

We will require substantial additional funds to execute our business plan and, if additional capital is not available, we may need to limit, scale back or cease our operations.

As of March 31, 2007, we had cash, cash equivalents and marketable securities totaling $176.7 million. For the three months ended March 31, 2007, we had a net loss of $17.0 million and used cash in operating activities of $13.5 million. We will continue to require substantial funds to conduct research and development, process development, manufacturing,

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preclinical testing and clinical trials of our drug candidates, as well as funds necessary to manufacture and market any products that are approved for commercial sale. Because successful development of our drug candidates is uncertain, we are unable to estimate the actual funds we will require to complete research and development and commercialize our products under development.

Our future capital requirements may vary depending on the following:

·                     the timing of FDA approval of the products of our competitors;

·                     the advancement of our generic product candidates and other development programs;

·                     the cost of litigation, including potential patent litigation with Sanofi-Aventis relating to Lovenox that is not otherwise covered by our collaboration agreement, or potential patent litigation with others, as well as any damages, including possibly treble damages, that may be owed to Sanofi-Aventis or others should we be unsuccessful in such litigation;

·                     the time and costs involved in obtaining regulatory approvals;

·                     the continued progress in our research and development programs, including completion of our preclinical studies and clinical trials;

·                     the potential acquisition and in-licensing of other technologies, products or assets; and

·                     the cost of manufacturing, marketing and sales activities, if any.

We may seek additional funding in the future and intend to do so through collaborative arrangements and public or private equity and debt financings. Additional funds may not be available to us on acceptable terms or at all. In addition, the terms of any financing may adversely affect the holdings or the rights of our stockholders. If we are unable to obtain funding on a timely basis, we may be required to significantly curtail one or more of our research or development programs. We also could be required to seek funds through arrangements with collaborators or others that may require us to relinquish rights to some of our technologies, product candidates or products which we would otherwise pursue on our own.

If we are not able to retain our current senior management team or attract and retain qualified scientific, technical and business personnel, our business will suffer.

We are dependent on the members of our senior management team for our business success. Our employment arrangements with our executive officers are terminable by either party on short notice or no notice. We do not carry life insurance on the lives of any of our personnel. The loss of any of our executive officers would result in a significant loss in the knowledge and experience that we, as an organization, possess and could cause significant delays, or outright failure, in the development and approval of our product candidates. In addition, our growth will require us to hire a significant number of qualified scientific and administrative personnel. There is intense competition from numerous pharmaceutical and biotechnology companies, universities, governmental entities and other research institutions, for human resources, including management, in the technical fields in which we operate, and we may not be able to attract and retain qualified personnel necessary for the successful development and commercialization of our product candidates.

There is a substantial risk of product liability claims in our business. If our existing product liability insurance is insufficient, a product liability claim against us that exceeds the amount of our insurance coverage could adversely affect our business.

Our business exposes us to significant potential product liability risks that are inherent in the development, manufacturing and marketing of human therapeutic products. Product liability claims could delay or prevent completion of our development programs.  If we succeed in marketing products, such claims could result in a recall of our products or a change in the indications for which they may be used. While we currently maintain product liability insurance coverage that we believe is adequate for our current operations, we cannot be sure that such coverage will be adequate to cover any incident or all incidents. Furthermore, clinical trial and product liability insurance is becoming increasingly expensive. As a result, we may be unable to maintain sufficient insurance at a reasonable cost to protect us against losses that could have a material adverse effect on our business. These liabilities could prevent or interfere with our product development and commercialization efforts.

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As we evolve from a company primarily involved in drug discovery and development into one that is also involved in the commercialization of drug products, we may have difficulty managing our growth and expanding our operations successfully.

As we advance our drug candidates through the development process, we will need to expand our development, regulatory, manufacturing, sales and marketing capabilities or contract with other organizations to provide these capabilities for us. As our operations expand, we expect that we will need to manage additional relationships with various collaborative partners, suppliers and other organizations. Our ability to manage our operations and growth requires us to continue to improve our operational, financial and management controls, reporting systems and procedures. Such growth could place a strain on our administrative and operational infrastructure. We may not be able to make improvements to our management information and control systems in an efficient or timely manner and may discover deficiencies in existing systems and controls.

We may acquire or make investments in companies or technologies that could adversely effect our business and financial results.

We may in the future acquire or invest in companies, products and technologies. Such transactions involve a number of risks, including:

·                     we may find that the acquired company or assets do not further our business strategy, or that we overpaid for the company or assets, or that economic conditions change, all of which may generate a future impairment charge;

·                     difficulty integrating the operations and personnel of the acquired business, and difficulty retaining the key personnel of the acquired business;

·                     difficulty incorporating the acquired technologies;

·                     difficulties or failures with the performance of the acquired technologies or drug products;

·                     we may face product liability risks associated with the sale of the acquired company’s products;

·                     disruption or diversion of management’s attention by transition or integration issues and the complexity of managing diverse locations;

·                     difficulty maintaining uniform standards, internal controls, procedures and policies;

·                     the acquisition may result in litigation from terminated employees or third-parties; and

·                     we may experience significant problems or liabilities associated with product quality, technology and legal contingencies.

These factors could have a material adverse effect on our business, results of operations and financial condition or cash flows, particularly in the case of a larger acquisition or multiple acquisitions in a short period of time. From time to time, we may enter into negotiations for acquisitions that are not ultimately consummated. Such negotiations could result in significant diversion of management time, as well as out-of-pocket costs.

The consideration paid in connection with an acquisition also affects our financial results. If we were to proceed with one or more significant acquisitions in which the consideration included cash, we could be required to use a substantial portion of our available cash to consummate any acquisition. To the extent we issue shares of stock or other rights to purchase stock, including options or other rights, existing stockholders may be diluted and earnings per share may decrease. In addition, acquisitions may result in the incurrence of debt, large one-time write-offs and restructuring charges. They may also result in goodwill and other intangible assets that are subject to impairment tests, which could result in future impairment charges.

Risks Relating to Development and Regulatory Approval

If we are not able to demonstrate therapeutic equivalence for our generic versions of complex drugs, including M-Enoxaparin, to the satisfaction of the FDA, we will not obtain regulatory approval for commercial sale of our generic product candidates, and our future results of operations will be adversely affected.

Our future results of operations depend, to a significant degree, on our ability to obtain regulatory approval for and commercialize generic versions of complex drugs, including M-Enoxaparin. We will be required to demonstrate to the satisfaction of the FDA, among other things, that our generic products contain the same active ingredients, are of the same

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dosage form, strength and route of administration as the branded products upon which they are based, and meet compendial or other applicable standards for strength, quality, purity and identity, including potency. In addition, we may be required to conduct in vivo studies to demonstrate that our generic versions of complex drugs are bioequivalent, meaning typically that there are no significant differences between the generic drug and its branded counterpart with respect to the rate and extent to which the active ingredients are absorbed and become available at the site of drug action.

Determination of the same active ingredients for our generic versions of complex drugs will be based on our demonstration of chemical equivalence to the respective reference listed drugs. The FDA may not agree that we have adequately characterized our products or that our products are equivalent to their respective branded drugs. The FDA may require additional information, including, for example, animal or human testing, to determine therapeutic equivalence and that any inactive ingredients or impurities do not compromise the product’s safety and efficacy. Provision of sufficient information for approval may prove difficult, time consuming and expensive. We must also demonstrate the adequacy of our methods, controls and facilities used in the manufacture of the product, including that they meet current good manufacturing practices, or cGMP. We cannot predict whether any of our generic product candidates will meet FDA requirements for approval.

In the event that the FDA modifies its current standards for therapeutic equivalence with respect to generic versions of Lovenox or other complex drug products, does not establish standards for interchangeability for generic versions of complex drug products, or requires us to conduct clinical trials or other lengthy processes, the commercialization of some of our development candidates could be delayed or prevented. Delays in any part of the process or our inability to obtain regulatory approval for our products could adversely affect our operating results by restricting or significantly delaying our introduction of new products.

If the FDA is not able to establish specific guidelines or arrive at a consensus regarding the scientific analyses required for characterizing follow-on versions of complex protein drugs, and if the U.S. Congress does not take action to create an abbreviated regulatory pathway for protein products, then the uncertainty about the value of our glycoprotein program will be increased.

The regulatory climate for follow-on versions of protein products in the U.S. remains uncertain.  Although there has been recent legislative activity, there is currently no established statutory or regulatory pathway for approval of follow-on versions of most protein drugs. The FDA has approved the majority of protein products under the Public Health Service Act, or PHSA, through the use of BLAs. Unlike drugs approved through the submission of NDAs, under section 505 of the Federal Food, Drug, and Cosmetic Act, or the FDCA, there is no provision in the PHSA for an abbreviated BLA approval pathway, and the FDA has stated it does not believe it has the authority to rely on prior BLA approvals or on their underlying data to approve follow-on products.  Moreover, even for proteins originally approved as NDAs, there is uncertainty as to what data the FDA may deem is necessary to demonstrate the sameness required for approval of an ANDA under section 505(j) of the FDCA.  In addition, there has been opposition to the FDA’s use of section 505(b)(2), which allows an applicant to rely on information from published scientific literature and/or a prior approval of a similar drug, to approve follow-on versions of protein and other complex drug products approved under section 505 of the FDCA.  

Although the FDA has previously stated its intention to draft guidance that is broadly applicable to follow-on protein products, the agency has not issued such guidance to date and may never do so.  Protracted timelines and failure of the FDA to establish standards for approval of follow-on protein products or of the U.S. Congress to enact legislation establishing an abbreviated pathway for approval for follow-on products to approved BLA products could reduce the value of, or render obsolete, our glycoprotein program. 

If our preclinical studies and clinical trials for our development candidates, including M118, are not successful, we will not be able to obtain regulatory approval for commercial sale of our novel or improved drug candidates.

To obtain regulatory approval for the commercial sale of our novel or improved drug candidates, we are required to demonstrate through preclinical studies and clinical trials that our drug development candidates are safe and effective. Preclinical testing and clinical trials of new development candidates are lengthy and expensive and the historical failure rate for development candidates is high.

A failure of one or more of our preclinical studies or clinical trials can occur at any stage of testing.  We may experience numerous unforeseen events during, or as a result of, preclinical testing and the clinical trial process that could delay or prevent our ability to receive regulatory approval or commercialize M118 or our other drug candidates, including:

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·                   regulators or institutional review boards may not authorize us to commence a clinical trial or conduct a clinical trial at a prospective trial site;

·                   our preclinical studies or clinical trials may produce negative or inconclusive results, and we may be required to conduct additional preclinical studies or clinical trials or we may abandon projects that we expect to be promising;

·                   enrollment in our clinical trials may be slower than we anticipate, resulting in significant delays, and participants may drop out of our clinical trials at a higher rate than we anticipate;

·                   we might have to suspend or terminate our clinical trials if the participants are being exposed to unacceptable health risks;

·                   regulators or institutional review boards may require that we hold, suspend or terminate clinical research for various reasons, including noncompliance with regulatory requirements;

·                   the cost of our clinical trials may be greater than we anticipate; and

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

The results from preclinical testing of a development candidate may not predict the results that will be obtained in human clinical trials.   If we are required to conduct additional clinical trials or other testing of M118 or our product candidates beyond those that we currently contemplate, if we are unable to successfully complete our clinical trials or other tests, or if the results of these trials are not positive or are only modestly positive, we may be delayed in obtaining marketing approval for our drug candidates or we may not be able to obtain marketing approval at all.  Our product development costs will also increase if we experience delays in testing or approvals.  Significant clinical trial delays could allow our competitors to bring products to market before we do and impair our ability to commercialize our products or potential products.  If any of this occurs, our business will be materially harmed. 

Failure to obtain regulatory approval in foreign jurisdictions would prevent us from marketing our products abroad.

We intend in the future to market our products outside of the United States. In order to market our products in the European Union and many other foreign jurisdictions, we must obtain separate regulatory approvals and comply with the numerous and varying regulatory requirements of each jurisdiction. The approval procedure and requirements varies among countries, and can require, among other things, submitting or conducting additional testing in each jurisdiction. The time required to obtain approval abroad may differ from that required to obtain FDA approval. The foreign regulatory approval process may include all of the risks associated with obtaining FDA approval, and we may not obtain foreign regulatory approvals on a timely basis, if at all. Approval by the FDA does not ensure approval by regulatory authorities in other countries, and approval by one foreign regulatory authority does not ensure approval by regulatory authorities in any other foreign country or by the FDA. We and our collaborators may not be able to file for regulatory approvals and may not receive necessary approvals to commercialize our products in any market outside of the United States. The failure to obtain these approvals could materially adversely affect our business, financial condition and results of operations.

Even if we obtain regulatory approvals, our marketed drugs will be subject to ongoing regulatory review. If we fail to comply with continuing United States and foreign regulations, we could lose our approvals to market drugs and our business would be seriously harmed.

Even after approval, any drug products we develop will be subject to ongoing regulatory review, including the review of clinical results which are reported after our drug products are made commercially available. In addition, the manufacturer and manufacturing facilities we use to produce any of our drug candidates will be subject to periodic review and inspection by the FDA. We will be required to report any serious and unexpected adverse experiences and certain quality problems with our products and make other periodic reports to the FDA. The discovery of any new or previously unknown problems with the product, manufacturer or facility may result in restrictions on the drug or manufacturer or facility, including withdrawal of the drug from the market. Certain changes to an approved product, including in the way it is manufactured or promoted, often require prior FDA approval before the product as modified may be marketed. If we fail to comply with applicable continuing regulatory requirements, we may be subject to warning letters, civil penalties, suspension or withdrawal of regulatory approvals, product recalls and seizures, injunctions, operating restrictions and/or criminal prosecutions and penalties.  In addition, neither we, nor any of our third-party collaborators, are permitted to employ in any capacity, any individual who has been debarred under the FDA’s Application Integrity Policy, and if such person is or has been so employed, the FDA may delay its review and approval of some or all of our applications, reject certain studies, withdraw approval of our applications, and take other adverse administrative action against us.

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If third-party payors do not adequately reimburse customers for any of our approved products, they might not be purchased or used, and our revenues and profits will not develop or increase.

Our revenues and profits will depend heavily upon the availability of adequate reimbursement for the use of our approved product candidates from governmental and other third-party payors, both in the United States and in foreign markets. Reimbursement by a third-party payor may depend upon a number of factors, including the third-party payor’s determination that use of a product is:

·                     a covered benefit under its health plan;

·                     safe, effective and medically necessary;

·                     appropriate for the specific patient;

·                     cost-effective; and

·                    neither experimental nor investigational.

Obtaining reimbursement approval for a product from each government or other third-party payor is a time-consuming and costly process that could require us to provide supporting scientific, clinical and cost-effectiveness data for the use of our products to each payor. We may not be able to provide data sufficient to gain acceptance with respect to reimbursement. There is substantial uncertainty whether any particular payor will reimburse the use of any drug products incorporating new technology. Even when a payor determines that a product is eligible for reimbursement, the payor may impose coverage limitations that preclude payment for some uses that are approved by the FDA or comparable authority. Moreover, eligibility for coverage does not imply that any product will be reimbursed in all cases or at a rate that allows us to make a profit or even cover our costs. Interim payments for new products, if applicable, may also not be sufficient to cover our costs and may not be made permanent. Reimbursement rates may vary according to the use of the product and the clinical setting in which it is used, may be based on payments allowed for lower-cost products that are already reimbursed, may be incorporated into existing payments for other products or services, and may reflect budgetary constraints and/or imperfections in Medicare, Medicaid or other data used to calculate these rates. Net prices for products may be reduced by mandatory discounts or rebates required by government health care programs or by any future relaxation of laws that restrict imports of certain medical products from countries where they may be sold at lower prices than in the United States.

There have been, and we expect that there will continue to be, federal and state proposals to constrain expenditures for medical products and services, which may affect payments for our products. The Centers for Medicare and Medicaid Services, or CMS, frequently change product descriptors, coverage policies, product and service codes, payment methodologies and reimbursement values. Third-party payors often follow Medicare coverage policy and payment limitations in setting their own reimbursement rates, and both CMS and other third-party payors may have sufficient market power to demand significant price reductions. Due in part to actions by third-party payors, the health care industry is experiencing a trend toward containing or reducing costs through various means, including lowering reimbursement rates, limiting therapeutic class coverage and negotiating reduced payment schedules with service providers for drug products.

Our inability to promptly obtain coverage and profitable reimbursement rates from government-funded and private payors for our products could have a material adverse effect on our operating results and our overall financial condition.

New federal legislation will increase the pressure to reduce prices of pharmaceutical products paid for by Medicare, which could adversely affect our revenues, if any.

The Medicare Prescription Drug Improvement and Modernization Act of 2003, or MMA, changed the way Medicare covers and reimburses for pharmaceutical products. The legislation introduced a new reimbursement methodology based on average sales prices for drugs that are used in hospital settings or under the direct supervision of a physician and, starting in 2006, expanded Medicare coverage for drug purchases by the elderly. In addition, the MMA requires the creation of formularies for self-administered drugs, and provides authority for limiting the number of drugs that will be covered in any therapeutic class and provides for plan sponsors to negotiate prices with manufacturers and suppliers of covered drugs. As a result of the MMA and the expansion of federal coverage of drug products, we expect continuing pressure to contain and reduce costs of pharmaceutical products. Cost reduction initiatives and other provisions of this legislation could decrease the coverage and price that we receive for our products and could materially adversely affect our operating results and overall financial condition. While the MMA generally applies only to drug benefits for Medicare beneficiaries, private payors often follow Medicare coverage policy and payment limitations in setting their own reimbursement policies, and any reduction in coverage or payment that results from the MMA may result in a similar reduction in coverage or payments from private payors.

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Congress has considered separate legislation, which if enacted, would permit more widespread re-importation of drugs from foreign countries into the United States and which may include re-importation from foreign countries where drugs are frequently sold at lower prices than in the United States; other proposed legislation would remove restrictions on CMS’ ability to negotiate discounts directly with prescription drug manufacturers provided through the Medicare program.  Such legislation, or similar regulatory changes, could decrease the amount of reimbursement we receive for any approved products which, in turn, could materially adversely affect our operating results and our overall financial condition.

If efforts by manufacturers of branded products to delay or limit the use of generics are successful, our sales of technology-enabled generic products may suffer.

Many manufacturers of branded products have increasingly used legislative, regulatory and other means to delay competition from manufacturers of generic drugs. These efforts have included:

·                     settling patent lawsuits with generic companies, resulting in such patents remaining an obstacle for generic approval by others; 

·                     innovator companies settling paragraph IV patent litigation with generic companies to prevent the expiration of the 180-day generic marketing exclusivity period or to delay the triggering of such exclusivity period;

·                     submitting Citizen Petitions to request the Commissioner of Food and Drugs to take administrative action with respect to prospective and submitted generic drug applications;

·                     seeking changes to the United States Pharmacopeia, an industry recognized compilation of drug standards;

·                     pursuing new patents for existing products or processes which may issue before the expiration of one patent, which could extend patent protection for a number of years or otherwise delay the launch of generic drugs; and

·                     attaching special patent extension amendments to unrelated federal legislation.

