3. Sale of Commercial Business

Ipsen

On April 3, 2017, the Company completed the sale of the Commercial Business to Ipsen. Pursuant to the Asset Sale Agreement, the Company may be entitled to up to $450.0 million in additional payments based on the achievement by or on behalf of Ipsen of certain milestone events if the U.S. Food and Drug Administration (the “FDA”) approves ONIVYDE for certain indications as follows: (i) $225.0 million upon the regulatory approval by the FDA of ONIVYDE for the first-line treatment of metastatic adenocarcinoma of the pancreas (a) in combination with fluorouracil and leucovorin (with or without oxaliplatin), (b) in combination with gemcitabine and abraxane or (c) following submission and filing of regulatory approval by Ipsen for purposes of commercialization by Ipsen; (ii) $150.0 million upon the regulatory approval by the FDA of ONIVYDE for the treatment of small cell lung cancer after failure of first-line chemotherapy; and (iii) $75.0 million upon the regulatory approval by the FDA of ONIVYDE for an additional indication unrelated to those described above.

In connection with the sale of the Commercial Business, on April 3, 2017, the Company entered into a transition services agreement, a sublease agreement and an intellectual property license agreement with Ipsen, among others, as further described in Note 13, “Subsequent Events.” Pursuant to the transition services agreement, the Company and Ipsen are providing certain services to each other for a period of 24 months following the closing, including Ipsen’s agreement to manufacture MM-310 and to perform certain quality related services.

Discontinued Operations and Assets Held for Sale

The condensed consolidated financial statements for the three months ended March 31, 2017 and 2016 reflect the operations of the Commercial Business as a discontinued operation. Discontinued operations for the three months ended March 31, 2017 and 2016 includes the following:

(in thousands)	Three Months Ended March 31,
	2017			2016
Revenues:
Product revenues, net	$	16,135		$	9,968
License and collaboration revenues		7,797			11,313
Other revenues		1,973			—
Total revenues		25,905			21,281
Costs and expenses:
Cost of revenues		3,890			711
Research and development expenses		3,730			4,880
Selling, general and administrative expenses		8,733			11,343
Restructuring expenses		5,265			—
Total costs and expenses		21,618			16,934
Other income and expenses:
Interest expense		(5,234	)		(5,290	)
Loss from discontinued operations		(947	)		(943	)

The carrying value of the assets and liabilities of the Commercial Business classified as “Assets held for sale” in the condensed consolidated balance sheets are as follows:

(in thousands)	March 31, 2017		December 31, 2016
Assets
Current assets:
Accounts receivable, net	$	8,985	$	17,194
Inventory		15,532		14,554
Prepaid expenses and other current assets		2,117		1,547
Total current assets held for sale		26,634		33,295
Property and equipment, net		1,376		1,553
Intangible assets, net		3,833		3,977
Goodwill		3,605		3,605
Total long-term assets held for sale		8,814		9,135
Liabilities
Current liabilities:
Accounts payable, accrued expenses and other		28,563		20,613
Deferred revenues		38,624		36,226
Total current liabilities held for sale		67,187		56,839
Deferred revenues, net of current portion		16,877		25,673
Total liabilities held for sale		16,877		25,673

Inventory

Inventory of the Commercial Business as of March 31, 2017 and December 31, 2016 consisted of the following:

(in thousands)	March 31, 2017		December 31, 2016
Raw materials	$	4,246	$	4,483
Work in process		9,053		8,651
Finished goods		2,233		1,420
Total inventory	$	15,532	$	14,554

Restructuring Activities

On January 8, 2017, the Company announced a reduction in headcount by approximately 30% in connection with the Asset Sale and the completion of its strategic pipeline review. Upon the closing of the Asset Sale and the completion of its strategic pipeline review, the Company had approximately 80 employees.

Under this corporate restructuring, for the three months ended March 31, 2017, the Company recognized total restructuring expenses of $5.3 million, which was related to contractual termination benefits for employees with pre-existing severance arrangements. These one-time employee termination benefits are comprised of severance, benefits and related costs, all of which are expected to result in cash expenditures. The Company anticipates that the majority of these payments will be made during the second quarter of 2017. The expense of $5.3 million was included in discontinued operations, as the costs are directly associated with the sale of the Commercial Business.

The following table summarizes the charges related to the restructuring activities as of March 31, 2017:

(in thousands)

Accrued Restructuring Expenses at

December 31, 2016

Expenses

Less: Payments

Accrued Restructuring Expenses at

March 31, 2017

Severance, benefits and related costs

—

5,265

—

5,265

Totals

—

5,265

—

5,265

See Note 13, “Subsequent Events,” in the accompanying notes to the condensed consolidated financial statements for additional information.

License and Collaboration Agreements Related to the Asset Sale

Baxalta

On September 23, 2014, the Company and Baxter International Inc., Baxter Healthcare Corporation and Baxter Healthcare SA entered into a license and collaboration agreement (the “Baxalta Agreement”) for the development and commercialization of ONIVYDE outside of the United States and Taiwan (the “Licensed Territory”). In connection with Baxter International Inc.’s separation of the Baxalta business, the Baxalta Agreement was assigned to Baxalta during the second quarter of 2015. As part of the Baxalta Agreement, the Company granted Baxalta an exclusive, royalty-bearing right and license under the Company’s patent rights and know-how to develop and commercialize ONIVYDE in the Licensed Territory.

On April 3, 2017, the Baxalta Agreement and all related agreements, including the Company’s agreement related to the commercial supply of ONIVYDE, were assigned to Ipsen in connection with the Asset Sale. Pursuant to the Asset Sale Agreement, the Company retained the rights to receive net milestone payments of up to $33.0 million that may become payable pursuant to the Baxalta Agreement for the ex-U.S. development and commercialization of ONIVYDE, which is comprised of potential payments of $18.0 million from the sale of ONIVYDE in two additional major European countries, $5.0 million related to the sale of ONIVYDE in the first major non-European, non-Asian country and $10.0 million for the first patient dosed in the planned small cell lung cancer trial.

PharmaEngine, Inc.

On May 5, 2011, the Company and PharmaEngine, Inc. (“PharmaEngine”) entered into an assignment, sublicense and collaboration agreement (the “PharmaEngine Agreement”) under which the Company reacquired rights in Europe and certain countries in Asia to ONIVYDE. In exchange, the Company agreed to pay PharmaEngine a nonrefundable, noncreditable upfront payment of $10.0 million and up to an additional $80.0 million in aggregate development and regulatory milestones and $130.0 million in aggregate sales milestones.

On April 3, 2017, the PharmaEngine Agreement and all related agreements, including the Company’s agreement related to its commercial supply of ONIVYDE, were assigned to Ipsen in connection with the Asset Sale.