Momenta Pharmaceuticals, Inc.
MOMENTA PHARMACEUTICALS INC (Form: 10-K, Received: 02/24/2017 16:56:33)
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2016
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                        to
Commission file number: 000-50797
MOMENTA PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
Delaware
 (State or other jurisdiction of
incorporation or organization)
04-3561634
(I.R.S. Employer Identification No.)
675 West Kendall Street, Cambridge, Massachusetts 02142
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (617) 491-9700
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Name of each exchange on which registered
Common Stock, $0.0001 par value per share
 
The NASDAQ Stock Market
(The NASDAQ Global Select Market)
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes      No 
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes      No 
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      No 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes      No 
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
Accelerated filer
Non-accelerated filer
(Do not check if a smaller reporting company)
Smaller reporting company
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes      No 
The aggregate market value of the registrant's voting shares of Common Stock held by non-affiliates of the registrant on June 30, 2016, based on $10.80 per share, the last reported sale price of Common Stock on The NASDAQ Global Select Market on that date, was $744,539,278 .
As of February 1, 2017 , the registrant had 71,853,002 shares of Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the information required by Part III of Form 10-K will appear in the registrant's definitive Proxy Statement on Schedule 14A for its 2017 Annual Meeting of Stockholders and are hereby incorporated by reference into this report.



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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Statements contained or incorporated by reference in this Annual Report on Form 10-K that are about future events or future results, or are otherwise not statements of historical fact are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements are based on current expectations, estimates, forecasts, projections, intentions, goals, strategies, plans, prospects and the beliefs and assumptions of our management. In some cases, these statements can be identified by words such as "anticipate," "believe," "continue," "could," "hope," "target," "project," "goal," "objective," "plan," "potential," "predict," "might," "estimate," "expect," "intend," "may," "seek", "should," "will," "would," "look forward" and other similar words or expressions, or the negative of these words or similar words or expressions. These statements include, but are not limited to, statements regarding our expectations regarding the development and utility of our products and product candidates; development, manufacture and commercialization of our products and product candidates; efforts to seek and manage relationships with collaboration partners, including without limitation for our biosimilar and novel therapeutic programs; the timing of clinical trials and the availability of results; the timing of launch of products and product candidates, including GLATOPA ® (glatiramer acetate injection) 40 mg/mL; GLATOPA market share, market potential and product revenues; the timing, merits, strategy, impact and outcome of litigation and legal proceedings; collaboration revenues and research and development revenues; manufacturing, including statements regarding Sandoz' third party fill/finish manufacturer for GLATOPA, Pfizer Inc.; timing of regulatory filings, reviews and approvals, including the timing of the regulatory review and approval of the GLATOPA 40 mg/mL ANDA; the sufficiency of our current capital resources and projected milestone payments and product revenues for future operations; our future financial position, including but not limited to our future operating losses, our potential future profitability, our future expenses, the composition and mix of our cash, cash equivalents and marketable securities, our future revenues and our future liabilities; our funding transactions and our intended uses of proceeds thereof; Enoxaparin Sodium Injection product revenues and market potential; product candidate development costs; receipt of contingent milestone payments; accounting policies, estimates and judgments; our estimates regarding the fair value of our investment portfolio; the market risk of our cash equivalents, marketable securities, and derivative, foreign currency and other financial instruments; rights, obligations, terms, conditions and allocation of responsibilities and decision making under our collaboration agreements; the regulatory pathway for biosimilars; our strategy, including but not limited to our regulatory strategy, and scientific approach; the importance of key customer distribution arrangements; market potential and acceptance of our products and product candidates; future capital requirements; reliance on our collaboration partners and other third parties, including Sandoz' third party fill/finish manufacturer for GLATOPA, Pfizer Inc.; the competitive landscape; changes in, impact of and compliance with laws, rules and regulations; product reimbursement policies and trends; pricing of pharmaceutical products, including our products and product candidates; our stock price; our intellectual property strategy and position; sufficiency of insurance; attracting and retaining qualified personnel; our internal controls and procedures; acquisitions or investments in companies, products and technologies; entering into collaboration and/or license arrangements; marketing plans; financing our planned operating and capital expenditure; leasing additional facilities; materials used in our research and development; transfer of regulatory, development, manufacturing and commercialization activities and related records for M923; Baxalta’s performance of transitional development and manufacturing activities for M923; dilution; royalty rates; and vesting of equity awards.
Any forward-looking statements in this Annual Report on Form 10-K involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. Important factors that may cause actual results to differ materially from current expectations include, among other things, those listed under Part I, Item 1A. "Risk Factors" and discussed elsewhere in this Annual Report on Form 10-K. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future.
This Annual Report on Form 10-K also contains estimates, projections and other information concerning our industry, our business, and the markets for certain diseases, including data regarding the estimated size of those markets, and the incidence and prevalence of certain medical conditions. Information that is based on estimates, forecasts, projections, market research or similar methodologies is inherently subject to uncertainties and actual events or circumstances may differ materially from events and circumstances reflected in this information. Unless otherwise expressly stated, we obtained this industry, business, market and other data from reports, research surveys, studies and similar data prepared by market research firms and other third parties, industry, medical and general publications, government data and similar sources.

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PART I
Item 1.    BUSINESS
Our Company
We are a biotechnology company focused on developing generic versions of complex drugs, biosimilars and novel therapeutics for autoimmune disease.
Our approach to drug discovery and development is built around a complex systems analysis platform that we use to obtain a detailed understanding of complex chemical and biologic systems, design product candidates, evaluate the biological function of products and product candidates, and develop reliable and scalable manufacturing processes. The core objective of our platform is to resolve the complexity of molecular structures and related biologic systems. We first map the key measurements needed to obtain comprehensive data on a targeted molecular structure and related biology and then develop a set of analytic tools and methods, including standard, modified and proprietary analytics, to generate the data, including multiple related and complementary, or orthogonal, measures. We also utilize proprietary data analytics software. Applying our approach, we developed the first generic version of LOVENOX® (enoxaparin sodium injection), which was approved by the United States Food and Drug Administration, or FDA, in July 2010, and GLATOPA® 20 mg/mL, which was approved by the FDA in April 2015 and is, to date, the only generic version of once-daily COPAXONE® (glatiramer acetate injection) 20 mg/mL. Both products were approved without the need for clinical safety and efficacy data.
Today we are developing biosimilar and novel drug candidates using some of the structural and process insights gained from our work on complex generics. We believe our complex systems analysis platform and our biological protein engineering capabilities gives us a competitive advantage in developing biosimilars and novel therapeutics. The analytic tools and methods, models and data sets, and the knowledge and insights developed in one area further expand the platform and can direct, inform and advance efforts in other areas. For example, in our biosimilars program, the analytics aimed at fully characterizing monoclonal antibodies and fusion proteins were adapted from the physicochemical analytics we developed in our complex generics programs. The biocharacterization efforts for our complex generics and biosimilar programs provide a core set of models and biologic data sets that can form the basis of inquiries in our novel therapeutic research. Our understanding of the impact of sialylation patterns on antibodies derived in our biosimilars program has informed our research on our novel autoimmune product candidates. In selecting our current development programs and in the evaluation of any potentially new programs, we look for those opportunities where we believe we can best leverage our platform to realize a competitive advantage to bring new medicines to patients and create value for our stockholders.
We have three product areas: Complex Generics, Biosimilars and Novel Therapeutics. A summary of our programs in each area is set forth below.
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Complex Generics
Our Approach
We have developed generic versions of two complex drugs. Generics are therapeutic equivalents of chemically synthesized brand name drugs that were approved by the FDA under New Drug Applications, or NDAs. While most chemically synthesized brand name drugs are simple small molecules that are relatively easy to duplicate, we have focused on developing generic versions of LOVENOX and COPAXONE, which are complex molecular mixtures that are difficult to analyze and reproduce.
Our Programs
GLATOPA ® 20 mg/mL—Generic Once-daily COPAXONE ® (glatiramer acetate injection) 20 mg/mL
GLATOPA 20 mg/mL is a generic version of once-daily COPAXONE 20 mg/mL indicated for the treatment of patients with relapsing forms of multiple sclerosis, a chronic disease of the central nervous system characterized by inflammation and neurodegeneration. COPAXONE is available in both a once-daily 20 mg/mL formulation, which was approved by the FDA in 1996, and a three-times-weekly 40 mg/mL formulation, which was approved in January 2014. COPAXONE is marketed in the United States by Teva Neuroscience, Inc., a subsidiary of Teva Pharmaceutical Industries, Ltd.
GLATOPA 20 mg/mL was approved by the FDA on April 16, 2015 and was launched on June 18, 2015. GLATOPA 20 mg/mL is the first "AP" rated, substitutable generic equivalent of once-daily COPAXONE. GLATOPA 20 mg/mL was developed and is being commercialized in collaboration with Sandoz AG, or Sandoz, the generic pharmaceuticals division of Novartis Pharma AG, or Novartis. Under our collaboration agreement, Sandoz is responsible for commercialization of GLATOPA 20 mg/mL, and we earn 50% of contractually-defined profits on GLATOPA 20 mg/mL sales. The terms of our Sandoz collaboration for GLATOPA 20 mg/mL are further discussed below under " Collaborations, Licenses and Asset Purchases—Sandoz ."
On February 17, 2017, we announced that Sandoz’ third party fill/finish manufacturing partner for GLATOPA, Pfizer Inc., received an FDA warning letter. The FDA warning letter does not restrict the production or shipment of the GLATOPA 20 mg/mL product that is currently marketed by Sandoz in the United States.
For the year ended December 31, 2016 , we recorded $74.6 million in product revenues from Sandoz' profits on sales of GLATOPA 20 mg/mL.
GLATOPA 20 mg/mL was formerly referred to as "GLATOPA." GLATOPA now refers to GLATOPA 20 mg/mL and our generic product candidate for three-times-weekly COPAXONE 40 mg/mL, GLATOPA 40 mg/mL, collectively.
GLATOPA 40 mg/mL—Generic Three-times-weekly COPAXONE ® (glatiramer acetate injection) 40 mg/mL
GLATOPA 40 mg/mL is our generic product candidate for three-times-weekly COPAXONE 40 mg/mL. GLATOPA 40 mg/mL is being developed in collaboration with Sandoz. Under our collaboration agreement, Sandoz is responsible for commercialization of GLATOPA 40 mg/mL, if approved, and we will earn 50% of contractually-defined profits on GLATOPA 40 mg/mL sales, if any. The terms of our Sandoz collaboration for GLATOPA 40 mg/mL are further discussed below under " Collaborations, Licenses and Asset Purchases—Sandoz ."
The ANDA seeking approval of GLATOPA 40 mg/mL was filed by Sandoz in February 2014 and remains under review by the FDA. Our GLATOPA 40 mg/mL formulation contains the same active pharmaceutical ingredient, or API, as GLATOPA 20 mg/mL, which we believe should help streamline the FDA review of the ANDA. To date, we are the only ANDA applicant for the three-times-weekly COPAXONE 40 mg/mL with an FDA-approved API. On February 17, 2017, we announced that Sandoz’ third party fill/finish manufacturing partner for GLATOPA, Pfizer Inc., received an FDA warning letter. The FDA may withhold approval of pending drug applications listing the facility, including the ANDA for GLATOPA 40 mg/mL, until satisfactory resolution of the compliance observations in the FDA warning letter. We therefore believe that an approval of the GLATOPA 40 mg/mL ANDA in the first quarter of 2017 is unlikely.
The ANDA approval process and related patent challenge process are described below under " Regulatory and Legal Matters—United States Government Regulation—"ANDA Approval Process for Generics" and "—Patent Challenge Process ANDAs ." Legal proceedings related to GLATOPA 40 mg/mL are described below under " Item 3. Legal Proceedings -- GLATOPA 40 mg/mL-Related Proceedings. "
Teva reported $3.5 billion and $3.2 billion in U.S. sales of COPAXONE (combined 20 mg/mL and 40 mg/mL) in 2016 and 2015 , respectively.
GLATOPA 40 mg/mL was formerly referred to as "M356."

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Enoxaparin Sodium Injection—Generic LOVENOX®
Enoxaparin Sodium Injection is a generic version of LOVENOX indicated for the prevention and treatment of deep vein thrombosis and to support the treatment of acute coronary syndromes. LOVENOX is marketed in the United States by Sanofi. Our Enoxaparin Sodium Injection was developed and is being commercialized in the United States in collaboration with Sandoz. Under the collaboration agreement, Sandoz is responsible for commercialization of Enoxaparin Sodium Injection and we earn 50% of contractually-defined profits on Enoxaparin Sodium Injection sales.
Due to increased generic competition and resulting decreased market pricing for generic enoxaparin sodium injection products, we do not anticipate significant Enoxaparin Sodium Injection product revenue in the near future.

Biosimilars
Our Approach
Biosimilars are biologics that are highly similar to therapeutic biologic products, referred to as reference products, approved by the FDA under Biologics License Applications, or BLAs. Biologics are produced using living cells. Biosimilars have no clinically meaningful differences from their respective reference products in terms of safety, purity and potency. Our approach to biosimilars has three parts:
1.
Build a broad and diverse product portfolio .
We are advancing a broad portfolio of biosimilar candidates. We believe having a broad portfolio can help diversify risk, reduce reliance on single source revenue and allow us to capture the scale, technology, and regulatory synergies that are possible in biologic product development. Our portfolio consists of over half a dozen complex biosimilar candidates such as monoclonal antibodies and fusion proteins at various stages of development. We select biosimilar candidates with development and litigation timelines that we believe provide us the opportunity to have the first, or among the first, biosimilars on the market for each targeted reference product.
2.
Gain competitive advantage through our scientific approach and regulatory strategies .
We believe our approach to biosimilars is capable of providing the FDA with robust and compelling analytical evidence of biosimilarity so that the FDA, under its totality-of-the-evidence approach to biosimilars, could designate our products as interchangeable and grant extrapolation across indications with reduced clinical trial requirements. We believe the realization of potentially reduced clinical and marketing costs would give our products an advantage over competing biosimilars. The biosimilar regulatory pathway is discussed in more detail below under "Regulatory and Legal Matters—United States Government Regulation—Biosimilars."
3.
Ensure product candidates are positioned to capture the global opportunity through collaborations with leading pharmaceutical companies.
We are developing and commercializing M834 and five other programs in collaboration with Mylan Ireland Limited, or Mylan. Mylan provides financial resources, manufacturing expertise and extensive commercial reach to better position our product candidates for future commercial success. We are identifying and exploring possible collaboration partners for M923 who similarly possess global commercial capabilities and can help secure high quality, low cost manufacturing and distribution.
Biologics represent an important advance in the treatment of disease and continue to have a transformative impact on the lives of patients with difficult to treat conditions like cancer and autoimmune disease. The market for biologics is significant and growing. In 2016, the global biologics market represented approximately $225 billion in sales, with virtually the entire market comprised of brand products. In 2020, global sales of biologics are expected to be approximately $306 billion. Many currently commercially successful biologics are expected to face loss of patent exclusivity in the next five to ten years. While therapeutically beneficial, biologics can be extremely costly to patients, costing upwards of thousands, or even hundreds of thousands, of dollars a year. They can also be costly to governments, insurers and other payers of healthcare benefits. Biosimilars are expected to generally be more affordable than their reference products. As a result, we believe there is a significant market potential for biosimilars.
Our Programs
M923—Biosimilar HUMIRA ® (adalimumab) Candidate

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We are developing M923 as a biosimilar of HUMIRA. HUMIRA is a monoclonal antibody that can bind to a substance in the body known as tumor necrosis factor, or TNF, thereby inhibiting the known effect of TNF as a potent mediator of inflammation. HUMIRA is indicated for the treatment of patients with rheumatoid arthritis, Crohn's disease, ulcerative colitis and psoriasis, among other diseases. HUMIRA is the largest selling therapeutic in the world. HUMIRA is marketed globally by AbbVie.
In February 2015, a randomized, double-blind, single-dose study was commenced in healthy volunteers to compare the pharmacokinetics, safety, tolerability and immunogenicity of M923 versus EU-sourced and US-sourced HUMIRA. A total of 324 healthy volunteers were enrolled in the study. The volunteers were randomized 1:1:1 to receive a single 40 mg injection of M923, US-sourced HUMIRA, or EU-sourced HUMIRA. The volunteers were followed for 71 days. In December 2015, we announced that M923 met its primary endpoint in the study as the data demonstrated pharmacokinetic bioequivalence to the reference products. In October 2015, a pivotal confirmatory clinical trial of M923 was initiated in patients with moderate-to-severe chronic plaque psoriasis. The trial is a randomized, double blind, active control, multi-center, global study in patients with moderate-to-severe chronic plaque psoriasis to compare the safety, efficacy and immunogenicity of M923 with HUMIRA. In April 2016, enrollment in the pivotal clinical trial for M923 was completed, and in November 2016, following an interim analysis, we announced that M923 met its primary endpoint in the study. The proportion of subjects in the study who achieved the primary endpoint, at least 75% reduction in the Psoriasis Area and Severity Index, or PASI-75, following 16 weeks of treatment, was equivalent between M923 and HUMIRA. The estimated difference in responders was well within the pre-specified confidence interval, confirming equivalence. Equivalence was also achieved for all secondary efficacy endpoints, including the achievement of PASI-50, PASI-90, proportion achieving clear or near-clear skin, and change from baseline in absolute PASI score. Adverse events were comparable in terms of type, frequency, and severity, and were consistent with the published safety data for HUMIRA. Due to unexpectedly high enrollment rates, additional patients to those included in the interim analysis were enrolled in the study. We expect to present final analysis of the full dataset for the study at a future conference or in a future publication. The first regulatory submission for marketing approval for M923 is planned for mid-2017 and, subject to marketing approval and patent considerations, we are planning for the first commercial launch to be as early as the 2020 timeframe.
M923 was previously developed in collaboration with Baxalta. In June 2016, Baxalta became a wholly-owned subsidiary of Shire plc. In September 2016, Baxalta gave us twelve months' prior written notice of the exercise of its right to terminate for its convenience our collaboration agreement. On December 31, 2016, we and Baxalta entered into an asset return and termination agreement pursuant to which the collaboration agreement was terminated effective December 31, 2016. Baxalta was relieved of its obligations to perform activities for M923 after that date, except for certain clinical and regulatory activities expected to be completed by April 2017, and in January 2017, Baxalta paid us a one-time payment of $51.2 million , representing the costs Baxalta would have incurred in performing the activities it would have performed under the collaboration agreement through the original termination effective date. The terms of the collaboration agreement and the asset return and termination agreement are described below under " Collaborations, Licenses and Asset Purchases - Baxalta ."
AbbVie reported approximately $16.1 billion in worldwide sales of HUMIRA in 2016 , including approximately $10.4 billion in the United States. Total worldwide sales of HUMIRA are expected to be approximately $18.2 billion in 2020, including approximately $13.1 billion in the United States.
M834—Biosimilar ORENCIA ® (abatacept) Candidate
M834 is being developed as a biosimilar of ORENCIA. ORENCIA is a complex fusion protein composed of the Fc region of the immunoglobulin IgG1 fused to the extracellular domain of CTLA-4 that inhibits an immune response by blocking certain T cell signals. ORENCIA is the only CTLA-4Ig fusion protein approved for autoimmune diseases. ORENCIA is approved for use in treating patients with rheumatoid arthritis and juvenile idiopathic arthritis and is in development for several high unmet need indications. Analysts estimate that worldwide ORENCIA sales could increase to $2.5 billion by 2020. ORENCIA is marketed globally by Bristol-Myers Squibb and co-promoted by Ono Pharmaceutical in Japan.
M834 is being developed and commercialized in collaboration with Mylan. Under our collaboration agreement, we and Mylan share equally costs and profits (losses) for M834. We and Mylan share development and manufacturing responsibilities, and Mylan will lead commercialization of M834, if approved. The terms of our Mylan collaboration are further discussed below under " Collaborations, Licenses and Asset Purchases—Mylan ."
In November 2016, we initiated a randomized, double-blind, three-arm, parallel group, single-dose Phase 1 clinical trial in normal healthy volunteers to compare the pharmacokinetics, safety and immunogenicity of M834 to US-sourced and EU-sourced ORENCIA. We plan to report top-line data from the trial in the second half of 2017. We believe there is currently limited biosimilar competition for M834. Subject to development, marketing approval and patent considerations, we expect to be able to launch M834 in the 2020 timeframe to be able to be among the first biosimilars of ORENCIA on the market.

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ORENCIA's composition of matter patents expire in the United States in 2019. In December 2016, the U.S. PTAB in an Inter Partes Review we filed upheld the validity of Bristol-Myers Squibb's formulation patent '239 on ORENCIA. We are considering our options to appeal. Information about this proceeding is further discussed below under " Item 3. Legal Proceedings -- M834-Related Proceedings ."
Bristol-Myers Squibb reported approximately $2.3 billion in worldwide sales of ORENCIA in 2016 , including approximately $1.5 billion in the United States.
Other Biosimilar Programs in Collaboration with Mylan
In addition to M834, we are also developing five other biosimilar candidates from our portfolio with Mylan, including our undisclosed biosimilar candidate, M710. We and Mylan will share equally costs and profits (losses) related to these earlier stage product candidates. We and Mylan will share development and manufacturing responsibilities across product candidates, and Mylan will lead commercialization of the products, if approved. The terms of our Mylan collaboration are further discussed below under " Collaborations, Licenses and Asset Purchases—Mylan ."
Total worldwide sales of the reference products that we are targeting in these biosimilar programs were approximately $17.8 billion in 2016 , including approximately $11.1 billion in the United States, and are projected to be approximately $25.3 billion in 2020, including approximately $15.5 billion in the United States. Taking into account the timing of reference product loss of regulatory exclusivity and key reference product patent expirations, we plan to launch each of these products as early as the 2020-2025 timeframe to be among the first biosimilars on the market for each reference product.

Novel Therapeutics
Our Approach
We seek to develop novel therapeutics and novel combinations of therapeutics that may positively modulate key disease pathways and meet significant unmet patient need. The majority of human diseases result from the interaction of a complex web of biologic systems. We believe that applying our complex systems analysis and biological protein engineering platforms may enable new insights into the complex biology underlying diseases and the optimal design of therapeutics. Currently we are applying these platforms to development of novel therapeutics for autoimmune disease.
Autoimmune Diseases
Many autoimmune diseases are characterized by the formation of autoantibodies that bind self-antigens to form immune complexes. These immune complexes can recruit and activate immune cells leading to tissue inflammation and damage, thereby presenting a common pathological mechanism across multiple autoimmune diseases. However, few therapeutic agents exist that interfere directly with these autoantibodies or immune complex-immune cell activation processes. Today, intravenous immunoglobulin, or IVIg, and plasmapheresis represent the most common approaches to treat autoantibody-driven disease. IVIg is a therapeutic drug product that contains pooled, human immunoglobulin G, or IgG, antibodies purified from blood plasma. IVIg is used to treat several inflammatory diseases, including idiopathic thrombocytopenic purpura, or ITP, Kawasaki disease, and chronic inflammatory demyelinating polyneuropathy, or CIDP. We estimate that the global market for immunoglobulin products currently approved for use in the treatment of autoimmune disease is approximately $3.2 billion. The manufacture of IVIg, which requires large amounts of human plasma sourced from donated blood, is expensive, subject to donated blood shortages and often involves high batch-to-batch variation.
We are developing therapeutics for patients with autoimmune diseases, and in particular, those with autoantibody-driven disease. Initially we have applied our complex systems analysis and biological protein engineering platforms in an effort to improve IVIg. We utilized our proprietary sialylation technology, a method to add sialic acid to protein, to create a high potency version of IVIg. By gaining a deeper understanding of IVIg and immune complex driven autoimmune disease, we have designed two novel recombinant therapeutic candidates to leverage what we believe are key biologies associated with autoimmune disease. The design of these candidates was based on our analysis of the complex mechanism of action of IVIg and our insights into biological protein engineering.
We believe our novel product candidates could be capable of treating a large number of immunological disorders driven by antibodies, immune complexes, and Fc receptor biology. Such disorders include systemic lupus erythematosus, autoimmune neurologic diseases such as Guillain-Barre syndrome, chronic inflammatory demyelinating neuropathy and myasthenia gravis, autoimmune blood disorders such as immune thrombocytopenic purpura, systemic autoimmune diseases such as dermatomyositis, and antiphospholipid syndrome, antibody-mediated transplant rejection, and autoimmune blistering diseases, several of which have few treatment options.

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Our Programs
M254 - hsIVIg Candidate
M254 is a hyper-sialylated version of IVIg. Using our proprietary sialylation technology, we have developed a robust, controlled sialylation process to generate tetra-Fc-sialylated immunoglobulins, or hsIVIg, with consistent enhanced anti-inflammatory activity. In nonclinical trials, hsIVIg has been shown to have up to ten times more enhanced anti-inflammatory activity than IVIg in a variety of animal models of autoimmune disease.
Our hsIVIg product is currently in nonclinical development and has the potential to be developed as a high-potency alternative to IVIg. We plan to initiate a toxicology study in 2017 that will enable an Investigational New Drug application, or IND, with the FDA. We continue to identify and explore potential collaboration opportunities to further develop and commercialize this product candidate.
M281 - Anti-FcRn Candidate
M281 is a fully-human monoclonal antibody that blocks the neonatal Fc receptor, or FcRn. This receptor recycles IgG antibodies, enabling a long half-life. M281 blocks this receptor, effectively inhibiting the binding of IgGs and leading to the rapid clearance of IgGs, similar to what occurs in plasmapheresis. M281 exhibits high affinity to human and non-human FcRn in nonclinical studies and shows selective induction of human and non-human IgG clearance. Based on this data, we believe M281 has the potential for use as acute and chronic/intermittent therapies in a broad range of autoantibody driven disease.
A Phase 1 study to evaluate the safety, tolerability, pharmacokinetics and pharmacodynamics of M281 was initiated in June 2016. In January 2017, we announced that we had successfully completed five cohorts in the Phase 1 single ascending dose, or SAD, study in healthy volunteers. In the SAD portion of the study, a single dose of 30 mg/kg achieved up to 80% reduction in circulating IgG antibodies, and M281 was well-tolerated with no serious adverse events observed. The multiple ascending portion of the study was initiated in January 2017. We plan to report the full data from the single and multiple ascending dose portions of the study in the second half of 2017.
M230 - Selective Immunomodulator of Fc receptors (SIF3) Candidate
M230, a selective immunomodulator of Fc receptors, or SIF3, is a novel homogenous recombinant Fc multimer containing three IgG Fc regions joined carefully to maximize activity. The multiple Fc domains of immune complexes aggregate Fcγ receptors, or FcγRs, triggering cellular activation processes that play critical roles in inflammation and tissue damage. The development of therapeutics that broadly antagonize FcγRs has been hampered by a limited understanding of the molecular determinants directing FcγRs activation. Through the engineering and characterization of oligomeric Fc structures we believe we have novel insights into FcγRs modulation for the development of M230. Nonclinical data has shown that M230 enhances the molecules' avidity and affinity for the Fc receptors matching the potency and efficacy of IVIg at significantly lower doses.
On January 5, 2017, we entered into a License and Option Agreement, which became effective on February 17, 2017, with CSL Behring Recombinant Facility AG, or CSL, a wholly-owned indirect subsidiary of CSL Limited, pursuant to which we have granted CSL an exclusive worldwide license to research, develop, and commercialize M230. We and CSL plan to advance this candidate with a goal of beginning clinical development in 2017. The terms of our CSL collaboration are further discussed below under " Collaborations, Licenses and Asset Purchases-CSL. "
Necuparanib— Former Oncology Product Candidate
In August 2016, following the outcome of a planned futility analysis, we discontinued development of necuparanib, an oncology product candidate then being studied in a Phase 2 clinical trial.

