
	Restructuring Liabilities

Kendall Restructuring

In 2003, the Company adopted a plan to restructure its operations to coincide with its increasing internal emphasis on advancing drug candidates through clinical development to commercialization. The restructuring liability relates to specialized laboratory and office space that is leased to the Company pursuant to a 15-year lease that terminates in 2018, and that the Company has not used since it adopted the plan to restructure its operations in 2003. This laboratory and office space currently is subleased to third parties.

In estimating the expense and liability under its lease obligations, the Company estimated (i) the costs to be incurred to satisfy rental and build-out commitments under the lease (including operating costs), (ii) the lead-time necessary to sublease the space, (iii) the projected sublease rental rates and (iv) the anticipated durations of subleases. The Company uses a credit-adjusted risk-free rate of approximately 10% to discount the estimated cash flows. The Company reviews its estimates and assumptions on at least a quarterly basis, intends to continue such reviews until the termination of the applicable lease, and will make whatever modifications the Company believes necessary, based on the Company’s best judgment, to reflect any changed circumstances.

The activities related to the restructuring liability for the three and nine months ended September 30, 2013 and 2012 were as follows:



	Three Months Ended September 30,						Nine Months Ended September 30,
	2013			2012			2013			2012
	(in thousands)
Liability, beginning of the period	$	22,051		$	24,830		$	23,328		$	26,313
Cash payments	(3,901		)	(3,726		)	(11,323		)	(11,137		)
Cash received from subleases	2,670			2,355			8,000			7,329
Restructuring expense	524			696			1,339			1,650
Liability, end of the period	$	21,344		$	24,155		$	21,344		$	24,155

Strategic Restructuring

In October 2013, the Company adopted a restructuring plan. The restructuring plan included (i) a workforce reduction primarily related to the support of INCIVEK following the continued and rapid decline in the number of patients being treated with INCIVEK as new medicines for the treatment of HCV infection near approval, and (ii) the write-off of certain assets. This action resulted from the Company's decision to focus its investment on future opportunities in cystic fibrosis and other research and development programs.

The Company estimates that it will incur aggregate restructuring charges of approximately $35.0 million to $45.0 million, including $20.0 million to $25.0 million for employee severance and benefit costs, $6.0 million to $8.0 million in assets associated with this restructuring that have become impaired and $9.0 million to $12.0 million for other costs. The Company recorded $11.4 million of these restructuring charges in the third quarter of 2013. The Company expects the vast majority of this restructuring to be completed during the fourth quarter of 2013.

The restructuring charges recorded during the three months ended September 30, 2013 and the related liability balance as of September 30, 2013 for each major type of cost associated with this restructuring plan are as follows:



	Restructuring Expense		Cash Payments		Non-cash Expense			Restructuring Liability at September 30, 2013
	(in thousands)
Employee severance, benefits and related costs	$	409	$	—	$	—		$	409
Asset impairments	6,650		—		(6,650		)	—
Contract termination and other associated costs	4,385		—		—			4,385
Liability, end of the period	$	11,444	$	—	$	(6,650	)	$	4,794

Fan Pier Move Restructuring

In connection with transitioning its Massachusetts operations to Fan Pier in Boston, Massachusetts, the Company expects to incur restructuring charges related to its remaining lease obligations at its current facilities in Cambridge, Massachusetts starting in the fourth quarter of 2013 and continuing through April 30, 2018. Most of these restructuring charges will relate to cease use charges that will be incurred during the fourth quarter of 2013 and the first half of 2014. In addition, the Company will continue to incur restructuring charges related to several buildings in Cambridge through December 31, 2015 and the Kendall Square building through April 30, 2018. The continuing charges will relate to the difference between the Company’s estimated future cash flows related to its lease obligations and the actual cash flows that it incurs.