Annual report pursuant to Section 13 and 15(d)

Commitments and Contingencies

Commitments and Contingencies
12 Months Ended
Dec. 31, 2014
Commitments and Contingencies [Abstract]  
Commitments and Contingencies
11. Commitments and Contingencies

Collaborative Agreements, Royalties and Milestone Payments

The Company is obligated to pay royalties, ranging from 0.5% to 5% of the selling price of the licensed component and up to 40% of any sublicense fees to various universities and other research institutions based on future sales or licensing of products that incorporate certain products and technologies developed by those institutions.

In addition, the Company has committed to make potential future “milestone” payments to third parties as part of licensing and development programs. Payments under these agreements become due and payable only upon the achievement of certain developmental, regulatory and/or commercial milestones. Because it is uncertain if and when these milestones will be achieved, such contingencies, aggregating up to $77.3 million (assuming one product per contract meets all milestones events) have not been recorded on the accompanying consolidated balance sheet. The Company is unable to determine precisely when and if payment obligations under the agreements will become due as these obligations are based on milestone events, the achievement of which is subject to a significant number of risks and uncertainties.


As of December 31, 2014, the Company leased administrative, research facilities, and office equipment under operating leases expiring on various dates through April 2023. These leases require the Company to pay taxes, insurance, maintenance and minimum lease payments.

The Company estimates future minimum lease payments, excluding sub-lease income as of December 31, 2014 to be (in thousands):

Operating Leases
Minimum lease payments
Total rental expense, including other costs required under the Company’s leases, was approximately $3.5 million, $3.5 million and $4.5 million for the years ended December 31, 2014, 2013, and 2012, respectively. Rental expense based on leases allowing for escalated rent payments are recognized on a straight-line basis. At the expiration of the lease, the Company is required to restore certain of its leased property to certain conditions in place at the time of lease inception. The Company believes these costs will not be material to its operations.

In 2012, the Company vacated and subleased two of its leased facilities, which housed its large scale manufacturing operations and associated quality functions. The Company incurred $0.1 million in restructuring charges during 2014 in connection with a portion of lease payments not offset by sublease income for these buildings. The Company does not expect to incur restructuring charges during 2015 in connection with these lease payments.

As a result of the restructuring in the second quarter of 2009, the Company vacated one of its leased buildings. Effective December 2010, the Company entered into a sublease agreement for this building through May of 2014. For the year ended December 31, 2014, the Company recognized $49,000 in sublease income under this agreement.