Collaborations, Licenses and Asset Purchases
Sandoz
In 2006 and 2007, we entered into a series of agreements, including a collaboration and license agreement, as amended, or the 2006 Sandoz Collaboration Agreement, with Sandoz and a stock purchase agreement and an investor rights agreement with Novartis. Under the 2006 Sandoz Collaboration Agreement, we and Sandoz agreed to exclusively collaborate on the development and commercialization of GLATOPA, among other products. Costs, including development costs and the costs of clinical studies, will be borne by the parties in varying proportions depending on the type of expense. For GLATOPA, we are generally responsible for all of the development costs in the United States. For GLATOPA outside of the United States, we share development costs in proportion to our profit sharing interest. We are reimbursed at a contractual FTE rate for any full-time equivalent employee expenses as well as any external costs incurred in the development of products to the extent

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development costs are born by Sandoz. All commercialization costs will be borne by Sandoz as they are incurred for all products.
Sandoz commenced sales of GLATOPA 20 mg/mL in the United States on June 18, 2015. Under the 2006 Sandoz Collaboration Agreement, we earn 50% of contractually-defined profits on Sandoz' worldwide net sales of GLATOPA 20 mg/mL. We are entitled to earn 50% of contractually-defined profits on Sandoz' worldwide net sales of GLATOPA 40 mg/mL, if and when GLATOPA 40 mg/mL is commercialized. Profits on net sales of GLATOPA are calculated by deducting from net sales the costs of goods sold and an allowance for selling, general and administrative costs, which is a contractual percentage of net sales. With respect to GLATOPA, Sandoz is responsible for funding all of the legal expenses incurred under the 2006 Sandoz Collaboration Agreement, except for our FTE costs with respect to certain legal activities for GLATOPA; however, a portion of certain legal expenses, including any patent infringement damages, can be offset by Sandoz against the profit-sharing amounts in proportion to our 50% profit sharing interest. In the year ended December 31, 2015 , we earned a $10 million regulatory milestone payment upon GLATOPA 20 mg/mL receiving sole FDA approval and an additional $10 million milestone payment upon the first commercial sale of GLATOPA 20 mg/mL. We are eligible to receive up to $120 million in additional milestone payments upon the achievement of certain commercial and sales-based milestones for GLATOPA in the United States. None of these payments, once received, is refundable and there are no general rights of return in the arrangement. Sandoz has agreed to indemnify us for various claims, and a certain portion of such costs may be offset against certain future payments received by us.
Under the 2006 Sandoz Collaboration Agreement, 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. We have agreed to provide development and related services on a commercially reasonable best-efforts basis, which includes developing a manufacturing process to make the products, scaling up the process, contributing to the preparation of regulatory filings, further scaling up the manufacturing process to commercial scale, and related development of intellectual property. We have the right to participate in a joint steering committee, which is responsible for overseeing development, legal and commercial activities and which prepares and approves the annual collaboration plans. Sandoz is responsible for commercialization activities and exclusively distributes and markets the products.
The term of the 2006 Sandoz Collaboration Agreement extends throughout the development and commercialization of the products until the last sale of the products, unless earlier terminated by either party pursuant to the provisions of the 2006 Sandoz Collaboration Agreement. The 2006 Sandoz Collaboration Agreement may be terminated if either party breaches the 2006 Sandoz Collaboration Agreement or files for bankruptcy. In addition, either we or Sandoz may terminate the 2006 Sandoz Collaboration Agreement with respect to GLATOPA 40 mg/mL, if clinical trials are required for regulatory approval of GLATOPA 40 mg/mL.
Under the stock purchase agreement, we sold approximately 4.7 million shares of our common stock to Novartis for an aggregate purchase price of $75 million , representing a premium of $13.6 million based on the closing price of our common stock on The NASDAQ Global Select Market on the date of purchase. As of December 31, 2016 , Novartis had sold all of its shares of our common stock.
Mylan
We and Mylan, a wholly-owned indirect subsidiary of Mylan N.V., entered into a collaboration agreement, or the Mylan Collaboration Agreement, which became effective on February 9, 2016, pursuant to which we and Mylan agreed to collaborate exclusively, on a worldwide basis, to develop, manufacture and commercialize six of our biosimilar candidates, including M834.
Under the terms of the Mylan Collaboration Agreement, Mylan paid us a non-refundable upfront payment of $45 million . In addition, we and Mylan agreed to share equally costs (including development, manufacturing, commercialization and certain legal expenses) and profits (losses) with respect to such product candidates, with Mylan funding its share of collaboration expenses incurred by us, in part, through up to six contingent early development milestone payments, totaling up to $200 million across the six product candidates.
For each product candidate other than M834, at a specified stage of early development, we and Mylan will each decide, based on the product candidate's development progress and commercial considerations, whether to continue the development, manufacture and commercialization of such product candidate under the collaboration or to terminate the collaboration with respect to such product candidate. If one party decides not to continue development, manufacture and commercialization of a product candidate under the Mylan Collaboration Agreement, the other party will have the right to continue the development, manufacture and commercialization of such product candidate.
Under the Mylan Collaboration Agreement, we granted Mylan an exclusive license under our intellectual property rights to develop, manufacture and commercialize the product candidates for all therapeutic indications, and Mylan has granted us a

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co-exclusive license under Mylan's intellectual property rights for us to perform our development and manufacturing activities under the product work plans agreed by the parties, and to perform certain commercialization activities to be agreed by the Joint Steering Committee, or JSC, for such product candidates if we exercise our co-commercialization option described below. We and Mylan have established a JSC consisting of an equal number of members from us and Mylan, to oversee and manage the development, manufacture and commercialization of product candidates under the collaboration. Unless otherwise determined by the JSC, it is anticipated that, in collaboration with the other party, (a) we will be primarily responsible for nonclinical development activities and initial clinical development activities for the product candidates; additional (pivotal or phase 3 equivalent) clinical development activities for M834; and regulatory activities for the product candidates in the United States through regulatory approval; and (b) Mylan will be primarily responsible for additional (pivotal or phase 3 equivalent) clinical development activities for the product candidates other than M834; regulatory activities for the product candidates outside the United States; and regulatory activities for products in the United States after regulatory approval, when all marketing authorizations for the products in the United States will be transferred to Mylan. Mylan will commercialize any approved products, with us having an option to co-commercialize, in a supporting commercial role, any approved products in the United States. The JSC will allocate responsibilities for other activities under the collaboration.
The term of the collaboration will continue throughout the development and commercialization of the product candidates, on a product-by-product and country-by-country basis, until development and commercialization by or on behalf of us and Mylan pursuant to the Mylan Collaboration Agreement has ceased for a continuous period of two years for a given product candidate in a given country, unless earlier terminated by either party pursuant to the terms of the Mylan Collaboration Agreement.
The Mylan Collaboration Agreement may be terminated by either party for breach by, or bankruptcy of, the other party; for its convenience; or for certain activities involving competing products or the challenge of certain patents. Other than in the case of a termination for convenience, the terminating party shall have the right to continue the development, manufacture and commercialization of the terminated products in the terminated countries. In the case of a termination for convenience, the other party shall have the right to continue. If a termination occurs, the licenses granted to the non-continuing party for the applicable product will terminate for the terminated country. Subject to certain terms and conditions, the party that has the right to continue the development, manufacture or commercialization of a given product candidate may retain royalty-bearing licenses to certain intellectual property rights, and rights to certain data, for the continued development and sale of the applicable product in the country or countries for which termination applies.
CSL
We and CSL Behring Recombinant Facility AG, or CSL, a wholly-owned indirect subsidiary of CSL Limited, entered into a License and Option Agreement, or the CSL License Agreement, which became effective on February 17, 2017, or the Effective Date, pursuant to which we granted CSL an exclusive worldwide license to research, develop, and commercialize our M230 pre-clinical product candidate, an Fc multimer protein that is a selective immunomodulator of the Fc receptor. The CSL License Agreement also provides, on an exclusive basis, for us and CSL to conduct research on other Fc multimer proteins, and provides CSL the right to develop and commercialize these additional research products globally.
Pursuant to the CSL License Agreement, CSL has agreed to pay us a non-refundable upfront payment of $50 million. For the development and commercialization of M230, we are eligible to receive up to $550 million in contingent clinical, regulatory and sales milestone payments, and additional negotiated milestone payments for a named research stage product should that enter development. We are also entitled to sales-based royalty payments in percentages ranging from a mid-single digit to low-double digits for M230 and a named research stage product should that enter development and be commercialized, and royalties and development milestone payments to be negotiated for any other products developed under the CSL License Agreement. Sales milestones are based on aggregated sales across M230 and any other products developed under the CSL License Agreement. We also have the option to participate in a cost-and-profit sharing arrangement, under which we would fund 50% of global research and development costs and 50% of U.S. commercialization costs for all products developed pursuant to the CSL License Agreement, or the Co-Funded Products, in exchange for either a 50% share of U.S. profits or 30% share of U.S. profits, determined by the stage of development at which we make such election. For Co-Funded Products, royalties remain payable for territories outside of the United States and milestone payments are reduced. We also have the right to opt-out of such arrangement at our sole discretion, which would result in milestone payments and royalties reverting to their pre-arrangement amounts. We also have the option to participate in the promotion of Co-Funded Products in the United States, subject to a co-promotion agreement to be negotiated with CSL.
Under the CSL License Agreement, we have granted CSL an exclusive license under our intellectual property to research, develop, manufacture and commercialize product candidates for all therapeutic indications. CSL has granted us a non-exclusive, royalty-free license under CSL’s intellectual property for our research and development activities pursuant to the CSL License Agreement and our commercialization activities under any co-promotion agreement with CSL.

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We and CSL will form a joint steering committee, or JSC, consisting of an equal number of members from Momenta and CSL, to facilitate the research, development, and commercialization of product candidates.
Unless earlier terminated, the term of the CSL License Agreement commenced on the Effective Date and will continue until the later of (i) the expiration of all payment obligations with respect to products under the CSL License Agreement, (ii) we are no longer co-funding development or commercialization of any products and (iii) we and CSL are not otherwise collaborating on the development and commercialization of products or product candidates. CSL may terminate the CSL License Agreement on a product-by-product basis subject to notice periods and certain circumstances related to clinical development. We may terminate the CSL License Agreement under certain circumstances related to the development of M230 and if no activities are being conducted under the CSL License Agreement. Either party may terminate the CSL License Agreement (i) on a product-by-product basis if certain patent challenges are made, (ii) on a product-by-product or country-by-country basis for material breaches, or (iii) due to the other party’s bankruptcy. Upon termination of the CSL License Agreement, subject to certain exceptions, the licenses granted under the CSL License Agreement terminate. In addition, dependent upon the circumstances under which the CSL License Agreement is terminated, we or CSL have the right to continue the research, development, and commercialization of terminated products, including rights to certain data, for the continued development and sale of terminated products and, subject to certain limitations, obligations to make sales-based royalty payments to the other party.
CSL's obligations under the CSL License Agreement are guaranteed by its parent company, CSL Limited.
Baxalta
We and Baxter International, Inc., Baxter Healthcare Corporation and Baxter Healthcare SA (or collectively referred to as Baxter) entered into a global collaboration and license agreement, or the Baxter Collaboration Agreement, effective February 2012, to develop and commercialize biosimilars, including M923. In connection with Baxter's internal corporate restructuring in July 2015, Baxter assigned the Baxter Collaboration Agreement to Baxalta U.S. Inc., Baxalta GmbH and Baxalta Incorporated (or collectively referred to as Baxalta). Subsequent to the assignment, we refer to "Baxter" as "Baxalta" and the "Baxter Collaboration Agreement" as the "Baxalta Collaboration Agreement." On September 27, 2016, Baxalta gave us twelve months’ prior written notice of the exercise of its right to terminate for its convenience the Baxalta Collaboration Agreement. On December 31, 2016, we and Baxalta entered into an asset return and termination agreement, or the Baxalta Termination Agreement, which made the termination of the Baxalta Collaboration Agreement effective as of December 31, 2016.
Under the Baxalta Collaboration Agreement, we and Baxalta agreed to collaborate, on a worldwide basis, on the development and commercialization of M923 and M834, and Baxalta had the right to select four additional reference products to target for biosimilar development under the collaboration. In July 2012, Baxalta selected an additional product candidate and in December 2013, following an internal portfolio review, terminated its option to license the product candidate. In February 2015, Baxalta's right to select additional programs expired without further exercise. Also, in February 2015, Baxalta terminated in part the Baxalta Collaboration Agreement as it related to M834 and all worldwide development and commercialization rights for M834 reverted to us.
Under the Baxalta Collaboration Agreement, each party granted the other an exclusive license under its intellectual property rights to develop and commercialize M923 for all therapeutic indications. We agreed to provide development and related services on a commercially reasonable basis through the filing of an IND or equivalent application in the European Union for M923. Development and related services included high-resolution analytics, characterization, and product and process development. Baxalta was responsible for clinical development, manufacturing and commercialization activities for M923. We had the right to participate in a joint steering committee, consisting of an equal number of members from us and Baxalta, to oversee and manage the development and commercialization of M923 under the collaboration. Costs, including development costs, payments to third parties for intellectual property licenses, and expenses for legal proceedings, including the patent exchange process pursuant to the Biologics Price Competition and Innovation Act of 2009, was to be borne by the parties in varying proportions, depending on the type of expense and the stage of development. We were generally responsible for research and process development costs prior to filing an IND or equivalent application in the European Union, and the cost of in-human clinical trials, manufacturing in accordance with current good manufacturing practices and commercialization was borne by Baxalta.
Under the terms of the Baxalta Collaboration Agreement, we received an initial cash payment of $33 million , a $7 million license payment for achieving pre-defined "minimum development criteria" for M834, and $12 million in technical and development milestone payments in connection with the UK Medicines and Healthcare Products Regulatory Agency's acceptance of Baxalta's clinical trial application to initiate a pharmacokinetic clinical trial for M923. We were reimbursed at a contractual FTE rate for any FTE employee expenses and external development costs for reimbursable activities related to M923. Had M923 been successfully developed and launched under the Baxalta Collaboration Agreement, Baxalta would have been required to pay us royalties on net sales of licensed products worldwide, with a base royalty rate in the high single digits

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with the potential for significant tiered increases based on the number of competitors, the interchangeability of the product, and the sales tier for the product. The maximum royalty with all potential increases would have been slightly more than double the base royalty.
On June 3, 2016, Baxalta Incorporated and Shire plc, or Shire, announced the completion of the combination of Baxalta Incorporated and Shire. As a result of the combination, Baxalta Incorporated, of which Baxalta US Inc. and Baxalta GmbH are wholly-owned subsidiaries, is a wholly-owned subsidiary of Shire. On September 27, 2016, Baxalta gave us twelve months’ prior written notice of the exercise of its right to terminate for its convenience the Baxalta Collaboration Agreement. Under the terms of the Baxalta Collaboration Agreement, the effective date of the termination was twelve months following the date Baxalta gave the termination notice, as more particularly set forth in the Baxalta Collaboration Agreement. As of the termination effective date, (i) Baxalta was obligated to transfer to us all ongoing regulatory, development, manufacturing and commercialization activities and related records for M923 and, at our request, assign to us any third party agreements reasonably necessary for and primarily related to the development, manufacture, and commercialization of M923 to the extent permitted by the agreements' terms, (ii) the licenses granted pursuant to the Baxalta Collaboration Agreement by us to Baxalta under our intellectual property rights relating to M923 would terminate, the licenses granted pursuant to the Baxalta Collaboration Agreement by Baxalta to us under Baxalta’s intellectual property rights relating to M923 would survive, and Baxalta was obligated to grant to us additional licenses under Baxalta’s intellectual property rights relating to M923 existing as of the termination effective date, and (iii) we were obligated to pay to Baxalta a royalty of 5% of net sales, as such term is defined in the Baxalta Collaboration Agreement, until Baxalta’s development expenses and commercialization costs, as such terms are defined in the Baxalta Collaboration Agreement, occurring through the termination effective date were reimbursed. Following receipt of the termination notice, we were no longer eligible to receive any regulatory milestone payments under the Baxalta Collaboration Agreement. Prior to the termination effective date, Baxalta was obligated to continue to perform development and manufacturing activities for M923.
On December 31, 2016, we and Baxalta entered into the Baxalta Termination Agreement, amending certain termination provisions of the Baxalta Collaboration Agreement. Under the terms of the Baxalta Termination Agreement, the termination of the Baxalta Collaboration Agreement was effective December 31, 2016. Baxalta was relieved of its obligations to continue to perform development, manufacturing or commercialization activities for M923 after December 31, 2016, except for certain clinical and regulatory activities that are expected to be completed by April 2017, which we refer to as the Transition Services. In order to fund the other activities that it would have been required to perform under the Baxalta Collaboration Agreement through the original termination effective date, in January 2017, Baxalta paid us a one-time cash payment of $51.2 million . Under the termination provisions of the Baxalta Collaboration Agreement, following the commercialization of M923, we are obligated to pay to Baxalta a royalty of 5% of M923's net sales (as such term is defined in the Baxalta Collaboration Agreement) until the combined total amount of Baxalta’s development expenses and commercialization costs (as such terms are defined in the Baxalta Collaboration Agreement) are reimbursed. Effective December 31, 2016, under the Baxalta Termination Agreement, this royalty obligation covers Baxalta's actual development expenses and commercialization costs incurred through December 31, 2016, plus Baxalta's costs incurred in providing the Transition Services and plus the $51.2 million payment we received in January 2017. The licenses granted pursuant to the Baxalta Collaboration Agreement by us to Baxalta under our intellectual property rights relating to M923 terminated as of December 31, 2016, except solely to the extent reasonably necessary or useful for Baxalta to perform the Transition Services. The licenses granted by Baxalta to us under its intellectual property rights relating to M923 survive, and Baxalta has granted to us licenses under additional Baxalta intellectual property rights, if any, relating to M923 existing upon completion of the Transition Services. The Baxalta Termination Agreement also assigned to us certain third party agreements relating to the development, manufacture, and commercialization of M923.
Parivid
In April 2007, we entered into an asset purchase agreement with Parivid, LLC, or Parivid, a provider of data integration and analysis services to us, and S. Raguram, the principal owner and Chief Technology Officer of Parivid. Pursuant to the purchase agreement, which was amended in August 2009 and July 2011, we acquired certain of the assets and assumed certain of the liabilities of Parivid related to the acquired assets in exchange for $2.5 million in cash paid at closing and 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 if certain milestones are achieved within 15 years of the date of the purchase agreement. In August 2016, we paid the final milestone payment under the purchase agreement by issuing 265,605 shares of our common stock to Parivid upon GLATOPA 20 mg/mL remaining the sole generic COPAXONE 20 mg/mL product on the U.S. market for one-year following its commercial launch in June 2016.

Patents and Proprietary Rights

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Our success depends in part on our ability to obtain and maintain proprietary protection for our technology and product candidates, to operate without infringing on the proprietary rights of others and to prevent others from infringing our proprietary rights. Our policy is to seek to protect our proprietary position by, among other methods, filing United States and foreign patent applications related to our proprietary technology and product candidates that are important to the development of our business. We also rely on trade secrets, know-how, continuing technological innovation and in-licensing opportunities to develop and maintain our proprietary position.
We license or own a patent portfolio of around 150 patent families, each of which includes United States patent applications and/or issued patents as well as foreign counterparts to certain of the United States patents and patent applications. Our patent portfolio includes issued or pending claims covering:
methods and technologies for characterizing complex generics and biosimilars, including our biosimilar HUMIRA candidate and our biosimilar ORENCIA candidate;
methods for manufacturing complex generics and biosimilars, including our biosimilar HUMIRA candidate and our biosimilar ORENCIA candidate;
composition of matter, methods of use, and methods of making novel therapeutics for autoimmune disease, including our novel product candidates such as M230, M281 and M254;
composition of matter, methods of use, and methods of making certain novel low molecular weight heparins;
composition of matter and use of certain heparinases, heparinase variants and other enzymes; and
methods and technologies for the analysis and synthesis of polysaccharides.
The patent positions of companies like ours are generally uncertain and involve complex legal and factual questions. Our ability to maintain and solidify our proprietary position for our technology will depend on our success in obtaining effective claims and enforcing those claims once granted. We do not know whether any of our patent applications will result in the issuance of any patents. Moreover, any issued patent does not guarantee us the right to practice the patented technology or to commercialize the patented product. Third parties may have blocking patents that could be used to prevent us from commercializing our patented products and practicing our patented technology. Our issued patents and those that may be issued in the future may be challenged, invalidated or circumvented, which could limit our ability to stop competitors from marketing related products or the length of the term of patent protection that we may have for our products. In addition, the rights granted under any issued patents may not provide us with proprietary protection or competitive advantages against competitors with similar technology. Furthermore, our competitors may independently develop similar technologies. For these reasons, we may have competition for our generic, biosimilar and novel products. Moreover, because of the extensive time required for development, testing and regulatory review of a potential product, it is possible that, before any of our products can be commercialized, any related patent may expire or remain in force for only a short period following commercialization, thereby reducing any advantage of the patent.
We may rely, in some circumstances, on trade secrets to protect our technology. However, trade secrets are difficult to protect. We seek to protect our technology and product candidates, in part, by confidentiality agreements with our employees, consultants, advisors, contractors and collaborators. These agreements may be breached and we may not have adequate remedies for any breach. In addition, our trade secrets may otherwise become known or be independently discovered by competitors. To the extent that our employees, consultants, advisors, contractors and collaborators use intellectual property owned by others in their work for us, disputes may arise as to the rights in related or resulting know-how and inventions.

Manufacturing
We do not own or operate facilities for commercial scale manufacturing of our products. We do own a process development scale manufacturing facility used in the development of our biologics. While we have personnel with experience and expertise in manufacturing, as well as process development, analytical development, quality assurance and quality control, we rely on contract manufacturers and our collaboration partners for manufacturing and supply activities. Under the 2006 Sandoz Collaboration Agreement, Sandoz is responsible for commercial manufacture of GLATOPA. Under the Mylan Collaboration Agreement, we and Mylan will jointly oversee manufacturing activities, with us having primary responsibility for contracting with contract manufacturers for clinical supply for products and Mylan having primary responsibility for contracting with contract manufacturers for commercial supply for products other than M834. Under the CSL License Agreement, CSL is responsible for manufacturing activities, except that we are responsible, at CSL's direction, for contracting with contract manufacturers for certain clinical supply of M230.

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We have entered into various agreements with third party contractors for process development, analytical services and manufacturing. In each of our agreements with contractors, we retain ownership of our intellectual property and generally own and/or are assigned ownership of processes, developments, data, results and other intellectual property generated during the course of the performance of each agreement that primarily relate to our products. Where applicable, we are granted non-exclusive licenses to certain contractor intellectual property for purposes of exploiting the products that are the subject of the agreement and in a few instances we grant non-exclusive licenses to the contract manufacturers for use outside of our product area. The agreements also typically contain provisions for both parties to terminate for material breach, bankruptcy and insolvency.

Sales, Marketing and Distribution
We do not currently have any sales, marketing and distribution capabilities other than strategic sales and marketing expertise, nor do we currently have any plans to build a sales, marketing and distribution capability to support any of our products. While we have personnel with experience and expertise in sales and marketing, we rely on our collaboration partners for these activities. In order for us to commercialize any products we would have to either develop a sales, marketing and distribution infrastructure or collaborate or contract with third parties that have sales, marketing and distribution capabilities. Under the 2006 Sandoz Collaboration Agreement, Sandoz is responsible for commercializing GLATOPA. Under the Mylan Collaboration Agreement, we have an option to participate in the commercialization of products, in a supporting commercial role, with Mylan in the United States. Under the CSL License Agreement, CSL is responsible for commercialization of products and we have an option to co-promote products in the United States.

Regulatory and Legal Matters
Government authorities in the United States, at the federal, state and local level, the European Union and other countries extensively regulate, among other things, the research, development, testing, manufacture, labeling, promotion, advertising, distribution, marketing and exporting and importing of products such as those we are developing.
United States Government Regulation
In the United States, the information that must be submitted to the FDA in order to obtain market approval of a new drug or biologic varies depending on whether the drug or biologic is a new product whose safety and effectiveness has not previously been demonstrated in humans, or a drug or biologic whose active ingredient(s) and certain other properties are the same as those of a previously approved drug or biologic, i.e., biosimilar. Approval of new drugs and biologics follows the NDA and BLA routes, respectively. A drug that claims to be the same as an already approved NDA drug may be able to file for approval under the ANDA approval pathway. Beginning in 2010, with the enactment of the Biologics Price Competition and Innovation Act, or BPCI Act, a biosimilar may also be filed for approval under the abbreviated pathway under Section 351(k) of the Public Health Service Act.
ANDA Approval Process for Generics
FDA approval is required before a generic equivalent of an existing brand name drug may be marketed. Such approval is typically obtained by submitting an ANDA to the FDA and demonstrating therapeutic equivalence. However, it is within the FDA's regulatory discretion to determine the kind and amount of evidence required to approve a product for marketing. An ANDA may be submitted for a drug on the basis that it is the same as a previously approved branded drug, also known as a reference listed drug. Specifically, the generic drug that is the subject of the ANDA must have the same active ingredient(s), route of administration, dosage form, and strength, as well as the same labeling, with certain exceptions, and the labeling must prescribe conditions of use that have been previously approved for the listed drug. If the generic drug product has a different route of administration, dosage form, or strength, the FDA must grant a suitability petition approving the differences(s) from the listed drug before the ANDA may be filed. The ANDA must also contain data and information demonstrating that the generic drug is bioequivalent to the listed drug (or alternatively seek a waiver as is requested for most injectable products), or if the application is submitted pursuant to an approved suitability petition, information to show that the listed drug and the generic drug can be expected to have the same therapeutic effect when administered to patients for a proposed condition of use.
Generic drug applications are termed "abbreviated" because they are not required to duplicate the clinical (human) testing or, generally, nonclinical testing necessary to establish the underlying safety and effectiveness of the branded product, other than the requirement for bioequivalence testing. However, the FDA may refuse to approve an ANDA if there is insufficient information to show that the active ingredients are the same and to demonstrate that any impurities or differences in active ingredients do not affect the safety or efficacy of the generic product. In addition, like NDAs, an ANDA will not be approved

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unless the product is manufactured in current Good Manufacturing Practices, or cGMP, compliant facilities to assure and preserve the drug's identity, strength, quality and purity. As is the case for NDAs and BLAs, the FDA may refuse to accept and review insufficiently complete ANDAs.
Generally, in an ANDA submission, determination of the "sameness" of the active ingredients to those in the reference listed drug is based on the demonstration of the chemical equivalence of the components of the generic version to those of the branded product. While the standard for demonstrating chemical equivalence is relatively straightforward for small molecule drugs, it is inherently more difficult to define sameness for the active ingredients of complex drugs. Under the NDA pathway, these types of drugs include products such as recombinant versions of certain hormones, among others. Due to the limited number of ANDA submissions for generic complex drugs, the FDA has not reached a final position for demonstrating chemical equivalence for many of these products specifically, nor provided broad guidance for achieving "sameness" for complex drugs in general. In many cases, the criteria the FDA may apply are evolving and are being determined on an application-by-application basis.
To demonstrate bioequivalence, ANDAs generally must also contain in vivo bioavailability data for the generic and branded drugs. "Bioavailability" indicates the rate and extent of absorption and levels of concentration of a drug product in the bloodstream needed to produce a therapeutic effect. "Bioequivalence" compares the bioavailability of one drug product with another, and when established, indicates that the rate of absorption and levels of concentration of a generic drug in the body are the same as the previously approved branded drug. The studies required to demonstrate in vivo bioequivalence are generally very small, quick to complete, and involve relatively few subjects. Under current regulations, the FDA may waive requirements for in vivo bioequivalence data for certain drug products, including products where bioequivalence is self-evident such as injectable solutions which have been shown to contain the same active and inactive ingredients as the reference listed drug. Although the FDA may waive requirements for in vivo bioequivalence data, it may still require the submission of alternative data on purity, such as immunogenicity and/or pharmacokinetics and pharmacodynamics data, to provide additional evidence of pharmaceutical equivalence. The FDA, however, does not always waive requirements for in vivo bioequivalence data.
Generic drug products that are found to be therapeutically equivalent by the FDA receive an "A" rating in FDA's Orange Book, which lists all approved drug products and therapeutic equivalence evaluations. Products that are therapeutically equivalent can be expected in the FDA's judgment to have equivalent clinical effect and no difference in their potential for adverse effects when used under the approved conditions of their approved labeling. Products with "A" ratings are generally substitutable for the innovator drug by both in-hospital and retail pharmacies. Many health insurance plans require automatic substitution for "A" rated generic versions of products when they are available, although physicians may still prescribe the branded drug for individual patients. On rare occasions in the past, generic products were approved that were not rated as therapeutically equivalent, and these products were generally not substitutable at retail pharmacies. Therapeutic equivalence ratings are used under Medicare to determine reimbursement for generic drugs and facilitate market uptake of generic drugs.
The timing of final FDA approval of a generic drug for commercial distribution depends on a variety of factors, including whether the applicant challenges any listed patents for the drug and/or its use and whether the manufacturer of the branded product is entitled to one or more statutory periods of non-patent regulatory exclusivity, during which the FDA is prohibited from accepting or approving generic product applications. For example, submission of an ANDA for a drug that was approved under an NDA as a new chemical entity will be blocked for five years after the pioneer's approval or for four years after approval if the application includes a paragraph IV certification of non-infringement or invalidity against a patent applicable to the branded drug. In certain circumstances, a regulatory exclusivity period can extend beyond the life of a patent, and thus block ANDAs from being approved on or after the patent expiration date. For example, a three-year exclusivity period may be granted for new indications, dosage forms, routes of administration, or strengths of previously approved drugs, or for new uses, if approval of such changes required the sponsor to conduct new clinical studies. In addition, the FDA may extend the exclusivity of a product by six months past the date of patent expiry or other regulatory exclusivity if the manufacturer undertakes studies on the effect of their product in children, a so-called pediatric exclusivity.
The brand manufacturer may seek to delay or prevent the approval of an ANDA by filing a Citizen Petition or other forms of comments with the FDA. For example, a Citizen Petition may request the FDA to rule that a determination of "sameness" and/or therapeutic equivalence for a particular ANDA is not possible without extensive clinical testing, based on the characteristics of the brand product. Because relatively few ANDAs for complex mixture drugs have been reviewed by FDA, such a petition could substantially delay approval, or result in non-approval, of an ANDA for a complex mixture generic product. For example, Teva filed a Citizen Petition that argued that "sameness" could not be established by any applicant filing an ANDA for a generic COPAXONE on the grounds that COPAXONE was too complex to be thoroughly characterized. The FDA denied Teva's petition in connection with the approval of the ANDA for GLATOPA 20 mg/mL. The review of the Citizen Petition or other comments filed with the FDA and the preparation of the FDA response, however, can involve significant legal and regulatory resources that may extend the time for FDA review and approval of an ANDA.
Patent Challenge Process Regarding ANDAs