 In February 2003, Aventis filed a Citizen Petition with the FDA requesting that the FDA withhold approval of any ANDA for a generic version of Lovenox until and unless the FDA determines that the manufacturing process used by the generic applicant is equivalent to the process used to make Lovenox, or until the generic applicant demonstrates through clinical trials that its product is equally safe and effective as Lovenox, and unless the generic product is shown to contain a specific molecular structure.  Teva, Amphastar, and others have filed comments opposing the Petition, and Aventis has filed at least three supplements and numerous reply comments in support of its Petition.  The FDA has yet to rule on the Petition, and if the FDA ultimately grants the Petition, we and Sandoz may be unable to obtain approval of our ANDA for M-Enoxaparin, which would materially harm our business.

Further, some manufacturers of branded products have engaged in state-by-state initiatives to enact legislation that restrict the substitution of some branded drugs with generic drugs. If these efforts to delay or block competition are successful, we may be unable to sell our generic products, which could have a material adverse effect on our sales and profitability.

Foreign governments tend to impose strict price controls, which may adversely affect our revenues, if any.

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

If we do not comply with laws regulating the protection of the environment and health and human safety, our business could be adversely affected.

Our research and development involves, and may in the future involve, the use of hazardous materials and chemicals and certain radioactive materials and related equipment. For the years ended December 31, 2006, 2005 and 2004, we spent approximately $31,000, $19,000, and $25,000, respectively, in order to comply with environmental and waste disposal regulations.  Although we believe that our safety procedures for handling and disposing of these materials comply with the standards mandated by state and federal regulations, the risk of accidental contamination or injury from these materials cannot be eliminated. If an accident occurs, we could be held liable for resulting damages, which could be substantial. We are

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also subject to numerous environmental, health and workplace safety laws and regulations, including those governing laboratory procedures, exposure to blood-borne pathogens and the handling of biohazardous materials. Although we maintain workers’ compensation insurance as prescribed by the Commonwealth of Massachusetts and, for claims not covered by workers’ compensation insurance, employer’s liability insurance, to cover us for costs and expenses we may incur due to injuries to our employees resulting from the use of these materials, this insurance may not provide adequate coverage against potential liabilities. We do not maintain insurance for environmental liability or toxic tort claims that may be asserted against us. Additional federal, state and local laws and regulations affecting our operations may be adopted in the future. We may incur substantial costs to comply with, and substantial fines or penalties if we violate, any of these laws or regulations.

Risks Relating to Patents and Licenses

If we are not able to obtain and enforce patent protection for our discoveries, our ability to successfully commercialize our product candidates will be harmed and we may not be able to operate our business profitably.

Our success depends, in part, on our ability to protect proprietary methods and technologies that we develop under the patent and other intellectual property laws of the United States and other countries, so that we can prevent others from using our inventions and proprietary information. However, we may not hold proprietary rights to some patents related to our current or future product candidates. Because patent applications in the United States and many foreign jurisdictions are typically not published until 18 months after filing, or in some cases not at all, and because publications of discoveries in scientific literature lag behind actual discoveries, we cannot be certain that we were the first to make the inventions claimed in issued patents or pending patent applications, or that we were the first to file for protection of the inventions set forth in our patent applications. As a result, we may be required to obtain licenses under third-party patents to market our proposed products. If licenses are not available to us on acceptable terms, or at all, we will not be able to market the affected products.

Our strategy depends on our ability to rapidly identify and seek patent protection for our discoveries. This process is expensive and time consuming, and we may not be able to file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner. Despite our efforts to protect our proprietary rights, unauthorized parties may be able to obtain and use information that we regard as proprietary. The issuance of a patent does not guarantee that it is valid or enforceable, so even if we obtain patents, they may not be valid or enforceable against third parties. In addition, the issuance of a patent does not guarantee that we have the right to practice the patented invention. Third parties may have blocking patents that could be used to prevent us from marketing our own patented product and practicing our own patented technology.

Our pending patent applications may not result in issued patents. The patent position of pharmaceutical or biotechnology companies, including ours, is generally uncertain and involves complex legal and factual considerations. The standards which the USPTO and its foreign counterparts use to grant patents are not always applied predictably or uniformly and can change. There is also no uniform, worldwide policy regarding the subject matter and scope of claims granted or allowable in pharmaceutical or biotechnology patents. The laws of some foreign countries do not protect proprietary information to the same extent as the laws of the United States, and many companies have encountered significant problems and costs in protecting their proprietary information in these foreign countries. Accordingly, we do not know the degree of future protection for our proprietary rights or the breadth of claims allowed in any patents issued to us or to others. The allowance of broader claims may increase the incidence and cost of patent interference proceedings and/or opposition proceedings, and the risk of infringement litigation. On the other hand, the allowance of narrower claims may limit the value of our proprietary rights. Our issued patents may not contain claims sufficiently broad to protect us against third parties with similar technologies or products, or provide us with any competitive advantage. Moreover, once they have issued, our patents and any patent for which we have licensed or may license rights may be challenged, narrowed, invalidated or circumvented. If our patents are invalidated or otherwise limited, other companies will be better able to develop products that compete with ours, which could adversely affect our competitive business position, business prospects and financial condition.

We also rely on trade secrets, know-how and technology, which are not protected by patents, to maintain our competitive position. If any trade secret, know-how or other technology not protected by a patent were to be disclosed to or independently developed by a competitor, our business and financial condition could be materially adversely affected.

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Our competitors may allege that we are infringing their intellectual property, forcing us to expend substantial resources in resulting litigation, the outcome of which would be uncertain. Any unfavorable outcome of such litigation could have a material adverse effect on our business, financial position and results of operations .

If any party successfully asserts that we are infringing their intellectual property or that our creation or use of proprietary technology infringes upon their intellectual property rights, we might be forced to incur expenses to litigate the claims and pay damages, potentially including treble damages, if we are found to have willfully infringed such parties’ patent rights. In addition, if we are unsuccessful in litigation, or pending the outcome of litigation, a court could issue a temporary injunction or a permanent injunction preventing us from marketing and selling the patented drug or other technology for the life of the patent that we have allegedly or been deemed to have infringed. Litigation concerning patents, other forms of intellectual property and proprietary technologies is becoming more widespread and can be protracted and expensive, and can distract management and other key personnel from performing their duties for us.

Any legal action against us or our collaborators claiming damages and seeking to enjoin any activities, including commercial activities relating to the affected products, and processes could, in addition to subjecting us to potential liability for damages, require us or our collaborators to obtain a license in order to continue to manufacture or market the affected products and processes. Any license required under any patent may not be made available on commercially acceptable terms, if at all. In addition, some licenses may be non-exclusive, and therefore, our competitors may have access to the same technology licensed to us. If we fail to obtain a required license or are unable to design around a patent, we may be unable to effectively market some of our technology and products, which could limit our ability to generate revenues or achieve profitability and possibly prevent us from generating revenue sufficient to sustain our operations.

If we become involved in patent litigation or other proceedings, we could incur substantial costs, substantial liability for damages and may be required to stop our product commercialization efforts.

We may need to resort to litigation to enforce a patent issued to us or to determine the scope and validity of third-party patent or other proprietary rights in jurisdictions where we intend to market our products, including the United States, the European Union, and many other foreign jurisdictions.  Alternatively, we may be subject to claims of patent infringement in jurisdictions where we intend to market our products.  The cost to us of any litigation or other proceeding relating to determining the validity of intellectual property rights, even if resolved in our favor, could be substantial and could divert our management’s efforts. Some of our competitors may be able to sustain the costs of complex patent litigation more effectively than we can because they may have substantially greater resources.  Moreover, the failure to obtain a favorable outcome in any litigation in a jurisdiction where there is a claim of patent infringement could significantly delay marketing of our products in that particular jurisdiction.  The costs and uncertainties resulting from the initiation and continuation of any litigation could limit our ability to continue our operations. 

We in-license a significant portion of our proprietary technologies and if we fail to comply with our obligations under any of the related agreements, we could lose license rights that are necessary to develop our product candidates.

We are a party to and rely on a number of in-license agreements with third parties, such as those with the Massachusetts Institute of Technology, that give us rights to intellectual property that is necessary for our business. In addition, we expect to enter into additional licenses in the future. Our current in-license arrangements impose various development, royalty and other obligations on us.  If we breach our obligations with regard to our exclusive in-licenses, they could be converted to non-exclusive licenses or the agreements could be terminated, which would result in our being unable to develop, manufacture and sell products that are covered by the licensed technology.

Risks Relating to Our Dependence on Third Parties

Our 2003 Sandoz Collaboration and 2006 Sandoz Collaboration are important to our business. If Sandoz fails to adequately perform under either collaboration, or we or Sandoz terminate all or a portion of either collaboration, the development and commercialization of some of our drug candidates, including injectable enoxaparin, would be delayed or terminated and our business would be adversely affected.

Under our 2003 Sandoz Collaboration, we and Sandoz agree to exclusively work with each other in the development and commercialization of injectable enoxaparin within the United States. We also granted to Sandoz the right to negotiate additional rights for certain products under certain circumstances. Under our 2006 Sandoz Collaboration, we and Sandoz agree to exclusively work with each other in the development and commercialization of four follow-on and complex generic

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products for sale in specified regions of the world, including M356 and the expansion of M-Enoxaparin activity into the European Union.   

2003 Sandoz Collaboration

Either we or Sandoz may terminate the 2003 Sandoz Collaboration for material uncured breaches or certain events of bankruptcy or insolvency by the other party. Sandoz may also terminate the 2003 Sandoz Collaboration if the injectable enoxaparin product or the market lacks commercial viability, if new laws or regulations are passed or court decisions rendered that substantially diminish our legal avenues for redress, or, in multiple cases, if certain costs exceed mutually agreed upon limits. If the 2003 Sandoz Collaboration is terminated other than due to our uncured breach or bankruptcy, we will be granted an exclusive license under certain intellectual property of Sandoz to develop and commercialize injectable enoxaparin in the United States. In that event, we would need to expand our internal capabilities or enter into another collaboration, which could cause significant delays that could prevent us from completing the development and commercialization of injectable enoxaparin.  If Sandoz terminates the 2003 Sandoz Collaboration due to our uncured breach or bankruptcy, Sandoz would retain the exclusive right to develop and commercialize injectable enoxaparin in the United States. In that event, we would no longer have any influence over the development or commercialization strategy of injectable Enoxaparin in the United States. In addition, Sandoz would retain its rights of first negotiation with respect to certain of our other products in certain circumstances and its rights of first refusal outside of the United States and the European Union. Accordingly, if Sandoz terminates the 2003 Sandoz Collaboration, our introduction of M-Enoxaparin may be significantly delayed, we may decide to discontinue the M-Enoxaparin project, or our revenues may be reduced, any one of which could have a material adverse effect on our business.

2006 Sandoz Collaboration

Either we or Sandoz may terminate the 2006 Sandoz Collaboration for material uncured breaches or certain events of bankruptcy or insolvency by the other party. In addition, the following termination rights apply to some of the products, on a product-by-product basis: (i) if clinical trials are required, (ii) at Sandoz’ convenience within a certain time period, (iii) if the parties agree, or the relevant regulatory authority states in writing, that our intellectual property does not contribute to product approval, or (iv) if Sandoz decides to permanently cease development and commercialization of a product.  For some of the products, for any termination of the 2006 Sandoz Collaboration other than a termination by Sandoz due to our uncured breach or bankruptcy, or a termination by us alone due to the need for clinical trials, we will be granted an exclusive license under certain intellectual property of Sandoz to develop and commercialize the particular product. In that event, we would need to expand our internal capabilities or enter into another collaboration, which could cause significant delays that could prevent us from completing the development and commercialization of such product.  For some products, if Sandoz terminates the 2006 Sandoz Collaboration due to our uncured breach or bankruptcy, or if there is a termination by us alone due to the need for clinical trials, Sandoz would retain the exclusive right to develop and commercialize the applicable product. In that event, we would no longer have any influence over the development or commercialization strategy of such product.  In addition, for other products, if Sandoz terminates the 2006 Sandoz Collaboration due to our uncured breach or bankruptcy, Sandoz retains a right to license certain of our intellectual property without the obligation to make any additional payments for such licenses.  For certain products, if the 2006 Sandoz Collaboration is terminated other than due to our uncured breach or bankruptcy, neither party will have a license to the other party’s intellectual property.  In that event, we would need to expand our internal capabilities or enter into another collaboration, which could cause significant delays that could prevent us from completing the development and commercialization of such product.  Accordingly, if the 2006 Sandoz Collaboration is terminated, our introduction of certain products may be significantly delayed, or our revenues may be significantly reduced either of which could have a material adverse effect on our business.

We depend on third-parties for the manufacture of products. If in the future we encounter difficulties in our supply or manufacturing arrangements, our business may be materially adversely affected.

We have limited personnel with experience in, and we do not own facilities for, manufacturing any products. In addition, we do not have, and do not intend to develop, the ability to manufacture material for our clinical trials or at commercial scale. To develop our drug candidates, apply for regulatory approvals and commercialize any products, we or our partners need to contract for or otherwise arrange for the necessary manufacturing facilities and capabilities. As a result, we expect generally to rely on contract manufacturers for regulatory compliance. If our contract manufacturers were to breach or terminate their manufacturing arrangements with us, the development or commercialization of the affected products or drug candidates could be delayed, which could have a material adverse effect on our business. In addition, any change in our

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manufacturers could be costly because the commercial terms of any new arrangement could be less favorable and because the expenses relating to the transfer of necessary technology and processes could be significant.

We have relied upon third parties to produce material for preclinical studies and may continue to do so in the future. Although we believe that we will not have any material supply issues, we cannot be certain that we will be able to obtain long-term supply arrangements of those materials on acceptable terms, if at all. If we are unable to arrange for third-party manufacturing, or to do so on commercially reasonable terms, we may not be able to complete development of our products or market them.

In addition, the FDA and other regulatory authorities require that our products be manufactured according to cGMP regulations. Any failure by us or our third-party manufacturers to comply with cGMP, and/or our failure to scale-up our manufacturing processes could lead to a delay in, or failure to obtain, regulatory approval. In addition, such failure could be the basis for action by the FDA to withdraw approvals for drug candidates previously granted to us and for other regulatory action. To the extent we rely on a third-party manufacturer, the risk of non-compliance with cGMPs may be greater and the ability to effect corrective actions for any such noncompliance may be compromised or delayed.

We may need or elect to enter into alliances or collaborations with other companies to supplement and enhance our own capabilities or fund our development efforts. If we are unsuccessful in forming or maintaining these alliances on favorable terms, or if any collaborative partner terminates or fails to perform its obligations, our business could be adversely affected.

Because we have limited or no capabilities for drug development, manufacturing, sales, marketing and distribution, we may need to enter into alliances with other companies that can assist with the development and commercialization of our drug candidates. We may, for example, form alliances with major pharmaceutical companies to jointly develop specific drug candidates and to jointly commercialize them if they are approved. In such alliances, we would expect our pharmaceutical company partners to provide substantial capabilities in clinical development, manufacturing, regulatory affairs, sales and marketing. We may not be successful in entering into any such alliances. Even if we do succeed in securing such alliances, we may not be able to maintain them if, for example, development or approval of a drug candidate is delayed or sales of an approved drug are disappointing.

Factors that may affect the success of our collaborations include the following:

·                    disputes may arise in the future with respect to the ownership of rights to technology developed with collaborators; 

·                    our collaborators may pursue alternative technologies or develop alternative products, either on their own or in collaboration with others, that may be competitive with the products on which they are collaborating with us or which could affect our collaborators’ commitment to our collaborations;

·                    our collaborators may terminate their collaborations with us, which could make it difficult for us to attract new collaborators or adversely affect how we are perceived in the business and financial communities;

·                    our collaborators may pursue higher-priority programs or change the focus of their development programs, which could affect the collaborators’ commitment to us; and

·                    our collaborators with marketing rights may choose to devote fewer resources to the marketing of our product candidates, if any are approved for marketing, than to products from their own development programs.

In addition to relying on a third party for its capabilities, we may depend on our alliances with other companies to provide substantial additional funding for development and potential commercialization of our drug candidates. We may not be able to obtain funding on favorable terms from these alliances, and if we are not successful in doing so, we may not have sufficient funds to develop a particular drug candidate internally, or to bring drug candidates to market. Failure or delays in bringing our drug candidates to market will reduce their competitiveness and prevent us from generating sales revenues, which may substantially harm our business.

Furthermore, in an effort to continually update and enhance our proprietary technology platform we enter into agreements with other companies to develop, license, acquire and/or collaborate on various technologies. If we are unable to enter into the desired agreements, if the agreements do not yield the intended results or if the agreements terminate, we may need to find alternative approaches to such technology needs.

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If any of these occur, the development and commercialization of one or more drug candidates could be delayed, curtailed or terminated, any of which may adversely affect our business.

If we are unable to establish sales and marketing capabilities or enter into agreements with third parties to market and sell our product candidates, we may be unable to generate product revenues.

We do not have a sales organization and have no experience as a company in the sales, marketing and distribution of pharmaceutical products. There are risks involved with establishing our own sales and marketing capabilities, as well as entering into arrangements with third parties to perform these services. For example, developing a sales force is expensive and time consuming and could delay any product launch. In addition, to the extent that we enter into arrangements with third parties to perform sales, marketing and distribution services, we will have less control over sales of our products, and our future revenues would depend heavily on the success of the efforts of these third parties.

General Company Related Risks

Our directors, executive officers and major stockholders have substantial influence or control over matters submitted to stockholders for approval that could delay or prevent a change in corporate control.

Our directors, executive officers and principal stockholders, together with their affiliates and related persons, beneficially owned, in the aggregate, approximately 39.5% of our outstanding common stock as of March 31, 2007. As a result, these stockholders, if acting together, may have the ability to determine the outcome of or influence matters submitted to our stockholders for approval, including the election and removal of directors and any merger, consolidation or sale of all or substantially all of our assets. In addition, these persons, acting together, may have the ability to control the management and affairs of our company. Accordingly, this concentration of ownership may harm the market price of our common stock by:

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

·                     entrenching our management and/or board;

·                     impeding a merger, consolidation, takeover or other business combination involving our company; or

·                     discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of our company.

Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of us, which may be beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove our current management.

