Commitments and Contingencies

9 Months Ended

Sep. 30, 2012

Commitments and Contingencies

Commitments and Contingencies

Note 11. Commitments and Contingencies

Commitments

On August 29, 2012, we entered into a contract manufacturing agreement, covering the commercial production of the active ingredient used in the manufacture of Kyprolis. On June 25, 2012, we entered into a contract manufacturing agreement, to manufacture the bulk drug substance of Kyprolis for the use in the manufacture of Kyprolis. On July 3, 2012, we entered into a contract manufacturing and supply agreement, to produce commercial quantities of the Kyprolis drug product. Minimum contractual payments to be made by the Company under its license and contract manufacturing agreements are expected to aggregate to approximately $5.3 million in 2012 and $4.3 million in 2013.

In April 2011, we moved our company headquarters to 249 East Grand Avenue, South San Francisco, California from Emeryville, California. In November 2011, the Company entered into an arrangement to lease up to an additional 171,000 square feet in a building to be constructed adjacent to our corporate headquarters in South San Francisco, California and this lease is expected to expire in approximately 2024. For accounting purposes, due to the nature of our involvement with the construction of the buildings subject to the lease agreement, we are considered to be the owner of the assets during the construction period through the lease commencement date, even though the lessor is responsible for funding and constructing the building shell and some infrastructure costs. Through September 30, 2012, we have capitalized $21.9 million of construction costs in property, plant and equipment, and have also recognized a corresponding amount in long-term debt in the accompanying consolidated balance sheets. We expect at the time of completion of the project, if all the buildings and infrastructure were completed by the lessor, our construction asset and related obligation will be in excess of $45.0 million, excluding costs related to leasehold improvements. In April 2012 we entered into a short term operating lease for an additional 20,000 square feet of office space in South San Francisco, California, to accommodate the expansion of the Company, until the expansion of the headquarters is complete. The lease expires on May 31, 2013. Rent expense for the three months and nine months ended September 30, 2012 was $1.3 million and $3.5 million, respectively compared to $0.8 million and $3.6 million for the three months and nine months ended September 30, 2011. We received no sublease income during these periods.

Contingencies

From time to time, the Company may become involved in claims and other legal matters arising in the ordinary course of business. Management is not currently aware of any matters that could have a material adverse effect on the financial position, results of operations or cash flows of the Company.