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The Hatch-Waxman Act provides incentives for generic pharmaceutical manufacturers to challenge patents on branded pharmaceutical products and/or their methods of use, as well as to develop products comprising non-infringing forms of the patented drugs. The Hatch-Waxman legislation places significant burdens on the ANDA filer to ensure that such challenges are not frivolous, but also offers the opportunity for significant financial reward if the challenge is successful.
If there is a patent listed for the branded drug in the FDA's Approved Drug Products with Therapeutic Equivalence and Evaluations listing or "Orange Book" at the time of submission of the ANDA, or at any time before the ANDA is approved, the generic manufacturer's ANDA must include one of four types of patent certification with respect to each listed patent. If the applicant seeks approval to market the generic equivalent prior to the expiration of a listed patent, the generic company includes a certification asserting that the patent is invalid or unenforceable or will not be infringed, a so-called "paragraph IV certification." Within 20 days after receiving notice from the FDA that its application is acceptable for review, or immediately if the ANDA has been amended to include a paragraph IV certification after the application was submitted to the FDA, the generic applicant is required to send the patent owner and the holder of the NDA for the brand-name drug notice explaining why it believes that the listed patents in question are invalid, unenforceable or not infringed. If the patent holder commences a patent infringement lawsuit within 45 days of receipt of such notice, the Hatch-Waxman Act provides for an automatic stay on the FDA's ability to grant final approval of the ANDA for the generic product, generally for a period of 30 months. A 30-month stay may be shortened or lengthened by a court order if the district court finds that a party has failed to reasonably cooperate in expediting the action. Moreover, the district court may, before expiration of the stay, issue a preliminary injunction prohibiting the commercial sale of the generic drug until the court rules on the issues of validity, infringement, and enforceability. If the district court finds that the relevant patent is invalid, unenforceable, or not infringed, such ruling terminates the 30-month stay on the date of the judgment. If it is finally determined that the patent is valid, enforceable, and infringed, approval of the ANDA may not be granted prior to the expiration of the patent. In addition, if the challenged patent expires during the 30-month period, the FDA may grant final approval for the generic drug for marketing, if the FDA has determined that the application meets all technical and regulatory requirements for approval and there are no other obstacles to approval.
In most cases, patent holders may only obtain one 30-month stay with respect to patents listed in the Orange Book. Specifically, for ANDAs with paragraph IV certifications to a patent listed for the branded drug in the Orange Book on or after August 18, 2003, a single 30-month stay is available for litigation related to that patent only if the patent was submitted to the FDA before the date that the ANDA (excluding an amendment or supplement) was submitted. In other words, 30-months stays are not triggered by later listed patents submitted to the FDA on or after the date the ANDA application was submitted. Because of this limitation, in most cases ANDAs will be subject to no more than one 30-month stay.
Under the Hatch-Waxman Act, the first ANDA applicant to have submitted a substantially complete ANDA that includes a paragraph IV certification may be eligible to receive a 180-day period of generic market exclusivity during which the FDA may not approve any other ANDA for the same drug product. However, this exclusivity does not prevent the sponsor of the innovator drug from selling an unbranded "authorized generic" version of its own product during the 180-day exclusivity period. This period of market exclusivity may provide the patent challenger with the opportunity to earn a return on the risks taken and its legal and development costs and to build its market share before other generic competitors can enter the market. Under the Hatch-Waxman Act, as amended by the Medicare Modernization Act of 2003, or MMA, there are a number of ways an applicant who has filed an ANDA after the date of the MMA may forfeit its 180-day exclusivity, including if the ANDA is withdrawn or if the applicant fails to market its product within the specified statutory timeframe or achieve at least tentative approval within the specified timeframe. In addition, for ANDAs filed after the MMA was enacted, it is possible for more than one ANDA applicant to be eligible for 180-day exclusivity. This occurs when multiple "first" applicants submit substantially complete ANDAs with paragraph IV certifications on the same day.
Approval Process for Biosimilars
With the enactment of federal healthcare reform legislation in 2010, the Biologics Price Competition and Innovation Act, or BPCI Act, was enacted which created a new abbreviated approval pathway for biosimilars. The abbreviated pathway is codified in Section 351(k) of the Public Health Service Act. Under Section 351(k), the FDA must wait four years after approval of a product under a BLA before accepting a filing for a biosimilar version of the reference product, and the FDA cannot approve a biosimilar version of the reference product until 12 years after the reference product was approved under a BLA. In addition, the new legislation redefines "biologic" versus "drug." There is a ten year transition period during which applicants can elect regulation as a drug or biologic when applications are filed.
The Section 351(k) pathway creates a regulatory and legal pathway to encourage the development of biosimilars. First, it authorizes the FDA to rely on the safety and efficacy of a reference product approved under a BLA to approve biosimilar products under the abbreviated pathway. Second, it establishes a process for negotiation and clearance of patents controlled by the reference product BLA holder. The law defines a biosimilar product as a biologic that:

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is "highly similar" to the reference product, notwithstanding minor differences in clinically inactive components; and
has no clinically meaningful differences from the reference product in terms of safety, purity and potency.
Biosimilars may be approved for one or more, and possibly all, indications for which a reference product is approved. In some cases, clinical trial data successfully demonstrating the use of a biosimilar for one indication, and submitted to support approval for that indication, may be extrapolated to support approval for one or more other indications of the reference product.
The Section 351(k) pathway further defines a subset of biosimilar products as "interchangeable" if an applicant can demonstrate that:
the interchangeable biological product can be expected to produce the same clinical result as the reference product in any given patient; and
if the product is administered more than once in a patient, that the risk in terms of safety or diminished efficacy of alternating or switching between the use of the interchangeable biologic product and the reference product is no greater than the risk of using the reference product without switching.
The Section 351(k) pathway states that a biosimilar product that is determined to be interchangeable may be substituted for the reference product without the intervention of a health care provider who prescribed the reference product. The law states that the biosimilar must be for the same indication as the reference product, involve the same mechanism of action and that the manufacturing facility meets the standards necessary to assure that the product continues to be safe, pure and potent. The types of data that would ordinarily be required in an application to show similarity would include:
analytical data and studies to demonstrate chemical similarity;
nonclinical studies (including toxicity studies); and
clinical studies.
The FDA has the discretion to determine whether one or more of these elements are necessary and its guidance to date does not establish a single method for demonstrating biosimilarity but states that the degree of residual uncertainty that remains following analytical and nonclinical research will determine the nature and the extent of clinical studies that may be required. In 2012, the FDA implemented its biosimilar user fee program which includes a fee-based meeting process for consultation between applicants and the FDA reviewing division on biosimilar and interchangeable biologics applications under the new approval pathway. It provides for pre-application meetings where the applicant can propose and submit analytic, physicochemical and biologic characterization data along with a proposed development plan. The proposed development plan may have a reduced scope of clinical development based on the nature and extent of the characterization data. There are defined time periods for meetings and written advice. Since 2012, the FDA has published a series of draft and final guidance documents for the development and registration of biosimilars and interchangeable biologics, on topics ranging from demonstrating biosimilarity and interchangeability, non-proprietary naming, labeling and other scientific and regulatory issues. The draft and final guidance documents indicate that the FDA will consider the totality-of-the-evidence developed by an applicant in determining the nature and extent of the development, nonclinical and clinical requirements for a biosimilar or interchangeable biologic product. In addition, the guidance documents confirm the importance of analytical characterization to demonstrating biosimilarity and interchangeability in showing the absence of differences from the reference product. Where differences are identified, uncertainty associated with their clinical meaning or impact is expected to be resolved by nonclinical testing and clinical trials. The greater the similarity, the less uncertainty and the more likely the FDA will authorize an applicant to conduct targeted clinical trials or use extrapolation in support of demonstrating biosimilarity and interchangeability. The BPCI Act also provides for limited regulatory exclusivity for the first FDA-approved interchangeable biologic with respect to each reference product. This means that the FDA will defer approval of additional interchangeable biologics to the same reference product for defined periods of one year or more.
Upon filing an abbreviated application, an applicant may trigger the patent negotiation and clearance process. Under the provisions, an applicant and the reference product company are required to share information to seek to resolve any patent disputes prior to regulatory approval and launch. A failure to share information or participate in the process has defined consequences that include the loss of the right to seek patent clearance on the applicant's part and the loss of the right to seek lost profits or injunctive relief for infringement on the reference product patent right holder's part. The process, if initiated by the applicant, has several stages, including defining which patents to include in a pre-approval litigation proceeding, initiating litigation, notice 180 days prior to launch of a biosimilar, the initiation of a second round of litigation relating to patents the parties did not include in the first round litigation, and, following approval, litigation on patents brought by the reference product company or other patent holders not involved in the prior patent process.

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The BPCI Act is complex and is only beginning to be interpreted and implemented by the FDA. As a result, its ultimate impact, implementation and meaning will be subject to uncertainty for years to come.
NDA and BLA Approval Processes for New Drugs and Biologics
In the United States, the FDA regulates drugs and biologics under the Federal Food, Drug, and Cosmetic Act, and, in the case of biologics, also under the Public Health Service Act, and implementing regulations. The steps required before a new drug or biologic may be marketed in the United States include:
completion of nonclinical laboratory tests, nonclinical studies and formulation studies under the FDA's good laboratory practices;
completion of developmental chemistry, manufacturing and controls activities and manufacture under current Good Manufacturing Practices, or cGMP;
submission to the FDA of an IND for human clinical testing, which must become effective before human clinical trials may begin and must include independent Institutional Review Board, or IRB, approval at each clinical site before the trial is initiated;
performance of adequate and well-controlled clinical trials to establish the safety and efficacy of the investigational drug product for each indication or the safety, purity and potency of the biological product for its intended indication;
submission to the FDA of an NDA or BLA;
satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the product is produced to assess compliance with cGMPs and to assure that the facilities, methods and controls are adequate to preserve the drug's identity, strength, quality and purity or to meet standards designed to ensure the biologic's continued safety, purity and potency;
satisfactory completion of FDA inspections of nonclinical and or clinical testing sites;
satisfactory completion of an FDA Advisory Committee review, if applicable; and
FDA review and approval of the NDA or BLA.
Nonclinical tests include laboratory evaluations of product chemistry, toxicity and formulation, as well as nonclinical studies. An IND sponsor must submit the results of the nonclinical tests, together with manufacturing information and analytical and stability data, to the FDA as part of the IND. An IND will automatically become effective 30 days after receipt by the FDA unless, before that time, the FDA raises concerns or questions about issues such as the conduct of the trials as outlined in the IND. In that case, the IND sponsor and the FDA must resolve any outstanding FDA concerns or questions before clinical trials can proceed. Submission of an IND may not result in the FDA allowing clinical trials to commence.
Clinical trials involve the administration of the investigational product to human subjects or patients in accordance with specific protocols and under the supervision of qualified investigators in accordance with good clinical practices, or GCPs. Each clinical trial protocol must be submitted to the FDA as part of the IND, and an IRB at each site where the study is conducted must also approve the study. Clinical trials typically are conducted in three sequential phases, but the phases may overlap or be combined. Phase 1 trials usually involve the initial introduction of the investigational drug into humans to evaluate the product's safety, dosage tolerance, pharmacokinetics and pharmacodynamics. If feasible, Phase 1 studies also attempt to detect any early indication of a drug's potential effectiveness. Phase 2 trials usually involve controlled trials in a limited patient population to evaluate dosage tolerance and appropriate dosage, identify possible adverse effects and safety risks and evaluate the preliminary efficacy of the drug for specific indications. Phase 3 trials usually test a specific hypothesis to evaluate clinical efficacy and test further for safety in an expanded patient population, to establish the overall benefit-risk relationship of the product and to provide adequate information for the labeling of the product. Phase 1, Phase 2 and Phase 3 testing may not be completed successfully within any specified period, if at all. Furthermore, the FDA, an IRB or a sponsor may suspend or terminate clinical trials at any time on various grounds, including a finding that the subjects or patients are being exposed to an unacceptable health risk. The FDA can also request that additional clinical trials be conducted as a condition of product approval. Finally, sponsors are required to publicly disseminate information about ongoing and completed clinical trials on a government website administered by the National Institutes of Health, or NIH, and are subject to civil money penalties and other civil and criminal sanctions for failing to meet these obligations.
Assuming successful completion of the required clinical testing, the results of the nonclinical studies and of the clinical studies, together with other detailed information, including information on the chemistry, manufacture and control of the

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product, are submitted to the FDA in the form of an NDA or BLA requesting approval to market the product for one or more indications. The FDA reviews an NDA to determine, among other things, whether a product is safe and effective for its intended use and whether its manufacturing is cGMP-compliant to assure and preserve the product's identity, strength, quality and purity. The FDA reviews a BLA to determine, among other things, whether the product is safe, pure and potent and the facility in which it is manufactured, processed, packed or held meets standards designed to assure the product's continued safety, purity and potency. The FDA may refuse to accept and review insufficiently complete applications.
The testing and approval process requires substantial time, effort and financial resources, and each may take several years to complete. Moreover, after approval, some types of changes to the approved product, such as adding new indications, manufacturing changes and additional labeling claims, are subject to further FDA review and approval of a new NDA or BLA, or NDA or BLA supplement, before the change can be implemented.
Upon approval of a new drug or a new indication based under an NDA or a supplement to an NDA, the holder of the approval receives the benefit of protection from generic competition. As discussed above, for example, the FDA must wait at least four years before accepting a filing for approval of a generic version of the brand product under an ANDA, and the FDA cannot approve a generic version of the brand product under an ANDA until five years after the brand product was approved under the NDA. In addition, in certain circumstances where a brand product files additional data as outlined above for a new indication or use of a brand based upon new clinical studies and receives an approval, the FDA is similarly precluded from approving a generic version of the brand product for such new indication or use until three years after the new use or indication was approved by the brand.
The BPCI Act added new exclusivity provisions for reference products along with the creation of a new approval pathway for biosimilars. Under the law, the FDA must wait four years after approval of a biologic under a BLA before accepting a filing for a biosimilar of that product, and the FDA cannot approve a biosimilar of the reference product until 12 years after the reference product was approved under a BLA. In addition, the new legislation redefines the definition of biologic versus drug and, as a result, a number of products that were previously regulated as drugs may now be regulated as biologics. There is a ten year transition period during which applicants can elect regulation as a drug or as a biologic when applications are filed. This could provide an applicant that elects regulation as a biologic with the longer twelve year period of exclusivity protection as compared to the five year period of exclusivity protection against generic drug competition.
Manufacturing Requirements
Before approving an NDA, BLA, ANDA or Section 351(a) application, the FDA may inspect the facility or the facilities at which the product is manufactured. The FDA will not approve the product, and may delay an approval of an application, unless or until it determines that the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistent production of the product within required specifications. Additionally, before approving an NDA, BLA, ANDA or Section 351(a) application, the FDA will typically inspect one or more clinical sites to assure compliance with GCPs. If the FDA determines the application, manufacturing process or manufacturing facilities are not acceptable, it will outline the deficiencies in the submission and often will request additional testing or information. Notwithstanding the submission of any requested additional information, the FDA ultimately may decide that the application does not satisfy the regulatory criteria for approval.
Post-Approval Requirements
After regulatory approval of a product is obtained, we are required to comply with a number of post-approval requirements. For example, as a condition of approval of an NDA, BLA, ANDA or Section 351(k) application, the FDA may require post-marketing testing and surveillance to further assess and monitor the product's safety or efficacy after commercialization. Any post-approval regulatory obligations, and the cost of complying with such obligations, could expand in the future.
In addition, holders of an approved NDA, BLA, ANDA or Section 351(k) approval are required to report, among other things, certain adverse reactions and production problems to the FDA, to provide updated safety and efficacy information and to comply with requirements concerning advertising and promotional labeling for their products. Also, quality control and manufacturing procedures must continue to conform to cGMP after approval. The FDA periodically inspects manufacturing facilities to assess compliance with cGMP, which imposes extensive procedural, substantive and recordkeeping requirements. Accordingly, manufacturers must continue to expend time, money and effort in the area of production and quality control to maintain compliance with cGMP and other aspects of regulatory compliance.
Discovery of problems with a product or failure to comply with the applicable United States requirements at any time during the product development process, approval process or after approval, may subject an applicant to administrative or judicial sanctions. These sanctions could include the imposition by the FDA or an IRB of a clinical hold on or termination of studies, the FDA's refusal to approve pending applications or supplements, license suspension or revocation, withdrawal of an

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approval, restriction on marketing, warning letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, civil penalties or criminal prosecution. Also, new government requirements may be established that could delay or prevent regulatory approval of our products under development.
Foreign Regulation
In addition to regulations in the United States, we are and will be subject to a variety of foreign regulations governing clinical trials and commercial sales and distribution of our products in those markets. Whether or not we obtain FDA approval for a product, we must obtain approval of a clinical trial application or product from the applicable regulatory authorities of foreign countries before we can commence clinical trials or marketing of the product in those countries. The approval process varies from country to country, and the time may be longer or shorter than that required for FDA approval. The requirements governing the conduct of clinical trials, product licensing, pricing and reimbursement vary greatly from country to country.
Under European Union regulatory systems, we may submit marketing authorizations either under a centralized or decentralized procedure. The centralized procedure is mandatory for the approval of biotechnology products and many pharmaceutical products and provides for the grant of a single marketing authorization that is valid for all European Union member states. The decentralized procedure provides for mutual recognition of national approval decisions and is available at the request of the applicant for products that are not subject to the centralized procedure. Under this procedure, the holder of a national marketing authorization from one European Union member state (the reference member state) may submit an application to the remaining member states. Generally, each member state decides whether to recognize the reference member state's approval in its own country.
Related Matters
From time to time, legislation is drafted, introduced and passed in Congress that could significantly change the statutory provisions governing the approval, manufacturing and marketing of products regulated by the FDA or reimbursed under Medicare by the Center for Medicare Services. In addition, FDA regulations and guidance are often revised or reinterpreted by the agency in ways that may significantly affect our business and our products. It is impossible to predict whether legislative changes will be enacted, or FDA regulations, guidance or interpretations will be changed, or what the impact of such changes, if any, may be.
Hazardous Materials
Our research and development processes involve the controlled use of certain hazardous materials and chemicals, including radioactive materials and equipment. We are subject to federal, state and local environmental, health and workplace safety laws and regulations governing the use, manufacture, storage, handling and disposal of hazardous materials and waste products. We do not expect the cost of complying with these laws and regulations to be material.

Competition
The development and commercialization of pharmaceutical products is highly competitive due to existing product competition at the time of product launch and the development of subsequent therapeutics with different methods of action, efficacy and safety profiles. Many of our competitors, who already market or are developing products similar to those in our portfolio, have considerable experience in product development, obtaining regulatory approval, and commercializing pharmaceutical products. Further, certain of these competitive companies have substantially greater financial, marketing, research and development and human resources than we do.
We believe that our ability to successfully compete will depend on a number of factors, including our ability to successfully develop safe and efficacious products, the timing and scope of regulatory approval of our products and those of our competitors, our ability to collaborate with third parties, our ability to maintain favorable patent protection for our products, our ability to obtain market acceptance of our products and our ability to manufacture sufficient quantities of our products at commercially acceptable costs.
GLATOPA
GLATOPA 20 mg/mL is a substitutable generic equivalent for, and competes directly with, Teva's once-daily COPAXONE 20 mg/mL. It also competes with Teva's three-times-weekly COPAXONE 40 mg/mL. If the ANDA for GLATOPA 40 mg/mL is approved, GLATOPA 40 mg/mL would be a substitutable generic for, and would compete directly with, Teva's three-times-weekly COPAXONE 40 mg/mL. Teva's three-times-weekly COPAXONE 40 mg/mL, which launched in early 2014, accounts for approximately 81% of the overall U.S. glatiramer acetate market (20 mg/mL and 40mg/mL) based on volume prescribed. Teva's three-times-weekly COPAXONE 40 mg/mL share of the overall glatiramer acetate market may

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continue to increase, which could continue to decrease the size of the 20 mg/mL glatiramer acetate market and the market potential for GLATOPA 20 mg/mL. Currently, GLATOPA 20 mg/mL is the sole approved generic for once-daily COPAXONE 20 mg/mL in the United States and, to date, there is no approved generic for three-times-weekly COPAXONE 40 mg/mL in the United States. However, we may be subject to competition from other generic versions of COPAXONE approved in the future by the FDA. ANDAs for generic versions of COPAXONE 20 mg/mL and/or 40 mg/mL have been submitted to the FDA by Mylan Inc., Synthon Pharmaceuticals, Inc., Dr. Reddy's Laboratories, Amneal Pharmaceuticals, and Biocon Ltd. Other ANDAs or other regulatory applications may have been submitted or may be submitted in the future. In addition, GLATOPA 20 mg/mL competes (and GLATOPA 40 mg/mL, if approved, will compete) with other FDA approved multiple sclerosis therapies. These currently include, among others, Rebif (interferon-beta-1a), marketed by EMD Serono Inc. and Pfizer Inc.; Avonex (interferon beta-1a), Tysabri (natalizumab), Tecfidera (dimethyl fumarate), Plegridy (peginterferon beta-1a), and Zinbryta (daclizumab), each marketed by Biogen Idec Inc.; Betaseron (interferon-beta-1b), marketed by Bayer Schering Pharma; Extavia (interferon-Beta-1b) and Gilenya (fingolimod), each marketed by Novartis Pharmaceuticals Corporation; Lemtrada (alemtuzumab), marketed by Sanofi and Bayer; and Aubagio (teriflunomide), marketed by Sanofi.
Biosimilars
If approved, our biosimilar candidates would compete with their applicable reference products, biosimilars to those reference products, as well as other therapies used to treat the indications for which our biosimilars would be approved. Many of the companies developing biosimilars are significantly larger than us, have substantially greater financial resources and have significant pre-existing resources to devote to their biosimilars business. Amgen’s biosimilar to HUMIRA, Amjevita, received FDA approval in 2016 and a Committee for Medicinal Products for Human Use, or CHMP, positive opinion in January 2017. Currently, Sandoz, Samsung Bioepis, Fujifilm Kyowa Kirin Bio., Pfizer, Boehringer Ingelheim, Biocon/Mylan, Merck KGaA, LG Life Sciences, Coherus, Innovent Biologics, Oncobiologics, Biocad, Genor/Biocnd, and Bio-Thera have biosimilars to HUMIRA in clinical development. There are two biosimilars to HUMIRA approved in India, one from Torrent Pharmaceuticals and one from Zydus Cadila. Alphamab, bioXpress, Dr. Reddy's Laboratories, and Harvest Moon have announced they are developing a biosimilar to ORENCIA.
Novel Therapeutics
Our novel product pipeline will also face substantial competition from major pharmaceutical and other biotechnology companies. Our development work focused on Fc biology, which has yielded three named product candidates: M230, an Fc multimer, M281, anti-FcRn, and M254, hyper-sialylated IVIg. These candidates face competition from a number of companies. Merck & Co. and Pfizer have compounds in development that are mechanistically similar to M230. Pfizer's compound is in nonclinical development, and Merck's compound completed a Phase I clinical trial in May 2015. Several companies, including UCB, HanAll, Shire, Syntimmune and Argenx are developing FcRn targeted agents. UCB's compound is in a phase II clinical trial in ITP. Argenx’s compound is in a phase 2 trial in myasthenia gravis, and Syntimmune’s compound is in a phase I clinical trial. HanAll and Shire are in nonclinical development. M254 would compete with currently marketed intravenous and subcutaneous IgG products, including Octagam 5% and Octagam 10% marketed by Octapharma, Gammagard S/D, Gammagard Liquid 10%, Cuvitru and HyQvia marketed by Shire, Carimune, Privigen Liquid 10%, Carimune NF, and Hizentra marketed by CSL Behring, Flebogamma 5% DIF, Gamunex-C, Flebogamma 10% DIF marketed by Grifols, Gammaplex marketed by BPL Holdings, Gammaked marketed by Kendrion Biopharma, and Bivigam Liquid 10% marketed by Biotest, as well as those that are currently in development.

Employees
We believe that our success will depend greatly on our ability to identify, attract and retain capable employees. As of December 31, 2016 , we had 290 employees, including 81 employees who hold Ph.D. degrees and one employee who holds an M.D degree. Our employees are not represented by any collective bargaining group or labor union, and we believe our relations with our employees are good.

Research and Development Expenses
Research and development expenses consist of costs incurred in identifying, developing and testing product candidates. These expenses consist primarily of salaries and related expenses for personnel, license fees, consulting fees, nonclinical and clinical trial costs, contract research and manufacturing costs, and the costs of laboratory equipment and facilities. Research and development expense for 2016 was $119.9 million , compared with $126.0 million in 2015 and $106.5 million in 2014 .


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Financial Information about Segments and Geographic Areas
We view our business as one reportable operating segment—the discovery, development and commercialization of pharmaceutical products. We derive our revenues from our collaborations. All of our revenues through December 31, 2016 have come from our collaborators and are based solely on activities in the United States. Our long-lived assets were $26.0 million , $25.4 million and $30.0 million at December 31, 2016 , 2015 , and 2014 , respectively, and are located solely in the United States. See Part II, Item 6 "Selected Consolidated Financial Information" and the section entitled "Segment Reporting" appearing in Note 2 to our consolidated financial statements for further information about our segment. The notes to our consolidated financial statements are contained in Part II, Item 8 of this Annual Report on Form 10-K.

Company Background and Securities Exchange Act Reports
We were incorporated in Delaware in May 2001 under the name Mimeon, Inc. In September 2002, we changed our name to Momenta Pharmaceuticals, Inc. Our principal executive offices are located at 675 West Kendall Street, Cambridge, Massachusetts 02142, and our telephone number is (617) 491-9700.
In this Annual Report on Form 10-K, the terms "Momenta," "we," "us" "the Company" and "our" refer to Momenta Pharmaceuticals, Inc. and its subsidiary.
We are subject to the informational requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and, accordingly, file reports, proxy statements and other information with the Securities and Exchange Commission. Such reports, proxy statements and other information can be read and copied at the public reference facilities maintained by the Securities and Exchange Commission at the Public Reference Room, 100 F Street, NE, Washington, D.C. 20549. Information regarding the operation of the Public Reference Room may be obtained by calling the Securities and Exchange Commission at 1-800-SEC-0330. The Securities and Exchange Commission maintains a web site ( http://www.sec.gov ) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the Securities and Exchange Commission.
Our internet address is www.momentapharma.com. We are not including the information contained on our web site as a part of, or incorporating it by reference into, this Annual Report on Form 10-K.
We make available free of charge on our website our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission.
Our logo, trademarks, and service marks are the property of Momenta. Other trademarks or service marks appearing in this Annual Report on Form 10-K are the property of their respective holders.
Item 1A.    RISK FACTORS
Investing in our securities involves a high degree of risk. You should carefully consider the risks, uncertainties and other important factors described below in addition to other information included or incorporated by reference in this Annual Report on Form 10-K before purchasing our securities. The risks, uncertainties and other important factors described below are not the only ones we face. Additional risks, uncertainties and other important factors of which we are unaware, or that we currently believe are not material, may also affect us. If any of the following risks actually occurs, our business, financial condition or results of operations would likely suffer.
 
Risks Relating to Our Business

If we or our collaborative partners encounter difficulties in our supply or manufacturing arrangements, including an inability by third party manufacturers to satisfy FDA quality standards and related regulatory requirements, our development and commercialization efforts may be materially harmed.

We have limited personnel with experience in, and we do not own facilities for, manufacturing any products. We depend upon our collaborative partners and other third parties, including sole source suppliers, to provide raw materials meeting FDA quality standards and related regulatory requirements, manufacture the drug substance, produce the final drug product and provide certain analytical services with respect to our products and product candidates. The FDA and other regulatory authorities require that our products be manufactured according to current good manufacturing practices, or cGMP, regulations

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and that proper procedures are implemented to assure the quality of our sourcing of raw materials and the manufacture of our products. Any failure by us, our collaborative partners or our third-party manufacturers to comply with cGMP and/or scale-up manufacturing processes could lead to a delay in, or failure to obtain, regulatory approval. In addition, such failure could be the basis for action by the FDA to withdraw approvals for products previously granted to us and for other regulatory action, including product recall or seizure, fines, imposition of operating restrictions, total or partial suspension of production or injunctions. To the extent we rely on a third-party manufacturer, the risk of non-compliance with cGMPs may be greater and the ability to effect corrective actions for any such noncompliance may be compromised or delayed. For example, on February 17, 2017, we announced that Sandoz’ third party fill/finish manufacturing partner for GLATOPA, Pfizer Inc., received an FDA warning letter. The FDA warning letter does not restrict the production or shipment of the GLATOPA 20 mg/mL product that is currently marketed by Sandoz in the United States; however, the FDA may withhold approval of pending drug applications listing the facility, including the ANDA for GLATOPA 40 mg/mL, until satisfactory resolution of the compliance observations in the FDA warning letter. If the FDA delays an approval of the GLATOPA 40 mg/mL until satisfactory resolution of the compliance observations in the FDA warning letter, the greater the risk to us and Sandoz of prior or contemporaneous competition from other generic versions of COPAXONE 40 mg/mL. Any prior or contemporaneous competition from other generic versions of COPAXONE 40 mg/mL could have a material adverse impact on our business, financial position and results of operations and could cause the market value of our common stock to decline.

In addition, any change in manufacturers, including for GLATOPA, could be costly because the commercial terms of any new arrangement could be less favorable, and the expenses and development and commercial delays relating to the transfer of necessary technology and processes could be significant. For GLATOPA 40 mg/mL, the longer the period of time that it would take for Sandoz to transfer the necessary technology and processes to a new fill/finish manufacturer, the greater the risk to us and Sandoz of prior or contemporaneous competition from other generic versions of COPAXONE 40 mg/mL. Any prior or contemporaneous competition from other generic versions of COPAXONE 40 mg/mL could have a material adverse impact on our business, financial position and results of operations and could cause the market value of our common stock to decline.

Moreover, in order to generate revenue from the sales of Enoxaparin Sodium Injection, GLATOPA 20 mg/mL, and if approved, GLATOPA 40 mg/mL, sufficient quantities of such product must also be produced in order to satisfy demand. If these contract manufacturers and suppliers, which include sole source suppliers, are unable to manufacture sufficient quantities of product or breach or terminate their manufacturing arrangements with us or Sandoz, as applicable, the development and commercialization of the affected products or product candidates could be delayed, which could have a material adverse effect on our business.

We have relied upon third parties, including sole source suppliers, to produce material for nonclinical and clinical studies and may continue to do so in the future. We cannot be certain that we will be able to obtain and/or maintain long-term supply and supply arrangements of those materials on acceptable terms, if at all. If we are unable to arrange for third-party manufacturing, or to do so on commercially reasonable terms, we may not be able to complete development of our product candidates or market them.

If GLATOPA 40 mg/mL is launched following any FDA approval and prior to final resolution of product-related patent infringement litigation in our favor, we may incur significant damages.

Sandoz has the sole right to decide the timing and scope of the launch of GLATOPA 40 mg/mL following FDA approval. If Sandoz markets and sells GLATOPA 40 mg/mL following any FDA approval and prior to a final judicial resolution of product-related patent infringement litigation in our and Sandoz’ favor, we and Sandoz may be subject to claims for patent infringement damages. Damages for infringement may in some instances exceed the amount of revenue earned by the infringing product. If Sandoz launches GLATOPA 40 mg/mL prior to final resolution of any product-related patent infringement litigation and Teva subsequently succeeds in any such litigation, we and Sandoz may be liable for significant damages. Our collaboration with Sandoz provides that our fifty (50) percent share of such damages would be payable from any contractual profits due to us from sales of GLATOPA. Our payment of such damages could have a material adverse effect on our business, financial position and results of operations and could cause the market value of our common stock to decline.

Sandoz may delay or reduce the scope of a GLATOPA 40 mg/mL launch following any FDA approval until we and Sandoz prevail in product-related patent infringement litigation or until the relevant patents expire.