Provisions in our certificate of incorporation and our by-laws may delay or prevent an acquisition of us or a change in our management. In addition, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors. Because our board of directors is responsible for appointing the members of our management team, these provisions could in turn affect any attempt by our stockholders to replace current members of our management team. These provisions include:

·                     a classified board of directors;

·                     a prohibition on actions by our stockholders by written consent;

·                     a “poison pill” in accordance with the Company’s Shareholders Rights Plan that would work to dilute the stock ownership of a potential hostile acquirer, effectively preventing acquisitions that have not been approved by our board of directors; and

·                     limitations on the removal of directors.

Moreover, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which prohibits a person who owns in excess of 15% of our outstanding voting stock from merging or combining with us for a period of three years after the date of the transaction in which the person acquired in excess of 15% of our outstanding voting stock, unless the merger or combination is approved in a prescribed manner. Finally, these provisions establish advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted upon at stockholder meetings. These provisions would apply even if the offer may be considered beneficial by some stockholders.

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Our stock price may be volatile, and purchasers of our common stock could incur substantial losses.

The stock market in general and the market prices for securities of biotechnology companies in particular have experienced extreme volatility that often have been unrelated or disproportionate to the operating performance of these companies. The trading price of our common stock has been, and is likely to continue to be, volatile. Our stock price could be subject to wide fluctuations in response to a variety of factors, including the following:

·                     failure to obtain FDA approval for M-Enoxaparin or other adverse FDA decisions relating to M-Enoxaparin, including the FDA requiring clinical trials as a condition to M-Enoxaparin approval;

·                     FDA approval of other ANDAs for generic versions of Lovenox;

·                     litigation involving our company or our general industry or both;

·                   a decision in favor of Sanofi-Aventis in either of the current patent litigation matters, or a settlement related to either of those cases;

·                     results or delays in our or our competitors’ clinical trials or regulatory filings;

·                     failure to demonstrate therapeutic equivalence with respect to our technology-enabled generic product candidates and safety and efficacy for our novel development product candidates;

·                     our ability to manufacture any products to commercial standards;

·                     failure of any of our product candidates, if approved, to achieve commercial success;

·                     developments or disputes concerning our patents or other proprietary rights;

·                     changes in estimates of our financial results or recommendations by securities analysts;

·                     termination of any of our strategic partnerships;

·                     significant acquisitions, strategic partnerships, joint ventures or capital commitments by us or our competitors; and

·                     investors’ general perception of our company, our products, the economy and general market conditions. 

If any of these factors causes an adverse effect on our business, results of operations or financial condition, the price of our common stock could fall and investors may not be able to sell their common stock at or above their respective purchase prices.

Item 6.    Exhibits.

10.1

 

Termination of Consulting Agreement between Bennett M. Shaprio and the Registrant dated March 30, 2007.

 

 

 

10.2

 

Letter Agreement between Sandoz and Registrant dated February 1, 2007.

 

 

 

10.3+

 

Asset Purchase Agreement between the Registrant, Parivid LLC and S. Raguram dated April 20, 2007.

 

 

 

31.1

 

Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

 

 

31.2

 

Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

 

 

32.1

 

Certification Pursuant to 18 U.S.C. Section 1350.

 


+ Confidential treatment requested as to certain portions of this Exhibit, which portions are omitted and filed separately with the Securities and Exchange Commission.

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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.

Momenta Pharmaceuticals, Inc.

Date: May 10, 2007

 

 

 

By:

/s/ Craig A. Wheeler

 

 

Craig A. Wheeler, President and Chief Executive Officer

(Principal Executive Officer)

 

 

Date: May 10, 2007

 

 

 

By:

/s/ Richard P. Shea

 

 

Richard P. Shea, Chief Financial Officer
(Principal Financial and Accounting Officer)

 

37




 

Exhibit 10.1

TERMINATION OF
CONSULTING AGREEMENT

Reference is made to the Consulting Agreement dated October 4, 2004 between MOMENTA PHARMACEUTICALS, INC., (the “Company”) and Bennett M. Shapiro (“Consultant”), as amended (collectively, the “Agreement”).  Capitalized terms used herein and not otherwise defined shall have the meanings given such terms in the Agreement.

The parties hereby agree to terminate Agreement effective as of March 30, 2007.  Notwithstanding anything to the contrary, Sections 3 (Developments) and 4 (Confidentiality) shall survive such termination.

Agreed to as of the date of last signature below.

CONSULTANT

 

MOMENTA PHARMACEUTICALS, INC.

/s/ Bennett M. Shapiro

 

By:

/s/ Craig A. Wheeler

Bennett M. Shapiro

 

Print Name: Craig A. Wheeler

Date:

 

Title: President & CEO

 

 

Date: March 30, 2007

 




 

Exhibit 10.2

 

Georg Rieder
Managing Director

 

Sandoz NV
Pietermaai 15
Willemstad, Curacao
Netherlands Antilles
Phone
 +599-9-737-1721
Fax  +599-9-736-4065
E-mail  georg.rieder

@sandoz.com
www.sandoz.com

 

February 1, 2007

VIA OVERNIGHT MAIL
Momenta Pharmaceuticals Inc.
675 West Kendall Street
Cambridge, Massachusetts  02142

Re:                  Collaboration and License Agreement between Sandoz N.V. (f/k/a Biochemie West Indies, N.V.), Sandoz Inc. (f/k/a Geneva Pharmaceuticals, Inc.),  and Momenta Pharmaceuticals Inc., dated November 1, 2003 (the “Collaboration Agreement”); Assignment from Sandoz N.V. to Sandoz AG and removal of Sandoz GmbH as Guarantor

Gentlemen,

All terms used, but not defined, herein have the meanings ascribed to them in the Collaboration Agreement.

Sandoz N.V. is informing Momenta that it has assigned all of its rights and obligations, including without limitation any license rights it had under Momenta IP and Momenta’s rights in the Joint Collaboration IP, under the Collaboration Agreement to Sandoz AG, and Sandoz AG has agreed to assume all of the rights and obligations of Sandoz N.V. under the Collaboration Agreement.  Sandoz N.V. desires the written consent of Momenta to such assignment pursuant to Section 14.3(b) of the Collaboration Agreement.  Sandoz AG is a Swiss corporation and an Affiliate (as defined in the Collaboration Agreement) of Sandoz N.V., having its office at Lichtstrasse 35, CH 4056 Basel, Switzerland.  Sandoz N.V. and Sandoz AG each represent that Sandoz N.V. has assigned to Sandoz AG all right, title and interest in and to the Sandoz IP and Sandoz N.V.’s rights in the Joint Collaboration IP.  By execution of this letter, all of the parties hereto also agree that the guarantee of Sandoz GmbH to the Collaboration Agreement is hereby rendered null and void and of no further force or effect.  Please duly sign and return two copies of this letter to Sandoz AG, Attention:  Peter Rupprecht, at the above mentioned




 

address, which shall forthwith be substituted for the notice address of Sandoz N.V. in Section 14.5 of the Collaboration Agreement.  Thank you.

Best regards,

Sandoz N.V.

 

Sandoz AG

 

 

 

 

 

By:

/s/ Georg Rieder

 

By:

/s/ Barbara Kessler

 

Name: Georg Rieder

 

 

Name: Barbara Kessler

 

Title: Managing Director

 

 

Title: Member of the Board of Directors

 

 

 

 

 

By:

/s/ Felix Eichhorn                         /s/ Jurgen Vierkotter

 

By:

/s/ [illegible]

 

Name: Felix Eichhorn                       Jurgen Vierkotter

 

 

Name:

 

Title: Authorized signatory              Authorized Signatory

 

 

Title:

 

 

 

 

 

Sandoz GmbH

 

SANDOZ INC.

 

 

 

 

 

By:

/s/ E. Dolejsi Jegerbaghern

 

By:

/s/ Eric Pomerantz

 

Name: E. Dolejsi Jegerbaghern

 

 

Name: Eric Pomerantz

 

Title: Head, Legal Head SDC

 

 

Title: VP & General Counsel

 

 

 

 

 

By:

 

 

 

 

 

Name:

 

 

 

 

Title:

 

 

 

 

 

 

 

 

Acknowledged and Agreed:

 

 

 

Momenta Pharmaceuticals, Inc.

 

 

 

 

 

 

 

By:

/s/ Craig A. Wheeler

 

 

 

 

Name:

 

 

 

 

Title:

 

 

 

 




Exhibit 10.3

CONFIDENTIAL

Confidential Materials omitted and filed separately with the

Securities and Exchange Commission. Asterisks denote omissions.

ASSET PURCHASE AGREEMENT

dated April 20, 2007

among

MOMENTA PHARMACEUTICALS, INC.,

PARIVID, LLC

and

S. RAGURAM




TABLE OF CONTENTS

 

 

 

Page

 

 

 

ARTICLE I

 

 

THE ASSET PURCHASE

 

1

1.1

 

Purchase and Sale of Assets

 

1

1.2

 

Assumption of Liabilities

 

1

1.3

 

Purchase Price

 

1

1.4

 

Contingent Milestone Payments

 

2

1.5

 

The Closing

 

3

1.6

 

Allocation

 

3

1.7

 

Further Assurances

 

4

 

 

 

 

 

ARTICLE II

 

 

REPRESENTATIONS AND WARRANTIES OF THE SELLER AND THE PRIMARY MEMBER

 

4

2.1

 

Organization, Qualification and Corporate Power

 

4

2.2

 

Authorization of Transaction

 

4

2.3

 

Noncontravention

 

5

2.4

 

Subsidiaries

 

5

2.5

 

Financial Statements

 

5

2.6

 

Undisclosed Liabilities

 

5

2.7

 

Tax Matters.

 

5

2.8

 

Ownership and Condition of Assets

 

6

2.9

 

Intellectual Property

 

6

  2.10

 

Contracts

 

9

  2.11

 

Litigation

 

10

  2.12

 

Employees and Employee Benefits

 

10

  2.13

 

Environmental Matters

 

10

  2.14

 

Legal Compliance

 

10

  2.15

 

Permits

 

11

  2.16

 

Certain Business Relationships With Affiliates

 

11

  2.17

 

Brokers’ Fees

 

11

  2.18

 

Disclosure

 

11

 

 

 

 

 

ARTICLE III

 

 

REPRESENTATIONS AND WARRANTIES OF THE BUYER

 

11

3.1

 

Organization and Corporate Power

 

11

3.2

 

Authorization of the Transaction

 

11

3.3

 

Noncontravention

 

11

3.4

 

Litigation

 

12

3.5

 

Brokers’ Fees

 

12

 

i




 

ARTICLE IV

 

 

CONDITIONS TO CLOSING

 

12

4.1

 

Conditions to Obligations of the Buyer

 

12

4.2

 

Conditions to Obligations of the Seller

 

12

 

 

 

 

 

ARTICLE V

 

 

POST-CLOSING COVENANTS

 

13

5.1

 

Proprietary Information

 

13

5.2

 

Non-Competition

 

13

5.3

 

Tax Matters

 

13

5.4

 

Sharing of Data

 

14

 

 

 

 

 

ARTICLE VI

 

 

INDEMNIFICATION

 

14

6.1

 

Indemnification by the Seller and the Primary Member

 

14

6.2

 

Indemnification by the Buyer

 

14

6.3

 

Indemnification Claims

 

15

6.4

 

Survival of Representations and Warranties

 

16

6.5

 

Limitations

 

17

6.6

 

Treatment of Indemnity Payments

 

17

 

 

 

 

 

ARTICLE VII

 

 

REGISTRATION RIGHTS

 

17

7.1

 

Registration of Shares

 

17

7.2

 

Limitations on Registration Rights

 

18

7.3

 

Registration Procedures

 

18

7.4

 

Requirements of the Seller

 

19

7.5

 

Indemnification

 

19

7.6

 

Assignment of Rights

 

20

 

 

 

 

 

ARTICLE VIII

 

 

DEFINITIONS

 

20

 

 

 

 

 

ARTICLE IX

 

 

MISCELLANEOUS

 

29

9.1

 

Press Releases and Announcements

 

29

9.2

 

No Third Party Beneficiaries

 

29

9.3

 

Entire Agreement

 

29

9.4

 

Succession and Assignment

 

29

9.5

 

Counterparts and Facsimile Signature

 

29

9.6

 

Headings

 

29

9.7

 

Notices

 

30

9.8

 

Governing Law

 

30

 

ii




 

9.9

 

Amendments and Waivers

 

30

  9.10

 

Severability

 

31

  9.11

 

Expenses

 

31

  9.12

 

Submission to Jurisdiction

 

31

  9.13

 

Specific Performance

 

31

  9.14

 

Construction

 

31

 

Exhibits

Exhibit A -

Bill of Sale

Exhibit B -

Patent Assignment

Exhibit C-

Instrument of Assumption

 

Schedules

Disclosure Schedule

iii




CONFIDENTIAL

ASSET PURCHASE AGREEMENT

This Asset Purchase Agreement (the “Agreement”) is entered into as of April 20, 2007 by and among MOMENTA PHARMACEUTICALS, INC., a Delaware corporation (the “Buyer”), PARIVID, LLC, a Massachusetts limited liability company (the “Seller”) and S. RAGURAM, an individual residing at [**] (“Primary Member”).

This Agreement contemplates a transaction in which the Buyer will purchase certain of the assets and assume certain of the liabilities of the Seller.

The Primary Member is the owner of substantially all of the membership interests of the Seller.

Capitalized terms used in this Agreement shall have the meanings ascribed to them in Article VIII.

In consideration of the representations, warranties and covenants herein contained, the Parties agree as follows.

ARTICLE I

THE ASSET PURCHASE

1.1                                  Purchase and Sale of Assets .

(a)                                   Upon and subject to the terms and conditions of this Agreement, the Buyer shall purchase from the Seller, and the Seller shall sell, transfer, convey, assign and deliver to the Buyer, at the Closing, for the consideration specified below in this Article I, all right, title and interest in, to and under the Acquired Assets.

(b)                                  Notwithstanding the provisions of Section 1.1(a) or any other provision of this Agreement to the contrary, the Acquired Assets shall not include the Excluded Assets.

1.2                                  Assumption of Liabilities .

(a)                                   Upon and subject to the terms and conditions of this Agreement, the Buyer shall assume and become responsible for, from and after the Closing, the Assumed Liabilities.

(b)                                  Notwithstanding the terms of Section 1.2(a) or any other provision of this Agreement to the contrary, the Buyer shall not assume or become responsible for, and the Seller shall remain liable for, the Retained Liabilities.

1.3                                  Purchase Price .  The Purchase Price to be paid by the Buyer for the Acquired Assets shall be as follows:

(a)                                   On the Closing Date, the Buyer shall pay the Seller, by wire transfer of immediately available funds to an account designated by the Seller, $2,500,000 (the “Closing Date Payment”).

(b)                                  The Seller shall also be entitled to receive contingent milestone payments in the manner and on the terms and conditions set forth in Section 1.4.




1.4                                  Contingent Milestone Payments .  The Seller shall be entitled to receive additional consideration from the Buyer if any of the following conditions are satisfied:

(a)                                   The Buyer shall pay the Seller, by wire transfer of immediately available funds to an account designated by the Seller, $2,000,000 within 10 days following the completion and satisfaction of the Capabilities Build Milestone.  Notwithstanding the foregoing, in the event the entire Capabilities Build Milestone has not been satisfied on or before the second (2 nd ) anniversary of the Closing Date, the Buyer shall pay the Seller, by wire transfer of immediately available funds to an account designated by the Seller within 10 days following the second (2 nd ) anniversary of the Closing Date, (i) $[**] in the event Submilestone A of the Capabilities Build Milestone has been satisfied on or before such date or (ii) $[**] if both Submilestone A and Submilestone B of the Capabilities Build Milestone have been satisfied on or before such date; provided, however, that no such payment shall be due under clauses (i) or (ii) in the event the Primary Member’s employment with the Buyer has been terminated by the Buyer for Cause or has been terminated by the Primary Member without Good Reason (as each of  such terms is defined in the Employment Agreement of even date herewith by and between the Buyer and the Primary Member) on or before the second (2nd) anniversary of the Closing Date.

(b)                                  Provided that the M-Enoxaparin Milestone is reached within 15 years after the date of this Agreement, the Buyer shall issue to the Seller, within 90 days following the completion and satisfaction of the M-Enoxaparin Milestone, that number of shares of Buyer Common Stock (rounded to the nearest whole share) equal to $[**] divided by the Closing Value (the “Preliminary M-Enoxaparin Shares”); provided however that in the event the Issuance Value multiplied by the number of such Preliminary M-Enoxaparin Shares shall exceed $[**], then the number of shares of Buyer Common Stock to be issued to the Seller upon achievement of the M-Enoxaparin Milestone shall be reduced to such number of shares of Buyer Common Stock (rounded to the nearest whole share) equal to $[**] divided by the Issuance Value.

(c)                                   Provided that the Second Generic Product Milestone is reached within 15 years after the date of this Agreement, the Buyer shall issue to the Seller, within 90 days following the completion and satisfaction of the Second Generic Product Milestone, that number of shares of Buyer Common Stock (rounded to the nearest whole share) equal to $[**] divided by the Closing Value (the “Preliminary Second Generic Shares”); provided however that in the event the Issuance Value multiplied by the number of such Preliminary Second Generic Shares shall exceed $[**], then the number of shares of Buyer Common Stock to be issued to the Seller upon achievement of the Second Generic Product Milestone shall be reduced to such number of shares of Buyer Common Stock (rounded to the nearest whole share) equal to $[**] divided by the Issuance Value.

(d)                                  The Seller and the Primary Member agree and acknowledge that the Buyer may make from time to time such business decisions as it deems appropriate in the conduct of its business, including actions that may have an impact on the achievement of any Milestone, and the Seller and the Primary Member will have no right to claim any lost milestone consideration or other damages as a result of such decisions so long as the actions were not taken by the Buyer in bad faith or for the principal purpose of frustrating the provisions of this Section.  For the avoidance of doubt, the termination of the employment of the Primary Member with the Buyer for any reason (with or without Cause) shall not affect the achievement of the M-Enoxaparin Milestone or the Second Generic Product Milestone; viz. , to the extent either of the Milestones are achieved then the Seller will receive the consideration set forth in this Section 1.4(b) and/or 1.4(c), respectively, regardless of whether the Primary Member is an employee of the Buyer at the time such Milestone is achieved.

2




1.5                                  The Closing .

(a)                                   The Closing shall take place at the offices of WilmerHale in Boston, Massachusetts commencing at 9:00 a.m. local time on the date of this Agreement (the “Closing Date”).  All transactions at the Closing shall be deemed to take place simultaneously, and no transaction shall be deemed to have been completed and no documents or certificates shall be deemed to have been delivered until all other transactions are completed and all other documents and certificates are delivered.

