SUBSEQUENT EVENTS	6 Months Ended
Jun. 30, 2013
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS	12. SUBSEQUENT EVENTS Commercial Supply Agreement On July 31, 2013, the Company entered into a commercial supply agreement, or the Commercial Supply Agreement, with Sanofi Chimie, a wholly owned subsidiary of Sanofi. Under the terms of the Commercial Supply Agreement, Sanofi Chimie will manufacture and supply the API for avanafil on an exclusive basis in the United States and other territories and on a semi-exclusive basis in Europe and Latin America. Each year, the Company must purchase a minimum quantity of API from Sanofi Chimie. The Supply Agreement has an initial five year term commencing on January 1, 2014 and will auto-renew for additional two year periods unless either party makes a timely election not to renew. Either party may terminate the Supply Agreement for the other party’s uncured material breach or bankruptcy or in the event of a persistent force majeure event. License and Commercialization Agreement On July 5, 2013, the Company entered into a license and commercialization agreement, or the License Agreement, and a commercial supply agreement, or the Supply Agreement, with the Menarini Group through its subsidiary Berlin-Chemie AG, or Menarini. Under the terms of the License Agreement, Menarini received an exclusive license to commercialize and promote the Company’s drug SPEDRA™ (avanafil) for the treatment of erectile dysfunction in over 40 European countries, plus Australia and New Zealand. Additionally, the Company has agreed to transfer to Menarini ownership of the European Union marketing authorization for SPEDRA for the treatment of erectile dysfunction, which was granted by the European Commission in June 2013. Each party agreed not to develop, commercialize, or in-license any other product that operates as a phosphodiesterase type-5 inhibitor for the treatment of erectile dysfunction for a limited time period, subject to certain exceptions. Per the terms of the License Agreement, the Company will receive upfront payments and various approval and sales milestones, plus royalties on SPEDRA sales. Within the first year, the Company expects to receive approximately €39 million including upfront payments totaling €16 million. Menarini will also reimburse the Company for payments made to cover various obligations to Mitsubishi Tanabe Pharma Corporation, or MTPC, during the term of the License Agreement. The License Agreement will terminate on a country-by-country basis in the relevant territories upon the latest to occur of the following: the expiration of the last-to-expire valid Company patent covering SPEDRA; the expiration of data protection covering SPEDRA; or ten (10) years after the SPEDRA product launch. In addition, Menarini may terminate the License Agreement if certain additional regulatory obligations are imposed on SPEDRA, including if Menarini challenges the Company’s patents covering SPEDRA or if Menarini commits certain legal violations. Either party may terminate the License Agreement for the other party’s uncured material breach or bankruptcy. Under the terms of the Supply Agreement, the Company will supply Menarini with STENDRA drug product until December 31, 2018 at the latest. Menarini also has the right to manufacture STENDRA independently, provided that it continues to satisfy certain minimum purchase obligations to the Company. Following the expiration of the Supply Agreement, Menarini will be responsible for its own supply of STENDRA. Either party may terminate the Supply Agreement for the other party’s uncured material breach or bankruptcy, or upon the termination of the License Agreement. Settlement Agreement On July 18, 2013, the Company entered into a Settlement Agreement with First Manhattan terminating the pending proxy contest with respect to the election of the Company’s board of directors, or the Board, at the Company’s 2013 annual meeting of stockholders, or the Annual Meeting. Pursuant to the Settlement Agreement, the Company, among other things, reconstituted the Board with the following individuals: Michael James Astrue, J. Martin Carroll, Samuel F. Colin, M.D., Alexander J. Denner, Ph.D., Johannes J.P. Kastelein, Mark B. Logan, David York Norton, Jorge Plutzky, M.D., Herman Rosenman and Robert N. Wilson. In connection therewith, Charles J. Casamento, Ernest Mario, Ph.D., Linda M. Dairiki Shortliffe, M.D., Peter Y. Tam, and Leland F. Wilson resigned as directors of the Company. Also in connection with the Settlement Agreement, Leland Wilson resigned as Chief Executive Officer of the Company. On July 22, 2013, the reconstituted Board appointed Anthony P. Zook to serve as Chief Executive Officer. On July 25, 2013, Mr. Zook was also appointed to the Board as the eleventh member of the reconstituted Board. In connection with the Settlement Agreement, the Board has authorized the reimbursement of approximately $3.5 million to First Manhattan of expenses incurred by First Manhattan in connection with its proxy solicitation. New Chief Executive Officer On July 25, 2013, the Company’s Compensation Committee granted Mr. Zook a stock option to purchase 1,000,000 shares of the Company’s common stock, of which one-third of the shares subject to the option shall vest on the first anniversary of the date of grant, and 1/36th of the total number of shares subject to the option shall vest each month thereafter, subject to Mr. Zook’s continued services to the Company on such dates. The stock option has an exercise price of $13.70 per share and a seven year term from the date of grant.