Since the damages associated with a GLATOPA 40 mg/mL launch prior to final resolution of any product-related patent infringement litigation in our and Sandoz’ favor can be substantial, Sandoz may delay or reduce the scope of a GLATOPA 40 mg/mL launch following any FDA approval. A delayed launch could occur as late as final resolution of all GLATOPA 40 mg/mL-related patent infringement litigation in our and Sandoz’ favor or, if we and Sandoz are unsuccessful in such litigation, the expiration of the GLATOPA 40 mg/mL-related patents. A launch that is delayed or reduced in scope could delay or reduce any

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future contractual profits due to us from sales of GLATOPA 40 mg/mL, which could have a material adverse effect on our business, financial position and results of operations and could cause the market value of our common stock to decline.
Sandoz may be prevented from marketing and selling GLATOPA 40 mg/mL following any FDA approval if Teva is successful in obtaining injunctive relief.

A court may issue a temporary or permanent injunction pending the outcome of any GLATOPA 40 mg/mL-related patent infringement litigation or as a remedy if Teva prevails in any GLATOPA 40 mg/mL-related patent infringement litigation. An injunction would prevent us and Sandoz from manufacturing and selling GLATOPA 40 mg/mL and/or prohibit the use of previously manufactured GLATOPA 40 mg/mL for commercial sale until we and Sandoz prevail in litigation or the relevant patents expire. If Teva is successful in obtaining injunctive relief for any GLATOPA 40 mg/mL-related patents, Sandoz’ ability to successfully commercialize GLATOPA 40 mg/mL would be significantly impaired, which could have a material adverse effect on our business, financial position and results of operations and could cause the market value of our common stock to decline.

We may incur significant expenses and damages in the future in connection with allegations by Teva that we and Sandoz are infringing COPAXONE-related patents other than those at issue in the current GLATOPA 40 mg/mL-related patent infringement suits.

We and Sandoz are currently parties in patent infringement litigation in respect of all Orange Book-listed patents for COPAXONE 40 mg/mL as well as an additional COPAXONE 40 mg/mL-related patent. Teva may allege in the future that our and Sandoz’ manufacturing and sale of GLATOPA infringes COPAXONE-related patents other than those at issue in the currently pending litigation, including patents that may issue in the future. We would incur significant expenses under the terms of our collaboration with Sandoz to respond to and litigate any such claims, the outcomes of which would be uncertain. Furthermore, we may be liable for significant damages from the contractual profits of GLATOPA 20 mg/mL and, if approved and launched, GLATOPA 40 mg/mL if we and Sandoz are found to have infringed any such patents, which could have a material adverse effect on our business, financial position and results of operations and could cause the market value of our common stock to decline. Moreover, litigation concerning intellectual property and proprietary technologies can be protracted and expensive and can distract management and personnel from running our business.
 
If other generic versions of the brand name drugs, or other biosimilars of the reference products, for which we have products or product candidates, including GLATOPA 20 mg/mL, GLATOPA 40 mg/mL, M923 and M834, are approved and successfully commercialized, our business would suffer.

Pricing and market share of generic and biosimilar products may decline, often dramatically, as other generics or biosimilars of the same brand name drug or reference product, respectively, enter the market. Competing generics include brand name manufacturers’ “authorized generics” of their own brand name products. Generally, earlier-to-market generics and biosimilars are better able to gain significantly greater market share than later-to-market competing generics and biosimilars, respectively. Accordingly, revenue and profits from GLATOPA 20 mg/mL and, if approved, our generic and biosimilar product candidates, may be significantly reduced based on the timing and number of competing generics and biosimilars, respectively. We expect GLATOPA 20 mg/mL and, if approved, certain of our generic and biosimilar product candidates may face intense and increasing competition from other generics and biosimilars. For example, Mylan and several other companies have submitted ANDAs to the FDA for generic versions of COPAXONE. A launch of an additional generic version of COPAXONE could significantly reduce anticipated revenue from GLATOPA 20 mg/mL and, if approved and launched, GLATOPA 40 mg/mL. The longer the period of time that it takes us and Sandoz to receive approval of the GLATOPA 40 mg/mL ANDA, the greater the risk of prior or contemporaneous competition from other generic versions of COPAXONE. On February 17, 2017, we announced that Sandoz’ third party fill/finish manufacturing partner for GLATOPA, Pfizer Inc., received an FDA warning letter. The FDA may withhold approval of pending drug applications listing the facility, including the ANDA for GLATOPA 40 mg/mL, until satisfactory resolution of the compliance observations in the FDA warning letter.

In addition, the first biosimilar determined to be interchangeable with a particular reference product for any condition of use is eligible for a period of market exclusivity that delays an FDA determination that a second or subsequent biosimilar product is interchangeable with that reference product for any condition of use until the earlier of: (1) one year after the first commercial marketing of the first interchangeable product; (2) 18 months after resolution of a patent infringement suit instituted under 42 U.S.C. § 262(l)(6) against the applicant that submitted the application for the first interchangeable product, based on a final court decision regarding all of the patents in the litigation or dismissal of the litigation with or without prejudice; (3) 42 months after approval of the first interchangeable product, if a patent infringement suit instituted under 42 U.S.C. § 262(l)(6) against the applicant that submitted the application for the first interchangeable product is still ongoing; or (4) 18 months after approval of the first interchangeable product if the applicant that submitted the application for the first

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interchangeable product has not been sued under 42 U.S.C. § 262(l)(6). A determination that another company’s product is interchangeable with HUMIRA, ORENCIA or another of the reference products for which we have a biosimilar product candidate prior to approval of M923, M834 or our other applicable biosimilar product candidates may therefore delay any determination that our product is interchangeable with the reference product, which may materially adversely affect our results of operations and delay, prevent or limit our ability to generate revenue.
 
If an alternative version of a reference product, such as COPAXONE, HUMIRA or ORENCIA, is developed that has a new product profile and labeling, the alternative version of the product could significantly reduce the market share of the original reference product, and may cause a significant decline in sales or potential sales of our corresponding generic or biosimilar product.
 
Brand companies may develop alternative versions of a reference product as part of a life cycle extension strategy, and may obtain approval of the alternative version under a supplemental new drug application, for a drug, or biologics license application, for a biologic. The alternative version may offer patients added benefits such as a more convenient form of administration or dosing regimen. Should the brand company succeed in obtaining an approval of an alternative product, it may capture a significant share of the collective reference product market and significantly reduce the market for the original reference product and thereby the potential size of the market for our generic or biosimilar products. For example, Teva’s three-times-weekly COPAXONE 40 mg/mL, which launched in early 2014, accounts for approximately 81% of the overall U.S. glatiramer acetate market (20 mg/mL and 40 mg/mL) based on volume prescribed. As a result, the market potential for GLATOPA 20 mg/mL has decreased, and may decrease further as additional patients are converted from once-daily COPAXONE to three-times-weekly COPAXONE. In addition, the alternative product may be protected by additional patent rights as well as have the benefit, in the case of drugs, of an additional three years of FDA marketing approval exclusivity, which would prohibit a generic version of the alternative product for some period of time. As a result, our business, including our financial results and our ability to fund future discovery and development programs, would suffer.
 
If the market for a reference product, such as COPAXONE, HUMIRA or ORENCIA, significantly declines, sales or potential sales of our corresponding generic and biosimilars product and product candidates may suffer and our business would be materially impacted.

Competition in the biotechnology industry is intense. Reference products face competition on numerous fronts as technological advances are made or new products are introduced that may offer patients a more convenient form of administration, increased efficacy or improved safety profile. As new products are approved that compete with the reference product to our generic products and product candidates and our biosimilar product candidates, respectively, sales of reference products and biosimilar and generics may be significantly and adversely impacted and may render the reference products obsolete.
 
Current injectable treatments commonly used to treat multiple sclerosis, including COPAXONE, are competing with novel therapeutic products, including oral therapies. These oral therapies may offer patients a more convenient form of administration than COPAXONE and may provide increased efficacy.
 
If the market for the reference product is impacted, we in turn may lose significant market share or market potential for our generic or biosimilar products and product candidates, and the value for our generic or biosimilar pipeline could be negatively impacted. As a result, our business, including our financial results and our ability to fund future discovery and development programs, would suffer.
 
Our future GLATOPA product revenue is dependent on the continued successful commercialization of GLATOPA 20 mg/mL and successful commercialization of GLATOPA 40 mg/mL, if approved.
 
Our near-term ability to generate GLATOPA product revenue depends, in large part, on Sandoz’ ability to continue to manufacture and commercialize GLATOPA 20 mg/mL, manufacture and commercialize GLATOPA 40 mg/mL, if approved. On February 17, 2017, we announced that Sandoz’ third party fill/finish manufacturing partner for GLATOPA, Pfizer Inc., received an FDA warning letter. The FDA warning letter does not restrict the production or shipment of the GLATOPA 20 mg/mL product that is currently marketed by Sandoz in the United States; however, the FDA may withhold approval of pending drug applications listing the facility, including the ANDA for GLATOPA 40 mg/mL, until satisfactory resolution of the compliance observations in the FDA warning letter.

Our near-term ability to generate GLATOPA product revenue also depends in large part on Sandoz' ability to maintain market share and the pricing levels for GLATOPA 20 mg/mL and, if approved, GLATOPA 40 mg/mL, as Sandoz competes with Teva’s three-times-weekly COPAXONE 40 mg/mL, which currently accounts for approximately 81% of the overall U.S.

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glatiramer acetate market (20 mg/mL and 40 mg/mL) based on volume prescribed. Because GLATOPA 20 mg/mL is only a substitutable generic version of the once-daily 20 mg/mL formulation of COPAXONE, the market potential of GLATOPA 20 mg/mL is negatively impacted by the conversion of patients from once-daily COPAXONE 20 mg/mL to three-times-weekly COPAXONE 40 mg/mL prior to the approval and launch of the GLATOPA 40 mg/mL product, which is currently pending FDA approval. Following any such approval and launch of the GLATOPA 40 mg/mL product, our near-term ability to generate GLATOPA product revenue will continue to depend on Sandoz' ability to compete with Teva's three-times-weekly COPAXONE 40 mg/mL product. In addition, other competitors may in the future receive approval to market generic versions of the 20 mg/mL or 40 mg/mL formulations of COPAXONE which would further impact our product revenue, which is based on a fifty-percent contractual profit share and, as a result, our business, including our near-term financial results and our ability to utilize GLATOPA revenue to fund future discovery and development programs, may suffer.
 
Any future Enoxaparin Sodium Injection product revenue is dependent on the successful manufacture and commercialization of Enoxaparin Sodium Injection .
 
Our near-term ability to generate Enoxaparin Sodium Injection product revenue depends, in large part, on Sandoz’ ability to manufacture and commercialize Enoxaparin Sodium Injection and compete with LOVENOX brand competition as well as authorized and other generic competition. Sandoz is facing increasing competition and pricing pressure from brand, authorized generic and other currently-approved generic competitors, which has and will continue to impact Sandoz’ net sales and profits from Enoxaparin Sodium Injection, and therefore our product revenue. Furthermore, other competitors may in the future receive approval to market generic Enoxaparin products which would further impact our product revenue, which is based on a fifty-percent contractual profit share. Due to these circumstances, the resulting market price for our Enoxaparin Sodium Injection product has substantially decreased and may decrease further. Sandoz did not record any profit on sales of Enoxaparin Sodium Injection in the year ended December 31, 2016 , and therefore we recorded no product revenue for Enoxaparin Sodium Injection in the same period. Accordingly, we do not anticipate significant Enoxaparin Sodium Injection revenue in the near term.
 
If our patent litigation against Amphastar related to Enoxaparin Sodium Injection is not successful or third parties are successful in antitrust litigation against us relating to Enoxaparin Sodium Injection, we may be liable for damages and our business may be materially harmed.
 
In the event that we are not successful in our continued prosecution of our suit against Amphastar and Amphastar is able to prove it suffered damages as a result of the preliminary injunction preventing it from selling its Enoxaparin product in the United States, we could be liable for up to $35 million of the security bond for such damages. Moreover, if third parties are successful in antitrust litigation against us for asserting our Enoxaparin patent rights, they may be able to recover damages incurred as a result of enforcement of our patent rights, thereby negatively affecting our financial condition and results of operations.

If efforts by manufacturers of reference products to delay or limit the use of generics or biosimilars are successful, our sales of generic and biosimilar products may suffer.
 
Many manufacturers of branded products have increasingly used legislative, regulatory and other means to delay regulatory approval and to seek to restrict competition from manufacturers of generic drugs and biosimilars. These efforts have included:
 
settling patent lawsuits with generic or biosimilar companies, resulting in such patents remaining an obstacle for generic or biosimilar approval by others;
 
seeking to restrict biosimilar commercialization options by making mandatory the optional right to adjudicate patent rights under Section 351(l) of the Biologics Price, Competition and Innovation Act or restricting access by biosimilar and generic applicants to the use of inter partes patent review proceedings at the U.S. Patent Office to challenge invalid biologic patent rights;

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

submitting Citizen Petitions to request the FDA Commissioner to take administrative action with respect to prospective and submitted generic drug or biosimilar applications or to influence the adoption of policy with regard to the submission of biosimilar applications;


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appealing denials of Citizen Petitions in United States federal district courts and seeking injunctive relief to reverse approval of generic drug or biosimilar applications;

restricting access to reference products for equivalence and biosimilarity testing that interfere with timely generic and biosimilar development plans, respectively;

conducting medical education with physicians, payers and regulators that claim that generic or biosimilar products are too complex for generic or biosimilar approval and influence potential market share;

seeking state law restrictions on the substitution of generic and biosimilar products at the pharmacy without the intervention of a physician or through other restrictive means such as excessive recordkeeping requirements or patient and physician notification;

seeking federal or state regulatory restrictions on the use of the same non-proprietary name as the reference brand product for a biosimilar or interchangeable biologic;

seeking federal reimbursement policies that do not promote adoption of biosimilars and interchangeable biologics;

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

pursuing new patents for existing products or processes which could extend patent protection for a number of years or otherwise delay the launch of generic drugs or biosimilars; and

influencing legislatures so that they attach special regulatory exclusivity or patent extension amendments to unrelated federal legislation.
 
The FDA’s practice is to rule within 150 days on Citizen Petitions that seek to prevent approval of an ANDA if the petition was filed after the Medicare Prescription Drug Improvement and Modernization Act of 2003, or MMA. If, at the end of the 150-day period, the ANDA is not ready for approval or rejection, then the FDA has typically denied and dismissed the petition without acting on the petition. For example, Teva Neuroscience, Inc. filed eight Citizen Petitions regarding GLATOPA 20 mg/mL, all of which have been denied, dismissed or withdrawn. Teva also sought reversal of the denial of a Citizen Petition in federal court. Other third parties may also file Citizen Petitions requesting that the FDA adopt specific approval standards for generic or biosimilar products. Teva may seek to file additional Citizen Petitions pertaining to the GLATOPA 40 mg/mL ANDA or file other forms of comments to the FDA, and seek to delay or prevent the FDA approval of the GLATOPA 40 mg/mL ANDA, which could materially harm our business.
 
If these efforts to delay or block competition are successful, we may be unable to sell our generic and biosimilar products, if approved, which could have a material adverse effect on our sales and profitability.

Competition in the biotechnology and pharmaceutical industries is intense, and if we are unable to compete effectively, our financial results will suffer.
 
The markets in which we intend to compete are undergoing, and are expected to continue to undergo, rapid and significant technological change. We expect competition to intensify as technological advances are made or new biotechnology products are introduced. New developments by competitors may render our current or future product candidates and/or technologies non-competitive, obsolete or not economical. Our competitors’ products may be more efficacious or marketed and sold more effectively than any of our products.
 
Many of our competitors have:
 
significantly greater financial, technical and human resources than we have at every stage of the discovery, development, manufacturing and commercialization process;

more extensive experience in commercializing generic drugs, biosimilars and novel therapeutics, conducting nonclinical studies, conducting clinical trials, obtaining regulatory approvals, challenging patents and manufacturing and marketing pharmaceutical products;

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

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collaborative arrangements in our target markets with leading companies and/or research institutions.
 
We face, and will continue to face, competition with regard to our products and, if approved, our product candidates, based on many different factors, including:
 
the safety and effectiveness of our products;

with regard to our generic products and our generic and biosimilar product candidates, the differential availability of clinical data and experience and willingness of physicians, payers and formularies to rely on biosimilarity data;

the timing and scope of regulatory approvals for these products and regulatory opposition to any product approvals;

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

the effectiveness of our marketing, distribution and sales capabilities;

the price of our products;

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

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

If we or our collaborators are unable to establish and maintain key customer distribution arrangements, sales of our products, and therefore revenue, would be adversely impacted.
 
Drug products and biologics are sold through various channels, including retail, mail order, and to hospitals through group purchasing organizations, or GPOs. The distribution of such products is also managed by pharmacy benefit management firms, or PBMs, such as Express Scripts or CVS. These GPOs and PBMs rely on competitive bidding, discounts and rebates across their purchasing arrangements. We believe that we, in collaboration with commercial collaboration partners, will need to maintain adequate drug supplies, remain price competitive, comply with FDA regulations and provide high-quality products to establish and maintain relationships with GPOs and PBMs. The GPOs, PBMs and other customers with whom we or our collaborators have established contracts may also have relationships with our competitors and may decide to contract for or otherwise prefer products other than ours, limiting access of products to certain market segments. Our sales could also be negatively affected by any rebates, discounts or fees that are required by, or offered to, GPOs, PBMs, and customers, including wholesalers, distributors, retail chains or mail order services, to gain and retain market acceptance for our or our competitors’ products. For example, if PBMs, distributors and other customers contract with Teva for net price discounts or rebates on COPAXONE 20 mg/mL and 40 mg/mL in exchange for exclusivity or preferred status for COPAXONE prior to approval and launch of GLATOPA 40 mg/mL, our opportunity to capture market share would be significantly restricted for the term of these contracts even after a launch of GLATOPA 40 mg/mL. If we or our collaborators are unable to establish and maintain competitive distribution arrangements with all of these customers, sales of our products, our revenue and our profits would suffer.
 
Even if we receive approval to market our product candidates, the market may not be receptive to our product candidates upon their commercial introduction, which could adversely affect our ability to generate sufficient revenue from product sales to maintain or grow our business.
 
Even if our product candidates are successfully developed and approved for marketing, our success and growth will also depend upon the acceptance of our products by patients, physicians and third-party payers. Acceptance of our products will be a function of our products being clinically useful, being cost effective and demonstrating sameness, in the case of our generic product candidate, and biosimilarity or interchangeability, in the case of our biosimilar product candidates, with an acceptable side effect profile as compared to existing or future treatments. In addition, even if our products achieve market acceptance, we may not be able to maintain that market acceptance over time.
 
Factors that we believe will materially affect market acceptance of our product candidates under development include:

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

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

the competitive pricing of our products;

physician confidence in the safety and efficacy of complex generic products or biosimilars;

the absence of, or limited clinical data available from, sameness testing of our complex generic products and biosimilarity or interchangeability testing of our biosimilar products;

the success and extent of our physician education and marketing programs;

the clinical, medical affairs, sales, distribution and marketing efforts of competitors; and

the availability and amount of government and third-party payer reimbursement.
 
If our products do not achieve market acceptance, we will not be able to generate sufficient revenue from product sales to maintain or grow our business.
 
If we are not able to retain our current management team or attract and retain qualified scientific, technical and business personnel, our business will suffer.
 
We are dependent on the members of our 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 key person life insurance on the lives of any of our personnel. The loss of any of our executive officers would result in a significant loss in the knowledge and experience that we, as an organization, possess and could cause significant delays, or outright failure, in the development and approval of our product candidates. In addition, there is intense competition from numerous pharmaceutical and biotechnology companies, universities, governmental entities and other research institutions, for human resources, including management, in the technical fields in which we operate, and we may not be able to attract and retain qualified personnel necessary for the successful development and commercialization of our product candidates. Another component of retention is the intrinsic value of equity awards, including stock options. Stock options granted to our executives and employees are may be under pressure given the volatility of our stock performance and at such times may not always provide a retentive effect. If we lose key members of our management team, or are unable to attract and retain qualified personnel, our business could be negatively affected.

There is a substantial risk of product liability claims in our business. If our existing product liability insurance is insufficient, a product liability claim against us that exceeds the amount of our insurance coverage could adversely affect our business.
 
Our business exposes us to significant potential product liability risks that are inherent in the development, manufacturing and marketing of human therapeutic products. Product liability claims could delay or prevent completion of our development programs. If we succeed in marketing products, such claims could result in a recall of our products or a change in the approved indications for which they may be used. We cannot be sure that the product liability insurance coverage we maintain will be adequate to cover any incident or all incidents. Furthermore, clinical trial and product liability insurance is becoming increasingly expensive. As a result, we may be unable to maintain sufficient insurance at a reasonable cost to protect us against losses that could have a material adverse effect on our business. These liabilities could prevent or interfere with our product development and commercialization efforts.
 
Our business and operations would suffer in the event of system failures or security breaches.
 
Our operations rely on the secure processing, storage and transmission of confidential and other information in our and our third party contractors' computer systems and networks. Our internal computer systems are vulnerable to breakdown or breach, including as a result of computer viruses, security breaches by individuals with authorized access, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures. The increased use of mobile and cloud technologies can heighten these and other operational risks. Moreover, systems breaches are increasing in their frequency, sophistication and intensity, and are becoming increasingly difficult to detect. Any breakdown or breach by employees or others

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may pose a risk that sensitive data, including clinical trial data, intellectual property, trade secrets or personal information belonging to us, our patients or our collaborators may be exposed to unauthorized persons or to the public. If such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our development programs and our business operations. For example, the loss of clinical trial data from completed or future clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. Likewise, we rely on third parties to manufacture and commercialize our products and conduct clinical trials, and similar events relating to their computer systems could also have a material adverse effect on our business. To the extent that any disruption or security breach were to result in a loss of, or damage to, our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability, the further development and commercialization of our products and product candidates could be delayed, we could suffer reputational harm, we could be subject to regulatory action, and the trading price of our common stock could be adversely affected. In addition, our liability insurance may not be sufficient in type or amount to cover us against claims related to breakdown or breach of our computer systems and other related breaches.
 
As we continue to evolve from a company primarily involved in discovery and development of pharmaceutical products into one that is also involved in the development and commercialization of multiple pharmaceutical products, we may have difficulty managing our growth and expanding our operations successfully.
 
As we advance an increasing number of product candidates through the development process, we will need to expand our development, regulatory, manufacturing, quality, distribution, sales and marketing capabilities or contract with other organizations to provide these capabilities for us. As our operations expand, we expect that we will need to lease additional or alternative facilities and manage additional relationships with various collaborative partners, suppliers and other organizations. The market for laboratory and office facilities is highly competitive near our current location. If we are not successful in leasing additional or alternative space in our current area and have to move our facilities, the timing of our development programs could be disrupted.
 
In addition, our ability to manage our operations and growth requires us to continue to improve our operational, financial and management controls, reporting systems and procedures. For example, some jurisdictions, such as the District of Columbia, have imposed licensing requirements for sales representatives. In addition, the District of Columbia and the Commonwealth of Massachusetts, as well as the federal government, by way of the Sunshine Act provisions of the Patient Protection and Affordable Care Act of 2010, have established reporting requirements that would require public reporting of consulting and research fees to health care professionals. Because the reporting requirements vary in each jurisdiction, compliance can be complex and expensive and may create barriers to entering the commercialization phase. The need to build new systems as part of our growth could place a strain on our administrative and operational infrastructure. We may not be able to make improvements to our management information and control systems in an efficient or timely manner and may discover deficiencies in existing systems and controls. Such requirements may also impact our opportunities to collaborate with physicians at academic research centers as new restrictions on academic-industry relationships are put in place. In the past, collaborations between academia and industry have led to important new innovations, but the new laws may have an effect on these activities. While we cannot predict whether any legislative or regulatory changes will have negative or positive effects, they could have a material adverse effect on our business, financial condition and potential profitability.
 
We may incur costs and allocate resources to identify and develop additional product candidates or acquire or make investments in companies or technologies without realizing any benefit, which could have an adverse effect on our business, results of operations and financial condition or cash flows.
 
Along with continuing to progress our current product candidates, the long-term success of our business also depends on our ability to successfully identify, develop and commercialize additional product candidates. Research programs to identify new product candidates require substantial technical, financial and human resources. We may focus our efforts and resources on potential programs and product candidates that ultimately prove to be unsuccessful.
 
In addition, we may acquire or invest in companies, products and technologies. Such transactions involve a number of risks, including:

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

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

difficulty incorporating the acquired technologies;

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

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

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

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

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

we may experience significant problems or liabilities associated with product quality, technology and legal contingencies.
 
These factors could have a material adverse effect on our business, results of operations and financial condition or cash flows, particularly in the case of a larger acquisition or multiple acquisitions in a short period of time. From time to time, we may enter into negotiations for acquisitions that are not ultimately consummated. Such negotiations could result in significant diversion of management time, as well as out-of-pocket costs.
 
The consideration paid in connection with an acquisition also affects our financial results. If we were to proceed with one or more significant acquisitions in which the consideration included cash, we could be required to use a substantial portion of our available cash to consummate any acquisition. To the extent we issue shares of stock or other rights to purchase stock, including options or other rights, existing stockholders may be diluted and earnings per share may decrease. In addition, acquisitions may result in the incurrence of debt, large one-time write-offs and restructuring charges. They may also result in goodwill and other intangible assets that are subject to impairment tests, which could result in future impairment charges.
 
If we fail to maintain appropriate internal controls in the future, we may not be able to report our financial results accurately, which may adversely affect our stock price and our business.
 
Our efforts to comply with Section 404 of the Sarbanes-Oxley Act of 2002, as amended, and the related regulations regarding our required assessment of our internal controls over financial reporting and our external auditors’ audit of that assessment requires the commitment of significant financial and managerial resources.
 
Internal control over financial reporting has inherent limitations, including human error, the possibility that controls could be circumvented or become inadequate because of changed conditions, and fraud. If we are unable to maintain effective internal controls, we may not have adequate, accurate or timely financial information, and we may be unable to meet our reporting obligations as a publicly traded company or comply with the requirements of the SEC or the Sarbanes-Oxley Act of 2002, as amended. This could result in a restatement of our financial statements, the imposition of sanctions, including the inability of registered broker dealers to make a market in our stock, or investigation by regulatory authorities. Any such action or other negative results caused by our inability to meet our reporting requirements or comply with legal and regulatory requirements or by disclosure of an accounting, reporting or control issue could adversely affect the trading price of our stock and our business.

Risks Relating to Our Financial Position and Need for Additional Capital

We have incurred a cumulative loss since inception. If we do not generate significant revenue, we may not return to profitability.
 
We have incurred significant losses since our inception in May 2001. At December 31, 2016 , our accumulated deficit was $473 million . We may incur annual operating losses over the next several years as we expand our product development, commercialization and discovery efforts. In addition, we must successfully develop and obtain regulatory approval for our product candidates, and effectively manufacture, market and sell any products we successfully develop. Accordingly, we may not generate significant revenue in the longer term and, even if we do generate significant revenue, we may never achieve long-term profitability.
 
To be profitable, we and our collaborative partners must succeed in developing and commercializing products with significant market potential. This will require us and our collaborative partners to be successful in a range of challenging activities: developing product candidates; obtaining regulatory approval for product candidates through either existing or new

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regulatory approval pathways; clearing allegedly infringing patent rights; enforcing our patent rights; and manufacturing, distributing, marketing and selling products. Our potential profitability will also be adversely impacted by the entry of competitive products and, if so, the degree of the impact could be affected by whether the entry is before or after the launch of our products. We may never succeed in these activities and may never generate revenues that are significant enough to achieve profitability. Even if we achieve profitability in the future, we may not be able to sustain profitability in subsequent periods. Our failure to become or remain profitable would depress our market value and could impair our ability to raise capital, expand our business, discover or develop other therapeutic candidates or continue our operations. A decline in the value of our company could cause our shareholders to lose all or part of their investment.

We will require substantial funds and may require additional capital to execute our business plan and, if additional capital is not available, we may need to delay, limit or cease our product development efforts or other operations. If we are unable to fund our obligations under our collaboration and license agreements, we may breach those agreements and our collaboration partners could terminate those agreements.
 
As of December 31, 2016 , we had cash, cash equivalents and marketable securities totaling approximately $353.2 million . For the year ended December 31, 2016 , we had a net loss of $21.0 million and our operations provided cash of $7.9 million . We will continue to require substantial funds to conduct research and development, process development, manufacturing, nonclinical testing and clinical trials of our product candidates, as well as funds necessary to manufacture and market products that are approved for commercial sale. Because successful development and commercialization of our product candidates is uncertain, we are unable to estimate the actual funds we will require to complete research and development and commercialize our products under development.
 
Our future capital requirements will depend on many factors, including but not limited to:
 
the level of sales of GLATOPA 20 mg/mL;

the successful commercialization of GLATOPA 40 mg/mL and our other product candidates;
 
the cost of advancing our product candidates and funding our development programs, including the costs of nonclinical and clinical studies and obtaining regulatory approvals;

the receipt of continuation payments under our Mylan Collaboration Agreement;

the receipt of milestone payments under our CSL License Agreement;

the continuation without disruption of development and manufacturing activities of M923 following Baxalta’s termination of the Baxalta Collaboration Agreement, which was effective on December 31, 2016;

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

the cost of litigation, including with Amphastar relating to Enoxaparin Sodium Injection, that is not otherwise covered by our collaboration agreements, or potential patent litigation with others, as well as any damages, including possibly treble damages, that may be owed to third parties should we be unsuccessful in such litigation;

the ability to enter into additional strategic alliances for our non-partnered programs, such as M923, as well as the terms and timing of any milestone, royalty or profit share payments thereunder;

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

the cost of acquiring and/or in-licensing other technologies, products or assets; and

the cost of manufacturing, marketing and sales activities, if any.
 
We expect to finance and manage our planned operating and capital expenditure requirements principally through our current cash, cash equivalents and marketable securities, capital raised through our collaboration and license agreements and equity financings, including utilization of our At-the-Market financing facility, continuation and milestone payments and product revenues under existing collaboration and license agreements. We believe that these funds will be sufficient to meet our operating requirements through at least the end of 2018. We may seek additional funding in the future through third-party

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collaborations and licensing arrangements, public or private debt financings or from other sources. Additional funds may not be available to us on acceptable terms or at all. If we are unable to obtain funding on a timely basis, we may be required to significantly curtail one or more of our research or development programs. We also may not be able to fund our obligations under one or more of our collaboration and license agreements, which could enable one or more of our collaborators to terminate their agreements with us, and therefore harm our business, financial condition and results of operations.