(b)                                  At the Closing:

(i)                                      the Seller shall deliver to the Buyer the various certificates, instruments and documents referred to in Section 4.1;

(ii)                                   the Buyer shall deliver to the Seller the various certificates, instruments and documents referred to in Section 4.2;

(iii)                                the Seller shall execute and deliver to the Buyer a bill of sale in substantially the form attached hereto as Exhibit A , one or more patent assignments in substantially the form attached hereto as Exhibit B , and such other instruments of conveyance as the Buyer may reasonably request in order to effect the sale, transfer, conveyance and assignment to the Buyer of valid ownership of the Acquired Assets;

(iv)                               the Buyer shall execute and deliver to the Seller an instrument of assumption in substantially the form attached hereto as Exhibit C and such other instruments as the Seller may reasonably request in order to effect the assumption by the Buyer of the Assumed Liabilities;

(v)                                  the Buyer and the Seller shall execute and deliver a termination of the Collaboration Agreements effective as of the Closing;

(vi)                               the Buyer and the Seller shall execute a joint instruction mutually agreeable to the parties to Iron Mountain Intellectual Property Management, Inc. to terminate the Preferred Escrow Agreement dated as of April 20, 2004, as amended, by and among the Seller, the Buyer and Iron Mountain Intellectual Property Management, Inc. and directing the deposit materials held in escrow be delivered to the Buyer;

(vii)                            the Buyer shall pay to the Seller the Closing Date Payment;

(viii)                         the Seller shall deliver to the Buyer, or otherwise put the Buyer in possession and control of, all of the Acquired Assets of a tangible nature; and

(ix)                                 the Buyer and the Seller shall execute and deliver to each other a cross-receipt evidencing the transactions referred to above.

1.6                                  Allocation .  The Buyer shall prepare a schedule with an allocation of the Purchase Price (and all other capitalizable costs) among the Acquired Assets and the non-competition covenant set forth in Section 5.2 (the “ Allocation Schedule ”) within ninety (90) days after the Closing Date.  After preparation of the Allocation Schedule, it shall be submitted to the Seller for review and approval, which review shall be completed within thirty (30) days.  The Buyer and the Seller shall attempt in good faith to resolve any differences between them as to the allocation.  If the Buyer and the Seller are unable to resolve any differences as to allocation, the disputed parts of the Allocation Schedule shall be submitted to a mutually-agreeable, neutral, nationally recognized accounting firm

3




for resolution.  Any determination by the accounting firm will be final and the Buyer and the Seller shall be deemed to have approved of the Allocation Schedule as modified by any such determination.  After approval, the Allocation Schedule shall be conclusive and binding upon the parties hereto and shall be used by them for all purposes, including financial accounting purposes and in the preparation of all Tax Returns, unless otherwise required as a result of an audit by a Taxing authority or a court order.

1.7                                  Further Assurances .  At any time and from time to time after the Closing, at the request of the Buyer and without further consideration, the Seller shall execute and deliver such other instruments of sale, transfer, conveyance and assignment and take such actions as the Buyer may reasonably request to more effectively transfer, convey and assign to the Buyer, and to confirm the Buyer’s rights to, title in and ownership of, the Acquired Assets and to place the Buyer in actual possession and operating control thereof.  Without limitation of the foregoing, in the event of any breach of the representations and warranties of the Seller and the Primary Member set forth in Section 2.8(b), the Seller shall convey to the Buyer such additional assets of the Seller as shall be required to cure the breach of such representations and warranties and such additional assets, when so conveyed to the Buyer, shall constitute Acquired Assets for all purposes of this Agreement.

ARTICLE II

REPRESENTATIONS AND WARRANTIES OF THE

SELLER AND THE PRIMARY MEMBER

The Seller and the Primary Member jointly and severally represent and warrant to the Buyer that, except as set forth in the Disclosure Schedule, the statements contained in this Article II are true and correct as of the date of this Agreement, except to the extent such representations and warranties are specifically made as of a particular date (in which case such representations and warranties are true and correct as of such date).  The Disclosure Schedule shall be arranged in sections and subsections corresponding to the numbered and lettered sections and subsections contained in this Article II.  The disclosures in any section or subsection of the Disclosure Schedule shall qualify other sections and subsections in this Article II only to the extent it is clear from a reading of the disclosure that such disclosure is applicable to such other sections and subsections.  For purposes of this Article II, the phrase “to the knowledge of the Seller” or any phrase of similar import shall be deemed to refer to the actual knowledge of the Primary Member, as well as any other knowledge which the Primary Member would have possessed had he made reasonable inquiry of appropriate employees and agents of the Seller with respect to the matter in question.

2.1                                  Organization, Qualification and Corporate Power .  The Seller is a limited liability company duly organized, validly existing and in good standing under the laws of the Commonwealth of Massachusetts.  The Seller is duly qualified to conduct business and is in good standing under the laws of each jurisdiction listed in Section 2.1 of the Disclosure Schedule, which jurisdictions constitute the only jurisdictions in which the nature of the Seller’s businesses or the ownership or leasing of its properties requires such qualification.  The Seller has all requisite limited liability company power and authority to carry on the Acquired Business and to own and use the properties owned and used by it in connection therewith (including the Acquired Assets).  The Seller has furnished to the Buyer complete and accurate copies of its Certificate of Organization and its Operating Agreement as presently in effect.  The Seller is not in default under or in violation of any provision of its Certificate of Organization or its Operating Agreement as presently in effect.

2.2                                  Authorization of Transaction .  The Seller has all requisite power and authority to execute and deliver this Agreement and the Ancillary Agreements and to perform its obligations hereunder and thereunder.  The execution and delivery by the Seller of this Agreement and the performance by the Seller of this Agreement and the Ancillary Agreements and the consummation by the Seller of the transactions contemplated hereby and thereby

4




have been duly and validly authorized by all necessary limited liability company action on the part of the Seller.  This Agreement has been duly and validly executed and delivered by the Seller and constitutes, and each of the Ancillary Agreements, upon its execution and delivery by the Seller, will constitute, a valid and binding obligation of the Seller, enforceable against the Seller in accordance with its terms.

2.3                                  Noncontravention .  Neither the execution and delivery by the Seller of this Agreement or the Ancillary Agreements, nor the consummation by the Seller of the transactions contemplated hereby or thereby, will (a) conflict with or violate any provision of the Certificate of Organization or the Operating Agreement of the Seller, (b) require on the part of the Seller any notice to or filing with, or any permit, authorization, consent or approval of, any Governmental Entity, (c) conflict with, result in a breach of, constitute (with or without due notice or lapse of time or both) a default under, result in the acceleration of obligations under, create in any party the right to terminate, modify or cancel, or require any notice, consent or waiver under, any contract or instrument to which the Seller is a party or by which the Seller is bound or to which any of its assets are subject, (d) result in the imposition of any Security Interest upon any assets of the Seller or (e) violate any order, writ, injunction, decree, statute, rule or regulation applicable to the Seller or any of its properties or assets.

2.4                                  Subsidiaries .  The Seller does not control directly or indirectly or have any direct or indirect equity participation or similar interest in any corporation, partnership, limited liability company, joint venture, trust or other business association or entity.

2.5                                  Financial Statements .  The Seller has provided to the Buyer the Financial Statements.  The Financial Statements fairly present the financial position of the Seller as of the dates thereof, consistent with the books and records of the Seller.  Since the Most Recent Balance Sheet Date, there has occurred no event or development which, individually or in the aggregate, has had, or could reasonably be expected to have in the future, a Seller Material Adverse Effect.

2.6                                  Undisclosed Liabilities .  The Seller has no liability (whether known or unknown, whether absolute or contingent, whether liquidated or unliquidated and whether due or to become due), except for (a) liabilities shown on the Most Recent Balance Sheet, (b) liabilities which have arisen since the Most Recent Balance Sheet Date in the Ordinary Course of Business and (c) contractual and other liabilities incurred in the Ordinary Course of Business which are not required by GAAP to be reflected on a balance sheet.

2.7                                  Tax Matters .

(a)                                   The Seller has properly filed on a timely basis all Tax Returns that it was required to file, and all such Tax Returns were true, correct and complete.  The Seller has paid on a timely basis all Taxes that were due and payable. The Seller has at all times since its formation been treated as a partnership for income Tax purposes.  The Seller does not have any actual or potential liability as a transferee or successor, pursuant to any contractual obligation, or otherwise for any Taxes of any person other than the Seller. The Seller is not a party to or bound by any Tax indemnity, Tax sharing, Tax allocation or similar agreement.    All Taxes that the Seller was required by law to withhold or collect have been duly withheld or collected and, to the extent required, have been properly paid to the appropriate Governmental Entity.

(b)                                  There are no liens or other encumbrances with respect to Taxes upon any of the assets or properties of the Seller, other than with respect to Taxes not yet due and payable.

5




2.8                                  Ownership and Condition of Assets .

(a)                                   The Seller is the true and lawful owner, and has good title to, all of the Acquired Assets, free and clear of all Security Interests, except as set forth in Section 2.8(a)(i) of the Disclosure Schedule.  Upon execution and delivery by the Seller to the Buyer of the instruments of conveyance referred to in Section 1.5(b)(iii), the Buyer will become the true and lawful owner of, and will receive good title to, the Acquired Assets, free and clear of all Security Interests other than those set forth in Section 2.8(a)(ii) of the Disclosure Schedule.

(b)                                  The Acquired Assets are sufficient for the conduct of the Acquired Business as presently conducted and constitute all assets used by the Seller in such business.  Each tangible Acquired Asset is free from material defects, has been maintained in accordance with normal industry practice, is in good operating condition and repair (subject to normal wear and tear) and is suitable for the purposes for which it presently is used.

2.9                                  Intellectual Property .

(a)                                   Seller Registrations .  Section 2.9(a) of the Disclosure Schedule lists all Seller Registrations, in each case enumerating specifically the applicable filing or registration number, title, jurisdiction in which filing was made or from which registration issued, date of filing or issuance, names of all current applicant(s) and registered owners(s), as applicable.  All assignments of Seller Registrations to the Seller have been properly executed and recorded.  To the knowledge of the Seller, all Seller Registrations are valid and enforceable and all issuance, renewal, maintenance and other payments that are or have become due with respect thereto have been timely paid by or on behalf of the Seller.

(b)                                  Prosecution Matters .  There are no inventorship challenges, opposition or nullity proceedings or interferences declared, commenced or provoked, or to the knowledge of the Seller threatened, with respect to any Patent Rights included in the Seller Registrations.   The Seller has complied with its duty of candor and disclosure to the United States Patent and Trademark Office and any relevant foreign patent office with respect to all patent and trademark applications filed by or on behalf of the Seller and has made no material misrepresentation in such applications.   The Seller has no knowledge of any information that would preclude the Seller from having clear title to the Seller Registrations or affecting the patentability or enforceability of any Seller Registrations.

(c)                                   Ownership; Sufficiency .  Each item of Seller Intellectual Property will be owned or available for use by the Buyer immediately following the Closing on substantially identical terms and conditions as it was immediately prior to the Closing.  The Seller is the sole and exclusive owner of all Seller Owned Intellectual Property, free and clear of any Security Interests and all joint owners of the Seller Owned Intellectual Property are listed in Section 2.9(c) of the Disclosure Schedule.  The Seller Intellectual Property constitutes all Intellectual Property necessary (i) to Exploit the Acquired Assets in the manner so done currently, (ii) to Exploit the Internal Systems as they are currently used, and (iii) otherwise to conduct the Acquired Business in all material respects in the manner currently conducted.

(d)                                  Protection Measures .  The Seller has taken reasonable measures to protect the proprietary nature of each item of Seller Owned Intellectual Property, and to maintain in confidence all trade secrets and confidential information comprising a part thereof.   The Seller has complied with all applicable contractual and legal requirements pertaining to information privacy and security as they relate to Seller Intellectual Property.  No complaint relating to an improper use or disclosure of, or a breach in the security of, any Seller Intellectual Property has been made or, to the knowledge of the Seller, threatened against the Seller.  To the knowledge of the Seller, there has been no (i) unauthorized disclosure of any third party proprietary or confidential information relating to

6




the Acquired Business or the Acquired Assets in the possession, custody or control of the Seller or (ii) breach of the Seller’s security procedures wherein confidential information has been disclosed to a third person.

(e)                                   Infringement by Seller .  To the knowledge of the Seller, neither the Patent Rights included in the Acquired Assets nor the Exploitation thereof by the Seller or by any reseller, distributor, customer or user thereof, or any other activity of the Seller related thereto, infringes or violates, or constitutes a misappropriation of, any Intellectual Property rights of any third party.  Subject to the foregoing sentence, none of the Acquired Assets, or the Exploitation thereof by the Seller or by any reseller, distributor, customer or user thereof, or any other activity of the Seller related thereto, infringes or violates, or constitutes a misappropriation of, any Intellectual Property rights of any third party.  Section 2.9(e) of the Disclosure Schedule lists any complaint, claim or notice, or threat of any of the foregoing (including any notification that a license under any patent is or may be required), received by the Seller alleging any such infringement, violation or misappropriation and any request or demand for indemnification or defense received by the Seller from any reseller, distributor, customer, user or any other third party; and the Seller has provided to the Buyer copies of all such complaints, claims, notices, requests, demands or threats, as well as any legal opinions, studies, market surveys and analyses relating to any alleged or potential infringement, violation or misappropriation.

(f)                                     Infringement of Rights . To the knowledge of the Seller, no person (including, without limitation, any current or former employee or consultant of Seller) is infringing, violating or misappropriating any of the Seller Owned Intellectual Property or any Seller Licensed Intellectual Property which is exclusively licensed to the Seller.  The Seller has provided to the Buyer copies of all correspondence, analyses, legal opinions, complaints, claims, notices or threats concerning the infringement, violation or misappropriation of any Seller Owned Intellectual Property.

(g)                                  Outbound IP Agreements .  Section 2.9(g) of the Disclosure Schedule identifies each license, covenant or other agreement pursuant to which the Seller has assigned, transferred, licensed, distributed or otherwise granted any right or access to any person, or covenanted not to assert any right, with respect to any past, existing or future Seller Intellectual Property.  The Seller has not agreed to indemnify any person other than the Buyer against any infringement, violation or misappropriation of any Intellectual Property rights with respect to any Acquired Assets or any third party Intellectual Property rights.  The Seller is not a member of or party to any patent pool, industry standards body, trade association or other organization pursuant to the rules of which it is obligated to license any existing or future Seller Intellectual Property to any person.

(h)                                  Inbound IP Agreements .  Section 2.9(h) of the Disclosure Schedule identifies (i) each item of Seller Licensed Intellectual Property and the license or agreement pursuant to which the Seller Exploits it (excluding currently-available, off the shelf software programs that are part of the Internal Systems and are licensed by the Seller pursuant to “shrink wrap” licenses, the total fees associated with which are less than $2,500) and (ii) each agreement, contract, assignment or other instrument pursuant to which the Seller has obtained any joint or sole ownership interest in or to each item of Seller Owned Intellectual Property.  No third party inventions, methods, services, materials, processes or Software are included in or required to Exploit the Acquired Assets.  None of the Acquired Assets includes “shareware,” “freeware” or other Software or other material that was obtained by the Seller from third parties other than pursuant to the license agreements listed in Section 2.9(h) of the Disclosure Schedule.

(i)                                      Source Code .  The Seller has not licensed, distributed or disclosed, and knows of no distribution or disclosure by others (including its employees and contractors) of, the Seller Source Code to any person, other than Buyer, except pursuant to the agreements listed in Section 2.9(i) of the Disclosure Schedule, and the Seller has taken all reasonable physical and electronic security measures to prevent disclosure of such Seller

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Source Code. To the knowledge of the Seller, no event has occurred, and no circumstance or condition exists, that (with or without notice or lapse of time, or both) will, or would reasonably be expected to, nor will the consummation of the transactions contemplated hereby, result in the disclosure or release of such Seller Source Code by the Seller, its escrow agent(s) or any other person to any third party.

(j)                                      Authorship .  All of the Software and Documentation comprising, incorporated in or bundled with the Acquired Assets or Internal Systems have been designed, authored, tested and debugged by regular employees of the Seller within the scope of their employment or by independent contractors of the Seller who have executed valid and binding agreements expressly assigning all right, title and interest in such copyrightable materials to the Seller, waiving their non-assignable rights (including moral rights) in favor of the Seller and its permitted assigns and licensees, and have no residual claim to such materials.

(k)                                   Open Source Code .  Section 2.9(k) of the Disclosure Schedule lists all Open Source Materials that the Seller has utilized in any way in the Exploitation of the Software or Documentation included in the Internal Systems and describes the manner in which such Open Source Materials have been utilized, including, without limitation, whether and how the Open Source Materials have been modified and/or distributed by the Seller.  The Seller has not (i) incorporated Open Source Materials into, or combined Open Source Materials with, the Acquired Assets; (ii) distributed Open Source Materials in conjunction with any other software developed or distributed by the Seller; or (iii) used Open Source Materials that create, or purport to create, obligations for the Seller with respect to the Acquired Assets or grant, or purport to grant, to any third party, any rights or immunities under Intellectual Property rights (including, but not limited to, using any Open Source Materials that require, as a condition of Exploitation of such Open Source Materials, that other Software incorporated into, derived from or distributed with such Open Source Materials be (x) disclosed or distributed in source code form, (y) licensed for the purpose of making derivative works, or (z) redistributable at no charge or minimal charge).

(l)                                      Employee and Contractor Assignments .  Each employee of the Seller and each independent contractor of the Seller who has created any portion of the Acquired Assets has executed a valid and binding written agreement expressly assigning to the Seller all right, title and interest in any inventions and works of authorship, whether or not patentable, invented, created, developed, conceived and/or reduced to practice during the term of such employee’s employment or such independent contractor’s work for the Seller, and all Intellectual Property rights therein, and has waived all moral rights therein to the extent legally permissible.

(m)                                Quality .  The Acquired Assets are free from significant defects (defined, in the case of the Software, as defects that would prevent the Software substantially from fulfilling its fundamental purpose) in design, workmanship and materials. The Acquired Assets and the Internal Systems do not contain any disabling device, virus, worm, back door, Trojan horse or other disruptive or malicious code that may or are intended to impair their intended performance or otherwise permit unauthorized access to, hamper, delete or damage any computer system, software, network or data.

(n)                                  Support and Funding .  Except as set forth in Section 2.9(n) of the Disclosure Schedule, the Seller has neither sought, applied for nor received any support, funding, resources or assistance from any federal, state, local or foreign governmental or quasi-governmental agency or funding source in connection with the Exploitation of the Acquired Assets, the Internal Systems or any facilities or equipment used in connection therewith.

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2.10                            Contracts .