12. SUBSEQUENT EVENTS

Commercial Supply Agreement

On July 31, 2013, the Company entered into a commercial supply agreement, or the Commercial Supply Agreement, with Sanofi Chimie, a wholly owned subsidiary of Sanofi. Under the terms of the Commercial Supply Agreement, Sanofi Chimie will manufacture and supply the API for avanafil on an exclusive basis in the United States and other territories and on a semi-exclusive basis in Europe and Latin America. Each year, the Company must purchase a minimum quantity of API from Sanofi Chimie.

The Supply Agreement has an initial five year term commencing on January 1, 2014 and will auto-renew for additional two year periods unless either party makes a timely election not to renew. Either party may terminate the Supply Agreement for the other party’s uncured material breach or bankruptcy or in the event of a persistent force majeure event.

License and Commercialization Agreement

On July 5, 2013, the Company entered into a license and commercialization agreement, or the License Agreement, and a commercial supply agreement, or the Supply Agreement, with the Menarini Group through its subsidiary Berlin-Chemie AG, or Menarini.

Under the terms of the License Agreement, Menarini received an exclusive license to commercialize and promote the Company’s drug SPEDRA™ (avanafil) for the treatment of erectile dysfunction in over 40 European countries, plus Australia and New Zealand. Additionally, the Company has agreed to transfer to Menarini ownership of the European Union marketing authorization for SPEDRA for the treatment of erectile dysfunction, which was granted by the European Commission in June 2013. Each party agreed not to develop, commercialize, or in-license any other product that operates as a phosphodiesterase type-5 inhibitor for the treatment of erectile dysfunction for a limited time period, subject to certain exceptions.

Per the terms of the License Agreement, the Company will receive upfront payments and various approval and sales milestones, plus royalties on SPEDRA sales. Within the first year, the Company expects to receive approximately €39 million including upfront payments totaling €16 million. Menarini will also reimburse the Company for payments made to cover various obligations to Mitsubishi Tanabe Pharma Corporation, or MTPC, during the term of the License Agreement. The License Agreement will terminate on a country-by-country basis in the relevant territories upon the latest to occur of the following: the expiration of the last-to-expire valid Company patent covering SPEDRA; the expiration of data protection covering SPEDRA; or ten (10) years after the SPEDRA product launch. In addition, Menarini may terminate the License Agreement if certain additional regulatory obligations are imposed on SPEDRA, including if Menarini challenges the Company’s patents covering SPEDRA or if Menarini commits certain legal violations. Either party may terminate the License Agreement for the other party’s uncured material breach or bankruptcy.

Under the terms of the Supply Agreement, the Company will supply Menarini with STENDRA drug product until December 31, 2018 at the latest. Menarini also has the right to manufacture STENDRA independently, provided that it continues to satisfy certain minimum purchase obligations to the Company. Following the expiration of the Supply Agreement, Menarini will be responsible for its own supply of STENDRA. Either party may terminate the Supply Agreement for the other party’s uncured material breach or bankruptcy, or upon the termination of the License Agreement.

Settlement Agreement

On July 18, 2013, the Company entered into a Settlement Agreement with First Manhattan terminating the pending proxy contest with respect to the election of the Company’s board of directors, or the Board, at the Company’s 2013 annual meeting of stockholders, or the Annual Meeting.

Pursuant to the Settlement Agreement, the Company, among other things, reconstituted the Board with the following individuals: Michael James Astrue, J. Martin Carroll, Samuel F. Colin, M.D., Alexander J. Denner, Ph.D., Johannes J.P. Kastelein, Mark B. Logan, David York Norton, Jorge Plutzky, M.D., Herman Rosenman and Robert N. Wilson. In connection therewith, Charles J. Casamento, Ernest Mario, Ph.D., Linda M. Dairiki Shortliffe, M.D., Peter Y. Tam, and Leland F. Wilson resigned as directors of the Company.

Also in connection with the Settlement Agreement, Leland Wilson resigned as Chief Executive Officer of the Company. On July 22, 2013, the reconstituted Board appointed Anthony P. Zook to serve as Chief Executive Officer. On July 25, 2013, Mr. Zook was also appointed to the Board as the eleventh member of the reconstituted Board.

In connection with the Settlement Agreement, the Board has authorized the reimbursement of approximately $3.5 million to First Manhattan of expenses incurred by First Manhattan in connection with its proxy solicitation.

New Chief Executive Officer

On July 25, 2013, the Company’s Compensation Committee granted Mr. Zook a stock option to purchase 1,000,000 shares of the Company’s common stock, of which one-third of the shares subject to the option shall vest on the first anniversary of the date of grant, and 1/36th of the total number of shares subject to the option shall vest each month thereafter, subject to Mr. Zook’s continued services to the Company on such dates. The stock option has an exercise price of $13.70 per share and a seven year term from the date of grant.