Raising additional capital by issuing securities or through collaboration and licensing arrangements may cause dilution to existing stockholders, restrict our operations or require us to relinquish proprietary rights.

We may seek to raise the additional capital necessary to fund our operations through public or private equity offerings, debt financings, and collaboration and licensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, our stockholders’ ownership interest will be diluted, and the terms of such securities may include liquidation or other preferences that adversely affect our stockholders’ rights or, in the case of debt securities, require us to pay interest that would reduce our cash flows from operations or comply with certain covenants that could restrict our operations. If we raise additional funds through collaboration and licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies or product candidates, or grant licenses on terms that are not favorable to us.

Risks Relating to Development and Regulatory Approval
 
The future success of our business is significantly dependent on the success of our GLATOPA 40 mg/mL product candidate. If we are not able to obtain regulatory approval for the commercial sale of our GLATOPA 40 mg/mL product candidate, 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 GLATOPA 40 mg/mL. Our application for GLATOPA 40 mg/mL has been under review with the FDA since February 2014. To receive approval, we will be required to demonstrate to the satisfaction of the FDA, among other things, that GLATOPA 40 mg/mL:

contains the same active ingredients as COPAXONE 40 mg/mL;

is of the same dosage form, strength and route of administration as COPAXONE 40 mg/mL, and has the same labeling as the approved labeling for COPAXONE 40 mg/mL, with certain exceptions; and

meets compendia or other applicable standards for strength, quality, purity and identity, including potency.
 
In addition, approval of a generic product generally requires demonstrating that the generic drug is bioequivalent to the reference listed drug upon which it is based, meaning that there are no significant differences with respect to the rate and extent to which the active ingredients are absorbed and become available at the site of drug action. However, the FDA may or may not waive the requirements for certain bioequivalence data (including clinical data) for certain drug products, including injectable solutions that have been shown to contain the same active and inactive ingredients in the same concentration as the reference listed drug.
 
Determination of therapeutic equivalence of GLATOPA 40 mg/mL to COPAXONE 40 mg/mL will be based, in part, on our demonstration of the chemical equivalence of our version to its respective reference listed drugs. The FDA may not agree that we have adequately characterized GLATOPA 40 mg/mL or that GLATOPA 40 mg/mL and COPAXONE 40 mg/mL are chemical equivalents. In that case, the FDA may require additional information, including nonclinical or clinical trial results, to determine therapeutic equivalence or to confirm that any inactive ingredients or impurities do not compromise the product’s safety and efficacy. Provision of sufficient information for approval may be difficult, expensive and lengthy. We cannot predict whether GLATOPA 40 mg/mL will receive FDA approval as therapeutically equivalent to COPAXONE 40 mg/mL.
 
In the event that the FDA modifies its current standards for therapeutic equivalence with respect to generic versions of COPAXONE 40 mg/mL, or requires us to conduct clinical trials or complete other lengthy procedures, the commercialization of GLATOPA 40 mg/mL could be delayed or prevented or become more expensive. Regulatory approval of this or any other product may also be significantly delayed where manufacturing inspections are pending or have unresolved pending compliance issues. Delays in any part of the process or our inability to obtain regulatory approval for GLATOPA 40 mg/mL could adversely affect our operating results by restricting or significantly delaying our introduction of GLATOPA 40 mg/mL.

Moreover, on February 17, 2017, we announced that Sandoz’ third party fill/finish manufacturing partner for GLATOPA, Pfizer Inc., received an FDA warning letter. The FDA may withhold approval of pending drug applications listing the facility,

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including the ANDA for GLATOPA 40 mg/mL, until satisfactory resolution of the compliance observations in the FDA warning letter.
 
Although the BPCI Act establishes a regulatory pathway for the approval by the FDA of biosimilars, the standards for determining biosimilarity and interchangeability for biosimilars are only just being implemented by the FDA under recently developed and developing guidance. Therefore, substantial uncertainty remains about the potential value of our scientific approach and regulatory strategy for biosimilar development.
 
The regulatory climate in the United States for biosimilar versions of biologic and complex protein products remains uncertain, even following the enactment of legislation establishing a regulatory pathway for the approval of biosimilars under the Biologics Price Competition and Innovation Act, or BPCI Act. For example, the FDA only recently issued a series of draft and final guidance documents on certain matters concerning approval of biosimilars, interchangeable biologics, non-proprietary naming and labeling, as well as quality and scientific considerations. Experience will develop as the number of products and applications increase. The pathway contemplates approval of two categories of follow-on biologic products: (1) biosimilar products, which are highly similar to the existing reference product, notwithstanding minor differences in clinically inactive components, and for which there are no clinically meaningful differences from the reference product and (2) interchangeable biologic products, which in addition to being biosimilar can be expected to produce the same clinical result in any given patient without an increase in risk due to switching from the reference product. Only interchangeable biosimilar products would be considered substitutable at the retail pharmacy level without the intervention of a physician. The legislation authorizes but does not require the FDA to establish standards or criteria for determining biosimilarity and interchangeability, and also authorizes the FDA to use its discretion to determine the nature and extent of product characterization, nonclinical testing and clinical testing on a product-by-product basis.
 
Our competitive advantage in this area will depend on our success in demonstrating to the FDA that our analytics, biocharacterization and protein engineering platform technology provides a level of scientific assurance that facilitates determinations of biosimilarity and/or interchangeability, reduces the need for large scale clinical trials or other testing, and raises the scientific quality requirements for our competitors to demonstrate that their products are highly similar to a reference product. Our ability to succeed will depend in part on our ability to invest in new programs and develop data in a timeframe that enables the FDA to consider our approach within the context of the biosimilar meeting and application review process. In addition, the FDA will likely require significant new resources and expertise to review biosimilar applications, and the timeliness of the review and approval of our future applications could be adversely affected if there were a decline or even limited growth in FDA funding. Our strategy to reduce and target clinical requirements by relying on analytical and functional nonclinical data may not be successful or may take longer than strategies that rely more heavily on clinical trial data.
 
The regulatory pathway also creates a number of additional obstacles to the approval and launch of biosimilar and interchangeable products, including:
 
a requirement for the applicant, as a condition to using the pre-approval patent exchange and clearance process, to share, in confidence, the information in its abbreviated pathway application with the reference product company’s and patent owner’s counsel;

the inclusion of multiple potential patent rights in the patent clearance process; and

a grant to each reference product company of 12 years of marketing exclusivity following the reference product approval.
 
Furthermore, the regulatory pathway creates the risk that the reference product company, during its 12-year marketing exclusivity period, will develop and replace its product with a non-substitutable or modified product that may also qualify for an additional 12-year marketing exclusivity period, reducing the opportunity for substitution at the retail pharmacy level for interchangeable biosimilars. Finally, the legislation also creates the risk that, as reference product and biosimilar companies gain experience with the regulatory pathway, subsequent FDA determinations or court rulings could create additional areas for potential disputes and resulting delays in biosimilars approval.
 
In addition, there is reconsideration and legislative debate that could lead to the repeal or amendment of the healthcare legislation. If the legislation is significantly amended or is repealed with respect to the biosimilar approval pathway, our opportunity to develop biosimilars (including interchangeable biologics) could be materially impaired and our business could be materially and adversely affected. Similarly, the legislative debate at the federal level regarding the federal government budget in 2013 restricted federal agency funding for the biosimilar pathway, including biosimilar user fee funding for fiscal year 2014, and has resulted in delays in hiring and in the conduct of meetings with biosimilar applicants and the review of

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biosimilar meeting and application information. The scheduling and conduct of biosimilar meeting and applications review was also suspended during the U.S. Government shutdown in October 2013, and could be subject to future suspensions as a result of future deadlocks in passage of federal appropriations bills in 2017 or future years. In addition, the hiring and regulatory freeze implemented by the federal government in 2017 and other potential regulatory reform initiatives could also impact the future implementation of the biosimilar regulatory pathway. While proposals to repeal the Affordable Care Act do not appear to include proposals to repeal the BPCI Act, there is still some uncertainty about that possibility. Depending on the timing and the extent of these funding, meeting and review disruptions, our development of biosimilar products could be delayed.
 
Our opportunity to realize value from the potential of the biosimilars market is difficult and challenging due to the significant scientific and development expertise required to develop and consistently manufacture complex protein biologics.
 
The market potential of biosimilars may be difficult to realize, in large part due to the challenges of successfully developing and manufacturing biosimilars. Biologics are therapeutic proteins and are much more complex and much more difficult to characterize and replicate than small-molecule, chemically synthesized drugs. Proteins tend to be 100 to 1000 times larger than conventional drugs, and are more susceptible to physical factors such as light, heat and agitation. They also have greater structural complexity. Protein molecules differ from one another primarily in their sequence of amino acids, which results in folding of the protein into a specific three-dimensional structure that determines its activity. Although the sequence of amino acids in a protein is consistently replicated, there are a number of changes that can occur following synthesis that create inherent variability. Chief among these is the glycosylation, or the attachment of sugars at certain amino acids. Glycosylation is critical to protein structure and function, and thoroughly characterizing and matching the glycosylation profile of a targeted biologic is essential and poses significant scientific and technical challenges. Furthermore, it is often challenging to consistently manufacture proteins with complex glycosylation profiles, especially on a commercial scale. Protein-based therapeutics are inherently heterogeneous and their structure is highly dependent on the production process and conditions. Products from one production facility can differ within an acceptable range from those produced in another facility. Similarly, physicochemical differences can also exist among different lots of the same product produced at the same facility. The physicochemical complexity and size of biologics creates significant technical and scientific challenges in their replication as biosimilar products. Accordingly, the technical complexity involved and expertise and technical skill required to successfully develop and manufacture biosimilars poses significant barriers to entry. Any difficulties encountered in developing and producing, or any inability to develop and produce, biosimilars could adversely affect our business, financial condition and results of operations.
 
Even if we are able to obtain regulatory approval for our generic and biosimilar product candidates as therapeutically equivalent or interchangeable, state pharmacy boards or agencies may conclude that our products are not substitutable at the pharmacy level for the corresponding reference product. If our generic or biosimilar products are not substitutable at the pharmacy level for the corresponding reference product, this could materially reduce sales of our products and our business would suffer.
 
Although the FDA may determine that a generic product is therapeutically equivalent to a reference product and provide it with an “A” rating in the FDA’s Orange Book, this designation is not binding on state pharmacy boards or agencies for generic drugs. As a result, in states that do not deem our generic drugs and product candidates therapeutically equivalent, physicians will be required to specifically prescribe a generic product alternative rather than have a routine substitution at the pharmacy level for the prescribed reference product. Should this occur with respect to one of our generic drugs or product candidates, it could materially reduce sales in those states which would substantially harm our business.
 
While a designation of interchangeability is a finding by the FDA that a biosimilar can be substituted at the pharmacy without physician intervention or prescription, reference product pharmaceutical companies are lobbying state legislatures and the FDA to enact physician prescription requirements, or in the absence of a prescription, physician and patient notification requirements, special labeling requirements and unique naming requirements for biosimilars which if enacted could create barriers to substitution and adoption rates of interchangeable biologics as well as non-interchangeable biosimilars. Should this occur with respect to one of our biosimilars or interchangeable biologic product candidates in a discriminatory manner, it could materially reduce sales in those states which would substantially harm our business. To date, the FDA has adopted a non-discriminatory policy that would apply the same non-proprietary naming requirements to reference products.

If our nonclinical studies and clinical trials for our novel product candidates are not successful, we will not be able to obtain regulatory approval for commercial sale of those product candidates.
 
To obtain regulatory approval for the commercial sale of our novel product candidates, we are required to demonstrate through nonclinical studies and clinical trials that our product candidates are safe and effective. Nonclinical studies and clinical trials of novel product candidates are lengthy and expensive and the historical failure rate for novel product candidates is high.
 

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A failure of one or more of our nonclinical studies or clinical trials can occur at any stage of testing. We may experience numerous unforeseen events during, or as a result of, nonclinical studies and clinical trials that could delay or prevent our ability to receive regulatory approval or commercialize our novel product candidates, including:
 
regulators or institutional review boards may not authorize us to commence a clinical trial or conduct a clinical trial at a prospective trial site;

our nonclinical studies or clinical trials may produce negative or inconclusive results, and we may be required to conduct additional nonclinical studies or clinical trials or we may abandon projects that we previously expected to be promising;

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

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

regulators or institutional review boards may require that we hold, suspend or terminate clinical research for various reasons, including noncompliance with regulatory requirements or if, in their opinion, participants are being exposed to unacceptable health risks;

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

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

we may decide to modify or expand the clinical trials we are undertaking if new agents are introduced that influence current standard of care and medical practice, warranting a revision to our clinical development plan.
 
The results from nonclinical studies of a novel product candidate and in initial human clinical studies of a novel product candidate may not predict the results that will be obtained in subsequent human clinical trials. If we are required by regulatory authorities to conduct additional clinical trials or other testing of our novel product candidates that we did not anticipate, if we are unable to successfully complete our clinical trials or other tests, or if the results of these trials are not positive or are only modestly positive, we may be delayed in obtaining marketing approval for our novel product candidates or we may not be able to obtain marketing approval at all. Our product development costs will also increase if we experience delays in testing or approvals. Significant clinical trial delays could allow our competitors to bring products to market before we do and impair our ability to commercialize our novel product candidates. If any of these events occur, 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, if approved, outside of the United States, either directly or through collaborative partners. In order to market our products in the European Union and many other foreign jurisdictions, we must obtain separate regulatory approvals and comply with the numerous and varying regulatory requirements of each jurisdiction. The approval procedure and requirements vary among countries, and can require, among other things, conducting additional testing in each jurisdiction. The time required to obtain approval abroad may differ from that required to obtain FDA approval. The foreign regulatory approval process may include all of the risks associated with obtaining FDA approval, and we may not obtain foreign regulatory approvals on a timely basis, if at all. Approval by the FDA does not ensure approval by regulatory authorities in other countries, and approval by one foreign regulatory authority does not ensure approval by regulatory authorities in any other foreign country or by the FDA. We and our collaborators may not be able to file for regulatory approvals and may not receive necessary approvals to commercialize our products in any market outside of the United States. The failure to obtain these approvals could materially adversely affect our business, financial condition, and results of operations.

Even if we obtain regulatory approvals, our marketed products will be subject to ongoing regulatory review. If we fail to comply with continuing United States and foreign regulations, we could lose our approvals to market products and our business would be seriously harmed.
 
Even after approval, any pharmaceutical products we develop will be subject to ongoing regulatory review, including the review of clinical results that are reported after our products are made commercially available. Any regulatory approvals that

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we obtain for our product candidates may also be subject to limitations on the approved indicated uses for which the product may be marketed or to the conditions of approval, or contain requirements for potentially costly post-marketing testing, including Phase 4 clinical trials, and surveillance to monitor the safety and efficacy of the product candidate. In addition, the manufacturer and manufacturing facilities we use to produce any of our product candidates will be subject to periodic review and inspection by the FDA, or foreign equivalent, and other regulatory agencies. We will be required to report any serious and unexpected adverse experiences and certain quality problems with our products and make other periodic reports to the FDA. The discovery of any new or previously unknown problems with the product, manufacturer or facility may result in restrictions on the product or manufacturer or facility, including withdrawal of the product from the market. Certain changes to an approved product, including in the way it is manufactured or promoted, often require prior FDA approval before the product as modified may be marketed. If we fail to comply with applicable FDA regulatory requirements, we may be subject to fines, warning letters, civil penalties, refusal by the FDA to approve pending applications or supplements, suspension or withdrawal of regulatory approvals, product recalls and seizures, injunctions, operating restrictions, refusal to permit the import or export of products, and/or criminal prosecutions and penalties.
 
Similarly, our commercial activities will be subject to comprehensive compliance obligations under state and federal reimbursement, Sunshine Act, anti-kickback and government pricing regulations. If we make false price reports, fail to implement adequate compliance controls or our employees violate the laws and regulations governing relationships with health care providers, we could also be subject to substantial fines and penalties, criminal prosecution and debarment from participation in the Medicare, Medicaid, or other government reimbursement programs.
 
In addition, the FDA’s policies may change and additional government regulations may be enacted that could prevent, limit, or delay regulatory approval of our product candidates. For example, in December 2016, the 21st Century Cures Act, or Cures Act, was signed into law. The Cures Act, among other things, is intended to modernize the regulation of drugs, and to spur innovation, but its ultimate implementation remains unclear. We cannot predict the likelihood, nature, or extent of government regulation that may arise from future legislation or administrative action, either in the United States or abroad. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approval that we may have obtained and we may not achieve or sustain profitability, which would adversely affect our business.

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

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

a covered benefit under its health plan;

safe, effective and medically necessary;

appropriate for the specific patient;

cost-effective; and

neither experimental nor investigational.

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

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discounts or rebates required by government health care programs or by any future relaxation of laws that restrict imports of certain medical products from countries where they may be sold at lower prices than in the United States.

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

We also anticipate that application of the existing and evolving reimbursement regimes to biosimilar products will be somewhat uncertain. In the 2016 Physician Fee Schedule Final Rule, CMS made it clear that the payment amount for a biosimilar is based on the average sales price of all products included within the same billing and payment code. In general, this means that CMS will group biosimilar products that rely on a common reference product’s biologics license application into the same payment calculation, and these products will share a common payment limit and billing code. Separate codes could reduce or significantly impair the value of interchangeability of the biosimilar. However, it is unclear what effect this will have on private payors. Reimbursement uncertainty could adversely impact market acceptance of biosimilar products.

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

Federal legislation will increase the pressure to reduce prices of pharmaceutical products paid for by Medicare or may otherwise seek to limit healthcare costs, either of which could adversely affect our revenue, if any.

The MMA changed the way Medicare covers and reimburses for pharmaceutical products. The legislation introduced a new reimbursement methodology based on average sales prices for pharmaceutical products that are used in hospital settings or under the direct supervision of a physician and, starting in 2006, expanded Medicare coverage for pharmaceutical product purchases by the elderly. In addition, the MMA requires the creation of formularies for self-administered pharmaceutical products, and provides authority for limiting the number of pharmaceutical products that will be covered in any therapeutic class and provides for plan sponsors to negotiate prices with manufacturers and suppliers of covered pharmaceutical products. As a result of the MMA and the expansion of federal coverage of pharmaceutical 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 pharmaceutical product benefits for Medicare beneficiaries, private payers 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 payers.

Furthermore, healthcare reform legislation that was enacted in 2010 and is now being implemented could significantly change the United States health care system and the reimbursement of products. A primary goal of the law is to reduce or limit the growth of health care costs, which could change the market for pharmaceuticals and biological products. The law contains provisions that will affect companies in the pharmaceutical industry and other healthcare-related industries by imposing additional costs and changes to business practices. Provisions affecting pharmaceutical companies include an increase to the mandatory rebates for pharmaceutical products sold into the Medicaid program, an extension of the rebate requirement to pharmaceutical products used in risk-based Medicaid managed care plans, an extension of mandatory discounts for pharmaceutical products sold to certain critical access hospitals, cancer hospitals and other covered entities, and discounts and fees applicable to brand-name pharmaceutical products. Although many of these provisions may not apply directly to us, they may change business practices in our industry and, assuming our products are approved for commercial sale, such changes could adversely impact our profitability.

Moreover, increasing efforts by governmental and third-party payers, in the United States and abroad, to cap or reduce healthcare costs or introduce price controls or price negotiation may cause the government or other organizations to limit both coverage and level of reimbursement for approved products and, as a result, they may not cover or provide adequate payment for our products and product candidates. We expect to experience pricing pressures in connection with the sale of any of our products and product candidates due to the trend toward managed healthcare, the increasing influence of health maintenance organizations and additional legislative changes. The downward pressure on healthcare costs in general, particularly

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prescription drugs, surgical procedures and other treatments, has become very intense. As a result, increasingly high barriers are being erected to the entry of new products.

Additionally, the BPCI Act establishes an abbreviated regulatory pathway for the approval of biosimilars and provides that reference products may receive 12 years of market exclusivity, with a possible six-month extension for pediatric products. By creating a new approval pathway for biosimilars and adjusting reimbursement for biosimilars, the new law could promote the development and commercialization of biosimilars. However, given the uncertainty of how the law will be interpreted and implemented, the impact of the law on our strategy for biosimilars as well as novel biologics remains uncertain. Other provisions in the law, such as the comparative effectiveness provisions, may ultimately impact positively or negatively both brand and biosimilars products alike depending on an applicant’s clinical data, effectiveness and cost profile. If a reference product cannot be shown to provide a benefit over other therapies, then it might receive reduced coverage and reimbursement. While this might increase market share for biosimilars based on cost savings, it could also have the effect of reducing biosimilars’ market share.

The full effects of the U.S. healthcare reform legislation cannot be known until the new law is implemented through regulations or guidance issued by the CMS and other federal and state health care agencies. While we cannot predict whether any legislative or regulatory changes will have negative or positive effects, they could have a material adverse effect on our business, financial condition and potential profitability. In addition, litigation may prevent some or all of the legislation from taking effect. In 2017 and beyond, we may face additional uncertainties as a result of likely federal and administrative efforts to repeal, substantially modify or invalidate some or all of the provisions of the U.S. healthcare reform legislation. There is no assurance that the U.S. healthcare reform legislation, as amended in the future, will not adversely affect our business and financial results, and we cannot predict how future federal or state legislative or administrative changes relating to healthcare reform will affect our business.

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

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

If we do not comply with laws regulating the protection of the environment and health and human safety, our business could be adversely affected.
 
Our research and development involves, and may in the future involve, the use of hazardous materials and chemicals and certain radioactive materials and related equipment. If an accident occurs, we could be held liable for resulting damages, which could be substantial. We are also subject to numerous environmental, health and workplace safety laws and regulations, including those governing laboratory procedures, exposure to blood-borne pathogens and the handling of biohazardous materials. Insurance may not provide adequate coverage against potential liabilities, and we do not maintain insurance for environmental liability or toxic tort claims that may be asserted against us. Additional federal, state and local laws and regulations affecting our operations may be adopted in the future. We may incur substantial costs to comply with, and substantial fines or penalties if we violate, any of these laws or regulations.
 
The FDA has reported that it has a substantial backlog of ANDA filings that have resulted in significant delays in review and approval of applications. As a result, the review and potential approval of our application for GLATOPA 40 mg/mL may be significantly delayed.
 
The FDA has reported that it has a substantial backlog of ANDA filings that have resulted in significant delays in the review and approval of ANDAs and amendments or supplements due to insufficient staffing and resources. Resource constraints have also resulted in significant delays in conducting ANDA-related pre-approval inspections. Until the backlog of ANDA filings is reduced, our application for GLATOPA 40 mg/mL and any supplements may be subject to significant delays during their review cycles, which may adversely affect our business and financial condition. In addition, the hiring freeze implemented by the federal government in 2017 could also impact the review and potential approval of our application for GLATOPA 40 mg/mL, which may adversely affect our business and financial condition.
 
Risks Relating to Intellectual Property
 

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If we are not able to obtain and enforce patent protection for our discoveries, our ability to successfully commercialize our product candidates will be harmed, and we may not be able to operate our business profitably.
 
Our success depends, in part, on our ability to protect proprietary methods and technologies that we develop under the patent and other intellectual property laws of the United States and other countries, so that we can prevent others from using our inventions and proprietary information. Because patent applications in the United States and many foreign jurisdictions are typically not published until 18 months after filing, or in some cases not at all, and because publications of discoveries in scientific literature lag behind actual discoveries, we cannot be certain that we were the first to make the inventions claimed in issued patents or pending patent applications, or that we were the first to file for protection of the inventions set forth in our patent applications. As a result, we may be required to obtain licenses under third-party patents to market our proposed products. If licenses are not available to us on acceptable terms, or at all, we will not be able to market the affected products.
 
Assuming the other requirements for patentability are met, the first inventor to file a patent application is entitled to the patent. We may be subject to a third-party preissuance submission of prior art to the U.S. Patent and Trademark Office, or U.S. PTO, or become involved in opposition, derivation, reexamination, Inter Partes Review, or IPR, or interference proceedings challenging our patent rights or the patent rights of others. For example, several of our European patents are being challenged in opposition proceedings before the European Patent Office. An adverse determination in any such submission, proceeding or litigation could reduce the scope of, or invalidate, our patent rights, allow third parties to commercialize our technology or products and compete directly with us, without payment to us, or result in our inability to manufacture or commercialize products without infringing third-party patent rights.
 
Our strategy depends on our ability to rapidly identify and seek patent protection for our discoveries. This process is expensive and time consuming, and we may not be able to file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner.
 
Despite our efforts to protect our proprietary rights, unauthorized parties may be able to obtain and use information that we regard as proprietary. The issuance of a patent does not guarantee that it is valid or enforceable, so even if we obtain patents, they may not be valid or enforceable against third parties.

Our pending patent applications may not result in issued patents. The patent position of pharmaceutical or biotechnology companies, including ours, is generally uncertain and involves complex legal and factual considerations. The standards which the U.S. PTO and its foreign counterparts use to grant patents are not always applied predictably or uniformly and can change. There is also no uniform, worldwide policy regarding the subject matter and scope of claims granted or allowable in pharmaceutical or biotechnology patents. The laws of some foreign countries do not protect proprietary information to the same extent as the laws of the United States, and many companies have encountered significant problems and costs in protecting their proprietary information in these foreign countries.
 
The breadth of patent claims allowed in any patents issued to us or to others may be unclear. The allowance of broader claims may increase the incidence and cost of patent interference proceedings and/or opposition proceedings, and the risk of infringement litigation. On the other hand, the allowance of narrower claims may limit the value of our proprietary rights. Our issued patents may not contain claims sufficiently broad to protect us against third parties with similar technologies or products, or provide us with any competitive advantage. Moreover, once they have issued, our patents and any patent for which we have licensed or may license rights may be challenged, narrowed, invalidated or circumvented. If our patents are invalidated or otherwise limited, other companies will be better able to develop products that compete with ours, which could adversely affect our competitive business position, business prospects and financial condition.
 
We also rely on trade secrets, know-how and technology, which are not protected by patents, to maintain our competitive position. If any trade secret, know-how or other technology not protected by a patent were to be disclosed to or independently developed by a competitor, our business and financial condition could be materially adversely affected.
 
Third parties may allege that we are infringing their intellectual property rights, forcing us to expend substantial resources in resulting litigation, the outcome of which would be uncertain. Any unfavorable outcome of such litigation could have a material adverse effect on our business, financial position and results of operations.
 
The issuance of our own patents does not guarantee that we have the right to practice the patented inventions. Third parties may have blocking patents that could be used to prevent us from marketing our own patented product and practicing our own patented technology.
 

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If any party asserts that we are infringing its intellectual property rights or that our creation or use of proprietary technology infringes upon its intellectual property rights, we might be forced to incur expenses to respond to and litigate the claims. Furthermore, we may be ordered to pay damages, potentially including treble damages, if we are found to have willfully infringed a party’s patent rights. In addition, if we are unsuccessful in litigation, or pending the outcome of litigation, a court could issue a temporary injunction or a permanent injunction preventing us from marketing and selling the patented drug or other technology for the life of the patent that we have been alleged or deemed to have infringed. Litigation concerning intellectual property and proprietary technologies is widespread and can be protracted and expensive, and can distract management and other key personnel from performing their duties for us.
 
Any legal action against us or our collaborators claiming damages and seeking to enjoin any activities, including commercial activities relating to the affected products, and processes could, in addition to subjecting us to potential liability for damages, require us or our collaborators to obtain a license in order to continue to manufacture or market the affected products and processes. Any license required under any patent may not be made available on commercially acceptable terms, if at all. In addition, some licenses may be non-exclusive, and therefore, our competitors may have access to the same technology licensed to us.
 
If we fail to obtain a required license or are unable to design around a patent, we may be unable to effectively market some of our technology and products, which could limit our ability to generate revenue or achieve profitability and possibly prevent us from generating revenue sufficient to sustain our operations.
 
If we remain involved in patent litigation or other proceedings to determine or enforce our intellectual property rights, we could incur substantial costs which could adversely affect our business.
 
We may need to continue to resort to litigation to enforce a patent issued to us or to determine the scope and validity of a third-party patent or other proprietary rights such as trade secrets in jurisdictions where we intend to market our products, including the United States, the European Union, and many other foreign jurisdictions. The cost to us of any litigation or other proceeding relating to determining the validity of intellectual property rights, 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 the marketing of our products in that particular jurisdiction. Counterclaims for damages and other relief may be triggered by such enforcement actions. The costs, uncertainties and counterclaims resulting from the initiation and continuation of any litigation could limit our ability to continue our operations.
 
We in-license a portion of our proprietary technologies, and if we fail to comply with our obligations under any of the related agreements, we could lose license rights that are necessary to develop our product candidates.
 
We are a party to and rely on a number of in-license agreements with third parties, such as those with the Massachusetts Institute of Technology and Rockefeller University, which give us rights to intellectual property that may be necessary for certain parts of our business. In addition, we expect to enter into additional licenses in the future. Our current in-license arrangements impose various diligence, development, royalty and other obligations on us. If we breach our obligations with regard to our exclusive in-licenses, they could be converted to non-exclusive licenses or the agreements could be terminated, which would result in our being unable to develop, manufacture and sell products that are covered by the licensed technology.
 
Risks Relating to Our Dependence on Third Parties
 
The 2006 Sandoz Collaboration Agreement is important to our business. If Sandoz AG fails to adequately perform under this collaboration, or if we or Sandoz AG terminate all or a portion of this collaboration, the development and commercialization of some of our products and product candidates, including GLATOPA 20 mg/mL and GLATOPA 40 mg/mL, would be impacted, delayed or terminated and our business would be adversely affected.
 
