2. Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The Company’s accompanying condensed consolidated financial statements are unaudited and have been prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP, applicable to interim periods and, in the opinion of management, include all normal and recurring adjustments that are necessary to state fairly the results of operations for the reported periods. The Company’s condensed consolidated financial statements have also been prepared on a basis substantially consistent with, and should be read in conjunction with, the Company’s audited consolidated financial statements for the year ended December 31, 2014, which were included in the Company’s Annual Report on Form 10-K that was filed with the Securities and Exchange Commission, or SEC, on February 27, 2015. The year-end condensed balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP. The results of the Company’s operations for any interim period are not necessarily indicative of the results of the Company’s operations for any other interim period or for a full fiscal year.

The accompanying consolidated financial statements reflect the operations of the Company and the Company’s wholly-owned subsidiary Momenta Pharmaceuticals Securities Corporation. All significant intercompany accounts and transactions have been eliminated.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, the Company evaluates its estimates and judgments, including those related to revenue recognition, accrued expenses, and share-based payments. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results could differ from those estimates.

Net Loss Per Common Share

The Company computes basic net loss per common share by dividing net loss by the weighted average number of common shares outstanding, which includes common stock issued and outstanding and excludes unvested shares of restricted common stock. The Company computes diluted net loss per common share by dividing net loss by the weighted average number of common shares and potential shares from outstanding stock options and unvested restricted stock determined by applying the treasury stock method.

The following table presents anti-dilutive shares for the three and nine months ended September 30, 2015 and 2014 (in thousands):

	Three Months Ended September 30,		Nine Months Ended September 30,
	2015	2014	2015	2014
Weighted-average anti-dilutive shares related to:
Outstanding stock options	2,690	6,572	4,341	5,763
Restricted stock awards	457	822	547	860

Since the Company had a net loss for all periods presented, the effect of all potentially dilutive securities is anti-dilutive. Accordingly, basic and diluted net loss per share is the same for the three and nine months ended September 30, 2015 and 2014. Anti-dilutive shares comprise the impact of the number of shares that would have been dilutive had the Company had net income plus the number of common stock equivalents that would be anti-dilutive had the Company had net income. Furthermore, 312,916 performance-based restricted common stock awards which vest on the one year anniversary of the U.S. Food and Drug Administration, or FDA, approval for Glatopa in the United States were excluded from diluted shares outstanding as the vesting condition for the amended awards, discussed further in Note 6 “Share-Based Payments,” had not been met as of September 30, 2015.

Fair Value Measurements

The tables below present information about the Company’s assets that are regularly measured and carried at fair value as of September 30, 2015 and December 31, 2014, and indicate the level within the fair value hierarchy of the valuation techniques utilized to determine such fair value (in thousands):

Description	Balance as of September 30, 2015		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)
Assets:
Cash equivalents:
Money market funds and overnight repurchase agreement	$	64,341	$	48,341	$	16,000	$	—
Marketable securities:
Corporate debt securities	102,034		—		102,034		—
Commercial paper obligations	145,345		—		145,345		—
Asset-backed securities	57,503		—		57,503		—


Total	$	369,223	$	48,341	$	320,882	$	—

Description	Balance as of December 31, 2014		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)
Assets:
Cash equivalents:
Money market funds	$	55,283	$	55,283	$	—	$	—
Corporate debt securities	980		—		980		—
Marketable securities:
Corporate debt securities	70,668		—		70,668		—
Commercial paper obligations	15,250		—		15,250		—
Foreign government bonds	18,520		—		18,520		—
Asset-backed securities	25,742		—		25,742		—


Total	$	186,443	$	55,283	$	131,160	$	—

There have been no impairments of the Company’s assets measured and carried at fair value during the three and nine months ended September 30, 2015 and 2014. In addition, there were no changes in valuation techniques or transfers between the fair value measurement levels during the three and nine months ended September 30, 2015. The fair value of Level 2 instruments classified as marketable securities were determined through third party pricing services. For a description of the Company’s validation procedures related to prices provided by third party pricing services, refer to Note 2 “Summary of Significant Accounting Policies: Fair Value Measurements” to the Company’s consolidated financial statements in its Annual Report on Form 10-K for the year ended December 31, 2014. The carrying amounts reflected in the Company’s condensed consolidated balance sheets for cash, accounts receivable, unbilled receivables, other current assets, accounts payable and accrued expenses approximate fair value due to their short-term maturities.

Cash, Cash Equivalents and Marketable Securities

The Company invests its cash in bank deposits, money market accounts, corporate debt securities, U.S. treasury obligations, commercial paper, asset-backed securities and U.S. government-sponsored enterprise securities in accordance with its investment policy. The Company has established guidelines relating to diversification and maturities that allow the Company to manage risk. The Company’s cash equivalents are primarily composed of money market funds carried at fair value, which approximates cost at September 30, 2015 and December 31, 2014. The Company classifies corporate debt securities, U.S. treasury obligations, commercial paper, asset-backed securities and U.S. government-sponsored enterprise securities as short-term and long-term marketable securities in its consolidated financial statements. See Note 2 “Summary of Significant Accounting Policies: Cash, Cash Equivalents and Marketable Securities” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014 for a discussion of the Company’s accounting policies.