(a)                                   Section 2.10 of the Disclosure Schedule lists all contracts or agreements (written or oral) to which the Seller is a party as of the date of this Agreement including, without limitation:

(i)                                      any agreement (or group of related agreements) for the lease of personal property;

(ii)                                   any agreement (A) which calls for performance over a period of more than one year, (B) which involves more than the sum of $10,000, or (C) in which the Seller has granted “most favored nation” pricing provisions or marketing or distribution rights;

(iii)                                any agreement under which the Seller has granted to a third party any license, assignment or other transfer of rights or interests (including any covenants not to assert rights) in or to Seller Intellectual Property;

(iv)                               any agreement for the disposition of any significant portion of the assets or business of the Seller;

(v)                                  any agreement concerning exclusivity or confidentiality;

(vi)                               any employment or consulting agreement relating to individuals who have created any portion of the Acquired Assets;

(vii)                            any agreement involving any current or former officer, director or member of the Seller or an Affiliate thereof;

(viii)                         any agreement under which the consequences of a default or termination would reasonably be expected to have a Seller Material Adverse Effect;

(ix)                                 any agreement which contains any provisions requiring the Seller to indemnify any other party (excluding indemnities contained in agreements for the purchase, sale or license of products entered into in the Ordinary Course of Business);

(x)                                    any agreement that could reasonably be expected to have the effect of prohibiting or impairing the conduct of the Acquired Business of the Seller or the Buyer or any of its subsidiaries;

(xi)                                 any agreement under which the Seller or any of its Affiliates is restricted from selling, licensing or otherwise distributing any of its technology or products, or providing services to, customers or potential customers or any class of customers, in any geographic area, during any period of time or any segment of the market or line of business;

(xii)                              any agreement which would entitle any third party to receive a license or any other right to intellectual property of the Buyer or any of the Buyer’s Affiliates following the Closing; and

(xiii)                           any other agreement of Seller which is not otherwise described in subclauses (i) through (xii) above.

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(b)                                  The Seller has delivered to the Buyer a complete and accurate copy of each agreement listed in Section 2.9 or Section 2.10 of the Disclosure Schedule.  With respect to each agreement so listed, (i) the agreement is legal, valid, binding and enforceable and in full force and effect; (ii) the agreement is assignable by the Seller to the Buyer without the consent or approval of any party (except as set forth in Section 2.3 of the Disclosure Schedule) and will continue to be legal, valid, binding and enforceable and in full force and effect immediately following the Closing in accordance with the terms thereof as in effect immediately prior to the Closing; and (iii) neither the Seller nor, to the knowledge of the Seller, any other party, is in breach or violation of, or default under, any such agreement, and no event has occurred, is pending or, to the knowledge of the Seller, is threatened, which, after the giving of notice, with lapse of time, or otherwise, would constitute a breach or default by the Seller or, to the knowledge of the Seller, any other party under such agreement.

2.11                            Litigation .  There is no Legal Proceeding which is pending or has been threatened in writing against the Seller that relates in any way to the Acquired Business, the Acquired Assets or the transactions contemplated by this Agreement.  There are no judgments, orders or decrees outstanding against the Seller.

2.12                            Employees and Employee Benefits .

(a)                                   Section 2.12 of the Disclosure Schedule contains a list of all employees of the Seller, along with the position and the annual rate of compensation of each such person.  Section 2.12 of the Disclosure Schedule contains a list of all employees of the Seller who are a party to a non-competition agreement with the Seller; copies of such agreements have previously been delivered to the Buyer. Section 2.12 of the Disclosure Schedule contains a list of all employees of the Seller who are not citizens of the United States.

 (b)                               The Seller has complied with all federal, state and local laws relating to the hiring and classification of employees and the employment of labor, including provisions thereof relating to wages, hours, equal opportunity, collective bargaining and the payment of social security and other Taxes.  The Seller is not delinquent in payments to any of its employees for any wages, salaries, commissions, bonuses or other direct compensation for any services performed by them or amounts required to be reimbursed to such employees and upon any termination of the employment of any such employees.

(c)                                   Except as set forth in Section 2.12 of the Disclosure Schedule, the Seller does not maintain or contribute to, or have any obligation to contribute to, any Employee Benefit Plan or any other material perquisite or benefit to officers, employees or consultants of the Seller.

2.13                            Environmental Matters .  The Seller has complied with all applicable Environmental Laws.  There is no pending or, to the knowledge of the Seller, threatened civil or criminal litigation, written notice of violation, formal administrative proceeding, or investigation, inquiry or information request by any Governmental Entity, relating to any Environmental Law involving the Seller.  The Seller has no liabilities or obligations arising from the release of any Materials of Environmental Concern into the environment.

2.14                            Legal Compliance .  The Seller is currently conducting, and has at all times since its formation conducted, the Acquired Business in compliance with each applicable law (including rules and regulations thereunder) of any federal, state, local or foreign government, or any Governmental Entity.  The Seller has not received any notice or communication from any Governmental Entity alleging noncompliance with any applicable law, rule or regulation related to the Acquired Business or Acquired Assets.  The Seller has not received any proceeds under the Small Business Technology Transfer grant listed in Section 2.10(xiii) of the Disclosure Schedule (the “Grant”). Until the Seller draws funding under the Grant, the Seller is not deemed to have accepted the Grant award and therefore has no obligations under the Grant terms and conditions.

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2.15                            Permits .   Section 2.15 of the Disclosure Schedule sets forth a list of all Permits issued to or held by the Seller relating to the Acquired Business or Acquired Assets.  Such listed Permits are the only Permits that are required for the Seller to conduct the Acquired Business and Acquired Assets as presently conducted.  Each such Permit is in full force and effect; the Seller is in compliance with the terms of each such Permit; and, to the knowledge of the Seller, no suspension or cancellation of such Permit is threatened and there is no basis for believing that such Permit will not be renewable upon expiration.  Each such Permit is assignable by the Seller to the Buyer without the consent or approval of any party (other than consents or approvals listed in Section 2.15 of the Disclosure Schedule) and will continue in full force and effect immediately following the Closing.

2.16                            Certain Business Relationships With Affiliates .  Except as set forth in Section 2.16 of the Disclosure Schedule, no Affiliate of the Seller (a) owns any property or right, tangible or intangible, which is used in the Acquired Business or with the Acquired Assets, (b) has any claim or cause of action against the Seller with respect to the Acquired Business or Acquired Assets, or (c) owes any money to, or is owed any money by, the Seller with respect to the Acquired Business.  Section 2.16 of the Disclosure Schedule describes any transactions or relationships between the Seller and any Affiliate thereof which occurred or have existed since the beginning of the time period covered by the Financial Statements.

2.17                            Brokers’ Fees .  The Seller has no liability or obligation to pay any fees or commissions to any broker, finder or agent with respect to the transactions contemplated by this Agreement.

2.18                            Disclosure .  No representation or warranty by the Seller and the Primary Member contained in this Agreement, and no statement contained in the Disclosure Schedule or any other document, certificate or other instrument delivered or to be delivered by or on behalf of the Seller pursuant to this Agreement, contains or will contain any untrue statement of a material fact or omits or will omit to state any material fact necessary, in light of the circumstances under which it was or will be made, in order to make the statements herein or therein not misleading.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE BUYER

The Buyer represents and warrants to the Seller and the Primary Member that the statements contained in this Article III are true and correct as of the date of this Agreement.

3.1                                  Organization and Corporate Power .  The Buyer is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware.  The Buyer has all requisite corporate power and authority to carry on the businesses in which it is engaged and to own and use the properties owned and used by it.

3.2                                  Authorization of the Transaction .  The Buyer has all requisite power and authority to execute and deliver this Agreement and the Ancillary Agreements and to perform its obligations hereunder and thereunder.  The execution and delivery by the Buyer of this Agreement and the Ancillary Agreements and the consummation by the Buyer of the transactions contemplated hereby and thereby have been duly and validly authorized by all necessary corporate action on the part of the Buyer.  This Agreement has been duly and validly executed and delivered by the Buyer and constitutes a valid and binding obligation of the Buyer, enforceable against it in accordance with its terms.

3.3                                  Noncontravention .  Neither the execution and delivery by the Buyer of this Agreement or the Ancillary Agreements, nor the consummation by the Buyer of the transactions contemplated hereby or thereby, will (a) conflict with or violate any provision of the Certificate of Incorporation or by-laws of the Buyer, (b) require on

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the part of the Buyer any filing with, or permit, authorization, consent or approval of, any Governmental Entity, except for such filings with the SEC as the Buyer may deem necessary and required, (c) conflict with, result in breach of, constitute (with or without due notice or lapse of time or both) a default under, result in the acceleration of obligations under, create in any party any right to terminate, modify or cancel, or require any notice, consent or waiver under, any contract or instrument to which the Buyer is a party or by which it is bound or to which any of its assets is subject, except for (i) any conflict, breach, default, acceleration, termination, modification or cancellation which would not adversely affect the consummation of the transactions contemplated hereby or (ii) any notice, consent or waiver the absence of which would not adversely affect the consummation of the transactions contemplated hereby, or (d) violate any order, writ, injunction, decree, statute, rule or regulation applicable to the Buyer or any of its properties or assets.

3.4                                  Litigation .  There is no Legal Proceeding which is pending or has been threatened in writing against the Buyer that relates in any way to the transactions contemplated by this Agreement.

3.5                                  Brokers’ Fees .  The Buyer has no liability or obligation to pay any fees or commissions to any broker, finder or agent with respect to the transactions contemplated by this Agreement.

ARTICLE IV

CONDITIONS TO CLOSING

4.1                                  Conditions to Obligations of the Buyer .  The obligation of the Buyer to consummate the transactions contemplated by this Agreement to be consummated at the Closing is subject to the satisfaction of the following additional conditions:

(a)                                   the Seller shall have delivered to the Buyer documents evidencing the release or termination of all Security Interests on the Acquired Assets, and copies of filed UCC termination statements with respect to all UCC financing statements evidencing Security Interests, other than Security Interests which are listed in Section 2.8(a)(ii) of the Disclosure Schedule under the heading “Permitted Security Interests”;

(b)                                  the Buyer shall have received such certificates and instruments (including certificates of good standing of the Seller in its jurisdiction of organization and the various foreign jurisdictions in which it is qualified, certified charter documents, certificates as to the incumbency of officers and the adoption of authorizing resolutions) as it shall reasonably request in connection with the Closing; and

(c)                                   the Primary Member shall have executed an employment agreement (the “Employment Agreement”) with the Buyer.

4.2                                  Conditions to Obligations of the Seller .  The obligation of the Seller to consummate the transactions contemplated by this Agreement to be consummated at the Closing is subject to the Seller’s receipt of such certificates and instruments (including certificates of good standing of the Buyer in its jurisdiction of organization, certificates as to the incumbency of officers and the adoption of authorizing resolutions) as it shall reasonably request in connection with the Closing, as well as to the Buyer’s executing the Employment Agreement with the Primary Member.

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ARTICLE V

POST-CLOSING COVENANTS

5.1                                  Proprietary Information .  Except in the course of bona fide employment with the Buyer, from and after the Closing, the Seller and the Primary Member shall not disclose or make use of (except to pursue their rights under this Agreement or the Ancillary Agreements), and shall use their best efforts to cause all of their respective Affiliates, employees and consultants not to disclose or make use of, any knowledge, information or documents of a confidential nature or not generally known to the public with respect to Acquired Assets, the Acquired Business or the Buyer or its business, except to the extent that such knowledge, information or documents shall have become public knowledge other than through improper disclosure by the Seller, the Primary Member or any of their respective Affiliates.  The Seller shall enforce, for the benefit of the Buyer, and at Buyer’s request and expense, all confidentiality, non-disclosure, invention assignments and similar agreements between the Seller and any other party relating to the Acquired Assets or the Acquired Business of the Seller, which are not Assigned Contracts.

5.2                                  Non-Competition .

(a)                                   During the Non-Competition Period, neither the Seller nor the Primary Member shall, either directly or indirectly as a stockholder, investor, partner, consultant or otherwise, (A) design, develop, manufacture, market, sell or license any product or provide any service anywhere in the world which is competitive with any product designed, developed (or under development), manufactured, sold or licensed or any service provided by the Seller prior to the Closing Date (other than the Retained Business), or (B) engage anywhere in the world in any business competitive with the business of the Seller prior to the Closing Date (other than the Retained Business).  The Seller shall enforce, for the benefit of the Buyer, all non-competition and similar agreements between the Seller and any other party which are not Assigned Contracts.

(b)                                  The Seller and the Primary Member agree that the duration and geographic scope of the non-competition provision set forth in this Section 5.2 are reasonable.  In the event that any court determines that the duration or the geographic scope, or both, are unreasonable and that such provision is to that extent unenforceable, the Parties agree that the provision shall remain in full force and effect for the greatest time period and in the greatest area that would not render it unenforceable.  The Parties intend that this non-competition provision shall be deemed to be a series of separate covenants, one for each and every county of each and every state of the United States of America and each and every political subdivision of each and every country outside the United States of America where this provision is intended to be effective.

5.3                                  Tax Matters .

(a)                                   All transfer taxes and similar charges related to the sale of the Acquired Assets contemplated by this Agreement shall be paid by the Seller.

(b)                                  All Sales Taxes shall be paid by the Buyer.

(c)                                   Notwithstanding any other provision in this Agreement, the Buyer shall have the right to deduct and withhold Taxes for which the Seller is responsible from any payments to be made pursuant to this Agreement or any other agreement executed in connection with this Agreement if such withholding is required by law, and to collect any necessary Tax forms, including Forms W-8 or W-9, as applicable, or any similar information, from Seller and any other recipients of payments under this Agreement or any other agreement in connection with this Agreement.  Any payments so withheld will be paid by the Buyer to the appropriate Governmental Entity as and when required by law.  To the extent that amounts are so withheld and timely paid to

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the appropriate Governmental Entity, such withheld amounts shall be treated for all purposes of this Agreement or any other agreements in connection with this Agreement as having been delivered and paid to the Seller or any other recipient of payments in respect of which such deduction and withholding were made.

5.4                                  Sharing of Data .

(a)                                   The Seller shall have the right for a period of seven years following the Closing Date to have reasonable access to such books, records and accounts that are transferred to the Buyer pursuant to the terms of this Agreement for the limited purposes of concluding its involvement in the Acquired Business.  The Buyer shall have the right for a period of seven years following the Closing Date to have reasonable access to those books, records and accounts that are retained by the Seller pursuant to the terms of this Agreement to the extent that any of the foregoing is needed by the Buyer for the purpose of conducting the Acquired Business after the Closing.  Neither the Buyer nor the Seller shall destroy any such books, records or accounts retained by it without first providing the other Party with the opportunity to obtain or copy such books, records, or accounts at such other Party’s expense.

(b)                                  Promptly upon request by the Buyer made at any time following the Closing Date, the Seller shall authorize the release to the Buyer of all files pertaining to the Acquired Assets or the Acquired Business held by any federal, state, county or local authorities, agencies or instrumentalities.

ARTICLE VI

INDEMNIFICATION

6.1                                  Indemnification by the Seller and the Primary Member .  The Seller and the Primary Member shall jointly and severally indemnify the Buyer in respect of, and hold the Buyer harmless against, Damages incurred or suffered by the Buyer or any Affiliate thereof resulting from, relating to or constituting:

(a)                                   any breach of any representation or warranty of the Seller or the Primary Member contained in this Agreement, any Ancillary Agreement or any other agreement or instrument furnished by the Seller or the Primary Member to the Buyer pursuant to this Agreement;

(b)                                  any failure to perform any covenant or agreement of the Seller or the Primary Member contained in this Agreement, any Ancillary Agreement or any agreement or instrument furnished by the Seller or the Primary Member to the Buyer pursuant to this Agreement; or

(c)                                   any Retained Liabilities.

6.2                                  Indemnification by the Buyer .  The Buyer shall indemnify the Seller and the Primary Member in respect of, and hold them harmless against, any and all Damages incurred or suffered by the Seller or the Primary Member resulting from, relating to or constituting:

(a)                                   any breach of any representation or warranty of the Buyer contained in this Agreement, any Ancillary Agreement or any other agreement or instrument furnished by the Buyer to the Seller or the Primary Member pursuant to this Agreement;

(b)                                  any failure to perform any covenant or agreement of the Buyer contained in this Agreement, any Ancillary Agreement or any other agreement or instrument furnished by the Buyer to the Seller or the Primary Member pursuant to this Agreement;

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(c)                                   any Assumed Liabilities; or

(d)                                  any Sales Taxes to which Seller may be obligated as a result of Buyer’s failure to pay such Sales Taxes pursuant to Section 5.3(b).

6.3                                  Indemnification Claims .

(a)                                   An Indemnified Party shall give written notification to the Indemnifying Party of the commencement of any Third Party Action.  Such notification shall be given within 20 days after receipt by the Indemnified Party of notice of such Third Party Action, and shall describe in reasonable detail (to the extent known by the Indemnified Party) the facts constituting the basis for such Third Party Action and the amount of the claimed damages; provided, however, that no delay or failure on the part of the Indemnified Party in so notifying the Indemnifying Party shall relieve the Indemnifying Party of any liability or obligation hereunder except to the extent of any damage or liability caused by or arising out of such failure.  Within 20 days after delivery of such notification, the Indemnifying Party may, upon written notice thereof to the Indemnified Party, assume control of the defense of such Third Party Action with counsel reasonably satisfactory to the Indemnified Party; provided that (i) the Indemnifying Party may only assume control of such defense if it acknowledges in writing to the Indemnified Party that any damages, fines, costs or other liabilities that may be assessed against the Indemnified Party in connection with such Third Party Action constitute Damages for which the Indemnified Party shall be indemnified pursuant to this Article VI and (ii) the Indemnifying Party may not assume control of the defense of Third Party Action involving criminal liability or in which equitable relief is sought against the Indemnified Party.  If the Indemnifying Party does not, or is not permitted under the terms hereof to, so assume control of the defense of a Third Party Action, the Indemnified Party shall control such defense.  The Non-controlling Party may participate in such defense at its own expense.  The Controlling Party shall keep the Non-controlling Party advised of the status of such Third Party Action and the defense thereof and shall consider in good faith recommendations made by the Non-controlling Party with respect thereto.  The Non-controlling Party shall furnish the Controlling Party with such information as it may have with respect to such Third Party Action (including copies of any summons, complaint or other pleading which may have been served on such party and any written claim, demand, invoice, billing or other document evidencing or asserting the same) and shall otherwise cooperate with and assist the Controlling Party in the defense of such Third Party Action.  The fees and expenses of counsel to the Indemnified Party with respect to a Third Party Action shall be considered Damages for purposes of this Agreement if (i) the Indemnified Party controls the defense of such Third Party Action pursuant to the terms of this Section 6.3(a) or (ii) the Indemnifying Party assumes control of such defense and the Indemnified Party reasonably concludes that the Indemnifying Party and the Indemnified Party have conflicting interests or different defenses available with respect to such Third Party Action.  The Indemnifying Party shall not agree to any settlement of, or the entry of any judgment arising from, any Third Party Action without the prior written consent of the Indemnified Party, which shall not be unreasonably withheld, conditioned or delayed; provided that the consent of the Indemnified Party shall not be required if the Indemnifying Party agrees in writing to pay any amounts payable pursuant to such settlement or judgment and such settlement or judgment includes a complete release of the Indemnified Party from further liability and has no other adverse effect on the Indemnified Party.  The Indemnified Party shall not agree to any settlement of, or the entry of any judgment arising from, any such Third Party Action without the prior written consent of the Indemnifying Party, which shall not be unreasonably withheld, conditioned or delayed.