Either we or Sandoz AG may terminate the 2006 Sandoz Collaboration Agreement for material uncured breaches or certain events of bankruptcy or insolvency by the other party. For some of the products, for any termination of the 2006 Sandoz Collaboration Agreement other than a termination by Sandoz AG due to our uncured breach or bankruptcy, or a termination by us alone due to the need for clinical trials, we will be granted an exclusive license under certain intellectual property of Sandoz AG to develop and commercialize the particular product. In that event, we would need to expand our internal capabilities or enter into another collaboration, which could cause significant delays that could prevent us from completing the development and commercialization of such product. For some products, if Sandoz AG terminates the 2006 Sandoz Collaboration Agreement due to our uncured breach or bankruptcy, or if there is a termination by us alone due to the need for clinical trials, Sandoz AG

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would retain the exclusive right to develop and commercialize the applicable product. In that event, we would no longer have any influence over the development or commercialization strategy of such product. In addition, for other products, if Sandoz AG terminates due to our uncured breach or bankruptcy, Sandoz AG retains a right to license certain of our intellectual property without the obligation to make any additional payments for such licenses. For certain products, if the 2006 Sandoz Collaboration Agreement is terminated other than due to our uncured breach or bankruptcy, neither party will have a license to the other party’s intellectual property. In that event, we would need to expand our internal capabilities or enter into another collaboration, which, if we were able to do so, could cause significant delays that could prevent us from completing the development and commercialization of such product. Any alternative collaboration could also be on less favorable terms to us. Accordingly, if the 2006 Sandoz Collaboration Agreement is terminated, our introduction of certain products may be significantly delayed, or our revenue may be significantly reduced, either of which could have a material adverse effect on our business.
 
Under our collaboration agreement, we are dependent upon Sandoz AG to successfully continue to commercialize GLATOPA 20 mg/mL and are significantly dependent on Sandoz AG to successfully commercialize GLATOPA 40 mg/mL. We do not fully control Sandoz AG’s commercialization activities or the resources it allocates to our products. While the 2006 Sandoz Collaboration Agreement contemplates joint decision making and alignment, our interests and Sandoz AG’s interests may differ or conflict from time-to-time or we may disagree with Sandoz AG’s level of effort or resource allocation. Sandoz AG may internally prioritize our products and product candidates differently than we do or it may fail to allocate sufficient resources to effectively or optimally commercialize our products and alignment may only be achieved through dispute resolution. If these events were to occur, our business would be adversely affected.
 
The development and commercialization of our lead biosimilar product candidate, M923, could be delayed or terminated as a result of the termination of the Baxalta Collaboration Agreement, and our business may be adversely affected.
 
On September 27, 2016, Baxalta gave us twelve months’ prior written notice of the exercise of its right to terminate for its convenience the Baxalta Collaboration Agreement, or the Baxalta Termination. On December 31, 2016, we and Baxalta entered into an Asset Return and Termination Agreement pursuant to which the effective date of the Baxalta Termination was December 31, 2016. Following the effective date of the Baxalta Termination, Baxalta is not obligated to continue to perform development, manufacturing or commercialization activities for M923 except for certain transitional clinical and regulatory activities that are expected to be completed by April 2017. If Baxalta does not allocate sufficient resources for the agreed upon transitional clinical and regulatory activities for M923, there could be significant delays in the M923 program. Furthermore, there could be changes or delays in the timing of the M923 program in connection with the transition of the M923 program back to us.

In addition, following the effective date of the Baxalta Termination, we have the right to research, develop, manufacture and commercialize M923 or license a third party to do so. In the event we elect to research, develop, manufacture and commercialize M923 by ourselves, we would need to expand our internal capabilities, in connection with which there could be significant delays in the M923 program. In the event we elect to license M923 to a third party, the terms of such a license and collaboration could be less favorable than those under the Baxalta Collaboration Agreement, and finding and negotiating a new collaboration could cause significant delays in the M923 program. Any of the delays described above could prevent us from commercializing M923. In addition, we may need to seek additional financing to support the research, development and commercialization of M923, or alternatively we may decide to discontinue M923, which could have a material adverse effect on our business.
 
The Mylan Collaboration Agreement is important to our business. If we or Mylan fail to adequately perform under the Agreement, or if we or Mylan terminate the Mylan Collaboration Agreement, the development and commercialization of one or more of our biosimilar candidates, including M834, could be delayed or terminated and our business would be adversely affected.
 
The Mylan Collaboration Agreement may be terminated by either party for breach by, or bankruptcy of, the other party; for its convenience; or for certain activities involving competing products or the challenge of certain patents. Other than in the case of a termination for convenience, the terminating party shall have the right to continue the development, manufacture and commercialization of the terminated products in the terminated countries. In the case of a termination for convenience, the other party shall have the right to continue. If a termination occurs, the licenses granted to the non-continuing party for the applicable product will terminate for the terminated country. Subject to certain terms and conditions, the party that has the right to continue the development or commercialization of a given product candidate may retain royalty-bearing licenses to certain intellectual property rights, and rights to certain data, for the continued development and sale of the applicable product in the country or countries for which termination applies.
 

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If the Mylan Collaboration Agreement were terminated and we had the right to continue the development and commercialization of one or more terminated products, to fully exercise that right, we would need to expand our internal capabilities or enter into another collaboration, which, if we were able to do so, could cause significant delays that could prevent us from commercializing those products. Any alternative collaboration could be on less favorable terms to us. In addition, we may need to seek additional financing to support the development and commercialization of any terminated products, or alternatively we may decide to discontinue one or more terminated products, which could have a material adverse effect on our business. If the Mylan Collaboration Agreement were terminated and Mylan had the right to continue the development and commercialization of one or more terminated products, we would have no influence or input into those activities.
 
Under the Mylan Collaboration Agreement, we are dependent upon Mylan to successfully perform its responsibilities and activities, including conducting clinical trials for certain products and leading the commercialization of products. We do not control Mylan’s execution of its responsibilities, including commercialization activities, or the resources it allocates to our products. Our interests and Mylan’s interests may differ or conflict from time to time, or we may disagree with Mylan’s level of effort or resource allocation. Mylan may internally prioritize our products and product candidates differently than we do or it may not allocate sufficient resources to effectively or optimally execute its responsibilities or activities. If these events were to occur, our business would be adversely affected.

The CSL License Agreement is important to our business. If we or CSL fail to adequately perform under the Agreement, or if we or CSL terminate the Agreement, the development and commercialization of our novel therapeutic, M230, could be delayed or terminated and our business would be adversely affected.
 
CSL may terminate the CSL License Agreement on a product-by-product basis subject to notice periods and certain circumstances related to clinical development. We may terminate the CSL License Agreement under certain circumstances related to the development of M230 and if no activities are being conducted under the CSL License Agreement. Either party may terminate the Agreement on a product-by-product basis if certain patent challenges are made, on a product-by-product or country-by-country basis for material breaches, or due to the other party’s bankruptcy. Upon termination of the CSL License Agreement, subject to certain exceptions, the licenses granted under the CSL License Agreement terminate. In addition, dependent upon the circumstances under which the CSL License Agreement is terminated, we or CSL have the right to continue the research, development, and commercialization of terminated products, including rights to certain data, for the continued development and sale of terminated products and, subject to certain limitations, obligations to make sales-based royalty payments to the other party.
 
If the CSL License Agreement were terminated and we had the right to continue the research, development, and commercialization of one or more terminated products, to fully exercise that right, we would need to expand our internal capabilities or enter into another collaboration, which, if we were able to do so, could cause significant delays that could prevent us from commercializing those products. Any alternative collaboration could be on less favorable terms to us. In addition, we may need to seek additional financing to support the research, development and commercialization of any terminated products, or alternatively we may decide to discontinue one or more terminated products, which could have a material adverse effect on our business. If the CSL License Agreement were terminated and CSL had the right to continue the development and commercialization of one or more terminated products, we would have no influence or input into those activities.
 
Under the CSL License Agreement, we are dependent upon CSL to successfully perform its responsibilities and activities, including the research, development and commercialization of M230 and research on other Fc multimer proteins. We do not control CSL’s execution of its responsibilities or the resources it allocates to our products and product candidates. Our interests and CSL’s interests may differ or conflict from time to time, or we may disagree with CSL’s level of effort or resource allocation. CSL may internally prioritize our products and product candidates differently than we do or it may not allocate sufficient resources to effectively or optimally execute its responsibilities or activities. If these events were to occur, our business would be adversely affected.
 
We may need to enter into additional strategic alliances with other companies that can provide capabilities and funds for the development and commercialization of our product candidates. If we are unsuccessful in forming or maintaining these arrangements on favorable terms, we may have to alter our development and commercialization plans, and our business could be adversely affected.
 
Because we have limited internal capabilities for late-stage product development, manufacturing, sales, marketing and distribution, we may need to enter into strategic alliances with other companies in addition to our current alliances with Sandoz, Mylan and CSL. In such alliances, we would expect our collaboration partners to provide substantial capabilities in clinical

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development, manufacturing, regulatory affairs, sales and marketing. We may not be successful in entering into any such alliances as a result of many factors including the following:

competition in seeking appropriate collaborators;
restrictions on future strategic alliances in existing strategic alliance agreements;
a reduced number of potential collaborators due to recent business combinations of large pharmaceutical companies;
inability to negotiate strategic alliances on a timely basis; and
inability to negotiate strategic alliances on acceptable terms.

Even if we do succeed in securing such alliances, we may not be able to maintain them or they may be unsuccessful. We may be unable to maintain a strategic alliance if the development or approval of a product candidate that is the subject of the alliance is delayed or sales of an approved product that is the subject of the alliance are disappointing. The success of our collaboration agreements will depend heavily on the efforts and activities of our collaborators. Collaborators generally have significant discretion in determining the efforts and resources that they will apply to these collaborations. Any such alliance would entail numerous operational and financial risks, including significant integration and implementation challenges that could disrupt our business and divert our management's time and attention. If we are unable to secure or maintain such alliances or if such alliances are unsuccessful, we may not have the capabilities necessary to continue or complete development of our product candidates and bring them to market, which may have an adverse effect on our business.
 
In addition to product development and commercialization capabilities, we may depend on our alliances with other companies to provide substantial additional funding for development and potential commercialization of our product candidates. These arrangements may require us to relinquish rights to some of our technologies, product candidates or products which we would otherwise pursue on our own. These alliances may also involve the other company purchasing a significant number of shares of our common stock. Future alliances may involve similar or greater sales of equity, debt financing or other funding arrangements. We may not be able to obtain funding on favorable terms from these alliances, and if we are not successful in doing so, we may not have sufficient funds to develop a particular product candidate internally or to bring product candidates to market. Failure to bring our product candidates to market will prevent us from generating sales revenue, and this may substantially harm our business. Furthermore, any delay in entering into these alliances could delay the development and commercialization of our product candidates and reduce their competitiveness even if they reach the market. As a result, our business and operating results may be adversely affected.
 
If we are unable to establish sales and marketing capabilities or enter into agreements with third parties to market and sell our product candidates, we may be unable to generate product revenue.
 
We do not have a sales organization and have no experience as a company in the sale, marketing or distribution of pharmaceutical products. There are risks involved with establishing our own sales and marketing capabilities, as well as entering into arrangements with third parties to perform these services. For example, developing a sales force is expensive and time consuming and could delay any product launch. In addition, to the extent that we enter into arrangements with third parties to perform sales, marketing or distribution services, we will have less control over sales of our products and our future revenue would depend heavily on the success of the efforts of these third parties.
 
A significant change in the business operations of, a change in the financial condition of, a change in senior executive management within, or a change in control of our third-party collaborators, or any future collaboration partners or third party manufacturers could have a negative impact on our business operations.
 
Since many of our product candidates are developed under collaborations or licenses with third parties, we do not have sole decision making authority with respect to commercialization or development of those product candidates. We have built relationships and work collaboratively with our third-party collaborators and manufacturers to ensure the success of our development and commercialization efforts. A significant change in the senior management team, a change in the financial condition or a change in the business operations, including a change in control or internal corporate restructuring, of any of our collaboration partners or third-party manufacturers, could result in delayed timelines on our products. In addition, we may have to re-establish working relationships and familiarize new counterparts with our products and business. Any such change may result in the collaboration partner or third party manufacturer internally re-prioritizing our programs or decreasing resources or funding allocated to support our programs. For example, in June 2016, Baxalta Incorporated and Shire announced the completion of a combination of Baxalta Incorporated and Shire, as a result of which Baxalta Incorporated became a wholly-

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owned subsidiary of Shire. On September 27, 2016, Baxalta gave us twelve months’ prior written notice of the exercise of its right to terminate for its convenience the Baxalta Collaboration Agreement, and on December 31, 2016, we and Baxalta entered into an Asset Return and Termination Agreement pursuant to which the effective date of the Baxalta Termination was December 31, 2016. Baxalta is obligated to perform certain transitional clinical and regulatory activities that are expected to be completed by April 2017. As a result, we are dependent on Shire to allocate resources for the agreed upon transitional clinical and regulatory activities of M923, and there could be changes or delays in the timing of the M923 program in connection with the transition of the M923 program back to us. Similar changes with respect to any of our other collaborators may negatively impact our business operations.
 
General Company Related Risks
 
Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of us, which may be beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove our current management.
 
Provisions in our certificate of incorporation and our by-laws may delay or prevent an acquisition of us or a change in our management. In addition, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors. Because our board of directors is responsible for appointing the members of our management team, these provisions could in turn affect any attempt by our stockholders to replace current members of our management team. These provisions include:
 
a classified board of directors;

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

limitations on the removal of directors.
 
Moreover, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which prohibit a person who owns in excess of 15% of our outstanding voting stock from merging or combining with us for a period of three years after the date of the transaction in which the person acquired in excess of 15% of our outstanding voting stock, unless the merger or combination is approved in a prescribed manner. Finally, these provisions establish advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted upon at stockholder meetings. These provisions would apply even if the offer may be considered beneficial by some stockholders.
 
Our stock price may be volatile, and purchasers of our common stock could incur substantial losses.
 
The stock market in general and the market prices for securities of biotechnology companies in particular have experienced extreme volatility that often has been unrelated or disproportionate to the operating performance of these companies. The trading price of our common stock has been, and is likely to continue to be, volatile. Furthermore, our stock price could be subject to wide fluctuations in response to a variety of factors, including the following:
 
delays in achievement of, or failure to achieve, program milestones that are associated with the valuation of our company or significant milestone revenue;

failure of GLATOPA 20 mg/mL to sustain profitable sales or market share that meet expectations of securities analysts;

other adverse FDA decisions relating to our GLATOPA programs, including any FDA decision to delay approval of the GLATOPA 40 mg/mL ANDA until satisfactory resolution of the compliance observations in the FDA's February 2017 warning letter to Pfizer, Sandoz’ third party fill/finish manufacturing partner for GLATOPA, and an FDA decision to require additional data, including requiring clinical trials, as a condition to GLATOPA 40 mg/mL ANDA approval;

litigation involving our company or our general industry or both, including litigation pertaining to the launch of our collaborative partners’ or our competitors’ products, including without limitation, a decision in the GLATOPA 40 mg/mL patent litigation or a competitors’ related patent litigation that prevents the launch or delays the launch of our GLATOPA 40 mg/mL product;

a decision in favor of, or against, Amphastar in our patent litigation suits, a settlement related to any case; or a decision in favor of third parties in antitrust litigation filed against us;

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announcements by other companies regarding the status of their ANDAs for generic versions of COPAXONE;

FDA approval of other companies’ ANDAs for generic versions of COPAXONE;

marketing and/or launch of other companies’ generic versions of COPAXONE;

adverse FDA decisions regarding the development requirements for one of our biosimilar product candidates or failure of our other product applications to meet the requirements for regulatory review and/or approval;

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

enactment of legislation that repeals the law enacting the biosimilar regulatory approval pathway or amends the law in a manner that is adverse to our biosimilar development strategy;

failure to demonstrate therapeutic equivalence with respect to our technology-enabled generic product candidate, GLATOPA 40 mg/mL, or biosimilarity or interchangeability with respect to our biosimilar product candidates such as M923 or M834;

demonstration of or failure to demonstrate the safety and efficacy for our novel product candidates;

our inability to manufacture any products in conformance with cGMP or in sufficient quantities to meet the requirements for the commercial sale of the product or to meet market demand;

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

the discovery of unexpected or increased incidence in patients’ adverse reactions to the use of our products or product candidates or indications of other safety concerns;

developments or disputes concerning our patents or other proprietary rights;

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

termination of any of our product development and commercialization collaborations;

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

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

rapid or disorderly sales of stock by holders of significant amounts of our stock; or

significant fluctuations in the price of securities generally or biotechnology company securities specifically.
 
If any of these factors cause an adverse effect on our business, results of operations or financial condition, the price of our common stock could fall and investors may not be able to sell their common stock at or above their respective purchase prices.
 
We could be subject to class action litigation due to stock price volatility, which, if it occurs, will distract our management and could result in substantial costs or large judgments against us.
 
The stock market in general has recently experienced significant price and volume fluctuations. In addition, the market prices of securities of companies in the biotechnology industry have been extremely volatile and have experienced fluctuations that have often been unrelated or disproportionate to the operating performance of or other events at these companies. These fluctuations could adversely affect the market price of our common stock. In the past, securities class action litigation has often been brought against companies following periods of volatility in the market prices of their securities. We may be the target of similar litigation in the future. For example, we are aware that several law firms have announced investigations of potential claims against the Company concerning possible violations of federal securities laws in connection with our February 17, 2017, announcement of the FDA warning letter to Sandoz’ third party fill/finish manufacturing partner for GLATOPA. Securities

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litigation could result in substantial costs and divert our management’s attention and resources, which could cause serious harm to our business, operating results and financial condition.

Item 1B.    UNRESOLVED STAFF COMMENTS
None.
Item 2.    PROPERTIES
As of February 5, 2017, pursuant to our sublease agreements, we lease a total of approximately 263,500 square feet of office and laboratory space in Cambridge, Massachusetts:
Property Location
Approximate Square Footage
 
Use
 
Lease Expiration Date
675 West Kendall Street
Cambridge, Massachusetts 02142
78,500

 
Laboratory and Office
 
04/30/2018
320 Bent Street
Cambridge, Massachusetts 02141
105,000

 
Laboratory and Office
 
02/28/2027
301 Binney Street
Cambridge, Massachusetts 02142
80,000

 
Laboratory and Office
 
06/29/2025
 
263,500

 
 
 
 
Item 3.    LEGAL PROCEEDINGS
GLATOPA 40 mg/mL-Related Proceedings
 
On September 10, 2014, Teva and Yeda filed a suit against us and Sandoz Inc. in the United States District Court for the District of Delaware in response to the filing by Sandoz Inc. of the ANDA with a Paragraph IV certification for GLATOPA 40 mg/mL. The suit initially alleged infringement related to two Orange Book-listed patents for COPAXONE 40 mg/mL, each expiring in 2030, and sought declaratory and injunctive relief prohibiting the launch of our product until the last to expire of these patents. In April 2015, Teva and Yeda filed an additional suit against us and Sandoz Inc. in the United States District Court for the District of Delaware alleging infringement related to a third Orange Book-listed patent for COPAXONE 40 mg/mL, which issued in March 2015 and expires in 2030. In May 2015, this suit was consolidated with the initial suit that was filed in September 2014. In November 2015, Teva and Yeda filed a suit against us and Sandoz Inc. in the United States District Court for the District of Delaware alleging infringement related to a fourth Orange Book-listed patent for COPAXONE 40 mg/mL, which issued in October 2015 and expires in 2030. In December 2015, this suit was also consolidated with the initial suit that was filed in September 2014. Teva and Yeda seek declaratory and injunctive relief prohibiting the launch of GLATOPA 40 mg/mL until the expiration of these patents. On January 30, 2017, the District Court found the four patents to be invalid due to obviousness. On February 2, 2017, Teva and Yeda filed a notice of appeal of the District Court's January 30, 2017, decision to the Court of Appeals for the Federal Circuit.

On December 19, 2016, Teva and Yeda filed suit against us and Sandoz Inc. in the United States District Court for the District of Delaware again in response to the filing by Sandoz Inc. of the ANDA with a Paragraph IV certification for GLATOPA 40 mg/mL for alleged infringement of an Orange Book-listed patent for COPAXONE 40 mg/mL, U.S. Patent No. 9,402,874. On January 31, 2017, Teva filed a suit against us and Sandoz Inc. in the United States District Court for the District of New Jersey alleging infringement related to an additional patent for COPAXONE 40 mg/mL, U.S. Patent No. 9,155,775, which issued in October 2015 and expires in October 2035. We and Sandoz Inc. filed a motion to dismiss and a motion to transfer the suit to the United States District Court for the District of Delaware. On January 31, 2017, Teva voluntarily dismissed us from the New Jersey suit, maintaining the suit against Sandoz Inc. On February 2, 2017, we filed a complaint in the United States District Court for the District of Delaware seeking a declaration that U.S. Patent No. 9,155,775 is invalid, not infringed or not enforceable against us. On February 17, 2017, Teva filed a motion for preliminary injunction against Sandoz Inc. in the New Jersey suit for U.S. Patent No. 9,155,775.
 
M834-Related Proceedings
 
On July 2, 2015, we filed a petition for Inter Partes Review, or IPR, with the PTAB to challenge the validity of U.S. Patent No 8,476,239, a patent for ORENCIA owned by Bristol-Myers Squibb, or BMS. The PTAB issued a decision instituting the IPR proceedings in January 2016, and BMS filed for a rehearing by the full PTAB. Oral arguments took place in

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September 2016. On December 22, 2016, the PTAB issued a decision upholding the validity of the patent. We filed a notice of appeal in the United States Court of Appeals for the Federal Court on February 22, 2017.
 
Enoxaparin Sodium Injection-Related Proceedings
 
On September 21, 2011, we and Sandoz Inc. sued Amphastar and Actavis in the United States District Court for the District of Massachusetts for infringement of two of our patents. Also in September 2011, we filed a request for a temporary restraining order and preliminary injunction to prevent Amphastar and Actavis from selling their Enoxaparin product in the United States. In October 2011, the District Court granted our motion for a preliminary injunction and entered an order enjoining Amphastar and Actavis from advertising, offering for sale or selling their Enoxaparin product in the United States until the conclusion of a trial on the merits and required us and Sandoz Inc. to post a security bond of $100 million in connection with the litigation. Amphastar and Actavis appealed the decision to the Court of Appeals for the Federal Circuit, or CAFC, and in January 2012, the CAFC stayed the preliminary injunction. In August 2012, the CAFC vacated the preliminary injunction and remanded the case to the District Court. In September 2012, we filed a petition with the CAFC for rehearing by the full court en banc , which was denied. In February 2013, we filed a petition for a writ of certiorari for review of the CAFC decision by the United States Supreme Court, which was denied in June 2013.
 
In July 2013, the District Court granted a motion by Amphastar and Actavis for summary judgment. We filed a notice of appeal of that decision to the CAFC. In February 2014, Amphastar filed a motion to the CAFC for summary affirmance of the District Court ruling, which the CAFC denied in May 2014. On November 10, 2015, the CAFC affirmed the District Court summary judgment decision with respect to Actavis, reversed the District Court summary judgment decision with respect to Amphastar, and remanded the case against Amphastar to the District Court. On January 11, 2016, Amphastar filed a petition for rehearing by the CAFC, which was denied on February 17, 2016. On May 17, 2016, Amphastar filed a petition for a writ of certiorari for review of the CAFC decision by the United States Supreme Court, which was denied on October 3, 2016. The District Court trial is scheduled to begin on July 10, 2017. In the event that we are not successful in further prosecution or settlement of this action against Amphastar, and Amphastar is able to prove it suffered damages as a result of the preliminary injunction, we could be liable for damages for up to $35 million of the security bond. Litigation involves many risks and uncertainties, and there is no assurance that we or Sandoz Inc. will prevail in this patent enforcement suit.
 
On September 17, 2015, Amphastar filed a complaint against us and Sandoz Inc. in the United States District Court for the Central District of California. The complaint alleges that, in connection with filing the September 2011 patent infringement suit against Amphastar and Actavis, we and Sandoz Inc. sought to prevent Amphastar from selling generic Enoxaparin Sodium Injection and thereby exclude competition for generic Enoxaparin Sodium Injection in violation of federal and California anti-trust laws and California unfair business laws. Amphastar is seeking unspecified damages and fees. In December 2015, we and Sandoz Inc. filed a motion to dismiss and a motion to transfer the case. In January 2016, the case was transferred to the United States District Court for the District of Massachusetts. In February 2016, Amphastar filed a writ of mandamus with the United States Court of Appeals for the Ninth Circuit requesting that the court reverse and review the District Court’s grant of transfer, and in May 2016, the writ requested by Amphastar was denied. On July 27, 2016, our and Sandoz Inc.’s motion to dismiss was granted by the District Court, and the case was dismissed. On August 25, 2016, Amphastar filed a notice of appeal from the dismissal with the United States Court of Appeals for the First Circuit. Briefing was completed in December 2016, and oral argument was held on February 9, 2017.
 
On October 14, 2015, The Hospital Authority of Metropolitan Government of Nashville and Davidson County, Tennessee, d/b/a Nashville General Hospital, or NGH, filed a class action suit against us and Sandoz Inc. in the United States District Court for the Middle District of Tennessee on behalf of certain purchasers of LOVENOX or generic Enoxaparin Sodium Injection. The complaint alleges that, in connection with filing the September 2011 patent infringement suit against Amphastar and Actavis, we and Sandoz Inc. sought to prevent Amphastar from selling generic Enoxaparin Sodium Injection and thereby exclude competition for generic Enoxaparin Sodium Injection in violation of federal anti-trust laws. NGH is seeking injunctive relief, disgorgement of profits and unspecified damages and fees. In December 2015, we and Sandoz Inc. filed a motion to dismiss and a motion to transfer the case to the United States District Court for the District of Massachusetts. Hearings on the motions were held before a U.S. magistrate in April 2016 and February 2016, respectively. On September 29, 2016, the magistrate judge filed a Report and Recommendation to the District Court to deny the motions to dismiss and to transfer. These motions are subject to briefing and review by the District Court. While the outcome of litigation is inherently uncertain, we believe this suit is without merit, and we intend to vigorously defend ourselves in this litigation.
Item 4.    MINE SAFETY DISCLOSURES
Not applicable.

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PART II
Item 5.    MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
Our common stock is traded publicly on The NASDAQ Global Select Market under the symbol "MNTA." The following table sets forth the high and low sale prices of our common stock for the periods indicated, as reported on The NASDAQ Global Select Market:
Quarter ended
High
 
Low
March 31, 2015
$
15.98

 
$
10.22

June 30, 2015
25.56

 
14.58

September 30, 2015
23.89

 
15.61

December 31, 2015
18.85

 
14.55

March 31, 2016
$
15.15

 
$
7.86

June 30, 2016
13.30

 
8.82

September 30, 2016
14.24

 
10.50

December 31, 2016
15.90

 
10.75

Holders
On February 8, 2017, the approximate number of holders of record of our common stock was 33.
Dividends
We have never declared or paid any cash dividends on our common stock. We anticipate that, in the foreseeable future, we will continue to retain any earnings for use in the operation of our business and will not pay any cash dividends.
Equity Compensation Plan Information
Information relating to compensation plans under which our equity securities are authorized for issuance is set forth in Item 12 below.
Stock Performance Graph
The comparative stock performance graph below compares the cumulative total stockholder return (assuming reinvestment of dividends, if any) from investing $100 on December 31, 2011 through December 31, 2016, in each of (i) our common stock, (ii) The NASDAQ Composite Index and (iii) The NASDAQ Biotechnology Index (capitalization weighted).

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COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among Momenta Pharmaceuticals, Inc., the NASDAQ Composite Index,
and the NASDAQ Biotechnology Index

MNTA123120_CHART-24045.JPG
*$100 invested on 12/31/11 in stock or index, including reinvestment of dividends.
Fiscal year ending December 31.
 
12/11
 
12/12
 
12/13
 
12/14
 
12/15
 
12/16
Momenta Pharmaceuticals, Inc.
100.00

 
67.80

 
69.24

 
86.54

 
101.67

 
85.34

NASDAQ Composite
100.00

 
116.41

 
188.69

 
216.54

 
165.47

 
200.32

NASDAQ Biotechnology
100.00

 
134.68

 
307.67

 
262.08

 
232.37

 
328.76

The information included under the heading "Stock Performance Graph" in Item 5 of this Annual Report on Form 10-K is "furnished" and not "filed" and shall not be deemed to be "soliciting material" or subject to Regulation 14A, shall not be deemed "filed" for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act.
Item 6.    SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data set forth below with respect to our statements of operations and comprehensive loss data for the years ended December 31, 2016 , 2015 and 2014 and the balance sheet data as of December 31, 2016 and 2015 are derived from our audited financial statements included in this Annual Report on Form 10-K. The statements of operations and comprehensive loss data for the years ended December 31, 2013 and 2012 and the balance sheet data as of December 31, 2014 , 2013 and 2012 are derived from our audited financial statements, which are not included herein. Historical results are not necessarily indicative of future results. See the notes to the consolidated financial statements for an explanation of the method used to determine the number of shares used in computing basic and diluted net loss per share. The selected consolidated financial data set forth below should be read in conjunction with and is qualified in its entirety by our audited consolidated financial statements and related notes thereto found under Item 8 " Financial Statements and Supplementary Data " and Item 7 " Management's Discussion and Analysis of Financial Condition and Results of Operations " included in this Annual Report on Form 10-K.