The following tables summarize the Company’s cash, cash equivalents and marketable securities as of September 30, 2015 and December 31, 2014 (in thousands):

As of September 30, 2015	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Cash, money market funds and overnight repurchase agreement	$	69,987	$	—	$	—		$	69,987
Corporate debt securities due in one year or less	102,148		3		(116		)	102,035
Commercial paper obligations due in one year or less	145,205		139		—			145,344
Asset-backed securities due in one year or less	57,513		2		(12		)	57,503


Total	$	374,853	$	144	$	(128	)	$	374,869

Reported as:
Cash and cash equivalents	$	69,987	$	—	$	—		$	69,987
Marketable securities	304,866		144		(128		)	304,882

Total	$	374,853	$	144	$	(128	)	$	374,869

As of December 31, 2014	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Cash and money market funds	$	60,369	$	—	$	—		$	60,369
Corporate debt securities due in one year or less	71,669		3		(24		)	71,648
Commercial paper obligations due in one year or less	15,237		13		—			15,250
Foreign government bonds due in one year or less	18,519		2		(1		)	18,520
Asset-backed securities due in one year or less	25,751		—		(9		)	25,742

Total	$	191,545	$	18	$	(34	)	$	191,529

Reported as:
Cash and cash equivalents	$	61,349	$	—	$	—		$	61,349
Marketable securities	130,196		18		(34		)	130,180

Total	$	191,545	$	18	$	(34	)	$	191,529

At September 30, 2015 and December 31, 2014, the Company held 52 and 44 marketable securities, respectively, that were in a continuous unrealized loss position for less than one year. At September 30, 2015, there were no securities in a continuous unrealized loss position for greater than one year. At December 31, 2014, there was one marketable security in a continuous unrealized loss position for greater than one year. The Company believes the unrealized losses were caused by fluctuations in interest rates.

The following table summarizes the aggregate fair value of these securities at September 30, 2015 and December 31, 2014 (in thousands):

	As of September 30, 2015					As of December 31, 2014
	Aggregate Fair Value		Unrealized Losses			Aggregate Fair Value		Unrealized Losses
Corporate debt securities due in one year or less	$	89,793	$	(116	)	$	63,221	$	(24	)
Foreign government bonds due in one year or less	$	—	$	—		$	12,773	$	(1	)
Asset-backed securities due in one year or less	$	52,558	$	(12	)	$	25,742	$	(9	)

Treasury Stock

Treasury stock represents common stock currently owned by the Company as a result of shares withheld from the vesting of performance-based restricted common stock to satisfy minimum tax withholding requirements.

Comprehensive Income (Loss)

Comprehensive income (loss) is the change in equity of a company during a period from transactions and other events and circumstances, excluding transactions resulting from investments by owners and distributions to owners. Comprehensive income (loss) includes net (loss) income and the change in accumulated other comprehensive income (loss) for the period. Accumulated other comprehensive income (loss) consists entirely of unrealized gains and losses on available-for-sale marketable securities for all periods presented.

The following tables summarize the changes in accumulated other comprehensive income (loss) during the three and nine months ended September 30, 2015 and 2014 (in thousands):

	Unrealized Gains (Losses) on Securities Available for Sale
Balance as of July 1, 2015	$	20
Other comprehensive loss before reclassifications	(4		)
Amounts reclassified from accumulated other comprehensive income (loss)	—


Net current period other comprehensive loss	(4		)


Balance as of September 30, 2015	$	16

	Unrealized Gains (Losses) on Securities Available for Sale
Balance as of January 1, 2015	$	(16	)
Other comprehensive income before reclassifications	32
Amounts reclassified from accumulated other comprehensive income (loss)	—


Net current period other comprehensive income	32


Balance as of September 30, 2015	$	16

	Unrealized Gains (Losses) on Securities Available for Sale
Balance as of July 1, 2014	$	46
Other comprehensive income before reclassifications	(26		)
Amounts reclassified from accumulated other comprehensive income (loss)	—


Net current period other comprehensive income	(26		)


Balance as of September 30, 2014	$	20

	Unrealized Gains (Losses) on Securities Available for Sale
Balance as of January 1, 2014	$	25
Other comprehensive income before reclassifications	(5		)
Amounts reclassified from accumulated other comprehensive income (loss)	—


Net current period other comprehensive income	(5		)


Balance as of September 30, 2014	$	20

New Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers, or ASU 2014-09, which converges the FASB and the International Accounting Standards Board standards on revenue recognition. Areas of revenue recognition that will be affected include, but are not limited to, transfer of control, variable consideration, allocation of transfer pricing, licenses, time value of money, contract costs and disclosures. In July 2015, the FASB decided to delay the effective date of the new revenue standard by one year. The board also agreed to allow entities to choose to adopt the standard as of the original effective date of January 1, 2017. The FASB decided, based on its outreach to various stakeholders and the forthcoming amendments to the new revenue standard, that a deferral is necessary to provide adequate time to effectively implement the new revenue standard. The new standard will be effective for the Company on January 1, 2018. The Company is currently evaluating the method of adoption and the potential impact that ASU 2014-09 may have on its financial position and results of operations.