(b)                                  In order to seek indemnification under this Article VI, an Indemnified Party shall deliver a Claim Notice to the Indemnifying Party.

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(c)                                   Within 20 days after delivery of a Claim Notice, the Indemnifying Party shall deliver to the Indemnified Party a Response, in which the Indemnifying Party shall (i) agree that the Indemnified Party is entitled to receive all of the Claimed Amount (in which case the Response shall be accompanied by a payment by the Indemnifying Party to the Indemnified Party of the Claimed Amount, by check or by wire transfer), (ii) agree that the Indemnified Party is entitled to receive the Agreed Amount (in which case the Response shall be accompanied by a payment by the Indemnifying Party to the Indemnified Party of the Agreed Amount, by check or by wire transfer) or (iii) dispute that the Indemnified Party is entitled to receive any of the Claimed Amount.

(d)                                  During the 30-day period following the delivery of a Response that reflects a Dispute, the Indemnifying Party and the Indemnified Party shall use good faith efforts to resolve the Dispute.  If the Dispute is not resolved within such 30-day period, such Dispute shall be resolved in a state or federal court sitting in the Commonwealth of Massachusetts, in accordance with Section 9.12.

(e)                                   Notwithstanding the other provisions of this Section 6.3, if a third party asserts (other than by means of a lawsuit) that an Indemnified Party is liable to such third party for a monetary or other obligation which may constitute or result in Damages for which such Indemnified Party may be entitled to indemnification pursuant to this Article VI, and such Indemnified Party reasonably determines that it has a valid business reason to fulfill such obligation, then (i) such Indemnified Party shall be entitled to satisfy such obligation, with prior notice to and consent from the Indemnifying Party (provided that (A) such notice and/or consent shall not be required where commercially impracticable, (B) such consent shall not be unreasonably withheld, conditioned or delayed and (C) if such consent is not granted, then any additional damages incurred by Indemnified Party as a result of such failure to consent shall be considered Damages for purposes of this Agreement), (ii) such Indemnified Party may subsequently make a claim for indemnification in accordance with the provisions of this Article VI, and (iii) such Indemnified Party shall be reimbursed, in accordance with the provisions of this Article VI, for any such Damages for which it is entitled to indemnification pursuant to this Article VI (subject to the right of the Indemnifying Party to dispute the Indemnified Party’s entitlement to indemnification, or the amount for which it is entitled to indemnification, under the terms of this Article VI).

6.4                                  Survival of Representations and Warranties .  All representations and warranties that are covered by the indemnification agreements in Section 6.1(a) and Section 6.2(a) shall (a) survive the Closing and (b) shall expire on the date 24 months following the Closing Date, except that (i) the representations and warranties set forth in Sections 2.1, 2.2, 3.1 and 3.2 shall survive the Closing without limitation and (ii) the representations and warranties set forth in Section 2.7 shall survive until 30 days following expiration of all statutes of limitation applicable to the matters referred to therein.  If an Indemnified Party delivers to an Indemnifying Party, before expiration of a representation or warranty, either a Claim Notice based upon a breach of such representation or warranty, or an Expected Claim Notice based upon a breach of such representation or warranty, then the applicable representation or warranty shall survive until, but only for purposes of, the resolution of the matter covered by such notice.  If the legal proceeding or written claim with respect to which an Expected Claim Notice has been given is definitively withdrawn or resolved in favor of the Indemnified Party, the Indemnified Party shall promptly so notify the Indemnifying Party.  The rights to indemnification set forth in this Article VI shall not be affected by any investigation conducted by or on behalf of an Indemnified Party or any knowledge acquired (or capable of being acquired) by an Indemnified Party, whether before or after the date of this Agreement, with respect to the inaccuracy or noncompliance with any representation, warranty, covenant or obligation which is the subject of indemnification hereunder.

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6.5                                  Limitations .

(a)           Notwithstanding anything to the contrary herein, the Seller and the Primary Member shall be liable for only (i) any single claim or related group of claims that exceeds $10,000   and (ii) that portion of the aggregate Damages under Section 6.1(a) for which they would otherwise be liable which exceeds $100,000; provided that the limitation set forth in this sentence shall not apply to a claim pursuant to Section 6.1(a) relating to a breach of the representations and warranties set forth in Sections 2.1, 2.3 or 2.7.  For purposes solely of this Article VI, all representations and warranties of the Seller in Article II (other than Sections 2.5 and 2.18) shall be construed as if the term “material” and any reference to “Seller Material Adverse Effect” (and variations thereof) were omitted from such representations and warranties.

(b)          Notwithstanding anything to the contrary herein, the Buyer shall be liable for only (i) any single claim or related group of claims that exceeds $10,000 and (ii) that portion of the aggregate Damages under Section 6.2(a) for which it would otherwise be liable which exceeds $100,000; provided that the limitation set forth in this sentence shall not apply to a claim pursuant to Section 6.2(a) relating to a breach of the representations and warranties set forth in Sections 3.1 or 3.2. For purposes solely of this Article VII, all representations and warranties of the Buyer in Article III shall be construed as if the term “material” were omitted from such representations and warranties.

(c)           The Buyer shall have the right to offset any Damages for which it is entitled to indemnification under this Agreement against any milestone consideration otherwise payable to the Seller under Section 1.4 of this Agreement.  However, the rights of the Buyer to offset such milestone consideration shall not be the exclusive means for the Buyer to enforce such rights.

(d)          Except with respect to claims based on fraud, after the Closing, the rights of the Indemnified Parties under this Article VI shall be the exclusive remedy of the Indemnified Parties with respect to claims resulting from or relating to any misrepresentation, breach of warranty or failure to perform any covenant or agreement contained in this Agreement by any Party hereto.

6.6                                  Treatment of Indemnity Payments .  Any payments made to an Indemnified Party pursuant to this Article VI shall be treated as an adjustment to the Purchase Price for tax purposes.

ARTICLE VII

REGISTRATION RIGHTS

7.1                                  Registration of Shares .  The Buyer shall file a Registration Statement with the SEC within 90 days following the completion and satisfaction of each of the M-Enoxaparin Milestone and the Second Generic Milestone.  The Buyer shall use its best efforts to cause each Registration Statement to be declared effective by the SEC as soon as practicable.  The Buyer shall as expeditiously as possible prepare and file with the SEC any amendments and supplements to the Registration Statement and the prospectus included in the Registration Statement as may be necessary to comply with the provisions of the Securities Act (including the anti-fraud provisions thereof), and shall cause each Registration Statement to remain effective until the date one (1) year after the issuance of the Milestone Shares issued in connection with the completion and satisfaction of the M-Enoxaparin Milestone and the Second Generic Milestone, as the case may be, or such earlier time as all of the applicable Milestone Shares covered by such Registration Statement have been sold pursuant thereto; provided, that such one-year period shall be extended to 30 months in the event that at the termination thereof the Seller is not able to sell such Milestone Shares pursuant to and in accordance with Rule 144 under the Securities Act of 1933, as such Rule may then be in effect, or any similar rule or regulation hereafter adopted by the SEC.

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7.2                                  Limitations on Registration Rights .

(a)                                   The Buyer may, by written notice to the Seller, (i) delay the filing or effectiveness of any Registration Statement or (ii) suspend any Registration Statement after effectiveness and require that the Seller immediately cease sales of shares pursuant to the Registration Statement, in the event that (A) the Buyer files a registration statement (other than a registration statement on Form S-8 or its successor form) with the SEC for a public offering of its securities or (B) the Buyer is engaged in any activity or transaction or preparations or negotiations for any activity or transaction that the Buyer desires to keep confidential for business reasons, if the Buyer determines in good faith that the public disclosure requirements imposed on the Buyer under the Securities Act in connection with such Registration Statement would require disclosure of such activity, transaction, preparations or negotiations.  Notwithstanding anything to the contrary herein, the Buyer shall not exercise its rights under this Section 7.2(a) to suspend sales of Milestone Shares for a period in excess of 90 days consecutively or 180 days in any 365-day period.

(b)                                  If the Buyer delays or suspends any Registration Statement or requires the Seller to cease sales of shares pursuant to paragraph (a) above, the Buyer shall, as promptly as practicable following the termination of the circumstance which entitled the Buyer to do so (or at the end of such 90-day period, whichever first occurs), take such actions as may be necessary to file or reinstate the effectiveness of such Registration Statement and/or give written notice to the Seller authorizing it to resume sales pursuant to such Registration Statement.  If as a result thereof the prospectus included in such Registration Statement has been amended to comply with the requirements of the Securities Act, the Buyer shall enclose such revised prospectus with the notice to the Seller given pursuant to this paragraph (b), and the Seller shall make no offers or sales of shares pursuant to such Registration Statement other than by means of such revised prospectus.

7.3                                  Registration Procedures .

(a)                                   In connection with the filing by the Buyer of any Registration Statement, the Buyer shall furnish to the Seller a copy of the prospectus, including a preliminary prospectus, in conformity with the requirements of the Securities Act.

(b)                                  The Buyer shall use its best efforts to register or qualify the applicable Milestone Shares covered by such Registration Statement under the securities laws of each state of the United States; provided, however, that the Buyer shall not be required in connection with this paragraph (b) to qualify as a foreign corporation or execute a general consent to service of process in any jurisdiction.

(c)                                   The Buyer shall, as expeditiously as possible, notify the Seller, promptly after it shall receive notice thereof, of the time when such Registration Statement has become effective or a supplement to any prospectus forming a part of such Registration Statement has been filed.

(d)                                  The Buyer shall, as expeditiously as possible, cause all such Milestone Shares to be listed on each securities exchange or automated quotation system on which similar securities issued by the Buyer are then listed.

(e)                                   The Buyer shall promptly provide a transfer agent, registrar and CUSIP number for all such Milestone Shares not later than the effective date of such registration statement.

(f)                                     If the Buyer has delivered preliminary or final prospectuses to the Seller and after having done so the prospectus is amended or supplemented to comply with the requirements of the Securities Act, the

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Buyer shall promptly notify the Seller and, if requested by the Buyer, the Seller shall immediately cease making offers or sales of shares under such Registration Statement and return all prospectuses to the Buyer.  The Buyer shall promptly provide the Seller with revised or supplemented prospectuses and, following receipt of the revised or supplemented prospectuses, the Seller shall be free to resume making offers and sales under such Registration Statement.

(g)                                  The Buyer shall, as expeditiously as possible following the effectiveness of such Registration Statement, notify the Seller of any request by the SEC for the amending or supplementing of such Registration Statement or prospectus.

(h)                                  The Buyer shall pay the expenses incurred by it in complying with its obligations under this Article VII, including all registration and filing fees, exchange listing fees, fees and expenses of counsel for the Buyer, and fees and expenses of accountants for the Buyer, but excluding (i) any brokerage fees, selling commissions or underwriting discounts incurred by the Seller in connection with sales under any Registration Statement and (ii) the fees and expenses of any counsel retained by the Seller.

7.4                                  Requirements of the Seller .  The Buyer shall not be required to include any Milestone Shares in any Registration Statement unless:

(a)                                   the Seller furnishes to the Buyer in writing such information regarding the Seller and the proposed sale of Milestone Shares by the Seller as the Buyer may reasonably request in writing in connection with such Registration Statement or as shall be required in connection therewith by the SEC or any state securities law authorities;

(b)                                  the Seller shall have provided to the Buyer its written agreement:

(i)                                      to indemnify the Buyer and each of its directors and officers against, and hold the Buyer and each of its directors and officers harmless from, any losses, claims, damages, expenses or liabilities (including reasonable attorneys fees) to which the Buyer or such directors and officers may become subject by reason of any statement or omission in such Registration Statement made in reliance upon, or in conformity with, a written statement by the Seller furnished pursuant to this Section 7.4; and

(ii)                                   to report to the Buyer sales made pursuant to such Registration Statement.

7.5                                  Indemnification .  The Buyer agrees to indemnify and hold harmless the Seller against any losses, claims, damages, expenses or liabilities to which the Seller may become subject by reason of (i) any untrue statement of a material fact contained in any Registration Statement, any preliminary prospectus or final prospectus contained in the Registration Statement, or any amendment or supplement to such Registration Statement, (ii) or any omission to state therein a fact required to be stated therein or necessary to make the statements therein not misleading, or (iii) any violation or alleged violation by the Buyer of the Securities Act, the Exchange Act, any state securities law or any rule or regulation promulgated under the Securities Act, the Exchange Act or any state securities law in connection with the Registration Statement or the offering contemplated thereby; except insofar as such losses, claims, damages, expenses or liabilities arise out of or are based upon information furnished to the Buyer by or on behalf of the Seller for use in such Registration Statement.  The Buyer shall have the right to assume the defense and settlement of any claim or suit for which the Buyer may be responsible for indemnification under this Section 7.5.

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7.6                                  Assignment of Rights .  The Seller may not assign any of its rights under this Article VII except in connection with the transfer of some or all of its Milestone Shares to its members pursuant to a pro rata distribution of the Milestone Shares, provided each such transferee agrees in a written instrument delivered to the Buyer to be bound by the provisions of this Article VII.

ARTICLE VIII

DEFINITIONS

For purposes of this Agreement, each of the following terms shall have the meaning set forth below.

 “ Acquired Assets ” shall mean the assets, properties and rights of the Seller existing as of the Closing relating to the Acquired Business, including:

(a)                                   all computers, hardware and other tangible property containing Seller Intellectual Property;

(b)                                  all Seller Intellectual Property, including the right to recover for past infringement;

(c)                                   all Internal Systems;

(d)                                  all rights under Assigned Contracts;

(e)                                   to the extent that they relate to the foregoing items (a) through (d), all claims, prepayments, deposits, refunds, causes of action, choses in action, rights of recovery, rights of setoff and rights of recoupment;

(f)                                     all Permits; and

(g)                                  to the extent that they relate to the foregoing items (a) through (f), all books, records, accounts, ledgers, files, documents, correspondence, lists (including customer and prospect lists), employment records, procedural manuals, Intellectual Property records, sales and promotional materials, studies, reports and other printed or written materials.

 “ Acquired Business ” shall mean all of the business of the Seller relating to the characterization, analysis, description or mathematical integration of data related to complex sugars, glycans, peptides, proteins or other complex mixtures, and all Software developed or used to enable any of the foregoing.

Additional M-Enoxaparin Shares ” shall have the meaning set forth in Section 1.4(b).

Affiliate ” shall mean any corporation, company, partnership, joint venture and/or firm that controls, is controlled by, or is under common control with a 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 having the right to vote for the election of directors and (b) in the case of non-corporate entities, direct or indirect ownership of at least fifty percent (50%) of the equity interest with the power to direct the management and policies of such non-corporate entities.  The Parties acknowledge that in the case of certain entities organized under the laws of certain countries outside the United States, the maximum percentage ownership permitted by law for a foreign investor may be less than fifty percent (50%), and that in such case such lower percentage shall be substituted in the preceding sentence, provided that such foreign investor has the power to direct the management and policies of such entity.

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Agreed Amount ” shall mean part, but not all, of the Claimed Amount.

Allocation Schedule ” shall have the meaning set forth in Section 1.6.

Ancillary Agreements ” shall mean the bill of sale and other instruments of conveyance referred to in Section 1.5(b)(iii) and the instrument of assumption and other instruments referred to in Section 1.5(b)(iv).

Assigned Contracts ” shall mean the MIT Agreement (as defined in the Disclosure Schedule).

Assumed Liabilities ” shall mean all obligations of the Seller arising after the Closing under the Assigned Contracts.

Buyer ” shall have the meaning set forth in the first paragraph of this Agreement.

Buyer Common Stock ” shall mean shares of common stock of the Buyer, $0.0001 par value per share.

Capabilities Build Milestone ” shall mean the establishment within 24 months following the Closing Date of a group in Buyer’s Cambridge location that, to Buyer’s reasonable satisfaction, can achieve all of the following:

(a) [**] (referred to herein as “Submilestone A”);

(b) [**] (referred to herein as “Submilestone B”); and

(c) [**] (referred to herein as “Submilestone C”).

Claim Notice ” shall mean written notification which contains (i) a description of the Damages incurred or reasonably expected to be incurred by the Indemnified Party and the Claimed Amount of such Damages, to the extent then known, (ii) a statement that the Indemnified Party is entitled to indemnification under Article VI for such Damages and a reasonable explanation of the basis therefor, and (iii) a demand for payment in the amount of such Damages.

Claimed Amount ” shall mean the amount of any Damages incurred or reasonably expected to be incurred by the Indemnified Party.

Closing ” shall mean the closing of the transactions contemplated by this Agreement.

Closing Date ” shall have the meaning set forth in Section 1.5(a) of this Agreement.

 “ Closing Date Payment ” shall have the meaning set forth in Section 1.3(a) of this Agreement.

Closing Value ” shall mean the average last reported sale price per share of the Buyer Common Stock over the five consecutive trading days ending two days prior to the Closing Date.  The Closing Value shall be subject to equitable adjustment in the event of any stock split, stock dividend, reverse stock split or similar event affecting the Buyer Common Stock between the Closing Date and the date of the issuance of such Milestone Shares.

Code ” shall mean the Internal Revenue Code of 1986, as amended.

Collaboration Agreements ” shall mean (a) the Collaboration Agreement dated as of March 24, 2004 and (b) the Collaboration Agreement dated as of April 5, 2005, in each case by and between the Buyer and the Seller.

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Controlling Party ” shall mean the party controlling the defense of any Third Party Action.

Damages ” shall mean any and all debts, obligations and other liabilities (whether absolute, accrued, contingent, fixed or otherwise, or whether known or unknown, or due or to become due or otherwise), diminution in value, monetary damages, fines, fees, penalties, interest obligations, deficiencies, losses and expenses (including amounts paid in settlement, interest, court costs, costs of investigators, fees and expenses of attorneys, accountants, financial advisors and other experts, and other expenses of litigation); provided however that Seller may not make any claims for diminution in value to the extent Seller can remedy the breach of the applicable representation or warranty in accordance with the provisions of Section 1.7 of this Agreement.

Disclosure Schedule ” shall mean the disclosure schedule provided by the Seller and the Primary Member to the Buyer and attached hereto.

Dispute ” shall mean the dispute resulting if the Indemnifying Party in a Response disputes its liability for all or part of the Claimed Amount.

Documentation ” shall mean printed, visual or electronic materials, reports, white papers, documentation, specifications, designs, flow charts, code listings, instructions, user manuals, frequently asked questions, release notes, recall notices, error logs, diagnostic reports, marketing materials, packaging, labeling, service manuals and other information describing the use, operation, installation, configuration, features, functionality, pricing, marketing or correction of a product, whether or not provided to end user.