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Momenta Pharmaceuticals, Inc.
Selected Financial Data
 
2016
 
2015
 
2014
 
2013
 
2012
 
(in thousands, except per share information)
Statements of Operations and Comprehensive Loss Data:
 
 
 
 
 
 
 
 
 
Collaboration revenues:
 
 
 
 
 
 
 
 
 
Product revenue
$
74,648

 
$
48,503

 
$
19,963

 
$
16,701

 
$
54,772

Research and development revenue
34,971

 
41,147

 
32,287

 
18,764

 
9,149

Total collaboration revenue
109,619

 
89,650

 
52,250

 
35,465

 
63,921

Operating expenses:
 
 
 
 
 
 
 
 
 
Research and development
119,880

 
126,033

 
106,482

 
103,999

 
80,345

General and administrative
64,466

 
48,051

 
45,164

 
41,057

 
43,682

Total operating expenses
184,346

 
174,084

 
151,646

 
145,056

 
124,027

Operating loss
(74,727
)
 
(84,434
)
 
(99,396
)
 
(109,591
)
 
(60,106
)
Interest income
2,226

 
808

 
548

 
950

 
1,238

Other income
51,498

 
313

 
248

 
233

 
220

Net loss
$
(21,003
)
 
$
(83,313
)
 
$
(98,600
)
 
$
(108,408
)
 
$
(58,648
)
 
 
 
 
 
 
 
 
 
 
Basic and diluted net loss per share
$
(0.31
)
 
$
(1.32
)
 
$
(1.91
)
 
$
(2.13
)
 
$
(1.16
)
 
 
 
 
 
 
 
 
 
 
Shares used in calculating basic and diluted net loss per share
68,656

 
63,130

 
51,664

 
50,907

 
50,411

 
 
 
 
 
 
 
 
 
 
Comprehensive loss
$
(20,921
)
 
$
(83,293
)
 
$
(98,641
)
 
$
(108,494
)
 
$
(58,456
)
 
As of December 31,
 
2016
 
2015
 
2014
 
2013
 
2012
Balance Sheet Data:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
150,738

 
$
61,461

 
$
61,349

 
$
29,766

 
$
52,990

Marketable securities
202,413

 
288,583

 
130,180

 
215,916

 
287,613

Working capital
357,324

 
335,926

 
181,541

 
243,649

 
339,006

Total assets
477,737

 
421,040

 
256,216

 
316,815

 
406,629

Deferred revenue
38,632

 
21,983

 
30,998

 
27,716

 
31,695

Other liabilities
67,197

 
29,081

 
18,850

 
19,262

 
14,447

Total liabilities
105,829

 
51,064

 
49,848

 
46,978

 
46,142

Accumulated deficit
(473,375
)
 
(452,372
)
 
(369,059
)
 
(270,459
)
 
(162,051
)
Total stockholders' equity
371,908

 
369,976

 
206,368

 
269,837

 
360,487

Item 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the notes to those financial statements appearing elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements that involve significant risks and uncertainties. As a result of many important factors, such as those set forth under "Risk Factors" in Item 1A of this Annual Report on Form 10-K, our actual results may differ materially from those anticipated in these forward-looking statements.

Business Overview

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Introduction
We are a biotechnology company focused on developing generic versions of complex drugs, biosimilars and novel therapeutics for autoimmune disease.
To date, we have devoted substantially all of our capital resource expenditures to the research and development of our product candidates. Although we were profitable in fiscal years 2010 and 2011, since that time we have been incurring operating losses and we expect to incur annual operating losses over the next several years as we advance our drug development portfolio. As of December 31, 2016 , we had an accumulated deficit of approximately $473 million . We will need to generate significant revenue to return to profitability. We expect that our return to profitability, if at all, will most likely come from the commercialization of the products in our drug development portfolio.
Recent Development—CSL License and Option Agreement
On January 5, 2017, we and CSL Behring Recombinant Facility AG, or CSL, a wholly-owned indirect subsidiary of CSL Limited, entered into a License and Option Agreement, or the CSL License Agreement, which became effective on February 17, 2017, pursuant to which we have granted CSL an exclusive worldwide license to research, develop, and commercialize our M230 nonclinical product candidate, an Fc multimer protein that is a selective immunomodulator of the Fc receptor. The CSL License Agreement also provides, on an exclusive basis, for us and CSL to conduct research on other Fc multimer proteins, and provides CSL the right to develop and commercialize these additional research products globally.
Under the terms of the CSL License Agreement, CSL has agreed to pay us a non-refundable upfront payment of $50 million . For the development and commercialization of M230, we are eligible to receive up to $550 million in contingent clinical, regulatory and sales milestone payments, and additional negotiated milestone payments for a named research stage product should that enter development.
Complex Generics
GLATOPA ® 20 mg/mL—Generic Once-daily COPAXONE ® (glatiramer acetate injection) 20 mg/mL
On April 16, 2015, the FDA approved the ANDA for once-daily GLATOPA (glatiramer acetate injection) 20 mg/mL, a generic equivalent of once-daily COPAXONE® 20 mg/mL. GLATOPA 20 mg/mL is the first "AP" rated, substitutable generic equivalent of once-daily COPAXONE. Sandoz commenced sales of GLATOPA 20 mg/mL on June 18, 2015. Under our collaboration agreement with Sandoz, we earn 50% of contractually-defined profits on GLATOPA 20 mg/mL sales. For the year ended December 31, 2016 , we recorded $74.6 million in product revenues from Sandoz' sales of GLATOPA 20 mg/mL, reflecting $78.2 million in profit share net of a deduction of $3.6 million for reimbursement to Sandoz of 50% of GLATOPA 40 mg/mL legal expenses incurred by Sandoz.
On February 17, 2017, we announced that Sandoz’ third party fill/finish manufacturing partner for GLATOPA, Pfizer Inc., received an FDA warning letter. The FDA warning letter does not restrict the production or shipment of the GLATOPA 20 mg/mL product that is currently marketed by Sandoz in the United States.
GLATOPA 40 mg/mL—Generic Three-times-weekly COPAXONE® (glatiramer acetate injection) 40 mg/mL
An ANDA seeking approval for GLATOPA 40 mg/mL, our generic version of three-times-weekly COPAXONE 40 mg/mL, was filed in February 2014 and remains under review by the FDA. Our GLATOPA 40 mg/mL formulation contains the same drug substance as GLATOPA 20 mg/mL, which we believe should help streamline the FDA review of the ANDA. To date, we are the only ANDA applicants for the three-times-weekly COPAXONE 40 mg/mL with an FDA-approved active pharmaceutical ingredient. On February 17, 2017, we announced that Sandoz’ third party fill/finish manufacturing partner for GLATOPA, Pfizer Inc., received an FDA warning letter. The FDA may withhold approval of pending drug applications listing the facility, including the ANDA for GLATOPA 40 mg/mL, until satisfactory resolution of the compliance observations in the FDA warning letter. We therefore believe that an approval of the GLATOPA 40 mg/mL ANDA in the first quarter of 2017 is unlikely.

On January 30, 2017, the District Court for the District of Delaware found four Orange Book-listed patents related to COPAXONE 40 mg/mL that we were alleged to have infringed to be invalid. Three of these patents had previously been found invalid in August 2016 by the Patent Trial and Appeal Board of the U.S. Patent and Trademark Office, or PTAB, in an Inter Partes Review filed by an unrelated third party. On February 2, 2017, Teva and Yeda filed a notice of appeal of the District Court's January 30, 2017, decision to the Court of Appeals for the Federal Circuit. This and other legal proceedings related to GLATOPA 40 mg/mL are described under "Item 3. Legal Proceedings - GLATOPA 40 mg/mL-Related Proceedings."
Enoxaparin Sodium Injection—Generic LOVENOX®

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In June 2015, we and Sandoz amended our collaboration agreement relating to Enoxaparin Sodium Injection, replacing Sandoz' obligation to pay us a royalty on net sales with an obligation to pay us 50% of contractually-defined profits on sales. The amendment, which was effective April 1, 2015, better aligned our interests in an evolving market that has seen continued pricing pressure.
Due to increased generic competition and resulting decreased market pricing for generic enoxaparin sodium injection products, Sandoz did not record any profit on sales of Enoxaparin Sodium Injection in the year ended December 31, 2016 , and therefore we recorded no product revenue for Enoxaparin Sodium Injection in the same period.
Biosimilars
M923—Biosimilar HUMIRA® (adalimumab) Candidate
In November 2016, following an interim analysis, we announced that the confirmatory, randomized, double-blind, multi-center, global study evaluating the efficacy, safety and immunogenicity of M923 in adult patients with moderate-to-severe chronic plaque psoriasis met its primary endpoint. Patients received up to 48 weeks treatment with M923, HUMIRA, or HUMIRA alternating with M923. The proportion of subjects who achieved the primary endpoint, at least 75% reduction in the Psoriasis Area and Severity Index, or PASI-75, following 16 weeks of treatment, was equivalent between M923 and HUMIRA. The estimated difference in responders was well within the pre-specified confidence interval, confirming equivalence. Equivalence was also achieved for all secondary efficacy endpoints, including the achievement of PASI-50, PASI-90, proportion achieving clear or near-clear skin, and change from baseline in absolute PASI score. Adverse events were comparable in terms of type, frequency, and severity, and were consistent with the published safety data for HUMIRA. Due to unexpectedly high enrollment rates, additional patients to those included in the interim analysis were enrolled in the study. We expect to present final analysis of the full dataset for the study at a future conference or in a future publication.
The first regulatory submission for marketing approval for M923 is planned for mid- 2017 and, subject to marketing approval and patent considerations, we are planning for the first commercial launch to be as early as the 2020 timeframe.
On September 27, 2016, Baxalta gave us twelve months ’ prior written notice of the exercise of its right to terminate for its convenience the Baxalta Collaboration Agreement, pursuant to which we and Baxalta had agreed to collaborate, on a worldwide basis, on the development and commercialization of M923. On December 31, 2016 , we and Baxalta entered into an asset return and termination agreement, or the Baxalta Termination Agreement, amending certain termination provisions of the Baxalta Collaboration Agreement. Under the terms of the Baxalta Termination Agreement, the termination of the Baxalta Collaboration Agreement was made effective December 31, 2016 . Baxalta was relieved of its obligations to continue to perform activities for M923 after December 31, 2016 , except for certain clinical and regulatory activities that are expected to be completed by April 2017, and in January 2017, Baxalta paid us a one-time cash payment of $51.2 million , representing the costs Baxalta would have incurred in performing the activities it would have performed under the Baxalta Collaboration Agreement through the original termination effective date.
M834—Biosimilar ORENCIA® (abatacept) Candidate
On January 8, 2016, we entered into a collaboration agreement, which became effective on February 9, 2016, with Mylan Ireland Limited, a wholly-owned indirect subsidiary of Mylan N.V., or Mylan, to develop and commercialize M834. In November 2016, we initiated a randomized, double-blind, three-arm, parallel group, single-dose Phase 1 clinical trial in normal healthy volunteers to compare the pharmacokinetics, safety and immunogenicity of M834 to US-sourced and EU-sourced ORENCIA. We plan to report top-line data from the trial in the second half of 2017 .
We believe there is currently limited biosimilar competition for M834. Subject to development, marketing approval and patent considerations, we expect to be able to launch M834 in the 2020 timeframe to be able to be among the first biosimilars of ORENCIA on the market.
ORENCIA's composition of matter patents expire in the United States in 2019. In December 2016, the U.S. PTAB in an Inter Partes Review we filed upheld the validity of Bristol-Myers Squibb's formulation patent '239 on ORENCIA. We are considering our options to appeal. Information about this proceeding is further discussed below under " Item 3. Legal Proceedings -- M834-Related Proceedings ."
Other Biosimilar Candidates
Under our Mylan collaboration, we and Mylan are also developing five other biosimilar candidates from our portfolio in addition to M834, including our undisclosed biosimilar candidate, M710. We and Mylan will share equally costs and profits (losses) related to these earlier stage product candidates. We and Mylan will share development and manufacturing responsibilities across product candidates, and Mylan will lead commercialization of the products.

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As of December 31, 2016 , we had approximately 100 employees working on our biosimilars programs. We maintain a state-of-the-art development facility for bioprocess manufacturing development and scale-up and operations.
Novel Therapeutics
We believe our novel programs discussed below could have the potential to produce product candidates capable of treating a large number of immunological disorders driven by antibodies, immune complexes, and Fc receptor biology. Such disorders include rheumatoid arthritis, autoimmune neurologic diseases such as Guillain-Barre syndrome, chronic inflammatory demyelinating neuropathy and myasthenia gravis, autoimmune blood disorders such as immune thrombocytopenic purpura, systemic autoimmune diseases such as dermatomyositis, lupus nephritis, and catastrophic antiphospholipid syndrome, antibody-mediated transplant rejection, and autoimmune blistering diseases, several of which have few treatment options.
M281 - Anti-FcRn Candidate
M281 is a fully-human monoclonal antibody that blocks the neonatal Fc receptor, or FcRn. A Phase 1 study to evaluate the safety, tolerability, pharmacokinetics and pharmacodynamics of M281 was initiated in June 2016. In January 2017, we announced that we had successfully completed five cohorts in the Phase 1 single ascending dose, or SAD, study in healthy volunteers. In the SAD portion of the study, a single dose of 30 mg/kg achieved up to 80% reduction in circulating IgG antibodies, and M281 was well-tolerated with no serious adverse events observed. The multiple ascending portion of the study was initiated in January 2017. We plan to report the full data from the single and multiple ascending dose portions of the study in the second half of 2017 .

M230 - Selective Immunomodulator of Fc receptors (SIF3) Candidate
M230, a selective immunomodulator of Fc receptors, or SIF3, is a novel homogenous recombinant Fc multimer containing three IgG Fc regions joined carefully to maximize activity. Nonclinical data have shown that M230 enhances the molecules' avidity and affinity for the Fc receptors matching the potency and efficacy of IVIg at significantly lower doses.
Pursuant to the License and Option Agreement with CSL, we have granted CSL an exclusive worldwide license to research, develop, and commercialize M230. We and CSL plan to advance this candidate with a goal of beginning clinical development in 2017 .
M254 - hsIVIg Candidate
M254 is a hyper-sialylated version of IVIg, a therapeutic drug product that contains pooled, human immunoglobulin G, or IgG, antibodies purified from blood plasma. IVIg is used to treat several inflammatory diseases, including idiopathic thrombocytopenic purpura, Kawasaki disease, and chronic inflammatory demyelinating polyneuropathy. Our hsIVIg product is currently in nonclinical development and has the potential to be developed as a high-potency alternative to IVIg. We plan to initiate an IND-enabling toxicology study in 2017 . We continue to identify and explore potential collaboration opportunities to further develop and commercialize this product candidate.
Necuparanib—Former Oncology Product Candidate
In August 2016, following the results of a planned futility analysis, we discontinued development of necuparanib, which was then being studied in a Phase 2 clinical trial. The Phase 2 clinical trial was part of a Phase 1/2 clinical trial initiated in 2012 evaluating necuparanib in combination with ABRAXANE® (nab-paclitaxel) plus gemcitabine in patients with advanced metastatic pancreatic cancer.
Equity Financings
In May 2015, we sold an aggregate of 8,337,500 shares of our common stock through an underwritten public offering at a price to the public of $19.00 per share. As a result of the offering, which included the full exercise of the underwriters' option to purchase additional shares, we received aggregate net proceeds of approximately $148.4 million , after deducting underwriting discounts and commissions and other offering expenses.
In May 2014, we entered into an At-the-Market Equity Offering Sales Agreement, or the 2014 ATM Agreement, with Stifel, Nicolaus & Company, Incorporated, or Stifel, under which we were authorized to issue and sell shares of our common stock having aggregate sales proceeds of up to $75 million from time to time through Stifel, acting as sales agent and/or principal. We paid Stifel a commission of 2.0% of the gross proceeds from the sale of shares of our common stock under this facility. The offering was conducted by us pursuant to an effective shelf registration statement on Form S-3 previously filed with the Securities and Exchange Commission, or SEC, (Reg. No. 333-188227) and a related prospectus supplement. We intend to use the net proceeds from this facility to advance our development pipeline and for general corporate purposes, including

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working capital. Between October 2014 and April 2015, we sold approximately 5.4 million shares of common stock under the 2014 ATM Agreement, raising aggregate net proceeds of approximately $73.5 million . We concluded sales under the 2014 ATM Agreement in April 2015.
In April 2015, we entered into a new ATM Agreement, or the 2015 ATM Agreement, with Stifel, under which we are authorized to issue and sell shares of our common stock having aggregate sales proceeds of up to $75 million from time to time through Stifel, acting as sales agent and/or principal. We are required to pay Stifel a commission of 2.0% of the gross proceeds from the sale of shares of our common stock under the 2015 ATM Agreement. From April 2015 through December 2015, we sold approximately 0.5 million shares of common stock under the 2015 ATM Agreement pursuant to an effective shelf registration statement previously filed with the SEC (Reg. No. 333-188227) and a related prospectus supplement, raising aggregate net proceeds of approximately $9.3 million . We did not sell any shares of common stock under the 2015 ATM Agreement in the year ended December 31, 2016 .
Results of Operations
Comparison of Years Ended December 31, 2016 , 2015 and 2014
Collaboration Revenue
Collaboration revenue includes both product revenue and research and development revenue earned under our collaborative arrangements. Product revenue includes our contractually-defined profits and/or royalties earned on Sandoz’ sales of Enoxaparin Sodium Injection and GLATOPA.

GLATOPA ® 20 mg/mL—Generic Once-daily COPAXONE® (glatiramer acetate injection) 20 mg/mL
Sandoz commenced sales of GLATOPA 20 mg/mL in the United States on June 18, 2015. We earn 50% of contractually-defined profits on Sandoz’ sales of GLATOPA 20 mg/mL. A portion of certain legal expenses for GLATOPA, including any patent infringement damages, is deducted from our profits in proportion to our 50% profit sharing interest. 
For the year ended December 31, 2016 , we recorded $74.6 million in product revenues from Sandoz’ sales of GLATOPA 20 mg/mL, reflecting $78.2 million in profit share net of a deduction of $3.6 million for reimbursement to Sandoz of 50% of GLATOPA-related legal expenses incurred by Sandoz. For the year ended December 31, 2015 , we recorded $43.4 million in product revenues from Sandoz' sales of GLATOPA 20 mg/mL, reflecting $52.5 million in profit share net of a deduction of $9.1 million for reimbursement to Sandoz of 50% of GLATOPA-related legal expenses incurred by Sandoz since 2008. The increase in product revenues of $31.2 million , or 72% from the 2015 period to the 2016 period was primarily due to a higher number of GLATOPA 20 mg/mL units sold. We expect that any future quarterly legal expense deductions will be lower as they will generally be incurred and reimbursed on a quarterly basis. We estimate that the number of prescriptions for GLATOPA 20 mg/mL represents approximately 42% of the once-daily 20 mg/mL U.S. glatiramer acetate market.

We believe there is a meaningful market opportunity for GLATOPA 20 mg/mL. The price for once-daily COPAXONE 20 mg/mL has increased over 190% since 2009, and there is no other generic for relapsing forms of multiple sclerosis currently available in the United States. Teva received marketing approval of its three-times-weekly COPAXONE 40 mg/mL in January 2014. Teva’s three-times-weekly COPAXONE 40 mg/mL accounts for approximately 81% of the overall U.S. glatiramer acetate market (20 mg/mL and 40 mg/mL) based on total prescriptions. Because GLATOPA 20 mg/mL is a substitutable generic version of the once-daily 20 mg/mL formulation of COPAXONE and not the three-times-weekly COPAXONE, the market potential of GLATOPA 20 mg/mL is negatively impacted by the conversion of patients from once-daily COPAXONE to three-times-weekly COPAXONE. Teva reported $4.2 billion in worldwide sales of COPAXONE (20 mg/mL and 40 mg/mL) in 2016 , $3.5 billion of which was from the United States.
 
Enoxaparin Sodium Injection—Generic LOVENOX®
Effective April 1, 2015, we began to earn 50% of contractually-defined profits on Sandoz' sales of Enoxaparin Sodium Injection. A portion of Enoxaparin Sodium Injection development expenses and certain legal expenses, which in the aggregate have exceeded a specified amount, are offset against profit-sharing amounts, royalties and milestone payments. Our contractual share of such development and legal expenses is subject to an annual claw-back adjustment at the end of each of the first five product years, with the product year beginning on July 1 and ending on June 30. The annual adjustment can only reduce our profits, royalties and milestones by up to 50% in a given calendar quarter and any excess amount due would be carried forward into future quarters and reduce any profits in those future periods until it is paid in full. Annual adjustments, including amounts carried forward into future periods, are recorded as a reduction in product revenue.
Sandoz did not record any profit on sales of Enoxaparin Sodium Injection in the year ended December 31, 2016 , therefore we recorded no product revenue for Enoxaparin Sodium Injection in that period.

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For the year ended December 31, 2015 , we earned $5.1 million in product revenue consisting of $6.9 million in contractual profit share and royalties, net of an annual claw-back adjustment of $1.8 million for the product year ended June 30, 2015, on Sandoz' sales of Enoxaparin Sodium Injection. As of December 31, 2015 , the 2015 annual claw-back adjustment was fully paid.
For the year ended December 31, 2014 , we earned $19.9 million in product revenue, which consists of $20.0 million in royalties on Sandoz' sales of Enoxaparin Sodium Injection, offset by $2.2 million of our contractual share of development and other expenses for the product year ended June 30, 2014, and increased by $2.1 million to reflect an adjustment to royalties earned in the product year ended June 30, 2012.
The decrease in our product revenue was $5.1 million , or 100% , from the 2015 period to the 2016 period was attributed to the change in our collaboration economics (change from a royalty to a profit sharing arrangement) and lower unit sales driven by lower market share and lower prices in response to competitor pricing reductions on enoxaparin.
The decrease in our product revenue was $14.8 million , or 74% , from the 2014 period to the 2015 period, and was attributed to the change in our collaboration economics and lower unit sales driven by lower market share and lower prices in response to competitor pricing reductions on enoxaparin.
Due to increased generic competition and resulting decreased market pricing for generic enoxaparin sodium injection products, we do not anticipate significant Enoxaparin Sodium Injection product revenue in the near future.
Research and Development Revenue
Research and development revenue generally consists of amounts earned by us under our collaborations for:
Technical development, regulatory and commercial milestones under the Sandoz and Baxalta collaborations;
 
Reimbursement of research and development services and reimbursement of development costs under our Sandoz and Baxalta collaborations; and
 
Recognition of upfront and license payments under our Baxalta and Mylan collaborations.
Research and development revenue for 2016 was $35.0 million , compared with $41.1 million for 2015 and $32.3 million for 2014 . The decrease in research and development revenue of $6.1 million , or 15% , from the 2015 period to the 2016 period resulted from $20 million in milestone payments we earned in 2015 upon GLATOPA 20 mg/mL being the sole generic of COPAXONE 20 mg/mL to receive FDA approval and upon first commercial sale of GLATOPA 20 mg/mL in June 2015, partially offset by the recognition of the remaining balance of the upfront and license payments from Baxalta of $22 million in the 2016 period as we had no further performance obligations under that collaboration agreement as of the termination effective date of December 31, 2016 . The increase in research and development revenue of $8.8 million , or 27% , from the 2014 period to the 2015 period is due to an increase of $20 million for 2015 milestone payments we earned on GLATOPA 20 mg/mL's FDA approval and launch partially offset by a decrease of $12 million in milestone payments we earned in 2014 upon achieving technical development criteria for M923 under our collaboration with Baxalta.
We expect collaborative research and development revenue earned by us related to FTE and external expense reimbursement from Sandoz will fluctuate from quarter to quarter in 2017 depending on our research and development activities. We expect to recognize the upfront payment from Mylan ratably as revenue over our performance period with quarterly revenue in 2017 of approximately $2.0 million.  
Research and Development Expense
Research and development expenses consist of costs incurred to conduct research, such as the discovery and development of our product candidates. We recognize all research and development costs as they are incurred. We track the external research and development costs incurred for each of our product candidates. Our external research and development expenses consist primarily of:
expenses incurred under agreements with consultants, third-party contract research organizations, or CROs, and investigative sites where all of our nonclinical studies and clinical trials are conducted;
costs of acquiring reference comparator materials and manufacturing nonclinical study and clinical trial supplies and other materials from contract manufacturing organizations, or CMOs, and related costs associated with release and stability testing; and
costs associated with process development activities.

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Internal research and development costs are associated with activities performed by our research and development organization and consist primarily of:
personnel-related expenses, which include salaries, benefits and share-based compensation; and
facilities and other allocated expenses, which include direct and allocated expenses for rent and maintenance of facilities, depreciation and amortization of leasehold improvements and equipment and laboratory and other supplies.
Beginning on February 9, 2016, under the Mylan Collaboration Agreement, we share collaboration expenses with Mylan. A portion of the net amount due from Mylan for its 50% share of collaboration expenses is recorded as a reduction in research and development expenses based on the nature of the cost reimbursement. Collaboration costs for development of the six biosimilar candidates under the collaboration incurred by us are recorded as research and development expense as incurred.
Research and development expense for 2016 was $119.9 million , compared with $126.0 million in 2015 and $106.5 million in 2014 . The decrease of $6.1 million , or 5% , from the 2015 period to the 2016 period resulted from a decrease of $26.5 million due to Mylan’s 50% share of collaboration costs under the cost-sharing provisions of the Mylan Collaboration Agreement, partially offset by increases of: $7.6 million in third-party research and process development costs primarily attributable to advance our biosimilar and novel autoimmune programs; $4.9 million in personnel-related expenses, of which $2.5 million is due to increased headcount and $2.4 million is primarily attributed to share-based compensation expense associated with performance-based restricted stock awards granted in 2016 that increased the amount of research and development expenses we recorded; $4.3 million in nonclinical study costs for M281, M230 and M834; $2.9 million in costs for the Phase 1 clinical studies of M281 and M834; and $0.7 million in expenses for rent and maintenance of facilities, depreciation and amortization of leasehold improvements, equipment and intangible assets.
The increase of $19.5 million , or 18% , from the 2014 period to the 2015 period primarily resulted from increases of $17.6 million in third-party research and process development costs primarily attributable to advance M834 and M281 towards the clinic; $3.3 million in clinical trial expenses as the necuparanib Phase 2 clinical trial continued to accrue patients; and $1.4 million in nonclinical studies for our novel therapeutics and early stage biosimilar programs. These increases were partially offset by a decrease of $2.5 million for purchases of antibodies to be used in our novel therapeutics research program and a decrease of $0.3 million in personnel-related expenses, primarily attributed to the reversal of prior period share-based compensation expense associated with performance-based stock awards. In 2011 and 2012, we granted broad-based performance stock awards that vested 50% upon FDA approval of our GLATOPA 20 mg/mL ANDA and 50% one year later. The awards were scheduled to expire March 28, 2015. In March 2015, we amended the awards to extend the performance period to September 2015, but with share amounts that decreased monthly. Upon the amendment, stock compensation previously recognized was reversed and new stock compensation was recognized ratably based on the date the FDA approved our GLATOPA 20 mg/mL ANDA, which occurred in April 2015, and the one year anniversary of FDA approval, or April 2016. In the year ended December 31, 2015 , research and development expense included a stock compensation credit of $5.1 million and expense of $4.0 million relating to the performance grants.
The lengthy process of securing FDA approval for generics and new drugs requires the expenditure of substantial resources. Any failure by us to obtain, or any delay in obtaining, regulatory approvals would materially adversely affect our product development efforts and our business overall. Accordingly, we cannot currently estimate with any degree of certainty the amount of time or money that we will be required to expend in the future on our product candidates prior to their regulatory approval, if such approval is ever granted. As a result of these uncertainties surrounding the timing and outcome of any approvals, we are currently unable to estimate when, if ever, our product candidates will generate revenues and cash flows.
The following table sets forth the primary components of our research and development external expenditures, including the amortization of our intangible asset, for each of our principal development programs for the years ended December 31, 2016 , 2015 and 2014 . The figures in the table include project expenditures incurred by us and reimbursed by our collaborators, but exclude project expenditures incurred by our collaborators. Although we track and accumulate personnel effort by percentage of time spent on our programs, a significant portion of our internal research and development costs, including salaries and benefits, share-based compensation, facilities, depreciation and laboratory supplies are not directly charged to programs. Therefore, our methods for accounting for internal research and development costs preclude us from reporting these

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costs on a project-by-project basis.
 
Phase of Development as of December 31, 2016
 
Year Ended December 31,
 
Project Inception to December 31, 2016
 
 
2016
 
2015
 
2014
 
External Costs Incurred by Product Candidate:
 
 
 
 
 
 
 
 
 
GLATOPA
ANDAs filed (1)
 
$
1,911

 
$
856

 
$
920

 
$
50,774

Necuparanib
(2)
 
8,504

 
11,801

 
6,739

 
45,379

Biosimilars
Various (3)
 
34,593

 
23,605

 
19,583

 
113,720

Other Novel Therapeutic Programs
Various (4)
 
21,997

 
15,999

 
5,213

 
 
Internal Costs
 
 
79,399

 
73,772

 
74,027

 
 
Subtotal
 
 
$
146,404

 
$
126,033

 
$
106,482

 
 
Less: Reimbursable from Mylan (5)
 
 
(26,524
)
 

 

 
 
Total Research and Development Expenses(5)
 
 
$
119,880

 
$
126,033

 
$
106,482

 
 
_______________________________________
(1)
On April 16, 2015, the FDA approved the ANDA for once-daily GLATOPA 20 mg/mL. Sandoz launched GLATOPA 20 mg/mL on June 18, 2015. The ANDA for GLATOPA 40 mg/mL is under FDA review.
(2)
In August 2016, following the outcome of a planned futility analysis, we discontinued development of necuparanib, an oncology product candidate then being studied in a Phase 2 clinical trial.
(3)
Biosimilars include M923, a biosimilar candidate of HUMIRA® (adalimumab), M834, a biosimilar candidate of ORENCIA® (abatacept), as well as five other biosimilar candidates. In April 2016, enrollment in the pivotal clinical trial for M923 was completed and in November 2016, following an interim analysis, we announced top-line Phase 3 results including that M923 met its primary endpoint in the study. We initiated a Phase 1 clinical trial of M834 in November 2016. Our other biosimilar candidates are in discovery and process development.
(4)
Other novel therapeutic programs include M281, for which a Phase 1 dosing study was initiated in June 2016; M230, for which we and CSL plan to advance this product candidate with a goal of beginning clinical development in 2017 ; hsIVIg, which is currently in preclinical development and we are planning to initiate an IND-enabling toxicology study in 2017 ; as well as other discovery and nonclinical stage programs.
(5)
As a result of the cost-sharing provisions of the Mylan Collaboration Agreement, we offset approximately $26.5 million against research and development costs in 2016 .
GLATOPA external expenditures increased by $1.1 million , or 123% , from the 2015 period to the 2016 period as we continued to support our GLATOPA 40 mg/mL ANDA filing. Necuparanib external expenditures decreased by $3.3 million , or 28% , from the 2015 period to the 2016 period following our decision to discontinue development of this product candidate. External expenditures for our biosimilars programs increased by $11.0 million , or 47% , from the 2015 period to the 2016 period primarily due to increased costs to advance our programs, including M834, under the Mylan Collaboration Agreement. The increase of $6.0 million , or 37% , in other novel therapeutic programs external expenditures from the 2015 period to the 2016 period was primarily due to costs incurred in the M281 Phase 1 clinical trial as well as nonclinical and process development costs to advance M230 towards the clinic. Finally, internal costs grew by $5.6 million , or 8% , from the 2015 period to the 2016 period primarily due to headcount-related costs.
Our necuparanib external expenditures increased by $5.1 million , or 75% , from the 2014 period to the 2015 period for patient accruals and CRO costs for the Phase 1/2 clinical trial. The increase of $4.0 million , or 21% , in biosimilars external expenditures from the 2014 period to the 2015 period was due to higher third-party process development and contract research costs incurred for M834 and our other early stage biosimilar candidates partially offset by lower costs for M923 as Baxalta was responsible for clinical development of M923. The increase of $10.8 million , 207% , in other novel therapeutics program external expenditures from the 2014 period to the 2015 period was due to increased nonclinical and process development to advance M281 and M230. The decrease of $0.3 million , or less than 1%, in research and development internal costs from the 2014 period to the 2015 period was primarily due to the reversal of prior period share-based compensation expense associated with performance-based stock awards discussed under " Research and Development Expense ".

