12. 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 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 commercial headquarters. 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 utilizes approximately 9,000 square feet of laboratory space in India pursuant to an agreement that expires in December 2015.

The future minimum rentals under the Company’s non-cancelable operating leases at December 31, 2012, were as follows:


Years Ending December 31,	Annual Payments
2013	$	6,549
2014		6,628
2015		6,722
2016		5,435
2017		5,529
2018 and thereafter		8,566

Total	$	39,429

Rent expense for the years ended December 31, 2012, 2011 and 2010 was $6.0 million, $2.8 million and $2.2 million, respectively. 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) Restricted Cash

The Company had outstanding letters of credit collateralized by restricted cash totaling $9.2 million and $6.0 million at December 31, 2012 and 2011, respectively, to secure various operating leases. At December 31, 2012, $0.3 million and $8.8 million of restricted cash associated with these letters of credit were classified as current and long-term assets, respectively, on the consolidated balance sheets. At December 31, 2011, $0.5 million and $5.5 million of restricted cash associated with these letters of credit were classified as current and long-term assets, respectively, on the consolidated balance sheets.

(c) License Agreement with UCLA

Under an August 2005 license agreement with UCLA, and subsequent amendments to this agreement, the Company’s subsidiary Medivation Prostate Therapeutics, Inc. holds an exclusive worldwide license under several UCLA patents and patent applications covering XTANDI and related compounds. Under the Astellas Collaboration Agreement, the Company granted Astellas a sublicense under the patent rights licensed to it by UCLA.

The Company is required to pay UCLA (a) an annual maintenance fee, (b) $2.8 million in aggregate milestone payments upon achievement of certain development and regulatory milestone events with respect to XTANDI (all of which has been paid at December 31, 2012), (c) ten percent of the remaining $277.0 million in substantive development milestone payments that the Company is eligible to earn under the Astellas Collaboration Agreement, and (d) a four percent royalty on sales of XTANDI. Under the terms of the Astellas Collaboration Agreement, the Company shares this royalty obligation with Astellas 50/50 with respect to sales in the United States, and Astellas bears this entire royalty obligation with respect to sales outside of the United States. In addition, in ongoing litigation initiated by the Company, UCLA has filed a counterclaim alleging that the Company is also required to share with it ten percent of the $320.0 million in sales milestone payments that it is eligible to earn under the Astellas Collaboration Agreement. Additional information about this litigation is included below.

UCLA may terminate the agreement if the Company does not meet a general obligation to diligently proceed with the development, manufacturing and sale of licensed products, or if it commits any other uncured material breach of the agreement. The Company may terminate the agreement at any time upon advance written notice to UCLA. If neither party terminates the agreement early, the agreement will continue in force until the expiration of the last-to-expire patent.

(d) Litigation

The Company is party to legal proceedings, investigations, and claims in the ordinary course of its business, including the matters described below. The Company records accruals for outstanding legal matters when it believes that it is both probable that a liability has been incurred and the amount of such liability can be reasonably estimated. The Company evaluates, on a quarterly basis, developments in legal matters that could affect the amount of any accrual and developments that would make a loss contingency both probable and reasonably estimable. To the extent new information is obtained and the Company’s views on the probable outcomes of claims, suits, assessments, investigations or legal proceedings change, changes in the Company’s accrued liabilities would be recorded in the period in which such determination is made. For the matters described below, the liability is not probable or the amount cannot be reasonably estimated; and, therefore, accruals have not been made. In addition, in accordance with the relevant authoritative guidance, for matters for which the likelihood of material loss is at least reasonably possible, the Company provides disclosure of the possible loss or range of loss; however, if a reasonable estimate cannot be made, the Company will provide disclosure to that effect.

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. 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. On December 20, 2012 and January 25, 2013, the Court granted summary judgment motions filed by defendants Regents and Aragon, resulting in dismissal of all claims against Regents and Aragon, but denied such motions filed by the remaining Regents professor, and trial of Medivation’s claims against him, and of Regents’ cross-complaint, is scheduled to commence in April 2013.

While the Company believes it has meritorious positions with respect to the claims asserted against it and intends to advance its positions in these lawsuits vigorously, including on appeal, the process of resolving matters through litigation or other means is inherently uncertain, and it is not possible to predict the ultimate resolution of any such proceeding. The actual cost of defending the Company’s position may be significant, and the Company may not prevail. The Company believes it is entitled to coverage under its relevant insurance policies with respect to the putative securities class action lawsuits, subject to a $350,000 retention, but coverage could be denied or prove to be insufficient.