 “ Employee Benefit Plan ” shall mean any “employee pension benefit plan” (as defined in Section 3(2) of ERISA), any “employee welfare benefit plan” (as defined in Section 3(1) of ERISA), and any other written or oral plan, agreement or arrangement involving direct or indirect compensation, including insurance coverage, severance benefits, disability benefits, deferred compensation, bonuses, stock options, stock purchase, phantom stock, stock appreciation or other forms of incentive compensation or post-retirement compensation.

  “ Environmental Law ” shall mean any federal, state or local law, statute, rule, order, directive, judgment, Permit or regulation or the common law relating to the environment, occupational health and safety, or exposure of persons or property to Materials of Environmental Concern, including any statute, regulation, administrative decision or order pertaining to:   (i) the presence of or the treatment, storage, disposal, generation, transportation, handling, distribution, manufacture, processing, use, import, export, labeling, recycling, registration, investigation or remediation of Materials of Environmental Concern or documentation related to the foregoing; (ii) air, water and noise pollution; (iii) groundwater and soil contamination; (iv) the release, threatened release, or accidental release into the environment, the workplace or other areas of Materials of Environmental Concern, including emissions, discharges, injections, spills, escapes or dumping of Materials of Environmental Concern; (v) transfer of interests in or control of real property which may be contaminated; (vi) community or worker right-to-know disclosures with respect to Materials of Environmental Concern; (vii) the protection of wild life, marine life and wetlands, and endangered and threatened species; (viii) storage tanks, vessels, containers, abandoned or discarded barrels and other closed receptacles; and (ix) health and safety of employees and other persons.  As used above, the term “release” shall have the meaning set forth in the federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended (“CERCLA”).

ERISA ” shall mean the Employee Retirement Income Security Act of 1974, as amended.

Excluded Assets ” shall mean all assets of the Seller not included in the Acquired Assets, including the following assets of the Seller:

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(a)                                   the limited liability company charter, qualifications to conduct business as a foreign entity, arrangements with registered agents relating to foreign qualifications, taxpayer and other identification numbers, seals, minute books, membership transfer books and other documents relating to the organization and existence of the Seller as a limited liability company;

(b)                                  all rights relating to refunds, recovery or recoupment of Taxes;

(c)                                   all rights to any contracts, agreements or instruments to which the Seller is a party other than the Assigned Contracts; and

(d)                                  any of the rights of the Seller under this Agreement or under the Ancillary Agreements.

Expected Claim Notice ” shall mean a notice that, as a result of a legal proceeding instituted by or written claim made by a third party, an Indemnified Party reasonably expects to incur Damages for which it is entitled to indemnification under Article VI.

Exploit ” shall mean develop, design, test, modify, make, use, sell, have made, used and sold, import, reproduce, market, distribute, commercialize, support, maintain, correct and create derivative works of.

FDA ” shall mean the United States Food and Drug Administration, or any successor agency thereto.

 “ Financial Statements ” shall mean the Seller’s federal and state income tax returns for the tax years 2003 through 2006, inclusive.

GAAP ” shall mean United States generally accepted accounting principles.

Governmental Entity ” shall mean any court, arbitrational tribunal, administrative agency or commission or other governmental or regulatory authority or agency.

Grant” shall have the meaning set forth in Section 2.14 of this Agreement

Indemnified Party ” shall mean a party entitled, or seeking to assert rights, to indemnification under Article VI of this Agreement.

Indemnifying Party ” shall mean the party from whom indemnification is sought by the Indemnified Party.

Intellectual Property ” shall mean the following subsisting throughout the world:

(a)                                   Patent Rights, including the right to recover for past infringement;

(b)                                  Trademarks and all goodwill in the Trademarks;

(c)                                   copyrights, designs, data and database rights and registrations and applications for registration thereof, including moral rights of authors;

(d)                                  mask works and registrations and applications for registration thereof and any other rights in semiconductor topologies under the laws of any jurisdiction;

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(e)                                   inventions, invention disclosures, statutory invention registrations,  trade secrets and confidential business information, know-how, manufacturing and product processes and techniques, research and development information, financial, marketing and business data, pricing and cost information, business and marketing plans and customer and supplier lists and information, whether patentable or nonpatentable, whether copyrightable or noncopyrightable and whether or not reduced to practice; and

(f)                                     other proprietary rights relating to any of the foregoing (including remedies against infringement thereof and rights of protection of interest therein under the laws of all jurisdictions).

Intellectual Property Registrations ” means Patent Rights, registered Trademarks, registered copyrights and designs, mask work registrations and applications for each of the foregoing.

Internal Systems ” shall mean the Software and Documentation and the computer, communications and network systems (both desktop and enterprise-wide), used by the Seller in the Acquired Business to develop, manufacture, fabricate, assemble, provide, distribute, support, maintain or test the Acquired Assets, whether located on the premises of the Seller or hosted at a third party site.  All Internal Systems that are material to the business of the Seller are listed and described in Section 2.9(c) of the Disclosure Schedule.

Issuance Value ” shall mean the average last reported sale price per share of the Buyer Common Stock over the five consecutive trading days ending two days prior to the date the achievement of the Milestone resulting in the issuance of the applicable Milestone Shares.  The Issuance Value shall be subject to equitable adjustment in the event of any stock split, stock dividend, reverse stock split or similar event affecting the Buyer Common Stock during such five consecutive trading day period.

 “ Legal Proceeding ” shall mean any action, suit, proceeding, claim, arbitration or investigation before any Governmental Entity or before any arbitrator.

Materials of Environmental Concern ” shall mean any:  pollutants, contaminants or hazardous substances (as such terms are defined under CERCLA), pesticides (as such term is defined under the Federal Insecticide, Fungicide and Rodenticide Act), solid wastes and hazardous wastes (as such terms are defined under the Resource Conservation and Recovery Act), chemicals, other hazardous, radioactive or toxic materials, oil, petroleum and petroleum products (and fractions thereof), or any other material (or article containing such material) listed or subject to regulation under any law, statute, rule, regulation, order, Permit, or directive due to its potential, directly or indirectly, to harm the environment or the health of humans or other living beings.

M-Enoxaparin ” shall mean a generic version of enoxaparin, as developed by the Buyer.

M-Enoxaparin Milestone ” shall mean the first [**] period during which (a) M-Enoxaparin has been sold commercially in the United States by the Buyer or its Affiliates or licensees, and (b) no Person has sold a generic version of enoxaparin (other than M-Enoxaparin) in the United States.

Milestone Shares ” shall mean the shares of Buyer Common Stock issuable upon the satisfaction of each of the M-Enoxaparin Milestone and the Second Generic Milestone.

Milestones ” shall mean the Capabilities Build Milestone, the M-Enoxaparin Milestone and the Second Generic Milestone.

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Most Recent Balance Sheet ” shall mean the balance sheet of the Seller contained in the Seller’s 2006 federal income tax return.

Non-Competition Period ” shall mean the period ending on the earlier to occur of (a) [**] years after the Closing Date or (b) [**] years after the date of the achievement of the Second Generic Product Milestone; provided, however, that:

(i)                                      if the Primary Member’s employment with the Buyer has been terminated by the Buyer without Cause or by the Primary Member for Good Reason (as such terms are defined in the Employment Agreement of even date between the Buyer and the Primary Member) prior to the earlier to occur of (x) the [**] anniversary of the Closing Date or (y) the achievement of the entire Capabilities Build Milestone, then the Non-Competition Period shall expire on such termination date, unless the Buyer pays the then unpaid components of the Capabilities Build Milestone on the date of such termination; and

(ii)                                   if the Buyer, the Buyer’s Affiliates or licensees or the Affiliates, distributors or sublicensees of any of the Buyer’s licensees have not filed an application with the FDA seeking marketing approval for a Second Generic Product on or before the [**] anniversary of the Closing Date and as of such [**] anniversary of the Closing Date the Primary Member’s employment with the Buyer has been terminated by the Buyer without Cause or by the Primary Member for Good Reason, then the Non-Competition Period shall expire on the [**] anniversary of the Closing Date unless the Buyer pays the Seller $[**] on or before the [**] anniversary of the Closing Date.

Non-controlling Party ” shall mean the party not controlling the defense of any Third Party Action.

Open Source Materials ” means any Software or any other work of authorship or other material that (a) is, or is a derivative work of, any Software that is distributed as “open source software” or “free software” (including Linux) or licensed or distributed under any of the following licensing or distribution models, or any similar model:  the GNU General Public License (GPL), GNU Lesser General Public License or GNU Library General Public License (LGPL), Mozilla Public License (MPL), BSD licenses, the Artistic License, the Netscape Public License, the Sun Community Source License (SCSL), the Sun Industry Standards License (SISL), the Apache License, the Berkeley Open Infrastructure for Network Computing License (BOINCL), the Berkeley Software Distribution License (BSDL), the Microsoft Shared Source License, the Common Public License, the Apache License, the Redhat License or any license listed at www.opensource.org; (b) creates, or purports to create, obligations for the Seller to grant, or purport to grant, to any person, any rights or immunities under the Intellectual Property owned or licensed by the Seller; or (c) requires, as a condition of use, modification and/or distribution of such Software, work of authorship or other material, that such Software, work of authorship or other material, or other Software, work of authorship or other material incorporated into, derived from or distributed with such Software, work of authorship or other material, be (A) disclosed or distributed in source code form, (B) licensed for the purpose of making derivative works or (C) redistributable or otherwise made available at no charge or minimal charge.

Ordinary Course of Business ” shall mean the ordinary course of business consistent with past custom and practice (including with respect to frequency and amount).

Parties ” shall mean the Buyer, the Seller and the Primary Member.

Patent Rights ” shall mean all patents, patent applications, utility models, design registrations and certificates of invention and other governmental grants for the protection of inventions or industrial designs worldwide (including all related continuations, continuations-in-part, divisionals, reissues and reexaminations).

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Permits ” shall mean all permits, licenses, registrations, certificates, orders, approvals, franchises, variances and similar rights issued by or obtained from any Governmental Entity relating to the Acquired Business or Acquired Assets (including those issued or required under Environmental Laws and those relating to the occupancy or use of owned or leased real property).

Person ” shall mean 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.

Preliminary M-Enoxaparin Shares ” shall have the meaning set forth in Section 1.4(b).

Preliminary Second Generic Shares ” shall have the meaning set forth in Section 1.4(c).

 “ Primary Member ” shall have the meaning set forth in the first paragraph of this Agreement.

 “ Purchase Price ” shall mean the purchase price to be paid by the Buyer for the Acquired Business and the Acquired Assets as set forth in Section 1.3.

Reasonable Best Efforts ” shall mean best efforts, to the extent commercially reasonable.

Registration Statement ” shall mean a registration statement on Form S-3 or, if the Buyer is not eligible to use form S-3, Form S-1 (or such other form as the Buyer shall deem appropriate) covering the resale to the public by the Seller of the Milestone Shares.

Response ” shall mean a written response containing the information provided for in Section 6.3(c).

Retained Business ” shall mean all businesses of the Seller other than the Acquired Business.

Retained Liabilities ” shall mean any and all liabilities or obligations (whether known or unknown, absolute or contingent, liquidated or unliquidated, due or to become due and accrued or unaccrued, and whether claims with respect thereto are asserted before or after the Closing) of the Seller which are not Assumed Liabilities.  The Retained Liabilities shall include, without limitation, all liabilities and obligations of the Seller:

(a)                                   relating to the Retained Business or the Excluded Assets;

(b)                                  for all Taxes (other than Sales Taxes) arising in connection with the consummation of the transactions contemplated by this Agreement (including any income Taxes arising as a result of the transfer by the Seller to the Buyer of the Acquired Assets);

(b)                                  for costs and expenses incurred in connection with this Agreement or the consummation of the transactions contemplated by this Agreement;

(c)                                   under this Agreement or the Ancillary Agreements;

(d)                                  for any Taxes, including, without limitation, deferred taxes or taxes measured by income of the Seller earned prior to the Closing, any liabilities for federal or state income tax and FICA taxes of employees of the Seller which the Seller is legally obligated to withhold, any liabilities of the Seller for employer FICA and

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unemployment taxes incurred, but excluding any liabilities for Sales Taxes, which are expressly the responsibility of the Buyer;

(e)                                   under any agreements, contracts, leases or licenses which are listed on Schedule 1.1(b) ;

(f)                                     arising prior to the Closing under the Assigned Contracts, and all liabilities for any breach, act or omission by the Seller prior to the Closing under any Assigned Contract;

(g)                                  arising out of events, conduct or conditions existing or occurring prior to the Closing that constitute a violation of or non-compliance with any law, rule or regulation (including Environmental Laws), any judgment, decree or order of any Governmental Entity, or any Permit or that give rise to liabilities or obligations with respect to Materials of Environmental Concern;

(h)                                  to pay severance benefits to any employee of the Seller whose employment is terminated (or treated as terminated) in connection with the consummation of the transactions contemplated by this Agreement, and all liabilities resulting from the termination of employment of employees of the Seller prior to the Closing that arose under any federal or state law or under any Employee Benefit Plan established or maintained by the Seller;

(i)                                      to any consultant or independent contractor of the Seller;

(j)                                      to indemnify any person or entity by reason of the fact that such person or entity was a director, officer, employee, or agent of the Seller or was serving at the request of the Seller as a partner, trustee, director, officer, employee, or agent of another entity (whether such indemnification is for judgments, damages, penalties, fines, costs, amounts paid in settlement, losses, expenses, or otherwise and whether such indemnification is pursuant to any statute, charter document, bylaw, agreement, or otherwise);

(k)                                   injury to or death of persons or damage to or destruction of property occurring prior to the Closing (including any workers compensation claim); and

(l)                                      for medical, dental and disability (both long-term and short-term benefits), whether insured or self-insured, owed to employees or former employees of the Seller based upon (A) exposure to conditions in existence prior to the Closing or (B) disabilities existing prior to the Closing (including any such disabilities which may have been aggravated following the Closing).

Sales Taxes ” means any federal, state, or local sales, use, excise, value-added, or other similar taxes, fees, duties, or governmental charges imposed upon or made payable and arising out of the consummation of the transactions contemplated by this Agreement.

SEC ” shall mean the Securities and Exchange Commission.

Second Generic Product ” means a pharmaceutical product (other than M-Enoxaparin) developed by the Buyer that is a generic or follow-on version of a reference listed drug (a “ Branded Product ”) and for which all or a material portion of the data set generated by or created with the Seller’s technology acquired by Buyer in this transaction is included in the application for regulatory approval filed with the FDA by the Buyer, the Buyer’s Affiliates or licensees or the Affiliates, distributors or sublicensees of any of the Buyer’s licensees.

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 “ Second Generic Product Milestone ” shall mean the first [**] period during which (a) a Second Generic Product has been sold commercially sold in the United States by the Buyer or its Affiliates or licensees and (b) no third party has sold a generic or follow-on version of the relevant Branded Product (other than such Second Generic Product) in the United States.  For the avoidance of doubt, this “Second Generic Product Milestone” may be achieved if any Second Generic Product satisfies the requirements of clauses (a) and (b) above, regardless of the number of Second Generic Products and regardless of the order in which any one or more of such products are filed, approved or sold.

Securities Act ” shall mean the Securities Act of 1933, as amended.

Security Interest ” shall mean any mortgage, pledge, security interest, encumbrance, charge or other lien (whether arising by contract or by operation of law), other than (i) mechanic’s, materialmen’s, and similar liens, (ii) liens arising under worker’s compensation, unemployment insurance, social security, retirement, and similar legislation and (iii) liens on goods in transit incurred pursuant to documentary letters of credit, in each case arising in the Ordinary Course of Business of the Seller and not material to the Seller.

Seller ” shall have the meaning set forth in the first paragraph of this Agreement.

Seller Intellectual Property ” shall mean shall the Seller Owned Intellectual Property and the Seller Licensed Intellectual Property.

Seller Licensed Intellectual Property ” shall mean all Intellectual Property related to the Acquired Business or Acquired Assets that is licensed to the Seller by any third party.

 “ Seller Material Adverse Effect ” shall mean any material adverse change, event, circumstance or development with respect to, or material adverse effect on, (i) the business, assets, liabilities, capitalization, prospects, condition (financial or other), or results of operations of the Seller, or (ii) the ability of the Buyer to operate the Acquired Business immediately after the Closing. For the avoidance of doubt, the parties agree that the terms “material”, “materially” or “materiality” as used in this Agreement with an initial lower case “m” shall have their respective customary and ordinary meanings, without regard to the meaning ascribed to Seller Material Adverse Effect.

Seller Owned Intellectual Property ” shall mean all Intellectual Property related to the Acquired Business, Acquired Assets (including Software developed by Seller relating to the Acquired Business), or the Assigned Contracts, which is owned or purported to be owned by the Seller, in whole or in part.

Seller Registrations ” shall mean Intellectual Property registrations that are registered or filed in the name of the Seller, alone or jointly with others, that relate to the Acquired Business or Acquired Assets.

Seller Source Code ” shall mean the source code for any Software included in the Acquired Assets or Internal Systems.

Software ” shall mean computer software code, applications, utilities, development tools, diagnostics, databases and embedded systems, whether in source code, interpreted code or object code form.

 “ Taxes ” shall mean any and all taxes, charges, fees, duties, contributions, levies or other similar assessments or liabilities in the nature of a tax, including, without limitation, income, gross receipts, corporation, ad valorem, premium, value-added, net worth, capital stock, capital gains, documentary, recapture, alternative or add-

28




on minimum, disability, estimated, registration, recording, excise, real property, personal property, sales, use, license, lease, service, service use, transfer, withholding, employment, unemployment, insurance, social security, national insurance, business license, business organization, environmental, workers compensation, payroll, profits, severance, stamp, occupation, windfall profits, customs duties, franchise and other taxes of any kind whatsoever imposed by the United States of America or any state, local or foreign government, or any agency or political subdivision thereof, and any interest, fines, penalties, assessments or additions to tax imposed with respect to such items or any contest or dispute thereof.

Tax Returns ” shall mean any and all reports, returns, declarations, or statements relating to Taxes, including any schedule or attachment thereto and any related or supporting work papers or information with respect to any of the foregoing, including any amendment thereof.

 “ Third Party Action ” shall mean any suit or proceeding by a person or entity other than a Party for which indemnification may be sought by a Party under Article VI.

Trademarks ” shall mean all registered trademarks and service marks, logos, Internet domain names, corporate names and doing business designations and all registrations and applications for registration of the foregoing, common law trademarks and service marks and trade dress.

