Commitments and Contingencies

3 Months Ended

Mar. 31, 2012

Commitments and Contingencies

Commitments and Contingencies

10.  Commitments and Contingencies

Operating leases

The Company leases its office, laboratory and manufacturing space under non-cancellable operating leases. Total rent expense under these operating leases was $700,000 and $893,000 for the three months ended March 31, 2011 and 2012, respectively.

During the first quarter of 2012, the Company entered into a lease amendment to further expand its office, laboratory and manufacturing space. The amendment leases additional space for a seven year term effective March 2012. The aggregate rent due over the seven year term of the lease amendment is approximately $2.7 million. As part of this agreement, the landlord agreed to reimburse the Company for a portion of tenant improvements made to the facility, up to a total of $464,000. Tenant improvements are recorded in deferred lease benefits on the accompanying condensed consolidated balance sheets and amortized over the term of the lease as reductions to rent expense.

During the first quarter of 2012, the Company completed tenant improvements to the leased facility and recorded a related receivable from the landlord of $329,000 in prepaid expenses and other assets on the accompanying condensed consolidated balance sheets as of March 31, 2012.

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, during 2012 and 2013, the Company will reimburse Sanofi approximately $1.2 million of previously billed amounts. The Company has recorded a contractual liability of $1.2 million in accrued expenses and other on the accompanying condensed consolidated balance sheets as of March 31, 2012. 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 three months ended March 31, 2012 in the accompanying condensed consolidated statement of operations.