Research and Development Facility Lease Obligation
InMarch 2010, we entered into a lease agreement with an affiliate of BioMed Realty, L.P. Under the lease,
BioMed constructed a new facility in Carlsbad, California. The lease has an initial term of 20 years with an
option to extend the lease for up to four five-year periods. Our rent under this lease is based on a percentage of
the total construction costs spent by BioMed to acquire the land and build the new facility. To gain early access
to the facility, we agreed to modify our lease with BioMed to accept additional responsibility. As a result,
accounting rules required us to record the cost of the facility as a fixed asset with a corresponding liability. We
are depreciating the building over its economic life and we apply our rent payments, which began on January 1,
2012, against the liability over the term of the lease.
In addition to contractual obligations, we had outstanding purchase orders as of December 31, 2014 for the
purchase of services, capital equipment and materials as part of our normal course of business.
We plan to continue to enter into collaborations with partners to provide for additional revenue to us and we
may incur additional cash expenditures related to our obligations under any of the new agreements we may enter
into. We currently intend to use our cash, cash equivalents and short-term investments to finance our activities.
However, we may also pursue other financing alternatives, like issuing additional shares of our common stock,
issuing debt instruments, refinancing our existing debt, or securing lines of credit. Whether we use our existing
capital resources or choose to obtain financing will depend on various factors, including the future success of our
business, the prevailing interest rate environment and the condition of financial markets generally.
Item7A. Quantitative andQualitative Disclosures About Market Risk
We are exposed to changes in interest rates primarily from our long-term debt arrangements and,
secondarily, investments in certain short-term investments. We primarily invest our excess cash in highly liquid
short-term investments of the U.S. Treasury, reputable financial institutions, corporations, U.S. government
agencies and securities issued by states of the United States and political subdivisions of the states with strong
credit ratings. We typically hold our investments for the duration of the term of the respective instrument. We do
not utilize derivative financial instruments, derivative commodity instruments or other market risk sensitive
instruments, positions or transactions to manage exposure to interest rate changes. Accordingly, we believe that,
while the securities we hold are subject to changes in the financial standing of the issuer of such securities, we
are not subject to any material risks arising from changes in interest rates, foreign currency exchange rates,
commodity prices, equity prices or other market changes that affect market risk sensitive instruments.
Item8.
Financial Statements and Supplementary Data
We filed our consolidated financial statements and supplementary data required by this item as exhibits
hereto, and listed them under Item 15(a)(1) and (2), and incorporate them herein by reference.
Item9.
Changes in and DisagreementsWithAccountants onAccounting and Financial Disclosure
There have been no reported disagreements on any matter of accounting principles or procedures or
financial statement disclosure in 2014 with our Independent Registered PublicAccounting Firm.
Item9A. Controls and Procedures
Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the
Securities ExchangeAct of 1934, as amended, or ExchangeAct) that are designed to ensure that information we
are required to disclose in our ExchangeAct reports is recorded, processed, summarized and reported within the
time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated
to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow
timely decisions regarding required disclosure. We designed and evaluate our disclosure controls and procedures
recognizing that any controls and procedures, no matter howwell designed and operated, can provide only
reasonable assurance and not absolute assurance of achieving the desired control objectives.
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