NOTE 11 — COMMITMENTS AND CONTINGENCIES

(a) Operating Leases

In December 2011, the Company entered into a non-cancelable lease agreement for approximately 57,000 square feet of office space located at 525 Market Street, San Francisco, California for its new corporate headquarters. In September 2012, the Company entered into an amendment to this lease for an additional 29,000 square feet of office space. The lease agreement, as amended, expires in June 2019 and the Company has an option to extend the term of the lease for an additional five years. The Company is entitled to tenant improvement allowances of $3.5 million under the lease agreement, as amended. The Company records tenant improvement allowances as deferred rent and associated capital expenditures as leasehold improvements that will be amortized over the shorter of their useful life or the term of the lease. In connection with the execution of the initial lease and subsequent amendment, the Company delivered to the lessor letters of credit collateralized by restricted cash totaling $8.0 million.

In February 2012, the Company entered into a non-cancelable lease agreement for approximately 15,000 square feet of office space located in Oakbrook Terrace, Illinois for its new commercial headquarters. The Company selected this location for its commercial headquarters based on its proximity to the Company’s collaboration partner, Astellas. The lease agreement expires in December 2019. As part of the lease agreement, the Company received a tenant improvement allowance of $0.8 million. The Company recorded the allowance as deferred rent and associated capital expenditures as leasehold improvements that will be amortized over the shorter of their useful life or the term of the lease. In connection with the execution of the lease, the Company delivered to the lessor a letter of credit collateralized by restricted cash totaling $0.8 million.

The Company also leases approximately 14,000 square feet of office space at the location of its former corporate headquarters at 201 Spear Street, San Francisco, California pursuant to a lease agreement that expires in May 2013, and approximately 9,000 square feet of laboratory space in India pursuant to a lease agreement that expires in December 2015.

The future minimum rentals under the Company’s non-cancelable operating leases at September 30, 2012 were as follows:


Years Ending December 31,	Annual Payments
2012 (remainder of year)	$	1,365
2013		6,549
2014		6,628
2015		6,722
2016		5,435
2017 and thereafter		14,096

Total	$	40,795

In addition to the future minimum rental payments included in the table above, certain lease agreements also require the Company to make additional payments during the lease term for taxes, insurance, and other operating expenses.

(b) Litigation

In March 2010, the first of several putative securities class action lawsuits was commenced in the U.S. District Court for the Northern District of California, naming as defendants the Company and certain of its officers. The lawsuits are largely identical and allege violations of the Securities Exchange Act of 1934, as amended. The plaintiffs allege, among other things, that the defendants disseminated false and misleading statements about the effectiveness of dimebon for the treatment of Alzheimer’s disease. The plaintiffs purport to seek damages, an award of their costs and injunctive relief on behalf of a class of stockholders who purchased or otherwise acquired the Company’s common stock between September 21, 2006 and March 2, 2010. The actions were consolidated in September 2010 and, in April 2011 the court entered an order appointing Catoosa Fund, L.P. and its attorneys as lead plaintiff and lead counsel. Thereafter, the lead plaintiff filed a consolidated amended complaint, which was dismissed without prejudice as to all defendants in August 2011. The lead plaintiff filed a second amended complaint in November 2011. In March 2012, the court dismissed the second amended complaint with prejudice and entered judgment in favor of defendants. Lead plaintiff filed a notice of appeal to the U.S. Circuit Court of Appeals for the Ninth Circuit in April 2012. The appeal is fully briefed, and the Company is awaiting notice of the date for oral argument.

In May 2011, the Company filed a lawsuit in San Francisco Superior Court against the Regents of the University of California, or the Regents, and one of its professors, alleging breach of contract and fraud claims, among others. The Company’s allegations in this lawsuit include that it has exclusive commercial rights to an investigational drug known as ARN-509, which is currently being developed by Aragon Pharmaceuticals, or Aragon, in a Phase 1-2 clinical trial in mCRPC. ARN-509 is a close structural analog of XTANDI, was developed contemporaneously with XTANDI in the same academic laboratories in which XTANDI was developed, and was purportedly licensed by the Regents to Aragon, a company co-founded by the heads of the academic laboratories in which XTANDI was developed. On February 9, 2012, the Company filed a Second Amended Complaint, adding as additional defendants a former Regents professor and Aragon. The Company seeks remedies including a declaration that it is the proper licensee of ARN-509, contractual remedies conferring to it exclusive patent license rights regarding ARN-509, and other equitable and monetary relief. On August 7, 2012, the Regents filed a cross-complaint against the Company seeking declaratory relief which, if granted, would require the Company to share with the Regents 10% of any sales milestone payments the Company may receive under the Astellas Collaboration Agreement. Under the Astellas Collaboration Agreement, the Company is eligible to receive up to $320.0 million in sales milestone payments. On September 18, 2012, the trial court approved a settlement agreement dismissing the former Regents professor who was added to the case on February 9, 2012.

The Company believes that it has meritorious positions in these lawsuits, and intends to advance its positions in these lawsuits vigorously. However, the lawsuits are subject to inherent uncertainties, the actual costs may be significant, and the Company may not prevail. The Company has not established any reserve for any potential liability relating to these lawsuits. The Company believes it is entitled to coverage under its relevant insurance policies for the putative securities class action lawsuits, subject to a $350,000 retention, but coverage could be denied or prove to be insufficient.