Commitments and Contingencies

12 Months Ended

Dec. 31, 2012

Commitments and Contingencies

Commitments and Contingencies

19. Commitments and Contingencies

Operating Leases

        The Company leases its office, laboratory and manufacturing space under noncancelable operating leases. Total rent expense under these operating leases was $2,846,000, $3,235,000 and $4,317,000 for the years ended December 31, 2010, 2011 and 2012, respectively.

        During March 2012, the Company entered into a facility lease amendment to further expand its office, laboratory and manufacturing space. The amendment leased additional space for a seven-year term effective March 2012. The aggregate additional rent due over the seven-year term of the lease amendment is approximately $2.7 million. As part of this amendment, the landlord agreed to reimburse the Company for a portion of tenant improvements made to the facility, up to a total of $0.5 million.

        During August 2012, the Company entered into an Indenture of Lease (the "Amended Lease"), which amended and restated its facility lease, including all previous amendments. Under the Amended Lease, the Company retained its existing office, laboratory and manufacturing space at its existing facility and agreed to occupy approximately 23,000 square feet of additional space, for a total of 109,000 square feet (the "Leased Space"), all of which is leased until June 30, 2019. The aggregate minimum lease payments due over the seven-year term of the Amended Lease are approximately $31.5 million. As part of the Amended Lease, the landlord agreed to reimburse the Company for a portion of tenant improvements made to the facility, up to approximately $6.6 million, with approximately $4.6 million reimbursable in 2012 and $1.0 million reimbursable in each of 2013 and 2014. As a result, the Company recorded amounts receivable from the landlord of $5.6 million in prepaid expenses and other current assets and $1.0 million in other non-current assets, with a corresponding and offsetting entry recorded to deferred rent. As of December 31, 2012, the Company has received $0.6 million of these tenant improvement reimbursements. Tenant improvements recorded in deferred rent are amortized over the term of the lease as reductions to rent expense. The Amended Lease expires on June 30, 2019. The Company retains an option to renew the Amended Lease with respect to all of the Leased Space for an additional period of either one or five years.

        Future minimum lease payments under noncancelable operating leases at December 31, 2012 are as follows:

Years ended December 31,	(in thousands)
2013		4,319
2014		4,439
2015		4,601
2016		4,735
2017		4,838
2018 and thereafter		7,427

Contingencies

Contractual Matter

        The Company manufactures MM-121 under a license and collaboration agreement with Sanofi. Under this agreement, Sanofi reimburses the Company for direct costs incurred in manufacturing. During 2009 and 2010, the Company utilized a third party contractor to perform fill-finish manufacturing services. This third party contractor experienced U.S. Food and Drug Administration ("FDA") inspection issues with its quality control process that resulted in a formal warning letter from the FDA. Following a review by Sanofi and the Company, some MM-121 was pulled from clinical trial sites and replaced with MM-121 that was filled by a different contractor. Sanofi had requested that the Company assume financial responsibility for the MM-121 material that was pulled from clinical trial sites. The Company and Sanofi have since agreed that, beginning in April 2012 and throughout 2013, the Company will reimburse Sanofi approximately $1.2 million of previously billed amounts. The Company's revenue recognition model for manufacturing services performed under the license and collaboration agreement with Sanofi is to recognize these services over the period of performance, which is currently estimated to be 12 years from the effective date of the agreement. Removal of these previously billed amounts from the revenue recognition model and establishing this contractual liability resulted in an earnings reduction of $0.2 million for the year ended December 31, 2012. The Company has accrued $0.9 million related to this contractual matter as of December 31, 2012.