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Due to the variability in the length of time necessary to develop a product, the uncertainties related to the estimated cost of the projects and ultimate ability to obtain governmental approval for commercialization, accurate and meaningful estimates of the ultimate cost to bring our product candidates to market are not available.
General and Administrative
General and administrative expenses consist primarily of salaries and other related costs for personnel in general and administrative functions, professional fees for legal and accounting services, royalty and license fees, insurance costs, and allocated rent, facility and lab supplies, and depreciation expense.
Beginning on February 9, 2016, under our collaboration agreement with Mylan we share collaboration expenses. A portion of the net amount due from Mylan for its 50% share of collaboration expenses under the cost-sharing arrangement is recorded as a reduction in general and administrative expenses based on the nature of the cost reimbursement. Collaboration costs for certain legal expenses for the six biosimilar candidates under the collaboration incurred by us are recorded as general and administrative expense as incurred.
General and administrative expense for 2016 was $64.5 million , compared with $48.1 million in 2015 and $45.2 million in 2014 . The increase of $16.4 million , or 34% , from the 2015 period to the 2016 period was due to increases of: $9.6 million in personnel-related expenses, of which $5.1 million is due to increased headcount and $4.5 million is primarily due to share-based compensation expense associated with performance-based restricted stock awards granted in 2016 that increased the amount of general and administrative expenses we recorded; $7.2 million in increased professional fees, driven mainly by consulting, legal and recruiting expenses; and $0.9 million in rent, facility and maintenance expense. These increases were partially offset by a decrease of $1.3 million for Mylan’s 50% share of collaboration costs under the cost-sharing provisions of the Mylan Collaboration Agreement.
The increase of $2.9 million , or 6% , from the 2014 period to the 2015 period was due to increases of: $2.3 million in professional fees, driven mainly by increased legal and consulting fees; $0.8 million in allocated rent and facility-related costs due to additional subleased laboratory and office space; and $0.4 million in allocated depreciation expense due to higher capital investments. The increases were partially offset by a $0.6 million decrease in personnel-related expenses primarily due to the reversal of prior period share-based compensation expenses associated with performance-based stock awards discussed under "Research and Development Expense".
We expect our general and administrative expenses, including internal and external legal and business development costs that support our various product development efforts, to vary from period to period in relation to our commercial and development activities .
Interest Income
Interest income was $2.2 million , $0.8 million and $0.5 million for the years ended December 31, 2016 , 2015 and 2014 , respectively. The increases of $1.4 million , or 175% , from the 2015 period to the 2016 period and $0.3 million , or 60% , from the 2014 period to the 2015 period were caused by higher average investment balances due to 2015 fundraising activities.
Other Income
Other income includes income related to a job creation tax award and other items of income. Other income was $51.5 million , $0.3 million and $0.2 million for the years ended December 31, 2016 , 2015 and 2014 , respectively. In the year ended December 31, 2016 , we recorded other income of $51.2 million in connection with Baxalta's termination of our collaboration agreement. We collected the termination payment in January 2017. Other income also includes $0.2 million , or one-fifth of a job creation tax award, in each of the years ended December 31, 2016 , 2015 and 2014 .
Liquidity and Capital Resources
At December 31, 2016 , we had $353.2 million in cash, cash equivalents and marketable securities and $70.2 million in collaboration receivables, which includes a $51.2 million receivable due from Baxalta in connection with the termination of the collaboration agreement that was collected in January 2017 and $15.8 million in profit share from Sandoz' sales of GLATOPA 20 mg/mL. In addition, we also held $21.8 million in restricted cash, of which $17.5 million serves as collateral for a security bond posted in the litigation against Amphastar. Our funds at December 31, 2016 were primarily invested in commercial paper, overnight repurchase agreements, asset-backed securities, corporate debt securities and United States money market funds, directly or through managed funds, with remaining maturities of 12 months or less. Our cash is deposited in and invested through highly rated financial institutions in North America. The composition and mix of cash, cash equivalents and marketable securities may change frequently as a result of our evaluation of conditions in the financial markets, the maturity of specific investments, and our near term liquidity needs. We do not believe that our cash equivalents and marketable securities were subject to significant market risk at December 31, 2016 .

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We have funded our operations primarily through the sale of equity securities and payments received under our collaboration and license agreements, including product revenue from Sandoz’ sales of Enoxaparin Sodium Injection and GLATOPA 20 mg/mL. Since our inception through December 31, 2016 , we have received $638 million through private and public issuances of equity securities, including approximately $148 million in net proceeds from our May 2015 public offering of common stock and approximately $83 million under our At-the-Market Equity Offering Sales Agreements, or the ATM Agreements, with Stifel, entered into in May 2014 and April 2015, respectively. As of December 31, 2016 , we had received a cumulative total of $738 million under our collaborations with Sandoz, including $468.6 million in revenues on sales of Enoxaparin Sodium Injection and regulatory and commercial milestones related to that product, and $138.1 million  in revenues on sales of GLATOPA 20 mg/mL and regulatory and commercial milestones related to that product. In addition, we received $86.7 million under our collaboration with Baxalta, including a $33 million upfront payment, $34.7 million in reimbursement of research and development services and costs and $19 million in license and milestone payments. In March 2016, we received a $45 million upfront payment from Mylan under the Mylan Collaboration Agreement. In the fourth quarter of 2016 , we received $60 million in milestone payments from Mylan, of which $32.9 million will be applied toward the funding of Mylan's 50% share of collaboration expenses that are expected to be incurred in 2017 .

We expect to fund our planned operating and expenditure requirements through a combination of current cash, cash equivalents and marketable securities; equity financings, including sales of common stock under our 2015 ATM Agreement; and milestone payments and product revenues under existing collaboration agreements. We may also seek funding from new collaborations and strategic alliances, debt financings and other financial arrangements. Future funding transactions may or may not be similar to our prior funding transactions. There can be no assurance that future funding transactions will be available on favorable terms, or at all. We currently believe that our current capital resources and projected milestone payments and product revenues will be sufficient to meet our operating requirements through at least the end of 2018 .
 
Year Ended December 31,
 
2016
 
2015
 
2014
 
(in thousands)
Net cash provided by (used in) operating activities
$
7,888

 
$
(71,515
)
 
$
(65,168
)
Net cash provided by (used in) investing activities
$
80,048

 
$
(163,834
)
 
$
75,173

Net cash provided by financing activities
$
1,341

 
$
235,461

 
$
21,578

Net increase in cash and cash equivalents
$
89,277

 
$
112

 
$
31,583

Cash provided by (used in) operating activities
The cash used for operating activities generally approximates our net loss adjusted for non-cash items and changes in operating assets and liabilities.
Cash provided by operating activities was $7.9 million for the year ended December 31, 2016 reflecting a net loss of $21.0 million , which was partially offset by non-cash charges of $9.1 million for depreciation and amortization of property, equipment and intangible assets, $18.3 million in share-based compensation and $0.6 million for amortization of purchased premiums on our marketable securities. The net change in our operating assets and liabilities provided cash of $0.9 million is primarily due to: a $51.2 million collaboration receivable due from Baxalta in connection with the termination of the collaboration agreement; the collection of $2.1 million in contractual profit on Sandoz' fourth quarter 2015 sales of Enoxaparin Sodium Injection; the receipt of $60 million in milestone payments from Mylan where $27.1 million was used to fund Mylan's 50% share of certain 2016 collaboration expenses and $32.9 million will be applied toward the funding of Mylan's 50% share of collaboration expenses that are expected to be incurred in 2017; and the receipt of a $45 million upfront payment from Mylan of which $6.4 million was recorded as research and development revenue in 2016 . In addition, in 2016 we recorded research and development revenue of $ 22 million representing the remaining unamortized balance of the $40 million upfront and license payments from Baxalta.
Cash used in operating activities was $71.5 million for the year ended December 31, 2015 reflecting a net loss of $83.3 million , which was partially offset by non-cash charges of $8.7 million for depreciation and amortization of property, equipment and intangible assets, $11.4 million for share-based compensation and $1.4 million for amortization of purchased premiums on our marketable securities. The net change in our operating assets and liabilities used cash of $9.7 million , primarily due to: an increase in accounts receivable of $12.0 million, which includes receivables from Sandoz totaling $17.8 million for contractual profit on sales of GLATOPA 20 mg/mL and Enoxaparin Sodium Injection and the receipt of Enoxaparin Sodium Injection royalties totaling $4.7 million; and a decrease in unbilled revenue of $1.1 million primarily due to lower reimbursable FTEs and external costs for M923.

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Cash used in operating activities was $65.2 million for the year ended December 31, 2014 reflecting a net loss of $98.6 million , which was partially offset by non-cash charges of $8.7 million for depreciation and amortization of property, equipment and intangible assets, $13.6 million for share-based compensation and $2.2 million for amortization of purchased premiums on our marketable securities. The net change in our operating assets and liabilities provided cash of $9.0 million , primarily driven by decreases in accounts receivable and unbilled revenue totaling $6.2 million , due to lower reimbursable FTEs and external costs for M923, and an increase in deferred revenue of $3.3 million , as we initially deferred revenue recognition of a $7.0 million M834 license payment from Baxalta.
Cash provided by (used in) investing activities
Cash provided by investing activities of $80 million for the year ended December 31, 2016 includes cash inflows of $445.7 million from maturities of marketable securities offset by cash outflows of $360 million for purchases of marketable securities and $5.6 million for capital equipment and leasehold improvements.
Cash used in investing activities of $163.8 million for the year ended December 31, 2015 includes cash inflows of $245.9 million from maturities of marketable securities offset by cash outflows of $405.6 million for purchases of marketable securities and $4.1 million for capital equipment and leasehold improvements.
Cash provided by investing activities of $75.2 million for the year ended December 31, 2014 includes cash inflows of $195.3 million from maturities of marketable securities offset by cash outflows of $111.8 million for purchases of marketable securities and $8.3 million for capital equipment and leasehold improvements.
Cash provided by financing activities
Cash provided by financing activities of $1.3 million for the year ended December 31, 2016 includes $2.4 million from stock option exercises and purchases of shares of our common stock through our employee stock purchase plan partially offset by $1.1 million of cash paid to tax authorities in connection with the vesting of employee performance-based restricted stock.
Cash provided by financing activities of $235.5 million for the year ended December 31, 2015 includes $148.4 million of net proceeds from the sale of 8.3 million shares of our common stock through an underwritten public offering, $64.5 million of net proceeds from the sale of 4.3 million shares of our common stock under our ATM Agreements and $24.6 million from stock option exercises and purchases of shares of our common stock through our employee stock purchase plan, for total proceeds of $237.5 million . Total proceeds were partially offset by $2.0 million of cash paid to tax authorities in connection with the vesting of employee performance-based restricted stock.
Cash provided by financing activities of $21.6 million for the year ended December 31, 2014 includes $18.3 million of net proceeds from the ATM facility and $3.3 million from stock option exercises and purchases of shares of our common stock through our employee stock purchase plan.
Contractual Obligations
Our major outstanding contractual obligations relate to license maintenance obligations including royalties payable to third parties as well as operating lease obligations.
The following table summarizes our contractual obligations at December 31, 2016 (in thousands):
Contractual Obligations
Total
 
2017
 
2018 through 2019
 
2020 through 2021
 
After 2021
License maintenance obligations
$
1,080

 
$
150

 
$
465

 
$
465

 
*

Operating lease obligations
140,198

 
11,144

 
29,534

 
29,516

 
$
70,004

Purchase obligations+
125,277

 
25,874

 
99,403

 

 

Total contractual obligations
$
266,555

 
$
37,168

 
$
129,402

 
$
29,981

 
$
70,004

_______________________________________
*
After 2021, the annual obligations, which extend through the life of the patents are approximately $0.2 million per year.
+
Purchase obligations reflect our estimate of the maximum amount we may be obligated to purchase pursuant to certain non-cancellable minimum purchase commitments. Actual amounts purchased during these periods may be less, potentially significantly less, than the amounts indicated.
Critical Accounting Policies and Estimates

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Our management's discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with United States generally accepted accounting principles, or GAAP. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, as well as the reported revenue generated and expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management's judgments and estimates.
Revenue Recognition
We generate revenue from collaboration and license agreements with pharmaceutical companies for the development and commercialization of certain of our product candidates. Collaboration and license agreements may include non-refundable upfront payments, reimbursement of research and development services and costs, payments based upon the achievement of defined collaboration objectives, license fees and profit share and/or royalties on sales of product candidates if they are successfully approved and commercialized. Our performance obligations under the collaborations may include the transfer of intellectual property rights in the form of licenses, obligations to provide research and development services and participation on certain committees with the collaborators. We make judgments that affect the periods over which we recognize revenue.
Our collaboration and license agreements may provide for reimbursement by our collaborators of a portion of our research and development expenses, and we make judgments that affect how these reimbursements are recorded. In collaborations where we are actively engaged in the research and development activities and contract directly with, manage the work of and are responsible for payments to third-party vendors for such development and related services, we recognize reimbursement of our research and development expenses as revenue.
We recognize revenue when persuasive evidence of an arrangement exists; services have been performed or products have been delivered; the fee is fixed and determinable; and collection is reasonably assured.
For collaborations with multiple-elements, at the inception of each agreement, we identify the deliverables included within the agreement and evaluate which deliverables may represent separate units of accounting based on criteria in the applicable revenue guidance, including whether the deliverable has stand-alone value to the collaborator. Deliverables under the arrangement are a separate unit of accounting if (i) the delivered item has value to the customer on a standalone basis and (ii) the arrangement includes a general right of return relative to the delivered item and delivery or performance of the undelivered items are considered probable and substantially within the Company's control. As a biotechnology entity with proprietary research and development services, we have been unable to demonstrate stand-alone value for the delivery of product licenses apart from the related research and development services as the services are essential to the functionality of the product licenses.
Arrangement consideration includes upfront payments and license payments. The Company determines how to allocate arrangement consideration to identified units of accounting based on the selling price hierarchy provided under the relevant guidance. The selling price used for each unit of accounting is based on vendor-specific objective evidence, if available, third-party evidence if vendor-specific objective evidence is not available or estimated selling price if neither vendor-specific nor third-party evidence is available. We expect, in general, to use the estimated selling price for allocating consideration to each deliverable. Management may be required to exercise considerable judgment in determining whether a deliverable is a separate unit of accounting and in estimating the selling prices of identified units of accounting under its agreements. The estimated selling prices may be based on similar license arrangements, the nature of the research and development services to be performed and market rates for similar services. The impact of any change in expected deliverables or arrangement consideration is accounted for on a prospective basis.
Upfront payments received in connection with licenses of our technology rights are deferred if facts and circumstances dictate that the product license does not have stand-alone value apart from the related research and development services and are recognized as research and development revenue over the estimated period of performance for the product. License payments are treated like upfront payments. Our estimate of the performance period is based on the period we expect to deliver research and development services under the collaboration. We periodically review our estimated periods of performance based on the progress under each arrangement and account for the impact of any changes in estimated periods of performance on a prospective basis.
At the inception of each agreement that includes milestone payments, we evaluate whether each milestone is substantive and at risk to both parties on the basis of the contingent nature of the milestone. We evaluate factors such as the scientific,

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regulatory, commercial and other risks that must be overcome to achieve the respective milestone, the level of effort and investment required to achieve the respective milestone and whether the milestone consideration is reasonable relative to all deliverables and payment terms in the arrangement in making this assessment. Non-refundable payments that are contingent upon achievement of a substantive milestone are recognized in their entirety in the period in which the milestone is achieved, assuming all other revenue recognition criteria are met. We recognize non-substantive milestone payments over the remaining estimated period of performance once the milestone is achieved. Sales-based and commercial milestones are accounted for as royalties and are recorded as revenue upon achievement of the milestone, assuming all other revenue recognition criteria are met.
We record product revenue on Sandoz' sales of Enoxaparin Sodium Injection and GLATOPA 20 mg/mL. Product revenue is based upon net sales of licensed products in licensed territories in the period the sales occur as provided by the collaboration agreement. These amounts are determined based on amounts Sandoz provides to us and involve the use of estimates and judgments, such as product sales allowances and accruals related to prompt payment discounts, chargebacks, governmental and other rebates, distributor, wholesaler and group purchasing organizations, or GPO, fees, and product returns, which could be adjusted based on actual results in the future.
Sandoz began selling Enoxaparin Sodium Injection in July 2010. Under the original payment terms of our 2003 collaboration agreement with Sandoz, or the 2003 Sandoz Collaboration Agreement, as discussed in Note 9 to our consolidated financial statements " Collaborations and License Agreements," Sandoz was obligated to pay us either a contractually-defined profit-share or royalty on net sales depending on the kind and number of other marketed generic versions of LOVENOX. We received 45% of profits from July 2010 through September 2011, a royalty on net sales from October 2011 through December 2011 and a share of profits in January 2012. From February 2012 to March 2015, we received a 10% royalty on net sales ( 12% on net sales above a certain threshold). In June 2015, we and Sandoz amended the 2003 Sandoz Collaboration Agreement, effective April 1, 2015, to provide that Sandoz would pay us 50% of contractually-defined profits on sales of Enoxaparin Sodium Injection.
Sandoz commenced sales of GLATOPA 20 mg/mL in the United States on June 18, 2015. Under the 2006 Sandoz Collaboration Agreement, we are entitled to earn 50% of contractually-defined profits on Sandoz' sales of GLATOPA 20 mg/mL. A portion of certain GLATOPA legal expenses, including any patent infringement damages, is deducted from our profits in proportion to our 50% profit sharing interest.
Fair Value Measurements
Financial assets that we measure at fair value on a recurring basis include cash equivalents and marketable securities. These financial assets are generally classified as Level 1 or 2 within the fair value hierarchy. In general, fair values determined by Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities. Fair values determined by Level 2 inputs utilize data points that are observable, such as quoted prices (adjusted), interest rates and yield curves. Fair values determined by Level 3 inputs utilize unobservable data points for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability. The fair value hierarchy level is determined by the lowest level of significant input.
Our financial assets have been initially valued at the transaction price and subsequently valued at the end of each reporting period, typically utilizing third-party pricing services or other market observable data. The pricing services utilize industry standard valuation models, including both income and market based approaches, and observable market inputs to determine value. These observable market inputs include reportable trades, benchmark yields, credit spreads, broker/dealer quotes, bids, offers, current spot rates and other industry and economic events. We validate the prices provided by its third-party pricing services by reviewing their pricing methods and matrices, obtaining market values from other pricing sources, analyzing pricing data in certain instances and confirming that the relevant markets are active. We did not adjust or override any fair value measurements provided by its pricing services as of December 31, 2016 and December 31, 2015 .
During the years ended December 31, 2016 and 2015 , there were no transfers between Level 1 and Level 2 financial assets. We did not have any non-recurring fair value measurements on any assets or liabilities at December 31, 2016 and December 31, 2015 . The carrying amounts reflected in our consolidated balance sheets for cash, accounts receivable, unbilled revenue, other current assets, accounts payable and accrued expenses approximate fair value due to their short-term maturities.
Accrued Research and Development Expenses
As part of the process of preparing financial statements, we are required to estimate and accrue expenses, the largest of which are research and development expenses. This process involves the following:

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communicating with appropriate internal personnel to identify services that have been performed on our behalf and estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of actual cost;
estimating and accruing expenses in our consolidated financial statements as of each balance sheet date based on facts and circumstances known to us at the time; and
periodically confirming the accuracy of our estimates with service providers and making adjustments, if necessary.
Examples of estimated research and development expenses that we accrue include:
fees paid to CROs in connection with process development and manufacturing activities;
fees paid to CROs in connection with nonclinical and toxicology studies and clinical trials;
fees paid to investigative sites in connection with clinical trials; and
professional service fees for consulting and related services.
We base our expense accruals related to clinical trials on our estimates of the services received and efforts expended pursuant to contracts with multiple research institutions and CROs that conduct and manage clinical trials on our behalf. The financial terms of these agreements vary from contract to contract and may result in uneven payment flows. Payments under some of these contracts depend on factors such as the successful enrollment of patients and the completion of clinical trial milestones. In accruing service fees, we estimate the time period over which services will be performed and the level of effort to be expended in each period. If we do not identify costs that we have begun to incur or if we underestimate or overestimate the level of services performed or the costs of these services, our actual expenses could differ from our estimates.
To date, we have not experienced significant changes in our estimates of accrued research and development expenses after a reporting period. However, due to the nature of estimates, we cannot assure you that we will not make changes to our estimates in the future as we become aware of additional information about the status or conduct of our clinical trials and other research activities.
Share-Based Compensation
We recognize the fair value of share-based compensation in our consolidated statements of operations and comprehensive loss. Share-based compensation expense primarily relates to stock options, restricted stock and stock issued under our stock option plans and employee stock purchase plan. For stock options, we recognize share-based compensation expense equal to the fair value of the stock options on a straight-line basis over the requisite service period. For time-based restricted stock awards, we record share-based compensation expense equal to the market value on the date of the grant on a straight-line basis over each award's explicit service period. For performance-based restricted stock awards, at each reporting period we assess the probability that the performance condition(s) will be achieved. We then expense the awards over the implicit service period based on the probability of achieving the performance objectives. We estimate an award's implicit service period based on our best estimate of the period over which an award's vesting condition(s) will be achieved. We review and evaluate these estimates on a quarterly basis and will recognize any remaining unrecognized compensation as of the date of an estimate revision over the revised remaining implicit service period. We issue new shares upon stock option exercises, upon the grant of restricted stock awards and under our employee stock purchase plan.
We estimate the fair value of each option award on the date of grant using the Black-Scholes-Merton option-pricing model. The Black-Scholes option-pricing model requires the use of highly subjective assumptions which determine the fair value of share-based awards. These assumptions include:
Expected term.   The expected term represents the period that share-based awards are expected to be outstanding. We use a blend of our own historical data and peer data to estimate option exercise patterns and post-vesting employment termination behavior, adjusted for known trends, to arrive at the estimated expected life of an option. For purposes of identifying peer entities, we consider characteristics such as industry, stage of life cycle and financial leverage. We review and evaluate these assumptions regularly to reflect recent historical data.
Expected volatility.   For our expected volatility assumption, we consider, among other factors, the implied volatilities of our currently traded options to provide an estimate of volatility based upon current trading activity. We use a blended volatility rate based upon our historical performance, as well as the implied volatilities of our currently traded options, as we believe this appropriately reflects the expected volatility of our stock. Changes in

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market price directly affect volatility and could cause share-based compensation expense to vary significantly in future reporting periods.
Risk-free interest rate.   The risk free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods corresponding with the expected term.
Expected dividends.   We have not paid and do not anticipate paying any dividends in the near future, and therefore we used an expected dividend yield of zero in the valuation model.
In addition to the Black-Scholes assumptions, we apply an estimated forfeiture rate to current period expense to recognize share-based compensation expense only for those stock and option awards expected to vest. We estimate forfeitures based upon historical data, adjusted for known trends, and will adjust our estimate of forfeitures if actual forfeitures differ, or are expected to differ from such estimates. Subsequent changes in estimated forfeitures will be recognized in full through a cumulative adjustment in the period of change and will also impact the amount of share-based compensation expense in future periods.
Income Taxes
We determine our deferred tax assets and liabilities based on the differences between the financial reporting and tax bases of assets and liabilities. The deferred tax assets and liabilities 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.
We apply judgment in the determination of the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. We recognize any material interest and penalties related to unrecognized tax benefits in income tax expense.
We file income tax returns in the United States federal jurisdiction and multiple state jurisdictions. We are no longer subject to any tax assessment from an income tax examination for years before 2013 , except to the extent that in the future we utilize net operating losses or tax credit carryforwards that originated before 2013 .
New Accounting Standards
Please see Note 2 to our consolidated financial statements, "Summary of Significant Accounting Policies" , for a discussion of new accounting standards. The notes to our consolidated financial statements are contained in Part II, Item 8 of this Annual Report on Form 10-K.
Item 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risk related to changes in interest rates. Our current investment policy is to maintain an investment portfolio consisting mainly of United States money market, government-secured, and high-grade corporate securities, directly or through managed funds, with maturities of twenty-four months or less. Our cash is deposited in and invested through highly rated financial institutions in North America. Our marketable securities are subject to interest rate risk and will fall in value if market interest rates increase. However, due to the conservative nature of our investments, low prevailing market rates and relatively short effective maturities of debt instruments, interest rate risk is mitigated. If market interest rates were to increase immediately and uniformly by 10% from levels at December 31, 2016 , we estimate that the fair value of our investment portfolio would decline by an immaterial amount. We do not own derivative financial instruments in our investment portfolio. Accordingly, we do not believe that there is any material market risk exposure with respect to derivative, foreign currency or other financial instruments that would require disclosure under this item.

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Item 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders of Momenta Pharmaceuticals, Inc.
We have audited the accompanying consolidated balance sheets of Momenta Pharmaceuticals, Inc. as of December 31, 2016 and 2015 , and the related consolidated statements of operations and comprehensive loss, stockholders' equity and cash flows for each of the three years in the period ended December 31, 2016 . These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Momenta Pharmaceuticals, Inc. at December 31, 2016 and 2015 , and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2016 , in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Momenta Pharmaceuticals, Inc.'s internal control over financial reporting as of December 31, 2016 , based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 24, 2017 expressed an unqualified opinion thereon.
 
/s/ Ernst & Young LLP
Boston, Massachusetts
 
February 24, 2017
 


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MOMENTA PHARMACEUTICALS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
 
December 31,
 
2016
 
2015
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
150,738

 
$
61,461

Marketable securities
202,413

 
288,583

Collaboration receivable
70,242

 
21,185

Prepaid expenses and other current assets
4,607

 
3,479

Total current assets
428,000

 
374,708

Property and equipment, net
20,847

 
21,896

Restricted cash
21,761

 
20,660

Intangible assets, net
5,189

 
3,528

Other long-term assets
1,940

 
248

Total assets
$
477,737

 
$
421,040

Liabilities and Stockholders' Equity
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
3,632

 
$
4,053

Accrued expenses
26,866

 
24,499

Collaboration advance
32,895

 

Deferred revenue
7,272

 
9,770

Other current liabilities
11

 
460

Total current liabilities
70,676

 
38,782

Deferred revenue, net of current portion
31,360

 
12,213

Other long-term liabilities
3,793

 
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Total liabilities
105,829

 
51,064

Commitments and contingencies (Note 14)


 


Stockholders' Equity:
 
 
 
Preferred stock, $0.01 par value per share; 5,000 shares authorized, 100 shares of Series A Junior Participating Preferred Stock, $0.01 par value per share designated and no shares issued and outstanding

 

Common stock, $0.0001 par value per share; 100,000 shares authorized, 71,305 shares issued and 71,076 shares outstanding at December 31, 2016 and 69,077 shares issued and 68,958 shares outstanding at December 31, 2015
7

 
7

Additional paid-in capital
848,304

 
824,385

Accumulated other comprehensive income
86

 
4

Accumulated deficit
(473,375
)
 
(452,372
)
Treasury stock, at cost, 229 shares and 119 shares at December 31, 2016 and December 31, 2015, respectively
(3,114
)
 
(2,048
)
Total stockholders' equity
371,908

 
369,976

Total liabilities and stockholders' equity
$
477,737

 
$
421,040

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

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MOMENTA PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(in thousands, except per share amounts)
 
Year Ended December 31,
 
2016
 
2015
 
2014
Collaboration revenues:
 
 
 
 
 
Product revenue
$
74,648

 
$
48,503

 
$
19,963

Research and development revenue
34,971

 
41,147

 
32,287

Total collaboration revenue
109,619

 
89,650

 
52,250

Operating expenses:
 
 
 
 
 
Research and development
119,880

 
126,033

 
106,482

General and administrative
64,466

 
48,051

 
45,164

Total operating expenses
184,346

 
174,084

 
151,646

Operating loss
(74,727
)
 
(84,434
)
 
(99,396
)
Other income:
 
 
 
 
 
Interest income
2,226

 
808

 
548

Other income
51,498

 
313

 
248

Total other income
53,724

 
1,121

 
796

Net loss
$
(21,003
)
 
$
(83,313
)
 
$
(98,600
)
Net loss per share:
 
 
 
 
 
Basic and diluted
$
(0.31
)
 
$
(1.32
)
 
$
(1.91
)
Weighted average shares outstanding:
 
 
 
 
 
Basic and diluted
68,656

 
63,130

 
51,664

 
 
 
 
 
 
Comprehensive loss:
 
 
 
 
 
Net loss
$
(21,003
)
 
$
(83,313
)
 
$
(98,600
)
Net unrealized holding gains (losses) on available-for-sale marketable securities
82

 
20

 
(41
)
Comprehensive loss
$
(20,921
)
 
$
(83,293
)
 
$
(98,641
)
The accompanying notes are an integral part of these consolidated financial statements.

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MOMENTA PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands)
 
Common Stock
 
 
 
 
 
 
 
Treasury Stock
 
 
 
Shares
 
Par Value
 
Additional Paid-In Capital
 
Accumulated Other Comprehensive Income (Loss)
 
Accumulated Deficit
 
Shares
 
Amount
 
Total Stockholders' Equity
Balances at December 31, 2013
52,357