ARTICLE IX

MISCELLANEOUS

9.1                                  Press Releases and Announcements .  No Party shall issue any press release or public announcement relating to the subject matter of this Agreement without the prior written approval of the other Parties; provided , however , that any Party may make any public disclosure it believes in good faith is required by applicable law, regulation or stock market rule (in which case the disclosing Party shall use reasonable efforts to advise the other Parties and provide them with a copy of the proposed disclosure prior to making the disclosure).

9.2                                  No Third Party Beneficiaries .  This Agreement shall not confer any rights or remedies upon any person other than the Parties and their respective successors and permitted assigns.

9.3                                  Entire Agreement .  This Agreement (including the documents referred to herein) constitutes the entire agreement between the Parties and supersedes any prior understandings, agreements, or representations by or between the Parties, written or oral, with respect to the subject matter hereof.

9.4                                  Succession and Assignment This Agreement shall be binding upon and inure to the benefit of the Parties named herein and their respective successors and permitted assigns. No Party may assign either this Agreement or any of its rights, interests, or obligations hereunder without the prior written approval of the other Parties; provided that the Buyer may assign some or all of its rights, interests and/or obligations hereunder to one or more Affiliates of the Buyer. Any attempted assignment in contravention of this provision shall be void.

9.5                                  Counterparts and Facsimile Signature .  This 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.  This Agreement may be executed by facsimile signature.

9.6                                  Headings .  The section headings contained in this Agreement are inserted for convenience only and shall not affect in any way the meaning or interpretation of this Agreement.

29




9.7                               Notices .  All notices, requests, demands, claims, and other communications hereunder shall be in writing.  Any notice, request, demand, claim, or other communication hereunder shall be deemed duly delivered four business days after it is sent by registered or certified mail, return receipt requested, postage prepaid, or one business day after it is sent for next business day delivery via a reputable nationwide overnight courier service, in each case to the intended recipient as set forth below:

If to the Seller or the Primary Member:

 

Copy to:

 

 

 

Parivid, LLC

3 Clyde Road, Suite 201

Somerset, NH 08873

Facsimile No.: [               ]

Attention: S. Raguram

 

B. David Sandberg, Esq.

166 Chestnut Street

Cambridge, MA 02139

Facsimile No.: (617)-492-4944

 

 

 

 

If to the Buyer:

 

Copy to:

 

 

 

Momenta Pharmaceuticals, Inc.

675 West Kendall Street

Cambridge, MA 02142

Facsimile No.: (617) 621-3097

Attention: President and Chief Executive Officer

 

Momenta Pharmaceuticals, Inc.

675 West Kendall Street

Cambridge, MA 02142

Facsimile No.: (617) 621-3014

Attention: Vice President, Legal Affairs

 

and to:

 

Wilmer Cutler Pickering Hale and Dorr LLP

60 State Street

Boston, MA 02109

Facsimile No.: (617) 526-5000

Attention: Steven D. Singer, Esq.

 

Any Party may give any notice, request, demand, claim, or other communication hereunder using any other means (including personal delivery, expedited courier, messenger service, telecopy, telex, ordinary mail, or electronic mail), but no such notice, request, demand, claim, or other communication shall be deemed to have been duly given unless and until it actually is received by the party for whom it is intended.  Any Party may change the address to which notices, requests, demands, claims, and other communications hereunder are to be delivered by giving the other Parties notice in the manner herein set forth.

9.8                               Governing Law .  This Agreement shall be governed by and construed in accordance with the internal laws of the Commonwealth of Massachusetts, without giving effect to any choice or conflict of law provision or rule (whether of the Commonwealth of Massachusetts or any other jurisdiction) that would  cause the application of laws of any jurisdictions other than those of the Commonwealth of Massachusetts.

9.9                               Amendments and Waivers .  The Parties may mutually amend any provision of this Agreement at any time.  No amendment of any provision of this Agreement shall be valid unless the same shall be in writing and signed by each of the Parties.  No waiver by any Party of any right or remedy hereunder shall be valid unless the same shall be in writing and signed by the Party giving such waiver.  No waiver by any Party with respect to any default, misrepresentation, or breach of warranty or covenant hereunder shall be deemed to extend to any prior or

30




subsequent default, misrepresentation, or breach of warranty or covenant hereunder or affect in any way any rights arising by virtue of any prior or subsequent such occurrence.

9.10                         Severability .  Any term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction.  If the final judgment of a court of competent jurisdiction declares that any term or provision hereof is invalid or unenforceable, the Parties agree that the court making the determination of invalidity or unenforceability shall have the power to limit the term or provision, to delete specific words or phrases, or to replace any invalid or unenforceable term or provision with a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision, and this Agreement shall be enforceable as so modified.

9.11                         Expenses .  Except as set forth in Article VI, each Party shall bear its own costs and expenses (including legal fees and expenses) incurred in connection with this Agreement and the transactions contemplated hereby.

9.12                         Submission to Jurisdiction .  Each Party (a) submits to the jurisdiction of any state or federal court sitting in the Commonwealth of Massachusetts in any action or proceeding arising out of or relating to this Agreement or the Ancillary Agreements (including any action or proceeding for the enforcement of any arbitral award made in connection with any arbitration of a Dispute hereunder), (b) agrees that all claims in respect of such action or proceeding may be heard and determined in any such court, (c) waives any claim of inconvenient forum or other challenge to venue in such court, (d) agrees not to bring any action or proceeding arising out of or relating to this Agreement or the Ancillary Agreements in any other court and (e) waives any right it may have to a trial by jury with respect to any action or proceeding arising out of or relating to this Agreement or the Ancillary Agreements.  Each party agrees to accept service of any summons, complaint or other initial pleading made in the manner provided for the giving of notices in Section 9.7, provided that nothing in this Section 9.12 shall affect the right of any Party to serve such summons, complaint or other initial pleading in any other manner permitted by law.

9.13                         Specific Performance .  Each Party acknowledges and agrees that the other Party would be damaged irreparably in the event any of the provisions of Article V of this Agreement are not performed in accordance with their specific terms or otherwise are breached.  Accordingly, each Party agrees that the other Party shall be entitled to an injunction or other equitable relief to prevent breaches of the provisions of Article V of this Agreement and to enforce specifically Article V of this Agreement and the terms and provisions thereof in any action instituted in any court of the United States or any state thereof having jurisdiction over the Parties and the matter, in addition to any other remedy to which it may be entitled, at law or in equity.

9.14                         Construction .

(a)                                   The language used in this Agreement shall be deemed to be the language chosen by the Parties to express their mutual intent, and no rule of strict construction shall be applied against either Party.

(b)                                  Any reference to any federal, state, local, or foreign statute or law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise.

(c)                                   Any reference herein to “including” shall be interpreted as “including without limitation”.

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(d)                                  Any reference to any Article, Section or paragraph shall be deemed to refer to an Article, Section or paragraph of this Agreement, unless the context clearly indicates otherwise.

32




IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date first above written.

MOMENTA PHARMACEUTICALS, INC.

 

 

 

 

 

 

 

By:

/s/ Craig A. Wheeler

 

 

 

Name: Craig A. Wheeler

 

 

Title: President and Chief Executive Officer

 

 

 

 

 

 

PARIVID, LLC

 

 

 

 

 

 

 

By:

/s/ S. Raguram

 

 

 

Name:  S. Raguram

 

 

Title:  Managing Member/CTO

 

 

 

 

 

 

PRIMARY MEMBER

 

 

 

 

 

 

 

/s/ S. Raguram

 

 

S. Raguram

 

[Signature Page to Asset Purchase Agreement]

33




EXHIBIT A

Bill of Sale




Exhibit A

BILL OF SALE

This Bill of Sale dated April 20, 2007 is executed and delivered by PARIVID, LLC, a Massachusetts limited liability company (the “Seller”), to MOMENTA PHARMACEUTICALS, INC., a Delaware corporation (the “Buyer”).  All capitalized words and terms used in this Bill of Sale and not defined herein shall have the respective meanings ascribed to them in the Asset Purchase Agreement dated April 20, 2007 by and among the Seller, the Buyer and S. Raguram (the “Agreement”).

WHEREAS, pursuant to the Agreement, the Seller has agreed to sell, transfer, convey, assign and deliver to the Buyer certain of the assets of the Seller, and the Buyer has agreed to assume certain of the liabilities of the Seller;

NOW, THEREFORE, in consideration of the mutual promises set forth in the Agreement and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Seller hereby agrees as follows:

1.                                        The Seller hereby sells, transfers, conveys, assigns and delivers to the Buyer, its successors and assigns, to have and to hold forever, all right, title and interest in, to and under all of the Acquired Assets.

2.                                        The Seller hereby covenants and agrees that it will, at the request of the Buyer and without further consideration, execute and deliver, and will cause its employees to execute and deliver, such other instruments of sale, transfer, conveyance and assignment, and take such other action, as may reasonably be necessary to more effectively sell, transfer, convey, assign and deliver to, and vest in, the Buyer, its successors and assigns, good, clear, record and marketable title to the Acquired Assets hereby sold, transferred, conveyed, assigned and delivered, or intended so to be, and to put the Buyer in actual possession and operating control thereof, to assist the Buyer in exercising all rights with respect thereto.

3.                                        The Seller does hereby irrevocably constitute and appoint the Buyer, its successors and assigns, its true and lawful attorney, with full power of substitution, in its name or otherwise, and on behalf of the Seller, or for its own use, to claim, demand, collect and receive at any time and from time to time any and all of the Acquired Assets, and to prosecute the same at law or in equity and, upon discharge thereof, to complete, execute and deliver any and all necessary instruments of satisfaction and release.

4.                                        The Seller, by its execution of this Bill of Sale, and the Buyer, by its acceptance of this Bill of Sale, each hereby acknowledges and agrees that neither the representations and warranties nor the rights, remedies or obligations of any party under the Agreement shall be deemed to be enlarged, modified or altered in any way by this instrument.




IN WITNESS WHEREOF, the Seller and the Buyer have caused this instrument to be duly executed under seal as of and on the date first above written.

 

PARIVID, LLC

 

 

 

 

 

 

 

By:

  /s/ S. Raguram

 

 

 

 

 

 

 

Name:

S. Raguram

 

 

Title:

Managing Member/CTO

 

Attest:

 

 

 

 

 

 

 

 

 

 

 

 

ACCEPTED:

 

 

 

 

 

MOMENTA PHARMACEUTICALS, INC.

 

 

 

 

 

 

 

 

By:

  /s/ Craig A. Wheeler

 

 

 

  Name:

Craig A. Wheeler

 

 

 

  Title:

President and Chief Executive Officer

 

 

 

 

[Signature Page to Bill of Sale]

2




EXHIBIT B

Patent Assignment




ASSIGNMENT

For valuable consideration, Parivid, LLC , a company created and existing under the laws of the Commonwealth of Massachusetts, United States of America, (hereinafter called “the Assignor”) having a place of business at:

3 Clyde Road, Suite 201
Somerset, NH 08873

hereby assigns to: Momenta Pharmaceuticals, Inc. , a corporation created and existing under the laws of the State of Delaware, United States of America, having a place of business at:

675 West Kendall Street
Cambridge, MA  02142

and its successors and assigns (collectively hereinafter called “the Assignee”), its entire right, title and interest throughout the world in the inventions and improvements which are subject of

·           an application for United States Patent entitled  Methods and Apparatus for Characterizing Polymeric Mixtures , filed September 1, 2004, and assigned U.S. Serial Number 10/931,939;

·           an application for United States Patent entitled  Methods and Products Related to the Improved Analysis of Carbohydrates , filed April 15, 2005, and assigned U.S. Serial Number 11/107,982;

·           an application for United States Patent entitled  Methods and Products Related to the Improved Analysis of Carbohydrates , filed October 6, 2005, and assigned U.S. Serial Number 11/244,826;

this assignment, including said applications, and any and all continuing applications, including continuations, continuations-in-part, and divisional applications, and any and all United States and foreign patents (including reissues, reexaminations, extensions), utility models, and design registrations granted for any of said inventions or improvements, and the right to claim priority based on the filing date of said application under the International Convention for the Protection of Industrial Property, the Patent Cooperation Treaty, the European Patent Convention, and all other treaties of like purposes; and Assignor authorizes the Assignee to apply in all countries in

1




Assignor’s name or in Assignee’s name for patents, utility models, design registrations and like rights of exclusion and for inventor’s certificates for said inventions and improvements; and Assignor agrees for itself, its legal representatives and assigns, without further compensation to perform such lawful acts and to sign such further applications, assignments, Preliminary Statements and other lawful documents as the Assignee may reasonably request to effectuate fully this assignment, the effectiveness of this assignment including as of the filing date of the above-identified application and any applications from which the above-identified application claims benefit of.

Assignor has the right to make this assignment by virtue of inventors’ assignments recorded at the U.S. Patent and Trademark Office at Reel 016042/Frame 0479; Reel 016042/Frame 0512; and Reel 017137/Frame 0347.

In witness whereof, Assignor has caused this Assignment to be signed in its corporate name by its duly authorized officers.

Parivid, LLC

 

 

 

 

Sign:

  /s/ S. Raguram

 

 

 

 

 

Print Name:

 S. Raguram

 

 

 

 

Title:

Managing Member/CTO

 

 

2




STATE OF NEW JERSEY)

                                            )  SS.

COUNTY OF SOMERSET)

On April 19, 2007, before me, the undersigned, a notary public for the State of New Jersey, there personally appeared S. Raguram personally known to me (or proved to me on the basis of satisfactory evidence) to be the person whose name is subscribed to this Assignment, who acknowledged having executed the same in his authorized capacity and that by his signature on this Assignment, the person or the entity upon behalf of which he acted, executed this Assignment.

WITNESS my hand and official seal.

/s/ Kerry Capriccio

 

 

Kerry Capriccio
Notary Public
State of New Jersey
My Commission Expires February 13, 2009

 

3




EXHIBIT C

Instrument of Assumption




Exhibit C

INSTRUMENT OF ASSUMPTION OF LIABILITIES

This Instrument of Assumption of Liabilities dated April 20, 2007, is made by, MOMENTA PHARMACEUTICALS, INC., a Delaware corporation (the “Buyer”), in favor of, PARIVID, LLC, a Massachusetts limited liability company (the “Seller”).  All capitalized words and terms used in this Instrument of Assumption of Liabilities and not defined herein shall have the respective meanings ascribed to them in the Asset Purchase Agreement dated April 20, 2007 by and among the Seller, the Buyer and S. Raguram (the “Agreement”).

WHEREAS, pursuant to the Agreement, the Seller has agreed to sell, transfer, convey, assign and deliver to the Buyer certain assets of the Seller; and

WHEREAS, in partial consideration therefor, the Agreement requires the Buyer to assume certain of the liabilities of the Seller;

NOW, THEREFORE, in consideration of the mutual promises set forth in the Agreement and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Buyer hereby agrees as follows:

1.             The Buyer hereby assumes and agrees to perform, pay and discharge the Assumed Liabilities.

2.             The Buyer does not hereby assume or agree to perform, pay or discharge, and the Seller shall remain unconditionally liable for, any and all liabilities or obligations (whether known or unknown, whether absolute or contingent, whether liquidated or unliquidated, whether due or to become due, and whether claims with respect thereto are asserted before or after the Closing) of the Seller which are not Assumed Liabilities.

3.             Nothing contained herein shall require the Buyer to perform, pay or discharge any liability, obligation or commitment expressly assumed by the Buyer herein so long as the Buyer in good faith contests or causes to be contested the amount or validity thereof.

4.             Nothing herein shall be deemed to deprive the Buyer of any defenses, set-offs or counterclaims which the Seller may have had or which the Buyer shall have with respect to any of the Assumed Liabilities (the “Defenses and Claims”).  The Seller hereby transfers, conveys and assigns to the Buyer all Defenses and Claims and agrees to cooperate with the Buyer to maintain, secure, perfect and enforce such Defenses and Claims, including the signing of any documents, the giving of any testimony or the taking of any such other action as is reasonably requested by the Buyer in connection with such Defenses and Claims.

5.             The Buyer, by its execution of this Instrument of Assumption of Liabilities, and the Seller, by its acceptance of this Instrument of Assumption of Liabilities, each hereby acknowledges and agrees that neither the representations and warranties nor the rights, remedies




or obligations of either party under the Agreement shall be deemed to be enlarged, modified or altered in any way by this instrument.

IN WITNESS WHEREOF, the Buyer and the Seller have caused this instrument to be duly executed under seal as of and on the date first above written.

MOMENTA PHARMACEUTICALS, INC.

 

 

 

 

 

 

 

By:

/s/ Craig A. Wheeler

 

 

 

 

 

 

 

Name:

Craig A. Wheeler

 

 

Title:

President and Chief Executive Officer

 

 

 

 

Attest:

 

 

/s/ Lynette Herscha

 

 

 

 

 

 

 

 

 

ACCEPTED:

 

 

 

 

 

PARIVID, LLC

 

 

 

 

 

 

 

 

By:

      /s/ S. Raguram

 

 

 

 

Name:

S. Raguram

 

 

 

 

Title:

  Managing Member/CTO

 

 

 

 

[Signature Page to Instrument of Assumption]

2




EXHIBIT 31.1

CERTIFICATION

I, Craig A. Wheeler, President and Chief Executive Officer of Momenta Pharmaceuticals, Inc., certify that:

1.                                        I have reviewed this Quarterly Report on Form 10-Q of Momenta Pharmaceuticals, Inc.;

2.                                        Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make 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; and

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; and

c)                                       Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)                                      Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.                                        The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)                                       All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)                                      Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ Craig A. Wheeler

 

Dated:   May 10, 2007

Craig A. Wheeler

 

President and Chief Executive Officer

 




EXHIBIT 31.2

CERTIFICATION

I, Richard P. Shea, Chief Financial Officer of Momenta Pharmaceuticals, Inc., certify that:

1.                                        I have reviewed this Quarterly Report on Form 10-Q of Momenta Pharmaceuticals, Inc.;

2.                                        Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make 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; and

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; and

c)                                       Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)                                      Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.                                        The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)                                       All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)                                      Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ Richard P. Shea

 

Dated:   May 10, 2007

Richard P. Shea

 

Chief Financial Officer

 




EXHIBIT 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Momenta Pharmaceuticals, Inc. (the “Company”) for the period ended March 31, 2007 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Craig A. Wheeler, President and Chief Executive Officer of the Company, and Richard P. Shea, Chief Financial Officer of the Company, each hereby certifies, pursuant to 18 U.S.C. Section 1350, that:

(1)       The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)       The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Craig A. Wheeler

 

Dated:   May 10, 2007

Craig A. Wheeler

 

 

President and Chief Executive Officer

 

 

 

 

 

 

 

 

/s/ Richard P. Shea

 

Dated:   May 10, 2007

Richard P. Shea

 

 

Chief Financial Officer

 

 

A signed original of this written statement required by Section 906 has been provided to Momenta Pharmaceuticals, Inc. and will be retained by Momenta Pharmaceuticals, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.